Zenith Bank Plc Annual Report 2022

Plain-text annual report

Contents1.Directors, Oﬃcers and Professional Advisers42.Results at a Glance/Key Performance Indices53.Group Financial Highlights64.Corporate Proﬁle and Strategy95.Notice of Annual General Meeting225.Awards246.Founder and Chairman’s Statement267.Chief Executive Oﬃcer’s Review308.Board of Directors349.Directors’ Report4210.Statement of Corporate Responsibility500111.Corporate Governance Report5212.Report of the Independent Consultant to the Board of Directors on their Appraisal6713.Corporate Responsibility and Sustainable Banking Practices6814.Independent Auditor’s Limited Sustainability Assurance Report74Governance & Sustainability0215.Statement of Directors’ Responsibilities in Relation to the Financial Statements8416.Report of the Audit Committee8517.Independent Auditor’s Report8618.Consolidated and Separate Statement of Proﬁt or Loss and Other Comprehensive Income9419.Consolidated and Separate Statements of Financial Position9520.Consolidated and Separate Statement of Changes in Equity9621.Consolidated and Separate Statements of Cash Flows9822.Notes to the Consolidated and Separate Financial Statements102Financials0323.Value Added Statement24224.Five Year Financial Summary24425.Share Capital History24826.Forms249Other National Disclosures042(cid:59)en(cid:74)t(cid:73)(cid:3)(cid:35)(cid:66)n(cid:76)(cid:3)(cid:49)(cid:77)(cid:68)(cid:3)(cid:3)(cid:34)nn(cid:86)(cid:66)(cid:77)(cid:3)(cid:51)e(cid:81)o(cid:83)t(cid:3)(cid:37)e(cid:68)e(cid:78)(cid:67)e(cid:83)(cid:3)(cid:20)(cid:18)(cid:13)(cid:3)2022 Co(cid:83)(cid:81)o(cid:83)(cid:66)te(cid:3)(cid:42)n(cid:71)o(cid:83)(cid:78)(cid:66)t(cid:74)on 4 01Zenith Bank Plc Annual Report December 31, 2022 Directors, Oﬃcers and Professional Advisers Directors Jim Ovia, CFR. Prof. Chukuka Enwemeka** Mr. Jeﬀrey Efeyini** Mr. Chuks Emma Okoh* Mr. Gabriel Ukpeh Engr. Mustafa Bello Dr. Al-Mujtaba Abubakar, MFR Dr. Omobola Ibidapo-Obe Ogunfowora Dr. Peter Olatunde Bamkole* Dr. Ebenezer Onyeagwu Dr. Adaora Umeoji,OON**** Mr. Umar Shuaib Ahmed*** Dr. Temitope Fasoranti Mr. Dennis Olisa*** Mr. Henry Oroh Mrs Adobi Nwapa* Mr. Akindele Ogunranti* Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director/Independent Non-Executive Director 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 Executive Director Executive Director *Appointed to the Board eﬀective 12 April 2022 **Retired from the Board eﬀective 1 July 2022 ***Retired from the Board eﬀective 28 December 2022 ****Retired from the Board eﬀective 24 February 2023 COMPANY SECRETARY Michael Osilama Otu REGISTERED OFFICE AUDITOR REGISTRAR AND TRANSFER OFFICE 4 Zenith Bank Plc Zenith Heights Plot 84/87, Ajose Adeogun Street, Victoria Island, Lagos PricewaterhouseCoopers (PwC) Chartered Accountants 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 Results at a Glance/ Key Performance Indices Financial Highlights In millions of Naira 31-Dec-22 31-Dec-21 % Change Income statement Highlights Interest and similar income Net interest income Impairment charge 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 540,166 366,627 (123,252) 624,342 (339,692) 284,650 223,911 7.14 4,123,966 8,975,653 12,285,629 1,378,940 16.8% 2.1% 7.3% 1.9% 3.2% 54.4% 75.0% 45.9% 1.93% 4.30% 427,597 320,804 (59,932) 569,907 (289,533) 280,374 244,558 7.78 3,501,878 6,472,054 9,447,843 1,279,662 20.4% 2.7% 6.7% 1.5% 1.9% 50.8% 71.6% 54.1% 21.0% 4.19% 26% 14% 106% 10% 17% 2% -8% -8% 18% 39% 30% 8% -18% -22% 9% 27% 68% 7% 5% -15% -6% -53% 5 Zenith Bank Plc Annual Report December 31, 2022 Group Financial Highlights Marginal growth of 2% in PBT attributable to significant impairment charge on the back of debt restructuring programme in Ghana. Profit after tax dropped by 8% due to increase in income tax expense from the Nigerian operations. Profit before tax - Group (N'bn) 232 243 256 280 285 Profit after tax - Group (N'bn) 245 231 224 209 193 250 200 150 100 50 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 300 250 200 150 100 50 0 Return on Average Equity (RoAE) and Return on Average Asset (RoAA) dropped year-on-year on the back of drop in profit after tax (PAT), increased shareholders’ funds and total assets. ROAE/ROAA 30.00% 20.00% 10.00% 0.00% 23.80% 23.80% 22.40% 20.40% 3.30% 3.40% 3.10% 2.70% 16.80% 2.10% 2018 2019 2020 2021 2022 ROAE ROAA 6 Total deposits grew by 39% (N2,(cid:13)0(cid:12)bn) reflecting public confidence in the (cid:28)enith brand. The funding mix was also rebalanced towards more stable retail deposits. Total assets grew by 30% (N2,838bn) to close at N12.3trn enhancing the Group’s revenue generating capacity. (cid:28)ota(cid:36) (cid:31)epo(cid:41)it(cid:41) - Group (N'bn) (cid:21)i(cid:44)i(cid:31)en(cid:31) (N) (cid:28)ota(cid:36) a(cid:41)(cid:41)et(cid:41) - Group (N'bn) 3.20 3.00 2.80 3(cid:6)690 2.60 9(cid:6)000 8(cid:6)000 7(cid:6)000 6(cid:6)000 5(cid:6)000 4(cid:6)000 3(cid:6)000 2(cid:6)000 1(cid:6)000 0 8(cid:6)976 3.10 3.00 6(cid:6)472 3.20 14(cid:6)000 12(cid:6)000 10(cid:6)000 12(cid:6)286 9(cid:6)448 8(cid:6)481 2.80 2.80 5(cid:6)340 4(cid:6)262 2018 2019 2020 2021 2022 5(cid:6)956 6(cid:6)347 8(cid:6)000 6(cid:6)000 4(cid:6)000 2(cid:6)000 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 (cid:26)hareholders’ funds grew year-on-year by 8% to N1,3(cid:14)9bn providing adequate buffer for business expansion. (cid:19)onsistent growth in dividend per share reflecting the Group’s ability to deliver superior returns to shareholders. (cid:28)ota(cid:36) (cid:41)(cid:34)are(cid:34)o(cid:36)(cid:31)er(cid:41)' fun(cid:31) - Group (N'bn) 1(cid:6)379 1(cid:6)280 1(cid:6)117 942 816 1400 1200 1000 800 600 400 200 0 (cid:21)i(cid:44)i(cid:31)en(cid:31) (N) 3.20 3.10 3.00 2.80 2.80 3.20 3.10 3.00 2.90 2.80 2.70 2.60 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 7 Zenith Bank Plc Annual Report December 31, 2022 Group Financial Highlights 8 IntroductionZenith Bank Plc has continued to win accolades both on the local and international fronts. Zenith Bank was recently named the Bank of the year by The Banker, Financial Times of London.Zenith Bank is an international bank with operations in the United Kingdom, United Arab Emirates and three other West African countries apart from Nigeria, namely: Ghana, Sierra Leone, and The Gambia. In Nigeria, we have a strong franchise and reputation anchored on three pillars: people, technology, and service. Within thirty-two years of its existence, Zenith Bank has demonstrated 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 robust risk management framework. 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:9ServiceTechnologyPeopleAt Zenith Bank , Our people are our most valuable asset. we attract, motivate and retain a highly talented pool of people from diverse backgrounds.Technology is the core of the business strategy of Zenith Bank. We depoly global best innovative technology infrastructure.For us at Zenith Bank, the customer is the reason we are in business, and this is not a mere mantra. Exceptional service delivery is at the centre of our operations.Corporate Proﬁle & StrategyHighly Skilled PersonelInnovationGood financial performanceStable and dedicated management teamLeadership in the use of Informationand Communication TechnologyStrategic distribution channelsRobust risk management framework“To build the Zenith brand into a reputableinternational financial institution recognized for innovation, superior customer service and performance while creating premium value for all stakeholders”.“ establish a presence in all major economicand financial centres in Nigeria, Africa and indeed all over the world; creating premium value for all stakeholders”.. Integrity. Professionalism. Excellence. Ethics. Commitment· Transparency· ServiceOur VisionOur MissionOur Value10Zenith Bank Plc Annual Report December 31, 2022Corporate Proﬁle & StrategyBusiness Focus Zenith Bank Group is a customer centric, innovation and technology enabled ﬁnancial services organisation that is geared towards surpassing its customers’ expectations. Zenith has clearly deﬁned its strategic business focus and that forms basis of resource allocation. The Group operations are managed through the following: Core business segments Operations outside Nigeria Operations in other sectors a) Core Business Segments 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 subsidiary four units: the Liability and Deposit Management Unit, Bonds Trading Unit, Foreign Currency Trading Unit and the Correspondent Banking Unit. Corporate Banking The Group’s Corporate Banking business unit oﬀers a wide variety of services to multinationals, large local conglomerates and corporate clients. The unit is focused on providing superior banking services and customized banking products to the top tier of the market. It is primarily focused on attracting, building and sustaining strong enduring relationships with its target market through the provision of innovative solutions together with excellent customer services to meet clients’ banking needs. It also looks at promoting the businesses of these corporate clients through the provision of services to the various stakeholders within the value chain of these corporate clients. This is aimed at building long-term relationships and partnership with our clients. 11 Zenith Bank Plc Annual Report December 31, 2022 Corporate Proﬁle & Strategy 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; SME grow my business i) ii) iii) iv) v) vi) 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). The Group’s MSME business has continued to grow on the upward trajectory. MSMEs remain the growth engine of any developing economy especially, contributing signiﬁcantly to the Nigerian GDP. MSMEs therefore provide a huge base to deliver value innovation and oﬀer compelling propositions and engagements for business growth and contribute more to National Development. loans and advances It oﬀers in the form of overdrafts, import ﬁnance lines, term loans and leases to the customers especially those involved in the sales and distribution of fast moving consumer good items and key distributors to major manufacturing companies. Credit facilities oﬀered by the unit are priced higher than those extended to corporate or institutional banking customers in order to compensate for the relatively higher risk. To achieve these and thereby fulﬁll this renewed commitment to support smaller businesses, the bank is collaborating with service providers, digital and technology companies in partnerships that focus on addressing the major challenges of this sector providing digital skills and sector-based trainings, oﬀering business solutions and tools that help businesses ﬁnd customers and build loyalty, access to business loans in a swifter manner as well as earn savings from discounted business expenses. 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. These in addition to the adoption of our customized SME card, enrollment on our electronic channels of Zenith Mobile App, Corporate Internet Banking and e-collection solutions gradually sets the tone for small businesses to commence own digital transformation, at their pace. Also, within the year, leveraging on our partnership with Google, Zenith Bank trained 590 SME business owners in two separate cohorts on diﬀerent subjects including – business growth strategies; digital marketing; increasing your sales, eﬀective ﬁnancial planning and pitching for success and certiﬁcates were duly awarded. In another collaborative eﬀorts with Google, we visited 10 Universities within the year, where ﬁnal year students 12 were taught the act of entrepreneurship, brand building and how to own and run a successful enterprise and staying productive online In partnership with VISA, we launched the Zenith Bank SME Visa Business Card, a customized card solution embedded with several oﬀerings including Business Expense Management, Card Controls features and other merchant solution oﬀerings. Within the year, we also launched our SME Arena, an avenue where platform owners and solution providers can showcase their various oﬀerings to Zenith SME Business communities. We hope to build the SME Arena into a huge market place to serve as a catalyst to achieve the Bank’s objective as a leading SME Bank in Nigeria. Retail Banking The Group’s strategic objective is to become the leading retail bank in Nigeria. To this end, our key strategic drivers are; customer engagement and value innovation. 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, core middle, 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. 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. 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. The Bank has deployed agency banking services across the 36 states as well as 774 Local Government Areas of the federation to ensure the bank has a touch point at every location in the country. The Bank has on-boarded about 93,257 agents as at 31st December 2022. 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 with a view to tracking key retail performance metrics on the journey to becoming the leader in the retail space 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 best-in-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 13 Zenith Bank Plc Annual Report December 31, 2022 Corporate Proﬁle & Strategy contact point for correspondent banking relationships with Nigerian and other West African banks by providing facilities for letter of credit conﬁrmation and treasury products. The operational mandate of Zenith UK also enables it to source deposits from institutions such as parastatals, corporate and institutional counterparties to support its funding needs. Through eﬀective treasury management, Zenith UK trades in ﬁxed income instruments which include government and institutional bonds and certiﬁcates of deposit. Zenith UK also has a wealth management unit which is dedicated to oﬀering long- term investment advisory and wealth management solutions to its customers. Zenith Bank West African Subsidiaries systems, oﬀshore remittances and foreign exchange and project ﬁnance. b) Operations outside Nigeria The Group’s overseas subsidiaries carry out banking operations, providing traditional banking products and services tailored to meet the needs of those customers who are either located in countries where the subsidiaries are based or who have a business presence in such locations. Each of the Group’s overseas subsidiaries act as intermediary between the ﬁnancially surplus and deﬁcit units in their locations, oﬀering a wide range of products and services to attract deposits and extend loans and advances. The Group’s overseas subsidiaries include the following: Zenith Bank UK Limited Zenith Bank UK Limited (“Zenith UK”) leverages on trade and investment ﬂows between Nigeria and Europe to intermediary banking services which include post shipment ﬁnance, back- to-back letters of credit, standby letters of credit and contract guarantees. Zenith UK also provides facilities for working capital and capital expenditure directly to Nigerian borrowers through participation in syndicated loans. The subsidiary acts as the 14 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 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. c) Operations in other sectors 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 2022, total funds under its custody amounted to approximately N6,266 trillion. Zenith Pensions has 132 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. trustees, Zenith Nominees Limited provides nominees, administrators, and executorship services for non-pension assets. It started operations in 2018. As at 31 December 2022, total funds under its custody amounted to approximately N514 billion Strategic objectives and service delivery The strategic objectives 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: Strategic and continuing investment in branch network expansion to reach out to existing and potential customers where digital technology alone is not adequate to meet this. Increasing investment in technology infrastructure that brings banking services to all nooks and crannies of the nation with the use of agents ensuring our banking services can reach the last mile. Continuous investment and deployment of state of the art technology and ICT platform Continue to seek, employ and retain the best personnel available Continuous investment in training and re- training of our personnel Maintain and reinforce our core customer service delivery charter Sustain strong proﬁtability and ensure adequate Return on Equity (ROE) Remain conservative but innovative Sustain strong balance sheet size with adequate liquidity and capital base Sustain our brand and premium customer services Cautious and synergistic global expansion Remain customer service focused Continuous emphasis on use of technology as a competitive tool Maintain 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. 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. Continue to deliver superior and tailor- made service experience to all our customers at all times Continue to develop deeper and broader relationship with all clients and strive to understand their individual and industry peculiarities with a view to developing speciﬁc solutions for each segment of our customer base Continue to expand our operations by adding new distribution channels especially in the digital space Consolidate our leadership as a banking service provider in Nigeria by continuing to build on long standing relationships, capabilities and the strength of our brand and reputation to drive our international business network expansion Continually enhance our processing and systems platforms to deliver new capabilities and improve operational eﬃciencies and achieve economies of scale. 15 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.” 17. 18. Investment in core banking infrastructure and other banking systems infrastructure to position the bank for the future as it expands and grows its business across the commercial and retail segments. The lending businesses in all our subsidiaries will focus primarily on international and export trade transactions. It will international trade bills for companies and also providing short-term credits to ﬁnancial institutions that use the bank as their correspondent bank. involve discounting During the year the Bank hosted its second edition of the Zenith Bank Tech fair on the 22nd and 23rd November 2022, with the theme, “Future Forward 2.0”. The major objective of the tech fair is to provide global and local technology brands the platform to showcase their leading and disruptive technologies. The Technology fair comprised of 3 major events namely, presentations and discussions by participants, tech exhibitions, and hackathon (christened “Zecathon”). Zenith Bank Plc Annual Report December 31, 2022 Corporate Proﬁle & Strategy 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 optimize our average revenue per customer. Continuous investment in technology infrastructure that is essential to support our growing retail customer base and further strengthen our existing payment platforms to increase digital banking and respond appropriately to the cashless policy necessitated by the naira redesign. Increasing corporate ﬁnance activities to boost fee income. Leveraging on our existing branch network to drive our product delivery and deposit liability growth. Leveraging on our understanding of speciﬁc trade and correspondent banking requirements to drive business relationships with banks and ﬁnancial institutions in the West African sub region to encourage them to use our foreign subsidiaries for businesses they are currently transacting with other banks. Generating more foreign exchange to support our trade business by focusing on non-oil export customers’ business in view of the Central Bank of Nigeria’s initiative to generate $200 billion from non-oil exports in three to ﬁve years. leadership of the corporate banking Continue business in its chosen territories, ensuring our customers receive best-in-class services and maximize returns of all stakeholders. Our foreign subsidiaries will target companies that currently have trade partners in Nigeria and other its 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 16 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. Exploring viable market entry/expansions into European and Sub-saharan African markets to further provide a bridge/platform for consummating our existing customers’ transactions across Africa and Europe while also acquiring new customers in the new geographical regions. Creating a digital one-stop payment ecosystem that can service the payments and collection needs of our teaming MSMEs in the Sub-Saharan African markets. 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. 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 The Group expects to continue its drive to deploy the latest innovations in banking technology in order to maintain its position at the forefront of the changing banking landscape in Nigeria. In addition, the Group will aim to enhance its systems and internal procedures, in order to be able to improve its levels of customer service by delivering improved operational capabilities and eﬃciencies, whilst at the same time achieving economies of scale. The Group’s increased deployment of digital channels and agency banking means more customers are able to carry out banking transactions without visiting its branches, thereby reducing operating costs. From an internal operating perspective, the Group has automated most of the operational activities, such as cheque conﬁrmation and clearing processes, account opening processes, credit administration process and internal audit processes. These automated processes have started yielding results in the form of reduced turnaround times in all operational activities as well as a reduction in operating costs. In addition to the above, other strategies that have been adopted to streamline our cost include: Business Locations As at 31 December 2022, the geographical spread of the Group’s business locations is as follows: Geographical Locations Federal Republic of Nigeria Republic of Ghana United Kingdom Sierra Leone The Gambia China Representative Oﬃce Total Branches Cash Centres Non-Banking Operations 396 30 2 7 7 1 443 155 10 - 1 7 - 173 3 - - - - - 3 17 Zenith Bank Plc Annual Report December 31, 2022 Corporate Proﬁle & Strategy As shown above, the Group also has 188 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 would eventually diminish in number as the CBN fully implements several cashless policies such as the e Naira launched in October 2021. However, we expect an increase in e-centres where various electronic transactions can be consummated as well as agents for its ﬁnancial inclusion customers. ATM network The Group has a total of 2,108 ATM at 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. Collaborating with training companies to redesign our training needs into an electronic format that allows it to be deployed electronically to all our staﬀ (by so doing de-emphasizing classroom and physical trainings) and thereby improving eﬃciency and lowering training costs, power and energy costs. The Bank also collaborates with other card issuing agencies to oﬀer internationally recognised cards, such as MasterCard, Visa and Verve, in diﬀerent currencies to their customers. Distribution Channels Other distribution channels which the Group uses include electronic and digital channels which oﬀers products and services, including electronic fund transfers at points of sale (POS), telephone banking, internet banking, visa telebanking, mobile banking, agency banking and the Group’s call centres. Furthermore, in addition to being able to use its branches, ATMs and the network of third party ATMs available throughout Nigeria under arrangements between the Bank and third party 18 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. *966*911# – This is a distress code to be dialed by Zenith customers to automatically block their accounts where customers’ smart phones has been stolen or privacy details have been compromised. *966*60# – This allows you to perform other self service. These include retrieve card PIN, Block Cards, manage card less withdrawal, select preferred USSD account to debit, perform transaction above N100k via USSD subject to signing an indemnity, activate agent banking activities i.e cash in and cash out and perform USSD on POS. USSD on POS – This allows customers to make payments at merchant stores using *966# EazyBanking 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. allows (Customised Branch Collections) Xpath 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. GlobalPay - 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 the Group on this platform. The platform provides additional beneﬁts to customers as it enables merchants to accept payment after banking hours, provides online transaction monitoring, can be customised to capture speciﬁc data and provides an alternative mode of payment. 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 use 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. Aspire Lite is a new product speciﬁcally designed for customers who are between 16 - 25years and are willing to open an Aspire account but unable to provide the necessary documents (valid ID/Admission letter/school ID). Wallet on CEVA is an additional service to agency banking platform. Customers without BVN are allowed to open wallet and perform banking transactions. The services are available are; withdrawal on wallet, and deposit on wallet at agent locations. As an industry leader in Digital Finance, the Bank launched the Zenith Intelligent Virtual Assistant (ZiVA), an upgraded Mobile App and the ‘Pay with Transfer on POS’ in response to the markets demands and the ever changing lifestyles of our customers. 19 Zenith Bank Plc Annual Report December 31, 2022 Corporate Proﬁle & Strategy The Zenith Intelligent Virtual Assistant (ZiVA) enables banking services to be oﬀered on WhatsApp, and subsequently across other social media platforms. It leverages artiﬁcial intelligence to provide transactional and support services to customers of the bank such as bills payment, funds transfer, account opening, balance check, dispute log and other value-added services. ZiVA is designed for existing and prospective individual account holders, who today have adopted the WhatsApp platform as preferred destination for online banking services. It is a reliable, convenient, and more “personal” medium of performing basic banking transactions, on their mobile devices. The launch is a response by the bank to banking on social media. to The Zenith Mobile App was more recently upgraded include features that make banking more interactive, seamless, intuitive, exciting, and productive. Life really has become mobile. The market keeps experiencing a signiﬁcant movement in terms of volume of transactions on the mobile applications. The mobile have become an everyday necessity, and banks are constantly raising the bars. 20 Most of the mobile banking applications have become full-ﬂedged and service mobile banking powerhouses. They provide many of the same banking services as a brick and mortar bank without the long queues and long waits. The enhanced Zenith Mobile boast of Customers Personal ﬁnance manager (PFM), editable proﬁle page, forex calculator and a lifestyle page amongst other interesting and exciting new features. Pay with Transfer on POS’ terminal is an industry ﬁrst, pioneered by the Bank in 2021. This leverages the advantage in the market today where customers have adopted transfers as a faster means of making payments for goods and services, person to person and person to business. The POS typically today allows for only card payments on the terminals. SME Arena is a one stop shop for business owners to enjoy product and services, discounted oﬀerings from selected partners from SME Arena SME Business Card is a debit card that help SMEs distinguish personal expenses from business expenses. It also oﬀers discounted prices at select merchant locations. Net Pos 2-in-1 is a portable dual function android device that acts as a mobile phone and means of card payment collections for SMEs. However, this service enables transfers to the POS and a receipt is generated afterwards as proof of payment, thus eliminating dispute situations of non-receipt or conﬁrmation of payment for goods and services at merchant’s locations. This service is cardless and contactless payment, keeping with the realities of our time which the COVID 19 pandemic has thrown at the market. ... THË ÏDËÅL WÅŸ TØ SÅVË FØR ŸØÜR ÇHÏLD’S FÜTÜRË.(cid:37)(cid:70)(cid:84)(cid:74)(cid:72)(cid:79)(cid:70)(cid:69)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:68)(cid:73)(cid:74)(cid:77)(cid:69)(cid:83)(cid:70)(cid:79)(cid:1)(cid:67)(cid:70)(cid:85)(cid:88)(cid:70)(cid:70)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:72)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:17)(cid:1)(cid:14)(cid:18)(cid:22)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:84)(cid:15)(cid:59)(cid:70)(cid:83)(cid:80)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:80)(cid:81)(cid:70)(cid:79)(cid:74)(cid:79)(cid:72)(cid:1)(cid:67)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:83)(cid:70)(cid:82)(cid:86)(cid:74)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:15)(cid:36)(cid:80)(cid:78)(cid:81)(cid:70)(cid:85)(cid:74)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:42)(cid:79)(cid:85)(cid:70)(cid:83)(cid:70)(cid:84)(cid:85)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:80)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:67)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70)(cid:84)(cid:15)(cid:1)(cid:52)(cid:85)(cid:66)(cid:79)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:80)(cid:83)(cid:69)(cid:70)(cid:83)(cid:1)(cid:71)(cid:86)(cid:79)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:80)(cid:81)(cid:85)(cid:74)(cid:80)(cid:79)(cid:15)(cid:42)(cid:79)(cid:87)(cid:74)(cid:85)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:79)(cid:79)(cid:86)(cid:66)(cid:77)(cid:1)(cid:59)(cid:70)(cid:79)(cid:74)(cid:85)(cid:73)(cid:1)(cid:36)(cid:73)(cid:74)(cid:77)(cid:69)(cid:83)(cid:70)(cid:79)(cid:8)(cid:84)(cid:1)(cid:49)(cid:66)(cid:83)(cid:66)(cid:69)(cid:70)(cid:1)(cid:11)(cid:52)(cid:66)(cid:87)(cid:74)(cid:79)(cid:72)(cid:84)(cid:1)(cid:68)(cid:66)(cid:79)(cid:1)(cid:67)(cid:70)(cid:1)(cid:69)(cid:70)(cid:79)(cid:80)(cid:78)(cid:74)(cid:79)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:47)(cid:66)(cid:74)(cid:83)(cid:66)(cid:1)(cid:80)(cid:83)(cid:1)(cid:54)(cid:52)(cid:1)(cid:37)(cid:80)(cid:77)(cid:77)(cid:66)(cid:83)(cid:84)(cid:59)(cid:38)(cid:36)(cid:34)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:84)(cid:86)(cid:67)(cid:75)(cid:70)(cid:68)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:66)(cid:69)(cid:78)(cid:74)(cid:79)(cid:74)(cid:84)(cid:85)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:70)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:1)(cid:77)(cid:66)(cid:88)(cid:1)(cid:80)(cid:83)(cid:1)(cid:81)(cid:83)(cid:80)(cid:67)(cid:66)(cid:85)(cid:70)(cid:15)(cid:1)PRODUCT FEATURES & BENEFITSwww.zenithbank.com/zecaOther National Disclosures04Zenith Bank Plc Annual Report December 31, 2022 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Thirty-Second Annual General Meeting of Zenith Bank Plc will hold virtually via www. zenithbank.com/32AGM at 9.00 a.m. on Tuesday the 2nd day of May, 2023 to transact the following business: 5. To authorize the Directors to ﬁx the remuneration of the Auditors. 6. To disclose the remuneration of Managers of the bank. ORDINARY BUSINESS 7. To elect members of the Audit Committee. 1. To present and consider the Bank’s Audited Accounts for the ﬁnancial year ended 31st December, 2022, the Reports of the Directors, Auditors and Audit Committee thereon. 2. To declare a ﬁnal dividend. SPECIAL BUSINESS 8. That Dr. Al-Mujtaba Abubakar, MFR, who has attained the age of 70 years since the last general meeting be re-elected as an Independent Non-Executive Director of the bank. 3. To approve the appointment of the following Directors: 9. (a) Peter Olatunde Bamkole as Independent Non-Executive Director (b.) Mr. Chuks Emma Okoh as Non-Executive Director 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, 2023 be and is hereby ﬁxed at N30 million only” for each Director. (c.) Mrs. Adobi Stella Nwapa as Executive Director Dated this 31st day of March, 2023. (d.) Mr. Anthony Akindele Ogunranti as Executive Director NOTES: The appointment of the Directors have been approved by the Central Bank of Nigeria. 1 . PROXY: The Proﬁle of the aforementioned Directors are available in the Annual Report and also on the Bank’s website at www. zenithbank.com. 4. To re-elect the following Directors who retire by rotation at this meeting (i) Dr. Omobola Ibidapo-Obe Ogunfowora (ii) Mr. Gabriel Ukpeh (iii) Dr. Temitope Fasoranti 22 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. Additionally, Shareholders may nominate any of the Directors as proxy. Note however that a proxy need not be a member of the company. 2 Virtual Meeting Link 6. Rights of Shareholders/Securities’ Holders to ask Questions Further to the signing into law of the Business Facilitation (Miscellaneous Provisions) Act, which allows public companies to hold meetings electronically, this AGM would be held virtually. The Virtual Meeting Link for the Annual General Meeting which will be live-streamed at www. zenithbank.com/32AGM, will also be available on the Company’s website at www.zenithbank.com and other social media platforms for the benefit of Shareholders. 3. Closure of Register of Members The Register of Members and Transfer Books of the Company will be closed on April 17th, 2023, to enable the Registrar prepare for the payment of dividend. 4. Dividend Warrants If approved, dividend warrants for the sum of N2.90K for every share of 50K (bringing the total dividend for the financial year ended December 31, 2022 to N3.20K) will be paid via e-mandate on the 2nd May, 2023, to shareholders whose names are registered in the register of members at the close of business on the 14th day of April, 2023. 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. Shareholders/Securities’ Holders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and such questions must be submitted to the Company on or before the 28th day of April, 2023. 7. 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. 8. E-Dividend Notice is hereby given to all shareholders to open bank accounts for the purpose of dividend payment in line with the Securities and Exchange Commission (SEC) directives. Detachable application forms for e-dividend and e-bonus are attached to the Annual Report to enable all shareholders furnish the particulars of their bank accounts/CCS details to the Registrars as soon as possible. 9. Profile of Directors The profile of all Directors are available for viewing on the bank’s website, www.zenithbank.com. This Notice supercedes our earlier Notice on this. 5. Audit Committee By Order of the Board the In accordance with Section 404(6) of 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. MICHAEL OSILAMA OTU, ESQ. Company Secretary/General Counsel Plot 87, Ajose Adeogun Street Victoria Island, Lagos 23 Best Corporate Governance ‘Financial Services’ AfricaEthical BoardroomTo all our esteemed Customers and Shareholders, your continuous support, patronage and loyalty to the Zenith Brand made the achievement of the awards possible in 2022.Bank of the Year, NigeriaThe BankerBest Commercial Bank, NigeriaInternational BankerBest Innovation in Retail Banking, NigeriaInternational BankerBank CEO of the YearBusinessDay Newspaper24Zenith Bank Plc Annual Report December 31, 2022AwardsBiggest Bank in Nigeriaby Tier-1 Capital The BankerBest Bank in NigeriaGlobal FinanceBest Corporate Governance Best Corporate Governance, NigeriaWorld FinanceBest Commercial Bank, NigeriaWorld FinanceBest Innovation in Retail Banking, NigeriaInternational BankerBest Company in Technology for DevelopmentSERAS AwardsBest Company in Work Place PracticeSERAS AwardsBank of the YearNew Telegraph NewspaperRetail Bank of the YearBusinessDay Newspaper25Zenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B 26 JIM OVIA, CFR Dear Esteemed Shareholders, Guests, and Ladies and Gentlemen, I am delighted to welcome you to the 32nd Annual General Meeting of our Bank and to present to you the Annual Report and Financial Statements for the Financial year ended December 31st, 2022. Before I proceed, I want to express my sincere appreciation to all of you for your continued unwavering loyalty and commitment to our Bank. Your continued support has been instrumental to the Bank’s sterling performance since its inception. The year 2022 was challenging in many signiﬁcant global and respects, with domestic economic developments that impacted our business in several ways. However, Zenith Bank responded well, leverage strategies adapting our available opportunities while creating value for all our stakeholders. Against this background, I will review the economic and ﬁnancial environment within which our Bank operated during the ﬁscal year under review. to MACROECONOMIC REVIEW The Nigerian economy continued to maintain a positive growth trend in 2022, albeit at a slower pace than in 2021, since exiting recession in 2020. According to the National Bureau of Statistics (NBS), Gross Domestic Product (GDP) grew by 3.10 per cent in 2022, lower than the 3.40 per cent recorded in 2021. Speciﬁcally, GDP grew by 3.11 per cent in Q1 2022, 3.54 per cent in Q2 2022, 2.25 per cent in Q3 2022, and 3.52 in Q4 2022. The slower pace of growth is attributable to the base eﬀects of the Founder and Chairman Founder And Chairman’s Statement recession and the challenging economic conditions that have impeded productive activities. Available statistics from the NBS show that the non- oil sector, comprising Telecommunication, Trade, and Agriculture, which grew by 4.84 per cent, was the major driver of the positive growth recorded in 2022. This rate was higher by 0.4 percentage points compared to the 4.44 growth rate recorded in 2021. In real terms, the non- oil sector contributed 94.33 per cent to the nation’s GDP in 2022, higher than the 92.76% reported in 2021. The oil sector, on the other hand, contracted by 19.22 per cent, indicating a decrease of 10.92 percentage points relative to the 8.30 per cent recorded in 2021. The performance of the sector was aﬀected by the lingering impact of muted domestic oil production, which stood at an average daily output of 1.34 million barrels per day (mbpd), lower than the average daily production of 1.50 mbpd recorded in 2021. The sector contributed 5.67 per cent to the total real GDP in 2022, down from the 7.24 per cent recorded in 2021. Aggregate GDP stood at NGN199,336,043.78 million in nominal terms in 2022, higher than the NGN173,527,662.34 million recorded in 2021. In 2022, the Consumer Price Index (CPI), which measures inﬂation, showed an upward trend. This was caused by disruptions in the supply of food products, increased import costs due to persistent currency depreciation, ongoing conﬂicts in eastern Europe, and a general increase in production costs due to high energy prices. According to the National Bureau of Statistics (NBS), the headline index steadily rose to 21.47 per cent in November 2022 before easing to 21.34 per cent in December 2022. The index averaged 18.85 per cent in 2022 compared to 16.95 per cent recorded in 2021. Although headline inﬂation showed signs of moderation in December 2022, it remained signiﬁcantly above the growth-aiding threshold of 6-9 per cent set by the Central Bank of Nigeria (CBN) and reached multi-decade highs in many other countries. To rein in inﬂation and maintain price stability globally, central banks across economies embarked on a rapid and synchronised tightening of monetary conditions not seen over the past ﬁve decades. On the domestic front, the Monetary Policy Committee (MPC) of the CBN raised the benchmark interest rate, Monetary Policy Rate (MPR), four consecutive times to 16.5 per cent. The committee also increased the Cash Reserve Requirement (CRR) by 500 basis points to 32.5 per cent. These hikes were aimed at reducing the negative real interest rate gap and inﬂationary pressure. However, other monetary policy parameters were held constant, with the asymmetric corridor around the MPR retained at +100/-700 basis points and the Liquidity Ratio (LR) maintained at 30 per cent. Despite signiﬁcant ﬂuctuations, global oil prices experienced a second straight year of gains in 2022. U.S. West Texas Intermediate (WTI) and Brent crude oil averaged $95.73/b and $100.61/b, respectively. The ﬁrst half of the year saw a price surge as Russia’s invasion of Ukraine disrupted global crude ﬂows, with Brent reaching its highest price since 2008 at $139.13/b. However, central bank interest rate hikes in the second half of the year caused prices to cool down and raised concerns about a recession. Brent gained about 10 per cent for the year, following a 50 per cent increase in 2021, while U.S. WTI rose nearly 7 per cent in 2022, after a 55 per cent gain in the previous year. The foreign exchange market continued to experience pressure in 2022. This was largely due to the high demand for dollars, a rising global inﬂation rate, and a decline in forex inﬂow from foreign capital ﬂows, remittances, and oil exports. As of December 2022, the exchange rate stood at NGN461.1/$1 at the Investors’ and Exporters’ (I&E) Window, while banks continued to sell foreign currencies to retail customers following the ban of Bureau De Change (BDC) Operators by the Central Bank of Nigeria (CBN). To manage demand pressure and maintain exchange rate stability, the CBN continued to implement its managed-ﬂoating exchange rate regime with regular interventions in the foreign exchange market. foreign exchange Consequently, Nigeria’s reserves signiﬁcantly depleted in 2022, according to data from the Central Bank of Nigeria (CBN). The country’s foreign reserves closed at $37.08 billion, having declined by $3.44 billion from $40.52 billion at the beginning of the year. 27 Zenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B Slower forex inﬂow from foreign capital ﬂows, remittances, and oil exports contributed to the decline in Nigeria’s stock of foreign reserves. the Bank’s total assets grew by 30 per cent from NGN 9.45 trillion to NGN 12.28 trillion, while shareholders’ funds rose by 7.76 per cent from NGN 1.28 trillion to NGN 1.38 trillion. During the year under review, the Federation Account Allocation Committee (FAAC) disbursed NGN11.69 trillion as allocations to the three tiers of government. This ﬁgure represents a 43.6% increase compared to the NGN8.14 trillion shared in the preceding year, attributable to improved government oil and non-oil revenue receipts. Despite dire macroeconomic conditions and global volatility, the Nigerian Exchange (NGX) closed 2022 with a positive return. For investors in the Nigerian stock market, 2022 represents an improvement over 2021 in terms of nominal price appreciation. Speciﬁcally, the All-Share Index (ASI) appreciated by 19.98%, rising from 42,716.44 index points at the start of the year to 51,251.06 index points by year-end. Market capitalisation also recorded a 25.20 per cent appreciation, closing at NGN27.915 trillion, up from NGN22.297 trillion at the start of the year. During the year, the market faced challenges such as foreign investors’ exit due to scarcity of foreign exchange and aggressive hikes in the Monetary Policy Rate (MPR), among others. FINANCIAL RESULTS The year 2022 presented several challenges for operators in the Nigerian banking industry due to various supervening factors in the global and domestic environment. However, despite these challenges, we were able to leverage inherent opportunities within the business environment to record a performance that further attests to our resilience as a brand. The result is a manifestation of the remarkable ﬁnancial health of the Bank and the Group. The Group’s gross earnings grew by 24 per cent from NGN 765.56 billion in 2021 to NGN 945.55 billion in 2022. Proﬁt-Before-Tax (PBT) rose by 2 per cent from NGN 280.37 billion in 2021 to NGN 284.65 billion in 2022, while Proﬁt- After-Tax (PAT) fell by 8 per cent from NGN 244.56 billion in 2021 to NGN 223.91 billion in 2022. Total deposits were NGN 8.97 trillion for the year ended December 31st, 2022, representing a 38.7 per cent increase over the previous year’s ﬁgure of NGN 6.47 trillion. During the same period, DIVIDEND At Zenith Bank, we remain 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. Despite the macroeconomic headwinds, we declared and paid an interim dividend of 30 kobo per share in the course of the 2022 ﬁnancial year. We hereby propose a ﬁnal dividend of NGN 2.90 per share. If approved, this will bring the total dividend for the year ended December 31st, 2022, to NGN 3.20 per share. THE BOARD OF DIRECTORS In 2022, Zenith Bank appointed Mrs. Adobi Stella Nwapa and Mr. Anthony Akindele Ogunranti as Executive Directors, while Mr. Peter Olatunde Bamkole and Mr. Chuks Emma Okoh were appointed as Independent Non-Executive Directors and Non-Executive Director, respectively. These appointments were approved by the Central Bank of Nigeria (CBN) eﬀective April 12th, 2022. Meanwhile, two Executive Directors, Mr. Ummar Shuaib Ahmed and Mr. Dennis Olisa retired from the Board on December 28th, 2022, following the expiration of their tenure. INVESTMENT IN TECHNOLOGY Zenith Bank remains committed to setting the pace invested in ﬁnancial technology. As such, we have signiﬁcantly in new technologies and digital solutions, in line with our commitment to creating value for our esteemed customers through innovative products and solutions that cater to their diverse needs. CORPORATE SOCIAL RESPONSIBILITY Zenith Bank is committed to building a more balanced, fairer, and inclusive economy, which is why we continue to internalise sustainability principles in our business operations and investment decisions, in line with global 28 Founder And Chairman’s Statement best practices. In 2022, we made considerable progress in this regard, bearing in mind our role in accelerating the achievement of the United Nations Sustainable Development Goals (SDGs). sports development, Our Corporate Social Responsibility initiatives are targeted at health, education, women and youth empowerment, and public infrastructure enhancement. In the course of the year, we invested NGN1.671 billion in these focus areas across the country. We believe that institutions’ social investments, contributions inclusive economic growth and development, as well as improvements in the physical environment, all constitute the balanced scorecard. As a testament to our achievements in this aspect, Zenith Bank won the awards for “Best Company in Technology for Development” and “Best Company in Workplace Practice” at the 2022 Sustainability, Enterprise, and Responsibility Awards (SERAs). to MACROECONOMIC OUTLOOK The outlook for the domestic and global economy remains uncertain amid the heightened global recession risk. The Nigerian economy is expected to continue to grow through 2023 but at a subdued pace. The World Bank expects a 2.9 per cent expansion, while the CBN forecasts a 3.03 per cent growth rate. Headwinds to growth remain persistent high inﬂation, perennial scarcity of Premium Motor Spirit (PMS), high energy prices, the rising cost of debt servicing, and deteriorating ﬁscal balances, among others. The Federal Government of Nigeria (FGN) 2023 budget has an aggregate expenditure estimate of NGN21.83 trillion, representing a 27 per cent increase compared to the NGN17.13 trillion budget for the 2022 ﬁscal year. The budget is predicated on crude oil production estimate of 1.69 million barrels per day, an exchange rate of NGN435.57/$1, real GDP growth of 3.75 per cent, and an inﬂation rate of 17.16 per cent. The budget deﬁcit is estimated at about NGN11.34 trillion and will be ﬁnanced mainly by new borrowings totalling NGN8.80 trillion, NGN206.18 billion from Privatization Proceeds, and NGN1.77 trillion drawdowns on loans secured for speciﬁc development projects. On the global front, the outlook of the global economy in the short to medium-term remains clouded by uncertainties associated with lingering headwinds from the Russia-Ukraine conﬂict and the residual impact of the COVID-19 pandemic. Also, the growth outlook is dampened by tightening global ﬁnancial conditions with elevated shocks to foreign capital ﬂows, the high level of corporate and public debt with a heightened risk of a global ﬁnancial meltdown, and the high level of inﬂation across several economies. Overall, the economic prospect in 2023 remains that of cautious optimism. APPRECIATION The year 2022 was a challenging but successful year for us as a Bank. Our superior performance recorded in the year was made possible by the collective eﬀorts of all our stakeholders. I am grateful to our customers for their steadfast loyalty, our staﬀ and Management for their dedication and commitment, and our Board for continually guiding the Bank along the path of sustained growth and prosperity. I welcome you to the 2023 ﬁnancial year with the ﬁrm assurance of continued excellent performance by our Bank. Thank you. JIM OVIA, CFR Founder and Chairman 29 Zenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B 30 DR. EBENEZER ONYEAGWU Dear shareholders, I am pleased to welcome you to the 32nd Annual General Meeting of our Bank. The global economy was beset by a range of challenges in 2022 that disrupted growth expectations. These included rising food and energy costs due to the Russia-Ukraine conﬂict, the sentiments associated with election cycles, and monetary policy tightening. As a result, the International Monetary Fund (IMF) estimated global economic growth of 3.4 per cent in 2022, down 45.2 per cent from 6.2 per cent in 2021. On the domestic front, the Nigerian economy maintained a positive trajectory in 2022, albeit at a slower pace, after exiting recession in 2020. The National Bureau of Statistics (NBS) reported that Gross Domestic Product (GDP) grew by 3.10 per cent in 2022, a decline of 8.8 per cent from the 3.4 per cent growth recorded in 2021. Economic performance was hampered by weak oil inﬂationary pressures, production, insecurity, and ﬂooding that inhibited agricultural productivity in several states of the federation. Additionally, tightening global ﬁnancial conditions and recession fears limited the ﬂow of investment into key sectors of the economy. One of the macroeconomic challenges the Central Bank of Nigeria (CBN) had to respond to in 2022 was maintaining price stability, with the inﬂation rate climbing to 21.34 per cent as at December 2022. The inﬂation was caused by a disruption in food production activities, the Russia-Ukraine conﬂict, and an uptick in importation costs. The Monetary Policy Committee (MPC) of the CBN raised the Monetary Policy Rate (MPR) four consecutive times to 16.5 per cent while increasing the Cash Reserve Requirement (CRR) by 500 basis points to 32.5 per cent. In a bid to rein in spiralling inﬂation, the CBN increased the interest rates on its intervention loans to 9 per cent from 5 per cent. The CBN also redesigned the Naira and updated cash withdrawal limits to gain control of currency in circulation and deepen the nation’s cashless policy. Amidst the headwinds to growth in the past year, we remained dedicated to creating value for our customers through our innovative suite of products and services. We supported clients across various sectors of the economy to weather the uncertain Group Managing Director/Chief Executive Oﬃcer business environment while enabling them to achieve their growth ambitions. Our services played a vital role in stabilising small businesses, helping them with post pandemic recoveries and positioning them for growth. Additionally, our interventions provided a platform for businesses to network and access emerging opportunities. The Bank successfully held its 7th Annual Export Seminar, a ﬂagship platform for canvassing and initiating trade policies while facilitating engagement between the key stakeholders in the Non-oil Export Sector. The Zenith Bank Tech Fair 2022, themed Future Forward 2.0, featured enriching presentations, panel discussions, the Zecathon, and exhibitions. The Bank is committed to incubating and mentoring the laureates that come through its digital entrepreneurship initiatives to ensure their growth. All the success we recorded in the past ﬁnancial year was only possible with the synergy between our people, technology infrastructure, and innovative services. Our highly talented team is committed to sustained innovative initiatives for continued value creation for our customers. We are relentless in delivering excellent services, which is one of the Bank’s hallmarks. Zenith Bank believes that technology is an enabler of business, both for us and our clients. Consequently, we are making robust investments in our technology infrastructure to make it ﬁt for the future. We are implementing a migration to a new enterprise software architecture as part of our digital transformation initiative as we strive to maintain our leadership in the digital ﬁnancial services space. Through our investments in technology, we are conﬁdent that we will maintain our ability to innovate and deepen our overall digital payments suite and oﬀerings, creating omni channels for digital service delivery. As a testament to our outstanding accomplishments in 2022, Zenith Bank received several domestic and international awards and recognition. These awards include Bank of the Year, Nigeria (The Banker); Biggest Bank in Nigeria by Tier-1 Capital (The Banker); Best Bank in Nigeria (Global Finance Magazine); Best Commercial Bank, Nigeria (World Finance); Best Corporate Governance, Nigeria (World Finance); Best Commercial Bank, Nigeria (International Banker); Best Corporate Governance Financial Services Africa (Ethical Boardroom); Bank of the Year (New Telegraph Newspaper); Best Company in Technology for Development (SERAs); and Best Company in Work Place Practice – SERAs. GMD/CEO’s Review As a leading ﬁnancial institution, we remain committed to addressing the challenges confronting society, as espoused in the Sustainable Development Goals of the United Nations and the Paris Agreement. The Bank has integrated sustainability principles and standards into its business operations and investment decisions because we subscribe to the principle of the Triple Bottom Line: People, Planet, and Proﬁt. We strongly believe that businesses should strive to deliver positive social, environmental, and economic impact. We are poised to deepen our sustainable banking practices and commitments. The outlook for the global economy and Nigeria is cautiously optimistic despite concerns about the trajectory of the Russia-Ukraine conﬂict and the risk of a global ﬁnancial contagion due to ﬁnancial fragilities in the United States and Switzerland. In its January 2023 World Economic Outlook Update report, the International Monetary Fund (IMF) noted that the global outlook is less gloomy than its October 2022 forecast, representing a turning point, with growth bottoming out and inﬂation declining. The IMF expects that global growth will slow from 3.4 per cent in 2022 to 2.9 per cent in 2023 due to eﬀorts to rein in inﬂation and the Russia-Ukraine conﬂict, which are expected to weigh on economic activities. Against this backdrop, the IMF projects that the Nigerian economy will grow by 3.2 per cent in 2023, up by 0.2 per cent from its October 2022 forecast. The Nigerian economy is also expected to beneﬁt from robust commodities trade and dynamic consumer goods and services markets in 2023, although there are downside risks, including high inﬂation, power supply challenges, and deteriorating ﬁscal balances. Overall, we are optimistic about the future, and Zenith Bank is well- positioned to take advantage of emerging growth opportunities. We will continue to make the necessary investments and sustain our sound risk management and corporate governance practices that have given us an edge as we create enduring value for all our stakeholders. Thank you. DR. EBENEZER ONYEAGWU Group Managing Director / CEO 31 (cid:51)es(cid:86)(cid:77)ts(cid:3)(cid:66)t(cid:3)(cid:66)(cid:3)(cid:40)(cid:77)(cid:66)n(cid:68)e(cid:16) (cid:76)e(cid:90)(cid:3)(cid:49)e(cid:83)(cid:71)o(cid:83)(cid:78)(cid:66)n(cid:68)e(cid:3)(cid:42)n(cid:69)(cid:74)(cid:68)es 4 Board of Directors Zenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B 34 JIM OVIA, CFR Jim Ovia, CFR is the founder and chairman of Zenith Bank Plc, one of Africa’s largest banks with over $26.64 billion in assets and shareholders’ funds of US$2.99 billion as at December, 2022. Zenith Bank is a global brand listed on the London Stock Exchange and the Nigerian Stock Exchange. In addition to major operations in Nigeria and other West African countries, the Bank has sizeable operations in London and Dubai. Jim Ovia, CFR is the founder and chancellor of James Hope University Lekki, Lagos which was recently approved by the National Universities Commission (NUC) to oﬀer postgraduate degrees in business courses. James Hope University will commence academic activities in September 2023. Through his philanthropy – the Jim Ovia Foundation – he has shown the importance he accords good education. In support of the Nigerian youth, Jim Ovia Foundation oﬀers scholarships to indigent students through the Mankind United to Support Total Education (MUSTE) initiative. Most of the beneﬁciaries of Jim Ovia Foundation scholarship are now accountants, business administrators, lawyers, engineers, doctors etc. He is the author of “Africa Rise And Shine”, published by ForbesBooks. The book which encapsulates Zenith Bank’s meteoric rise, details the secrets of success in doing business in Africa. He is an alumnus of the Harvard Business School (OPM), University of Louisiana (MBA), and Southern University, Louisiana, (B.Sc. Business Administration). Jim Ovia, CFR is a member of the World Economic Forum Community of Chairpersons, and a champion of the Forum’s EDISON Alliance. In recognition of Jim Ovia’s contributions to the economic development of Nigeria, in 2011 the Federal Government of Nigeria honoured him with Commander of the Order of the Niger, CON. Also, in 2022, the Federal Government of Nigeria honoured him with Commander of the Federal Republic, CFR. Founder and Chairman DR. EBENEZER ONYEAGWU Dr. Ebenezer Onyeagwu was appointed Group Managing Director/CEO of Zenith Bank Plc on the 1st of June 2019. He is a seasoned banker and an astute ﬁnancial strategist with over three decades of banking experience. He is an alumnus of Auchi Polytechnic, Delta State University Nigeria, the University of Oxford, England and Salford Business School, University of Salford, Manchester, United Kingdom. At the University of Oxford, he obtained a Postgraduate Diploma in Financial Strategy and a certiﬁcate in Macroeconomics while he received a Masters Degree in Financial Services Management from the University of Salford. He also holds an MBA from Delta State University, Abraka. 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. In March 2023, the University of Nigeria, Nsukka – Nigeria’s ﬁrst indigenous university, honoured him with the Doctor of Business Administration degree during the 50th convocation ceremony of the university. Before joining Zenith Bank Plc, he worked at Citizens International Bank Limited between 1991 and 2002. 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. He was appointed Executive Director of the bank in 2013, responsible for 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. Dr. Onyeagwu was named Deputy Managing Director of the bank in 2016. In that capacity, he deputised for the Group Managing Director and Chief Executive Oﬃcer with direct oversight of the bank’s Financial Control and Strategic Planning, Risk Management, Retail Banking, Institutional and Corporate Banking Portfolios, Information Technology Group, Credit Administration, and Treasury & Foreign Exchange Trading. Dr 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 and Lagos State Security Trust Fund (LSSTF). Dr. Onyeagwu is a member of the International Monetary Conference (IMC), Wall Street Journal CEO Council, and member of the African Trade Gateway Advisory Council of the Africa Export-Import Bank (Afreximbank). He also served on the board of Zenith Bank Ghana Limited, Zenith General Insurance, Zenith Securities Limited, Zenith Assets Management Company, Zenith Medicare Limited, and Africa Finance Corporation (AFC). Dr. Onyeagwu is a Fellow (FCA) of the Institute of Chartered Accountants of Nigeria (ICAN), 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). 35 Group Managing Director/Chief Executive OﬃcerZenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B DAME (DR.) ADAORA UMEOJI, OON With over 20 years of cognate banking and broad executive management experience, Dame (Dr.) Adaora Umeoji, OON rose through the ranks to her current position. She is an alumnus of Harvard Business School; she holds a Bachelor’s degree in Sociology from the University of Jos, a Bachelor’s degree in Accounting and a ﬁrst-class honours in Law from Baze University Abuja. She also holds a Master of Laws from the University of Salford, United Kingdom, and a Master in Business Administration (MBA) from the University of Calabar. She is a graduate of the Advanced Management Program (AMP) from Harvard Business School, a graduate of the Global Banking Program from Columbia Business School and holds a doctorate in Business Administration from Apollos University, USA. Her dissertation was on inspirational leadership and her ﬁndings have been recognized as a major contribution to leadership and people management. the strategic She attended thinking and management programme at Wharton Business School, USA, and holds a Certiﬁcate in Economics for Business from the prestigious MIT Management Sloan School and a Certiﬁcate in Leading from Harvard Business School, USA. Global Businesses She is a fellow of notable professional bodies including the Chartered Bankers Institute of London, the Chartered Institute of Bankers of Nigeria, the Institute of Credit Administration, the Institute of Certiﬁed Public Accountants of Nigeria, the Institute of Chartered Meditators & Conciliators, and the Institute of Chartered Secretaries & Administrators of Nigeria, among others. She has presented lead papers at major academic conferences and symposia. 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. 36 Dame (Dr.) Adaora Umeoji, OON has at diﬀerent times participated in high-level Bankers’ meetings with impactful contributions towards the advancement of the banking industry, 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, OON supports research and learning on inspirational leadership, mentorship, talent development, collaboration, change and adaptability, strategic thinking, innovation and creativity, amongst others. She promotes the Pink Breath Cancer Care Foundation which supports several healthcare programs within the six geopolitical zones of Nigeria. She has won numerous awards for excellence and creativity in management. Her contribution towards improving humanity has been recognized by various organizations including the Nigerian Red Cross. As a result of her passion for promoting professionalism in the banking industry and improving the well-being of the less privileged, Dr. Adaora Umeoji, OON founded the Catholic Bankers Association of Nigeria (CBAN), a platform she uses to promote ethical banking and service to humanity. Dame (Dr.) Adaora Umeoji, OON is a Peace Advocate of the United Nations (UN-POLAC), a Lady of the Order of Knights of St. John International (KSJI), and was recently awarded a Papal Knight of the Order of St. Sylvester by His Holiness Pope Francis. In 2022, the Federal Government of Nigeria honoured her with Oﬃcer of the Order of the Niger, OON, as a recognition of her contributions to nation-building. Deputy Managing Director GABRIEL UKPEH 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 PricewaterhouseCoopers (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 Administration 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. 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 Engineer. 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. ENGR. MUSTAFA BELLO He has attended several conferences, missions and meetings and represented the Federal Government of Nigeria. 37 Non-Executive DirectorNon-Executive DirectorZenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B DR. AL-MUJTABA ABUBAKAR, MFR 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 Chartered Accountant and a Fellow of the Institute of Chartered Accountants of Nigeria. Dr. Abubakar has extensive and tremendous experience in the ﬁnancial 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 Africa 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 programmes 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. In 2022, the Federal Government of Nigeria honoured him with Member of the Federal Republic. Dr. Omobola Ibidapo-Obe Ogunfowora, a Legal Practitioner and Corporate Governance Practitioner, graduated LLB (Hons) from the Cardiﬀ Law School, United Kingdom and obtained LLM from the same University. She obtained a Master’s degree (MRes) from the Queen Mary University of London, United Kingdom in 2010 and subsequently advanced to the Middlesex University, London, United Kingdom for her Doctorate degree and graduated with PhD in Competition Law. Dr. Ibidapo-Obe Ogunfowora was a Law Lecturer at the University of Lagos, Nigeria where she lectured at the Department of Commercial and Industrial Law. She has been a Legal Counsel with Olusola Ibidapo-Obe & Co., Legal Practitioners for almost two decades and also a Dispute Resolution Compliance Specialist with Ombudsman Services, United Kingdom. She had previously worked as a Research Assistant with the Lagos State Judiciary between February 2003 and August 2004. She is a Non-Executive Director with Barton Schools, Lagos, Nigeria, where she is responsible for overseeing the long term development of the schools and provide strategic advisory services to ensure sustainability of the schools. Dr. OMOBOLA IBIDAPO-OBE OGUNFOWORA Dr. Ogunfowora is a Corporate Governance Practitioner. 38 Non-Executive DirectorNon-Executive Director DR. PETER OLATUNDE BAMKOLE Dr. Peter Olatunde Bamkole graduated with B.Sc (Hons) Mechanical Engineering from the University of Greenwich, London, United Kingdom in 1984, holds an Executive MBA from IESE Spain/Lagos Business, Lagos (1999) and a PhD in Entrepreneurship and Innovation from International School of Management, Paris in 2022. Dr. Bamkole joins the Board of Zenith Bank Plc with robust experience spanning several sectors including oil and gas, public utilities, and executive education. He worked as in African Petroleum Plc between 1985 and 1986 as a Technical Sales and Services Engineer, north and with Elf Oil Nigeria now Total Nigeria Plc between October 1986 and April 1996. He also served as an Assistant General Manager with Lagos State Water Corporation between 1996 and 2002. Dr. Bamkole has been with the Pan-Atlantic University since January 2003 where he served as the pioneer Director of the Enterprise Development Centre of the University. He was appointed the Chief Operating Oﬃcer of Pan-Atlantic University in January, 2023. He is currently serving in the following capacities: • Advisory Board Chair of International Breweries Foundation. • Board Chair of Nigeria Climate Innovation Center. • BOT Chair, Global Entrepreneurship Network, Nigeria. • Board member of AIFA Reading Society. • Member, Lagos State Science, Research and Innovation Council (LASRIC). • Board Member, Novare Real Estate Companies in Nigeria Mr. Okoh graduated from the University of Nigeria, Nsukka, (BSc) in 1987 with several academic laurels to his credit including the overall best graduating student in Accounting. He is a Fellow of the Institute of Chartered Accountants of Nigeria (FCA) with over thirty (30) years cognate experience in the Banking industry & Telecommunications sector. Mr. Okoh has varied experience spanning the areas of Finance, Internal Audit, Risk Management, Compliance, Operations & Strategic Management. He comes with deep insight and has distinguished himself in various leadership roles and is a recipient of several Service Excellence & Exceptional Performance awards from the ﬁnancial services sector and the telecommunication sector. Mr. Okoh has attended various management development programmes at renowned educational Institutions including Cranﬁeld University School of Management, UK and INSEAD, France. He is an Alumnus of the prestigious Wharton Business School, University of Pennsylvania, USA and Lagos Business School. CHUKS EMMA OKOH 39 Non-Executive DirectorIndependent Non-Executive DirectorZenith Bank Plc Annual Report December 31, 2022 s r o t c e r i D f o d r a o B DR. TEMITOPE FASORANTI Dr. Temitope Fasoranti is a seasoned banker with over three decades of experience in the Nigerian ﬁnancial services industry. He is an alumnus of the Obafemi Awolowo University (OAU) Ile-Ife, where he received a Bachelor’s Degree in Economics (1988), a Master’s Degree in Economics (1991) and a Doctor of Philosophy Degree (PhD) in Economics. He worked in FBN Merchant Bankers from 1991 to 1997 before joining Zenith Bank in 1997. Prior to his appointment as Executive Director in December 2017, he was a General Manager/Group Zonal Head overseeing several branches and zones in Lagos State, including Ikeja Zone, Apapa Zone, Ilupeju Zone, and South-West region. He also served as the Group Head of strategic business units in the head oﬃce, including Oil & Gas, Conglomerate Group, and Agriculture Desk. Dr. Fasoranti’s experience spans Treasury Management, Corporate Finance, Corporate Banking, Risk Management and Retail Banking. He is also vastly experienced in managing Fintech relationships, with competences in cards, electronic banking and payment systems. He currently oversees Retail Marketing, Trade Services, Credit Risk and Management Group, Research, Card Services, Contact Centre, Digital Marketing, Diaspora Banking, ESettlement and a host of core marketing groups. He is responsible for driving the Bank’s Retail and Fintech strategy. He has also received executive-level education and attended several international courses and programmes, including Changing The Game: Negotiation and Competitive Decision Making (Harvard Business School), Creating and Leading High-Performance Teams (The Wharton School, Pennsylvania, USA), and Developing Strategy for Value Creation (London Business School). Dr. Fasoranti is a member of the Nigerian Economic Society (NES), Nigerian Institute of Management (NIM), the Institute of Credit Administration, and an honorary member of the Chartered Institute of Bankers of Nigeria (CIBN). He sits on the board of Zenith Pensions Custodian Limited. And was recently appointed a member of the MasterCard Africa Leadership Council. Henry Oroh holds a Bachelor’s Degree in Accounting from the University 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 honorary member of the Chartered Institute of Bankers (CIBN), Nigeria. He has over two decades of banking experience. He began his banking 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 expertise 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 Executive 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 Business School, New York, University of Chicago, University of Pennsylvania, HEC Paris, JP Morgan Chase, UK and the Lagos Business School. HENRY OROH He brings to the Board of Zenith Bank Plc strong competencies in Credit & Marketing, Operations, Information Technology, Treasury and impressive Leadership skills. 40 Executive DirectorExecutive Director Mrs. Adobi Stella Nwapa holds a Bachelor’s Degree (BA) in History from Imo State University, a Master’s in Public Administration (MPA) from Strayer University, Houston-Texas, a Master’s in Business Administration (MBA) from Jack Welch Management Institute and an honorary doctorate in Business Administration (DBA) from Abia State University. She has attended several local and international including Leading Change and courses and programmes, Organisational Renewal (Harvard Business School), Key Executive Programme (Harvard Business School), World Finance/Winning Negotiation Strategies (HSM Americas), Developing Strategies for Value Creation (London Business School) and the Senior Management Programme (Lagos Business School). She is a Fellow of several institutes, including the Institute of Management Consultants (IMC), the Institute of Credit Administration (ICA), the Institute of Chartered Management Accountants (ICMA) and the Institute of Management Specialists (IMS), United Kingdom. She is also a member of the Nigeria Institute of Management (NIM) and an honorary member of the Chartered Institute of Bankers (HCIB). Mrs. Nwapa comes to the board of Zenith Bank Plc with over thirty years’ cognate experience in banking, being a pioneer staﬀ of the Bank since 1990. She has held several senior management positions in the Bank, including business development and branch and zonal management, and treasury. Until her appointment as Executive Director, she was General Manager and Group Zonal Head of Ikoyi Zone as well as Group Head of Diaspora Banking. Mr. Ogunranti Akindele is a consummate professional banker with expertise across Banking Operations, Corporate, Commercial, Retail and Branch Banking, Multilaterals, Power & Infrastructure, Oil & Gas, Public Sector, Structured Trade & Project Finance, as well as General Management. He holds a B.Sc. (Hons) in International Relations from the Obafemi Awolowo University, Ile-Ife, an MBA in Marketing, and M.Sc. in Banking and Finance, University of Ibadan. He has attended the Moody’s Credit Academy, UK, the Executive Development Program (EDP), Wharton Business School, USA and the Leading Change and Organizational Renewal Program (LCOR) at Harvard Business School, USA. Mr. Ogunranti joined Zenith Bank Plc in 2004 as a Senior Manager and has held various leadership positions in the bank. He was General Manager Corporate Banking; Power and Infrastructure Sector; Apapa and Ikeja Zones. Prior to his appointment as Executive Director, he served as the MD/CEO, Zenith Bank Ghana Limited, where he led the Bank to achieve outstanding results. Under his leadership, the bank received several laurels and awards, notable among which was the Bank of the Year 2020 and the Best Bank in Ghana 2021. He was also a two-time winner of the CEO of The Year Award (Banking Category) in Ghana. He is currently a member of the Board of Africa Finance Corporation (AFC), and was until his appointment a Member of the Executive Committee of the Ghana Association of Bankers (GAB) and a Member of the Governing Council, of the National Banking College, Ghana. He was also conferred with the Distinguished Alumnus Award 2021, by the Obafemi Awolowo University, Ile-Ife. He is an Honorary Senior Member of Chartered Institute of Bankers of Nigeria (HCIB), Honorary Fellow Chartered Institute of Credit Management, Ghana (FCICM) and a Member Nigeria Institute of Management (MNIM). 41 ADOBI NWAPA ANTHONY AKINDELE OGUNRANTI Executive DirectorExecutive DirectorZenith Bank Plc Annual Report December 31, 2022 Directors’ Report for the Year Ended 31 December, 2022 The directors present their report on the aﬀairs of ZENITH BANK PLC (“the Bank”), together with the ﬁnancial statements and the independent auditor’s report for the year ended 31 December 2022. 1. Legal form The Bank was incorporated in Nigeria under the Companies and Allied Matters Act as a private limited liability company on 30 May,1990. It was granted a banking licence in June 1990, to carry on the business of commercial banking and commenced business on June 16, 1990. The Bank was converted into a Public Limited Liability Company on 20 May 2004. The Bank’s shares were listed on the ﬂoor of the Nigerian Stock Exchange on 21 October 2004. In August 2015, the Bank was admitted into the premium Board of the Nigerian Stock Exchange. 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. 2. Principal activities and business review The principal activity of the Bank is the provision of banking and other ﬁnancial services to corporate and individual customers. Such services include obtaining deposits from the public, granting of loans and advances, corporate ﬁnance and money market activities. The Bank has six subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pensions Custodian Limited, Zenith Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, Zenith Bank (The Gambia) Limited and Zenith Nominees Limited. During the year, the Bank opened three new branches and no branch was closed. As at 31 December 2022 the Group had 446 branches, 166 cash centers; 2,108 ATM terminals; 233,024 POS terminals and 21,832,175 cards issued to its customers. (31 December 2021: 443 branches, 188 cash centers, 2,086 ATM terminals, 163,398 POS terminals and 14,743,191 cards issued). 3. Operating results Gross earnings of the Group increased by 23.5% and proﬁt before tax increased by 1.5% . Highlights of the Group’s operating results for the period 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 credit risk reserve Transfer to retained earnings and other reserves Basic and diluted earnings per share (Naira) 42 31-Dec-22 N' Million 945,554 284,650 (60,739) 223,911 (139) 224,050 35,419 73,458 115,173 224,050 7.14 31-Dec-21 N' Million 765,558 280,374 (35,816) 244,558 156 244,402 44,686 19,580 180,136 244,402 7.78 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 N2.90 per share which in addition to the N0.30 per share as interim dividend amounts to N3.20 per share (2021: Interim dividend of N0.30 per share), ﬁnal dividend of N2.80 and a total dividend per share of N3.10 from the retained earnings account as at 31 December 2022. This will be presented for ratiﬁcation by the shareholders at the next Annual General Meeting. Payment of dividends is subject to witholding tax 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 Number of Shareholding 31 December, 2022 31 December, 2021 Director Designation Direct Indirect Direct Indirect Dr Al-Mujtaba Abubakar, MFR Non Executive Director / Independent Dr Omobola Ibidapo-Obe Ogunfowora Non Executive Director / Independent Dr Peter Olatunde Bamkole Non Executive Director / Independent Jim Ovia, CFR. Prof. Chukuka Enwemeka Mr Jeﬀrey Efeyini Mr. Chuks Emma Okoh Mr Gabriel Ukpeh Engr. Mustafa Bello Dr Ebenezer Onyeagwu Dr Adaora Umeoji, OON. Mr Umar Shuaib Ahmed Dr Temitope Fasoranti Mr Dennis Olisa Mr Henry Oroh Mrs Adobi Nwapa Mr Akindele Ogunranti Chairman / Non-Executive Director 3,546,199,395 1,528,304,916 3,546,199,395 1,525,904,916 Non-Executive Director** Non Executive Director** Non-Executive Director* Non Executive Director Non Executive Director / Independent 127,137 541,690 102,697 32,660 - - - - 127,137 541,690 - 32,660 - - - - 65,062,844 - - - - - - - - - - - - - - - - - Group Managing Director 82,176,078 Deputy Managing Director**** 68,873,169 1,710,123 68,873,169 1,710,123 Executive Director*** Executive Director Executive Director*** Executive Director Executive Director* Executive Director* 19,082,031 13,075,000 16,770,000 9,964,127 11,008,206 2,764,005 14,077,343 11,075,000 14,125,000 9,964,127 8,449,206 764,005 * Appointed to the Board eﬀective 12 April 2022 **Retired from the Board eﬀective 1 July 2022 ***Retired from the Board eﬀective 28 December 2022 ****Retired from the Board eﬀective 24 February 2023 43 Zenith Bank Plc Annual Report December 31, 2022 Directors’ Report for the Year Ended 31 December, 2022 The indirect holdings relate to the holdings of the director in the underlisted companies: • • Jim Ovia, CFR: (Institutional investors Ltd, Lurot Burca Ltd, Jovis Nigeria Ltd, Veritas Registars Ltd, Quantum Zenith Securities Ltd) Adaora Umeoji, OON: (Palais Vendome Limited) 6. Directors’ Remuneration The Bank ensures that remuneration paid to its Directors complies with the provisions of the Code of Corporate Governance issued by its regulators. In compliance with Section 34(5) of the Code of Corporate Governance for Public Companies as issued by Securities and Exchange Commission, the Bank makes disclosure of the remuneration paid to its directors as follows: Type of package Fixed Description - Part of gross salary package for Executive Directors only. Reﬂects the banking industry competitive salary package and the extent to which the Bank’s objectives have been met for the ﬁnancial year. Timing Paid monthly during the ﬁnancial year. - Part of gross salary package for Executive Directors only. Reﬂects the banking industry competitive salary package and the extent to which the Bank’s objectives have been met for the ﬁnancial year. Paid at periodic intervals during the ﬁnancial year. -Paid to executive directors only and tied to performance of the line report. It is also a function of the extent to which the Bank’s objectives have been met for the ﬁnancial year. Paid annually in 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 7. Changes on the Board The following changes to the board occured during the year. (i) Mr. Chuks Emma Okoh, FCA was appointed as non-executive director, eﬀective 12 April 2022 (ii) Mr. Peter Olatunde Bamkole was appointed Independent non-executive director, eﬀective 12 April 2022 (iii) Mrs. Adobi Nwapa and Mr Akindele Ogunranti were appointed as executive directors, eﬀective 12 April 2022 (iv) (v) Mr. Umar Shuaib Ahmed and Mr Dennis Olisa retired from the Board with eﬀect from 28 December,2022 (vi) Engr. Mustapha Bello was reclassiﬁed from INED to NED with eﬀect from 19 December 2022. Prof. Chukuka Enwemeka and Mr Jeﬀrey Efeyini retired from the Board eﬀective 1 July 2022 8. Directors’ interests in contracts 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. 9. Acquisition of own shares The shares of the Bank are held in accordance with the Articles of Association of the Bank. The Bank has no beneﬁcial interest in any of its shares. 10. Property and equipment Information relating to changes in property and equipment is given in Note 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. 44 11. Shareholding analysis The shareholding pattern of the Bank as at 31 December 2022 is as stated below: Share range No. of Shareholders Percentage of Shareholders Number of holdings Percentage Holdings (%) 1-10,000 10,001 - 50,000 5,001 - 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 1,000,000,000 540,735 79,892 23,183 1,341 174 170 65 2 645,562 83.7619 % 12.3756 % 3.5911 % 0.2077 % 0.0270 % 0.0263 % 0.0101 % 0.0003 % 100 % 1,594,624,498 1,652,248,795 3,968,693,955 2,745,286,982 1,227,788,415 3,688,327,472 11,691,005,260 4,828,518,410 31,396,493,787 5.08 % 5.26 % 12.64 % 8.74 % 3.91 % 11.75 % 37.24 % 15.38 % 100 % The shareholding pattern of the Bank as at December 31, 2021 is as stated below: Share range No. of Shareholders Percentage of Shareholders Number of holdings Percentage Holdings (%) 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 1,000,000,000 539,921 79,676 22,690 1,252 184 168 72 2 643,965 83.8432 % 12.3727% 3.5235 % 0.1944 % 0.0286 % 0.0261 % 0.0112 % 0.0003 % 100 % 1,595,654,831 1,644,838,601 3,846,174,546 2,625,604,697 1,276,980,061 3,610,190,362 11,968,532,279 4,828,518,410 31,396,493,787 5.08 % 5.24 % 12.25 % 8.36 % 4.07 % 11.50 % 38.12 % 15.38 % 100 % 12. Substantial interest in shares According to the register of members as at 31 December, 2022, the following shareholders held more than 5% of the issued share capital of the Bank. Jim Ovia, CFR Number of Shares Held Number of Shares Held 3, 546,199,395 11.29 % According to the register of members at 31 December 2021, the following shareholders held more than 5% of the issued share capital of the Bank. Jim Ovia, CFR 3, 546,199,395 11.29 % 45 Zenith Bank Plc Annual Report December 31, 2022 Directors’ Report for the Year Ended 31 December, 2022 13. Donations and charitable gifts The Bank made contributions to charitable and non-political organisations amounting to N1,671 million during the year ended 31 December 2022 (31 December 2021: N4,372 million). The beneﬁciaries are as follows: Various charity organizations Various state government infrastructure/security trust funds Various educational institutions Various sport organizations Various conferences and seminars Various health/medical initiatives 2022 Microsoft office secured productive enterprise CFA society of Nigeria Ikorodu peace initiative Shared agency network expansion facility(SANEF) FINTECH association of Nigeria University of Lagos alumni association Nigerian content development management board Nigerian bar association Other donations individually below N5million 14. Events after the reporting period 31 December 2022 N’ Million 522 331 171 159 63 54 22 20 20 11 10 8 8 5 267 1,671 On 14 February 2023, the Group exchanged N123.6bln (GHS 2,675,754,659 ) of its existing Government of Ghana bonds for a series of new bonds with maturity dates commencing from 2027 to 2038 under the Ghana Domestic Debt Exchange Programme. The new bonds were successfully settled on the 21st of February 2023 and have been allotted on the Central Securities Depository. The eﬀect of the exchange on impairment of the existing bonds at 31 December 2022 was duly recognised in the consolidated ﬁnancial statements. See disclosure in note 4.1 15. Group’s strategy against the impact of Covid-19 The Group has considered the impact of Covid-19 on its business operations and has put in place appropriate safeguards to minimize negative impact of Covid-19 pandemic on its business. The Group continues to make adjustments to the way and manner in which it renders banking and other ﬁnancial services to its customers in order to cope with the challenges posed by the Covid-19 pandemic. Critical areas of the bank’s business and operation which are closely monitored via-a-vis the threat of posed Covid-19 are; a. Protection of the bank’s cash ﬂow, b. Protection of the bank’s human resources and, c. Enhancement of the digital & electronic platforms of the bank to facilitate fast and seamless banking services to its customers. 46 Protection of the Group’s Cash flow In order to protect the cashﬂow of the Group and prevent a drop in the Group’s earnings, proﬁt and asset quality, the Group has adopted the following strategies: Continuous engagement and monitoring of the bank’s customers in key sectors in order to understand their business progression and recovery in the post pandemic era. Engaging of the bank’s 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. Continuous adoption of a complete and integrated approach to risk management that is driven from the Board level to the operational activities of the bank. Continuous review of the bank’s loan book in order to closely monitor all assets and liabilities classes and ensure that the bank has suﬃcient liquidity to meet its ﬁnancial obligations. Developing and testing several stress scenarios to assess the bank’s liquidity,capital adequacy and earning capacity in a period of post pandemic economic recovery. Update to the bank’s Expected Credit Loss (ECL) model in order to appropriately captures forward looking macro-economic indices which incorporates eﬀects of covid-19. In updating its ECL model, the Group leveraged on guidance from the International Accounting Standard Board (IASB) and the Financial Reporting Council of Nigeria (FRCN) circular “Covid-19 and its impact on the ﬁnancial reporting of entities in Nigeria, guidance for preparers of ﬁnancial statements during Covid-19 period”. Protection of the Group’s Human Resources The Group has put in place measures to protect its employees, customers and other stakeholders of the bank. Some of the measures are: Setting a clear direction and communicating this eﬀectively to all staﬀ and other stakeholders in accordance with our Business Continuity Plan (BCP). The Group continues to encourage electronic self-services for our traditional banking services,while most meetings are held virtually except in exceptional situations. Constant review and strengthening of the Group’s Business Continuity Plan (BCP) to reﬂect the current and potential impacts of Covid- 19 pandemic. The Group also continues to encourage ﬂexible working condition among its employees. Consequently, the Group has made signiﬁcant investment in IT infrastructure that facilitates remote working condition. To complement this, the group increased investment in IT and Cyber Security infrastructure to enable it meet the increasing digital needs of our customers while protecting its organization and customers from all cyber security threats. Enhancement of the Digital & Electronic Platforms of the Group The Group continues to enhance the capabilities of its digital and electronic banking channels. This is to ensure seamless processing of the huge volumes of digital transactions being processed on the bank’s channels. 47 Zenith Bank Plc Annual Report December 31, 2022 Directors’ Report for the Year Ended 31 December, 2022 16. Disclosure of customer complaints in financial statements for the year ended 31 December 2022 Description In millions of Naira Number Amount claimed Amount refunded 31-Dec-22 31-Dec-21 31-Dec-22 N’m 31-Dec-21 N’m 31-Dec-22 N’m 31-Dec-21 N’m Pending complaints brought forward Received Complaints Resolved Complaints 166,314 475,499 472,016 83,899 307,537 225,122 Unresolved Complaints 169,797 166,314 57,515 17,577 43,253 31,839 62,988 35,227 40,700 57,515 13 1,982 22,373 - 13 - 7,012 - 17. Human resources (i) Employment of disabled persons The Group maintains a policy of giving fair consideration to the application for employment made by disabled persons with due regard to their abilities and aptitude. The Group’s policy prohibits discrimination against disabled persons in the recruitment, training and career development of its employees. In the event of members of staﬀ becoming disabled, eﬀorts will be made to ensure that their employment continues and appropriate training arranged to ensure that they ﬁt into the Group’s working environment. (ii) Health, safety and welfare at work The Group enforces strict health and safety rules and practices at the work environment, which are reviewed and tested regularly. The COVID-19 pandemic also presented an opportunity for the Group to enhance its health and safety protocols in all its operating locations. The Group has retained Hospitals use by 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. (iii) Employee training and development The Group ensures, through various fora, that employees are informed on matters concerning them. Formal and informal channels are also employed in communication with employees with an appropriate two-way feedback mechanism. In acordance 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. 48 {iv) Gender analysis of staff The average number of employees of the Bank during the year by gender and level is as follows: a. Analysis of total employees Gender Number Gender Percentage Employees Male 3,378 3,378 Female 3,322 3,322 Total 6,700 6,700 Male 50% 50% Female 50% 50% b. Analysis of Board and top management staff Gender Number Gender Percentage Male Female Total Male Female Board members (Executive and Non-executive directors) Top management staﬀ (AGM-GM) 10 65 75 3 30 33 13 95 108 77% 68% 69% 23% 32% 31% c. Further analysis of board and top management staff Gender Number Gender Percentage Male Female Total Male Female 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 18. Auditors 42 15 8 6 3 - 1 21 8 1 1 1 1 - 63 23 9 7 4 1 1 75 33 108 67% 65% 89% 86% 75% -% 100% 69 % 33% 35% 11% 14% 25% 100% -% 31 % The auditors, Messrs. Pricewaterhousecoopers, having satisﬁed the relevant corporate governance rules on their tenure in oﬃce, have indicated their willingness to continue in oﬃce as auditors to the Bank. In accordance with section 401 (2) of the Companies and Allied Matters Act of Nigeria 2020, therefore, the auditors will be reappointed at the next annual general meeting of the Bank without any resolution being passed. By order of the Board Michael Osilama Otu (Esq.) Company Secretary January 26, 2023 FRC/2013/MULTI/00000001084 49 Statement of Corporate Responsibility for the Financial Statements for the Year Ended 31 December 2022 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 31 December 2022 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 31 December 2022. (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 2022. That we have disclosed to the bank’s Auditors and the Audit Committee the following information: (v) (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. 26 January 2023 Mukhtar Adam, PhD Chief Financial Oﬃcer FRC/2013/MUL Tl/00000003196 Dr. Ebenezer Onyeagwu Group Managing Director / CEO FRC/2013/ICAN/00000003788 50 Governance & Sustainability 02Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 3. Shareholers 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 company and relevant stakeholders during the period of review. The Board has a Charter which regulates its operations. The Charter, recently reviewed, has been forwarded to the Central Bank of Nigeria in line with the CBN Code of Corporate Governance. 5. Board structure 1. Introduction Zenith Bank conducts its business in line with the highest level of Corporate Governance and best practice. The Group’s governance practices which is replicated across its subsidiary companies are constantly reviewed to ensure that we keep pace with global standards as well as changes occasioned by the dynamics in the business environment. 2 The Directors and other key personnel During the period under review, the Directors and other key personnel of the Bank complied with the following Codes of Corporate Governance, which the Bank subscribes to: (a) The Central Bank of Nigeria (CBN) issued Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014. - (b) The Securities and Exchange Commission (SEC) issued Code of Corporate Governance for public companies. 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 in compliance with the Central Bank of Nigeria (CBN) circular on Appointment of Independent Directors by Banks. Independent Directors, appointed The Group Managing Director/Chief Executive is responsible for the day to day running of the Bank and oversees the group, 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. (c) The National Code of Corporate Governance for Public Companies which became eﬀective in January, 2019. 6. Responsibilities of the Board In addition to the above Codes, the Bank complies with relevant disclosure requirements in other jurisdictions where it operates. a) The Board is responsible for amongst others: reviewing and approving the Bank’s strategic plans for implementation by management; 52 b) c) review and approving the Bank’s ﬁnancial Statements; reviewing and approving the Bank’s ﬁnancial objectives, business plans and budgets, including capital allocations and expenditures; d) monitoring corporate performance against the strategic plans and business, operating and capital budgets; e) f ) implementing the Bank’s succession planning; approving acquisitions and divestitures of business operations, strategic investments and alliances and major business development initiatives; approving delegation of authority for any unbudgeted expenditure; setting the tone for and supervising the Corporate Governance Structure of the Bank, including corporate structure of the Bank and the Board and any changes and strategic plans of the Bank and the Group; Assessing its own eﬀectiveness in fulﬁlling its responsibilities, including monitoring the eﬀectiveness of individual directors. g) h) i) The membership of the Board during the year is as follows: Board of Directors Name Jim Ovia, CFR Prof. Chukuka Enwemeka Mr Jeﬀrey Efeyini Mr Chuks Emma Okoh Mr Gabriel Ukpeh Engr. Mustafa Bello Position Chairman Non-Executive Director Non-Executive Director Non-Executive Director Independent Non Executive Director Non-Executive Director Dr Al-Mujtaba Abubakar, MFR Independent Non Executive Director Dr Omobola Ibidapo-Obe Ogunfowora Independent Non Executive Director Dr Peter Olatunde Bamkole Independent Non Executive Director Dr Ebenezer Onyeagwu Dr Adaora Umeoji, O0N Mr Umar Shuaib Ahmed Dr Temitope Fasoranti Mr Dennis Olisa Mr Henry Oroh Mrs Adobi Nwapa Mr Akindele Ogunranti Group Managing Director/ Chief Executive Oﬃcer Deputy Managing Director Executive Director Executive Director Executive Director Executive Director Executive Director Executive Director * Appointed to the Board eﬀective 12 April 2022 **Retired from the Board eﬀective 1 July 2022 ***Retired from the Board eﬀective 28 December 2022 ****Retired from the Board eﬀective 24 February 2023 Date of Appointment April 2, 2014 June 23, 2010** June 23, 2010 ** April 12, 2022* February 24, 2016 December 29, 2017 August 1, 2019 June 30, 2021 April 12, 2022* April 24, 2013 October 9, 2012**** October 19, 2016*** December 29, 2017 December 29, 2017*** August 1, 2019 April 12, 2022* April 12, 2022* The Board meets at least every quarter but may hold extra-ordinary sessions to address urgent matters requiring the attention of the Board. 7. Roles of Chairman and Chief Executive The roles of the Chairman and Chief Executive are separate and no one individual combines the two positions. The Chairman’s main responsibility is to lead and manage the Board to ensure that it operates eﬀectively and fully discharges its legal and regulatory responsibilities. The Chairman is responsible for ensuring that Directors receive accurate, timely and clear information Governance & Sustainability 53 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 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. 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 period is as follows: Mr. Gabriel Ukpeh - Chairman Engr. Mustafa Bello Mr. Chuks Emma Okoh Dr. Al- Mujtaba Abubakar, MFR Dr. Ebenezer Onyeagwu Dame (Dr) Adaora Umeoji, OON Dr. Temitope Fasoranti 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. The 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 and Board Governance Nomination 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 to 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, in acquiring a detailed to assist Directors 54 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; recommendations to the Board of To make 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 Eight (8) members: four (4) non Executive Directors and four (4) Executive Directors. It is chaired by a nonexecutive Director. The Committee considers large scale procurement by the Bank, as well as matters relating to staﬀ welfare, discipline, staﬀ remuneration and promotion. The membership of the Committee during the period is as follows: Mr. Chuks Emma Okoh – Chairman Mr. Gabriel Ukpeh Dr.. Omobola Ibidapo-obe Ogunfowora Dr.Peter Olatunde Bamkole Dr. Ebenezer Onyeagwu Dr. Adaora Umeoji Mr. Henry Oroh Mrs.Adobi Stella Nwapa Terms of reference request tax planning activities and 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 for establishment of oﬀshore subsidiaries and other oﬀshore business oﬃces; Oversight responsibility with respect to the Bank and its subsidiary companies relating to material and strategic ﬁnancial matters, including those related to investment policies and strategies, merger and acquisition transactions, ﬁnancings, and structure including debts and equity securities, and credit agreements; Consider the Group’s ﬁnancial risk management and major insurance program Overall developments; Consider the ratings from Credit rating agencies. Consideration of the dividend policy of the Bank and the declaration of dividends or other forms of distributions and recommendation to the Board; Consideration of capital expenditures, divestments, acquisitions, joint ventures and other investments, and other major capital transactions; Consideration of senior management promotions as recommended by the GMD/CEO; Review and recommendations on recruitment, for senior promotion, and disciplinary actions 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 the Board, recommendation 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; related to Governance & Sustainability 55 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 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 , the chief information security 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 (a Non-Executive Director), the Committee’s membership comprises the following: Engr. Mustapha Bello – Chairman Dr. Peter Olatunde Bamkole Dr.Omobola Ibidapo-Obe Ogunfowora Dr. Al-Mujtaba Abubakar, MFR Mr. Umar Shuaib Ahmed* Dr. Ebenezer Onyeagwu Mr. Dennis Olisa* Mr.Anthony Akindele Ogunranti *Retired from the board eﬀective 28 December 2022 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 identifying, assessing and its responsibility for 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 progress and periodically review and report to the Board of Directors: (a) the magnitude of all material business risks; (b) (c) the processes, procedures and controls in place to manage material risks; and the overall eﬀectiveness of the risk management 56 process; To ensure the implementation of the approved cyber security 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 comprises Non-Executive Directors only and is chaired by - Dr. Al-Mujtaba Abubakar, 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. The Committee’s membership comprises the following: Dr. Al-Mujtaba Abubakar – Chairman Mr. Gabriel Ukpeh Engr. Mustafa Bello Dr.Peter Olatunde Bamkole Dr. Omobola Ibidapo-Obe Ogunfowora Committee’s terms of reference The Board Audit and Compliance Committee have the following responsibilities as delegated by the Board of Directors: the scope and planning of audit Ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirements and acceptable ethical practices; Review requirements; Review the ﬁndings on management matters (Management Letter) in conjunction with the external auditors and Management’s responses thereon; for the 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 to carry out internal auditor investigations into any activities of the Bank which may be of interest or concern to the Committee; Assist in the oversight of compliance with legal and other regulatory requirements, assessment of qualiﬁcations and independence of the external auditors and performance of the Bank’s internal audit function as well as that of the external auditors; Ensure that the internal audit function is ﬁrmly established and that there are other reliable means of obtaining suﬃcient assurance of regular review or appraisal of the system of internal control in the Bank; the Oversee management’s processes fraud risks across identiﬁcation of signiﬁcant the Bank and ensure that adequate prevention, detection and reporting mechanisms are in place On a quarterly basis, obtain and review reports by the internal auditor on the strength and quality of internal controls, including any issues or recommendations for improvement, raised during the most recent control review of the Bank; Discuss and review the Bank’s unaudited quarterly and annual ﬁnancial statements with management and external 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 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; encountered Review the response of management to the observations and recommendation of the Auditors and Bank regulatory authorities; Agree Internal Audit Plan for the year annually with the Internal auditor and ensure that the internal audit function is adequately resourced and has appropriate standing within the Bank; Review quarterly Internal Audit progress against Plan for the period and review outstanding Agreed Actions and follow up internal control To develop a comprehensive 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; The Chief Inspector and the Chief Compliance Oﬃcer makes quarterly presentation the Committee, in addition to reporting to the Group Managing Director. The Chief Inspector and the Chief Compliance Oﬃcer also have unrestricted access to the Chairman of the Committee;. To perform such other duties and responsibilities as the Board of Directors may assign from time to time. to 10.5. Board remuneration Committee governance, nomination and The Committee is made up of six (6) Non-Executive Directors and one of the Non-Executive Directors chairs the Committee. The membership of the Committee is as follows: Dr.Omobola Ibidapo-Obe Ogunfowora – (Chairman) Engr. Mustafa Bello Mr. Gabriel Ukpeh Dr. Al-Mujtaba Abubakar MFR Dr. Peter Olatunde Bamkole Mr. Chuks Emma Okoh Governance & Sustainability 57 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 Committe’s terms of reference and Directors To determine a fair reasonable and competitive compensation practices for Executive oﬃcers and other key employees of the Bank which are consistent with the Bank’s objectives; Determining the quantum and structure of compensation and beneﬁts for Non-Executive Directors;Executive senior management of the Group; Ensuring the existence of an appropriate remuneration policy and philosophy for Executive Directors, Non-Executive Directors and staﬀ of the Group; Review and recommendation for Board ratiﬁcation, all for terminal compensation arrangements Directors and senior management; Recommendation of appropriate compensation for Non-Executive Directors for Board and Annual General Meeting consideration; recommended Review and approval of any compensation actions for the Company’s Executive Committee members, including base salary, annual incentive bonus, incentive awards, long-term 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 the appointment and recommendations on election of New Directors (including the Group MD) to the Board, in line with the Group’s approved Director Selection criteria; Review of the eﬀectiveness of the process for the selection and removal of Directors and to make recommendations where appropriate; Ensuring that there is an approved training policy for Directors, and monitoring 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 58 to ensure code of ethics and business conduct for Directors and staﬀ; Review the Group’s organization structure and to make recommendations to the Board for approval; Review and agree at the beginning of the year, of the key performance indicators for the Group MD and Executive Directors; Ensure that the Group has a succession policy and plan in place for the Chairman of the Board, the MD/CEO and all other EDs, NEDs, and Senior Management positions leadership continuity in the Group; Review and makerecommendations on the recruitment, promotions and disciplinary actions for Executive Management level personnel; Ensure that board evaluation reports of subsidiaries are formally discussed and documented as a way of radiating sound governance practices across the Group; the Ensure annual is conducted. This performance of the Board 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 etc;. review or appraisal of 10.6. 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 two (2) 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 Committe 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 Dr. Al-Mujtaba Abubakar Engr. Mustafa Bello Committe’s terms of reference report, including any speciﬁc disclosures 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 related notes, the statements, Bank’s and discussion under “Managements Control Report” and the independent auditors’ in advance of publication; The performance and results of the external and internal audits, including the independent auditor’s management letter, and management’s responses thereto; The eﬀectiveness of the Bank’s system of internal controls, information systems and security; any recommendations by the 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. independent auditor and including computerized 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 the responsibility implementation of strategies approved by the Board, provide leadership to the Management team and ensure eﬃcient deployment and management of the Bank’s to ensure is resources. Its Chairman is responsible for the day-to-day running and performance of the Bank. 10.8. Other Committee In addition to the afore-mentioned committees, the Bank has in place, other standing management committees. They include: a) b) c) d) e) f ) g) Management Committee (MANCO) Assets and Liabilities Committee (ALCO) Management Global Credit Committee(MGCC) Risk Management Committee (RMC) Information technology (IT) steering committee Sustainability Steering Committee (SSC) Information Security Steering Committee 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 Committe meets weekly and as frequently as the need arises. c) Management Global Credit Committee(MGCC) The Management Global Credit Committee is Governance & Sustainability 59 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 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 such other times 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: 1. The Group Managing Director/Chief Executive Oﬃcer; 2. Two (2) Executive Directors; 3. Head of Treasury 4. Head of Trade Services 5. Marketing Groups Representatives 6. Chief Inspector; 60 7. Chief Risk Oﬃcer; 8. Chief Compliance Oﬃcer 9. Chief Information Security Oﬃcer (CISO) 10. Head of IT; 11. Head of Infotech - Software; 12. Head of Infotech - Enginering; 13. Head of Card Services; 14. Group Head of Operations 15. Group Head of IT Audit; 16. Head of e-Business 17. Head of Investigation The committee meets monthly or as the need arises. f) Sustainability Steering Committee (SSC) This Committee is responsible for regular analysis and review of sustainable Banking policies and practices within the Bank to ensure compliance with globally acceptable economic, environmental and social norms. The Bank, recognizing that every institution is as strong as the strength of its relationship and that the ability to nurture existing relationships and develop new ones will invariably play a signiﬁcant role in the ﬁnancial stability of the organization. Therefore, the Bank believes that an organization must forge a closer relationship with its stakeholders, including customers, employees, local communities, suppliers, among others, to ensure triple bottom line proﬁt. The Committee present quarterly reports to the Board Risk 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. g) Information Security Steering Committee The information security steering committee is responsible for the governance of the cybersecurity programme. The Committee is also responsible for providing oversight and ensure alignment between information security strategy and company objectives. Assessing the adequacy of resources and funding to sustain and advance successful security programs and practices for identifying, assessing, and mitigating cybersecurity risks across all business functions. The Committee review company policies information security and cyberthreats, pertaining to taking into account the potential for external threats, internal threats, and threats arising from transactions with trusted third parties and vendors. Review of privacy and information security policies and standards and review the ramiﬁcations of updates to policies and standards as well as establish standards and procedures for escalating signiﬁcant security incidents to the ISSC, Board, other steering committees, government agencies, and law enforcement agencies, as appropriate. MEMBERSHIP OF THE COMMITTEE The Information Security Steering Committee shall be comprised of: 1. Group Managing Director / CEO 2. Executive Directors 3. Chief Information Oﬃcer 4. Chief Inspector 5. Chief Risk Oﬃcer(CRO) 6. Chief Financial Oﬃcer(CFO) 7. Head of InfoTech - Software 8. Head of InfoTech – Engineering 9. Group Head Retail 10. Chief Information Security Oﬃcer(CISO) 11. Head of IT Audit 12. Information Security Oﬃcer 13. Head of Risk Management 14. Head of Card Services 15. Representatives of Marketing Group 11. Policy on trade in the Bank’s securities The Bank has in place a policy on trading on the Bank’s Securities by Directors and other key personnel of the Bank. This is to guide against situations where such personnel in possession of conﬁdential and price sensitive information deal with Bank’s securities in a manner that amounts to insider trading. 12 Relationship with shareholders Zenith Bank maintains an eﬀective communication with its shareholders, which enables them understand our business, ﬁnancial condition and operating performance and trends. Apart from our annual report and accounts, proxy statements and formal shareholders’ meetings, we maintain a rich website (with suggestion boxes) that provide information on a wide range of issues for all stakeholders. Also, a quarterly publication of the Bank and group line with the disclosure performance is made in 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, in addition to other programmes ,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. the remuneration Variable annual Zenith Bank ﬁnancial results. The amount of this is subject to achieving speciﬁc remuneration quantiﬁable directly with targets, shareholders’ interest. aligned linked to Governance & Sustainability 61 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 MONITORING COMPLIANCE WITH CORPORATE GOVERNANCE Liaison and Oversight Function Chief Compliance Officer laundering The Chief Compliance Oﬃcer monitors compliance with money and the implementation of the Code of Corporate Governance of the Bank. He reports to the Board through the the Executive compliance oﬃcer(ECO). requirements The Chief Compliance Oﬃcer and the Company Secretary forward regular returns to the Central Bank of Nigeria on all whistle-blowing reports and also on corporate governance compliance. Whistle Blowing Procedures The 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 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. 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. 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 breache. Codes of Coduct The Bank has a Code of Professional Conduct for Employees and third parties, which all members of staﬀ as well as vendors and contractors subscribe to upon assumption of duties signing onto transactions with the Bank. The Bank also has a Code of Conduct for Directors. 14. Foreign Subsidiaries Governance Structure The Bank as at 31 December 2022 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: 62 Local Board and Board Committee To ensure that the activities of the subsidiaries reﬂects the same values, ethics, controls and processes, Zenith Bank Plc is represented by at least one (1) non-executive director in the local board and board committee of each foreign subsidiary. These directors provide eﬀective oversight function over each subsidiary and ensure that there is consistency with the strategic direction of the Bank. They also act as a link with the parent board at the Group Head Oﬃce in Nigeria. Subsidiary Board Committees The Subsidiary Board meets at least every quarter and exercises oversight function on the business of each location through the following committee structure. • • • Board Credit Committee which is charged with the responsibility of considering the approval of new loans and renewal of existing ones above the threshold set for the Management Credit Committee. It also determines the credit policy or changes therein. Board Risk Management Committee which has oversight responsibility for the overall risk management of various areas of the Bank’s operations and compliance. This includes advising the Board on risk-related matters arising from its business. Board Audit and Compliance Committee is responsible for the review of accounting and reporting policies to ensure compliance with regulatory and ﬁnancial reporting requirements. The Board, through the committee exercise • • oversight on the Compliance and AML/CFT activities of the Bank. Overall, it monitors the eﬀectiveness of the Bank’s system of internal control to safeguard its assets for shareholders. Board Governance, Nomination and Remuneration Committee (BGNRC) saddled with the responsibility of determining a fair, reasonable and competitive renumeration 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 in The Internal Control & Audit Department of Zenith Bank Plc carries out an annual audit of each of the oﬀshore subsidiaries line with the Group’s Annual Audit Programme. This audit exercise covers all operational areas of the subsidiaries and the outcome is discussed with Executive Management at the home oﬃce for timely intervention on identiﬁed lapses. It is important to note that this exercise is distinct from the daily operations audit carried out by the respective internal audit unit within the subsidiaries Annual Loan Review/Audit This audit is carried out by the Loan Review & Monitoring Unit of Zenith Bank Plc. The core areas of concentration during this audit exercise include asset quality assessment, loan performance, review of security pledged, loan conformity with credit policy, documentation check and review of central liability report among others Group Compliance Function is committed to complying with Zenith Bank Plc regulatory requirements in all locations where it operate. To this end, The Bank’s Compliance Group monitors ongoing developments in the regulatory environment of each location where it operates and ensuring compliance with same. This include conducting periodic compliance checks on each subsidiary annually to ascertain compliance with local banking laws and regulations. Report of External Auditors In line with global best practices and regulatory guidelines, the Bank undertake review of Management letters from external Auditors on periodic audit of the subsidiary companies. This is to ensure that all exceptions are complied with and for implementation of the Auditors’ recommendations. 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. Governance & Sustainability 63 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 16. Schedule of board and board committees meeting held during the period The table below shows the frequency of meetings of the Board of directors, board committees and members’ attendance at these meetings during the year under review. Directors Board Board credit committee Finance & general purpose committee Board governance, Nomination and remuneration committee Board risk management committee Board audit and Compliance committee Attendance / Number of Meetings Jim Ovia, CFR Mr. Jeﬀrey Efeyini** Prof. Chukuka S.Enwemeka** Mr.Gabriel Ukpeh Engr.Mustafa Bello Dr. Al-Mujtaba Abubakar, MFR Dr. Omobola Ibidapo-Obe Ogunfowora Mr Peter Bamkole* Mr Chuks Emma Okoh* Dr. Ebenezer Onyeagwu Dr.Adaora Umeoji, OON Mr. Umar Shuaib Ahmed ***: Dr. Temitope Fasoranti Mr. Dennis Olisa**** Mr. Henry Oroh Mrs Adobi Nwapa* Mr. Akindele Ogunranti* Note: 7 7 4 4 7 7 7 7 4 4 7 7 7 7 7 7 4 4 4 N/A 2 2 4 2*** 4 N/A N/A 2 4 4 N/A 4 N/A N/A N/A N/A 4 N/A N/A 2 4 N/A N/A 4 2 2 4 4 N/A N/A N/A 4 0 N/A 4 N/A 2 N/A 4 4 4 2 ** 2 2 N/A N/A N/A N/A N/A N/A N/A N/A 4 N/A 2 2 N/A 4 4 2 ** 2 N/A 4 N/A 4 N/A 4 N/A N/A 2 4 N/A 2 N/A 4 4 4 4 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A * - Appointed to the Board eﬀective 12 April,2022 ** - Retired from the Board with eﬀect from July 1,2022 *** - Reconstitution of Board Committees, eﬀective July 2022 **** - Retired from the Board with eﬀect from 28 December, 2022 N/A - Not Applicable (Not a Committee member) Dates for Board and Board Committee meetings held within the year to 31 December 2022 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 27-Jan-22 26-Jan-22 25-Jan-22 25-Jan-22 25-Jan-22 25-Jan-22 25-Jan-22 09-Mar-22 06-Apr-22 28-Apr-22 27-Apr-22 28-Jul-22 27-Jul-22 21-Oct-22 19-Oct-22 28-Dec-22 17. Audit Committee 27-Apr-22 26-Jul-22 19-Oct-22 26-Apr-22 26-Jul-22 19-Oct-22 26-Apr-22 26-Jul-22 19-Oct-22 26-Apr-22 26-Jul-22 19-Oct-22 26-Apr-22 27-Jul-22 19-Oct-22 The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during the year under review. 64 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 (INED)* Dr. Al-mujtaba Abubakar (NED)* Mr. Gabriel Ukpeh (INED)* SR - Shareholders representative INED- Independent Non-Executive Director NED- Non-Executive Director * Changes arising from AGM Resolution Number of Meetings attended 4 4 4 4 3 1 Governance & Sustainability 65 (cid:21)(cid:28) (cid:26)0(cid:22)(cid:25)(cid:26) (cid:1) e T h (cid:59) (cid:70) (cid:79) (cid:74) (cid:85) (cid:73) (cid:35) (cid:66) (cid:79) (cid:76) (cid:1) (cid:70) (cid:14) (cid:53) (cid:80) (cid:76) (cid:70) (cid:79) (cid:34) (cid:81) (cid:81) (cid:37)(cid:80)(cid:88)(cid:79)(cid:77)(cid:80)(cid:66)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:59)(cid:70)(cid:79)(cid:74)(cid:85)(cid:73)(cid:1)(cid:70)(cid:14)(cid:53)(cid:80)(cid:76)(cid:70)(cid:79)(cid:1)(cid:34)(cid:81)(cid:81)(cid:1) (cid:85)(cid:80)(cid:1) (cid:68)(cid:80)(cid:79)(cid:87)(cid:70)(cid:79)(cid:74)(cid:70)(cid:79)(cid:85)(cid:77)(cid:90)(cid:1) (cid:72)(cid:70)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1) 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(cid:54)(cid:81)(cid:69)(cid:66)(cid:85)(cid:70)(cid:1)(cid:35)(cid:55)(cid:47) (cid:11)(cid:26)(cid:23)(cid:23)(cid:11)(cid:34)(cid:78)(cid:80)(cid:86)(cid:79)(cid:85)(cid:11)(cid:1)(cid:46)(cid:80)(cid:67)(cid:74)(cid:77)(cid:70)(cid:1)(cid:47)(cid:80)(cid:15)(cid:4) (cid:35)(cid:86)(cid:90)(cid:1)(cid:66)(cid:74)(cid:83)(cid:85)(cid:74)(cid:78)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:84) (cid:11)(cid:26)(cid:23)(cid:23)(cid:11)(cid:34)(cid:78)(cid:80)(cid:86)(cid:79)(cid:85)(cid:11)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:47)(cid:80)(cid:15)(cid:4) (cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:71)(cid:70)(cid:83)(cid:1)(cid:71)(cid:86)(cid:79)(cid:69)(cid:84) Report of the Independent Consultant to the Board of Directors of Zenith Bank PLC. On their Appraisal for the Year Ended 31 December 2022. 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”) 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 2022. The CBN Code mandates 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 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 of Corporate Governance mentioned above. A specific recommendation has been proffered to assist in enhancing the Bank’s governance disclosure. This has been articulated and included in our detailed report to the Board. Olumide Olayinka Partner and Head Advisory FRC/2013/ICAN/00000000427 17 February 202 3 67 Zenith Bank Plc Annual Report December 31, 2022 Corporate Governance Report for the Year Ended 31 December 2022 Corporate Responsibility & SUSTAINABLE BANKING PRACTICES W ithin thirty-two years, Zenith Bank has consistently demonstrated resilience irrespective of the business/ economic cycle and has witnessed growth in all areas. This growth has been driven primarily by a strategic business focus and a conservative business model. The group boasts of a stable and experienced management team that is well-positioned for strong execution, leading to signiﬁcant market share opportunities. For this year’s report, we have adopted a dynamic approach that seeks to incorporate as many existing and emerging ESG frameworks and reporting guidelines that apply to a business of our kind, locally and globally. While maintaining fundamental alignment with the GRI Standards, we have included many other frameworks in the report. These include Sustainable Development Goals (SDGs), the Nigerian Sustainable Banking Principles, the Nigerian Exchange - Sustainability Disclosure Guidelines, UN Women’s Empowerment Principles, and partly the Sustainability Standards Board (ISSB) Sustainability Reporting Guidelines. The report highlights our progress, challenges, and aspirations as we continue to advance our journey as sustainable ﬁnance leaders. Sustainability Strategy and Management Our sustainability journey began over a decade and a half ago and has remained a vital aspect of our corporate identity, signiﬁcantly deﬁning our business model and strategy. We have been leading in shaping and adopting sustainability regulations and frameworks within our industry and the broader corporate space. We are committed to upholding the highest possible sustainability standards and practices. 68 At Zenith Bank, we understand that the sustainability of our operations is directly related to the sustained value we create for our people, investors, and society. We strive to be a trusted partner that is better, simpler, and faster in meeting the needs of our stakeholders, thereby creating long-term value for our employees, investors, customers, suppliers, regulators, the community, and the environment. As a member of the United Nations Global Compact (UNGC), we are committed to driving progress towards the achievement of the Sustainable Development Goals (SDGs) of the United Nations. We recognise that we have a critical role to play, through our operations, in promoting sustainable development. In line with the SDGs, Zenith Bank is committed to improving the socioeconomic conditions of the communities where we do business. Our social initiatives are geared towards eradicating extreme poverty, encouraging skills development and capacity building, creating employment, and supporting the government’s eﬀorts to achieve inclusive growth and development, in line with the development priorities of the Federal Government of Nigeria as communicated in economic development plans and policies. Ethical Leadership At Zenith Bank, we set high standards for accountability, transparency, integrity, compliance, service delivery, and ethical behaviour in line with our mission: to build the Zenith brand into a reputable international ﬁnancial institution recognised for innovation, superior performance, and creation of premium value for all stakeholders. Our governance structures, corporate standards, and business principles ensure that sustainability is integrated into everything we do. We are committed to strong ethical business conduct and leadership to strengthen our culture of accountability and honest dealings with all our stakeholders. The Bank’s Ethical Code, Code of Business Conduct, Employee Handbook, and other relevant internal policies and procedures underpin our stance on promoting a culture of accountability, honesty, and ethical conduct. Zenith Bank promotes a workplace where employees feel empowered to speak up and report any concerns regarding unethical behaviour. Our commitment to ethical governance and an inclusive workplace starts at the top. Our directors and top executives come from diverse cultural, professional, and educational backgrounds. The collective experience and knowledge of our top management and board members add a wide range of skills and qualiﬁcations towards the stewardship of the Bank’s business, culture, and strategy. Local Communities and Social Investments Investing in local communities is a signiﬁcant aspect of Zenith Bank’s commitment to society. We support a wide range of activities within our areas of operation across the 36 states of Nigeria, focusing on initiatives that will improve the quality of life, including that of the vulnerable and disadvantaged. We identify community needs through engagement, physical assessments, and national emergencies to deﬁne our contributions and make lasting impacts on people’s lives, empowering communities and settling immediate needs. Governance & Sustainability 69 Zenith Bank Plc Annual Report December 31, 2022 Corporate Responsibility & Sustainabl Banking Practices Zenith Bank invested NGN1.671 billion in Corporate Social Responsibility (CSR) in 2022, representing about 0.75% of our Proﬁt After Tax (PAT). We remain one of the largest spenders on social investment in the Nigerian corporate space. Our CSR endeavours focus on 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. Security: Security is a fundamental need of our communities, and in 2022, we invested NGN331 million in our various partnerships with local communities, federal, state and local governments, and other relevant agencies to preserve public peace and ensure a crime-free environment. Zenith Bank won awards for achievements in this area of sustainability. Sports: In 2022, Zenith Bank invested approximately NGN159 million in sports development, supporting initiatives such as title sponsorship of the Zenith Bank Delta State Principal’s Cup, Zenith Bank Headmasters’ Cup, and various Zenith Tennis Championships held at Ikoyi Club and Lagos Country Club. Health: We continue to champion SDG3 (Good Health and Well-being), and in 2022, Zenith Bank invested about NGN54 million towards various medical interventions for low- income individuals faced with various life-threatening medical conditions. Education: In reaﬃrmation of our commitment to the development of the nation’s education sector, Zenith Bank expended approximately NGN171 million towards educational initiatives in 2022. Our investments in the education sector include donations to the educational endowment fund of St. Saviour’s School, Ikoyi, and the 2022 Microsoft Oﬃce Specialist World Championship sponsorship. Zenith Bank continues to pay great attention to championing SDG4 (Quality Education). Risk Management Framework importance of a robust risk Zenith Bank recognises the management framework to ensure resilience and business continuity and preemptively identify, assess, and mitigate risks inherent in its business processes. The risk management function of the Bank aligns with best practices standards and includes policies, procedures, processes, internal controls, tools, capabilities, and decision-making methods that ensure the mitigation of risks and compliance with extant regulations. Zenith Bank has made signiﬁcant progress in its Environmental, Social, and Governance (ESG) policies and practices, which have had a tremendous impact on its customers’ businesses, including suggestions for corrective action plans and Environmental Impact Assessment (EIA) certiﬁcation. The Bank has enhanced its credit process by ensuring all credit undergoes ESG assessment, and it conducts enhanced due diligence on its credit customers in their oﬀer to ensure compliance with E&S conditions letters. Zenith Bank is committed to continually improving its risk management function by training and educating its employees on ESG investing on an ongoing basis to develop their competency in ESG risk practices and promote sustainable investment. 70 Environmental Sustainability and Carbon Footprint Management Zenith Bank is dedicated to managing its environmental impact and supporting transition to a low-carbon economy. The Bank’s operational strategy aligns with global sustainability goals, including the 2015 Paris Climate Agreement, Task Force on Climate-Related Financial Disclosures (TCFD), and Sustainable Development Goal 13 (Climate Action). Zenith Bank continuously monitors, reviews, and sets environmental targets to manage its carbon footprint and overall environmental impact. The Bank has implemented eco-friendly practices, such as seeking alternative energy sources and adopting a resource eﬃciency approach, to achieve its targets while tracking its Greenhouse Gas (GHG) emissions. The Bank’s environmental and social risk management system includes assessing prospective and ongoing projects for E&S risks before approval, prioritising reducing GHG emissions through improved energy eﬃciency, sourcing carbon-eﬃcient assets, optimising digital solutions, reducing business trips, and minimising emissions by third parties. Zenith Bank is committed to achieving net-zero greenhouse emissions by 2050 and will continue to explore opportunities to reduce its environmental carbon-friendly impact and adopt technologies in its operations. inclusive workplace Our Workforce Zenith Bank is proud to have a diverse and fostering collaboration, innovation, and growth. Our workforce is made up of a mix of young aspiring professionals, established leaders, and experts in their respective ﬁelds. We value this mix of talents and are committed to attracting the best brains within the Nigerian labour market. As of December 31, 2022, our total active workforce (both permanent and temporary staﬀ ) stood at 9,040 of which 53.96% were female, and 46.04% were male. We believe that having a diverse inclusive workforce promotes and representation of a wide range of voices and perspectives, leading to better decision-making, innovation, and overall business success. In recognition of our eﬀorts, the Bank was awarded the Best Company in Workplace Practice at the 2022 SERAS Awards. Human Rights Zenith Bank is committed to respecting human rights and upholding the best practices on labour standards, as outlined by the UN Global Compact, United Nations Principles on Business Governance & Sustainability 71 Zenith Bank Plc Annual Report December 31, 2022 Corporate Responsibility & Sustainabl Banking Practices and Human Rights, and the United Nations Environment Programme Finance Initiative (UNEP-FI). We strongly condemn discrimination against employees or third parties based on age, gender, religion, ethnic group, disability, or political views. We do not condone any form of child labour or forced labour in our business operations. Our employees receive training on human rights, and we have a platform for reporting and investigating cases of human rights violations. We also consider human rights aspects in our supply chain and ﬁnancing activities by conducting E&S impact assessments on our ﬁnanced projects, ensuring that they have no human rights violations. The community members in ﬁnanced project areas can report any violation of human rights through the designated public liaison oﬃce and other available channels. In 2022, 75% of our employees received training on human rights. Women Empowerment At Zenith Bank, we are dedicated to creating a business environment that is free of gender bias and promotes the participation of women in economic and business activities. To this end, we oﬀer the Z-Woman Business Package, designed to address the unique needs of women-owned businesses. The package provides loans of up to NGN10 million at low-interest rates, free digital skills training, and free exhibition stands at Zenith Bank events, among other beneﬁts, to help women grow their businesses and increase sales. We provide equal opportunities for all employees to participate and compete at all levels of our organisation. In 2022, 53.96% of our active employees and 31% of our staﬀ in top management positions were women. Our employees also receive training on women’s rights courses through our e-learning module, including Women in Leadership: Mastering Key Leadership Competencies and Women in Leadership: Moving Beyond Gender Roles as a Leader. Financial Inclusion As a leading ﬁnancial institution, Zenith Bank is committed to supporting the ﬁnancial inclusion of underserved and unbanked communities. Lack of support or access to ﬁnancial services is a signiﬁcant barrier for these communities, and we recognise our duty to support the development of more sustainable ﬁnancial futures for our clients, employees, and communities. We have played a crucial role in promoting ﬁnancial inclusion through SME funding and developing ﬁnancial inclusion products. Our retail banking services have been instrumental in empowering the unbanked. We aim to promote ﬁnancial inclusion by developing products and services that meet the needs of our customers and improve access and use of ﬁnancial 72 services in rural communities. We also conduct educational workshops and awareness campaigns to increase ﬁnancial literacy in these communities. Zenith Bank Financial Literacy & World Savings Day Celebration We have partnered with the apex bank, the Central Bank of Nigeria, to mark Financial Literacy Day and World Saving Days with students from schools across states in Nigeria. This employee volunteering initiative provided an avenue for the Bank and 167 employees to impact young persons with basic ﬁnancial literacy knowledge. Also, the beneﬁtting students were gifted with corporate branded items such as knapsacks, liquid ﬂasks, food ﬂasks, towels, water bottles, raincoats, watch sets, drawing sets, notebooks, pen, and pencil sets, kiddies lunch bags, etc. In 2022, a total of 2,311 male students and 3,262 female students were impacted by the Financial Literacy Day Celebration. Similarly, a total of 3,400 male students and 3,946 female students were impacted by the World Savings Day Celebration. Talent Development At Zenith Bank, professional and personal development for our employees is a core factor, as we believe employees can deliver eﬃcient service to our clients and customers when they are adequately equipped with the right skills. Our training curriculum comprises control, interpersonal, leadership, and technical training for all our employees, delivered through physical and online sessions. This training helps employees to adopt new work methodologies and approaches, enhance capabilities, and improve collaborative skills and leadership techniques. In 2022, employees had training on anti-corruption, health and safety, ESG investing, human rights, leadership development, banking processes, basic emergency response and ﬁrst aid, and ﬁre safety. A total of 283,014.88 hours were expended on training 6,514 employees. We invested a total of NGN727,630,626.46 in specialised employee training in 2022, representing a 25.25% increase compared to the 2021 spending. risk management Sustainability, environment, and social sessions are integrated into our anti-money laundering and operational risk management training. As part of our strategy to increase sustainability awareness among our people, we publish and circulate weekly “Sustainability Titbits,” Safety Nuggets, “Sustainability Lifestyle Tips,” and “Sustainability Headlines” to all our employees via email. Reporting Zenith Bank is committed to sustainability reporting as a signatory to the Central Bank of Nigeria’s Nigerian Sustainable Banking Principles (NSBP), a member of the United Nations Global Compact and the United Nations Environment Programme’s Finance Initiative (UNEP-FI). A standalone Sustainability Report is published annually to demonstrate the Bank’s economic, environmental, and social progress in the ﬁnancial year, incorporating the Nigerian Stock Exchange (NSE) and Global Reporting Initiative (GRI) Sustainability reporting guidelines. Additionally, Zenith Bank sends biannual progress reports to the CBN and annual reports to the International Finance Corporation (IFC), United Nations Global Compact (UNGC), PROPARCO, and the African Development Bank (AfDB), among others. Conclusion At Zenith Bank, we understand that creating value for our people, investors, and society is directly related to the sustenance of our operations. Therefore, we are committed to being a trusted partner that is better, simpler, and faster in meeting the needs of our stakeholders, creating long-term value for our employees, investors, customers, suppliers, regulators, the community, and the environment. We will continue to drive sustainability at the highest level of our business, factoring environmental, social, and governance dimensions of our operations. This includes our products, services, investment decisions, and stakeholder relationships. Governance & Sustainability 73 Independent Auditor’s Limited Sustainability Assurance Report on the Selected Sustainability Information in Zenith Bank Plc’s Sustainability Report for the year ended 31 December 2022 To the Directors of Zenith Bank Plc. We have undertaken a limited assurance engagement in respect of the selected sustainability information, Independent Auditor’s Limited Sustainability Assurance Report on the Selected as described below, and presented in the 2022 Sustainability Report of Zenith Bank Plc. for the year ended Sustainability Information in Zenith Bank Plc’s Sustainability Report for the year ended 31 31 December 2022. This engagement was conducted by a multidisciplinary team including economic, December 2022 social and environmental assurance specialists with relevant experience in sustainability reporting. To the Directors of Zenith Bank Plc. Subject Matter We have undertaken a limited assurance engagement in respect of the selected sustainability information, You have engaged us to provide a limited assurance conclusion in our report on the following selected as described below, and presented in the 2022 Sustainability Report of Zenith Bank Plc. for the year ended 31 December 2022. This engagement was conducted by a multidisciplinary team including economic, on the relevant pages in the sustainability report for the year sustainability information, marked with social and environmental assurance specialists with relevant experience in sustainability reporting. ended 31 December 2022. The selected sustainability information in the table contained in this opinion have been prepared in accordance with the reporting criteria that accompanies the sustainability Subject Matter information on the relevant pages of the Report (the accompanying reporting criteria). You have engaged us to provide a limited assurance conclusion in our report on the following selected Zenith Bank Plc. Management’s responsibility sustainability information, marked with on the relevant pages in the sustainability report for the year The Management of Zenith Bank Plc. is responsible for the selection, preparation and presentation of the ended 31 December 2022. The selected sustainability information in the table contained in this opinion selected sustainability information in accordance with the accompanying reporting criteria as set out in the have been prepared in accordance with the reporting criteria that accompanies the sustainability Sustainability Report (the “Reporting Criteria”). information on the relevant pages of the Report (the accompanying reporting criteria). This responsibility includes: Zenith Bank Plc. Management’s responsibility • The Management of Zenith Bank Plc. is responsible for the selection, preparation and presentation of the selected sustainability information in accordance with the accompanying reporting criteria as set out in the Sustainability Report (the “Reporting Criteria”). Identification of the stakeholder requirements, material issues, commitments with respect to sustainability performance, and • Design, implementation and maintenance of internal control relevant to the preparation of the Sustainability performance data so that is free from material misstatement, whether due to fraud or error. This responsibility includes: • Determining the appropriateness of the measurement and reporting criteria in view of the intended users of the selected sustainability information and for ensuring that those criteria are publicly Identification of the stakeholder requirements, material issues, commitments with respect to available to the report users. sustainability performance, and • • Design, implementation and maintenance of internal control relevant to the preparation of the Sustainability performance data so that is free from material misstatement, whether due to fraud or error. • Determining the appropriateness of the measurement and reporting criteria in view of the intended users of the selected sustainability information and for ensuring that those criteria are publicly available to the report users. PricewaterhouseCoopers Chartered Accountants Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria T: +234 1 271 1700, www.pwc.com/ng TIN: 01556757-0001 BN: 958268 Partners: S Abu, O Adekoya, T Adeleke, W Adetokunbo-Ajayi, S Adu, E Agbeyi, A Akingbade, UN Akpata, O Alakhume, A Atitebi, C Azobu, A Banjo, E Erhie, K Erikume, M Iwelumo, H Jaiyeola,T Labeodan, U Muogilim, C Obaro, C Ojechi, U Ojinmah, O Oladipo, W Olowofoyeku, P Omontuemhen, O Osinubi, T Oyedele, O Ubah, C Uwaegbute, Y Yusuf PricewaterhouseCoopers Chartered Accountants Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria T: +234 1 271 1700, www.pwc.com/ng TIN: 01556757-0001 BN: 958268 74 Partners: S Abu, O Adekoya, T Adeleke, W Adetokunbo-Ajayi, S Adu, E Agbeyi, A Akingbade, UN Akpata, O Alakhume, A Atitebi, C Azobu, A Banjo, E Erhie, K Erikume, M Iwelumo, H Jaiyeola,T Labeodan, U Muogilim, C Obaro, C Ojechi, U Ojinmah, O Oladipo, W Olowofoyeku, P Omontuemhen, O Osinubi, T Oyedele, O Ubah, C Uwaegbute, Y Yusuf r e b m u n n i d e t a t s e b d u o w s a ( l t n e m e t a t s e g a P t l u s e r e c n a m r o f r e P d e t a d p U ) t r o p e r y t i l i i b a n a t s u s l a n i f e h t 8 4 t a d o o t s e c r o f k r o w e v i t c a l a o t t r u O t u o , 2 2 0 2 r e b m e c e D 1 3 t a s a ) (cid:73) (cid:73) (cid:68) (cid:87) (cid:86) (cid:92) (cid:85) (cid:68) (cid:85) (cid:82) (cid:83) (cid:80) (cid:72) (cid:87) (cid:71) (cid:81) (cid:68) (cid:87) (cid:81) (cid:72) (cid:81) (cid:68) (cid:80) (cid:85) (cid:72) (cid:83) ( 0 4 0 9 , e r e w ) % 6 9 3 5 ( . , 8 7 8 4 h c h w i f o e r e w ) . % 4 0 6 4 ( 2 6 1 4 , e l i h w , l e a m e f . l e a m Zenith Bank Plc Annual Report December 31, 2022 % 8 6 1 3 . , 2 2 0 2 r e b m e c e D 1 3 t a s A f f a t s t n e m e g a n a m p o t r u o f o ) 2 3 ( d n a r e g a n a M l a r e n e G t n a t s s s A i f o ( (cid:86) (cid:88) (cid:82) (cid:76) (cid:85) (cid:68) (cid:89) (cid:82) (cid:87) (cid:71) (cid:72) (cid:71) (cid:81) (cid:82) (cid:70) (cid:72) (cid:86) (cid:73) (cid:73) (cid:68) (cid:87) (cid:86) (cid:86) (cid:72) (cid:71) (cid:88) (cid:70) (cid:91) (cid:72) (cid:79) e l i h w e a m e l f e r e w ) l e v e l e v o b a (cid:76) (cid:86) (cid:75) (cid:55) . l e a m e r e w ) 9 6 ( % 2 3 8 6 . . l e a m e f % 0 0 0 2 . 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5 0 2 I R G . y n a p m o c . s e e y o p m e l l l a f o i g n e b l l e w e h t e t o m o r p t n e n a m r e p e v i t c a r u o f o % 3 1 0 9 . - i t n a t u o b a i i g n n a r t d n a n o i t a c n u m m o C i n o g n n a r t i i i d e v e c e r , s e e y o p m e l s e r u d e c o r p d n a s e c i i l o p n o i t p u r r o c y e n o m - i t n a d n a n o i t p u r r o c - i t n a . 2 2 0 2 n i g n i r e d n u a l n r e v o g d n a t c u d n o c l d u o h s s e s s e n s u B i 1 e l p i c n i r P E S N d n a y c n e r a p s n a r t i , s c h t e h t i l w s e v e s m e h t y t i l i b a t n u o c c a n o i t p u r r o C - i t n A y e n o M - i t n A d n a g n i r e d n u a L o h w e e y o p m E l . 5 e n o g r e d n u e v a h n o i g n n a r t i i t a b m o c / g n i t h g i f l i a c n a n i f g n e g a t n e c r e p d n a r e b m u n ( e m i r c ) e e y o p m e l l a t o t f o (cid:22) Zenith Bank Plc Annual Report December 31, 2022 o t d e s u l e s e d i f o e m u o v l l a t o t e h T s a w s r o t a r e n e g ’ s k n a B h t i n e Z n u r s e r t i l . 0 0 9 4 8 9 6 3 2 , , 5 4 n i d e r e v o c a e r a l t a o t e h t , 2 2 0 2 n I t a d o o t s i s r o s v d A 4 V y b d e t c u d n o c t i d u a t n i r p t o o f n o b r a c l a n r e t x e e h t . h W k 9 1 4 , 7 2 5 8 , s a w d i r g l a n o i t a n 2 / m e 2 O C t 2 1 . s a w e c i f f O d a e H r u o n i 2 / m e 2 O C t 1 . 1 m o r f e s a e r c e d % 9 0 9 . a g n i t i a c d n i , 2 2 0 2 n i t a i i s n o s s m e G H G . 2 . m 5 8 3 9 2 1 , 1 6 t n e p s e r e w s r u o h 7 6 . 1 4 8 , 2 2 0 2 n I 1 - 2 1 4 I R G i s t h g R n a m u H f o l i s s y a n A . 6 n a m u h f o s t c e p s a s u o i r a v n o f f a t s t n e m s s e s s a t c a p m i r o s w e v e r i s t h g i r n a m u h - n o n d n a t n e n a m r e p 0 5 0 5 , y b i g n n a r t i n o o t j t c e b u s n e e b e v a h t a h t s n o i t a r e p O t n e m s s e s s A i s t h g R n a m u H r e b m u n n i d e t a t s e b d u o w s a ( l t n e m e t a t s e g a P t l u s e r e c n a m r o f r e P d e t a d p U ) t r o p e r y t i l i i b a n a t s u s l a n i f e h t ) s P B S N / I R G ( a i r e t i r C g n i t r o p e R n i i g n d a e H b u S y t i l i b a n i a t s u S t r o p e R k n a B h t i n e Z s r o t a c i d n I a e r A s u c o F 5 4 f o t n u o m a l t a o t e h t , 2 2 0 2 n I 1 - 2 0 3 I R G e h t m o r f d e s a h c r u p y t i c i r t c e e l n o i t i a s n a g r o e h t i n h t i w n o i t p m u s n o c y g r e n E l d u o h s s e s s e n s u B i : 7 e l p i c n i r P E S N y t i l i b a t n u o c c a . s t h g i r n a m u h e t o m o r p d n a t c e p s e r f o % 3 3 . 5 7 s t n e s e r p e r i s h T . s t h g i r . s e e y o p m e l t n e n a m r e p e v i t c a r u o n r e v o g d n a t c u d n o c l d u o h s s e s s e n s u B i 1 s t h g R i n a m u H e l p i c n i r P E S N 3 P B S N d n a y c n e r a p s n a r t i , s c h t e h t i l w s e v e s m e h t l a t n e m n o r i v n E : s n o i t a r e p o s s e n s u B i t n i r p t o o f l i a c o s r u O d n a 9 e l p i c n i r P E S N e k a m d n a , t c e t o r p , t c e p s e r l d u o h s s s e n s u B i . t n e m n o r i v n e e h t e r o t s e r o t s t r o f f e 2 P B S N n o i t a n m i i r c s d i d n a s e c i i l o p s e c i t c a r p . ) r e b m u n ( t a e c n a m r o f r e P l a t n e m n o r i v n E k n a B h t i n e Z n o i t p m u s n o c i n h t i w n r e t t a p n o i t a s n a g r o i e h t y g r e n E . 7 l a t n e m n o r i v n E i i n o s s m e G H G ) 1 e p o c s ( t c e r i D 2 - 5 0 3 I R G 1 - 5 0 3 I R G t a e c n a m r o f r e P l a t n e m n o r i v n E n o b r a C t n i r p t o o f . 8 k n a B h t i n e Z t n e m e r u s a e m i i n o s s m e G H G ) 3 e p o c s ( t c e r i d n I r e h t O (cid:23) i i n o s s m e G H G ( t c e r i d n I y g r e n E : 3 - I R G t n e m e g a n a m d n a 77 . 1 2 0 2 l a t n e m n o r i v n E : s n o i t a r e p o s s e n s u B i t n i r p t o o f l i a c o s r u O d n a 9 e l p i c n i r P E S N e k a m d n a , t c e t o r p , t c e p s e r l d u o h s s s e n s u B i . t n e m n o r i v n e e h t e r o t s e r o t s t r o f f e 2 P B S N r e b m u n n i d e t a t s e b d u o w s a ( l t n e m e t a t s e g a P t l u s e r e c n a m r o f r e P d e t a d p U ) t r o p e r y t i l i i b a n a t s u s l a n i f e h t ) s P B S N / I R G ( a i r e t i r C g n i t r o p e R n i i g n d a e H b u S y t i l i b a n i a t s u S t r o p e R k n a B h t i n e Z s r o t a c i d n I a e r A s u c o F 78 (cid:24) Zenith Bank Plc Annual Report December 31, 2022 Inherent Limitations Non-financial performance information is subject to more inherent limitations than financial information, given the characteristics of the subject matter and the methods used for determining, calculating, sampling and estimating such information. The absence of a significant body of established practices on which to draw allows for the selection of different but acceptable measurement techniques that can result in materially different measurements and can impact on comparability. Qualitative interpretation of relevance, materiality and the accuracy of data are subject to individual assumptions and judgements. The precision of different measurement techniques may also vary. Furthermore, the nature and methods used to determine the information, as well as the measurement criteria and the precision thereof, may change over time. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the International Ethics Standards Board for Accountants (IESBA) issued by the International Federation of Accountants, which is founded on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The firm applies the International Standard on Quality Control 1 (ISQC 1), and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Assurance provider’s responsibility Our responsibility is to express a conclusion on the sustainability report based on conducting a limited assurance engagement. We performed our limited assurance engagement in accordance with International Standard on Assurance Engagements (revised), Assurance Engagements Other Than Audits or Reviews of Historic Financial Information (ISAE 3000). This standard requires that we comply with ethical requirements and that we plan and perform the engagement to obtain limited assurance about whether the subject matter information is free from material misstatement. Our assurance engagement involves performing procedures to obtain sufficient appropriate evidence about the sustainability report which is the subject of our assurance engagement. The procedures selected depend on our professional judgement, including an identification of areas where a material misstatement of the subject matter information is likely to arise whether due to fraud or error. In our identification, we considered internal control relevant to management’s preparation of the sustainability report in order to design procedures that are appropriate in the circumstances. A limited assurance is substantially less in scope than a reasonable assurance engagement in relation to both risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and included inquiries, observation of processes followed, inspection of documents, analytical procedures, evaluating the appropriateness of qualification methods and reporting policies, and agreeing or reconciling with underlying records. Given the circumstances of the engagement, and performing the procedures listed above, we: PricewaterhouseCoopers Chartered Accountants Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria T: +234 1 271 1700, www.pwc.com/ng TIN: 01556757-0001 BN: 958268 Partners: S Abu, O Adekoya, T Adeleke, W Adetokunbo-Ajayi, S Adu, E Agbeyi, A Akingbade, UN Akpata, O Alakhume, A Atitebi, C Azobu, A Banjo, E Erhie, K Erikume, M Iwelumo, H Jaiyeola,T Labeodan, U Muogilim, C Obaro, C Ojechi, U Ojinmah, O Oladipo, W Olowofoyeku, P Omontuemhen, O Osinubi, T Oyedele, O Ubah, C Uwaegbute, Y Yusuf 79 • Interviewed management to obtain an understanding of the internal control environment, risk assessment process and information systems relevant to the sustainability reporting process; Inspected documentation to corroborate the statements of management in our interviews; • • Tested the processes and systems to generate, collate, aggregate, monitor and report the selected sustainability information; • Performed a controls walkthrough of identified key controls; • Inspected supporting documentation on a sample basis and performed analytical procedures to evaluate the data generation and reporting processes against the reporting criteria; • Evaluated the reasonableness and appropriateness of significant estimates and judgements made by Management in the preparation of the selected sustainability information; and • Evaluated whether the selected sustainability information presented in the report are consistent with our overall knowledge and experience of sustainability management and performance at the Bank. The procedures performed in a limited assurance engagement vary in nature and timing and are less in extent than for a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the Bank’s sustainability information have been prepared, in all material respects, in accordance with the accompanying Bank’s reporting criteria. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Limited Assurance Conclusion Based on procedures we have performed and the evidence we have obtained, and subject to inherent limitations outlined elsewhere in this report, nothing has come to our attention that causes us to believe that the selected sustainability information as set out in the subject matter paragraph above for the year ended 31 December 2022 are not prepared, in all material respects, in accordance with the reporting criteria. 80 (cid:26) Zenith Bank Plc Annual Report December 31, 2022 Other Matters The maintenance and integrity of Zenith Bank’s website is the responsibility of Zenith Bank’s Directors. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or our independent assurance report that may have occurred since the initial date of presentation on Zenith Bank’s website. Our work has been undertaken to enable us to express a limited assurance conclusion on the selected sustainability information to the Directors of the Bank in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than the Bank for our work, for this report, or for the conclusion we have reached. For: PricewaterhouseCoopers 13 April 2023 Chartered Accountants Lagos, Nigeria Engagement Partner: Edafe Erhie FRC/2013/ICAN/00000001143 81 (cid:27) (cid:46)(cid:70)(cid:70)(cid:85) (cid:53)(cid:73)(cid:70)(cid:1)(cid:59)(cid:70)(cid:79)(cid:74)(cid:85)(cid:73)(cid:1)(cid:35)(cid:66)(cid:79)(cid:76)(cid:1)(cid:1) (cid:42)(cid:79)(cid:85)(cid:70)(cid:77)(cid:77)(cid:74)(cid:72)(cid:70)(cid:79)(cid:85)(cid:1)(cid:55)(cid:74)(cid:83)(cid:85)(cid:86)(cid:66)(cid:77)(cid:1) (cid:34)(cid:84)(cid:84)(cid:74)(cid:84)(cid:85)(cid:66)(cid:79)(cid:85)(cid:1) ZIVA  (cid:15)(cid:15)(cid:15)(cid:1)(cid:80)(cid:79)(cid:1)(cid:56)(cid:73)(cid:66)(cid:85)(cid:84)(cid:34)(cid:81)(cid:81)(cid:1) “07040004422"(cid:1) (cid:48)(cid:81)(cid:70)(cid:79)(cid:1)(cid:66)(cid:79)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85) (cid:51)(cid:70)(cid:66)(cid:68)(cid:85)(cid:74)(cid:87)(cid:66)(cid:85)(cid:70)(cid:1)(cid:66)(cid:79)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85) (cid:51)(cid:70)(cid:84)(cid:85)(cid:83)(cid:74)(cid:68)(cid:85)(cid:1)(cid:66)(cid:79)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85) (cid:36)(cid:73)(cid:70)(cid:68)(cid:76)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:35)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70) (cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:71)(cid:70)(cid:83)(cid:1)(cid:46)(cid:80)(cid:79)(cid:70)(cid:90) (cid:35)(cid:86)(cid:90)(cid:1)(cid:34)(cid:74)(cid:83)(cid:85)(cid:74)(cid:78)(cid:70) (cid:49)(cid:86)(cid:83)(cid:68)(cid:73)(cid:66)(cid:84)(cid:70)(cid:1)(cid:37)(cid:66)(cid:85)(cid:66) (cid:49)(cid:66)(cid:90)(cid:1)(cid:35)(cid:74)(cid:77)(cid:77)(cid:84) (cid:35)(cid:77)(cid:80)(cid:68)(cid:76)(cid:1)(cid:36)(cid:66)(cid:83)(cid:69) (cid:51)(cid:70)(cid:85)(cid:83)(cid:74)(cid:70)(cid:87)(cid:70)(cid:1)(cid:36)(cid:66)(cid:83)(cid:69) (cid:54)(cid:81)(cid:69)(cid:66)(cid:85)(cid:70)(cid:1)(cid:35)(cid:55)(cid:47) (cid:36)(cid:73)(cid:70)(cid:68)(cid:76)(cid:1)(cid:34)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85) (cid:45)(cid:80)(cid:72)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:77)(cid:66)(cid:74)(cid:79)(cid:85)(cid:84) (cid:51)(cid:70)(cid:82)(cid:86)(cid:70)(cid:84)(cid:85)(cid:1)(cid:45)(cid:80)(cid:66)(cid:79) (cid:45)(cid:80)(cid:68)(cid:66)(cid:85)(cid:70)(cid:1)(cid:66)(cid:1)(cid:59)(cid:70)(cid:79)(cid:74)(cid:85)(cid:73)(cid:1)(cid:34)(cid:53)(cid:46)(cid:16)(cid:35)(cid:83)(cid:66)(cid:79)(cid:68)(cid:73) (cid:45)(cid:80)(cid:68)(cid:66)(cid:85)(cid:70)(cid:1)(cid:66)(cid:1)(cid:59)(cid:46)(cid:80)(cid:79)(cid:70)(cid:90)(cid:1)(cid:34)(cid:72)(cid:70)(cid:79)(cid:85) (cid:36)(cid:73)(cid:66)(cid:85)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:66)(cid:79)(cid:1)(cid:34)(cid:72)(cid:70)(cid:79)(cid:85) (cid:51)(cid:70)(cid:84)(cid:70)(cid:85)(cid:1)(cid:49)(cid:42)(cid:47) (cid:43)(cid:86)(cid:84)(cid:85)(cid:1)(cid:84)(cid:66)(cid:87)(cid:70)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:69)(cid:70)(cid:69)(cid:74)(cid:68)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:56)(cid:73)(cid:66)(cid:85)(cid:84)(cid:34)(cid:81)(cid:81)(cid:1) (cid:79)(cid:86)(cid:78)(cid:67)(cid:70)(cid:83)(cid:1) (cid:12)(cid:19)(cid:20)(cid:21)(cid:1) (cid:24)(cid:17)(cid:21)(cid:1) (cid:17)(cid:17)(cid:17)(cid:1) (cid:21)(cid:21)(cid:19)(cid:19) (cid:1) (cid:80)(cid:79)(cid:1) (cid:90)(cid:80)(cid:86)(cid:83)(cid:1)(cid:34)(cid:77)(cid:70)(cid:83)(cid:85)(cid:59)(cid:1)(cid:77)(cid:74)(cid:79)(cid:70)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:84)(cid:66)(cid:90)(cid:1)(cid:105) (cid:41)i (cid:119)(cid:1)(cid:85)(cid:80)(cid:1)(cid:86)(cid:84)(cid:1) (cid:80)(cid:79)(cid:1)(cid:56)(cid:73)(cid:66)(cid:85)(cid:84)(cid:34)(cid:81)(cid:81)(cid:15) Governance (cid:7) Sustainability Financials 0203Statement of Directors’ Responsibilities in Relation to the Financial Statements for the Year Ended 31 December 2022 The Directors accept responsibility for the preparation of the consolidated and separate 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, (CAMA 2020) of Nigeria, Financial Reporting Council of Nigeria Act, 2011, the Banks and Other Financial Institutions Act, (BOFIA),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, (CAMA 2020) of Nigeria 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 period ahead. _________________________ Dr. Ebenezer Onyeagwu Group Managing Director / CEO FRC/2013/ICAN/00000003788 January 26, 2023 SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: _________________________ Mr. Jim Ovia, CFR Chairman FRC/2013/CIBN/00000002405 January 26, 2023 84 Report of The Audit Committee for the Year Ended 31 December, 2022 In compliance with Section 359(6) of the Companies and Allied Matters Act of Nigeria (2020), Cap C20 LFN 2004, we have reviewed the consolidated and separate ﬁnancial statements of Zenith Bank Pie for the year ended 31 December, 2022 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 satisfactorily by the management. Related party transactions and balances have been disclosed in note 38 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 25, 2023. Mrs. Adebimpe Balogun Chairman, Audit Committee FRC/2017/CITN/00000017467 MEMBERS OF THE COMMITTEE Shareholders’ Representative 1. Mrs Adebimpe Balogun 2. 3. Mr. Michael Olusoji Ajayi Professor Leonard F.O. Obika Directiors’ Representative Directors’ Representatives Engr. Mustafa Bello 1. Dr. AI-Mujtaba Abubakar MFR 2. - Chairman Financials 85 86 Zenith Bank Plc Annual Report December 31, 2022 Financials 87 88 Zenith Bank Plc Annual Report December 31, 2022 Financials 89 90 Zenith Bank Plc Annual Report December 31, 2022 Financials 91 Notes USSD Merchant (cid:52)ome(cid:1)(cid:47)ew(cid:1)(cid:34)(cid:81)(cid:81)(cid:1)(cid:39)eat(cid:86)(cid:83)e(cid:84)(cid:27)(cid:63)(cid:3)(cid:49)e(cid:90)(cid:3)(cid:15)(cid:15)(cid:15)(cid:1)(cid:88)(cid:73)(cid:70)(cid:83)(cid:70)(cid:1)(cid:68)(cid:77)(cid:66)(cid:84)(cid:84)(cid:1)(cid:78)(cid:70)(cid:70)(cid:85)(cid:84)(cid:1)(cid:68)(cid:80)(cid:79)(cid:87)(cid:70)(cid:79)(cid:74)(cid:70)(cid:79)(cid:68)(cid:70)(cid:52)(cid:36)(cid:34)(cid:47)(cid:1)(cid:53)(cid:48)(cid:1)(cid:37)(cid:48)(cid:56)(cid:47)(cid:45)(cid:48)(cid:34)(cid:37)(cid:18)(cid:15)(cid:1)(cid:1)(cid:49)(cid:70)(cid:83)(cid:84)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:39)(cid:74)(cid:79)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:15)(cid:19)(cid:15)(cid:1)(cid:1)(cid:39)(cid:80)(cid:83)(cid:70)(cid:89)(cid:1)(cid:36)(cid:86)(cid:83)(cid:83)(cid:70)(cid:79)(cid:68)(cid:90)(cid:1)(cid:38)(cid:89)(cid:68)(cid:73)(cid:66)(cid:79)(cid:72)(cid:70)(cid:1)(cid:51)(cid:66)(cid:85)(cid:70)(cid:1)(cid:7)(cid:1)(cid:36)(cid:80)(cid:79)(cid:87)(cid:70)(cid:83)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:36)(cid:66)(cid:77)(cid:68)(cid:86)(cid:77)(cid:66)(cid:85)(cid:80)(cid:83)(cid:15)(cid:20)(cid:15)(cid:1)(cid:1)(cid:49)(cid:83)(cid:80)(cid:246)(cid:77)(cid:70)(cid:1)(cid:37)(cid:66)(cid:85)(cid:66)(cid:1)(cid:49)(cid:66)(cid:72)(cid:70)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:15)4(cid:15)(cid:1)(cid:1)(cid:52)(cid:86)(cid:78)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:77)(cid:77)(cid:1)(cid:90)(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:67)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70)(cid:84)(cid:1)(cid:9)(cid:47)(cid:66)(cid:74)(cid:83)(cid:66)(cid:1)(cid:7)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:68)(cid:86)(cid:83)(cid:83)(cid:70)(cid:79)(cid:68)(cid:74)(cid:70)(cid:84)(cid:10)(cid:15)... and lots more.(cid:22)(cid:15)(cid:1)(cid:1)(cid:35)(cid:80)(cid:80)(cid:76)(cid:16)(cid:49)(cid:66)(cid:90)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:39)(cid:77)(cid:74)(cid:72)(cid:73)(cid:85)(cid:84)(cid:13)(cid:1)(cid:41)(cid:80)(cid:85)(cid:70)(cid:77)(cid:84)(cid:13)(cid:1)(cid:38)(cid:79)(cid:85)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:51)(cid:80)(cid:66)(cid:69)(cid:1)(cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:81)(cid:80)(cid:83)(cid:85)(cid:15)(cid:23)(cid:15)(cid:1)(cid:1)(cid:45)(cid:80)(cid:66)(cid:79)(cid:1)(cid:51)(cid:70)(cid:82)(cid:86)(cid:70)(cid:84)(cid:85)(cid:13)(cid:1)(cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:71)(cid:70)(cid:83)(cid:1)(cid:45)(cid:74)(cid:78)(cid:74)(cid:85)(cid:1)(cid:46)(cid:72)(cid:85)(cid:13)(cid:1)(cid:36)(cid:73)(cid:70)(cid:82)(cid:86)(cid:70)(cid:16)(cid:37)(cid:83)(cid:66)(cid:71)(cid:85)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:13)(cid:1)(cid:37)(cid:86)(cid:67)(cid:66)(cid:74)(cid:1)(cid:55)(cid:74)(cid:84)(cid:66)(cid:1)(cid:7)(cid:1)(cid:48)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:52)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:84)(cid:15)(cid:24)(cid:15)(cid:1)(cid:1)(cid:46)(cid:70)(cid:83)(cid:68)(cid:73)(cid:66)(cid:79)(cid:85)(cid:1)(cid:50)(cid:51)(cid:1)(cid:81)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)Pay with TransferNotes Zenith Bank Plc Annual Report December 31, 2022 Consolidated and Separate Statement of Proﬁt or Loss and Other Comprehensive Income for the Year Ended 31 December 2022 In millions of Naira Note(s) 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank Interest and similar income Interest and similar expense Net interest income Impairment charge 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 12 540,166 427,597 448,174 (173,539) (106,793) (153,019) 340,388 (82,718) 366,627 320,804 295,155 257,670 (123,252) (59,932) (61,896) (56,175) 243,375 260,872 233,259 201,495 132,795 212,678 35,494 (26,630) (3,678) 103,958 167,483 37,594 (25,305) (3,779) 110,098 201,645 49,790 (24,519) (3,045) 84,185 171,469 53,266 (23,204) (3,064) (86,412) (79,885) (68,475) (61,123) (222,972) (180,564) (204,703) (165,857) 284,650 280,374 294,050 257,167 13a (60,739) (35,816) (59,457) (24,034) 223,911 244,558 234,593 233,133 Items that will never be reclassified to profit or loss: Fair value movements on equity instruments at FVOCI 8,109 5,599 8,109 5,599 Items that are or may be reclassified to profit or loss: Foreign currency translation diﬀerences for foreign operations Fair value movements on debt securities at FVOCI (28,768) (6,602) 8,485 (2,227) - - - - Other comprehensive(loss)/ income for the year net of taxation (27,261) 11,857 8,109 5,599 Total comprehensive income for the year 196,650 256,415 242,702 238,732 Profit (loss) 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) 224,050 244,402 234,593 233,133 (139) 156 - - 196,981 256,245 242,702 238,732 (331) 170 - - 14 7.14 7.78 7.47 7.43 The accompanying notes are an integral part of these consolidated and separate ﬁnancial statements. 94 Consolidated and Separate Statement of Financial Position as at 31 December 2022 In millions of Naira 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 Note(s) 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 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 2,201,744 2,246,538 254,663 1,302,811 49,874 4,013,705 1,728,334 - 18,343 213,523 230,843 25,251 1,488,363 1,764,946 392,594 691,244 56,187 3,355,728 1,303,725 - 1,837 168,210 200,008 25,001 2,102,394 2,206,668 254,565 1,132,796 48,851 3,735,676 622,781 34,625 - 193,792 214,572 23,958 1,397,666 1,577,647 357,000 518,053 57,476 3,099,452 477,004 34,625 - 152,326 177,501 23,542 12,285,629 9,447,843 10,570,678 7,872,292 8,975,653 6,472,054 7,434,806 5,169,199 6,325 64,856 16,654 568,559 311,192 963,450 - 14,674 16,909 11,603 487,432 369,241 750,469 45,799 6,040 61,655 15,911 546,347 311,192 999,580 - 15,170 14,241 11,596 427,876 369,241 769,395 45,799 10,906,689 8,168,181 9,375,531 6,822,517 15,698 255,047 625,005 482,377 1,378,127 813 1,378,940 12,285,629 15,698 255,047 607,203 400,570 1,278,518 1,144 1,279,662 9,447,843 15,698 255,047 494,429 429,973 15,698 255,047 466,249 312,781 1,195,147 1,049,775 - 1,195,147 10,570,678 - 1,049,775 7,872,292 The accompanying notes are an integral part of these consolidated and separate ﬁnancial statements. The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 26th January 2023 and signed on its behalf by: Jim Ovia, CFR. (Chairman) FRC/2013/CIBN/00000002406 Dr. Ebenezer Onyeagwu (Group Managing Director & Chief Executive Officer) FRC/2013/ICAN/00000003788 Mukhtar Adam, PhD (Chief Financial Officer) FRC/2013/MUL Tl/00000003196 Financials 95 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f y t i u q E n i s e g n a h C f o t n e m e t a t S e t a r a p e S d n a d e t a d i l o s n o C 96 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z y t i u q e l a t o T - n o N l a t o T t s e r e t n i g n i l l o r t n o c i d e n a t e R i s g n n r a e e e v r e s e r k s i r t i d e r C I I S E M S e v r e s e r e v r e s e r y r o t u t a t S e v r e s e r l e u a v r i a F i n g e r o F y c n e r r u c e v r e s e r n o i t a l s n a r t e r a h S i m u m e r p e r a h S l a t i p a c s e t o N , 9 9 4 6 1 1 1 , , 3 9 2 1 2 5 6 6 2 2 , 9 2 7 3 , 7 0 3 1 3 2 , 1 0 1 2 4 , 8 5 0 5 4 , 7 4 0 5 5 2 , 8 9 6 5 1 , 0 5 6 6 9 1 , ) 1 3 3 ( 1 8 9 6 9 1 , , 0 5 0 4 2 2 5 1 4 6 5 2 , 0 7 1 , 5 4 2 6 5 2 2 0 4 4 4 2 , 8 5 5 4 4 2 , 5 8 4 8 , 9 9 5 5 , ) 7 2 2 2 ( , , 3 7 4 7 1 1 1 , 4 7 9 6 5 1 4 1 - - - ) 6 2 2 4 9 ( , , 2 6 6 9 7 2 1 , - 1 1 9 3 2 2 , , 2 6 6 9 7 2 1 , - - 4 4 1 1 , 4 4 1 1 , ) 9 3 1 ( - 9 0 1 8 , ) 2 0 6 6 ( , - - ) 8 6 7 8 2 ( , ) 2 9 1 ( - ) 1 7 3 7 9 ( , , 0 4 9 8 7 3 1 , - - 3 1 8 , 8 1 5 8 7 2 1 , , 8 1 5 8 7 2 1 , , 3 0 2 7 0 6 6 4 8 1 2 , , 3 0 2 7 0 6 6 4 8 1 2 , 9 2 7 3 , 9 2 7 3 , 3 9 9 5 7 2 , 3 7 4 5 4 , 3 9 9 5 7 2 , 3 7 4 5 4 , 1 7 4 8 , 9 9 5 5 , ) 7 2 2 2 ( , - - - 2 0 4 4 4 2 , 2 0 4 4 4 2 , ) 6 2 2 4 9 ( , ) 6 2 2 4 9 ( , - - ) 6 6 2 4 6 ( , 0 8 5 9 1 , - ) 6 7 5 8 2 ( , 9 0 1 8 , ) 2 0 6 6 ( , - - - - 0 5 0 4 2 2 , 0 5 0 4 2 2 , ) 1 7 3 7 9 ( , ) 1 7 3 7 9 ( , - - ) 6 7 8 8 0 1 ( , 8 5 4 3 7 , - - - - - - - - - - - - - - - - - - - - - - - - 6 8 6 4 4 , - - 9 9 5 5 , ) 7 2 2 2 ( , 2 7 3 3 , - - - - - - - - - - - - - - - - - 9 1 4 5 3 , - - - - - 9 0 1 8 , ) 2 0 6 6 ( , 7 0 5 1 , - - - 1 7 4 8 , 1 7 4 8 , - - - - 9 2 5 3 5 , 9 2 5 3 5 , ) 6 7 5 8 2 ( , - - ) 6 7 5 8 2 ( , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 4 0 5 5 2 , 8 9 6 5 1 , 7 4 0 5 5 2 , 8 9 6 5 1 , 5 3 0 4 5 3 0 4 : e m o c n i e v i s n e h e r p m o C r e h t O 1 2 0 2 y r a u n a J 1 r a e y e h t r o f t ﬁ o r P a r i a N f o s n o i l l i m n I p u o r G s t n e m u r t s n i y t i u q e n o s t n e m e v o m e u a v r i a F l s e i t i r u c e s t b e d n o s t n e m e v o m e u a v r i a F l r a e Y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T t n e r a P e h t f o s r e n w o h t i w s n o i t c a s n a r T s e v r e s e r n e e w t e b r e f s n a r T s d n e d v D i i s t n e m u r t s n i y t i u q e n o s t n e m e v o m e u a v r i a F l s e i t i r u c e s t b e d n o s t n e m e v o m e u a v r i a F l r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T t n e r a P e h t f o s r e n w o h t i w s n o i t c a s n a r T s e v r e s e r n e e w t e b r e f s n a r T s d n e d v D i i i s e c n e r e ﬀ d n o i t a l s n a r t y c n e r r u c n g e r o F i 1 2 0 2 r e b m e c e D 1 3 t a e c n a l a B 2 2 0 2 y r a u n a J 1 r a e y e h t r o f t ﬁ o r P : e m o c n i e v i s n e h e r p m o C r e h t O i s e c n e r e ﬀ d n o i t a l s n a r t y c n e r r u c n g e r o F i , 7 2 1 8 7 3 1 , , 5 0 0 5 2 6 4 0 3 5 9 , 9 2 7 3 , 1 1 4 1 1 3 , 0 8 9 6 4 , 3 5 9 4 2 , 7 4 0 5 5 2 , 8 9 6 5 1 , 2 2 0 2 r e b m e c e D 1 3 t a e c n a l a B 3 9 5 4 3 2 , 3 9 5 4 3 2 , 9 0 1 8 , - , 2 0 7 2 4 2 3 9 5 4 3 2 , - - - ) 0 3 3 7 9 ( , ) 0 3 3 7 9 ( , - - ) 4 8 0 9 0 1 ( , 5 9 8 3 7 , - - - - - - - - - 9 8 1 5 3 , - - - 9 0 1 8 , 9 0 1 8 , - - - - - - - - - - , 5 7 7 9 4 0 1 , , 6 7 7 9 4 0 1 , 9 4 2 6 6 4 , 6 1 0 0 2 , 9 2 7 3 , 4 1 4 3 4 2 , 2 2 6 5 4 , 7 4 0 5 5 2 , 8 9 6 5 1 , 0 5 2 6 6 4 , 6 1 0 0 2 , 9 2 7 3 , 4 1 4 3 4 2 , 2 2 6 5 4 , 7 4 0 5 5 2 , 8 9 6 5 1 , l a t o T y t i u q e i d e n a t e R i s g n n r a e e v r e s e r k s i r t i d e r C , 2 3 2 5 0 9 2 9 2 2 8 3 , 3 3 1 3 3 2 , 3 3 1 3 3 2 , 9 9 5 5 , - 2 3 7 8 3 2 , , 3 3 1 3 3 2 - - - - ) 9 8 1 4 9 ( , ) 9 8 1 4 9 ( , - - ) 7 8 9 4 5 ( , 6 1 0 0 2 , - - - - - - - - - 1 7 9 4 3 , - - - 9 9 5 5 , 9 9 5 5 , - - - - - - - - - - 9 2 7 3 , 3 4 4 8 0 2 , 3 2 0 0 4 , 7 4 0 5 5 2 , 8 9 6 5 1 , I I S E M S e v r e s e r e v r e s e r y r o t u t a t S l e u a v r i a F e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c s e t o N 5 3 0 4 5 3 0 4 s t n e m u r t s n i y t i u q e n o s t n e m e v o m e u a v r i a F l r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T : e m o c n i e v i s n e h e r p m o C r e h t O s e v r e s e r n e e w t e b r e f s n a r T 1 2 0 2 y r a u n a J 1 t a e c n a l a B k n a B r a e y e h t r o f t ﬁ o r P a r i a N f o s n o i l l i m n I s d n e d v D i i 1 2 0 2 r e b m e c e D 1 3 t a e c n a l a B 2 2 0 2 y r a u n a J 1 t a e c n a l a B : e m o c n i e v i s n e h e r p m o C r e h t O r a e y e h t r o f t ﬁ o r P s t n e m u r t s n i y t i u q e n o s t n e m e v o m e u a v r i a F l r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T s e v r e s e r n e e w t e b r e f s n a r T s d n e d v D i i , 7 4 1 5 9 1 1 , 9 2 4 4 9 4 , 1 1 9 3 9 , 9 2 7 3 , , 2 0 6 8 7 2 1 3 7 3 5 , 7 4 0 5 5 2 , 8 9 6 5 1 , 2 2 0 2 , r e b m e c e D 1 3 t a e c n a l a B . s t n e m e t a t s l i a c n a n ﬁ e t a r a p e s d n a d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T Notes 97 Zenith Bank Plc Annual Report December 31, 2022 Consolidated and Separate Statement of Cash Flows for the Year Ended 31 December 2022 For the year ended 31 December In millions of Naira Cash flows from operating activities Proﬁt before tax for the year Adjustments for: Group Bank Note(s) 2022 2021 2022 2021 284,650 280,374 294,050 257,167 Net impairment loss on ﬁnancial and non-ﬁnancial instruments 8 123,252 59,932 61,896 56,175 Unrealised fair value change in trading bond, bills and derivatives 44(xii) Depreciation of property and equipment Amortisation of intangible assets Dividend income Foreign exchange revaluation gain Write-oﬀ of Intangible Interest income Interest expense Gain on sale of property and equipment Gain on sale of ﬁnancial instruments Modiﬁcation Loss Gain on lease derecognition Changes in operating assets and liabilities: Net increase in loans and advances Net (increase) decrease in other assets 26 27 10 10 27 6 7 10 10 44 (xvi) 90,046 26,630 3,679 (2,223) (94,564) (88,394) (97,873) 25,305 3,779 24,520 3,045 23,204 3,064 (2,754) (17,148) (19,186) (25,201) (25,537) (25,320) (26,012) - 2,454 - 2,454 (540,166) (427,597) (448,174) (340,388) 173,539 106,793 153,019 82,718 (2,563) - - (78) (251) (353) (2,451) (69) - - - - - 44 (xvili) (2,028) - (2,025) (50,477) (71,791) (46,983) (58,746) 44(iii) (543,005) (536,014) (502,442) (409,303) 44 (viii) (59,586) 1,362 (55,735) 6,896 Net increase in treasury bills (FVTPL) including bills pledged 44(iib) (76,101) (97,724) (78,553) (95,938) Net (increase)/decrease in investment securities including bonds pledged (FVTPL and FVOCI) Net (increase)/decrease in restricted balances (cash reserves) 44(i) 44(x) (254,630) (160,011) 138 (418,711) 80,525 (419,705) Net decrease/ (increase) in due from banks with maturity greater than three months 44(vii) (15,661) 139,061 (21,065) 33,389 95,418 75,556 Net increase in customer deposits Net increase/(decrease) in Other liabilities 44(iv) 44(V) 2,362,290 1,091,293 2,153,832 823,850 48,387 (225,060) 84,480 (180,330) 992,506 221,641 1,113,967 290,792 Interest received from operating activities 44 (xiiia) 354,722 286,640 302,324 253,341 Interest paid Tax paid Net cash flows generated from operations Cash flows from investing activities Purchase of property and equipment Proceeds from Sale of property and equipment Purchase of intangible assets Additions to treasury bills Disposal of treasury bills Interest received from treasury bills and investment securities Acquisition of Right of Use Asset Additions to other Investment securities Disposal of other Investment securities Proceeds from sale of ﬁnancial instruments Dividends received Net cash from investing activities 98 44(xi) (143,859) (107,051) (128,805) (83,695) 13 (24,247) (15,045) (7,728) (2,581) 1,179,122 386,185 1,279,758 457,857 44(xivb) (67,245) (34,109) (64,357) (31,584) 44(vi) 3,207 448 2,671 437 27 (4,130) (14,884) (3,461) (14,361) 44(iia) (3,060,163) (2,652,094) (2,968,565) (2,346,839) 44(iiа) 2,833,003 2,449,816 2,679,567 2,056,995 44 (xiiib) 44(xiva) 88,416 (2,281) 78,970 (240) 71,700 (2,031) 41,492 (150) 44(XV) (559,328) (300,852) (206,285) (159,577) 44(i) 403,066 230,056 65,448 75,928 10 10 - 2,223 251 2,754 - - 17,148 19,186 (363,232) (239,884) (408,165) (358,474) In millions of Naira Group Bank Note(s) 2022 2021 2022 2021 Cash flows from financing activities Repayment of debt securities Issued Cash inﬂow from long term borrowings Repayment of long term borrowings Cash inﬂow from onlending facility Repayment of onlending facility Repayment of principal for lease liability Unclaimed dividend received Dividends paid to shareholders Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Analysis of changes in cash and cash equivalents : (46,071) - (46,071) - 31 31 30(b) 30(b) 44(v) 44(xvii) 1,243,614 712,420 1,279,743 693,944 (1,135,414) (860,123) (1,154,340) (826,805) - (59,470) (4,011) 1,117 14,482 (33,011) (2,802) 612 - 14,482 (59,470) (33,011) (2,927) 1,117 (2,007) 612 40 (97,371) (94,226) (97,330) (94,189) (97,606) (262,648) (79,278) (246,974) 718,284 (116,347) 792,315 (147,591) Cash and cash equivalent at the beginning of the year 1,134,519 1,208,520 776,574 882,683 (decrease)/increase in cash and cash equivalents Eﬀect of exchange rate movement on cash balances 718,286 (116,347) 792,315 (147,591) 87,955 42,346 88,297 41,482 Cash and cash equivalents at the end of the year 41 1,940,758 1,134,519 1,657,186 776,574 The accompanying notes are an integral part of these consolidated and separate ﬁnancial statements. Financials 99 (cid:37)(cid:80)(cid:1)(cid:46)(cid:80)(cid:83)(cid:70)(cid:1) (cid:1) (cid:1) (cid:52) (cid:48) (cid:45) (cid:54) (cid:53) (cid:42) (cid:48) (cid:47) (cid:52) (cid:39) (cid:44)(cid:42) (cid:44)(cid:55)C(cid:47)(cid:3)(cid:37)(cid:56)(cid:54)(cid:44)(cid:49) (cid:40)(cid:54)(cid:54)(cid:3) with (cid:16)(cid:16)(cid:16) (cid:49)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:36)(cid:80)(cid:77)(cid:77)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:52)(cid:80)(cid:77)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1) (cid:1)(cid:93) (cid:1)(cid:1)(cid:46)(cid:86)(cid:77)(cid:85)(cid:74)(cid:67)(cid:66)(cid:79)(cid:76)(cid:1)(cid:49)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:49)(cid:83)(cid:80)(cid:68)(cid:70)(cid:84)(cid:84)(cid:74)(cid:79)(cid:72) (cid:49)(cid:66)(cid:90)(cid:83)(cid:80)(cid:77)(cid:77)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:1) (cid:1)(cid:1)(cid:51)(cid:70)(cid:78)(cid:74)(cid:85)(cid:85)(cid:66)(cid:79)(cid:68)(cid:70)(cid:84)(cid:1)(cid:1) (cid:1)(cid:1)(cid:37)(cid:66)(cid:74)(cid:77)(cid:90)(cid:1)(cid:38)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85) (cid:93) (cid:93) (cid:36)(cid:86)(cid:84)(cid:85)(cid:80)(cid:78)(cid:74)(cid:91)(cid:70)(cid:69)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:52)(cid:80)(cid:77)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:1) (cid:1)(cid:1)(cid:34)(cid:69)(cid:87)(cid:74)(cid:84)(cid:80)(cid:83)(cid:90)(cid:1)(cid:52)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:84) (cid:93) (cid:66)(cid:79)(cid:69)(cid:1)(cid:77)(cid:80)(cid:85)(cid:84)(cid:1)(cid:78)(cid:80)(cid:83)(cid:70)(cid:15) Let us partner with you on  your journey to s(cid:86)(cid:68)(cid:68)ess.  Statement of Directors(cid:8)  Responsibilities Notes Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 1. General information (i) Property and Equipment: Proceeds before intended use – Amendments to IAS 16 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 registered oﬃce address of the company is Plot 84/87 Ajose Adeogun street, Victoria Island, Lagos. 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 and separate ﬁnancial statements for the year ended 31 December 2022 comprise the Bank and its subsidiaries (together referred to as “the Group” and individually as “Group entities”) and the separate ﬁnancial statements comprise the Bank. The consolidated and separate ﬁnancial statements for the year ended 31 December 2022 were approved and authorised for issue by the Board of Directors on 26 January 2023. The directors have the power to amend and re-issue the ﬁnancial statements The Group does not have any unconsolidated structured entity. 2.0(a) Changes in accounting policies Except as noted below, the Group has consistently applied the accounting policies as set out in Note 2(b) to all periods presented in these consolidated and separate ﬁnancial statements. The Group has adopted the following new standards and amendments including any consequential amendments to other standards with initial date of application of January 1, 2022. 102 The amendment to IAS 16 Property, Plant and Equipment (PP&E) prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing the asset for its intended use. It also clariﬁes that an entity is ‘testing whether the asset is functioning properly’ when it assesses technical and physical performance of the asset. The ﬁnancial performance of the asset is not relevant to this assessment. Entities must disclose separately the amounts of proceeds and costs relating to items produced that are not an output of the entity’s ordinary activities. This amendment does not have an impact on the Group Financial statements. (ii) Reference to the Conceptual Framework – Amendments to IFRS 3 Minor amendments were made to IFRS 3 Business Combinations to update the references to the Conceptual Framework for Financial Reporting and to 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. There has been no change in the Group structure within the period as such this amendment does not have an impact on the Group ﬁnancial statements. (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. This amendment does not have an impact on the Group Financial statements. (iv) 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 – amendment of illustrative example 13 to remove the illustration of payments from the lessor relating to leasehold improvements, to remove any confusion about the treatment of lease incentives. • IFRS 1 First-time Adoption of International Financial Reporting Standards – allows entities that have measured their assets and liabilities at carrying amounts recorded in their parent’s books to also measure any cumulative translation diﬀerences using the amounts reported by the parent. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption. 2.0(b) Changes in accounting policy following IFRS IC agenda discussions No Agenda decisions issued by the IFRS IC had an impact on the group ﬁnancial statements for the year ended 31 December 2022 2.0(c) IBOR reform disclosure Overview A reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank oﬀered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Zenith Bank has assessed and quantiﬁed its exposure to IBORs on its ﬁnancial instruments that will be reformed as part of this market-driven initiative. Over the course of the transition, the IBOR reform has had operational, risk management, legal and accounting impacts across all of our business lines. From the management point of view, the ﬁnancial risk is limited mainly to interest rate risk. Zenith Bank established a cross-functional IBOR Transition Working Group to manage its transition to alternative rates. The objectives of the Working Group include evaluating the extent to which the entity’s ﬁnancial assets and liabilities reference IBOR cash ﬂows, developing and executing a structured plan for the transition and how to manage communication about IBOR reform with clients and counterparties. The Working Group reports periodically to the Board and ALCO to support the management of interest rate risk and provide relevant information for key decisions relating to the IBOR reform. The Working Group aslo collaborates with other business functions as needed. No newly originated ﬂoating-rate loan or instrument referenced IBOR from 1 January 2022 However, the Bank is still in the process of negotiating the replacement rate for IBOR legacy contracts with rates that ceased as at 31 December 2022. The IBOR transition working group is working closely with the business teams to amend the contractual terms to replace the IBOR rate. The sections below contain details of all of the ﬁnancial instruments that the Group holds at 31 December 2022 which reference IBOR and have not yet transitioned to alternative interest rate benchmark. . There are no derivatives benchmarked to IBOR as at period end. (i) Non-derivative financial assets Zenith Bank’s IBOR exposures on ﬂoating-rate loans to customers is predominantly USD LIBOR. For these assets, Zenith Bank is in the process of reforming them to the Secured Overnight Financing Rate (‘SOFR’). This also consists of a change to the underlying calculation methodology. SOFR is a broad measure of the cost of borrowing cash overnight collateralised by U.S. Treasury securities in the repurchase agreement (repo) market. This rate is robust, is not at risk of cessation, and it meets international standards. It is produced by the New York Federal Reserve Bank in cooperation with the Oﬃce of Financial Research. The publication of the one week and two-month USD LIBOR ceased on December 31, 2021 and all other USD LIBOR tenors (e.g., overnight, one month, three-month, six-month and twelve- month) will cease after June 30, 2023 (applicable to legacy contracts only). Zenith Bank has revised its internal treasury and risk management systems to support the transition to SOFR. During the course of the transition, Zenith Bank’s IBOR Transition Working Group established policies for amending the interbank oﬀered rates on existing ﬂoating-rate loan portfolio indexed to IBORs. Loan products will be amended in a uniform way, while syndicated products, will be amended in bilateral negotiations with syndicated loan partners. The IBOR Transition Working Group is monitoring the progress of transition from IBORs to SOFR by reviewing the total amounts of impacted contracts. Zenith Bank also considers that a contract is not yet transitioned to an alternative benchmark rate when interest under the contract is indexed to a benchmark rate that is still subject to IBOR reform,(referred to as an ‘unreformed contract’). The following tables show the total amounts of unreformed non- derivative ﬁnancial assets as at 31 December 2022. The amounts of these assets are shown at their gross carrying amounts. Notes 103 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Dollars USD LIBOR USD LIBOR 31 Dec 2022 Carrying Value at 31 Dec 2022 Of which have yet to be transitioned as at 31 Dec 2022 Carrying Value at 31 Dec 2021 Of which have yet to be transitioned as at 31 Dec 2021 Loans and advances to customers Multilateral loans 1,228 1,228 873 873 2,883 2,883 2,883 2,883 (ii) Non-derivative financial liabilities Zenith Bank has ﬂoating-rate liabilities indexed to USD LIBOR. The IBOR Transition Working Group and Zenith Bank’s treasury team are in discussions with the counterparties of the Banks ﬁnancial liabilities to amend the contractual terms in response to IBOR reform. The following tables show the total amounts of unreformed non-derivative ﬁnancial liabilities as at 31 December 2022. The amounts shown in the table are the carrying amounts. In millions of Dollars USD LIBOR USD LIBOR 31 Dec 2022 Borrowings Multilateral Borrowings Carrying Value at 31 Dec 2022 Of which have yet to be transitioned as at 31 Dec 2022 Carrying Value at 31 Dec 2021 Of which have yet to be transitioned as at 31 Dec 2021 397 397 67 67 805 805 805 805 (d) 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. (e) Standards issued but not yet effective The following standards and interpretations had been issued but were not mandatory for annual reporting year ended on 31 December 2022. The Group has not early adopted the underlisted standards in preparing the ﬁnancial statements as it plans to adopt them at their respective eﬀective dates if applicable. (i) 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 waiver or a breach of covenant). The 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 2023. This amendment is not expected to have a signiﬁcant impact on the group ﬁnancial statement. 104 (ii) Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 The IASB amended IAS 1 to require entities to disclose their material rather than their signiﬁcant accounting policies. The amendments deﬁne what is ‘material accounting policy information’ and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The eﬀective date is 1 January 2023. This amendment is not expected to have a signiﬁcant impact on the accounting policies disclosed in the ﬁnancial statement. the beginning of the earliest comparative period presented. In addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be utilised) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary diﬀerences associated with: • • • restoration and right-of-use assets and lease liabilities, and decommissioning, similar liabilities, and the corresponding amounts recognised as part of the cost of the related assets. The cumulative eﬀect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appropriate. The eﬀective date is 1 January 2023. The impact of this amendment on the Group’s ﬁnancial statements is currently under assessment. iii) Definition Amendments to IAS 8 of Accounting Estimates – 2.1 Basis of preparation The amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clariﬁes how companies should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important, because changes in accounting estimates are applied prospectively to future transactions and other future events, but changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current period. The eﬀective date is 1 January 2023. This amendment does not have an impact on the Group ﬁnancial statements. (a) Statement of compliance The ﬁnancial statements are prepared in accordance with International Financial Reporting Standard (IFRS) ººand 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: iv) iv) Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary diﬀerences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after • Financial assets and amortised cost; • Derivative ﬁnancial liabilities measured at 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. (c) Use of estimates and judgements The preparation of ﬁnancial statements in conformity with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise its Notes 105 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are signiﬁcant to the consolidated and separate ﬁnancial statements are disclosed in Note 4. 2.2 Basis of Consolidation (a) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity if it is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to aﬀect those returns through its power over the entity. The Group reassesses whether it has control if there are changes to one or more elements of control. This includes circumstances in which protective rights held become substantive and lead to the Group having control over an investee. The ﬁnancial statements of subsidiaries are consolidated from the date the Group acquires control, up to the date that such eﬀective control ceases. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (transactions with owners). Interests When the proportion of the equity held by Non (NCIs) changes, the carrying Controlling 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 less accumulated impairment. (b) Loss of Control On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any related non-controlling interests and the other components of equity relating to a subsidiary. Any surplus or deﬁcit arising on the loss of control is recognised in proﬁt or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee or as a ﬁnancial asset depending on the level of inﬂuence retained. (c) Associates Associates are all entities over which the Group has signiﬁcant inﬂuence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting initially recognised at cost. The Group’s and are 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. 2.2 Basis of Consolidation 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 interests are measured at Non-controlling their proportionate share of the acquiree’s identiﬁable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. 106 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) assets and liabilities for statement of ﬁnancial position presented are translated at the closing rate at the reporting date; (ii) income and expenses for each statement of proﬁt or loss and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative eﬀect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange diﬀerences are recognised in other comprehensive income and presented within equity as foreign currency translation reserves. On the disposal of a foreign operation, the Group recognises in proﬁt or loss the cumulative amount of exchange diﬀerences relating to that foreign operation. When a subsidiary that includes a foreign operation is partially disposed of or sold, the Group re-attributes the proportionate share of the cumulative amount of the exchange diﬀerences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In the case of any other partial disposal of a foreign operation, the Group reclassiﬁes to proﬁt or loss only the proportionate share of the cumulative amount of exchange diﬀerences recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate at the reporting date. (c) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at periodend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in proﬁt or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the functional currency using the exchange rate at the transaction date, and those measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined and are recognised in the proﬁt or loss. When a gain or loss on non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss shall be recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in proﬁt or loss, any exchange of that gain or loss shall be recognised in proﬁt or loss. Translation diﬀerences on equities measured at fair value through other comprehensive income are included in other comprehensive income and transferred to the fair value reserve in equity. Foreign currency gains and losses on intra-group loans are recognised in proﬁt or loss unless settlement of the loan is neither planned nor likely to occur in the foreseeable future, in which case the foreign currency gains and losses are initially recognised in the foreign currency translation reserve in the consolidated ﬁnancial statements. Those gains and losses are recognised in proﬁt or loss at the earlier of settling the loan or at the time at which the foreign operation is disposed. 2.4 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 Notes 107 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 from the date of acquisition that are subject to an insigniﬁcant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. They include cash and non-restricted balances with central banks, treasury bills and other eligible bills, amounts due from other banks and short-term government securities. 2.5 Financial instruments (a) Initial recognition and measurement instruments are recognised Financial 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). (b) Subsequent measurement Subsequent to initial measurement, ﬁnancial instruments are measured either at amortised cost or fair value depending on their classiﬁcation category. (c) Classification (i) Financial assets Subsequent to initial recognition, all ﬁnancial assets within the Group are measured at: • • Amortised cost; Fair value through other comprehensive income (FVOCI); or • Fair value through proﬁt or loss (FVTPL) The Group’s ﬁnancial assets are subsequently measured at amortised cost if they meet both of the following criteria and are not designated as at FVTPL: 108 • Hold to collect’ business model test - The asset is held within a business model whose objective is to hold the ﬁnancial asset in other to collect contractual cash ﬂows; and • ‘SPPI’ contractual cash ﬂow characteristics test. The contractual terms of the ﬁnancial asset give rise to cash ﬂows that are solely payments of principal and interest (SPPI) on the principal amount outstanding on a speciﬁed date. Interest in this context is the consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. Debt instruments are measured at amortised cost by the Group if they meet both of the following criteria and are not designated as at FVTPL: • • ‘Hold to collect and sell’ business model is held within a business test: The asset 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 investments are measured at fair value. including equity A ﬁnancial asset is classiﬁed and measured at fair value through proﬁt or loss (FVTPL) by the Group if the ﬁnancial asset is: • • • A debt instrument that does not qualify to be measured at amortised cost or FVOCI; An equity investment which the Group has not irrevocably elected to classify as at FVOCI and present subsequent changes in fair value in OCI; A ﬁnancial asset where the Group has elected to measure the asset at FVTPL under the fair value option. (ii) Financial liabilities Financial liabilities are either classiﬁed by the Group as: • Financial liabilities at amortised cost; or • Financial liabilities as at fair value through proﬁt or loss (FVTPL). Financial liabilities are measured at amortised cost by the Group unless either: • • The ﬁnancial liability is held for trading and is therefore required to be measured at FVTPL, or The Group elects to measure the ﬁnancial liability at FVTPL (using the fair value option). (iii) Financial commitments guarantees contracts and loan A ﬁnancial guarantee contract is a contract that requires the Group (issuer) to make speciﬁed payments to reimburse the holder for a loss it incurs because a speciﬁed debtor fails to make payment when due in accordance with the original or modiﬁed terms of a debt instrument. Loan commitments’ are ﬁrm commitments to provide credit under pre-speciﬁed terms and conditions. Financial guarantees issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value. Subsequently, they are measured at the higher of the loss allowance determined in accordance with IFRS 9 (see note 3.2.18) and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15. The Group has issued no loan commitments that are measured at FVTPL. Liabilities arising from ﬁnancial guarantees and loan commitments are included within provisions. The Group conducts business involving commitments to customers. The majority of these facilities are set-oﬀ by corresponding obligations of third parties. Contingent liabilities and commitments comprise usance lines and letters of credit. Usance and letters of credit are agreements to lend to a customer in the future subject to certain conditions. An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. Letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the Customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts. Contingent liabilities and commitments are initially recognized at fair value which is also generally equal to the fees received and amortized over the life of the commitment. The carrying amount of contingent liabilities are subsequently measured at the higher of 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. Notes 109 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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; terms that limit the Group’s claim to cash ﬂows from speciﬁed assets (e.g. non-recourse loans); and features that modify consideration of the time value of money (e.g. periodical reset of Interest rate). The Group holds a portfolio of long-term ﬁxed-rate loans for which the Group has the option to propose to revise the interest rate at periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the revised rate or redeem the loan at par without penalty. The Group has determined that the contractual cash ﬂows of these loans are SPPI because the option varies the interest rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding. Reclassifications Financial assets are not reclassiﬁed subsequent to their initial recognition, except in the period after the Group changes its business model for managing ﬁnancial assets. 110 (d) Derecognition (i) Financial assets The Group derecognises a ﬁnancial asset when the contractual rights to the cash ﬂows from the ﬁnancial asset expire (see also (e)), or it transfers the rights to receive the contractual cash ﬂows in a transaction in which substantially all of the risks and rewards of ownership of the ﬁnancial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the ﬁnancial asset. On derecognition of a ﬁnancial asset, the diﬀerence between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in proﬁt or loss. Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in proﬁt or loss on derecognition of such securities. Any interest in transferred ﬁnancial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability. The Group sometimes enters into transactions whereby it transfers assets recognised on its statement of ﬁnancial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Examples of such transactions are securities lending and sale-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. (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. (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. Notes 111 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 (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. 112 Subsequent to initial recognition, the fair value of a ﬁnancial instrument is based on quoted market prices or dealer price quotation for ﬁnancial instruments. If a market for a ﬁnancial instrument is not active, then the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash ﬂow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates speciﬁc to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing ﬁnancial instruments. Inputs into valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the ﬁnancial instrument. See note 3.5 on assumptions. fair valuation methods and (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 in a hedging relationship are recognized immediately in proﬁt or loss and are included in Trading gains/(losses). Derivatives are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The method of recognizing the resulting fair value gain or loss depends on whether the derivative is designated and qualiﬁes as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as Hedges of the fair value of recognized assets or liabilities or ﬁrm commitments (fair value hedges). The Group documents, at the inception of the hedge, the relationship between hedged items and hedging instruments, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly eﬀective in oﬀsetting changes in fair values or cash ﬂows of hedged items. (a) Fair Value Hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of proﬁt or loss, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Bank discontinues hedge accounting in any of the following circumstances: • • • • • The hedging instrument is not, or has ceased to be, highly eﬀective as a hedge The hedging terminated, or exercised instrument has expired, is sold, The hedged item matures, is sold, or repaid The forecast transaction is no longer deemed highly probable The Bank elects to discontinue hedge accounting voluntarily Derivatives that do not qualify for Hedge Accounting Certain derivatives do not qualify for hedge accounting. Changes in the fair value of any derivative not designated 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. 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’. instruments Financial is recognised which are credit impaired are referred to as ‘Stage 3 ﬁnancial instruments”. lifetime ECL for which 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’ . Notes 113 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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 year. Also, signiﬁcant assumptions made during the year can be seen in note .1 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. 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. 114 The probability of debt being restructured, resulting in holders suﬀering losses through voluntary or mandatory debt forgiveness. The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to that country, as well as the intention, reﬂected in public statements, of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulﬁl the required criteria. 2.7.3 Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of ﬁnancial position as follows: Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; Loan commitments and ﬁnancial guarantee contracts: generally, as a provision; Where a ﬁnancial instrument includes both a drawn and an undrawn component, and the Group cannot identify the ECL on the loan commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision and; Debt instruments measured at FVOCI, no loss allowance is recognised in the statement of ﬁnancial position because the carrying amount of the asset is their fair value. However, the loss allowance is disclosed and recognised in the fair value reserve. 2.7.4 Write-off policy The Group writes oﬀ a loan balance when the Group’s credit department determines that the loan is uncollectable and had been declared delinquent and subsequently classiﬁed as lost. This determination is made after considering information such as the continuous deterioration in the customer’s ﬁnancial 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 amount of assets written oﬀ during the year ended 31 December 2022 was N74.1billion (31 December 2021: N42.5 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 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. reclassiﬁcation is applied prospectively The 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. from 2.9 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 diﬃculties 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. 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. Notes 115 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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. These repossessd collateral are sold as soon as practicable. 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 (Not depreciated) Motor vehicles Oﬃce equipment Furniture and ﬁttings 4 years 5 years 5 years Computer equipment 3 years Buildings 50 years Leasehold improvement Over the remaining lease period Aircraft 25 years Right of use assets Lower of lease term or the useful life for the speciﬁed class of item Depreciation is included in proﬁt or loss. Work in progress consists of items of property and equipment that are not yet available for use. Work in progress is carried at cost less any required impairment. Depreciation starts when assets are available for use. An impairment loss is recognised if the asset’s recoverable amount is less than cost. The asset is reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Once the items are available for use, they are transferred to relevant classes of property and equipment as appropriate. Property and equipment are derecognized on disposal, or when no future economic beneﬁts are expected from their use or disposal. Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in proﬁt or loss. Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. 116 Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset is capitalized as part of the cost of the asset. Other costs relating to borrowings which the group undertakes in the normal course of business are expensed in the period which they are incurred. 2.12 Intangible assets Computer software Software that is not integral to the related hardware acquired by the Group is stated at cost less accumulated amortisation and accumulated impairment losses. 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 product and use or sell it; intends to complete the software 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. 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. Notes 117 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 2.14 Leases A. 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. The major lease transaction wherein the Group/Bank is lessee relates to the lease of Bank’s branches To assess whether a contract conveys the right to control the use of an identiﬁed asset for a period of time, the Bank assesses whether, throughout the period of use, it has both of the following: (a) the right to obtain substantially all of the economic beneﬁts from use of the identiﬁed asset, and (b) the right to direct the use of the id entiﬁed 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. 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. 118 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. 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. 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) Share issue costs Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds. (b) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s shareholders. Dividends for the period that are declared after the end of the reporting period are dealt with in the subsequent events note. (c) Share premium Premiums from the issue of shares are reported in share premium. (d) Statutory reserve Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by The Banks and Other Financial Institutions Act (BOFIA) 2020, an appropriation of 30% of proﬁt after tax is made if the statutory reserve is less than the paid-up share capital and 15% of proﬁt after tax if the statutory reserve is greater than the paid-up share capital. (e) SMIEIS reserve The SMIEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set aside a portion of the proﬁt after tax in a fund to be used to ﬁnance equity investments in qualifying small and medium scale enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of proﬁt after tax and shall continue after the ﬁrst 5 years but banks’ contributions shall thereafter reduce to 5% of proﬁt after tax. The small and medium scale industries equity investment scheme reserves are non-distributable. Transfer to this reserve is no longer mandatory. (f) 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. (g) Retained earnings Retained earnings comprise the undistributed proﬁts from previous periods which have not been reclassiﬁed to any speciﬁed reserves. (h) Fair value reserve Comprises fair value movements on equity instruments and debt securities carried at FVOCI. Notes 119 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 (i) Foreign currency translation reserve Comprises exchange diﬀerences resulting from the translation to Naira of the results and ﬁnancial position of Group companies that have a functional currency other than Naira. Recognition of interest income and 2.18 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: 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. the gross carrying amount of the ﬁnancial asset; or the amortised cost of the ﬁnancial liability. For information on when ﬁnancial assets are credit-impaired, see Note 2.7.2. interest rate for ﬁnancial When calculating the eﬀective instruments other than purchased or originated credit-impaired assets, the Group estimates future cash ﬂows considering all contractual terms of the ﬁnancial instrument, but not ECL. For purchased or originated credit impaired ﬁnancial assets, a credit adjusted eﬀective interest rate is calculated using estimated future cash ﬂows including ECL. The calculation of the eﬀective interest rate includes transaction costs and fees and points paid or received that are an integral part of the eﬀective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a ﬁnancial asset or ﬁnancial liability. Amortised cost and gross carrying amount The ‘amortised cost’ of a ﬁnancial asset or ﬁnancial liability is the amount at which the ﬁnancial asset or ﬁnancial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the eﬀective interest method of any diﬀerence between that initial amount and the maturity amount and, for ﬁnancial assets, adjusted for any expected credit loss allowance. 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 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 liabilities measured at amortised cost. interest on ﬁnancial 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). 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 120 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. Fees and commission income are recognised at point in time and over time. Fees recognised over time relate to credit related fees (concerning participation fee and invoice discounting), guarantee fees, corporate ﬁnance fees, account maintenance fees and fees on electronic products charged monthly. Fees recognised at a point in time relate to credit related fees other than those recognised over time, account maintenance fee, auction fees, commission on agency and collection services, fees on electronic products (recognised at point in time), foreign currency transaction fees and foreign withdrawal charges. 2.20 Net Trading gains Net trading gain comprises gains less losses relating to trading assets and liabilities and includes all fair value changes, interest, dividends and foreign exchange diﬀerences. 2.21 Operating expense Expenses are decreases in economic beneﬁts during the accounting period in the form of outﬂows, depletion of assets or incurrence of liabilities that result in decrease in equity, other than those relating to distributions to equity participants. Expenses are recognized on an accrual basis regardless of the time of spending cash. Expenses are recognized in the income statement when a decrease in future economic beneﬁt related to a decrease in an assets or an increase of a liability has arisen that can be measured reliably. Expenses are measured at historical cost. Only the portion of cost of a previous period that is related to the income earned during the reporting period is recognized as an expense. Expenses that are not related to the income earned during the reporting period, but expected to generate future economic beneﬁts, are recorded in the ﬁnancial statement as assets. The portion of assets which is intended for earning income in the future periods shall be recognized as an expense when the associated income is earned. Expenses are recognized in the same reporting period when they are incurred in cases when it is not probable to directly relate them to particular income earned during the current reporting period and when they are not expected to generate any income during the coming years. 2.22 Current and deferred income tax Income tax expense comprises current tax (company income tax, tertiary education tax national information technology development agency levy and Nigeria Police Trust Fund levy) and deferred tax. It is recognised in proﬁt or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. to income The Bank had determined that interest and penalties tax relating treatments, do not meet the deﬁnition of income taxes, and therefore are accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. including uncertain taxes, (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 Notes 121 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 proﬁt (i.e. proﬁt after deducting all expenses and taxes from revenue earned by the company during the year). National Agency for Science and Engineering Infrastructure is computed on proﬁt before tax. assets and they relate to taxes levied by the same tax authority on the same taxable entity or on diﬀerent tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneouslyt. (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. 2.22 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 aﬀect the numbers of share issued, those shares are considered in calculating the diluted earnings per share. There is currently no share that could potentially dilute the total issued shares. 2.23 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 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. 2.24 Fiduciary activities 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. 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. 2.25 Deposit for outstanding investment in AGSMEIS The Agri-Business/Small and Medium Enterprises Investment Scheme is an initiative of Banker’s committee of Nigeria. The contributed funds are 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. 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 deferred tax liabilities are oﬀset if there is a legally enforceable right to oﬀset the current tax liabilities against the current tax 122 3. Risk management 3.1 Enterprise Risk Management The Zenith Bank Group adopts an integrated approach to risk management by bringing all risks together under a limited number of oversight functions. The Group addresses the challenge of risks comprehensively through the Enterprise Risk Management (ERM) Framework by applying practices that are supported by a governance structure consisting of Board- level and executive management committees. As part of its risk management policy, the Group segregates duties between market-facing business units and risk management functions while management is governed by well-deﬁned policies, which are clearly communicated across the Group. Risk related issues are taken into consideration in all business decisions and the Group continually strives to maintain a conservative balance between risk and revenue consideration. Continuous education and awareness of risk management has strengthened the risk management culture across the Group. 3.1.1 Risk Management Philosophy/Strategy The Group considers sound risk management practice to be the foundation of a long lasting ﬁnancial institution. a. The Group adopt a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number of oversight functions. b. c. d. e. 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 deﬁned, agreed upon by the business/support units and subject to annual reviews. 3.1.3 Risk Management Approach The Group addresses the challenge of risks comprehensively through an enterprise-wide risk management framework and a risk governance policy by applying leading practices that are supported by a robust governance structure consisting of Board-level and executive management committees. The Board drives the risk governance and compliance process through its committees. The Board audit and compliance 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 Board 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. 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; Notes 123 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 d. e. f. 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 and compliance 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. 3.1.4 Methodology for Risk Rating The risk management strategy is to develop an integrated approach to risk assessments, measurement, monitoring and 124 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. The Board has strategically implemented risk policies and procedures using techniques that addresses its risk appetite. 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; lines of authority and responsibility Establish for managing individual risk elements in line with the Board’s overall direction; identiﬁcation, measurement, monitoring and Risk control procedures; Establish eﬀective internal controls that cover each risk management process; Ensure that the Group’s risk management processes are properly documented; Create adequate awareness to make risk management a part of the corporate culture of the Group; that Ensure established by the Board; and risk remains within the boundaries 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 The Nigeria Gross Domestic Product (GDP) grew by 3.52 per cent in the fourth quarter of 2022 on a year-on-year basis. The performance of the GDP in the fourth quarter of 2022 was driven mainly by the services sector, which recorded a growth of 5.69 per cent and contributed 56.27 per cent to the aggregate GDP. The acceleration chieﬂy reﬂected the agricultural sector gaining steam and growing 2.0%. The aggregate GDP stood at N56.76 trillion in nominal terms in Q4, 2022. This improvement is reﬂected in the banking sector’s earnings and proﬁtability which appreciated in 2022, driven by broader adoption of digital channels post-lockdowns, a mild upswing in industry OPEX, and a slightly improved cost-to-income ratio. Zenith Bank’s principal strategy is aimed at promoting growth and proﬁtability of banking activities. The Bank adopted an integrated approach to risk management by bringing all risks together under a controlled oversight functions. Risk culture permeates the entire organization and the tone at the top is impeccable. Risk challenges are addressed through the Enterprise Risk Management (ERM) Framework supported by a governance structure consisting of board level and executive management committees. The Bank’s risk appetite is the core instrument used in aligning the overall corporate strategy, capital allocation and risk. The Bank has a comprehensive risk appetite framework linked to its corporate strategy and risk culture. As part of the Bank’s risk appetite framework, Risk Control Self-Assessment is conducted frequently. This assessment provides details on risk tolerance per risk category for each business/department across the entire bank. It also includes a nature of the threat, controls/mitigants, residual impact and early warning mechanisms for each risk. The Bank has both qualitative and quantitative indicators which are drawn from its existing risk management framework. There are several risk related frameworks and policies for both ﬁnancial and non-ﬁnancial risks. Macro-economic and market- based indicators are also used to proactively show and monitor negative trends, which may harm the Bank. The thresholds for the indicators were determined based on regulatory requirements (CBN), the Bank’s risk appetite and global good practice. The Bank is conservative as far as risk taking is concerned. As a result, the risk appetite is set at a level that minimizes erosion of earnings or capital due to avoidable losses or from frauds and operational ineﬃciencies. 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. 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 Notes 125 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 h. The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staﬀ and are implemented. 3.2.1 Credit Metrics and Measurement Tools Zenith Bank and its subsidiaries have devoted resources and harnessed their credit data to develop models that will improve the determination of economic and ﬁnancial threats resulting from credit risk. Before a sound and prudent credit decision can be taken, the credit risk engendered by the borrower or counterparty must be accurately assessed. This is the ﬁrst step in processing credit applications. As a result, some key factors are considered in credit risk assessment and measurement: These are: Zenith Group Rating Description of the grade AAA AA A BBB BB B CCC CC C D Investment Risk (Extremely Low Risk) Investment Risk (Very Low Risk) Investment Risk (Low Risk) Upper Standard Grade (Acceptable Risk) Lower Standard Grade (Moderately High Risk) Non-Investment Grade (High Risk) Non-Investment Grade (Very High Risk) Non-Investment Grade (Extremely High Risk) Non-Investment Grade (High Likelihood of Default) Non-Investment Grade (Lost) Adherence to the strict credit selection criteria, which includes deﬁned target market, credit history, the capacity and character of customers; Unrated Individually insigniﬁcant (unrated) (b) Other debt instruments a. b. c. d. e. Credit rating of obligor; The likelihood of failure to pay over the period stipulated in the contract; The size of the facility in case default occurs; and Estimated Rate of Recovery, which is a measure of the portion of the debt that can be 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. 126 With respect to other debt instruments, the Group takes the following in the into consideration 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. 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 macro-economic factors; industry, and 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: 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; e. f. g. h. i. j. Continuous mitigation strategies; assessment of concentrations and Continuous validation and modiﬁcation of early warning system to ensure proper functioning for risk identiﬁcation; Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert judgment; Systematic credit limits management which enables the Bank to monitor its credit exposure on daily basis at country, borrower, industry, credit risk rating and credit facility type levels; Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups; and Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering proper remedies. 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. Rigorous ﬁnancial, credit and overall risk analysis for each customer/transaction; 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. Regular portfolio examination performance indicators and periodic stress testing; line with key in Notes 127 a. b. c. d. Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The Group’s internal credit approval limits for the various authorities levels are as indicated below. Zenith Group Rating Board Credit Committee Approval limit (% of Shareholders’ Fund) N3.5 billion and above (Not exceeding 20% of total shareholders’ fund) Management Global Credit Committee Below N3.5 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 excellent quality Risk Assets Portfolio across the Group. A specialised and focused loan recovery and workout team handles the management and collection of problematic credit facilities. 3.2.7 (a) Credit Risk Mitigation, Collateral and other Credit Enhancements The Group’s approach to controlling various risks begins with optimizing the diversiﬁcation of its exposures. Zenith uses a variety of techniques to manage the credit risk arising from its lending activities. These techniques are set out in the Group’s internal policies and procedures. They are mainly reﬂected in the application of various exposure limits: credit concentration limits by counterparty and credit concentration limits by industry, country, region and type of ﬁnancial instrument. Enforceable legal documentation establishes Zenith’s direct, irrevocable and unconditional recourse to any collateral, security or other credit enhancements. (i) Collateral Security A key mitigation step employed by the Group in its credit risk management process includes the use of collateral securities to secure its loans and advances as alternative sources of repayment during adverse conditions. All major credit facilities to our customers are to be secured and the security instruments and documentations must be perfected and all conditions precedent must be met before drawdown or disbursement is allowed. Collateral analysis includes a good description of the collateral, its value, how the value was arrived at, and when the valuation was made. It is usually necessary to review the potential adverse changes in the value of collateral security for the foreseeable future. Collateral securities that are pledged must be in negotiable form and usually fall under the following categories: 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; a. b. c. 128 d. e. f. g. 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. As part of its Credit risk management strategy, the bank emphasizes on the robustness of its credit analysis and diagonsis prior to disbursment of loans and advances to its customers. The bank closely monitors the performance of its loans and advances. Once a loan shows sign of credit deterioration, the bank works closely with the customer to salvage the situation and ensure recoverability of its loans. Fore closure of collateral is usually the last measure adopted by the bank in the realization of its funds. Details of collateral pledged by customers against the carrying amount of loans and advances as at 31 December 2022 are as follows: In millions of Naira Secured against real estate Secured by shares of quoted companies Cash Collateral, lien over ﬁxed and ﬂoating assets Unsecured Total Gross amount ECL Allowance Net carrying amount Group Bank Total exposure Fair Value of collateral Total exposure Fair value of collateral 319,203 54,851 2,318,640 1,431,271 4,123,966 (110,261) 4,013,705 312,265 26,620 1,856,751 - 270,935 54,851 2,162,646 1,350,373 208,068 26,620 1,678,280 - 2,195,636 3,838,805 1,912,968 - (103,129) - 2,195,636 3,735,676 1,912,968 Notes 129 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Group 31 December 2022 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 Onlending Total 243,975 18,656 1,266,931 1,529,562 2,982,808 47,653 7,964 152,207 207,824 450,649 20,637 - 437,613 458,250 690,509 312,264 26,620 1,856,751 2,195,635 4,123,966 (62,315) (39,864) (8,082) (110,261) 2,920,493 410,785 682,427 (224,177) 4,013,705 (1,818,070) Grand total: Amount of overcollaterization/(undercollaterization) (1,390,931) (202,961) 31 December 2022 Term loan Overdrafts Onlending 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 129,049 18,233 732,826 880,108 2,078,669 (15,224) 33,870 3,484 137,584 174,938 373,017 (6,238) 2,063,445 366,778 18,912 - 436,790 455,702 687,421 (8,039) 679,382 181,831 21,717 1,307,200 1,510,747 3,139,107 (29,501) 3,109,606 Grand total: Amount of overcollaterization/(undercollaterization) (1,183,337) (191,840) (223,681) (1,598,859) 31 December 2022 Term loan Overdrafts Onlending 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 107,255 423 529,067 636,745 876,633 (34,523) 842,110 Grand total: Amount of overcollaterization/(undercollaterization) (205,365) 6,127 2,270 8,713 17,110 26,786 (830) 25,955 (8,845) 1,652 - - 1,652 1,975 (17) 1,958 (306) 115,034 2,693 537,779 655,506 905,394 (35,370) 870,023 (214,516) 31 December 2022 Term loan Overdrafts Onlending 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 Grand total: Amount of (undercollaterization)/overcollaterization 130 7,671 - 5,038 12,709 27,507 7,656 2,210 5,911 15,777 50,845 (12,569) (32,796) 14,938 (2,229) 18,049 (2,273) 73 - 823 896 1,113 (25) 1,088 (192) 15,400 2,210 11,772 29,382 79,465 (45,390) 34,075 (4,693) Bank 31 December 2022 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 154,805 18,656 1,097,502 1,270,963 2,720,843 (57,904) 2,662,939 32,625 7,964 143,165 183,754 427,453 (37,143) 390,310 20,637 - 437,613 458,250 690,509 (8,082) 682,427 208,067 26,620 1,678,280 1,912,967 3,838,805 (103,129) 3,735,676 Grand total: Amount of overcollaterization/(undercollaterization) (1,391,976) (206,556) (224,177) (1,822,709) 31 December 2022 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 Onlending Total 39,976 18,233 563,397 621,606 1,822,213 (11,812) 1,810,401 22,321 3,484 128,600 154,405 352,845 (5,418) 347,427 18,912 - 436,790 455,702 687,421 (8,039) 679,382 81,209 21,717 1,128,787 1,231,713 2,862,479 (25,269) 2,837,210 Grand total: Amount of overcollaterization/(undercollaterization) (1,188,795) (193,022) (223,680) (1,605,497) 31 December 2022 Term loan Overdrafts Onlending 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 107,158 423 529,067 636,648 871,125 (33,524) 837,601 Grand total: Amount of overcollaterization/(undercollaterization) (200,953) 6,104 2,270 8,713 17,087 26,645 (800) 25,845 (8,758) 1,652 - - 1,652 1,975 (17) 1,958 (306) 114,914 2,693 537,780 655,387 899,745 (34,341) 865,404 (210,017) 31 December 2022 Term loan Overdrafts Onlending 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 Grand total: Amount of overcollaterization/(undercollaterization) 7,671 - 5,038 12,709 27,505 4,199 2,210 5,852 12,261 47,962 (12,568) (30,926) 14,937 (2,228) 17,036 (4,775) 73 - 823 896 1,113 (25) 1,088 (192) 11,943 2,210 11,713 25,866 76,580 (43,519) 33,061 (7,195) Notes 131 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Details of collateral pledged by customers against carrying amount of loans and advances as at 31 December 2021 are as follows: In millions of Naira 31 December 2020 Group Bank Total exposure Fair Value of collateral Total exposure Value of collateral 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 31 December 2021 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 463,049 7,249 1,283,489 1,748,091 3,501,878 (146,150) 3,355,728 350,232 3,785 1,016,994 - 1,371,011 - 1,371,011 418,264 7,249 1,239,790 1,572,670 3,237,973 (138,521) 3,099,452 286,414 3,785 952,128 - 1,242,327 - 1,242,327 Term loan Overdrafts On lending Total 298,867 1,653 639,798 940,318 2,522,278 (77,487) 2,444,791 36,437 2,132 74,542 113,111 439,459 (63,176) 376,283 14,928 - 302,654 317,582 540,141 (5,487) 534,654 350,232 3,785 1,016,994 1,371,011 3,501,878 (146,150) 3,355,728 Grand total: Amount of overcollaterization/(undercollaterization) (1,504,473) (263,172) (217,072) (1,984,717) 31 December 2021 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 85,481 1,652 397,277 484,410 1,771,887 (12,942) 1,758,945 18,540 7 62,551 81,098 326,517 (3,642) 322,875 14,918 - 299,605 314,523 501,946 (5,222) 496,724 118,939 1,659 759,433 880,031 2,600,350 (21,806) 2,578,544 Grand total: Amount of overcollaterization/(undercollaterization) (1,274,535) (241,777) (182,201) (1,698,513) 31 December 2021 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 204,345 222,147 426,492 686,225 (26,239) 659,986 4,448 6,826 11,274 30,808 (542) 30,266 - 2,589 2,589 37,674 (257) 37,417 208,793 231,562 440,355 754,707 (27,038) 727,669 Grand total: Amount of overcollaterization/(undercollaterization) (233,494) (18,992) (34,828) (287,314) 132 31 December 2021 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 Grand total: Amount of overcollaterization/(undercollaterization) Bank 31 December 2021 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 9,041 13,447 - 20,375 29,416 64,166 2,126 5,166 20,739 82,134 (38,306) (58,992) 25,860 3,556 23,142 (2,403) 10 - 460 470 521 (8) 513 (43) 22,498 2,126 26,001 50,625 146,821 (97,306) 49,515 1,110 Term loan Overdrafts On lending Total 245,732 1,653 586,499 833,884 2,278,613 (73,557) 2,205,056 25,754 2,132 62,975 90,861 419,219 (59,478) 359,741 14,928 - 302,654 317,582 540,141 (5,486) 286,414 3,785 952,128 1,242,327 3,237,973 (138,521) 534,655 3,099,452 Grand total: Amount of overcollaterization/(undercollaterization) (1,371,172) (268,880) (217,073) (1,857,125) 31 December 2021 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 32,962 1,653 343,977 378,592 1,530,854 (9,312) 1,521,542 11,844 7 50,999 62,850 312,155 (3,000) 309,155 14,920 - 299,605 314,525 501,947 (5,222) 59,726 1,660 694,581 755,967 2,344,956 (17,534) 496,725 2,327,422 Grand total: Amount of overcollaterization/(undercollaterization) (1,142,950) (246,305) (182,200) (1,571,455) 31 December 2021 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 203,728 222,147 425,875 684,547 (25,942) 658,605 4,432 6,810 11,242 30,773 (472) 30,301 - 2,589 2,589 37,674 (257) 37,417 208,160 231,546 439,706 752,994 (26,671) 726,323 Grand total: Amount of overcollaterization/(undercollaterization) (232,730) (19,059) (34,828) (286,617) Notes 133 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 31 December 2021 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 Grand total: Amount of overcollaterization/(undercollaterization) (ii) Balance Sheet Netting Arrangements 9,040 - 20,375 29,415 63,211 9,477 2,126 5,167 16,770 76,290 (38,304) (56,004) 24,907 4,508 20,286 (3,516) 10 - 460 470 522 (8) 514 (44) 18,527 2,126 26,002 46,655 140,023 (94,316) 45,707 948 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 31 December 2022 and 31 December 2021 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 31 December 2022. In millions of Naira Maximum exposure to credit risk Maximum exposure to credit risk Group Bank Trading assets - Treasury bills - Investment in securities - Derivatives Asset -Hedging Instrument - Derivatives Asset-Non Hedging Instrument - Assets pledged as collateral 1,243,038 12,442 20,052 29,822 26,287 1,243,038 10,560 20,052 28,799 26,189 134 The following table contains an analysis of the maximum credit risk exposure from ﬁnancial assets not subject to impairment as at 31 December 2021 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 - Assets pledged as collateral 824,222 22,338 56,187 234,687 823,891 11,897 57,476 199,093 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 31 December 2022. In millions of Naira Maximum exposure to credit risk Maximum exposure to credit risk Group Bank 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 2,116,307 1,003,500 788,133 228,375 4,013,705 1,302,811 193,465 833,849 1,024,218 2,036,327 963,630 518,338 228,375 3,735,676 1,132,796 176,289 - 906,014 The following table contains an analysis of the maximum credit risk exposure from ﬁnancial assets subject to impairment as at 31 December 2021 In millions of Naira Maximum exposure to credit risk Maximum exposure to credit risk Group Bank 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 1,404,286 940,723 654,185 157,907 3,355,728 691,244 148,821 541,629 1,108,856 1,341,767 753,756 379,533 157,907 3,099,452 518,053 134,794 - 924,176 Notes 135 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 3.2.8 Concentration of Risks of Financial Assets with Credit Risk Exposure The Group monitors concentrations of credit risk by geographical location and by industry sector. An analysis of concentrations of credit risk at 31 December 2022 and 31 December 2021 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 31 December 2022 and 31 December 2021 respectively. For this table, the Group has allocated exposures to regions based on the regions the counterparties are domiciled. Other ﬁnancial assets included in the table below represents other assets excluding prepayment. In millions of Naira 31 December 2022 Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Asset - Hedging Instrument Derivative Asset-Non Hedging Instrument Other ﬁnancial assets Total Financial Guarantees Usance Letters of credit Performance bond and guarantees Total Group Bank Nigeria Rest of Africa Outside Africa Nigeria Rest of Africa Outside Africa 2,036,327 2,227,845 254,564 6,435 584,599 20,052 28,786 105,249 79,980 18,695 98 20,393 229,474 - 13 17,884 - - - 1,275,983 820,373 - 1,023 70,331 2,036,327 2,206,669 254,564 14,565 514,092 20,052 28,785 104,867 5,263,857 366,537 2,167,710 5,179,921 276,481 341,290 329,167 946,938 - 22,065 55,215 77,280 - - - - 276,481 279,791 323,824 880,096 - - - 3,057 14.804 - 13 1,262 19,136 - - 1,042 1,042 - - - 1,115,174 - - 1 70,159 1,185,334 - - 24,876 24,876 In millions of Naira 31 December 2021 Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative instruments Other ﬁnancial assets Total Financial Guarantees Usance Letters of credit Performance bond and guarantees Total Group Bank Nigeria Rest of Africa Outside Africa Nigeria Rest of Africa Outside Africa 1,341,768 1,671,640 357,000 - 460,456 55,223 115,095 62,518 93,305 35,594 49,158 239,155 698 15,049 - - - 642,086 518,541 266 18,677 1,341,767 1,577,647 357,000 - 390,917 55,223 115,333 - - - 7,663 513 1,437 1,178 4.001,182 495,477 1,179,570 3,837,887 10,791 195,354 493,180 343,238 1,031,772 - 59,574 17,239 76,813 - 1,732 4,155 5,887 195,354 398,605 335,833 929,792 - - - - - - - 510,390 - 816 18,283 529,489 - - - - Gross loans and advances to customers and the impairment allowance per geographical region as at 31 December 2022 Carrying amounts presented in the table below is determined as gross loans less impairment allowances. 136 In millions of Naira 31 December 2022 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 31 December 2021 South South Nigeria South West Nigeria South East Nigeria North Central Nigeria North West Nigeria North East Nigeria Rest of Africa Outside Africa 277,548 3,136,204 158,058 148,610 53,605 110,809 133,599 105,534 (5,380) (92,036) (1,822) (3,738) (671) (394) (5,122) (1,098) 272,168 277,548 3,044,168 3,090,175 156,236 144,872 52,934 110,415 128,476 104,435 158,058 148,610 53,605 110,809 - - (5,380) (91,124) (1,822) (3,738) (671) (394) - - 272,168 2,999,051 156,236 144,872 52,934 110,415 - - 4,123,966 (110,261) 4,013,705 3,838,805 (103,129) 3,735,676 366,246 2,445,088 128,638 111,570 75,430 151,683 121,152 102,071 6,774 126,734 1,279 2,740 453 763 6,016 1,391 359,515 366,246 2,357,697 2,444,975 127,478 109,177 74,977 110,571 115,622 100,691 128,638 111,570 75,430 111,114 - - 6,774 126,733 1,279 2,740 453 542 - - 359,472 2,318,242 127,359 108,830 74,977 110,572 - - 3,501,878 146,150 3,355,728 3,237,973 138,521 3,099,452 (b) Industry sectors Gross loans and advances to customers per industry sector as at 31 December 2022 Carrying amounts presented in the table below are determined as gross loans less impairment allowances. In millions of Naira 31 December 2022 Agriculture Oil and gas Consumer Credit Manufacturing Real estate and construction Finance and insurance Government Power Transportation Communication Education General Commerce Group Bank Loans and advances to customers Loans and advances to customers Gross loans Impairment Allowance Carrying amount Gross loans Impairment Allowance Carrying amount 265,213 931,045 120,345 1,254,050 136,403 72,959 529,942 67,143 116,856 26,218 15,146 588,646 4,123,966 (5,853) (59,309) (14,382) (10,774) (2,784) (667) (1,679) (566) (3,286) (317) (257) (10,386) (110,261) 259,359 871,737 105,963 251,306 912,505 94,448 1,243,276 1,190,640 133,619 72,292 528,263 66,577 113,570 25,900 14,889 134,017 37,181 488,286 67,016 98,529 21,790 14,501 578,268 528,586 (5,722) (58,641) (13,183) (8,039) (2,700) (280) (539) (565) (3,158) (142) (229) (9,931) 4,013,705 3,838,805 (103,129) 245,584 853,864 81,265 1,182,601 131,317 36,901 487,747 66,451 95,371 21,648 14,272 518,655 3,735,676 Notes 137 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 December 2021 Agriculture Oil and gas Consumer Credit Manufacturing Real estate and construction Finance and insurance Government Power Transportation Communication Education General Commerce Group Bank Loans and advances to customers Loans and advances to customers Grossloans Impairment Allowance Carrying amount Gross loans Impairment Allowance Carrying amount 227,237 782,412 199,129 848,478 109,143 5,996 509,021 67,132 176,747 59,111 11,542 505,930 8,931 55,273 15,124 5,408 1,668 158 2,375 4,830 1,236 22,410 136 28,601 218,306 727,139 184,005 843,070 107,475 5,838 506,646 62,302 175,511 36,701 11,406 212,587 756,936 170,239 826,275 105,760 8,562 472,151 66,649 162,688 52,126 10,579 477,329 393,421 8,571 54,418 13,064 5,035 1,580 83 1,597 4,825 990 22,316 133 25,909 138,521 204,016 702,518 157,175 821,240 104,180 8,479 470,554 61,824 161,698 29,810 10,446 367,512 3,099,452 3,501,878 146,150 3,355,728 3,237,973 Group Financial assets excluding loans and advances per industry sector as at 31 December 2022 In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Hedging instruments Derivatives Non Hedging instruments Other financial assets 31 December 2022 Government Manufacturing Finance and Insurance Communication Gross amount Impairment allowance 2,116,307 2,246,947 254,583 - - - - - - - 98 - 1,623,788 20,052 - - 1,302,886 8,279 42,454 - 22,163 27,579 1,206 1,037 - - 222,439 - - - - - 2,116,307 2,246,947 254,681 1,302,886 1,696,684 20,052 29,822 222,439 - (408) (19) (75) (62,233) (28,973) Carrying amount 2,116,307 2,246,539 254,662 1,302,811 1,634,451 20,052 29,822 193,466 Financial assets excluding loans and advances per industry sector as at 31 December 2021 31 December 2021 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 Communication Gross amount 1,404,285 1,765,760 392,792 - - - - - - - - - - - 691,968 - 1,148,302 56,187 16,771 17,208 39,637 - - - 1,404,285 1,765,760 392,792 691,968 1,221,918 56,187 Impairment allowance - (815) (198) (724) (3,766) - Carrying amount 1,404,285 1,764,945 392,594 691,244 1,218,152 56,187 Other financial assets 10,274 - 148,472 - 158,746 (9,925) 148,821 138 Bank Financial assets excluding loans and advances per industry sector as at 31 December 2022 In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Hedging instruments Derivatives Non Hedging instruments Other financial assets 31 December 2022 Government Manufacturing Finance and Insurance Communication Gross amount Impairment allowance 2,036,327 2,206,707 254,583 - - - - - - - - - - - 1,132,871 463,676 6,238 39,601 - 21,966 20,052 - - - 27,563 1,222 14 - - - 205.157 - 2,036,327 2,206,707 254,583 1,132,871 531,481 20,052 28,799 205,157 - (39) (18) (75) (2,583) - - (28,868) Carrying amount 2,036,327 2,206,668 254,565 1,132,796 528,898 20,052 28,799 178,289 Financial assets excluding loans and advances per industry sector as at 31 December, 2021 31 December 2021 In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Hedging instruments Derivatives Non Hedging instruments Other financial assets Government Manufacturing Finance and Insurance Communication Gross amount 1,341,767 1,578,042 357,198 - - - - - - - - - - - 518,111 - 321,262 15,512 15,685 39,637 1,341,767 1,578,042 357,198 518,111 392,096 Impairment allowance - (395) (198) (58) (666) Carrying amount 1,341,767 1,577,647 357,000 518,053 391,430 - - - - - - - 50,772 10,274 4,190 2,514 - - 134,355 - 57,476 144,629 - (9,835) 57,476 134,794 3.2.9 Credit quality analysis Group 31 December 2022 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 Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A BBB to BB CCC to C Unrated 2,036,327 2,206,975 254,583 1,128,219 1,283,859 2,994 37,723 - 76,986 - 2,249 - - 98 89,328 3,057 82,283 197,408 10,354 205,060 - 20,052 - - 312 133,177 27,266 - 2,245 25,152 45,498 18,612 Gross amount 2,116,307 2,246,947 254,681 1,302,887 1,696,681 20,052 29,823 222,439 ECL - impairment - (408) (19) (75) (62,233) - - (28,973) Carrying amount 2,116,307 2,246,539 254,662 1,302,812 1,634,448 20,052 29,823 193,466 Notes 139 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Loans and Advances Term loan Overdrafts On lending 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 2,078,669 876,633 27,507 2,892,808 (15,224) (34,523) (12,569) (62,316) 2,920,493 373,017 26,786 50,845 450,648 (6,238) (830) (32,796) (39,864) 410,783 Credit rating for loans and advances with 12 month ECL 687,421 1,975 1,113 (8,039) (17) (25) (8,081) 682,428 A AA B BB BBB CC CCC Below C Unrated Gross amount ECL-Impairment Carrying amount Bank 31 December 2021 Loans and Advances Term loan Overdrafts On lending 692,565 357,588 69,895 735,922 10,658 46 - - 211,996 2,078,669 (15,239) 2,063,430 99,827 147,369 1,299 104,682 - - - - 19,840 373,017 (6,251) 366,766 263,526 20,559 - 403,336 - - - - - 687,421 (8,039) 679,382 690,509 4,123,965 Total 3,139,107 905,393 79,465 (29,501) (35,370) (45,390) (110,275) 4,013,690 Total 1,055,918 525,516 71,194 1,243,940 10,658 46 - - 231,836 3,139,107 (29,530) 3,109,578 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 Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A BBB to BB CCC to C Unrated 2,036,327 2,206,707 254,583 - - - - - - - - - 957,055 170,984 3,057 1,775 480,352 51,129 - - - 312 133,162 20,052 27,265 - - - 1,222 26,478 45,493 24 Gross amount 2,036,327 2,206,707 254,583 1,132,871 531,481 20,052 28,799 205,157 ECL - impairment - (39) (18) (75) (2,583) - - (28,868) Carrying amount 2,036,327 2,206,668 254,565 1,132,796 528,898 20,052 28,799 176,289 140 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 A AA B BB BBB C CC CCC Below C Gross amount ECL-Impairment Carrying amount Group 31 December 2021 Loans and Advances Overdrafts On lending 690,509 3,838,804 Term loan 1,822,213 871,125 27,505 2,720,843 (11,812) (33,524) (12,568) (57,904) 2,662,939 352,845 26,645 47,962 427,452 (5,418) (800) (30,926) (37,144) 390,308 692,565 357,588 9 772,051 - - - - - 1,822,213 (11,812) 1,810,401 99,827 147,369 968 104,682 - - - - - 352,846 (5,418) 347,428 687,421 1,975 1,113 (8,039) (17) (25) (8,081) 682,428 263,526 20,559 - 403,336 - - - - - Total 2,862,479 899,745 76,580 (25,269) (34,341) (43,519) (103,129) 3,735,675 Total 1,055,918 525,516 977 1,280,069 - - - - - 687,421 (8,039) 679,382 2,862,480 (25,269) 2,837,211 Loans and Advances Term loan Overdrafts On lending Credit rating: All ﬁnancial assets with credit exposure 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 Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A BBB to BB Below B Unrated 1,404,285 1,765,760 392,792 263,051 - - - - - - - - - 84,147 1,055 856,410 175,600 5,487 343,715 184,421 Gross amount 1,404,285 1,765,760 392,792 691,968 1,221,918 ECL - impairment - (815) (198) (724) (3,766) Carrying amount 1,404,285 1,764,945 392,594 691,244 1,218,152 Loans and Advances - - - - - - - 56,187 - - - 90,351 38,530 - 29,865 56,187 158,746 - (9,925) 56,187 148,821 Notes 141 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of naira 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 Credit rating for loans and advances with 12 month ECL A AA B BB BBB C CC CCC Below C Unrated Gross amount ECL-Impairment Carrying amount Bank 31 December 2021 Term loan 1,771,887 686,225 64,166 2,522,278 12,942 26,239 38,306 77,487 2,444,791 Overdrafts On lending 326,517 30,808 82,134 439,459 3,642 542 58,992 63,176 376,283 501,946 37,674 521 540,141 5,222 257 8 5,487 534,654 Loans and Advances Term loan Overdrafts On lending 658,120 218,817 - 634,892 850,174 12,084 1,546 35,575 18,013 93,057 2,522,278 (77,487) 2,444,791 56,707 150,950 - 7,654 126,942 25,526 1,971 21,168 28,598 19,943 439,459 (63,176) 376,283 170,443 77,029 - 4,841 287,309 485 - - 34 - 540,141 (5,487) 534,654 Total 2,600,350 754,707 146,821 3,501,878 21,806 27,038 97,306 146,150 3,355,728 Total 885,270 446,796 - 647,387 1,264,425 38,095 3,517 56,743 46,645 113,000 3,501,878 (146,150) 3,355,728 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 AA to A AA to A BBB to BB CCC to C Unrated 1,341,767 1,578,042 357,198 228,273 367,261 - - - - - - - - - - - - - - 286,175 24,835 1,056 2,607 - - 4,003 - 50,772 - 2,701 Gross amount 1,341,767 1,578,042 357,198 518,111 392,096 57,476 ECL - impairment - (395) (198) (58) (666) - Carrying amount 1,341,767 1,577,647 357,000 518,053 391,430 57,476 90,349 - 38,529 - 15,751 144,629 (9,835) 134,794 142 In millions of Naira 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 A AA BB BBB C CC CCC Below C Unrated Gross amount ECL-Impairment Carrying amount Term loan 1,529,907 684,547 64,159 2,278,613 9,312 25,942 38,303 73,557 2,205,056 Loans and Advances Overdrafts On lending 311,567 30,419 77,233 419,219 3,000 474 56,004 59,478 359,741 501,946 37,674 521 540,141 5,221 257 8 5,486 534,655 Loans and Advances Term loan Overdrafts On lending 687,816 218,817 634,892 672,929 12,084 1,546 32,523 18,006 - 2,278,613 (73,557) 2,205,056 56,707 150,950 7,654 126,676 25,526 1,971 21,168 28,567 - 419,219 (59,478) 359,741 170,443 77,029 4,841 287,309 485 - - 34 - 540,141 (5,486) 534,655 Total 2,343,420 752,640 141,913 3,237,973 17,533 26,673 94,315 138,521 3,099,452 Total 914,966 446,796 647,387 1,086,914 38,095 3,517 53,691 46,607 - 3,237,973 (138,521) 3,099,452 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 ﬁnancial statements, management accounts, budgets and projections. Examples of areas of particular focus are: gross proﬁt margins, ﬁnancial leverage ratios, debt service coverage, compliance with covenants, quality of management, senior management changes Data from credit reference agencies, press articles, changes in external credit ratings Quoted bond and credit default swap (CDS) prices for the borrower where available Actual and expected signiﬁcant changes in the political, regulatory and technological environment of the borrower or in its business activities – Internally collected data on customer behaviour – e.g. utilisation of credit card facilities – Payment record – this includes overdue status as well as a range of variables about payment ratios Aﬀordability metrics External data from credit reference agencies, including industry-standard credit scores Utilisation of the granted limit Requests for and granting of forbearance Existing and forecast changes in business, ﬁnancial and economic conditions Notes 143 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades are deﬁned using qualitative and quantitative factors that are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower. Credit risk grades are deﬁned and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates so, for example, the diﬀerence in risk of default between credit risk grades 1 and 2 is smaller than the diﬀerence between credit risk grades 2 and 3. Each exposure is allocated to a credit risk grade at initial recognition based on available information about the borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a diﬀerent credit risk grade. 3.2.12 Internal portfolio segmentation Credit risk grades are a primary input into the determination of the term structure of PD for exposures. The Group collects performance and default information about its credit risk exposures analysed by jurisdiction or region and by type of product and borrower as well as by credit risk grading. For some portfolios, information purchased from external credit reference agencies is also used. 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 provision 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 in turn 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. 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. 144 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 Group monitors the eﬀectiveness of the criteria used to identify signiﬁcant increases in credit risk by regular reviews (quarterly) to conﬁrm that: the borrower’s payment performance against the modiﬁed contractual terms and considers various behavioural indicators. Generally, forbearance is a qualitative indicator of a signiﬁcant increase in credit risk and an expectation of forbearance may constitute evidence that an exposure is credit-impaired/in default. A customer needs to demonstrate consistently good payment behaviour over a period of time before the exposure is no longer considered to be credit-impaired/in default or the PD is considered to have decreased such that the loss allowance reverts to being measured at an amount equal to 12- month ECL. 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. 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 Board audit and compliance 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 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 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 Notes 145 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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. The macroeconomic variables considered include GDP growth rate, Inﬂation rate, Exchange rate, Crude oil production, Crude oil price, Monetary policy rate, Prime lending rate, and Government revenue. However, from the statistical analysis of the various macroeconomic variables, the results infer that the key drivers vary across the diﬀerent sectors and this necessitated the sectors to be grouped into three (3) segments. The macroeconomic variables used across the diﬀerent segments are as follows: Segment 1 Oil and Gas portfolio Macroeconomic Variables Adopted - GDP rate and Crude Oil production Segment 2 Consumer Credit, Finance & Insurance, General Commerce, Public Sector, Information, Manufacturing Macroeconomic Variables Adopted- Exchange rate and Prime lending rate. Segment 3 Agriculture, Art and ntertainment, Education, Transportation, Utility, Industry Retail Others, Industry Retail Staﬀ. Macroeconomic Variables Adopted- Inﬂation and Exchange rate. The economic scenarios used as at 31 December 2022 included the following key indicators for Nigeria for the years ending 31 December 2023 to 2027 sourced majorly from Nigerian bureau of statistics and Central Bank of Nigeria GDP growth rate % Inﬂation rate forecast % Prime lending rate (%) 2023 Base 2.9 2024 Base 3.0 2025 Base 2.0 2026 Base 2.0 Base 17.10 Base 13.0 Base 9.50 Base 9.50 2027 Base 2.50 Base 9.50 Base 21 Rasp 18.3 Rasp 18.3 Rasp 18.3 Rasp 18.3 Exchange rate (NGN / USD) Base 432.50 Base 475 Crude oil production (Million Barrels per day- mbpd) Base 1.89 Base 1.92 Crude Oil Price ($ Per Barrels) Base 100 Base 88 Base 575 Base 1.92 Base 85 Base 575 Base 1.92 Base 85 Base 625 Base 1.92 Base 85 Government Revenue (NGN trillions Base 3.726 Base 3.671 Base 3.671 Base 3.671 Base 3.671 Monetary policy rate Base 12.5% Base 13.5% Base 13.5% Base 13.5% Base 13.5% Please note that the Macroeconomic variables for 2025 and beyond are the forecast at the end of 2024. The Bank held the forecast constant from the end of 2024 because they believe that they cannot reliably estimate above 2024, given the expected change in government in 2023. 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 146 3.2.17 Measurement of ECL The key inputs into the measurement of ECL of ﬁnancial assets (treasury bills, assets pledged as collateral, due from other banks, loans and advances and investment securities) 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 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 grading 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. Notes 147 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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 2021 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 Foreign exchange and other movements Closing balance Gross amount 31 December 2022 31 December 2021 12-month ECL 12-month ECL 815 (400) - (8) 407 1,003,908 1,575 (781) 21 - 815 941,538 In millions of Naira Off balance sheet exposure Balance at 1 January Transfer to lifetime ECL not credit-impaired Transfer to lifetime ECL credit-impaired Impairment/(write back) (see note 8) Closing balance Gross amount 31 December 2022 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired Total 12-month ECL 31 December 2021 Lifetime ECL not credit impaired Lifetime ECL credit impaired Total 2,375 20 3,221 5,616 1,591 20 3,221 4,832 3,436 5,811 45 65 (2,483) 738 998 6,614 784 2,375 - 20 1,010,968 1,056 12,194 1,024,218 908,566 14,591 - 3,221 6,635 784 5,616 929,792 In millions of Naira 12-month ECL 12-month ECL 31 December 2022 31 December 2021 Assets pledged as collateral at ammortised cost Balance at 1 January Impairment Charge/(writeback) (see note 8) Foreign exchange and other movements Closing balance Gross amount 198 (181) - 17 228,492 355 (158) 1 198 158,105 148 In millions of Naira 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired 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 remesurement of loss allowance (see note 8) New ﬁnancial assets originated or purchased Derognized assets other than write oﬀ Write-oﬀ Foreign exchange and other movements Closing balance Gross amount Investment securities at amortised cost and fair value through OCI Balance at 1 January Impairment Charge/(writeback) (see note 8) Foreign exchange and other movements Closing balance Gross amount In millions of Naira Other financial assets Balance at 1 January Transfer to 12-month ECL Impairment Charge/(writeback) (see note 8) Foreign exchange and other movements Closing balance Gross amount 31 December 2022 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired Total 12-month ECL 31 December 2021 Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 26,032 94,445 146,149 23,400 108,211 140,314 25,672 1,650 (314) (613) 4,154 - - - (689) 1,675 327 7,671 - - - (961) (1,361) 286 - - - 26,518 38,343 - - - - (74,077) (74,077) (1,049) 354 540 (155) 2,911 (475) (301) - 137 - - - 8,703 (1,309) 28,546 (1,602) (28,071) (27,762) 28,063 - - - - - - 17.854 30,882 48,873 - - - - - (42,508) (42,508) (530) (530) 29,501 35,370 45,390 110,260 25,672 26,032 94,445 146,149 3,139,107 905,393 79,465 4,123,966 2,600,350 754,707 146,821 3,501,878 31 December 2022 31 December 2021 - - - - 10,649 52,464 (742) (3,456) (4,270) Total - 3,766 62,742 12-month ECL - 773 2,993 - Total - 773 2,993 - - 3,766 (371) (72) 3,323 1,400,136 9,907 90,253 49,008 62,238 195,605 1,685,994 3,766 657,957 3,766 657,957 31 December 2022 31 December 2021 12-month ECL 12-month ECL 9,925 - 19,037 11 28,973 168,692 2,141 - 7,781 3 9,925 117,858 Notes 149 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira Due from other banks Balance at 1 January Impairment/(write back) (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 31 December 2022 31 December 2021 12-month ECL 12-month ECL 724 (649) - 75 58 666 - 724 1,302,886 691,968 31 December 2022 31 December 2021 12-month ECL 12-month ECL1 395 (356) 39 676 (281) 395 963,669 754,151 In millions of Naira Off balance sheet exposure Balance at 1 January Impairment/(write back) (see note 8) Closing balance Gross amount 31 December 2022 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired Total 12-month ECL 31 December 2021 Lifetime ECL not credit impaired Lifetime ECL credit impaired 2,375 2,112 4,487 20 45 65 3,221 (2,482) 5,616 (325) 739 5,291 1,591 784 2,375 20 - 20 3,221 - 3,221 Total 4,832 784 5,616 893,456 367 12,191 906,014 908,566 14,591 6,635 929,792 In millions of Naira Assets pledged as collateral at amortised cost Balance at 1 January Impairment Charge/(writeback) (see note 8) Closing balance Gross amount 31 December 2022 31 December 2021 12-month ECL 12-month ECL 198 (179) 19 355 (158) 197 228,394 158,105 150 In millions of Naira 31 December 2022 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired Total 12-month ECL 31 December 2021 Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Loans and advances to customers at amortised cost Balance at 1 January - Transfer to 12-month ECL - Transfer to lifetime ECL not credit-impaired - Transfer to lifetime ECL credit-impaired Net remeasurement of loss allowances (see note 8) Impairment Charge (see note 8) Write-oﬀs Foreign exchange and other movements 17,578 26,628 1,399 (310) (613) 7,215 - - - (438) 1,671 (107) 6,587 - - - 94,315 (961) (1,361) 720 138,521 - - - 24,627 38,429 - - (73,821) (73,821) - - 16,931 810 (464) (301) 602 - - - 8,702 (509) 107,233 132,866 (301) - 28,226 (27,762) (27,762) 17,971 28,063 29,784 - - 48,357 - - - - - (42,702) (42,702) - - Closing balance Gross amount 25,269 34,341 43,519 103,129 17,578 26,628 94,315 138,521 2,862,479 899,746 76,580 3,838,805 2,343,420 752,640 141,913 3,237,973 In millions of Naira Other financial assets Balance at 1 January Impairment Charge (see note 8) Closing balance Gross amount 31 December 2022 31 December 2021 Lifetime ECL not credit-impaired Lifetime ECL not credit-impaired 9,835 19,033 28,868 150,690 2,046 7,789 9,835 144,629 The above loss allowance is not recognised in the statement of ﬁnancial position because the carrying amount of debt investment securities at FVOCI is their fair value. 31 December 2022 12-month ECL 31 December 2021 12-month ECL In millions of Naira Due from other Banks Balance at 1 January Impairment/(write back) (see note 8) Closing balance Gross amount 58 17 75 1,132,871 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 31 December 2022 31 December 2021 Investment securities at mortised cost and fair value through OCI Balance at 1 January Impairment Charge (see note 8) Closing balance Gross amount 666 611 1,277 518,217 - - - - - 1,306 1,306 2,703 666 1,917 2,583 755 (90) 666 520,920 380,199 - - - - - - - - 58 - 58 518,111 Total 755 (90) 666 38,019,900 Notes 151 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Signiﬁcant changes in the gross carrying amount of ﬁnancial assets that contributed to changes in the loss allowance were as follows: Group 31 December 2022 31 December 2021 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 Treasury bills at mortised cost Gross carrying amount at 1 January 941,538 Financial assets derecognised during the period other than write-oﬀs (2,741,441) Changes in mortised cost value New ﬁnancial assets originated or purchased (190,521) 2,994,157 - - - 177 - 941,538 880,957 - (2,741,441) (2,054,917) - - (190,521) 111 2,994,334 2,115,387 - - - - - 880,957 - (2,054,917) - - 111 2,115,387 Closing gross carrying amount 1,003,732 177 - 1,003,910 941,538 - - 941,538 In millions of Naira Off balance sheet exposure 31 December 2022 31 December 2021 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 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 Gross carrying amount at 1 January 1,093,246 14,591 6,635 1,114,472 599,927 - - 599,927 Transfers: Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Financial assets derecognised during the period other than write-oﬀs New ﬁnancial assets originated or purchased (1,315) (1,960) (388,847) 1,315 - (15,528) - 1,960 (1,834) - - (14,591) (6,635) (406,208) (194,947) 14,591 - - - 6,635 - - - (194,947) 309,843 679 5,433 315,954 709,492 - - 709,492 Closing gross carrying amount 1,010,968 1,056 12,194 1,024,218 1,093,246 14,591 6,635 1,114,472 In millions of Naira 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 Changes in amortised cost value New ﬁnancial assets originated or purchased Closing gross carrying amount 31 December 2022 31 December 2021 Stage 1 12-month ECL Stage 2 12-month ECL 158,105 (127,558) 907 196,941 228,395 227,283 (122,884) (535) 54,241 158,105 152 31 December 2022 31 December 2021 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: 2,600,349 Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 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 (89,454) (14,268) - - 43,018 1,644 754,708 89,454 - (2,682) 2,550 (43,018) - 14,268 2,682 (2,550) - - (1,644) 146,821 3,501,878 2,160,991 570,746 187,605 2,919,342 - - - - - - (66,388) (17,593) - - 23,742 7,218 66,388 - (39,210) - 17,593 39,210 37,703 (37,703) (23,742) - - (7,218) - - - - - - Financial assets derecognised during the period other than write- oﬀs (1,078,237) (20,231) (19,307) (1,117,775) (937,772) (19,235) (15,076) (972,083) New ﬁnancial assets originated or purchased 1,676,055 124,612 13,016 1,813,683 1,430,151 162,058 - 1,592,209 Write-oﬀs Foreign exchange and other movements - - - - (73,820) (73,820) - - - - - - (37,590) (37,590) - - Closing gross carrying amount 3,139,107 905,393 79,466 4,123,966 2,600,349 754,708 146,821 3,501,878 31 December 2022 31 December 2021 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 Investment Securities at amortised cost and fair value through OCI Gross carrying amount at 1 January Transfers: Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 3 Financial assets derecognised during the period other than write- oﬀs Changes in amortised cost value New ﬁnancial assets originated or purchased Foreign exchange and other movements 1,199,579 (53,680) (148,204) - (69,857) (10,942) 483,240 - - 53,680 - - - 148,204 (4,024) (4,402) - 4,024 - - 1,199,579 868,437 - - - - - - (74,259) (154,128) (10,942) 34,940 45,000 43,377 571,617 450,331 - - - - Closing gross carrying amount 1,400,136 90,523 195,605 1,685,995 1,199,580 - - - - - - - - - - - - - - - - - - 868,437 - - - (154,128) 34,940 450,331 - 1,199,580 In millions of Naira Other financial assets Gross carrying amount at 1 January Transfers: New ﬁnancial assets originated or purchased Financial asset derecognised during the year Foreign exchange and other movements Closing gross carrying amount of assets subject to simplified approach 31 December 2022 31 December 2021 Stage 1 12-month ECL Lifetime ECL not credit-impaired Stage 2 12-month ECL Lifetime ECL not credit-impaired - - - - - 117,857 50,835 - - 168,692 - - - - - 151,709 - (33,852) - 117,857 Notes 153 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira Due from other banks Gross carrying amount at 1 January Transfers: Financial assets derecognised during the year other than write-oﬀs New ﬁnancial assets originated or purchased Foreign exchange and other movements Closing gross carrying amount Bank In millions of Naira Treasury bills at amortised cost 31 December 2022 31 December 2021 Stage 1 12-month ECL Stage 1 12-month ECL 691,968 (91,034) 701,952 - 810,552 (118,584) - - 1,302,886 691,968 31 December 2022 31 December 2021 Stage 1 12-month ECL Total Stage 1 12-month ECL Total Gross carrying amount at 1 January Transfers: 754,151 754,151 695,898 695,898 Financial assets derecognised during the year other than write-oﬀs (2,554,055) (2,554,055) (1,990,231) (1,990,231) Changes in amortised cost value (190,521) (190,521) 63 63 New ﬁnancial assets originated or purchased 2,954,094 2,954,094 2,048,421 2,048,421 Closing gross carrying amount 963,669 963,669 754,151 754,151 In millions of Naira 31 December 2022 31 December 2021 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 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 Off balance sheet exposure Gross carrying amount at 1 January Transfers: 908,566 Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 3 to stage 2 Financial assets derecognised during the period other than write-oﬀs New ﬁnancial assets originated or purchased Closing gross carrying amount (1,304) (1,957) - 14,591 1,304 - - 6,635 929,792 - 1,957 - - - - (310,594) (15,528) (1,834) (327,956) 459,001 (14,591) (6,635) - - 298,745 893,456 - 367 5,433 304,178 470,791 - 14,591 - - - - - - 6,635 - - - Total 459,001 - - - - 470,791 12,191 906,014 908,566 14,591 6,635 929,792 31 December 2022 31 December 2021 Stage 1 12-month ECL Stage 2 12-month ECL 158,105 (127,558) 907 196,943 228,397 227,283 (122,884) (535) 54,241 158,105 In millions of Naira Assets pledged as collateral at amortised cost Gross carrying amount at 1 January Transfers: Financial assets derecognised during the year other than write-oﬀs Changes in amortised cost value New ﬁnancial assets originated or purchased Closing gross carrying amount 154 31 December, 2022 31 December, 2021 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: 2,343,421 Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 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 New ﬁnancial assets originated or purchased Financial assets derecognised during the year other than write-oﬀs Write-oﬀs Foreign exchange and other movements (85,122) (14,266) - - 42,999 1,644 1,652,040 (1,078,237) 141,912 3,237,973 2,012,000 578,481 182,182 2,772,663 752,640 85,122 - (2,670) 2,537 (42,999) - 14,266 2,670 (2,537) - - (1,644) - - - - - - (53,296) (8,904) - - 6,866 3,179 53,296 - (29,193) - 8,904 29,193 37,703 (37,703) (6,866) - - (3,179) - - - - - - 125,347 (20,231) 13,025 1,790,412 1,168,387 (17,293) (1,115,761) (784,811) 138,454 (19,235) - - 1,306,841 (804,046) - - - - (73,820) (73,820) - - - - - - (37,485) (37,485) - - Closing gross carrying amount 2,862,479 899,746 76,579 3,838,804 2,343,421 752,640 141,912 3,237,973 31 December, 2022 31 December, 2021 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 Investment securities at mortised cost Gross carrying amount at 1 January Transfers: Transfer from stage 1 to stage 3 Financial assets derecognised during the year other than write-oﬀs Changes in mortised cost value New ﬁnancial assets originated or purchased Foreign exchange and other movements Closing gross carrying amount 380,199 (2,703) (9,263) (16,683) 166,667 - 518,217 - - - - - - - - 380,199 208,973 2,703 - - - - - (9,263) (16,683) 166,667 - - - - 171,226 - 2,703 520,920 380,199 - - - - - - - - - - - - - - Total 208,973 - - - 171,226 - 380,199 In millions of Naira Other financial assets Gross carrying amount at 1 January Transfers: Financial assets derecognised during the period other than write-oﬀs New ﬁnancial assets originated or purchased Closing gross carrying amount of assts subject to simplified approach 31 December 2022 31 December 2021 Stage 1 12-month ECL Stage 2 Lifetime ECL not credit-impaired Stage 1 12-month ECL Stage 2 Lifetime ECL not credit-impaired - - - - 92,747 57,943 - 150,690 - - - - 145,347 (52,600) - 92,747 Notes 155 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira Due from other banks Gross carrying amount at 1 January Transfers: Financial assets derecognised during the period other than write-oﬀs New ﬁnancial assets originated or purchased Closing gross carrying amount 31 December 2022 31 December 2021 Stage 1 12-month ECL Stage 2 12-month ECL 518,111 (16,651) 631,410 1,132,870 532,435 (14,324) - 518,111 Summary of loss allowance by class of ﬁnancial instruments also showing ECL coverage ratio as at 31 December 2022 . Group Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items In millions of Naira Stage 1 Stage 2 Lifetime ECL Stage 3 Total Stage 1 Stage 3 Total Stage 2 Lifetime ECL Stage 1 Stage 2 Lifetime ECL Stage 3 Total % % % % On-balance sheet items Assets pledged as collateral Treasury bills Loans and advances to customers at amortised cost Debt investment securities at mortised cost and FVOCI 228,492 1,003,908 - - - - 228,492 1,003,908 17 407 - - - - 17 407 3,139,107 905,393 79,465 4,123,965 29,501 35,370 45,390 110,261 1,400,136 90,253 195,605 1,685,994 3,323 9,907 49,008 62,238 Other ﬁnancial assets measured at amortised cost - 168,692 Due from other Banks 1,302,886 - - - 168,692 1,302,886 - 75 28,973 - - - 28,973 75 Subtotal 7,074,529 1,164,338 275,070 8,513,937 33,323 74,427 94,398 202,148 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 363,328 275,723 - 4 27 754 363,355 276,481 2,743 1,794 372,609 363 11,410 384,382 1,015 78,901 1,090,561 7,896 8,263 2,952 89,749 15,143 1,113,967 260 5,812 - - - 65 65 27 133 2,770 1,927 40 1,055 538 738 863 6,615 8,165,090 1,172,601 290,213 9,627,904 39,135 74,492 95,136 208,763 0.01 0.04 0.94 0.24 - 0.01 0.47 0.75 0.65 0.27 0.33 0.53 0.48 - - - - 3.91 57.12 - - - - - - 6.41 34.32 0.01 0.04 2.67 3.69 - 0.01 2.37 - - - 100.00 17.64 0.76 0.70 0.35 0.27 0.82 0.79 6.35 18.22 4.87 32.78 0.96 0.59 2.17 * The Group adopted the simpliﬁed approach in estimating the ECL for other ﬁnancial asset. Under this approach, all ECL allowance are lifetime ECL. 156 Bank Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items In millions of Naira Stage 1 Stage 2 Lifetime ECL Stage 3 Total Stage 1 Stage 3 Total Stage 2 Lifetime ECL Stage 1 Stage 2 Lifetime ECL Stage 3 Total % % % % 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 228,394 963,669 - - - - 228,394 963,669 19 39 - - - - 19 39 2,862,479 899,746 76,580 3,838,805 25,269 34,341 43,519 103,129 0.01 - 0.88 - - - - 3.82 56.83 518,217 - 2,703 520,920 1,277 Due from other Banks 1,132,871 - - 150,690 - - 150,590 1,132,871 - 75 - - - 1,306 2,583 0.25 - 28,868 28,868 - 19.16 - 75 - 0.01 0.47 Subtotal 5,705,630 1,050,436 79,283 6,835,349 26,679 34,341 73,693 134,713 3.27 92.95 0.01 - 2.69 0.50 19.16 0.01 1.97 - - - 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 279,764 275,723 - 4 27 754 279,791 279,791 2,415 1,794 337,969 363 11,410 349,742 19 78,901 972,357 7,896 8,263 2,952 89,749 15,143 995,764 260 4,488 - - - 65 65 27 133 40 538 738 2,442 1,927 0.86 0.65 59 0.01 - - - 100.00 17.64 0.87 0.70 0.35 0.02 863 5,291 0.33 0.46 0.47 0.82 0.79 3.25 18.22 4,87 78.82 0.96 0.53 1.79 6,677,987 1,058,699 94,426 9,831,113 31,167 34,406 74,431 140,004 *The Group adopted the simpliﬁed approach in estimating the ECL for other ﬁnancial asset. Under this approach, all ECL allowance are lifetime ECL. Summary of loss allowance by class of ﬁnancial instruments also showing ECL coverage ratio as at 31 December 2021 Notes 157 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Group Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items In millions of Naira Stage 1 Stage 2 Lifetime ECL Stage 3 Total Stage 1 Stage 3 Total Stage 2 Lifetime ECL Stage 1 Stage 2 Lifetime ECL Stage 3 Total % % % % Financial Statement Items In millions of Naira On-balance sheet items Assets pledged as collateral Treasury bills 158,105 941,538 - - - - 158,105 941,538 198 815 - - - - 198 815 2,600,350 754,707 146,821 3,501,878 25,672 26,032 94,445 146,149 0.13 0.09 0.99 - - - - 3.45 64.33 Loans and advances to customers at amortised cost Debt investment securities at amortised cost Other ﬁnancial assets measured at amortised cost 657,957 - - 158,746 Due from other Banks 691,968 - - - - 657,957 3,766 - 158,746 - 9,925 691,968 724 - - - - 3,766 0.57 - 9,925 - 6.25 724 - 0.10 0.62 Subtotal 5,049,918 913,453 146,821 6,110,192 31,175 36,134 94,445 161,754 3.96 64.33 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 546,957 188,345 7,503 5,378 25 1,632 554,485 195,355 1,470 1,253 357,944 1,710 4,978 364,632 24 3 - - - 1,632 1,473 2,885 0.27 0.67 19 43 0.01 - - - - 100.00 0.27 1.48 0.38 0.01 125,944 1,219,190 10,045 24,636 1,941 8,576 137,930 1,252,402 807 3,554 116 119 292 1,943 1,215 5,616 6,269,108 938,089 155,397 7,362,594 34,729 36,253 96,388 167,370 0.64 0.29 0.55 1.15 0.48 15.04 22.66 3.86 62.03 0.88 0.45 2.27 *The Group adopted the simpliﬁed approach in estimating the ECL for other ﬁnancial asset. Under this approach, all ECL allowance are lifetime ECL. Bank Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items In millions of Naira Stage 1 Stage 2 Lifetime ECL Stage 3 Total Stage 1 Stage 3 Total Stage 2 Lifetime ECL Stage 1 Stage 2 Lifetime ECL Stage 3 Total % % % % 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 158,105 754,151 - - - - 158,105 754,151 197 395 - - - - 197 395 2,343,420 752,640 141,913 3,237,973 17,534 26,673 94,315 138,522 - - - - 3.54 66.46 380,199 - - 144,629 - - - 380,199 666 - 144,629 518,111 - 58 9,835 - - - - 666 9,835 58 - 6.80 - - 4.07 66.46 0.12 0.05 0.75 0.18 0.01 0.45 Due from other Banks 518,111 - Subtotal 4,153,986 897,269 141,913 5,193,168 18,850 36,508 94,315 149,673 158 0.13 0.09 4.17 0.57 6.25 0.10 2.65 0.12 0.05 4.28 0.18 6.80 0.01 2.88 - - - - - - Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items In millions of Naira Stage 1 Stage 2 Lifetime ECL Stage 3 Total Stage 1 Stage 3 Total Stage 2 Lifetime ECL Stage 1 Stage 2 Lifetime ECL Stage 3 Total % % % % Off-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 Loans and other credit related commitments Letters of credit Usance Financial guarantee and similar contracts Performance bonds and guarantees Undrawn overdraft balance Subtotal Total 391,076 188,345 7,503 5,378 25 1,631 398,604 195,354 1,470 1,253 329,145 1,710 4,978 335,833 24 3 - - - 1,632 1,473 2,885 19 43 125,944 1,034,510 10,045 24,636 1,941 8,575 137,930 1,067,721 807 3,554 116 119 292 1,943 1,215 5,616 5,188,496 921,905 150,488 6,260,889 22,404 36,627 96,258 155,289 0.38 0.67 0.01 0.64 0.34 0.43 0.04 - 100.06 0.37 1.48 - - 1.15 0.48 3.97 0.38 0.01 15.04 22.66 63.96 0.88 0.53 2.48 * The Group adopted the simpliﬁed approach in estimating the ECL for other ﬁnancial asset. Under this approach, all ECL allowance are lifetime ECL. 3.2.19 Restructuring Policy Loans with renegotiated terms are loans that have been restructured because the Group has made concessions by agreeing to terms and conditions that are more favorable for the customer than these provided by the Group initially. The Group implements restructuring policy in order to maximize collections opportunities and minimize the risk of default. The Group’s credit committee may, from time to time, grant approval for restructuring of certain facilities due to the following reasons: (a). Where the execution of the loan purpose and the repayment are no longer realistic in light of new cash ﬂows; (b). To avoid unintended default arising from adverse business conditions; (c). To align loan repayment with new pattern of achievable cash ﬂows; (d). Where there are proven cost over runs that may signiﬁcantly impair the project repayment capacity; (e). Where there is temporary downturn in the customer’s business environment; (f ). Where the customer’s going concern status is NOT in doubt or threatened; and (g). The revised terms of restructured facilities usually include extended maturity, changing timing of interest payments and amendments to the terms of the loan agreement. 3.3 Market risk Market risk is the risk of potential losses in both on- and oﬀ-balance sheet positions arising from movements in market prices. Market risks can arise from adverse changes in interest rates, foreign exchange rates, equity prices, commodity prices and other relevant factors such as market volatilities. The Group undertakes activities which give rise to some level of market risks exposures. The objective of market risk management activities is to continuously identify, manage and control market risk exposure within acceptable parameters, while optimizing the return on risks taken. Notes 159 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 3.3.1 Management of market risk The Group has an independent Market Risk Management unit which assesses, monitors, manages and reports on market risk taking activities across the Group. The Group enhances its Market Risk Management Framework on a continuous basis. The operations of the unit is guided by the mission of “inculcating enduring market risk management values and culture, with a view to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-oﬀ.” The Group’s market risk objectives, policies and processes are aimed at instituting a model that objectively identiﬁes, measures and manages market risks in the Group and ensure that: (a). The individuals who take or manage risk clearly understand it; (b). The Group’s risk exposure is within established limits; (c). Risk taking decisions are in line with business strategy and objectives set by the Board of Directors; (d). The expected payoﬀs compensate for the risks taken; and (e). Suﬃcient capital, as a buﬀer, is available to take risk. The Group proactively manages its market risk exposures in both the trading and non-trading books within the acceptable levels. The Group’s market risks exposures are broadly categorised into: 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). 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. (i) (ii) Group In millions of Naira Note Carrying Amount Trading Non-trading Carrying Amount Trading Non- trading At 31 December 2022 At 31 December 2021 Assets Cash and balances with central bank Treasury bills Assets pledged as collateral Due from other banks Derivative Asset • Hedging Instrument Derivative Asset -Non Hedging Instrument Loans and advances Investment securities Other ﬁnancial assets Liabilities Customer deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued 160 15 16 17 18 19 19 20 21 25 28 33 29 30 31 32 2,201,743 - 2,246,540 1,243,038 254,662 26,287 1,302,811 20,052 29,822 4,013,705 - 20,052 29,822 - 1,728,331 12,442 193,465 193,465 8,975,653 - - 6,325 6,325 545,938 311,192 963,450 - - - - - 2,201,743 1,003,500 228,375 1,302,811 - - 4,013,705 1,715,889 193,465 1,488,363 1,764,945 392,594 691,244 - 3,355,728 1,303,726 148,821 56,187 56,187 - 1,488,363 824,222 234,687 - - 940,723 157,907 691,244 - - - 3,355,728 22,338 1,281,388 - - 14,674 - - - - 148,821 6,472,054 - 455,776 369,241 750,469 45,799 8,975,653 6,472,054 - 545,938 311,192 963,450 - 14,674 455,776 369,241 750,469 45,799 Bank In millions of Naira Note Carrying Amount Trading Non-trading Carrying Amount Trading Non- trading At 31 December 2022 At 31 December 2021 Assets Cash and balances with central bank Treasury bills Assets pledged as collateral Due from other banks Derivative Asset • Hedging Instrument Derivative Asset -Non Hedging Instrument Loans and advances Investment securities Other ﬁnancial assets Liabilities Customer deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued 15 16 17 18 19 19 20 21 25 28 33 29 30 31 32 3.3.2 Measurement of Market Risk 2,102,394 - 2,102,394 2,206,669 1,243,038 254,564 26,189 963,630 228,375 1,132,796 - 1,132,796 20,052 28,799 - - - 3,735,676 612,220 176,289 1,397,666 1,577,647 357,000 518,053 - 3,099,452 477,004 134,794 57,476 57,476 20,052 28,799 3,735,676 622,780 176,289 7,434,806 6,040 526,945 311,192 999,580 - 10,560 - - 6,040 - - - - 7,434,806 5,169,199 - 526,945 311,192 999,580 - 15,170 409,103 369,241 769,395 45,799 - 1,397,666 823,891 199,093 - - 753,756 157,907 518,053 - - - 3,099,452 11,897 - - 15,170 - - - - 465,107 134,794 5,169,199 - 409,103 369,241 769,395 45,799 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 designating part of its derivatives for hedge accounting purposes and trading other basic derivative products. 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 Notes 161 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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 Bank’s risk appetite is the level of risk that the Bank would assume in achieving its business objectives at any point in time. This appetite is reviewed annually by the Board of Directors at a level that minimizes depletion of earnings and capital due to avoidable foreign exchange ﬂuctuations. The Bank’s strategy is to manage all material foreign exchange risks associated with highly probable forecast transactions, ﬁrm commitments and monetary items denominated in foreign currencies using derivative products such as forwards, futures and foreign currency swaps. Group The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December 2022 and 31 December 2021. Included in the table are the Group’s ﬁnancial instruments at carrying amounts, categorised by currency. In millions of Naira At 31 December 2022 Assets Naira Dollar GBP Euro Others Total Cash and balances with central bank 2,089,869 18,937 4,181 4,957 83,799 2,201,744 Treasury bills Assets pledged as collaterals Due from other banks Derivative assets-hedging instruments Derivative assets-non hedging instruments Loans and advances to customers Investment securities Other ﬁnancial assets Liabilities Customer’s deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued 2,227,845 254,565 - - - - - - 18,695 2,246,540 98 254,663 110 1,133,525 62,355 75,185 31,637 1,302,811 - 326 20,052 29,351 2,212,928 1,615,146 628,850 861,522 77,095 100,899 - - 14,087 96,955 227 - - - 145 20,052 29,822 77,477 35,155 94,066 4,013,704 105,852 1,728,333 33 15,210 193,464 6,185,521 2,084,960 202,842 135,821 366,511 8,975,655 374 430,582 311,192 - - 5,806 86,339 - 963,450 - - - 145 1,176 10,996 16,845 - - - - - - - - - 6,325 545,938 311,192 963,450 - As at 31 December 2022, the Group had outstanding SWAP transactions with various counterparties. The SWAP transactions creates for the Group both a right to receive US dollar of the notional SWAP amount at diﬀerent maturities and an obligation to deliver NGN of the notional SWAP amount at diﬀerent maturity. The total USD receivables at various maturity dates is USD 1.66 billion while the Naira payable at various maturities is N714 Billion: 162 In millions of Naira At 31 December 2021 Assets Cash and balances with central bank Treasury bills Assets pledged as collaterals Due from other banks Derivative assets-non hedging instruments Loans and advances to customers Investment securities Other ﬁnancial assets Liabilities Customer’s deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued Naira Dollar GBP Euro Others Total 4,689 1,877 9,436 89,302 1,488,363 1,383,059 1,671,658 357,000 - - 414 4,003 507,060 51,557 1,845,837 1,301,543 501,224 545,517 11,035 123,896 - - 49,479 184 23,439 43,550 - - - 82,801 1 59,872 22,632 93,287 1,764,945 35,594 51,220 442 392,594 691,244 56,187 125,037 3,355,728 190,803 1,303,726 18 13,872 148,821 4,062,040 1,626,142 163,580 116,701 503,591 6,472,054 3,820 9,475 256,532 135,804 369,241 - - - 750,469 45,799 - 578 - - - 470 9,252 909 53,610 - - - - - - 14,674 455,776 369,241 750,469 45,799 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% (31 December 2021: 6%, with all other variables held constant. 31 December 2022 31 December 2021 US Dollar eﬀect of 9% (31 December 2021:6%) 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 2021: 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 2021: 6%) up or (down) movement on OCI and statement of ﬁnancial position size (in millions of Naira) US Dollar eﬀect of 9% (31 December 2021: 6%) up or (down) movement on OCI and statement of ﬁnancial position size (in millions of Naira) 68,926 68,926 8,042 8,042 32,351 32,351 4,895 4,895 Notes 163 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Bank The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December 2022 and 31 December 2021. Included in the table are the Bank’s ﬁnancial instruments at carrying amounts, categorised by currency. In millions of Naira At 31 December 2022 Assets Naira Dollar GBP Euro Others Total Cash and balances with central bank 2,086,532 10,420 3,208 2,235 Treasury bills Assets pledged as collaterals Due from other banks Derivative assets-hedging instruments Derivative assets-non hedging instruments Loans and advances to customers Investment securities Other ﬁnancial assets Liabilities Customer’s deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings - - - 2,102,395 2,206,669 254,565 2,206,669 254,565 - - - - - - 10,020 1,032,923 23,240 56,122 10,490 1,132,795 - 326 20,052 28,328 2,212,764 1,481,680 593,312 15,364 75,387 100,813 - - 657 - 55 - - 38,569 14,103 33 - 145 20,052 28,799 2,005 3,735,675 - - 622,779 176,288 7.434.807 6,172,467 1,175,734 15,222 65,964 5,420 7,434,807 299 429,971 311,192 5,596 77,361 - - 999,580 - - 1,176 10,996 - - - - 145 7,440 - - 6,040 526,944 311,192 999,580 As at 31 December 2022, the Group had outstanding SWAP transactions with various counterparties. The SWAP transactions creates for the Bank both a right to receive US dollar of the notional SWAP amount at diﬀerent maturities and an obligation to deliver NGN of the notional SWAP amount at diﬀerent maturity. The total USD receivables at various maturity dates Is USD 1.66 billion while the naira payable at various maturities Is 714 billion. In millions of Naira At 31 December 2021 Assets Cash and balances with central bank Treasury bills Assets pledged as collaterals Due from other banks Derivative Asset -Non Hedging Instrument Loans and advances to customers Investment securities Other ﬁnancial assets Liabilities Customer’s deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued 164 Naira Dollar GBP Euro Others Total 1,382,751 1,577,647 357,000 3,703 1,846 9,367 - - - - - - - 458,061 8,542 51,111 - - - 339 441 1,397,667 1,577,647 357,000 518,053 57,476 4,003 52,847 1,845,837 1,222,657 462,071 14,933 11,275 123,501 184 60 - - 1 22,756 8,142 3,099,452 - 18 - - 477,004 134,794 4,062,040 1,019,434 17,072 67,828 2,825 5,169,199 3,820 10,438 256,490 135,804 369,241 - - - 769,395 45,799 - 578 - - - 470 9,252 442 6,979 - - - - - - 15,170 409,103 369,241 769,395 45,799 The Banks exposure to foreign currency risk Is largely concentrated in US Dollar. Movement In exchange rate between the US Dollar, and the Nigeriar Naira aﬀects reported earnings through revaluation gain or loss and statement of ﬁnancial position size through increase or decrease in the revalued amounts of assets and liabilities denominated in US Dollars. The Group’s closing and average Dollar rate as at 31 December 2022 was N461.1 USD and N428 96/USD respectively.. The table below shows the impact on the Bank’s proﬁt and statement of ﬁnancial position size if the exchange rate between the US Dollars, and Nigerian Naira had increased or decreased by 6% (31 December 2021: 9%), with all other variables held constant. In millions of Naira 31 December 2022 31 December 2021 US Dollar eﬀect of 9% (31 December 2021: 6%) up or (down) movement on proﬁt before tax and balance sheet size US Dollar eﬀect of 9% (31 December 2021: 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 2021: 6%) up or (down) movement on OCI and statement of ﬁnancial position size (in millions of Naira) US Dollar eﬀect of 9% (31 December 2021: 6%) up or (down) movement on OCI and statement of ﬁnancial position size (in millions of Naira) 3.3.3.1 Foreign exchange risk 68,927 68,927 8,042 8,042 28,047 28,047 4,895 4,895 A fair value hedge is used to hedge a change in the fair value of an asset or liability or an unrecognized ﬁrm commitment that is attributable to a particular risk and could aﬀect the proﬁt or loss or other comprehensive income. The Bank manages the foreign currency risk on a group basis and items that are subject to the same risk are managed together. The Bank has designated its foreign currency borrowings and term deposits as hedged items in a formal hedge relationship for accounting purposes. a) Hedged item: The Bank has hedged the NGN/USD spot exchange rate risk arising from the translation of recognized foreign currency borrowings (see note 31) and term deposits (see note 28) denominated in United States Dollars (USD) to NGN. This risk is due to the sustained depreciation of the Naira against the Dollar, leading to revaluation losses. b) Hedging instrument The Bank has designated the spot component of its currency swaps with the Central Bank of Nigeria (CBN) as the hedging instrument in the hedge relationship for accounting purposes. c) Hedge ratio :The Bank has deﬁned the hedge ratio as the actual ratio between the hedged item and hedging instruments. This is the ratio that the Bank uses for risk management purposes, which is appropriate for purposes of hedge accounting. The proportion of the hedging instrument designated in the hedge relationship is in line with the deﬁned hedge ratio of 1:1. d) Hedge eﬀectiveness: An economic relationship between a hedged item and hedging instrument exists where the values of the hedged item and hedging instrument will typically move in opposite directions in response to movements in the hedged risk. The Bank’s assessment is that gains and losses on the derivatives attributable to the spot component will continue to move in the opposite direction to the hedged items. The currency swap derivatives transaction was to “sell USD, buy NGN” at inception and “buy USD, sell NGN” at the forward date. A foreign currency gain is recognised if the Naira depreciates, and a loss recognised if it appreciates. For the hedged items - foreign currency liabilities, a foreign currency gain is recognised if the Naira appreciates, and a loss recognised if it depreciates. Therefore, management has assessed that there is an economic relationship between the hedging instrument and the hedged item as they will generally move in the opposite direction. The designated amounts and currency denomination for the hedge instruments and hedge items are also closely aligned. The Bank determines hedge eﬀectiveness at the inception of the hedge relationship, and through quarterly prospective eﬀectiveness assessments. Sources of ineﬀectiveness include; timing diﬀerences between the settlement dates of the hedged item and hedging instruments, credit risk of the Bank and its counterparty to the forward contract, and the use of existing currency swaps at the designation dates. Notes 165 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira Total exposure to foreign exchange risk- fair value hedge - Interest bearing borrowings - Term deposits Bank 271,705 100,453 The Bank’s accounting policy for its fair value hedges is set out in note 2.6 Further information about the hedging derivatives used by the Bank is provided below as at 31 st of December 2022: In millions of Naira At 31 December 2022 Risk Category Hedge Type: Fair Value hedge CBN Currency Swap Foreign Exchange risk Average Strike Price Nominal Amount of Hedging Instrument Carrying Amount of Hedging Instrument Changes in fair value used for calculatingHedging ineﬀectiveness Line Item in the statement of ﬁnancial position where the hedging instrument is located Number Assets Assets 430 346,918 20,052 40,632 Derivative assets In millions of Naira At 31 December 2022 Hedge Type: Fair Value hedge Foreign exchange risk on foreign currency interest bearing borrowing Foreign exchange risk on term deposits In millions of Naira At 31 December 2022 Fair Value hedge Foreign exchange risk Risk Category Carrying amount of hedged item Change in fair value for calculating hedge ineﬀectiveness Line Item In the statement of ﬁnancial position where the hedging instrument is located Foreign Exchange risk Liabilities 271,705 (24,830) Borrowings Foreign Exchange risk 100,453 (14,760) Customer’s deposits Hedge ratio Eﬀectiveness recognized in proﬁt or loss Hedge ineﬀectiveness recognized in proﬁt or loss Line item inproﬁt or loss that includeshedge ineﬀectiveness - 93% 39,590 1,042 Trading gains The notional contract amounts of the hedging instruments indicate the balance of designated hedging instruments at the reporting date. This balance ﬂuctuates over the hedging period in line with the amortizing nature of the hedged items. The following table shows the proﬁle of the timing of the nominal amount of the hedging instrument In millions of Naira At 31 December 2022 Up to 1 month 1-3 months 3-6 months 6-12 months Derivative assets - Hedging Gross settled Receivable Payable 614 (614) - - 95,466 (95,466) 250,838 (250,838) 166 3.3.4 Interest Rate Risk The Group is exposed to a considerable level of interest rate risk especially on the banking book (i.e. the risk that the future cash ﬂows of a ﬁnancial instrument will ﬂuctuate because of changes in market interest rates). 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: At 31 December 2022 In millions of Naira Assets Cash and balances with central banks Treasury and other eligible bills (Amortized cost) Assets pledged as collateral (Amortised cost) Due from other banks Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument 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 15 16 17 18 19 19 20 21 25 28 33 29 30 31 32 Note Carrying Amount Rate sensitive Non rate sensitive 2,201,743 1,003,501 228,474 1,302,811 20,052 29,822 4,013,705 1,715,889 193,465 - 0 - - - - 870,276 - - 10,709,462 870,276 2,201,743 1,003,501 228,474 1,302,811 20,052 29,822 3,143,429 1,715,889 193,465 9,839,186 8,975,654 3,145,312 5,830,342 6,324 545,938 311,192 963,450 - 284 - - 292,215 - 10,802,559 3,437,811 6,040 545,938 311,192 671,234 - 7,364,746 2,474,440 Total interest rate gap The table shows the maturity proﬁle of ﬁnancial instruments that are rate sensitive. (93,097) (2,567,535) At 31 December 2022 In millions of Naira Assets Loans and advances to customers Liabilities Customer deposits Borrowings Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive 40,139 40,139 607,695 607,695 2,854,186 - 104,666 240,529 43,640 43,640 37,739 51,685 30,958 30,958 147,844 147,844 870,276 870,276 62,615 86,106 3,145,312 - - 292,214 2,854,186 345,195 89,424 62,615 86,106 3,437,525 Total interest repricing gap (2,814,047) 262,500 (45,784) (31,657) 61,738 (2,567,250) Notes 167 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Impact of interest rate sensitivity on cash flows - Liabilities: For its liabilities, the group is primarily exposed to changes in interest rate on variable borrowings. Impact on cash ﬂow due to +/- 1 bps movement in Libor (holding all other variables constant) has been estimated to be N73 million. At 31 December 2021 In millions of Naira Assets Cash and balances with central banks Treasury and other eligible bills (Amortized cost) Assets pledged as collateral (Amortised cost) 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 liabilties Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued Total interest repricing gap Note Carrying Amount Rate sensitive Non rate sensitive 15 16 17 18 42 20 21 25 28 32 29 30 31 32 1,488,363 940,723 157,907 691,244 - 3,355,728 1,195,814 148,821 - - - - - 1,539,700 - - 7,978,600 1,539,700 1,488,363 940,723 157,907 691,244 - 1,816,028 1,195,814 148,821 6,438,900 6,472,054 1,194,221 5,277,833 - 455,776 369,241 750,469 45,799 8,093,339 (114,739) - - - 352,332 - 1,546,553 (6,853) - 455,776 369,241 398,137 45,799 6,546,786 - The table shows the maturity proﬁle of ﬁnancial instruments that are rate sensitive. In millions of Naira At 31 December 2021 Assets Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive Loans and advances to customers 524,255 39,430 155,212 36,113 784,690 1,539,700 Liabilities Customer deposits Borrowings 524,255 39,430 155,212 36,113 784,690 1,539,700 1,194,221 - 42,739 278,768 1,236,960 278,768 - 9,606 9,606 - 21,219 21,219 1,194,221 1,194,221 352,332 1,546,553 - - - Total interest repricing gap (712,705) (239,338) 145,606 14,894 784,690 (6,853) 168 Group Interest rate sensitivity showing fair value interest rate risk In millions of Naira Financial assets at FVPL Treasury bills Government bonds Assets pledged as collateral Total Impact on income statement: Favourable change at 5% reduction in interest rate (2021:2%) Unfavourable change at 5% increase in interest rate (2021:2%) FVOCI investment securities Government bonds Impact on other comprehensive income statement: Favourable change at 1% reduction in interest rate (2021: 2%) Unfavourable change at 1% increase in interest rate (2021: 2%) 31 December 2022 31 December 2021 1,243,038 12,442 26,189 1,281,669 64,083 (64,083) 824,222 22,338 234,687 1,081,247 21,625 (21,625) 833,849 541,629 8,338 (8,338) 10,833 (10,833) 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. Bank The table below summarizes the Bank’s interest rate gap position: At 31 December 2022 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 Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument 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 Total interest rate gap Note Carrying Amount Rate sensitive Non rate sensitive 15 16 17 18 19 19 20 21 25 28 32 29 30 31 32 2,102,394 963,630 228,376 1,132,796 20,052 28,799 3,735,676 612,220 176,289 - - - - - - 558,051 - - 9,000,232 558,051 2,102,394 963,330 228,376 1,132,796 20,052 28,799 3,177,625 612,220 176,289 8,444,881 7,434,806 2,673,518 4,761,287 6,040 526,945 311,192 999,580 - - - - 292,215 - 9,278,563 2,965,733 (278,331) (2,407,682) 6,040 526,945 311,192 707,365 - 6,312,829 2,132,052 Notes 169 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The table below shows the maturity proﬁle of ﬁnancial instruments that are rate sensitive. At 31 December 2022 In millions of Naira Assets Loans and advances to customers Liabilities Customer deposits Borrowings Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive 922 922 557,129 557,129 2,673,518 - - - - - 240,529 51,685 2,673,518 240,529 51,685 - - - - - - - - - - - - 558,051 558,051 2,673,518 292,214 2,965,732 (2,407,681) Total interest rate gap (2,672,596) 316,600 (51,685) Impact of interest rate sensitivity on cash ﬂows - Liabilities: For its liabilities, the group is primarily exposed to changes in interest rate on Libor based borrowings. Impact on cash ﬂow due to +/- 9 bps movement in Libor (holding all other variables constant) has been estimated to be N157 million. Note Carrying Amount Rate sensitive Non rate sensitive 15 16 17 18 42 20 21 25 28 29 13 30 31 32 1,397,666 753,756 157,907 518,053 54,476 - - - - - 3,099,452 1,253,615 477,004 134,794 - - 6,593,108 1,253,615 1,397,666 753,756 157,907 518,053 54,476 1,845,837 477,004 134,794 5,339,493 5,169,199 1,194,221 3,974,978 15,170 409,103 369,241 769,395 45,799 - - - 341,463 - 15,170 409,103 369,241 427,932 45,799 6,777,907 1,535,684 5,242,223 (184,799) (282,069) 97,270 At 31 December 2021 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 Investment securities (Amortized cost and Fair value through OCI) Other ﬁnancial assets Liabilities Customer deposits Derivative liabilities Other ﬁnancial liabilities On-lending facilities Borrowings Debt securities issued Total interest rate gap 170 The table below shows the maturity proﬁle of ﬁnancial instruments that are rate sensitive. At 31 December 2021 In millions of Naira Assets Loans and advances to customers Liabilities Customer deposits Borrowings Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive 469,345 469,345 1,194,221 - - - 42,739 267,899 1,236,960 267,899 120,847 17,064 646,359 1,253,615 120,847 17,064 646,359 1,253,615 - 9,606 9,606 - 21,219 21,219 - - - 1,194,221 341,463 1,535,684 Total interest repricing gap (767,615) (267,899) 111,241 (4,155) 646,359 (282,069) Bank Interest rate sensitivity showing fair value interest rate risk In millions of Naira Financial assets at FVPL Treasury bills Government bonds Assets pledged as collateral Total Impact on income statement: Favourable change at 5% reduction in interest rate(2021: 2%) Unfavourable change at 5% increase in interest rate(2021: 2%) 31 December 2022 31 December2021 1,243,038 10,560 26,189 1,279,787 63,989 (63,989) 823,891 11,897 199,093 1,034,881 20,698 (20,698) 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 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. 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) 7.795% equity holding in African Finance Corporation (AFC) valued at N86.6 billion and cost N40 billion. (ii) 3.6% equity holding in Nigerian Interbank Settlement Scheme (NIBBS) valued at N1.75 billion and cost N50 million (iii) 2.31% equity holding in FMDQ holdings pic valued at N2.90 billion. (iv) 0.79% equity holding in Uniﬁed Payment Services (UPS) valued at N105.9 million (v) 0.02% equity holdings in AFREXIM valued N266.4 million. Notes 171 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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). 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 (c). 3.4 Liquidity risk Liquidity risk is the potential loss arising from the Group’s inability to meet its obligations as they fall due or its inability to fund increases in assets without incurring unacceptable cost or losses. Liquidity risk is not viewed in isolation, because ﬁnancial risks are not mutually exclusive and liquidity risk is often triggered by consequences of other bank risks such as credit, market and operational risks. 3.4.1 Liquidity risk management process The Group has a comprehensive liquidity risk management framework that ensures that adequate liquidity, including a cushion of unencumbered and high quality liquid assets is maintained at all times, to enable the Group withstand a range of stress events, including those that might involve loss or impairment of funding sources. The Group’s liquidity risk exposure is monitored and managed by the Asset and Liability Management Committee (ALCO) on a regular basis. This process includes: a. b. c. d. e. f. Projecting cash ﬂows and considering the level of liquid assets necessary in relation thereto; Monitoring balance sheet liquidity ratios against internal and regulatory requirements; Maintaining a diverse range of funding sources with adequate back-up facilities; Managing the concentration and proﬁle of debt maturities; Monitoring deposit concentration in order to avoid undue reliance on large individual depositors and 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: 172 (a). Conducts on a regular basis appropriate stress tests so as to; (i) (ii) Identify sources of potential liquidity strain; and Ensure that current liquidity exposures continue to conform to the liquidity risk tolerance established by the board. (b). Analyses the separate and combined impact of possible future liquidity stresses on: (i) Cash ﬂows; (ii) Liquidity position; and (iii) Proﬁtability. The Board and the Asset and Liability Committee (ALCO) regularly review the stresses and scenarios tested to ensure that their nature and severity remain appropriate and relevant to the Bank. These reviews take into the account the following; a. b. c. Changes in market condition; Changes in the nature, scale or complexity of the Bank’s business model and activities; and The Group’s practical experience in periods of stress. 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. b. c. d. e. f. g. h. outlines strategies, policies and plans to manage a range of stresses; establishes a clear allocation of roles and clear lines of management responsibility; is formally documented; includes clear invocation and escalation procedures; is regularly tested and the result shared with the ALCO and Board; outlines that Group’s operational arrangements for managing a huge funding run; is suﬃciently 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. Notes 173 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 As part of the management of liquidity risk arising from ﬁnancial liabilities, the Group holds liquid assets comprising cash and cash equivalents, and debt securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In addition, the Group maintains agreed lines of credit with other banks. (a) Exposure to liquidity risk The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose, ‘net liquid assets’ includes cash and cash equivalents and investment-grade debt securities for which there is an active and liquid market less any balances with foreign banks and regulatory restricted cash. Customers’ deposit excludes deposit denominated in foreign currencies. Details of the reported Group ratio of net liquid assets to deposits from customers at the reporting date and during the reporting period were as follows. Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 At year end Average for the year Maximum for the year Minimum for the year (b) Liquidity reserve 75.00% 63.00% 75.00% 56.00% 71.19% 70.43% 72.18% 68.72% 67.00% 64.00% 67.00% 62.00% 59.73% 57.96% 61.14% 52.37% 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. 31 December 2022 31 December 2021 Gross value Gross value 452,135 2,246,946 1,302,886 660,485 - 4,662,452 407,487 2,206,707 1,132,871 383,973 - 4,131,038 157,466 1,765,760 668,425 1,123,565 - 3,715,216 127,465 1,578,042 432,139 293,733 - 2,431,379 In millions of naira Group Cash and balances with central banks Treasury bills Balances with other banks Investment securities Assets pledged as collaterals Total Bank Cash and balances with central banks Treasury bills Balances with other banks Investment securities Assets pledged as collaterals Total 174 (c) Financial assets available to support funding The table below sets out the availability of the Group’s ﬁnancial assets to support future funding Group At 31 December 2022 At 31 December 2021 In millions of Naira Note Encumbered Unencumbered Total Encumbered Unencumbered Total Cash and balances with central banks Treasury bills Assets pledged as collateral Due from other banks Loans and advances Investment securities Other ﬁnancial assets 15 16 17 18 20 21 25 1,749,608 452,136 2,201,744 1,330,897 157,466 1,488,363 - 2,246,540 2,246,540 - 1,764,945 1,764,945 254,662 115,315 1,770 - - - 254,662 1,187,496 1,302,811 4,011,935 4,013,705 1,728,331 1,728,331 193,464 193,464 392,594 23,543 - - - - 667,701 392,594 691,244 3,355,728 3,355,728 1,303,726 1,303,726 148,821 148,821 Group At 31 December 2022 At 31 December 2021 In millions of Naira Note Encumbered Unencumbered Total Encumbered Unencumbered Total Bank Cash and balances with central banks Treasury bills Assets pledged as collateral Due from other banks Loans and advances Investment securities Other ﬁnancial assets 15 16 17 18 20 21 25 1,694,907 407,488 2,102,395 1,275,201 122,465 1,397,666 - 2,206,669 2,206,669 - 1,577,647 1,577,647 254,564 115,315 - - - - 254,564 1,017,481 1,132,796 3,735,676 3,735,676 622,780 622,780 176,829 176,829 357,000 85,972 - - - - 357,000 432,081 518,053 3,099,452 3,099,452 477,004 477,004 134,794 134,794 (d) Financial assets pledged as collateral The total ﬁnancial assets recognized in the statement of ﬁnancial position that have been pledged as collateral for liabilities as at 31 December 2022 and 31 December 2021 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 re-pledge 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. Notes 175 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The liquidity analysis of lease liability is disclosed in note 29c. 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 25 463,163 323,828 4,595 1,263,202 981,044 70,368 168,268 938 - - 1,697,512 460,101 613,895 1,028,194 - 85,164 28,666 557,865 234,430 713 35,375 11,375 511,134 211,719 30 21,161 302,153 - 592,972 141,728 - 1,776,619 1,524,161 76 54,575 2,161,613 2,426,016 448,448 1,303,243 4,419,634 2,182,407 223,662 2,201,743 2,246,540 254,663 1,302,811 4,013,710 1,728,449 194,791 3,274,467 1,367,876 1,383,529 1,784,130 5,355,020 13,165,022 11,942,707 Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inﬂow/ (outﬂow) Carrying amount 8,183,517 396,598 2,771 35,146 402,334 124,131 23,000 225,342 202,080 113,935 385 18,092 370,726 9,569 29,871 229,298 84,476 16,503 276,278 130,980 8,986,342 8,975,654 547,186 350,012 991,491 545,938 311,192 963,449 7,187,769 495,526 381,958 320,194 504,624 10,875,031 9,377,460 28 29 30 31 19 614 (614) - - 95,466 250,838 (95,466) (250,838) 135,645 66,063 (105,614) (27,258) 13 13 104,297 (63,881) 48 134,410 (134,400) 252 22,659 43,405 - 27,243 58,114 11 731 39,781 46 - - 242 - - - - - - - - 346,918 (346,918) 20,052 20,052 440,421 (331,169) 326 50,633 141,300 299 29,822 29,822 326 6,325 6,325 299 Group At 31 December 2022 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 At 31 December 2022 Liabilities Non-derivative liabilities Customer’s deposits Other ﬁnancial liabilities On-lending facilities Borrowings Derivative Asset - Hedging Instrument Gross settled: Receivable Payable Derivative Asset -Non Hedging Instrument Gross settled: Receivable Payable Net settled Derivative liabilities 33 Gross settled: Receivable Payable Net settled 176 At 31 December 2021 Note Up to 1month 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 15 16 17 18 20 21 25 157,466 331,777 6,724 645,651 1,254,367 30,197 117,750 - 386,797 7,255 22,336 300,139 157,472 105 - 458,851 108,864 1,853 281,086 121,644 - - 1,330,897 621,404 152,604 3,902 237,561 168,247 - 309,561 17,583 1,360,162 1,302,303 - 40,888 1,488,363 1,798,829 585,008 691,325 3,433,315 1,779,863 158,743 1,488,363 1,764,945 392,594 691,244 3,355,728 1,303,726 148,821 2,543,932 874,104 972,298 1,183,718 4,361,394 9,935,446 9,145,421 At 31 December 2021 Note Up to 1month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inﬂow/(outﬂow) Carrying amount 5,911,598 334,843 2,408 62,078 - 268,589 97,795 2,036 211,953 - 118,299 544 3,128 189,444 47,231 113,528 10,576 61,261 20,027 6,418 442,932 264,864 28,814 - - 6,473,275 6,472,054 463,785 456,922 757,153 47,231 455,776 369,241 750,469 45,799 6,310,977 580,373 358,646 395,386 553,034 8,198,366 8,093,339 28 29 30 31 32 19 Liabilities Non-derivative liabilities Customer's deposits Other ﬁnancial Liabilities On-lending facilities Borrowings Debt securities issued Derivative assets Gross settled: Receivable Payable Net settled 202,006 169,887 304,628 350,156 (190,367) (153,433) (297,946) (339,275) 870 1,296 777 370 Derivative liabilities 33 Gross settled: Receivable Payable Net settled 99,580 81,216 (460,439) (412,973) 81,011 (27,726) 13,359 (13,611) 158,159 121,745 (69,492) (205,906) - - - - - - 1,026,677 (981,021) 3,313 275,166 (914,749) 4,506 52,874 52,874 3,313 10,167 10,167 4,506 Notes 177 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Bank At 31 December 2022 Note Up to 1month 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 Liabilities Non-derivative liabilities Customer's deposits Other ﬁnancial Liabilities On-lending facilities Borrowings Debt securities issued 15 16 17 18 20 21 25 28 29 30 31 32 407,488 317,767 4,595 1,131,783 956,681 8,653 150,690 - 444,309 85,066 1,380 498,681 10,367 - - 603,408 35,375 - 475,411 57,518 - - 1,694,907 1,020,587 - 21,161 302,153 - 569,863 28,407 - 1,671,708 962,816 2,102,395 2,386,071 448,350 1,133,163 4,172,344 1,067,761 2,102,394 2,206,669 254,565 1,132,796 3,735,676 622,780 - 54,467 205,157 176,289 2,977,657 1,039,803 1,171,712 1,640,018 4,686,051 11,515,241 10,231,169 6,921,203 385,106 2,771 35,146 - 314,782 124,060 23,000 166,668 282 18,092 42,783 9,439 29,871 225,342 384,559 251,594 - - - - 7,445,436 7,434,806 16,034 276,278 130,980 - 534,921 350,012 1,027,621 - 526,945 311,192 999,580 - 7,344,226 687,184 569,601 333,597 423,292 9,257,990 9,272,523 At 31 December 2021 Note Up to 1month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inﬂow/(outﬂow) Carrying amount Derivative Asset - Hedging Instrument 19 Gross settled: Receivable Payable Derivative Asset - Non Hedging Instrument 19 Gross settled: Receivable Payable Net settled Derivative liabilities 33 Gross settled: Receivable Payable Net settled 178 614 (614) - - 95,466 250,838 (95,466) (250,838) 135,651 (105,620) 13 66,063 (27,258) 13 104,297 (63,881) 48 134,410 (134,410) 252 22,659 43,405 - 27,243 58,114 11 731 39,781 46 - - 242 - - - - - - - - 346,918 (346,918) 20,052 (20,052) 440,421 (331,169) 326 50,633 141,300 299 28,799 28,799 326 5,741 5,741 299 At 31 December 2021 Note Up to 1month 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 Liabilities Non-derivative liabilities Customer's deposits Other ﬁnancial Liabilities On-lending facilities Borrowings Debt securities issued 15 16 17 18 20 21 25 28 29 30 31 32 122,465 287,459 6,724 509,885 - 274,343 7,255 4,283 1,199,643 260,927 20,676 103,636 5,681 105 - 454,208 108,864 - 246,931 8,504 - - 1,275,201 591,367 152,536 3,902 218,826 23,683 - 275,790 - 1,222,092 739,387 1,397,666 1,607,377 551,169 518,070 3,148,419 797,931 1,397,666 1,577,647 357,000 518,053 3,099,452 477,004 - 40,888 144,629 134,794 2,250,488 552,594 818,507 990,314 3,553,358 8,165,261 7,561,616 5,083,367 287,950 2,408 62,078 - 75,982 97,634 2,036 200,950 - 8,111 544 3,128 219,239 47,231 2,786 10,576 6,418 264,864 - 86 5,170,332 5,169,199 12,884 442,932 28,814 - 409,588 456,922 775,945 47,231 409,103 369,241 769,395 45,799 5,435,803 376,602 278,253 284,644 484,716 6,860,018 6,762,737 At 31 December 2021 Note Up to 1month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inﬂow/(outﬂow) Carrying amount Derivative Assets 19 Gross settled: Receivable Payable Net settled Derivative liabilities 33 Gross settled: Receivable Payable Net settled 183,399 105,119 267,385 402,905 (172,082) (101,564) (260,841) (393,450) 870 1,986 777 370 72,203 112,517 (432,890) (443,252) 832 1,978 60,007 (6,040) 736 - - 323 - - - - - - 958,808 (927,937) 4,003 244,727 (882,182) 3,819 53,473 53,473 4,003 11,350 11,350 3,819 Notes 179 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The amounts in the tables above and below 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. The Group’s expected cash ﬂows on some ﬁnancial assets and ﬁnancial liabilities vary signiﬁcantly from the contractual cash ﬂows. As part of the management of liquidity risk arising from ﬁnancial liabilities, the Group holds liquid assets comprising cash and cash equivalents, and debt securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In addition, the Group maintains agreed lines of credit with other banks and holds unencumbered assets that are eligible for use as collateral with central banks (these amounts are referred to as the ‘Group’s liquidity reserves’). Residual contractual maturities of off-balance sheet exposures. Group At 31 December, 2022 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 276,481 363,355 384,381 20,056 58,461 71,184 239,026 273,698 99,505 Total 1,024,217 149,701 612,229 17,399 23,577 144,771 185,747 - 7,619 51,272 58,891 - - 17,650 17,650 At 31 December, 2021 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 195,354 554,486 364,632 8,211 55,399 44,099 119,994 451,019 57,286 67,149 47,782 68,951 Total 1,114.,477 107,709 628,299 183,882 - 455 109,700 110,155 - - 84,427 84,477 180 Bank At 31 December, 2022 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 276,481 279,791 349,741 20,056 33,202 73,320 239,026 235,279 74,684 Total 906,013 126,578 548,989 17,399 11,310 134,513 163,222 - - 49,574 49,574 - - 17,650 17,650 At 31 December, 2021 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 195,354 398,605 335,833 929,792 8,211 462 41,604 50,277 119,994 359,581 50,746 67,149 38,562 68,916 530,321 174,627 - 169 89,971 90,140 - - 84,427 84,427 3.5 Fair value of financial assets and liabilities IFRS 7 speciﬁes a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reﬂect market data obtained from independent sources; unobservable inputs reﬂect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy. (i) (ii) 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). (iii) 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. Notes 181 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 3.5.a 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. At 31 December, 2022 In millions of Naira Note Carrying Value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills Investment securities (Fixed income) Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Asset pledged as collateral Carried at FVOCI: Equity securities (unquoted) Debt securities Carried at amortized cost: Treasury bills Assets pledged as collateral Investment securities Liabilities Carried at FVTPL Derivative liabilities 1,243,039 1,243,039 129,703 1,113,336 16 21 19 19 17 21 32 16 17 21 12,441 20,052 29,822 26,287 93,883 833,549 1,003,501 228,376 794,422 12,441 20,052 29,822 26,287 11,455 - - 9,997 825 20,052 29,822 16,290 93,883 - 833,549 833,549 - - 1,002,865 835,073 167,792 - - - - - 93,883 - - - 228,394 762,668 222,646 5,749 465,654 194,226 102,788 33 6,325 6,325 - 6,325 - The carrying values of the following assets and liabilities are assumed to be their fair values: • • • • • • • • • • The carrying values of the following assets and liabilities (which are measured at amortized cost) are assumed to be their approximate fair values: Cash and balances with central banks Due from other banks Other ﬁnancial assets Loans and advances to customers Customers deposits Other ﬁnancial liabilities On-lending Borrowings See additional disclosures on valuation methods in Note 3.5d 182 At 31 December, 2021 In millions of Naira Note Carrying Value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills Investment securities (Fixed income) Derivative Asset -Non Hedging Instrument Asset pledged as collateral Carried at FVOCI: Equity securities (unquoted) Debt securities Carried at amortized cost: Treasury bills Assets pledged as collateral Investment securities Liabilities Carried at FVTPL Derivative liabilities Carried at Amortised cost Debt securities issued Bank 16 21 19 17 21 32 16 17 21 33 32 824,222 22,338 56,187 234,687 85,574 541,629 940,723 157,907 654,185 824,222 270,914 553,308 22,338 56,187 16,548 - 5,790 56,187 234,687 33,340 201,347 85,574 - 541,629 541,629 - - 935,838 163,406 655,481 599,325 336,513 161,228 2,178 437,731 217,750 14,647 14,647 - 14,647 45,799 46,656 46,656 - - - - - 85,574 - - - - - - The table below sets out the Bank’s classiﬁcation of each class of its ﬁnancial assets and liabilities. At 31 December, 2022 In millions of Naira Note Carrying Value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills Investment securities (Fixed income) Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Asset pledged as collateral Carried at FVOCI: Equity securities (unquoted) Carried at amortized cost: Treasury bills Assets pledged as collateral Investment securities Liabilities Carried at FVTPL Derivative liabilities 16 21 19 19 17 21 16 17 21 1,243,038 1,243,038 129,703 1,113,336 10,560 20,052 28,799 26,189 10,560 20,052 28,799 26,189 10,433 - - 9,899 127 20,052 28,799 16,290 - - - - - 93,883 93,883 - - 93,883 963,630 228,376 518,337 963,669 228,394 501,399 795,877 167,792 222,646 442,388 5,749 59,011 33 6,040 6,040 - 6,040 - - - - Notes 183 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The carrying values of the following assets and liabilities are assumed to be their fair values: • • • • • • • • • Cash and balances with central banks Due from other banks Other ﬁnancial assets Loans and advances to customers Customers deposits Other ﬁnancial liabilities On lending Borrowings See additional disclosures on valuation methods in Note 3.5 31 December 2021 In millions of Naira Note Carrying Value Total Fair value Level 1 Level 2 Level 3 823,891 823,891 270,914 552,977 11,897 57,476 11,897 57,476 11,799 98 - 57,476 199,093 199,093 33,340 165,753 - - - - 85,574 753,756 157,908 379,533 85,574 748,633 - - 85,574 589,834 158,799 163,406 161,228 7,178 377,323 340,274 37,049 15,170 11,076 - 15,170 45,799 46,656 46,656 - - - - - - Assets Carried at FVTPL: Treasury bills Investment securities (Fixed income) Derivative Asset -Non Hedging Instrument Asset pledged as collateral Carried at FVOCI : Equity securities (Unquoted) Treasury bills Assets pledged as collateral Investment securities Liabilities Carried at FVTPL : Derivative liabilities Carried at amortized cost: Debt securities issued 16 21 19 17 21 16 17 21 33 32 184 3.5.b Financial instruments measured at fair value- Reconciliation of level 3. Group and Bank In millions of Naira At 1 January 2021 Transfer due to non-availability of observable data Gain recognised through other comprehensive income of equity investments At 31 December, 2021 Reconciliation of Level 3 items At 1 January 2022 Addition At 31 December 2022 21 21 3,912 76,063 5,599 85,574 85,574 200 8,109 93,883 In current year, there was no transfer between fair value hierachy( 2021:there was a transfer between fair value heirarchy from level 2 to level 3,due to the absence of observable market data). 3.5.c Level 3 fair value measurements (i) Unobservable inputs used in measuring fair value The table below sets out information about signiﬁcant unobservable inputs used at 31 December 2022 and 31 December 2021 in measuring ﬁnancial instruments categorized as level 3 in the fair value hierarchy. Type of financial instrument Fair values at 31 December, 2021 Valuation technique Significant unobservable input Unquoted equity investment N93.85 billion Equity DCF model. - Cost of equity. - Terminal growth rate. Risk premium is determined by adding country risk premium to the product of market premium and equity beta. (ii) The effect of unobservable inputs on fair value measurements Although the Group believes that its estimates of fair value are appropriate, the use of diﬀerent methodologies or assumptions could lead to diﬀerent measurements of fair value. For fair value measurement in Level 3, changing one or more of the assumptions would have the following eﬀects. In millions of Naira At 31 December 2022 The lowest and highest values if the cost of equity and terminal growth rate decrease or increase by 1% and 0.25%respectively Lowest value Highest value Actual value AFC FMDQ NIBSS UPSL AFREXIM 85,303 2,217 1,521 281 111 93,554 2,622 1,825 306 118 89,359 2,402 1,660 293 114 Notes 185 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The table below shows the eﬀect of changes in cost of equity and terminal growth rate on other comprehensive income. In millions of Naira Eﬀect of 1% decrease in cost of equity and 0.25% increase in terminal growth rate Eﬀect of 1% increase in cost of equity and 0.25% decrease in terminal growth rate 31 Dec 2022 31 Dec 2021 4,897 (4,394) 1,126 (1,099) 3.5.d Fair valuation methods and assumptions (i) Cash and balances with central banks Cash and balances with Central banks represent cash held with Central banks of the various jurisdictions in which the Group operates. The fair value of these balances is their carrying amounts. (ii) Due from other banks Due from other banks represents balances with local and correspondence banks, inter-bank placements and items in the course of collection. The fair value of the current account balances, ﬂoating placements and overnight deposits are their carrying amounts. (iii) Treasury bills, assets pledged as collateral 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. (iv) Loans and advances to customers Loans and advances are carried at amortized cost net of provision for impairment. The estimated fair value of loans and advances represents the discounted amount of amortised cost balance net of provision for impairment. The balance is discounted at current market rates to determine the fair value. (v) Other financial assets/financial liabilities Other ﬁnancial assets/ﬁnancial liabilities represent monetary assets, which usually have a short recycle period and as such, whose fair values approximate their carrying amount. (vi) Customer deposits, on-lending and borrowings The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand. (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 186 and also reduces the uncertainty associated with determining fair values. Availability of observable markets prices and inputs varies depending on the products and markets and is prone to changes based on speciﬁc events and general conditions in the ﬁnancial markets. 3.6 Capital management The strategy for assessing and managing the impact of our business plans on present and future regulatory capital forms an integral part of the Group’s strategic plan. Speciﬁcally, the Group considers how the present and future capital requirements will be managed and met against projected capital requirements. This is based on the Group’s assessment and against the supervisory/regulatory capital requirements taking account of the Group business strategy and value creation to all its stakeholders. The Group prides itself in maintaining very healthy capital adequacy ratio in all its areas of operations. Capital levels are determined either based on internal assessments or regulatory requirements. The Group maintained capital levels above the regulatory minimum prescribed in all its operating jurisdictions. The 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. 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. b. c. Proﬁt from Operations: The Group has consistently reported good proﬁt, which can easily be retained to support the capital base. Issue of Shares: The Group has successfully assessed the capital market to raise equity and debt. With such experiences, the Group is conﬁdent that it can access the capital market when the need arises. Bank Loans (long term/short term): In 2014 ﬁnancial year, Zenith Bank commenced capital computations in accordance with Basel II standard under the guidelines issued by the Central Bank of Nigeria. The guidelines require capital adequacy computations based on the Standardized Measurement Approach for Credit Risk and Market Risk while Basic Indicator Measurement Approach was advised for Operational Risk. The capital requirement for the Bank has been set at 15% and an addition of 1% as a Systemically Important Bank (SIB) in accordance with the guidelines. The table below shows the computation of the Group’s capital adequacy ratio for the period ended 31 December 2022 as well as the 31 December 2021 comparatives. During those two periods, the individual entities within the Group complied with all Notes 187 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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 Tier 1 capital Share capital Share premium Statutory reserves SMEIES reserve Retained earnings Non-controlling interest Total qualifying Tier 1 capital Deferred tax assets Intangible assets Investment in capital of ﬁnancial subsidiaries Unsecured lending to subsidiaries within the same group Group Bank 31-Dec-22 Basel II 31-Dec-21 Basel II 31-Dec-22 Basel II 31-Dec-21 Basel II 15,698 255,047 311,411 3,729 625,005 813 15,698 255,047 275,993 3,729 607,203 - 15,698 255,047 278,602 3,729 494,429 - 1,211,704 1,157,670 1,047,505 (18,343) (25,251) - - (1,837) (25,001) - - - (23,958) (17,313) - 15,698 255,047 243,414 3,729 466,249 - 984,137 - (23,542) (17,313) 14,343 Adjusted Total qualifying Tier 1 capital 1,168,110 1,130,832 1,006,234 957,625 Tier 2 capital Other comprehensive income (OCI) Total qualifying Tier 2 capital Investment in capital and ﬁnancial subsidiaries Net Tier 2 Capital Total regulatory capital Risk-weighted assets Credit risk Market risk Operational risk Total risk-weighted assets Risk-weighted Capital Adequacy Ratio (CAR) 3.7 Operational risk 72,923 72,923 - 72,923 99,002 99,002 - 99,002 1,241,033 1,229,834 4,961,579 142,290 1,163,701 6,267,570 20% 4,756,267 154,846 1,042,189 5,953,302 21 % 53,731 53,731 (17,313) 36,418 1,042,652 4,335,844 94,041 1,058,784 5,488,669 19 % 45,622 45,622 (17,313) 28,309 985,934 4,053,986 63,908 914,227 5,032,121 20 % 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. 188 Operational risk objectives include the following: major operational risk exposures and reinforces more qualitative eﬀorts to manage operational risk within each of the business lines. a. b. c. To provide clear and consistent direction in all operations of the group; framework and To provide a standardised 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 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. 3.8 Strategic risk Strategic risk is a possible source of loss that might arise from the pursuit of an unsuccessful business plan. Strategic risk examines the impact of design and implementation of business models and decisions on earnings and capital as well as the organisation’s responsiveness to industry changes. Processes and procedures have been established to ensure that the right models are employed and appropriately communicated to all decision makers in the Group on issues relating to strategic risk management. This has essentially driven the Group’s sound banking culture and performance record to date. 3.9 Legal risk Legal risk is deﬁned as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil) incurred during operations by the inability of the organisation to enforce its rights, or by failure to address identiﬁed concerns to the appropriate authorities where changes in the law are proposed. The Group manages this risk by monitoring new legislation, creating awareness of legislation among employees, identifying signiﬁcant legal risks as well as assessing the potential impact of these. Notes 189 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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: 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 Communications responsible Corporate for managing both the internal and external communications that may impact the reputation of the Bank. is The process of reputation risk management within the Bank encompasses the following steps: 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 reports for management review. regular, action-oriented a. b. c. i. ii. iii. iv. v. vi. 190 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. 4.1 Impairment losses on loans and advances and impairment of debt securities issued by the Government of Ghana (GOG) 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 3.2.10 to 3.2.17. A number of signiﬁcant judgements are also required in applying the accounting requirements for measuring ECL, such as: i ii Input assumptions applied in estimating probability of default, loss given default and exposure at default; Incorporation of forward-looking information; Detailed information about the judgements and estimatesmade by the Group in the above areas is set out in note 3.2.10 to 3.2.17. The table below shows the impact on expected credit losses on lans and advances of changes in macroeconomic risk drivers and how credit losses respond to 10% decrease and increase in macro-variables. This macro economic variables are crude production, GDP growth rate ,exchange rate, prime lending rate and inﬂation rate. 31 December 2022 In millions of Naira Gross exposure Loss allowance 10% increase No change 10% decrease 3,838,805 102,921 3,838,805 103,129 3,838,805 117,335 The table below shows the impact on expected credit losses on investment securities of changes in discount rate. 31 December 2022 In millions of Naira No change 0.5% Increase 1% increase Gross balance of Investment securities issued by the Government Ghana Loss allowance 202,448 (58,761) 202,448 (60,939) 202,448 (63,035) 4.2 Determining fair values The determination of fair value for ﬁnancial assets and liabilities for which there is no observable market prices requires the use of valuation techniques as described in note 3.5(c). 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) iii) 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 required to reﬂect diﬀerences between the instruments. See note 3.5c for sensitivity analysis on unquoted equity investments. 4.3 Deferred Tax Assets and Liabilities The deferred tax assets and liabilities recognized by the Group is dependent on the availability of taxable proﬁt in the foreseeable future to utilize the deferred tax. The Group reviews the carrying amount of the deferred tax at the end of each reporting period and recognizes an amount such that it is probable that suﬃcient taxable proﬁt will be available which the Group can use the beneﬁt therefrom. In determining the deferred tax assets recognized in the ﬁnancial statements, the Group has applied judgement in estimating the deferred tax recoverable in the foreseeable future. This involves the estimation of future income and expenses, and the consideration of non-taxable income and disallowable expenses in order to arrive at the future taxable proﬁt / loss. Notes 191 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 5. Segment analysis The Group’s strategic divisions oﬀer diﬀerent products and services, and are managed separately based on the Group’s management and internal reporting structure. 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 separately 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 customer accounts for 10% or more of the Group’s revenue. The measurement policies the Group uses for segment reporting are the same as those used in its ﬁnancial statements. There have been no changes from prior periods in the measurement methods used to determine reported segment proﬁt or loss. (c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The board of Directors assess the ﬁnancial performance and position of the group and makes strategic decisions. The board of Directors is the chief operating decision maker. 192 d n a s s o l r o t ﬁ o r p f o t n e m e t a t s e h t n i s t n u o m a e h t f o n o i t a i l i c n o c e r e h t l w o h s o s l a s e b a t e h T w o e b s e b a t e h t n l l . i d e d u c n l i s i l t n e m g e s e b a t r o p e r h c a e g n d r a g e r n o i t a m r o n f i I . n o i t i s o p l i a c n a n ﬁ f o t n e m e t a t s d n a s s o l r o t ﬁ o r p f o t n e m e t a t s ’ s p u o r G e h t n i s t n u o m a e h t o t l s t n e m g e s e b a t r o p e r e h t r o f n o i t i s o p l i a c n a n ﬁ f o t n e m e t a t s 6 6 1 0 4 5 , 6 1 2 7 5 1 , 4 9 4 5 3 , 8 7 6 2 1 2 , 4 5 5 5 4 9 , - 4 5 5 5 4 9 , 4 5 5 5 4 9 , ) 9 3 5 3 7 1 ( , ) 2 5 2 3 2 1 ( , ) 0 3 6 6 2 ( , ) 8 7 6 3 ( , ) 1 2 4 4 2 ( , ) 4 8 3 9 0 3 ( , 0 5 6 4 8 2 , ) 9 3 7 0 6 ( , 1 1 9 3 2 2 , ) 2 1 ( ) 0 0 7 3 ( , 3 0 1 ) 8 2 0 5 1 ( , ) 7 3 6 8 1 ( , - ) 7 3 6 8 1 ( , ) 7 3 6 8 1 ( , 0 0 7 3 , ) 2 4 0 1 ( , - - - - 4 5 4 ) 5 2 5 5 1 ( , ) 5 2 5 5 1 ( , 6 6 8 3 4 5 , 8 2 2 7 5 1 , 2 2 5 0 5 , 5 7 5 2 1 2 , 1 9 1 4 6 9 , 4 5 5 5 4 9 , 7 3 6 8 1 , 1 9 1 4 6 9 , ) 9 3 2 7 7 1 ( , ) 0 1 2 2 2 1 ( , ) 0 3 6 6 2 ( , ) 8 7 6 3 ( , ) 1 2 4 4 2 ( , ) 8 3 8 9 0 3 ( , 5 7 1 0 0 3 , ) 9 3 7 0 6 ( , 6 3 4 9 3 2 , 4 9 3 3 9 , 6 6 1 4 1 , 9 2 7 0 3 9 0 1 , 9 1 2 9 1 1 , 3 8 8 3 3 , 5 1 5 4 , ) 2 6 0 1 ( , 6 3 2 2 , 2 7 5 9 3 , 1 1 5 9 5 , 1 5 6 9 , 1 9 7 1 , 4 9 6 8 , 2 7 4 0 5 4 , 2 6 0 3 4 1 , 3 9 7 9 4 , 5 4 6 1 0 2 , 7 4 6 9 7 , 2 7 9 4 4 8 , - - - 9 1 2 9 1 1 , 2 7 5 9 3 , 7 4 6 9 7 , 5 3 3 6 2 8 , 7 3 6 8 1 , 9 1 2 9 1 1 , 2 7 5 9 3 , 7 4 6 9 7 , 2 7 9 4 4 8 , ) 7 1 2 4 2 ( , ) 9 8 1 0 6 ( , ) 7 4 5 ( ) 4 9 9 1 ( , ) 1 4 0 1 ( , ) 5 0 9 2 3 ( , ) 4 7 6 1 ( , 8 7 3 1 , ) 6 9 2 ( ) 2 3 4 6 ( , ) 2 2 3 1 ( , - ) 5 8 4 ( ) 3 3 2 ( ) 4 2 5 0 1 ( , 5 7 5 0 2 , ) 7 1 3 4 ( , 8 5 2 6 1 , ) 5 8 7 7 1 ( , ) 7 6 8 8 5 ( , ) 4 1 3 ( ) 9 0 5 1 ( , ) 1 4 0 1 ( , ) 1 8 3 2 2 ( , ) 9 4 2 2 2 ( , 5 9 6 5 , ) 4 5 5 6 1 ( , ) 2 2 0 3 5 1 ( , ) 1 2 0 2 6 ( , ) 6 3 6 4 2 ( , ) 1 3 1 3 ( , ) 0 8 3 3 2 ( , ) 3 3 9 6 7 2 ( , 9 4 8 1 0 3 , ) 7 1 1 2 6 ( , 2 3 7 9 3 2 , d e t a d i l o s n o C s n o i t a n m i i l E l e b a t r o p e r l a t o T e p o r u E a c i r f A s n o i s n e p d n a l i a t e r e t a r o p r o C s t n e m g e s s e c i v r e s n a i d o t s u c e d i s t u O ( l a t o T ) a i r e g N i i a i r e g N e d i s t u O a i r e g N i n o i s s i m m o c d n a e e f n o e m o c n i l a t o T e m o c n i g n i t a r e p o r e h t O e m o c n i r a l i m i s d n a t s e r e t n I a r i a N f o s n o i l l i m n I 2 2 0 2 r e b m e c e D 1 3 i s n a g g n d a r T i s t n e m g e s s s e n i s u b r e h t o m o r f d e v i r e D s r e m o t s u c l a n r e t x e m o r f d e v i r e D e u n e v e r l a t o T e u n e v e r l a t o T : e u n e v e R s t e s s a l i a c n a n ﬁ n o s s o l t n e m r i a p m I e s n e p x e t s e r e t n I e s n e p x e n o i s s i m m o c d n a s e e F s e s n e p x e g n i t a r e p o d n a n m d A i x a t e r o f e b ) s s o l ( / t ﬁ o r P e g r a h c n o i t a c e r p e D i e g r a h c n o i t a s i t r o m A x a t r e t f a t fi o r P e s n e p x e x a T Notes 193 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 December 2022 Nigeria Corporate retail and pensions sustanian services Outside Nigeria Africa Europe Total (Outside Nigeria) Total reportable segments Eliminations Consolidation Expenditure on non•current assers 71,501 3,259 398 3,657 75,158 - 75,158 Total assets 10,600,730 510,386 1,445,532 1,955,918 12,556,648 (271,019) 12,285,629 Other measures of assets: Loans and advances to customers Treasury bills Investment securities Total liabilities Other measures of liabilities Customer deposits Borrowings 3,735,839 2,206,935 90,043 39,603 223,953 313,996 4,049,835 (36,130) - 39,603 2,246,538 648,654 155,125 924,555 1,079,680 1,728,334 4,013,705 2,246,538 1,778,334 - - 9,378,927 451,703 1,313,009 1,764,712 11,143,639 (236,950) 10,906,689 7,434,806 436,541 1,303,257 1,739,798 9,174,604 (198,951) 8,975,653 999,580 - - 999,580 999,580 (36,130) 963,450 In millions of Naira 31 December 2021 Nigeria Corporate retail and pensions sustanian services Outside Nigeria Africa Europe Total reportable segments Eliminations Consolidation Interest and similar income Total income on fee and commission Other operating income Trading gains Total revenue Revenue: 342,517 120,648 53,528 171,469 688,162 68,955 8,590 1,599 (4,447) 74,697 16,309 3,646 (1,101) 461 19,315 427,781 132,884 54,026 167,483 782,174 (184) - (16,432) - (16,616) 427,597 132,884 37,594 167,483 765,558 Derived from external 671,541 74,702 19,315 765,558 - 765,558 customers Derived from other business 16,621 (5) - 16,616 16,616 - segments Total revenue In millions of Naira 31 December 2021 Interest expense Impairment loss on ﬁnancial assets Depreciation charge Amortisation charge Fees and commission expense 688,162 74,697 19,315 782,174 (16,616) 765,558 Nigeria Corporate retail and pensions sustanian services Outside Nigeria Africa Europe Total reportable segments Eliminations Consolidation (106,977) 184 (106,793) (82,723) (56,167) (23,316) (3,195) (27,975) (22,152) (2,033) (1,701) (312) (951) (2,102) (1,732) (288) (272) - (59,932) (25,305) (3,779) (28,926) Admin and operating expenses (228,877) (20,302) (9,996) (259,175) Proﬁt before tax Tax expense Profit / (loss)after tax 194 265,909 (26,033 239,876 27,246 18,937) 18,309 4,925 846 4,079 298,080 (35,816) 262,264 - - - - (1,274) 17,706 - 59,932 (25,305) (3,779) (28,926) (260,449) 280,374 (35,816) 17,706 244,558 In millions of Naira 31 December 2021 Nigeria Corporate retail and pensions sustanian services Outside Nigeria Africa Europe Total reportable segments Eliminations Consolidation Expenditure on non-current assets 47,805 3,484 205 51,494 - 51,494 Total assets Other measures of assets: Loans and advances to customers Treasury bills Investment securities Total liabilities Other measures of liabilities Customer deposits Borrowings 7,901,589 688,040 1,218,814 9,808,443 (360,600) 9,447,843 3,099,567 1,583,254 498,234 109,003 181,692 180,567 176,954 3,385,524 (29,796) - 1,764,946 624,924 1,303,725 - - 3,355,728 1,764,946 1,303,725 6,825,424 564,897 1,103,832 8,494,153 (325,972) 8,168,181 5,169,199 497,665 1,097,451 6,764,315 (292,261) 6,472,054 769,395 10,869 - 780,264 (29,795) 750,469 In millions of Naira 31 December 2022 31 December 2021 31 December 2022 31 December 2021 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 370,446 12,270 43,609 1,332 2,766 109,743 292,224 346,320 6,766 40,426 1,344 168 86,669 3,968 32,972 1,330 2,726 60,858 272,942 1,898 19,520 1,341 168 44,519 540,166 427,597 448,174 340,388 Interest and similar income represents interest income on ﬁnancial assets measured at amortised cost. Interest income accrued on impaired ﬁnancial assets amount to N5,228 million and N4,667 million (31 December 2021: N6,505 million and N6,505million) for Group and Bank respectively. 7. Interest and similar expense Current Account Savings accounts Time deposits Borrowed funds Leases 37,926 32,150 52,634 48,747 2,082 14,292 16,653 29,377 43,044 3,427 34,405 31,885 38,269 46,391 2,069 173,539 106,793 153,019 7,148 16,348 14,061 42,276 2,885 82,718 Total interest expense is 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. Notes 195 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 8. Impairment charge 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 25) 38,343 62,742 (400) 19,037 (649) (180) - 118,893 998 3,361 123,252 48,873 2,993 (781) 7,781 666 (158) - 59,374 784 (226) 59,932 38,429 1,918 (356) 19,033 17 (180) - 58,861 (326) 3,361 61,896 48,357 (90) (281) 7,789 - (158) - 55,617 784 (226) 56,175 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 9. Net income on Fees 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 Commission on letters of credit Commissions on agency and collection services Total fee and Commission income Fees and commission expense 6,609 1,165 41,557 10,536 45,739 3,389 9,595 622 1,691 15,551 8,541 12,221 157,216 (24,421) 132,795 9,451 1,613 31,390 8,894 37,470 3,298 8,276 517 186 9,129 8,603 14,057 132,884 (28,926) 103,958 1,406 - 40,860 6,829 43,275 3,258 - 622 1,691 15,535 8,303 11,699 133,478 (23,380) 110,098 5,294 - 30,867 6,629 35,443 2,590 - 517 118 9,129 8,322 13,251 112,160 (27,975) 84,185 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 N107,982 million and N84,636 million for Group and Bank (31 December 2021: N91,291 million and N71,092 million) respectively while an amount of N49,235million and N48,840 million (31 December 2021: N41,593 million and N41,068 million) was recognised over the service period. 196 10. Other operating income In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank Dividend income from equity investments (see note a below) Gain on disposal of property and equipment (see note 44(vii)) Income on cash handling Loan recovery (see note c below) Gain on disposal of equity investment Foreign currency revaluation gain (See note b below) 2,223 2,563 476 5,030 - 25,202 35,494 2,754 17,148 19,186 78 999 7,975 251 25,537 37,594 2,451 445 4,426 - 25,320 49,790 69 383 7,616 - 26,012 53,266 (a) (b) Dividend income from equity investments represent dividend received from subsidiaries of N14,925 million and N2,223 million received from 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. Foreign currency revaluation gain represents net gain on the revaluation of foreign currency-denominated assets and liabilities. This also includes the eﬀective portion of the gains on the derivatives designated in the fair value hedge of the foreign currency risk (note 3.3.3.1 and 11). (c) This represents amount recovered for previously written-oﬀ facilities. The amount is recognised on a cash basis only. 11. Trading gains (Loss)/gain on other trading books Gain on treasury bills FVTPL Loss on bonds FVTPL Interest income on trading bonds (1,325) 214,508 (910) 405 212,678 42,438 127,613 (3,232) 664 167,483 (9,238) 210,932 (454) 405 46,368 127,556 (3,119) 664 201,645 171,469 Included in gain/(loss) on other trading books is a mark to market gain on derivatives instruments of N47.9 billion and N42.8 billion for Group and Bank respectively (31 December 2021: Group 42.6 billion and Bank N42.31 billion). Hedge ineﬀectiveness recognized in Trading gain comprises: Fair value hedging FV gains on the derivatives designated as hedging instruments 40,632 - (spot component only) - Losses on the hedged items attributable to the hedged risk -Fair value hedge ineffectiveness (39,590) 1,042 - - - 40,632 (39,590) 1,042 - - - Notes 197 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 The eﬀective portion of the fair value gains on the derivatives designated in the fair value hedge of the foreign currency risk has been transferred to other income to net oﬀ the recognised losses on the hedged item attributable to the hedged risk (see note 10(b)) In millions of Naira 12. Operating expenses Directors' emoluments (see note 37 (b)) Auditors' remuneration Deposit insurance premium Professional fees Training and development Information Technology Lease expense Advertisement Outsourcing services Bank charges Fuel and maintenance Insurance Licenses, registrations and subscriptions Travel and hotel expenses Printing and stationery Security and cash handling Fines & Penalties (see note 42) Donations AMCON levy Telephone,postages and communication charges Corporate promotions Others Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 5,444 1,065 21,747 6,413 2,934 30,971 593 8,787 14,758 11,936 29,648 2,258 4,712 2,987 4,137 4,784 - 1,697 44,010 9,709 8,230 6,152 222,972 1,663 1,060 17,273 5,347 1,588 28,716 985 7,100 14,773 7,725 20,656 2,347 4,142 2,628 2,742 4,766 4 4,450 37,920 7,189 4,698 2,792 5,154 600 21,747 5,738 2,858 27,662 583 8,622 14,571 11,124 25,905 1,991 3,246 2,637 3,133 4,467 - 1,670 44,010 9,323 7,999 1,663 1,362 500 17,273 4,458 1,419 27,540 46 6,919 14,754 6,729 16,804 1,990 3,379 1,417 1,960 4,265 4 4,372 37,920 6,625 4,551 1,570 180,564 204,703 165,857 Lease expense represent the amount of straight line amortisation on short term lease in which the Group/Bank has applied the recognition exception. For the year ended 31 December 2022 an amount of N593 million and N583 million for Group and Bank (31 December 2021: N985 million and N46 million) respectively The Bank paid the external auditors’ professional fees for the provision of Non audit services. The total amount of non-audit services provided by the external auditors during the year was N118 million. These non-audit services were for the following: assessment of risk management practices (N40 million), assessment of compliance with whistle blowing guidelines (N10 million) and review of the Bank’s corporate governance (N42 million), ACL training (N6 million), assurance on the bank’s sustainability (N4 million) and professional service relating to the creation of a customer analytic portal for the bank (N16 million). These services in the Bank’s opinion, did not impair the independence and objectivity of the external auditors. The Group auditors did not engage in any non-audit service for any of the bank’s subsidiaries. 198 Included in training and development is a total 596 million which the bank paid as contribution to the industrial training fund. In millions of Naira 13. Taxation (a) Major components of the tax expense Income tax expense Corporate tax Information technology tax Tertiary Education tax Police trust fund levy National agency for science and engineering infrastructure levy National Fiscal Stabilization Levy & Financial Sector Recovery Reversal of prior period over provision Current income tax Deferred tax expense: Origination of temporary diﬀerences Income tax expense Total tax expense (b) Reconciliation of effective tax rate In millions of Naira Proﬁt before income tax Tax calculated at the weighted average Group rate of 30% (2021: 30%) Tax effect of adjustments on taxable income Eﬀect of tax rates in other jurisdictions Non-deductible expenses Tax exempt income Balancing charge Tax loss utilised Origination of Temporary diﬀerences Information technology levy Capital allowance utilised Tertiary education tax Reversal of prior period excess provision National Fiscal Stabilization Levy & Financial Sector Recovery Levy Police trust fund levy NASENI Total tax expense Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 68,156 3,026 6,775 15 735 - (6,513) 72,194 (11,455) 60,739 60,739 12,223 2,626 2,716 13 643 2,043 - 20,264 15,552 35,816 35,816 51,370 2,940 6,595 15 735 - (6,513) 55,142 4,315 59,457 59,457 1,905 2,546 2,598 13 643 - - 7,705 16,329 24,034 24,034 Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 284,650 85,395 (889) 35,802 (27,207) 5,610 (146) (11,455) 3,026 (30,408) 6,775 (6,513) - 15 735 280,374 84,112 (1,786) 40,208 (80,934) 46 (8,114) 15,552 2,626 (21,298) 2,705 - 2,043 13 643 294,050 88,215 - 17,658 (26,734) 2,640 - 4,315 2,940 (30,408) 6,595 (6,513) - 15 735 257,167 77,150 - 34,303 (80,274) 46 (8,533) 16,329 2,546 (20,787) 2,598 - - 13 643 60,739 35,816 59,457 24,034 Notes 199 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank (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 14. Earnings per share 16,909 (24,247) 72,194 - 64,856 11,690 (15,045) 20,264 - 14,241 (7,728) 55,142 - 9,117 (2,581) 7,705 - 16,909 61,655 14,241 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 period. In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank Proﬁt attributable to shareholders of the Bank (N'million) 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 (Naira) 224,050 31,396 31,396 7.14 244,402 31,396 31,396 7.78 234,593 31,396 31,396 7.47 233,133 31,396 31,396 7.43 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 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 85,437 366,699 1,668,919 80,689 2,201,744 452,136 1,749,608 2,201,744 84,077 73,389 1,250,208 80,689 66,067 341,420 1,614,217 80,689 55,899 66,566 1,194,512 80,689 1,488,363 2,102,394 1,397,666 157,466 1,330,897 1,488,363 407,488 1,694,906 2,102,394 122,465 1,275,201 1,397,666 Cash Operating accounts and deposits with Central Banks Mandatory reserve deposits with central bank (cash reserve) Special Cash Reserve Requirement Current Non current 200 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 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 1,243,038 1,003,908 (408) 824,222 941,539 (815) 1,243,038 963,669 (39) 823,891 754,151 (395) 2,246,538 1,764,946 2,206,668 1,577,647 2,246,538 2,246,538 1,764,946 1,764,946 2,206,668 2,206,668 1,577,647 1,577,647 Treasury bills measured at fair value through proﬁt and loss are held for trading. The following treasury bills have maturities less than three months and are classiﬁed as cash and cash equivalents for purposes of the statements of cash ﬂows (Note 41). 17. Assets pledged as collateral Bonds pledged as collateral Treasury bills under repurchase agreement ECL Allowance on assets pledged and under repo 232,218 315,795 232,218 230,213 232,218 315,795 232,218 230,213 119,145 135,536 (18) 139,458 253,334 (198) 119,047 135,536 (18) 103,864 253,334 (198) 254,663 392,594 254,565 357,000 Included in assets pledged as collateral for group/bank are treasury bills at amortised cost of N109,346 million and bonds at amortised cost of N119,047 million(31 December 2021:treasury bills N54,241 million and bonds 103,864 million). All other assets pledged as collateral for Group/Bank are treasury bills at fair value. Some of the balances are restricted (see note 3.4.3c). 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) N3.74billion (31 December 2021: N3.63 billion), Federal Inland Revenue Services N8.43billion (31 December 2021: N8.18 billion), V-Pay N47 million (31 December 2021: N45.46million), Interswitch Limited N2,247 billion (31 December 2021: N2.18 billion), the Bank of Industry (Nigeria) N31.88 billion (31 December 2021: N32.89 billion), E- Tranzact N47 million (31 December 2021: N45.22 million), CBN Real Sector Support Fund (RSSF) N21.67 billion (31 December 2021: N22.22 billion),CBN settlement clearing (31 December 2021: N14.78 billion), System Specs/REMITA N2.3 billion (31 December 2021: N2.27 billion) and Financial Market dealers Quotation (FMDQ) N1.81 billion (31 December 2021: N17.62 billion), pension funds management companies, institutional investors and high net worth customers related to Zenith Bank Ghana totals N3.86 billion. Notes 201 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Assets exchanged under repurchase agreement as at 31 December 2022 are with the following counterparties (note 31): Counterparties In millions of Naira ABSA (see note 31) Standard Bank London (see note 31) Carrying value of asset Carrying value of liability Carrying value of asset Carrying value of liability Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 51,492 130,770 182,262 46,340 63,456 109,796 51,492 130,770 182,262 46,340 63,456 109,796 Assets exchanged under repurchase agreement as at 31 December 2021 are with the following counterparties (note 31): Counterparties In millions of Naira ABSA (see note 31) JP Morgan Chase (see note 31) First Abu Dhabi Bank (see note 31) Mashreq Bank (see note 31) Classified as: Current Non-current Carrying value of asset Carrying value of liability Carrying value of asset Carrying value of liability Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 113,809 50,477 61,388 27,660 84,922 31,808 42,448 63,739 113,809 50,477 61,388 27,660 84,922 31,808 42,448 63,739 253,334 222,917 253,334 222,917 142,905 111,758 254,663 253,306 139,288 392,594 142,807 111,758 254,565 253,306 103,695 357,001 In millions of Naira 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Group Bank 18. Due from other banks Current balances with banks within Nigeria Current balances with banks outside Nigeria Placement with banks ECL allowance Classified as: Current 202 - 907,358 395,528 (75) 1,302,811 - 377,238 314,730 (724) 691,244 - 957,902 174,969 (75) 1,132,796 1,302,811 691,244 1,132,796 - 501,450 16,661 (58) 518,053 518,053 Included in balances with banks outside Nigeria is the amount of N45.02billion and N113.9billion for the Group and Bank respectively (31 December 2021: N23.54 billion and N85.97 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). Some of the balances are restricted (see note 3.4.3c). In millions of Naira Due from banks with maturity greater than 3 months and restricted balances:: Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 46,407 29,986 115,315 94,157 19. Derivative assets Instrument types (fair value): Forward and Swap Contracts Futures contracts Instrument types (Notional amount) : Forward and Swap Contracts Futures contract Total a) Hedging derivative assets 49,548 326 49,874 960,894 24,624 985,518 52,874 3,313 56,187 867,926 109,503 977,429 48,525 326 48,851 924,485 37,659 962,144 53,473 4,003 57,476 909,300 180,571 1,089,871 he Group estimates the fair value of the hedge derivative instrument transacted with the counterparties (CBN) using the discounted mark-to-market technique. The Group has designated part of its swap contracts with the CBN as hedging instruments in order to manage the foreign exchange volatility in its Proﬁt or Loss. See note 3.3.4 for the mark to market value of these hedge asset . b) 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. See note 3.3.4 for the mark-to-market value of these non-hedged assets. During the year , various derivative contracts entered into by the Group generated a net gain which was recognized in the statement of proﬁt or loss and other comprehensive income. All derivative assets are current. Notes 203 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 20. Loans and advances Overdraft Term Loans On Lending Facilities Gross loans and advances to customers Less: ECL Allowance (see note 3.2.18) Net Loans classified as: Current Non-current 450,649 2,982,808 690,509 4,123,966 (110,261) 439,459 2,522,278 540,141 3,501,878 (146,150) 427,453 2,720,843 690,509 3,838,805 (103,129) 419,219 2,278,613 540,141 3,237,973 (138,521) 4,013,705 3,355,728 3,735,676 3,099,452 2,133,065 1,880,640 4,013,705 1,456,094 1,899,634 1,958,733 1,776,943 1,376,248 1,723,204 3,355,728 3,735,676 3,099,452 Movement in ECL Allowance as at 31 December 2022 is presented in Note 3.2.18. In millions of Naira 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 and FVTOCI Debt securities (measured at fair value through proﬁt or loss) (see note ii) Net debt securities Equity securities Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 852,145 833,849 (63,986) 1,622,008 12,443 657,950 541,629 (3,766) 1,195,813 22,338 1,634,451 1,218,151 520,921 380,199 - (2,583) 518,338 10,560 528,898 - (666) 379,533 11,897 391,430 At fair value through other comprehensive income (see note (i) below) 93,883 85,574 93,883 85,574 1,728,334 1,303,725 622,781 477,004 Movement in impairment allowance on investment securities is presented in Note 3.2.18 Classified as: Current Non-current 101,339 1,626,995 1,728,334 53,960 77,887 21,476 1,249,765 1,303,725 544,894 455,528 622,781 477,004 (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 see note 3.3.5. 204 ii. The Group and Bank debt securities measured at FVTPL comprise FGN bonds (31 December 2022: N12.44 billion and N10.5 million respectively; 31 December 2021; N22.33 and N11.9 billion respectively). (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 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 660,485 32,996 120,438 18,464 19,762 559,584 383,973 281,833 19,163 52,230 17,096 9,877 31,636 67,798 18,425 19,089 19,163 52,230 17,096 9,877 852,145 657,950 520,921 380,199 22. Investment in subsidiaries The following table lists the entities which are controlled by the Group, either directly or indirectly through subsidiaries. Bank Name of company Zenith Bank (Ghana) Limited Zenith Bank (UK) Limited Zenith Bank (Sierra Leone) Limited Zenith Bank (Gambia) Limited Zenith Pensions Custodian Limited Zenith Nominees 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Ownership interest % Ownership interest % Carrying amount 99.42% 100.00% 99.99% 99.96% 99.00% 99.00% 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 Notes 205 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f s t n e m e t a t S l i i a c n a n F e t a r a p e S d n a d e t a d i l o s n o C e h t o t s e t o N 206 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z s e i t i t n e d e t a d i l o s n o c f o s t l u s e r d e s n e d n o C ) b ( h t i n e Z d e t i m i L i e e n m o N n a i d o t s u C a i b m a G e n o e L h t i n e Z n o i s n e P k n a B h t i n e Z h t i n e Z i a r r e S k n a B K U k n a B h t i n e Z k n a B h t i n e Z a n a h G c l P k n a B h t i n e Z p u o r g - a r t n I s n o i t c a s n a r t e c n a l a b d n a h t i n e Z p u o r G 5 1 4 ) 6 8 ( ) 2 6 ( 7 6 2 ) 6 3 1 ( 1 3 1 - - - - - 6 1 ) 3 6 ( 0 7 4 1 1 , ) 0 5 7 2 ( , 7 5 6 8 , ) 4 2 5 2 ( , 3 3 1 6 , - 7 6 2 - 3 6 7 - 3 6 1 2 8 1 2 , 1 9 6 3 2 , - 5 7 3 5 5 1 - 3 1 6 6 2 7 4 2 5 8 3 2 , ) 4 2 ( 2 7 0 3 , ) 5 4 4 1 ( , 3 0 6 1 , ) 9 4 3 ( 4 5 2 1 , 1 5 7 3 , 4 1 8 6 1 , - 3 2 0 6 , - 9 6 7 1 , 1 5 4 3 , - 6 2 6 0 1 3 5 1 3 1 , ) 0 9 ( 0 9 7 5 , ) 1 7 8 2 ( , 9 2 8 2 , ) 9 0 7 ( 0 2 1 2 , - - 7 3 3 3 , - 7 6 6 8 , 0 1 5 2 , 2 6 7 5 1 , - 1 6 4 0 3 0 7 4 3 5 0 6 2 2 , 5 9 7 7 2 , 1 0 5 3 3 , 4 6 1 1 3 , ) 8 6 3 2 ( , ) 9 4 7 8 5 ( , ) 6 9 8 1 6 ( , - ) 9 5 6 6 1 ( , ) 2 1 8 9 3 ( , ) 1 4 1 7 7 4 ( , 2 1 1 3 , 2 7 5 9 3 , 5 8 7 0 7 , 7 8 0 3 3 8 , ) 7 3 6 8 1 ( , 5 4 5 0 2 , ) 7 1 3 4 ( , 3 5 7 6 , ) 6 7 7 7 2 ( , 0 5 0 4 9 2 , ) 7 5 4 9 5 ( , - ) 5 2 5 5 1 ( , 4 5 5 5 4 9 , ) 2 5 6 7 3 5 ( , ) 2 5 2 3 2 1 ( , 0 5 6 4 8 2 , ) 9 3 7 0 6 ( , s s o l r o t fi o r p f o t n e m e t a t s d e s n e d n o C 2 2 0 2 r e b m e c e D 1 3 e m o c n i g n i t a r e p O s e s n e p x E - n o n d n a l i a c n a n ﬁ r o f e g r a h c t n e m r i a p n I x a t e r o f e b ) s s o l ( / t ﬁ o r P n o i t a x a T s t e s s a l i a c n a n ﬁ 8 2 2 6 1 , ) 3 2 0 1 2 ( , 3 9 5 4 3 2 , ) 5 2 5 5 1 ( , 1 1 9 3 2 2 , r a e y e h t r o f ) s s o l ( / t fi o r P - - 6 1 8 9 6 4 2 2 9 , 9 8 7 2 2 , 1 2 3 0 9 2 , 5 7 1 3 6 , , 4 9 3 2 0 1 2 , , 8 6 6 6 0 2 2 , , 5 6 5 4 5 2 , 6 9 7 2 3 1 1 , - - - ) 0 5 9 8 9 1 ( , , 4 4 7 1 0 2 2 , , 8 3 5 6 4 2 2 , n o i t i s o p l a i c n a n fi f o t n e m e t a t s d e s n e d n o C s k n a b l a r t n e c h t i l w s e c n a a b d n a h s a C s l l i b y r u s a e r T s t e s s A 3 6 6 4 5 2 , l a r e t a l l o c s a d e g d e p s t e s s A l , 1 1 8 2 0 3 1 , s k n a b r e h t o m o r f e u D 3 2 0 1 , - 1 5 8 8 4 , - 4 7 8 9 4 , t n e m e g a n a m k s i r r o f l d e h t e s s a e v i t a v i r e D 5 5 5 4 2 9 , , 2 1 9 5 3 1 , 1 8 7 2 2 6 - 3 5 9 3 2 2 , 4 6 7 5 8 , , 6 7 6 5 3 7 3 , ) 0 3 1 6 3 ( , , 5 0 7 3 1 0 4 , , 4 3 3 8 2 7 1 , - 3 7 7 1 4 2 3 , 8 5 4 2 9 1 1 , , 2 3 5 5 4 4 1 , - 7 1 0 5 1 , 8 4 2 7 1 , 3 2 0 3 1 , 8 5 4 0 3 7 5 4 4 , 5 2 6 4 3 , ) 5 2 6 4 3 ( , - - , 2 9 7 3 9 1 2 7 5 4 1 2 , 8 5 9 3 2 , , 8 7 6 0 7 5 0 1 , - - - ) 6 2 3 1 ( , ) 1 3 0 1 7 2 ( , 3 4 3 8 1 , 3 2 5 3 1 2 , 3 4 8 0 3 2 , 1 5 2 5 2 , , 9 2 6 5 8 2 2 1 , i s e i r a d i s b u s n i t n e m t s e v n I s e c n a v d a d n a s n a o L s e i t i r u c e s t n e m t s e v n I i t n e m p u q e d n a y t r e p o r P t e s s a x a t d e r r e f e D s t e s s a r e h t O l s t e s s a e b g n a t n i I - - - 5 6 3 6 1 - - - - - 6 8 7 2 8 3 2 , - - - - 1 9 2 3 4 4 1 , - - - - 4 4 4 5 5 6 - - 4 5 1 4 2 , 1 3 8 3 2 , 0 3 0 2 , 8 5 2 2 , 6 2 6 4 2 , 4 9 7 7 2 , 4 1 6 7 , 2 0 5 3 3 , 7 3 2 6 , 7 6 1 1 3 , - - 3 2 5 2 3 1 , , 2 3 5 5 4 4 1 , 0 1 2 4 6 5 - , 7 5 2 3 0 3 1 , 5 7 ) 5 4 5 ( 3 4 7 6 5 5 8 8 3 , 8 7 9 8 , 1 1 5 1 1 , - - 0 9 3 5 4 , 0 3 7 5 4 4 , 5 0 9 8 5 1 , ) 9 4 5 4 1 ( , ) 1 3 3 1 9 ( , 0 4 0 6 , 5 5 6 1 6 , 1 1 9 5 1 , 7 4 3 6 4 5 , 2 9 1 1 1 3 , , 0 8 5 9 9 9 , 6 0 8 4 3 4 7 , , 7 4 1 5 9 1 1 , , 8 7 6 0 7 5 0 1 , , 9 5 7 9 7 2 1 , - - - ) 1 5 9 8 9 1 ( , - ) 4 2 3 1 ( , ) 0 3 1 6 3 ( , ) 7 2 6 4 3 ( , ) 2 3 0 1 7 2 ( , ) 9 0 6 7 3 1 ( , 8 7 2 9 7 , 3 2 3 5 , ) 5 6 1 8 0 4 ( , , 2 1 2 0 2 1 - 9 2 3 7 3 3 ) 8 ( 2 1 3 1 5 2 1 ) 8 ( 6 2 2 4 , ) 0 0 0 6 ( , 1 5 2 2 , 7 7 4 - 5 8 9 1 , 4 5 3 1 , 9 3 3 3 , - 1 4 4 ) 2 0 1 3 ( , 4 4 3 2 1 , 9 1 6 3 1 , , ) 1 8 0 2 4 1 ( 0 5 0 4 1 , ) 9 3 8 2 3 1 ( , 5 2 0 3 5 , 6 1 3 2 9 7 , ) 4 7 0 2 1 ( , 6 8 4 1 , 4 8 0 9 , - 3 6 9 1 , 7 7 4 - 3 2 4 2 1 , 9 3 3 3 , - 0 8 6 1 , 0 3 7 5 1 , 0 5 0 4 1 , - 6 6 2 8 4 , ) 3 7 5 4 8 ( , ) 9 3 8 2 3 1 ( , ) 3 4 3 ( 1 7 7 5 2 1 , 3 5 4 8 7 1 , 5 2 0 3 5 , 4 7 5 6 7 7 , , 7 2 5 1 7 1 5 9 2 8 8 , 5 9 2 8 8 , - , 3 5 4 9 5 1 h t i n e Z d e t i m i L i e e n m o N h t i n e Z n o i s n e P n a i d o t s u C a i b m a G k n a B h t i n e Z k n a B h t i n e Z e n o e L a r r e S i K U a n a h G c l P k n a B h t i n e Z k n a B h t i n e Z k n a B h t i n e Z p u o r g - a r t n I s n o i t c a s n a r t e c n a l a b d n a h t i n e Z p u o r G 5 2 3 6 , 6 5 8 4 6 , 4 5 6 6 1 , , 9 5 5 8 6 5 2 9 1 1 1 3 , , 0 5 4 3 6 9 , 3 5 6 5 7 9 8 , , 0 4 9 8 7 3 1 , , 9 2 6 5 8 2 2 1 , , 3 2 1 9 7 1 1 , ) 6 0 6 7 9 ( , ) 1 3 2 3 6 3 ( , 6 8 3 8 1 7 , , 9 1 5 4 3 1 1 , s t n e l a v i u q e h s a c d n a h s a c n i ) e s a e r c e d ( / e s a e r c n I s e i t i v i t c a g n i t a r e p o m o r f / ) n i d e s u ( h s a c t e N i s e i t i v i t c a g n c n a n ﬁ m o r f / ) n i d e s u ( h s a c t e N s e i t i v i t c a g n i t s e v n i m o r f / ) n i d e s u ( h s a c t e N w o fl h s a c f o t n e m e t a t s d e s n e d n o C s t n e l a v i u q e h s a c d n a h s a C d o i r e p f o t r a t s t A s e i t i l i b a i l x a t e m o c n i d e r r e f e D y t i u q E & s e i t i l i b a i L s t i s o p e d r e m o t s u C s e i t i l i b a i l e v i t a v i r e D x a t e m o c n i t n e r r u C s e i t i l i c a f i g n d n e l - n O s e i t i l i b a i l r e h t O s e v r e s e r d n a y t i u q E i s g n w o r r o B 2 2 0 2 r e b m e c e D 1 3 6 1 3 2 9 7 , ) 4 7 0 2 1 ( , , 6 8 2 8 1 7 s t n e l a v i u q e h s a c d n a h s a c n i ) e s a e r c e d ( / e s a e r c n I Notes 207 4 5 9 7 8 , i l s t n e a v u q e h s a c d n a h s a c n o s t n e m e v o m e t a r e g n a h c x E , 9 5 7 0 4 9 1 , d o i r e p f o d n e t A 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f s t n e m e t a t S l i i a c n a n F e t a r a p e S d n a d e t a d h t i n e Z d e t i m i L i e e n m o N h t i n e Z n o i s n e P d e t i m i L n a i d o t s u C a i b m a G d e t i m i L k n a B h t i n e Z d e t i m i L k n a B h t i n e Z e n o e L a r r e S i d e t i m i L K U k n a B h t i n e Z a n a h G d e t i m i L c l P k n a B h t i n e Z k n a B h t i n e Z p u o r g - a r t n I s n o i t c a s n a r t e c n a l a b d n a h t i n e Z p u o r G 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z i l o s n o C e h t o t s e t o N 208 s s o l r o t fi o r p f o t n e m e t a t s d e s n e d n o C e m o c n i g n i t a r e p O s e s n e p x E 1 2 0 2 r e b m e c e D 1 3 - 8 5 3 ) 2 8 1 ( 6 7 1 ) 6 4 ( 0 3 1 2 2 9 2 1 - - - 1 5 9 8 1 , - - 3 4 6 1 0 2 8 1 2 5 0 1 , ) 3 6 9 1 ( , 6 6 5 8 , ) 3 5 9 1 ( , 3 1 6 6 , - - - 6 8 2 8 7 4 5 , 4 1 1 5 3 3 9 1 , - - 0 7 1 5 6 2 3 2 5 1 , ) 7 2 ( 9 4 6 2 , ) 9 2 3 1 ( , 3 9 2 1 , ) 4 1 3 ( 9 7 9 6 2 8 3 , 6 8 7 5 1 , - 9 9 9 5 , - 4 8 1 1 , 3 3 4 3 , - 2 5 6 2 0 3 5 6 2 1 , ) 2 5 ( 8 8 0 5 , ) 4 3 4 2 ( , 2 0 6 2 , ) 1 5 6 ( 1 5 9 1 , - - 3 5 0 1 , - 7 0 5 7 , 6 9 3 2 , 0 1 3 1 2 , - 5 9 7 9 4 1 2 8 8 8 5 1 3 9 1 , ) 8 5 6 2 1 ( , ) 2 3 7 1 ( , 5 2 9 4 , ) 6 4 8 ( 9 7 0 4 , - - 2 1 9 0 5 2 1 4 , 7 4 4 1 , 4 5 9 6 7 1 , 4 2 9 4 2 6 , - 6 8 3 7 8 4 4 4 5 6 5 1 , 6 2 1 2 , 1 7 1 7 2 , 2 6 8 1 3 , 7 6 7 3 3 , , 4 1 8 8 1 2 1 , 0 6 9 6 6 , ) 5 5 6 1 4 ( , ) 4 5 9 1 ( , 1 5 3 3 2 , ) 2 7 9 7 ( , 9 7 3 5 1 , 8 9 4 5 8 , 6 0 9 5 6 1 , 4 9 5 5 3 , 7 3 4 9 3 , - , 3 2 4 5 0 1 4 2 8 5 5 1 , - 4 5 6 1 , 8 2 8 3 1 , 0 7 6 8 1 , 7 7 5 , 1 1 4 2 2 6 3 8 2 7 7 6 , ) 1 4 9 3 6 3 ( , ) 5 7 1 6 5 ( , 7 6 1 7 5 2 , ) 4 3 0 4 2 ( , - ) 6 1 6 6 1 ( , ) 0 9 0 1 ( , - ) 6 0 7 7 1 ( , 3 3 1 3 3 2 , ) 6 0 7 7 1 ( , 8 5 5 5 6 7 , ) 2 5 2 5 2 4 ( , ) 2 3 9 9 5 ( , 4 7 3 0 8 2 , ) 6 1 8 5 3 ( , 8 5 5 4 4 2 , , 6 6 6 7 9 3 1 , 0 0 0 7 5 3 , 3 5 0 8 1 5 , 6 7 4 7 5 , , 7 4 6 7 7 5 1 , , 2 5 4 9 9 0 3 , 4 0 0 7 7 4 , 5 2 6 4 3 , - 6 2 3 2 5 1 , 1 0 5 7 7 1 , 2 4 5 3 2 , , 2 9 2 2 7 8 7 , - - - ) 1 6 2 2 9 2 ( , ) 6 3 7 2 ( , ) 6 9 7 9 2 ( , - ) 5 2 6 4 3 ( , - ) 2 8 1 1 ( , - - ) 0 0 6 0 6 3 ( , , 3 6 3 8 8 4 1 , 4 9 5 2 9 3 , 4 4 2 1 9 6 , 7 8 1 6 5 , , 6 4 9 4 6 7 1 , , 8 2 7 5 5 3 3 , , 5 2 7 3 0 3 1 , - 7 3 8 1 , 0 1 2 8 6 1 , 8 0 0 0 0 2 , 1 0 0 5 2 , , 3 4 8 7 4 4 9 , n o i t i s o p l a i c n a n fi f o t n e m e t a t s d e s n e d n o C s k n a b l a r t n e c h t i l w s e c n a a b d n a h s a C s t e s s A t n e m e g a n a m k s i r r o f l d e h t e s s a e v i t a v i r e D l a r e t a l l o c s a d e g d e p s t e s s A l s k n a b r e h t o m o r f e u D s l l i b y r u s a e r T i s e i r a d i s b u s n i t n e m t s e v n I s e c n a v d a d n a s n a o L s e i t i r u c e s t n e m t s e v n I i t n e m p u q e d n a y t r e p o r P t e s s a x a t d e r r e f e D s t e s s a r e h t O r a e y e h t r o f s s o l / t fi o r P · x a t e r o f e b t ﬁ o r P s t e s s a l i a c n a n ﬁ n o i t a x a T l s t e s s a e b g n a t n i I - n o n d n a l i a c n a n ﬁ r o f e g r a h c t n e m r i a p m I h t i n e Z d e t i m i L i e e n m o N d e t i m i L n a i d o t s u C a i b m a G d e t i m i L n o i s n e P h t i n e Z k n a B h t i n e Z d e t i m i L k n a B h t i n e Z e n o e L a r r e S i d e t i m i L K U k n a B h t i n e Z d e t i m i L d t L a n a h G k n a B h t i n e Z c l P k n a B h t i n e Z p u o r g - a r t n I s n o i t c a s n a r t e c n a l a b d n a h t i n e Z p u o r G - - 7 4 2 8 7 1 - - - - - 5 3 3 7 2 4 9 1 , - - - - - 6 7 2 8 0 0 1 , - - - - - 7 2 1 3 7 9 - - - 6 1 8 3 2 , 3 9 5 5 2 , 9 9 8 1 , 6 2 1 2 , 1 9 4 4 2 , 1 7 1 7 2 , 2 6 7 6 , 2 6 8 1 3 , 4 7 0 7 , 7 6 7 3 3 , - 9 2 3 ) 8 ( ) 7 3 3 ( 2 1 3 1 5 2 1 ) 8 ( 6 2 2 4 , ) 0 0 0 6 ( , 1 5 2 2 , 7 7 4 - 6 8 4 1 , 3 6 9 1 , 7 7 4 - 5 8 9 1 , 4 5 3 1 , 9 3 3 3 , - 4 8 0 9 , 3 2 4 2 1 , 9 3 3 3 , - 1 4 4 9 0 6 3 1 , 0 5 0 4 1 , - 0 8 6 1 , 0 3 7 5 1 , 0 5 0 4 1 , , 1 5 4 7 9 0 1 , - - 6 7 2 5 0 1 6 , - - - 2 8 9 4 1 1 , , 4 1 8 8 1 2 1 , ) 2 0 1 3 ( , 4 4 3 2 1 , ) 1 8 0 2 4 1 ( , ) 9 3 8 2 3 1 ( , - - 1 4 2 2 , 6 5 2 8 4 4 , - 8 3 7 1 5 , - 9 6 8 0 1 , 7 0 3 9 0 1 , 1 1 4 2 2 6 , 5 0 9 8 5 1 , ) 9 4 5 4 1 ( , ) 1 3 3 1 9 ( , 5 2 0 3 5 , , 9 9 1 9 6 1 5 , 0 7 1 5 1 , 1 4 2 4 1 , 6 9 5 1 1 , 6 7 8 7 2 4 , 1 4 2 9 6 3 , 5 9 3 9 6 7 , 9 9 7 5 4 , , 5 7 7 9 4 0 1 , , 2 9 2 2 7 8 7 , , 9 5 7 9 7 2 1 , - - ) 7 3 7 2 ( , ) 1 6 2 2 9 2 ( , - - ) 9 7 1 1 ( , ) 5 9 7 9 2 ( , ) 8 2 6 4 3 ( , ) 0 0 6 0 6 3 ( , ) 3 2 9 0 4 1 ( , , 4 5 0 2 7 4 6 , 4 7 6 4 1 , 9 0 9 6 1 , 3 0 6 1 1 , , 2 3 4 7 8 4 , 1 4 2 9 6 3 , 9 6 4 0 5 7 9 9 7 5 4 , , 2 6 6 9 7 2 1 , , 3 4 8 7 4 4 9 , , 9 0 8 5 7 1 1 , ) 8 7 2 9 7 ( , 1 4 8 5 , ) 5 6 1 8 0 4 ( , , 9 0 0 3 2 1 6 1 3 2 9 7 , ) 3 7 0 2 1 ( , ) 8 8 0 7 9 ( , , ) 4 3 4 0 6 3 ( 7 8 2 8 1 7 , 6 6 2 8 4 , 1 7 7 5 2 1 , 4 7 5 6 7 7 , 7 2 5 1 7 1 , , 9 1 5 4 3 1 1 , s t n e l a v i u q e h s a c d n a h s a c n i ) e s a e r c e D ( / e s a e r c n I s e i t i v i t c a g n i t a r e p o m o r f / ) n i d e s u ( h s a c t e N i s e i t i v i t c a g n c n a n ﬁ m o r f / ) n i d e s u ( h s a c t e N s e i t i v i t c a g n i t s e v n i m o r f / ) n i d e s u ( h s a c t e N w o fl h s a c d e s n e d n o C s t n e l a v i u q e h s a c d n a h s a C r a e y f o t r a t s t A s e i t i l i b a i l x a t e m o c n i d e r r e f e D y t i u q E & s e i t i l i b a i L s t i s o p e d r e m o t s u C s e i t i l i b a i l e v i t a v i r e D x a t e m o c n i t n e r r u C 1 2 0 2 r e b m e c e D 1 3 s e i t i l i c a f i g n d n e l - n O s e i t i l i b a i l r e h t O i s g n w o r r o B d e u s s i s e i t i r u c e s t b e D s e v r e s e r d n a y t i u q E - ) 3 7 5 4 8 ( , ) 9 3 8 2 3 1 ( , ) 3 4 3 ( 3 5 4 8 7 1 , 5 2 0 3 5 , 5 9 2 8 8 , - 4 5 9 7 8 , i l s t n e a v u q e h s a c d n a h s a c n o s t n e m e v o m e t a r e g n a h c x E , 5 8 1 7 5 6 1 , 4 5 4 9 5 1 , , 0 6 7 0 4 9 1 , r a e y f o d n e t A 6 1 3 2 9 7 , 3 7 0 2 1 , 7 8 2 8 1 7 , s t n e l a v i u q e h s a c d n a h s a c n i ) e s a e r c e d ( / e s a e r c n I Notes 209 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 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 in Nigeria 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. The investment in associates have been fully impaired. Hence the carrying amount of the investment in associates is Nil as at 31 December 2022 (31 December 2021: Nil). 210 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 Lease liability Foreign exchange diﬀerences Total deferred tax asset Set-oﬀ of deferred tax asset against deferred tax liabilities pursuant to set-oﬀ provisions (see (ii) below) Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 32 21,149 6 587 2,898 2,701 27,373 (9,030) 15,057 11,017 (8) 1,071 2,325 - 29,462 (27,625) - 6,132 - - 2,898 - 9,030 (9,030) 15,100 8,914 - - 2,325 - 26,339 (26,339) Net deferred tax asset 18,343 1,837 - - (ii) Deferred tax liability In millions of Naira Property and equipment Right of use asset Foreign exchange diﬀerences Fair value reserves Total deferred tax liability Set-oﬀ of deferred tax asset against deferred tax liabilities pursuant to set-oﬀ provisions (see (i) above) Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 17,296 3,161 5,227 - 25,684 (9,030) 16,861 4,151 17,795 421 39,228 (27,625) 16,553 3,161 5,227 - 24,941 (9,030) 15,989 4,151 17,795 - 37,935 (26,339) Net deferred tax liability 16,654 11,603 15,911 11,596 Group 31 December 2022 Movements in temporary differences during the year 1 January 2022 Recognised in proﬁt or loss 31December 2022 Asset Other assets Unutilized capital allowances ECL Allowance on not-credit impaired ﬁnancial instruments Tax loss carry forward Fair value reserve Lease liability 1,071 15,057 11,017 (8) - 2,325 29,462 (484) (15,025) 10,132 14 2,701 573 (2,089) 587 32 21,149 6 2,701 2,898 27,373 Notes 211 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 31 December 2021 Movements in temporary differences during the year 1 January 2022 Recognised in proﬁt or loss 31December 2022 Liabilities Property and equipment Right of use asset Fair value reserve Foreign exchange diﬀerences Bank 31 December 2022 16,861 4,151 421 17,795 39,228 435 (990) (421) (12,568) (13,544) 17,296 3,161 - 5,227 25,684 Movements in temporary differences during the year 1 January 2022 Recognised in proﬁt or loss 31December 2022 Asset ECL Allowance on not-credit impaired ﬁnancial instruments Unutilized capital allowances Lease liability Bank 31 December 2022 8,914 15,100 2,325 26,339 (2,782) (15,100) 573 (17,309) 6,132 - 2,898 9,030 Movements in temporary differences during the year 1 January 2022 Recognised in proﬁt or loss 31December 2022 Liabilities Property and equipment Right of use asset Foreign exchange diﬀerences 15,989 4,151 17,795 37,935 564 (990) (12,568) (12,994) 16,553 3,161 5,227 24,941 The group’s deferred tax asset is largely attributable to Zenith bank Ghana, which suﬀered a loss in the current year. The deferred tax asset principally arose from ECL allowance on ﬁnancial instruments. The group has recognized all of its deferred tax asset as at 31 Dec 2022. The group, therefore, has no unrecognized deferred tax asset. The group will continue to assess the recoverability of its deferred tax asset and ensure that only amounts considered recoverable are recognized in the books and presented in the statement of ﬁnancial position. 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 E-card and settlement receivables Intercompany receivables Deposit for investment in AGSMEIS Other receivables* Deposits for shares Gross other ﬁnancial assets Less: ECL allowance(see note 25(ii)) Net other ﬁnancial assets Total other assets (Net) 212 Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 9,803 13,615 23,418 (3,361) 20,057 9,626 9,763 19,389 - 19,389 7,363 13,501 20,864 (3,361) 17,503 127,583 101,520 125,569 - 53,747 41,109 - 222,439 (28,973) 193,466 213,523 - 40,888 16,338 - 158,746 (9,925) 148,821 542 53,747 24,579 720 205,157 (28,868) 176,289 7,717 9,815 17,532 - 17,532 88,601 458 40,888 13,962 720 144,629 (9,835) 134,794 168,210 193,792 152,326 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.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 promptly settled. *Other receivables comprises of mobile electronic funds receivable from customer. Classified as: Current Non-current 157,545 55,978 213,523 127,322 40,888 168,210 139,324 54,468 193,792 111,438 40,888 152,326 See note 3.2.18 for movement in impairment allowance for other ﬁnancial assets as at 31 December . (i) Movement in impairment allowance for non-ﬁnancial assets In millions of Naira At start of the year Charge for the year (see note 8) Non ﬁnancial asset At end of the year (ii) Provision matrix Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 - 3,361 - - 3,361 226 - (226) - - - 3,361 - - 3,361 226 - (226) - - The table below summarises the provision matrix of the Bank as at 31 December 2022. The loss allowance recorded by the other subsidiaries on their other ﬁnancial assets is considered insigniﬁcant to the Group. 31 December, 2022 0-30 days 31-60 days 61-90 days 91-180 days Above 180 days Total Receivables Expected loss rate ECL 124,077 2.35 % 2,918 555 4.71 % 26 145 1,813 24,101 150,691 7.07 % 100.00 % 100.00 % - 10 1,813 24,101 28,868 31 December, 2021 0-30 days 31-60 days 61-90 days 181-365 days Above 180 days Receivables Expected loss rate ECL 84,602 3.20 % 2,707 278 6.40 % 18 840 9.60 % 81 1,806 100.00 % 1,806 5,223 100.00 % 5,223 Total 92,749 - 9,835 The receivables exclude the deposit for shares and deposit for AGSMEIS which are not subject to impairment by the simpliﬁed approach. Notes 213 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f s t n e m e t a t S l i i a c n a n F e t a r a p e S d n a d e t a d i l o s n o C e h t o t s e t o N l a t o T n i k r o W s s e r g o r p - s t e s s a t f a r c r i A e s u - f o - t h g R i f o t h g R i s g n d i l i u b - t e s s a e s u r o t o M s e l c i h e v t f a r c r i A r e t u p m o C t n e m p u q e i , e r u t i n r u F d n a s g n i t t fi t n e m p u q e i l d o h e s a e L s t n e m e v o r p m i g n d i l i u B d n a L 2 2 0 2 r e b m e c e D 1 3 t n e m e v o m i t n e m p u q e d n a y t r e p o r P ) a ( i t n e m p u q e d n a y t r e p o r P . 6 2 p u o r G 214 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z - 5 7 6 0 0 4 6 7 3 , 7 1 0 1 7 , - 8 9 8 5 3 , 4 8 5 2 1 , ) 2 9 5 4 ( , - - - 0 0 6 2 1 , 4 0 1 7 2 , 2 7 7 3 , - 5 7 6 ) 6 3 6 6 1 ( , ) 3 3 ( ) 0 0 6 2 1 ( , ) 2 7 1 ( ) 4 8 0 9 ( , ) 9 3 4 ( 2 7 3 2 2 4 , 9 1 4 3 4 , - - ) 0 5 6 2 ( , 9 2 7 8 2 , 2 9 3 6 7 1 , 0 3 6 6 2 , - ) 0 8 3 9 ( , ) 3 1 1 2 ( , 9 2 5 1 9 1 , - - - - - - 3 4 8 0 3 2 , 9 1 4 3 4 , - 5 3 7 0 5 2 5 , ) 5 8 9 5 ( , - - - 7 6 8 5 , 2 1 3 2 , - ) 5 7 1 ( ) 2 7 ( 0 6 7 6 2 , 8 6 8 8 , - 9 7 6 ) 7 6 2 1 ( , ) 5 4 6 ( 5 9 3 4 3 , 4 5 5 0 2 , 1 0 6 3 , 1 ) 8 7 3 ( ) 8 5 0 1 ( , 2 3 9 7 , 0 2 7 2 2 , 7 5 3 6 1 9 8 3 , 2 5 3 8 8 , 5 1 9 1 2 , 8 3 3 1 1 , 9 9 7 0 2 , 5 7 6 1 1 , 7 4 3 5 2 , 2 6 9 8 , 3 3 5 2 2 , 8 3 5 4 , 4 2 7 4 5 , 7 4 8 8 3 , - 7 5 3 - - - 7 2 7 4 3 , 5 6 8 4 , ) 8 1 ( ) 9 0 5 ( ) 9 4 1 ( 6 4 6 8 7 , 4 6 2 1 1 , 7 4 ) 6 6 9 ( ) 9 3 6 ( 0 5 9 0 2 , 2 4 1 2 , 2 5 ) 0 8 6 ( ) 9 4 5 ( 8 9 3 0 1 , 4 5 3 1 , ) 1 8 ( ) 7 ( ) 6 2 3 ( - - - - - - I P W m o r f r e f s n a r t / s n o i t a c ﬁ i s s a c e R l n o i t a i c e r p e D d e t a l u m u c c A 2 2 0 2 y r a u n a J 1 t A r a e y e h t r o f e g r a h C i e c n e r e ﬀ d e g n a h c x E s l a s o p s i D 2 2 0 2 r e b m e c e D 1 3 t A 2 2 0 2 r e b m e c e D 1 3 t A t n u o m a k o o b t e N - - - - - 4 0 7 5 2 , 6 6 8 0 4 , 2 9 3 5 , 2 6 4 2 , - ) 8 4 5 ( ) 4 9 2 ( 4 4 1 8 , 8 0 9 3 0 1 , - 3 9 7 ) 5 3 0 1 ( , ) 5 2 9 ( 5 4 9 4 2 , 6 5 6 1 , 2 1 5 1 , - ) 1 8 9 ( ) 9 7 6 ( 8 8 8 7 6 , 1 3 4 6 3 , - - 5 7 4 2 , ) 8 4 8 ( ) 3 5 4 3 ( , - - - ) 6 ( 2 2 4 2 , I P W m o r f r e f s n a r t / n o i t a c ﬁ i s s a c e R l ﬀ o e t i r w / s l a s o p s i D i e c n e r e ﬀ d e g n a h c x E s n o i t a c ﬁ d o M i 2 2 0 2 , y r a u n a J 1 t A s n o i t i d d A t s o C 4 0 7 5 2 , 8 7 8 7 4 , , 5 8 8 0 1 1 3 5 4 6 2 , 2 6 0 6 6 , 7 4 8 8 3 , 2 2 0 2 r e b m e c e D 1 3 t A t r a p s a d e z i l i a t i p a c n e e b s a h t s o c g n w o r r o b o n y l t n e u q e s n o c , i s g n w o r r o b m o r f d e c n a n ﬁ e r e w s t e s s a s k n a B e h t ’ f o e n o N . t n e r r u c - n o n e r a t n e m p u q e d n a y t r e p o r p i l l A . t s o c . t s o c t e s s a f o . ) l i N : 1 2 0 2 r e b m e c e D 1 3 ( d o i r e p e h t g n i r u d t n e m p u q e d n a y t r e p o r p i f o n o i t i s i u q c a e h t o t d e t a e r l i s t s o c g n w o r r o b d e s i l a t i p a c o n e r e w e r e h T . ) l i N : 1 2 0 2 r e b m e c e D 1 3 ( d o i r e p e h t g n i r u d t n e m p u q e d n a y t r e p o r p i f l o s s a c y n a n o s e s s o l t n e m r i a p m i o n e r e w e r e h T . e s n e p x e e s a e l s a 2 1 e t o n n i n e e s e b n a c s t e s s a e s a e l l e u a v w o l d n a e s a e l m r e t t r o h s o t g n i t a e r l s e s n e p x E l a t o T n i k r o W s s e r g o r p t f a r c r i A f o t h g R i s g n d i l i u b - t e s s a e s u r o t o M s e l c i h e V t f a r c r i A f o t h g R i - t s e s s a e s u r e t u p m o C t n e m p u q e i , e r u t i n r u F d n a s g n i t t fi t n e m p u q e i l d o h e s a e L s t n e m e v o r p m i g n d i l i u B d n a L 1 2 0 2 r e b m e c e D 1 3 8 7 2 7 4 3 , 8 4 8 4 3 , ) 8 6 ( ) 5 9 3 6 ( , 7 3 7 9 3 9 3 2 , 5 0 1 5 1 , ) 6 3 2 3 ( , - 0 9 0 0 4 6 7 3 , 8 9 8 5 3 , 8 0 1 7 5 1 , 5 0 3 5 2 , - 4 ) 5 2 0 6 ( , 2 9 3 6 7 1 , - - - - - - 8 0 0 0 0 2 , 8 9 8 5 3 , - - - - - - - - - - - - - 0 8 2 4 2 , 9 3 7 0 0 8 1 , - 5 8 2 4 6 4 4 2 , 1 1 5 3 , 9 2 ) 6 6 2 1 ( , 2 2 0 0 6 2 1 , 0 9 5 6 3 , - - - - 9 8 8 3 , 9 4 7 ) 4 0 4 ( 2 4 3 0 1 8 9 , 1 4 6 7 , 4 9 6 1 , ) 3 3 5 3 ( , 3 6 6 3 6 2 , 8 2 2 1 , ) 8 5 7 1 ( , ) 3 3 9 ( 2 4 2 9 3 2 , 3 5 6 ) 9 5 2 ( 3 5 2 1 - - 3 4 3 9 4 8 4 6 , 7 8 0 6 3 , I P W m o r f r e f s n a r t / n o i t a c ﬁ i s s a c e R l i e c n e r e ﬀ d e g n a h c x E s l a s o p s i D 1 2 0 2 , y r a u n a J 1 t A s n o i t i d d A t s o C 4 0 1 7 2 , 0 6 7 6 2 , 0 0 6 2 1 , 6 6 8 0 4 , 8 0 9 3 0 1 , 5 4 9 4 2 , 8 8 8 7 6 , 1 3 4 6 3 , 1 2 0 2 r e b m e c e D 1 3 t A 6 5 4 3 , 6 6 9 1 , - 8 7 5 ) 3 3 1 ( 2 6 9 8 1 , 5 9 7 2 , - 6 3 ) 9 3 2 1 ( , - - - 0 9 9 3 , 0 6 2 1 , 5 9 1 1 3 , 0 2 9 3 , ) 7 2 ( ) 3 0 4 ( 2 4 8 2 9 9 6 , 1 3 9 1 1 , 3 7 ) 2 0 3 3 ( , 4 1 3 6 5 0 2 , 1 7 0 2 , ) 8 8 1 ( ) 3 1 9 ( 7 1 4 1 0 9 , 2 6 3 1 , 2 6 1 ) 8 6 1 ( 8 2 7 6 8 5 , 4 5 5 0 2 , 0 5 2 5 , 7 2 7 4 3 , 6 4 6 8 7 , 0 5 9 0 2 , 8 9 3 0 1 , - - - - - - 7 3 2 1 2 , 6 0 2 6 , 0 5 3 7 , 9 3 1 6 , 2 6 2 5 2 , 5 9 9 3 , 0 9 4 7 5 , 1 3 4 6 3 , I P W m o r f r e f s n a r t / s n o i t a c ﬁ i s s a c e R l n o i t a i c e r p e D d e t a l u m u c c A 1 2 0 2 y r a u n a J 1 t A r a e y e h t r o f e g r a h C i e c n e r e ﬀ d e g n a h c x E s l a s o p s i D 1 2 0 2 r e b m e c e D 1 3 t A 1 2 0 2 r e b m e c e D 1 3 t A t n u o m a k o o b t e N . . 4 1 2 e t o n e e s e s u f o t h g i r n o s t n e m e g d u j d n a y c i l o p g n i t n u o c c a r o F . e c n e m m o c o t t e y e r a t a h t s e s a e l f o t c e p s e r n i U O R o n s a h p u o r G e h T p u o r G Notes 215 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f s t n e m e t a t S l i i a c n a n F e t a r a p e S d n a d e t a d i l o s n o C e h t o t s e t o N 216 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z l a t o T n i k r o W s s e r g o r p 4 2 2 3 4 3 , 1 5 7 7 6 , - 5 7 6 ) 2 4 3 4 1 ( , - - 7 7 6 4 3 , 7 3 9 1 1 , ) 5 0 2 4 ( , - - - e s u - s t e s s a t f a r c r i A - f o - t h g R i 0 0 6 2 1 , ) 0 0 6 2 1 ( , 5 7 6 - - 1 6 7 6 1 , 4 9 3 3 , 2 7 6 4 2 , 6 8 9 7 , - 6 0 4 ) 1 9 9 ( - - - - 4 0 7 5 2 , 5 9 7 8 3 , 4 1 1 5 , - ) 3 4 ( 8 6 4 2 , 2 7 7 7 , 8 9 6 ) 3 7 6 ( - 0 0 5 0 0 1 , 1 3 6 1 2 , 7 7 1 1 , - ) 5 3 ( 8 8 4 1 , - - 8 5 1 7 5 , 6 4 2 2 , ) 9 4 8 ( - - ) 6 ( 1 3 4 6 3 , 2 2 4 2 , f o t h g R i s g n d i l i u b - t e s s a e s u r o t o M s e l c i h e V t f a r c r i A r e t u p m o C t n e m p u q e i , e r u t i n r u F d n a s g n i t t fi t n e m p u q e i l d o h e s a e L s t n e m e v o r p m i g n d i l i u B d n a L 2 2 0 2 r e b m e c e D 1 3 k n a B 2 2 0 2 y r a u n a J 1 t A s n o i t i d d A t s o C I P W m o r f r e f s n a r t / n o i t a c ﬁ i s s a c e R l s n o i t a c ﬁ d o M i s l a s o p s i D 8 0 3 7 9 3 , 8 0 4 2 4 , - 9 2 8 0 2 , 3 7 0 2 3 , 4 0 7 5 2 , 4 3 3 6 4 , 7 9 2 8 0 1 , 1 6 2 4 2 , 5 5 5 8 5 , 7 4 8 8 3 , 2 2 0 2 r e b m e c e D 1 3 t A - 4 2 7 5 6 1 , ) 7 0 5 7 ( , 9 1 5 4 2 , 6 3 7 2 8 1 , - - - - - 2 7 5 4 1 2 , 8 0 4 2 4 , 0 5 2 5 , ) 5 8 9 5 ( , - 5 3 7 - - - - 9 8 9 3 , 6 0 6 1 , 5 9 5 5 , - 5 8 1 9 1 , ) 3 3 8 ( 1 3 2 3 , 3 8 5 1 2 , - - - 7 5 3 7 5 3 ) 4 3 ( ) 0 2 ( 3 1 2 3 3 , 9 0 6 4 , 8 6 7 7 3 , 9 7 1 6 7 , 9 4 ) 7 2 6 ( 4 2 9 0 1 , 5 2 5 6 8 , ) 8 2 ( 2 5 9 7 4 8 1 , 5 2 9 1 , 8 2 4 0 2 , 9 2 4 9 , ) 0 ( ) 1 8 ( 2 3 1 1 , 9 7 4 0 1 , - - - - - 4 3 2 5 1 , 0 9 4 0 1 , 7 4 3 5 2 , 6 6 5 8 , 2 7 7 1 2 , 3 3 8 3 , 6 7 0 8 4 , 7 4 8 8 3 , I P W m o r f r e f s n a r t / s n o i t a c ﬁ i s s a c e R l n o i t a i c e r p e D d e t a l u m u c c A 2 2 0 2 y r a u n a J 1 t A s l a s o p s i D 2 2 0 2 r e b m e c e D 1 3 t A 2 2 0 2 r e b m e c e D 1 3 t A t n u o m a k o o b t e N r a e y e h t r o f e g r a h C t r a p s a d e z i l i a t i p a c n e e b s a h t s o c g n w o r r o b o n y l t n e u q e s n o c , i s g n w o r r o b m o r f d e c n a n ﬁ e r e w s t e s s a s k n a B e h t ’ f o e n o N . t n e r r u c - n o n e r a t n e m p u q e d n a y t r e p o r p i l l A . t s o c t e s s a f o . e c n e m m o c o t t e y e r a t a h t s e s a e l f o t c e p s e r n i U O R n o i l l i m 7 0 1 s a h k n a b e h t d n a 4 1 2 e t o n e e s e s u . f o t h g i r n o s t n e m e g d u j d n a y c i l o p g n i t n u o c c a r o F . ) l i N : 1 2 0 2 r e b m e c e D 1 3 ( r a e y e h t g n i r u d t n e m p u q e d n a y t r e p o r p i f o n o i t i s i u q c a e h t o t d e t a e r l i s t s o c g n w o r r o b d e s i l a t i p a c o n e r e w e r e h T . ) l i N : 1 2 0 2 r e b m e c e D 1 3 ( d o i r e p e h t g n i r u d t n e m p u q e d n a y t r e p o r p i f l o s s a c y n a n o s e s s o l t n e m r i a p m i o n e r e w e r e h T . e s n e p x e e s a e l s a 2 1 e t o n n i n e e s e b n a c s t e s s a e s a e l l e u a v w o l d n a e s a e l m r e t t r o h s o t g n i t a e r l s e s n e p x E l a t o T - 8 2 4 7 1 3 , 3 9 9 1 3 , I ) P W ( n i k r o W s s e r g o r p 7 9 0 3 2 , 0 8 3 4 1 , ) 0 0 8 2 ( , ) 6 9 1 6 ( , - e s u f o t h g R i s g n d i l i u b - t e s s a r o t o M s e l c i h e V e s u f o t h g R i t f a r c r i A - t s e s s a r e t u p m o C t n e m p u q e i , e r u t i n r u F d n a s g n i t t fi t n e m p u q e i l d o h e s a e L s t n e m e v o r p m i g n d i l i u B d n a L - - 9 0 4 2 5 3 6 1 , - 9 4 7 2 2 , 3 2 1 3 , ) 0 0 2 1 ( , - - - 0 0 6 2 1 , 3 0 9 4 3 , 2 3 7 1 6 5 3 , 1 5 1 5 9 , 2 2 3 7 , 9 5 5 1 , 3 5 8 8 2 1 2 , 4 9 0 1 , ) 1 0 4 ( ) 2 3 5 3 ( , ) 4 0 8 ( 1 0 2 5 5 , 5 5 4 1 6 7 1 , ) 9 5 2 ( 1 - 3 4 3 7 8 0 6 3 , r e b m e c e D 1 3 1 2 0 2 k n a B t s o C 1 2 0 2 , y r a u n a J 1 t A I P W m o r f r e f s n a r t / n o i t a c ﬁ i s s a c e R l s l a s o p s i D s n o i t i d d A 5 2 2 3 4 3 , 7 7 6 4 3 , 1 6 7 6 1 , 2 7 6 4 2 , 0 0 6 2 1 , 5 9 7 8 3 , , 0 0 5 0 0 1 1 3 6 1 2 , 8 5 1 7 5 , 1 3 4 6 3 , r e b m e c e D 1 3 t A n o i t a i c e r p e D d e t a l u m u c c A 1 2 0 2 - 8 4 3 8 4 1 , 4 0 2 3 2 , ) 8 2 8 5 ( , 4 2 7 5 6 1 , - - - - - - - 7 9 5 2 , 2 9 3 1 , 9 8 9 3 , - 9 4 9 7 1 , 8 2 4 2 , ) 2 9 1 1 ( , 5 8 1 9 1 , - - 0 9 9 3 , 0 6 2 1 , 0 5 2 5 , 5 7 9 9 2 , 5 6 6 3 , ) 7 2 ( ) 0 0 4 ( 3 1 2 3 3 , 5 7 1 1 9 7 6 , 4 9 4 1 1 , ) 1 0 3 3 ( , 9 7 1 6 7 , 3 9 5 7 1 , 3 6 8 1 , ) 0 1 2 ( ) 7 6 7 ( 9 7 4 8 1 , 3 3 3 8 , 2 0 1 1 , 2 6 1 ) 8 6 1 ( 9 2 4 9 , - - - - - 1 0 5 7 7 1 , 7 7 6 4 3 , 2 7 7 2 1 , 7 8 4 5 , 0 5 3 7 , 2 8 5 5 , 1 2 3 4 2 , 2 5 1 3 , 9 2 7 7 4 , 1 3 4 6 3 , 1 2 0 2 y r a u n a J 1 t A r a e y e h t r o f e g r a h C / s n o i t a c ﬁ i s s a c e R l I P W m o r f r e f s n a r t s l a s o p s i D r e b m e c e D 1 3 t A 1 2 0 2 t n u o m a k o o b t e N r e b m e c e D 1 3 t A 1 2 0 2 Notes 217 2 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o f s t n e m e t a t S l i i a c n a n F e t a r a p e S d n a d e t a d i l o s n o C e h t o t s e t o N 218 2 2 0 2 , 1 3 r e b m e c e D t r o p e R l l a u n n A c P k n a B h t i n e Z n o i t s o p l a i c n a n fi f o t n e m e t a t s e h t n i d e s i n g o c e r s t n u o m a e s u f o t h g R i ) b ( 0 5 3 7 , 2 7 7 2 1 , 2 2 1 0 2 , - 4 3 2 5 1 , 4 3 2 5 1 , 0 5 3 7 , 7 3 2 1 2 , 7 8 5 8 2 , - 7 9 7 0 2 , 7 9 7 0 2 , 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 l . ) y e v i t c e p s e r n o i l l i m 9 0 4 N d n a n o i l l i m 9 3 7 N : 1 2 0 2 r e b m e c e D 1 3 ( n o i l l i , m 4 9 3 3 N d n a n o i l l i , m 2 7 7 3 N s a w 2 2 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t g n i r u d r o f 7 7 5 2 , 1 3 1 4 1 , 8 0 7 6 1 , 4 2 2 9 8 8 , 6 1 9 8 , 6 0 4 3 , 6 9 6 0 2 , 2 0 1 4 2 , 9 1 4 1 7 5 4 1 , 0 9 9 4 1 , 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 0 6 2 1 , 2 9 3 1 , 2 5 6 2 , 5 8 8 2 , 6 4 5 3 7 6 0 6 1 , 1 4 3 2 , 9 6 0 2 , 3 8 5 0 6 2 1 , 6 6 9 1 , 6 2 2 3 , 7 2 4 3 , 5 8 9 5 3 7 2 1 3 2 , 7 4 0 3 , 2 8 0 2 , 3 9 5 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 1 2 0 2 c e D 1 3 2 2 0 2 c e D 1 3 t n e m e t a t s e m o c n i e h t n i d e s i n g o c e r s t n u o m A ) c ( t e s s a e s u - f o - t h g i r f o e g r a h c n o i t a i c e r p e D a r i a N f o s n o i l l i m n I ) 6 2 e t o n e e s ( s g n d i l i u B ) 6 2 e t o n e e s ( t f a r c r i A ) t s o c e c n a n ﬁ n i d e d u c n l i ( e s n e p x e t s e r e t n I e s n e p x e e s a e L t e s s a e s u - f o - t h g i r e h t o t s n o i t i d d A a r i a N f o s n o i l l i m n I s e i t i l i b a i l e s a e L t n e r r u c - n o N t n e r r u C a r i a N f o s n o i l l i m n I s t e s s a e s u - f o - t h g R i ) 6 2 e t o n e e s ( t f a r c r i A ) 6 2 e t o n e e s ( s g n d i l i u B The total cash outﬂow of leases as at 31 December 2022 was N3,826 million and 3,255 million respectively (31 December 2021: 4,805million andN3,957 million respectively) In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 27. Intangible assets Computer software Cost At start of the year Exchange diﬀerence Reclassiﬁcation from PPE Additions Write oﬀ Disposal At end of the year Accumulated amortization In millions of Naira At start of the year Exchange diﬀerence Disposal Charge for the year At end of the year Carrying amount at end of the year 48,353 (324) - 4,130 - (2,884) 49,275 35,609 246 68 14,884 (2,454) - 48,353 41,654 29,747 - - 3,461 - - 45,115 - - 14,361 (2,454) - 41,654 Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 23,352 (123) (2,884) 3,679 24,024 25,251 19,366 18,112 15,048 207 - 3,779 23,352 25,001 - - 3,045 21,157 23,958 - - 3,064 18,112 23,542 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 Classified as: Current 4,880,784 2,717,049 1,377,820 3,530,521 2,489,340 452,193 3,844,612 2,673,518 916,676 2,561,736 2,301,379 306,084 8,975,653 6,472,054 7,434,806 5,169,199 8,975,653 6,472,054 7,434,806 5,169,199 Notes 219 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 29. Other liabilities Other financial liabilities Customer deposits for letters of credit Managers’ cheques Collections accounts Unclaimed dividend Lease liability (see note (c) below) AMCON payable Electronic card and settlement payables Customers’ foreign transactions payables Account payables Total other financial liabilities In millions of Naira Non financial liabilities Tax collections Deferred income on ﬁnancial guarantee contracts Other payables Oﬀ Balance Sheet exposures impairment allowance Total other non ﬁnancial liabilities Total other liabilities Classified as: Current Non-current 113,680 19,614 111,953 29,764 14,990 1,908 107,619 30,979 115,431 545,938 86,872 18,279 154,728 28,647 24,102 3,817 60,829 8,653 69,849 455,776 113,680 19,244 108,689 29,764 8,916 1,908 106,268 30,975 107,501 526,945 86,872 17,707 154,694 28,647 16,708 3,817 58,000 8,653 34,005 409,103 Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 5,765 2,507 7,735 6,614 22,621 568,559 556,023 12,536 568,559 5,339 1,206 19,495 5,616 31,656 5,503 1,926 6,683 5,290 5,003 1,186 6,968 5,616 19,402 18,773 487,432 546,347 427,876 474,070 13,362 487,432 539,225 7,122 413,624 14,252 546,347 427,876 (a) ECL allowance for off balance sheet exposure In millions of Naira Bonds and guarantee contracts Undrawn portion of loan commitments Letters of credit 1,054 863 4,697 6,614 43 1,215 4,358 5,616 59 863 4,369 5,291 43 1,215 4,358 5,616 220 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank (b) Lease liability This relates to lease rental for aircraft and properties used by the Group. The net carrying amount of leased assets, included within property and equipment is N21.1 billion and N16.1 billion as at 31 December 2022. (31 December 2021: N28.60 billion and N20.12 billion) for both Group and Bank respectively. The undiscounted cash ﬂow 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 1,252 8,572 13,141 22,965 4,561 19,531 11,681 35,773 857 2,921 13,114 16,892 4,311 19,226 4,843 28,380 The table below shows the movement in lease liability during the year. In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank As at 1 January Additions Reclassiﬁcation Lease Termination Principal repayment Modiﬁcation Interest expense Interest paid Foreign exchange diﬀerence At end of the year 24,102 1,491 1,255 (4,011) (3,493) 675 2,082 (333) (1,631) 14,990 24,456 499 - - (2,802) 353 3,427 (2,003) 172 24,102 16,708 1,363 - (8,640) (2,927) 674 2,069 (333) - 8,914 17,521 259 - - (2,007) - 2,885 (1,950) - 16,708 Notes 221 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 30. On-lending facilities (a) This comprises: Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme Loan (i) Bank of Industry (BOI) Intervention Loan (ii) Central Bank of Nigeria (CBN) / Bank of Industry(BOI) - Power & Aviation intervention Funds (iii) CBN MSMEDF Deposit (iv) FGN SBS Intervention Fund (v) Excess Crude Loan Facilty Deposit (vi) Real Sector Support Facility (vii) Non-Oil Export Stimulation Facility (viii) Paddy Aggregation Scheme (Phase 2) Fund Creative Industry Financing Initiative (ix) Maize Aggregation Scheme Accelerated Agricultural Development Scheme (x) Classified as: Current Non-current (b) Movement In millions of Naira At beginning of the year Principal addition during the year Principal repayment during the year Interest expense during the year Interest paid during the year At end of the year 32,893 29,772 2,380 1,349 126,917 74,007 32,336 11,538 - - - - 43,631 32,266 3,893 1,233 136,605 83,030 40,398 19,593 - 229 - 8,363 32,893 29,772 2,380 1,349 126,917 74,007 32,336 11,538 - - - - 43,631 32,266 3,893 1,233 136,605 83,030 40,398 19,593 - 229 - 8,363 311,192 369,241 311,192 369,241 71,023 240,169 311,192 8,363 71,023 8,363 360,878 369,241 240,169 311,192 360,878 369,241 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 369,241 - (59,470) 6,278 (4,857) 311,192 384,573 14,482 (33,011) 4,881 (1,684) 369,241 369,241 - (59,470) 6,278 (4,857) 311,192 384,573 14,482 (33,011) 4,881 (1,684) 369,241 (i) The fund received under the Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme represents a credit line granted to the Bank for the purpose of providing concessionary funding to the agricultural sector. The facility has a tenor of 16 years with eﬀect from 2009 and will expire in September 2025. The facility attracts an interest rate of 2% per annum and the Bank is under obligation to on-lend to customers at an all-in interest rate of not more than 9% per annum. Based on the structure of the facility, the Bank assumes the default risk of all amounts lent to the Bank’s customers. This facility is not secured. (ii) The Central Bank of Nigeria (CBN) / Bank of Industry (B0I) - SME / Manufacturing Intervention Fund represents an intervention credit granted to the Bank for the purpose of reﬁnancing / restructuring existing loans to Small and Medium Scale Enterprises 222 (SMEs) and Manufacturing Companies. The total facility is secured by Nigerian Government Securities. 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 2% 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 2% per annum and the Bank is obligated to on-lend to SMEs at 9% per annum. The maximum tenor is 5 years while the tenor for working capital is 1 year. This facility is not secured. The Salary Bailout Scheme was approved by the Federal Government to assist State Governments in the settlement of outstanding salaries owed their workers. Funds are disbursed to Banks nominated by beneﬁciary States at 2% for onlending to the beneﬁciary states at 9%. The loans have a tenor of 20 years. Repayments are deducted at source, by the Accountant General of the Federation, as a ﬁrst line charge against each beneﬁciary state’s monthly statutory allocation. This facility is not secured.. 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. (iii) (iv) (v) (vi) (vii) (viii) Non-oil Export Stimulation Facility (NESF): This Facility was established by the Central Bank of Nigeria to diversify the economy away from the oil sector, after the fall in crude prices. The Central Bank invested N500billion debenture, issued by Nigerian Export-Import Bank (NEXIM). The facility disbursed per customer shall not exceed 70% of total cost of project, or subject to a maximum of N5billion. Funds disbursed to the Bank from CBN are at a cost of 2% which are then disbursed to qualifying customers at the rate of 9% per annum. (ix) 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 (x) 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 Notes 223 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 annum. Each state is allowed a facility of N1.5billion at 9% per annum and repayments are made via ISPO deductions. The Central Bank of Nigeria (CBN) further extended the 5% per annum interest rate on all intervention facilities for an additional year until February 28, 2023. The Bank on-lends to customers at 5% p.a. 31. Borrowings In millions of Naira 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Group Bank Long term borrowing comprise: Due to BUNGESA Due to KEXIM (i) Due to AFREXIM (i) Due to COMMERZ Due to ABSA bank (ili) Due to ICBC (Standard Bank London) (vi) Due to Mashreq (iv) Due to IFC (v) Due to First Abu Dhabi Bank Due to CAIXA Due to EMIRATESNB Due to J P Morgan Chase bank Due to Standard Chartered Bank UK Due to banks for clean letters of credit Due to WILBENTRAD Due to CITILON Due to SUMITOMOBN Due to ADMSTF Due to ZENUK 51,938 3,859 30,943 49,064 105,677 63,459 124,209 116,909 - 151,200 16,493 - 67,869 52,253 33,790 36,207 46,578 12,979 23 - 2,748 65,936 - 84,922 - 63,739 49,863 42,447 - - 31,808 10,869 398,137 - - - - - 51,938 3,859 30,943 49,064 105,677 63,459 124,209 116,909 - 151,200 16,493 - 67,869 74,550 33,790 36,207 46,578 12,979 13,856 - 2,748 65,936 - 84,922 - 63,739 49,863 42,447 - - 31,808 - 427,932 - - - - - The Group has not defaulted in the payment of principal or interest neither has the Group been in breach of any covenant relating to the liabilities during the year (31 December 2021: nil). The assets exchanged under repurchase agreements with counterparties are disclosed in note 17. 963,450 750,469 999,580 769,395 Classified as: In millions of Naira 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Group Bank 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 224 846,540 116,910 963,450 750,469 1,243,614 40,609 (20,917) (1,135,414) 85,089 963,450 724,548 25,921 750,469 870,080 712,420 34,778 (41,325) (860,123) 34,639 750,469 882,670 116,910 999,580 769,395 1,279,743 38,254 (20,917) (1,154,340) 87,445 999,580 743,474 25,921 769,395 874,090 693,944 34,011 (40,788) (826,805) 34,943 769,395 i. Due to KEXIM(The Export- Import Bank of Korea) The amount of N3.86billion (US $8.4million) represents the outstanding balance from two (2) short term loan facilities of US $4.8m and US $12million, granted by KEXIM in May 2022 and June 2022 respectively. Interest is payable quarterly at 3 months Term Sofr+1.8% for all running obligations. Final repayments on these facilities are due in May 2023 and June 2023 respectively. ii. Due to AFREXIM (African Export-Import Bank) The outstanding balance of N30.94bllion (US $66.66million) due to AFREXIM represents the amount payable by the Bank from 3year term loan, with a oneyear 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. iii. Due to ABSA (Amalgamated Banks of South Africa) The amount of N105.68billion (US 229 million) represents the amount payable by the Bank on dollar repurchase facilities of US$50 million each granted by ABSA in June 2022and August 2022 respectively. Interest is payable quarterly and is priced at a ﬁxed rate of 4.85% & 5.64%per annum respectively. The facility will mature in June 2023 and August 2023. iv. Due to Mashreq Bank The amount of N124.21 billion(US $269 million) represents the amount payable by the Bank on syndicated loan granted to the bank in April 2022 with Mashreq as the Lead Arranger, Bookrunner and Coordinator. Interest is payable at maturity, and it is priced at 12months Term Sofr+1.5%per annum and will mature in April 2023. v. Due to IFC (International Finance Corporation) The amount of N116.91 billion (US $250million) represents the amount payable by the bank on a 3-year term loan granted by IFC in two tranches of $150m & $100m in July 2022 and September 2022 respectively. Interest is payable semiannually at 6 months Term SOFR+2.87% and the facility will mature in September 2025. vi Due to ICBC Standard Bank Plc The amount of N63.46 billion (US $135 million) represents the amount payable by the Bank on a 6 month repurchase facility of US$ 90 million & US$45 million granted by ICBC in August 2022 & November 22 respectively. Interest is payable at maturity and both deals are priced at 6month Term Sofr+2.75% per annum and will mature in February 2023 and May 2023 respectively 32. Debt securities issued in Millions of Naira 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21 Group Bank Due to Euro bond holders - 45,799 - 45,799 In May 2022, the group paid down outstanding balance of the second tranche of US $500million eurobond. This eurobond was issued by Zenith Bank in May 2017 with a maturity date of May 2022 The Group has not had any defaults of principal, interest or other breaches with respect to the debt securities during the period (31 December 2021: Nil). Notes 225 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Movement in debt securities issued In Millions of Naira At start of the year Revaluation loss for the year Interest expense Principal repayment Interest paid Foreign exchange At end of the year Classified as: Current Non-current 33. Derivative liabilities Instrument types (Fair value): Forward and Swap Contracts Futures contracts Instrument types (Notional Amount): Forward and Swap Contracts Futures contracts Classified as: Current see additional disclosures in Note 19. 34. Share capital Issued and fully paid Group Bank 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21 45,799 - 1,860 (46,071) (1,699) 111 - - - 6,026 299 6,325 229,332 6,262 235,594 43,177 2,491 3,385 - (3,254) - 45,799 45,799 - 10,167 4,507 14,674 226,471 243,110 469,581 45,799 - 1,860 (46,071) (1,669) (683) - - 5,741 299 6,040 191,737 11,589 203,326 43,177 2,491 3,385 - (3,254) - 45,799 45,799 - 11,350 3,820 15,170 257,536 133,919 391,455 6,325 14,674 6,040 15,170 31,396,493,787 ordinary shares of 50k each (December 2021: 31,396,493,787) 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. 226 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 Share premium Group 31-Dec-22 255,047 31-Dec-21 255,047 Bank 31-Dec-22 255,047 31-Dec-21 255,047 The nature and purpose of the reserves in equity are as follows: (b) Share premium: Premiums from the issue of shares are reported in share premium. (c) (d) Retained earnings: Retained earnings represent undistributed proﬁts, net of statutory appropriations attributable to the ordinary shareholders. Statutory reserve: This represents the cumulative amount set aside from general reserves/retained earnings by the Bank and its subsidiaries. This amount is non-distributable. The Bank’s appropriation is in line with BOFIA 2020 which 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 N35.19billion (2021: N34.97 billion) representing 15% of Zenith Bank’s proﬁt after tax was appropriated. Other Non-Nigerian subsidiaries also make appropriation which is based on their proﬁt and in line with the requirement of their Central Bank. (e) SMIEIS reserve: 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). 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) Fair value reserve: Comprises fair value movements on equity and debt 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. Credit risk reserve: This reserve represents the cumulative diﬀerence between the loan loss provision determined per the Prudential Guidelines of the Central Bank of Nigeria and the Central Bank of other subsidiaries vis-a-viz the allowance/ reserve for loan losses as determined in line with the principles of IFRS 9. As at 31 December 2022, the Bank has made a cumulative credit risk reserve of N93.91 billion, while the cumulative amount made by the Group is N95.30 billion (31 December 2021: Group N21.85 billion and Bank 20.02 billion). (i) 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 below for the changes in non-controlling interest during the year. Notes 227 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira 31-Dec-22 31-Dec-21 Movement in Non-controlling interest At start of the year Proﬁt for the year Foreign currency translation diﬀerences At end of year 36. Pension contribution 1,144 (139) (192) 813 974 156 14 1,144 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 period were N3.89 billion and N2.98 billion respectively (31 December 2021: N4.07 billion and N2.80 billion). In millions of Naira 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21 Group Bank 37. Personnel expenses Compensation for the staﬀ are as follows: Salaries and wages Other staﬀ costs Pension contribution 74,102 8,423 3,887 86,412 69,910 5,903 4,072 79,885 58,576 6,916 2,983 68,475 53,466 4,860 2,797 61,123 (a) The average number of persons employed during the year by category: Executive directors Management Non-management Number Number Number Number 6 449 7,622 8,077 6 420 7,091 7,517 6 399 6,295 6,700 6 368 5,924 6,298 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 228 Number Number Number Number 257 61 2,601 683 717 58 3,700 8,077 80 1,819 145 1,106 1,164 154 3,049 7,517 - - 2,487 456 518 13 3,226 6,700 - 1,739 19 985 986 14 2,555 6,298 (b) Directors’ emoluments The remuneration paid to directors are as follows: Number Number Number Number Executive compensation Fees and sitting allowances Retirement Beneﬁt costs 1,563 602 3,279 5,444 1,086 568 9 1,663 Fees and other emoluments disclosed above include amounts paid to: The Chairman The highest paid director 1,563 312 3,279 5,154 39 285 1,086 267 9 1,362 38 246 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 15 35 15 13 Number Number Number Number 38. Group subsidiaries and related party transactions Parent: The Group is controlled by Zenith Bank Plc (incorporated in Nigeria) which is the parent company and whose shares are widely held. Subsidiaries: The amount of N6,266 billion (31 December 2021: N5,568 billion) represents the total pension assets under custody held by the Bank’s subsidiary, Zenith Pensions Custodian Limited under the custodial business. Included in the amount above is N114 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 are shown below. Entity Foreign/banking subsidiaries: Zenith Bank (Ghana) Limited Zenith Bank (UK) Limited Zenith Bank (Sierra Leone) Limited Zenith Bank (Gambia ) Limited Zenith Pensions Custodian Limited Zenith Nominee Limited Effective holding % Nominal share capital held 99.42 % 100.00 % 99.99 % 99.96 % 99.00 % 99.00 % 7,066 21,482 2,059 1,038 1,980 1,000 Notes 229 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 31 December, 2022 Transactions and balances with subsidiaries Receivable from Payable to Income received from Expense paid to In millions of Naira Zenith Bank (UK) Limited Zenith Bank (Ghana) Limited Zenith Bank (Sierra leone) Limited Zenith Bank (Gambia) Limited Zenith Pensions Custodian Limited 158,211 24 442 796 - 36,212 9,968 - - 708 4,643 6,897 - - 6,000 - - - - 697 The income received includes dividend received from subsidiaries during the year. 31 December 2021 Transactions and balances with subsidiaries Receivable from Payable to Income received from Expense paid to In millions of Naira Zenith Bank (UK) Limited Zenith Bank (Ghana) Limited Zenith Bank (Sierra leone) Limited Zenith Bank (Gambia) Limited Zenith Pensions Custodian Limited Significant restrictions 284,453 1,451 353 803 4 34,924 116 - - 708 3,445 8,247 - - 6,000 - - - - - 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 and 3.6 and for disclosures on liquidity and capital adequacy requirements respectively. The carrying amounts of banking subsidiaries’ assets and liabilities are N1,986 billion and N1,767 billion respectively (31 December 2021: N1,907 billion and N1,669 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 and non-executive directors, including their family members 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-22 31-Dec-21 31-Dec-22 31-Dec-21 Group Bank Key management compensation Short term beneﬁts Post employment beneﬁts Fees and sitting allowances 230 1,861 3,279 602 5,742 1,716 47 375 2,138 1,861 3,279 312 5,452 787 13 267 1,067 In millions of Naira 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21 Group Bank Loans and advances to key management personnel At start of the year Granted during the year Repayment during the year At end of of the year Interest earned 2,902 445 (102) 3,245 261 1,797 2,167 (1,062) 2,902 123 1,432 310 (50) 1,692 69 1,476 - (44) 1,432 65 Loans to key management personnel include mortgage loans and other personal loans. The loans are repayable from various repayment cycles, ranging from monthly to annually over the tenor and have an average interest rate of 4%. Loans granted to key management personnel are performing. Insider related transactions: These have been disclosed in accordance with CBN circular BSD/1/2004 31 December, 2022 Name of company Relationship/Name Loans Deposits Interest received Interest paid Directors Quantum Fund Management Common signiﬁcant shareholder/Jim Ovia Zenith General Insurance Company Ltd Common directorship/Jim Ovia Cyberspace Network Zenith Trustees Ltd Oviation limited Sirius Lumina Ltd Common signiﬁcant shareholder /Jim Ovia Common signiﬁcant shareholder /Jim Ovia Common directorship /Jim Ovia Director / Prof. Sam Enwemeka 1,588 - - - - - - 3,298 10 1,026 763 7 3,497 1 69 - - - - - - 1,588 8,602 69 - - - - - - - - Insider related transactions: These have been disclosed in accordance with CBN circular BSD/1/2004 31 December 2021 Directors Quantum Fund Management Common signiﬁcant shareholder/Jim Ovia Zenith General Insurance Company Ltd Common directorship/JimOvia Cyberspace Network Zenith Trustees Ltd Oviation Limited Sirius Lumina Ltd Common signiﬁcant shareholder /Jim Ovia Common signiﬁcant shareholder /Jim Ovia Common directorship /Jim Ovia Director / Prof. Sam Enwemeka 1,692 2,699 60 15 - - - - - - 18 1,136 484 12 2,358 1 - - - - - - - 9 - - - - 1,692 6,880 60 24 Loans granted to related parties are secured over real estate and other assets of the respective borrowers. Loans granted to related parties are performing. Notes 231 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 No life time impairment has been recognised in respect of loans granted to related parties (31 December 2021: Nil). During the year, Zenith Bank Plc. paid N795 million as insurance premium to Zenith General Insurance Limited (31 December 2021: N2.23 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 N2.76 billion Naira. The lease agreement has been exited and a total payment of 1.84bn was made during the year. The Bank paid N3.33billion (31 December 2021:N3.89 billion) to Cyberspace Network for various Information technology services rendered during the year. 39. Contingent liabilities and commitments (a) Legal proceedings 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 N967 billion (31 December 2021: N143.5 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. In arriving at this conclusion, the Group has relied on evidence and recommendations from its internal litigation group and its team of external solicitors. (b) Capital commitments At the reporting date, the Group had capital commitments amounting to N630 million (31 December 2021: N1,930 billion) in respect of authorized and contracted capital projects. Break down of capital commitments Property and equipment: Motor vehicles, Furniture and equipments Property Intangible assets: Information technology Group 31 December 2022 31 December 2021 191 104 334 629 811 748 371 1,930 (c) Confirmed credits and other obligations on behalf of customers In the normal course of business the group is a party to ﬁnancial instruments with oﬀ-balance sheet risk. These instruments are issued to meet the credit and other ﬁnancial requirements of customers. The contractual amounts of the oﬀ-balance sheet ﬁnancial instruments are: Performance bonds and guarantees Usance (see note ii below) Letters of credit (see note ii below) Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 384,382 276,481 363,355 364,632 195,354 554,486 1,024,218 1,114,472 349,742 276,481 279,791 906,014 335,833 195,354 398,605 929,792 Pension Funds (See Note iii below) 6,265,755 5,568,341 6,265,755 5,568,341 (i) 232 The transaction related performance bonds and guarantees are, generally, short-term commitments to third parties which are not directly dependent on the customer's creditworthiness. As at 31 December 2022, performance bonds and guarantees worth N7.5 billion (31 December 2021: N356 billion) are secured by cash while others are otherwise secured. (ii) (iii) 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 N6,266 billion (31 December 2021: N5,568 billion) represents the total pension 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 N114.4 million (31 December 2021: N94.4 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 pension asset held by our subsidiary, Zenith Pension Custodian Limited, the Group does not have any contingent liabilities in respect of related parties. 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 December 2022 31 December 2021 31 December 2022 31 December 2021 100,467 31,396 3.20 0.30 2.90 87,952 9,419 97,371 97,328 31,396 3.10 0.30 2.80 84,808 9,418 94,226 100,467 31,396 3.20 0.30 2.90 87,910 9,419 97,330 97,328 31,396 3.10 0.30 2.80 84,771 9,418 94,189 TThe Board of Directors, pursuant to the powers vested in it by the provisions of Section 426 of the CAMA 2020, paid an interim dividend of N0.30 per share and proposed a ﬁnal dividend of N2.90 per share (31 December 2021: interim; N0.30, ﬁnal; N2.80) from the retained earnings account as at 31 December 2022. This is subject to approval by shareholders at the next Annual General Meeting. The number of shares in issue and ranking for dividend represents the outstanding number of shares as at 31 December 2022 and 31 December 2021 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 cash ﬂow statement, cash and cash equivalents include cash and non-restricted balances with central banks, treasury bills and other eligible bills, operating account balances with other banks, amount due from other banks and short-term governement securities. Notes 233 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 Cash and cash balances with central bank (less mandatory reserve deposits) Treasury bills ((3 month tenor) (see note 16) Due from other banks Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 452,136 157,466 407,487 122,465 232,218 1,256,404 1,940,758 315,795 661,258 1,134,519 232,218 1,017,481 1,657,186 230,213 423,896 776,574 42. Compliance with banking regulations The bank did not pay any ﬁne or penalty during the year. 43. Prudential Adjustments Provisions under prudential guidelines are determined using the time-based provisioning speciﬁed by the revised Prudential Guidelines issued by the Central Bank of Nigeria. This is at variance with the expected credit loss (ECL) model required under IFRS 9. As a result of the diﬀerences in the methodology/provision, there will be variances in the impairments 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) 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: (i) Where Prudential Provisions is greater than IFRS provisions, the resulting diﬀerence should be transferred from the general reserve account to a nondistributable regulatory credit risk reserve. (ii) Where Prudential Provisions is less than IFRS provisions, the IFRS determined provision is charged to the statement of comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter transferred to the general reserve account. (b) The non-distributable reserve is classiﬁed under Tier 1 as part of the core capital for the purpose of determining capital adequacy. In the guidelines to IFRS implementation, the Central Bank of Nigeria (CBN) directed banks to maintain a regulatory credit risk reserve in the event that the impairment on loans determined using the CBN prudential guideline is higher than the impairment determined using IFRS principles. As a result of this directive, the Bank holds credit risk reserves of N93,911 billion as at 31 December 2022. Provision for loan losses per prudential guidelines In millions of Naira Loans and advances: -Lost - Doubtful - Substandard - Watchlist - Performing 234 Bank 31 December 2022 31 December 2021 74,968 1,901 1,069 96,484 62,850 237,272 16,656 7,814 3,790 99,109 47,936 175,305 In millions of Naira 31 December 2022 31 December 2021 Bank 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 25,268 34,341 43,518 103,127 75 39 18 2,583 28,868 3,361 5,290 143,361 93,911 (93,911) 17,708 26,671 94,142 138,521 58 395 198 666 9,835 - 5,616 155,289 20,016 (20,016) In millions of Naira Group Bank 44. Statement of cash flow reconciliation (i) Investment securities (see note 17 & 21) 31 December 2022 Investment securities (including pledged instruments amortised cost Investment securities including pledged instruments at FVTPL and FVOCI Investment securities (including pledged instruments) at amortised cost Investment securities including pledged instruments at FVTPL and FVOCI At 1 January 2022 Change in ECL allowance Additions to Investment securities Disposal of Investment securities Unrealised gain from changes in fair value recognised in proﬁt or loss Fair value gain/loss OCI Interest Income Interest received Foreign exchange diﬀerence Balance as at 31 December 2022 Recognised in cash ﬂow statement 757,851 (62,562) 559,128 (403,066) - - 113,841 (59,116) 1,113 (907,188) - 685,135 - 200 - (1,802) 1,507 - - 603 (940,273) (254,630) 483,199 (1,738) 206,085 (65,448) - - 64,914 (50,758) 1,113 (637,367) - 97,471 - 200 - (1,802) 8,109 - - 603 (104,443) 138 Notes 235 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 31 December 2021 Investment securities (including pledged instruments) at amortised cost At 1 January 2021 Change in ECL allowance Additions to Investment securities Disposal to Investment Securities Unrealised gain from changes in fair value recognised in proﬁt or loss Fair value gain/loss OCI Interest income Interest received Foreign exchange diﬀerence Balance as at 31 December 2022 Recognised in cash flow statement 649,228 (2,835) 300,852 (230,056) - - 88,181 (47,834) 314 (757,850) - In millions of Naira (iia) Treasury bills (Amortised cost) (see note 16 & 17) 31 December 2022 Investment securities (including pledged instruments) at amortized cost and FVOCI 521,402 - - - (173) 3,372 - - 524 (685,136) (160,011) Investment securities (including pledged instruments) at amortised cost 381,932 248 159,577 (75,928) - - 46,029 28,973 314 (483,199) - Investment securities (including pledged instruments) at amortized cost and FVOCI 124,910 - - - (173) 5,599 - - 524 (97,471) 33,389 Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 Treasury bills (including pledged instruments) at amortised cost as at 1 January (798,022) (535,673) (648,637) (351,511) Change in ECL allowance Interest income Additions Redemptions Interest received Balance as at 31 December 2022 (iib) Treasury bills (FVTPL) (see note 16) 31 December 2022 Treasury bills fair value through proﬁt or loss (Including pledged instruments) as at 1 January Unrealised fair value gain Balance as at end of period Recognised in Cashflow (iii) Loans and advances (see note 20) 31 December 2022 Loans and advances at 1 January Changes in ECL allowance Interest income Interest received Foreign exchange diﬀerence Balance as at end of year Recognised in Cash flow 236 (400) (781) 356 (281) (43,609) (40,426) (32,972) (19,520) (3,060,163) (2,652,094) (2,968,565) (2,346,839) 2,833,003 2,449,816 2,679,567 2,056,995 29,300 31,136 20,942 12,519 989,891 748,022 950,021 648,637 954,462 129,402 770,094 86,644 952,131 129,281 (1,159,965) (954,462) (1,159,965) (76,101) (97,724) (78,553) 769,800 86,393 (952,131) (95,938) 3,355,728 2,779,027 3,099,452 2,639,797 (38,343) (48,873) (38,429) 370,446 292,224 346,320 (48,357) 272,942 (342,562) (270,343) (298,466) (241,912) 125,432 67,679 124,357 67,679 (4,013,705) (3,355,728) (3,735,676) (3,099,452) (543,004) (536,014) (502,442) (409,303) (iv) Customer deposits In millions of Naira As at 1 January Interest expense Interest paid Foreign exchange diﬀerences Balance as at end of year Recognised in Cash flow (v) Other liabilities (see note 29) 31 December 2022 As at 1 January Changes in ECL allowance Lease modiﬁcation Lease liability additions Interest expense on lease liability Lease interest paid Principal repayment on lease liability Foreign exchange diﬀerence Unclaimed dividend received Lease terminations Balance as at end of year Net cash movement in operating activties (vi) Profit on disposal of property and equipment 31 December 2022 December 2021 Cost (see note 25) Accumulated depreciation (see note 25) Net book value Sales proceed Profit on Disposal (see note 10) (vii) Due from Banks (greater than 90 days) 31 December 2022 As at 1 January Due to banks below 90 days Changes in ECL allowance Interest Income Interest received Foreign exchange diﬀerence Balance as at end of Period Recognised in cash flow statement Group Bank 31 Dec 2022 (6,472,054) (122,710) 116,053 (134,652) 8,975,653 2,362,290 31 Dec 2021 (5,339,911) (60,322) 58,785 (39,313) 6,472,054 1,091,293 31 Dec 2022 (5,169,199) (104,559) 101,000 (108,216) 7,434,806 2,153,832 31 Dec 2021 (4,298,258) (37,556) 36,019 (45,554) 5,169,199 823,850 (487,432) (703,292) (427,876) (599,464) (998) (675) (1,491) (2,082) 333 4,011 (39,361) (1,117) 8,640 568,559 48,387 (784) (353) (499) (3,427) 2,003 2,802 (8,330) (612) - (487,432) (225,060) 326 (675) (1,363) (2,069) 333 2,927 (40,993) (1,117) 8,640 546,347 84,480 (784) - (259) (2,885) 1,950 2,007 (8,159) (612) - (427,876) (180,330) 31-Dec-21 31-Dec-20 31-Dec-21 31-Dec-20 644 - (644) 3,207 2,563 (6,395) 6,025 (370) 448 78 (220) - (220) 2,671 2,451 (6,196) 5,828 (368) 437 69 31-Dec-21 31-Dec-20 31-Dec-21 31-Dec-20 29,986 - 649 12,270 (12,159) - (46,407) (15,661) 179,244 (666) - 6,766 (16,297) - (29,986) 139,061 94,157 - (17) 3,967 (3,857) - (115,315) (21,065) 179,244 - - 1,898 (11,429) - (94,157) 75,556 Notes 237 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 In millions of Naira (viii) Other assets 31 December 2022 As at 1 January Changes in ECL allowance Foreign exchange diﬀerence Balance as at end of period Net cash movement in operating activities (ix) Net movement in Derivatives Derivative assets 31 December 2022 At 1 January Balance as at end of year Derivative liabilities 31 December 2022 At 1 January Balance as at end of period Recognised in cash ﬂow Net movement in derivatives Group Bank 31 Dec 2022 31 Dec 2021 31 Dec 2022 31 Dec 2021 168,210 (22,398) 8,125 (213,523) (59,586) 169,967 (7,555) 7,160 (168.210) 1,362 152,326 (22,394) 8,125 (193,792) (55,735) (56,187) 49,874 (6,313) (14,674) 6,325 (8,349) 2,036 (44,496) 56,187 11,691 (11,076) 14,674 3,598 8,073 (57,476) 48,851 (8,625) (15,170) 6,040 (9,130) 505 Group Bank 159,625 (7,563) 7,160 (152,326) 6,896 (41,729) 57,476 15,747 (11,076) 15,170 4,094 11,653 In millions of Naira 31 December 2022 31 December 2021 31 December 2022 31 December 2021 (x) Restricted balances (Cash Reserve)31 December 2022 Opening Balance Mandatory reserve deposit with central bank Special Cash Reserve Recognised in cash flow (xi) Interest paid 31 December 2022 1,330,897 (1,668,919) 80,689 (418,711) 1,411,422 (1,250,208) 80,689 80,525 1,275,201 (1,614,217) 80,689 (419,705) 1,370,619 (1,194,512) 80,689 95,418 In millions of Naira 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Group Bank Customer deposit (see note 44(iv) ) Onlending facilities (see note 30b) Lease liabilities (see 44(v)) Borrowings (see note 31) Debt securities (see note 32) 238 (116,053) (4,857) (333) (20,917) (1,699) (143,859) (58,785) (1,684) (3,254) (2,003) (41,325) (107,051) (101,000) (4,857) (333) (20,917) (1,698) 128,805 (36,019) (1,684) (3,254) (1,950) (40,788) (83,695) (xii) Unrealised fair value change 31 December 2022 Investment securities (see note 44(i)) Treasury bills (see note 44(ii)) Derivatives (see note 44(ix)) Hedging eﬀectiveness (xiiia) Interest received from operating activities 31 December 2022 Due from other banks (see note 41(vii)) Loans and advances (see note 41(iii)) 1,802 (129,402) (2,036) 39,590 (90,046) 173 (86,644) (8,093) - (94,564) 1,802 (129,281) (505) 39,590 (88,394) 173 (86,393) (11,653) - (97,873) 12,160 342,562 354,722 16,297 270,343 286,640 5,858 298,466 302,324 11,429 241,912 253,341 (xiiib) Interest received from treasury bills and investment securities 3 31 December 2022 1 December, 2021 Treasury bills (see note 41(ii)) Investment securities (see note 41(i)) (xiva) Acquisition of Right of use asset 31 December 2022 Addition to right of use (see note 26) Lease liability addition (see note 44(v)) 31-Dec-21 31-Dec-20 31-Dec-21 31-Dec-20 29,300 59,116 88,416 (3,772) 1,491 (2,281) 31,136 47,834 78,970 (739) 499 (240) 20,942 50,758 71,700 (3,394) 1,363 (2,031) 12,519 28,973 41,492 (409) 259 (150) (xivb) Additions to property, plant and equipment other than right of use 31 December 2022 Addition to property, plant and equipment (see note 26) Addition to right of use asset (see note 26) (71,017) 3,772 (67,245) (34,848) 739 (34,109) (67,751) 3,394 (64,357) (31,993) 409 (31,584) Notes 239 Zenith Bank Plc Annual Report December 31, 2022 Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2022 (xv) Additions to investment securities 31 December 2022 In millions of Naira Investment securities at amortized cost Investment securities at FVOCI (xvi) Lease Modification 31 December 2022 Right of use Lease Liability (xvii) Uncliamed dividend received 31 December 2022 As at 1 January Balance as at 31 Dec 2022 (xviii) Lease derecognition 31 December 2022 Right of use- cost Right of use-Accumulated depreciation lease liability 45. Comparatives Group Bank 31 December 2022 31 December 2021 31 December 2022 31 December 2021 (559,128) (200) (559,328) (300,852) - (300,852) (206,085) (200) (206,285) (159,577) - (159,577) (675) 675 - (28,647) 29,764 1,117 12,773 (6,160) (8,640) (2,028) - 353 (353) (28,035) 28,647 612 - - - - (675) 675 - (28,647) 29,764 1,117 12,600 (5,985) (8,640) (2,025) - - - (28,035) 28,647 612 - - - - Certain disclosures and some prior year ﬁgures have been re-presented to conform with current period presentation. 46. Events after the reporting period On 14 February 2023, the Group exchanged N123.6bln (GHS 2,675,754,659 ) of its existing Government of Ghana bonds for a series of new bonds with maturity dates commencing from 2027 to 2038 under the Ghana Domestic Debt Exchange Programme. The new bonds were successfully settled on the 21st of February 2023 and have been allotted on the Central Securities Depository. The eﬀect of the exchange on impairment of the existing bonds at 31 December 2022 was duly recognised in the consolidated ﬁnancial statements. See disclosures in Note 4.1 240 ... THË ÏDËÅL WÅŸ TØ SÅVË FØR ŸØÜR Other National Disclosures04Zenith Bank Plc Annual Report December 31, 2022 Zenith Bank Plc Annual Report December 31, 2022 Value Added Statement In millions of Naira 31 December 2022 31 December 2022 31 December 2021 31 December 2021 % % Group Gross income Interest and fee expense - Local - Foreign Impairment loss on ﬁnancial and non-ﬁnancial instruments Bought-in materials and services - Local - Foreign Value added Distribution Employees 956,351 (132,589) (76,169) 747,593 (123,252) 624,341 (206,841) (16,131) 401,369 100 765,558 (110,698) (25,021) 629,839 (59,932) 569,907 (167,921) (12,643) 389,343 100 Salaries and beneﬁts 86,412 22 79,885 21 Government Income tax Retained in the Group Replacement of property and equipment/ intangible assets Proﬁt for the year (including statutory reserves, small scale industry, and non-controling interest) 60,739 30,308 233,910 14 8 56 35,816 29,084 244,558 9 7 63 Total Value Added 401,369 100 389,343 100 Value added represents the additional wealth which the group has been able to create by its own and employees eﬀorts. 242 In millions of Naira 31 December 2022 31 December 2022 31 December 2021 31 December 2021 % % Bank Gross income Interest and fee expense - Local - Foreign Impairment loss on ﬁnancial and non-ﬁnancial instruments Bought-in materials and services - Local - Foreign Value added Distribution Employees 833,087 (136,285) (40,112) 656,690 (61,896) 594,794 (204,704) - 390,088 100 677,283 (65,532) (45,161) 566,589 (56,175) 510,415 (165,857) - 344,558 100 Salaries and beneﬁts 68,475 18 61,123 18 Government Income tax Retained in the Group Replacement of property and equipment/ intangible assets Proﬁt for the year (including statutory reserves, small scale industry, and non-controling interest) 59,457 27,564 234,593 15 7 60 24,034 26,268 233,133 7 8 68 Total Value Added 390,089 100 344,558 100 Other National Disclosures 243 Zenith Bank Plc Annual Report December 31, 2022 Zenith Bank Plc Annual Report December 31, 2022 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 asset Other assets Property and equipment Intangible assets Total assets Liabilities Customer deposits Derivative liabilities Current tax payable Deferred tax liabilities Other liabilities On-lending facilities Borrowings Debt Securities issued Total liabilities Net assets Equity Share capital Share premium Retained earnings Other Reserves 31 December 2022 31 December 2021 31 December 2020 31 December 2019 31 December 2018 2,201,744 1,488,363 1,591,768 2,246,538 1 764 946 1.577 875 254,663 1,302,811 49,874 4,013,705 1,728,334 - 18,343 213,523 230,843 25,251 392,594 691,244 56,187 3,355,728 1,303,725 - 1,837 168,210 200,008 25,001 298,530 810,494 44,496 2,779,027 996,916 - 5,786 169,967 190,170 16,243 936,278 991.393 431,728 707,103 92,722 2,305,565 591,097 - 11,885 77,395 185,216 16,497 954,416 1,000,560 592,935 674,274 88,826 1,823,111 565,312 - 9,513 80,948 149,137 16,678 12,285,629 9,447,843 8,481,272 6,346,879 5,955,710 8,975,653 6,472,054 5,339,911 4,262,289 3,690,295 6,325 64,856 16,654 568,559 311,192 963,450 - 10,906,689 1,378,940 15,698 255,047 625,005 482,377 14,674 16,909 11,603 487,432 369,241 750,469 45,799 8,168,181 1,279,662 15,698 255,047 607,203 400,570 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 14,762 9,711 25 363,764 392,871 322,479 39,092 5,404,993 941,886 15,698 255,047 412,948 257,439 941,132 754 941,886 16,995 9,154 67 231,716 393,295 437,260 361,177 5,139,959 815,751 15,698 255,047 322,237 221,231 814,213 1,538 815,751 Attributable to equity holders of the parent Non-controlling interest 1,378,127 1,278,518 1,116,499 813 1,144 974 Total shareholders' equity 1,378,940 1,279,662 1,117,473 * See note 43 244 In millions of Naira 31 December 2022 31 December 2021 31 December 2020 31 December 2019 31 December 2018 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 Taxation Profit after tax Foreign currency translation diﬀerences Fair value movements on equity instruments Fair value movements on debt securities at FVOCI Related tax Total comprehensive income Earning per share: Basic and diluted (kobo) 945,554 765,558 696,450 667,751 630,344 - (173,539) (364,113) (123,252) 284,650 (60,739) 223,911 (28,768) 8,109 (6,602) - 196,650 214,667 - (106,794) (318,458) (59,932) 280,372 (35,816) 244,556 8,485 5,599 (2,227) - - (121,131) (279,974) (39,534) 255,861 (25,296) 230,565 - 16,295 1,981 (355) - (148,532) (246,393) (24,032) 243,294 (34,451) 208,843 (8,498) 13,870 518 (66) - (144,458) (235,829) (18,372) 231,685 (38,261) 193,424 4,828 1,459 - - 256,413 214,667 248,486 199,711 214,667 199,711 714 778 734 665 615 Other National Disclosures 245 Zenith Bank Plc Annual Report December 31, 2022 Zenith Bank Plc Annual Report December 31, 2022 Five Year Financial Summary In millions of Naira Bank Statement of Financial Position Assets 31 December 2022 31 December 2021 31 December 2020 31 December 2019 31 December 2018 Cash and balances with central banks 2,102,394 1397,666 1,503,245 879,449 902,073 Treasury bills Assets pledged as collateral Due From Other Banks Derivatives Loans and advances Investment securities Investment in subsidiaries Investment in associates Deferred tax Other assets Property and equipment Intangible assets Total assets Liabilities Customer 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 2,206,668 1,577,647 1,393,421 822,449 817,043 254,565 1,132,796 48,851 357,000 518,053 57,476 298,530 532,377 41,729 431,728 482,070 92,722 592,935 393,466 88,826 3,735,676 3,099,452 2,639,797 2,239,472 1,736,066 622,781 34,625 477,004 34,625 - - 193,792 214,572 23,958 - - 152,326 177,501 23,542 333,126 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 10,570,678 7,872,292 7,124,987 5,435,073 4,955,445 7,434,806 5,169,199 4,298,258 3,486,887 2,821,066 6,040 61,655 15 911 546,347 311,192 999,580 - 15,170 14,241 11.596 427,876 369,241 769,395 45,799 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 9,375,531 1,195,147 6,822,517 1,049,775 6,219,755 905,232 4,656,078 778,995 4,280,413 675,032 61,655 15 911 15,698 255,047 494,429 429,973 15,698 255,047 466,250 312,781 15,698 255,047 382,292 252,195 905,232 15,698 255,047 302,028 206,222 778,995 15,698 255,047 238,635 165,652 675,032 Attributable to equity holders of the parent 1,195,147 1,049,776 Total shareholders' equity 1,195,147 1,049,776 905,232 778,995 675,032 246 In millions of Naira 31 December 2022 31 December 2021 31 December 2020 31 December 2019 31 December 2018 Statement of profit or loss and other comprehensive income Gross earnings Interest expense Other operating expenses Impairment charge for ﬁnancial assets Profit before tax Income tax Profit after tax Other comprehensive income Fair value movements on equity instruments 833,087 (153,019) (324,122) (61,896) 294,050 (59,457) 234,593 - 8,109 8,109 677,283 (82,718) (281,223) (56,175) 257,167 (24,034) 233,133 - 5,599 5,599 595,921 (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) 165,480 - 1,459 1,459 Total comprehensive income 242,702 238,732 214,147 194,202 166,939 Earning per share: Basic and diluted (kobo) 747 743 630 567 527 Other National Disclosures 247 Zenith Bank Plc Annual Report December 31, 2022 Zenith Bank Plc Annual Report December 31, 2022 Share Capital History Financial year Nominal value of shares Number of shares Nominal value per share (N) (units) (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 3 0 - S e p - 0 8 3 1 - D e c - 0 9 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 8 , 3 7 2 , 3 9 8 , 3 4 3 . 0 0 16,744,796,686.00 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 3 1 - D e c - 2 0 3 1 - D e c - 2 1 3 1 - D e c - 2 2 1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0 31,396,493,786.00 1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0 31,396,493,786.00 1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0 31,396,493,786.00 1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0 31,396,493,786.00 248 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 0 . 5 0 . 5 nd PROXY FORM FOR THE 32  ANNUAL GENERAL MEETING OF ZENITH BANK PLC TO BE HELD VIRTUALLY VIA WWW.ZENITHBANK.COM/32AGM ON TUESDAY, MAY 2,  2023 AT 9.00 A. M. I/We, ………………………………… being a member of Zenith Bank Plc hereby appoint..................................................................................................................................................  ............................................................................................................................................................................................................................................................................................ ........................................................................................................................................................................................................... as our proxy to act and vote for us and on our  behalf at the Annual General Meeting of the Company  to be held via www.zenithbank.com/32AGM on Tuesday, May 2, 2023 at 9.00 a.m. and at any adjournment thereof. I/We desire this proxy to be used in favour of/or against the resolution as indicated below (strike out whichever is not desired). 1.   To present and consider the Bank's Audited Accounts for the ﬁnancial year ended 31  December, 2022, the Reports of the    Directors, Auditors and Audit Committee thereon. st 2.   To declare a ﬁnal dividend. 3.  To approve the appointment of the following Directors꞉ (a.)  (b.)  (c.)  (d.)  Dr. Peter Olatunde Bamkole as Independent Non‑Executive Director Mr. Chuks Emma Okoh as Non‑Executive Director Mrs. Adobi Stella Nwapa as Executive Director Mr. Anthony Akindele Ogunranti as Executive Director 4.   To re‑elect the following Directors who retire by rotation at this meeting (I)  (ii)  (iii)  Dr. Omobola Ibidapo‑Obe Ogunfowora Mr.  Gabriel Ukpeh Dr. Temitope Fasoranti  5.   To authorize the Directors to ﬁx the remuneration of the Auditors. 6.   To disclose the remuneration of Managers of the bank. 7.   To elect members of the Audit Committee. 8.   9.  That Dr. Al‑Mujtaba Abubakar,  Independent Non‑Executive Director of the bank. MON , who has attained the age of 70 years since the last general meeting be re‑elected as an  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, 2023 be and is hereby ﬁxed at N30 million  only” for each Director. Please indicate with “x” in the appropriate box how you wish your vote to be cast on the resolutions set out above.  Unless otherwise instructed, the proxy will vote or abstain from voting on  his/her discretion. Dated this 31st Day of March, 2023 Authorized Signatory               Name/Designation NOTE Please sign the Proxy Form and stamp at the Stamp Duties Ofﬁce and forward by return email to enquiry@veritasregistrars.com, veritasregistrars@veritasregistrars.com and  michael.otu@zenithbank.com or by depositing it 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 ﬁxed for the meeting. The Company will bear the cost of stamping of all the duly completed and signed proxy forms submitted within the stipulated time. The meeting would also be accessible to all members virtually on the bank's website and our social media platforms.  A member who is unable to attend the Annual General Meeting is allowed to vote by Proxy.                                                     ENVIRONMENTAL 00 00 0000 SOCIAL GOVERNANCE

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