ZENITH BANK PLC
RC: 150224
HEAD OFFICE
Heights,
� Zenith
@;I) P. 0. Box 75315,
\. Tel: (01) 2787000,
ZEIBNGLA
(@ www.zenithbank.com
Plot 84/87 Ajose Adeogun
Island,
Lagos.
Victoria
4647000
2927000,
I SWIFT:
Street,
z ZENITH
Zenith Bani< Plc
Annual Report -31 December 2023
THE BOARD:
Chairman:
Jim Ovia, CFR. I Group Managing
Mr. Gabriel
Non-Executives:
Ukpeh I Engr. Mustafa
Peter Olatunde
Bamkole
Executive
Director/CEO:
Directors:
Dr. Ebenezer
Henry Oroh I Adobi Nwapa I Akindele
Bello I Dr. AI-Mujtaba Abubakar
I Deputy Managing
MFR. I Omobola
Onyeagwu
Ogunranti
{Ph.D)
I Mr. Chuks Emma
Okoh I Dr. Juliet
Ehimuan
lbidapo-Obe
Ogunfowora
{Ph.D)
Director:
Dame (Dr.)
OON.
Adaora Umeoji,
ZENITH BANK PLC
DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS
DIRECTORS
Jim Ovia, CFR
Mr. Chuks Emma Okoh
Engr. Mustafa Bello
Dr. Juliet Ehimuan**
Mr. Gabriel Ukpeh
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director/Independent
Dr. Omobola Ibidapo-Obe Ogunfowora
Non-Executive Director/Independent
Dr. Peter Olatunde Bamkole
Non-Executive Director/Independent
Dr. Al-Mujtaba Abubakar, MFR
Non-Executive Director/Independent
Dr. Ebenezer Onyeagwu
Dr. Adaora Umeoji, OON*
Dr. Temitope Fasoranti***
Mr. Henry Oroh
Mrs Adobi Nwapa
Mr. Akindele Ogunranti
Group Managing Director/CEO
Deputy Managing Director
Executive Director
Executive Director
Executive Director
Executive Director
*Dr. Adaora Umeoji, OON exited from the Board effective 24 February, 2023. She was also re-appointed to the Board on 2 August 2023 following
approval by the CBN.
**Dr. Juliet Ehimuan was appointed to the Board effective 29 August, 2023.
***Dr. Temitope Fasoranti retired from the Board effective 29 December, 2023.
COMPANY SECRETARY
REGISTERED OFFICE
AUDITOR
Michael Osilama Otu Esq.
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.
REGISTRAR AND TRANSFER OFFICE
Veritas Registrars Limited (formerly Zenith Registrars Limited)
Plot 89 A, Ajose Adeogun Street
Victoria Island
Lagos.
1 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Index
Note
Directors' Report
Statement of Corporate Responsibility in Relation to the Financial
Statements
Corporate Governance Report
Page Note
3
8
9
7 Interest and similar expense
8 Impairment charge on financial and non-financial
instruments
9 Net income on fee and commission
Statement of Directors' Responsibilities in Relation to the Financial
Statements
23
10 Trading gains
Report of the Audit Committee
Management's Annual Assessment of, and Report on, Zenith Bank
Plc's Internal Control over Financial Reporting
Chief Finance Officer's Certification of management’s assessment on
internal control over financial reporting
Chief Executive Officer's Certification of management’s assessment
on internal control over financial reporting
Independent Practitioner’s Report
Independent Auditor's Report
Consolidated and Separate Statements of Profit or Loss and Other
Comprehensive Income
Consolidated and Separate Statements of Financial Position
Consolidated and Separate Statements of Changes in Equity
Consolidated and Separate Statements of Cash Flows
Notes to the Consolidated and Separate Financial Statements
1 General information
2.0a Changes in accounting policies
2.0b Material accounting policies
2.1 Basis of preparation
2.2 Basis of Consolidation
2.3 Translation of foreign currencies
2.4 Cash and cash equivalents
2.5 Financial instruments
2.6 Derivative instruments
2.7 Impairment
2 Reclassification of financial instruments
2.9 Restructuring of financial instruments
2.10 Collateral
2.11 Property and equipment
2.12 Intangible assets
2.13 Impairment of non-financial assets
2.14 Leases
2.15 Provisions
2.16 Employee benefits
2.17 Share capital and reserves
2.18 Recognition of interest income and expense
2.19 Fees, commission and other income
2.20 Net trading gains
2.21 Operating expenses
2.22 Current and deferred income tax
2.23 Earnings per share
2.24 Segment reporting
2.26 Fiduciary activities
2.26 Deposit for investment in AGSMEIS
2.27 Hyperinflationary accounting
3 Risk management
4 Critical accounting estimate and judgements
5 Segment Analysis
6 Interest and similar income
11 Other operating income
12 Operating expenses
13 Taxation
14 Earnings per share (EPS)
15 Cash and balances with central banks
16 Treasury bills
17 Assets pledged as collateral
18 Due From Other Banks
19 Derivative assets
20 Loans and advances
21 Investment Securities
22a Investment in subsidiaries
22b Condensed results of consolidated entities
23 Investments in associates
24 Deferred tax balances
25 Other assets
26 Property and equipment
27 Intangible assets
28 Customers' deposits
29 Other liabilities
30 On lending facilities
31 Borrowings
32 Debt Securities issued
33 Derivative liabilities
34 Share capital
35 Share premium, retained earnings and other reserves
36 Pension contribution
37 Personnel expenses
38 Group subsidiaries and related party transactions
39 Contingent liabilities and commitments
40 Dividend payable
41 Cash and cash equivalents
42 Compliance with Banking Regulations
43 Prudential Adjustments
44 Statement of cash flow workings
45 Comparatives
Other National Disclosures
Value Added Statement
Five Year Financial Summary
24
25
26
28
30
32
39
40
41
43
45
45
45
47
47
47
48
49
49
53
54
56
56
56
57
57
58
58
59
59
60
61
62
62
62
62
63
64
64
64
64
65
155
157
162
Page
162
162
163
163
164
165
166
167
168
168
168
169
169
170
172
173
174
178
179
180
182
189
190
190
191
194
196
196
196
197
198
199
199
202
203
203
203
204
205
210
211
212
214
2 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Directors' Report
for the Year Ended 31 December 2023
The directors present their report on the affairs of ZENITH BANK PLC ("the Bank"), together with the financial statements and the independendt auditor's
report for the year ended 31 December 2023.
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 did not open any new branch and no
branch was closed.
As at 31 December 2023 the Group had 447 branches, 166 cash centers; 2,102 ATM terminals; 414,192 POS terminals and 25,653,330 cards issued to its
customers. (31 December 2022: 446 branches, 166 cash centers, 2,108 ATM terminals, 233,024 POS terminals and 21,832,175 cards issued).
3.
Operating results
Gross earnings of the Group increased by 125.4% and profit before tax increased by 179.6% . Highlights of the Group’s operating results for the year under
review are as follows:
Gross earnings
Profit before tax
Income tax expense
Profit after tax
Non- controlling interest
Profit attributable to the equity holders of the parent
Appropriations
Transfer to statutory reserve
Transfer to credit risk reserve
Transfer from retained earnings and other reserves
Basic and diluted earnings per share (Naira)
4.
Dividends
31 December 2023
N' Million
31 December 2022
N' Million
2,131,750
945,554
795,962
(119,053)
676,909
340
676,569
97,693
(1,322)
580,198
676,569
21.55
284,650
(60,739)
223,911
(139)
224,050
35,419
73,458
115,173
224,050
7.14
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 N3.50 per share which in addition to the N0.50 per share as interim dividend amounts to N4.00 per share (2022: Interim
dividend of N0.30 per share, final dividend of N2.90 and a total dividend per share of N3.20) from the retained earnings accounts as at 31 December 2023.
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:
3 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Directors' Report
for the Year Ended 31 December 2023
Interests in shares
Director
Jim Ovia, CFR.
Mr. Chuks Emma Okoh
Mr.Gabriel Ukpeh
Dr Juliet Ehimuan**
Engr. Mustafa Bello
Dr. Al-Mujtaba Abubakar,MFR
Dr. Omobola Ibidapo-Obe
Ogunfowora
Dr. Peter Olatunde Bamkole
Dr. Ebenezer Onyeagwu
Dr. Adaora Umeoji,OON.*
Dr. Temitope Fasoranti***
Mr. Henry Oroh
Mrs Adobi Nwapa
Mr. Akindele Ogunranti
Designation
Chairman / Non-Executive Director
Non-Executive Director
Non Executive Director
Non-Executive Director
Non Executive Director/Independent
Non Executive Director / Independent
Non Executive Director / Independent
Non Executive Director / Independent
Group Managing Director
Deputy Managing Director
Executive Director
Executive Director
Executive Director
Executive Director
Number of Shareholding
31 December 2023
31 December 2022
Direct
3,552,949,395
203,412
32,660
128,906
-
-
-
-
90,176,078
90,000,000
15,075,000
14,813,703
15,008,206
6,885,601
Indirect
1,529,851,344
-
-
-
-
-
-
-
-
1,710,123
-
-
-
-
Direct
3,546,199,395
102,697
32,660
128,906
-
-
-
-
82,176,078
68,873,169
13,075,000
9,964,127
11,008,206
2,764,005
Indirect
1,528,304,916
-
-
-
-
-
-
-
-
1,710,123
-
-
-
-
*Dr. Adaora Umeoji, OON exited from the Board effective 24 February, 2023. She was re-appointed to the Board on 2 August, 2023 following approval by the
CBN.
** Dr. Juliet Ehimuan was appointed to the Board on 29 August, 2023.
*** Dr. Temitope Fasoranti retired from the Board on 29 December, 2023.
The indirect holdings relate to the holdings of the director in the underlisted companies:
Jim Ovia: (Institutional investors Ltd, Lurot Burca Ltd, Jovis Nigeria Ltd, Veritas Registars Ltd, and Quantum Zenith Securities Ltd).
Adaora Umeoji: (Palais Vendome Limited).
6.
Directors' Remuneration
Type of package Fixed Description
Basic Salary
- Part of gross salary package for Executive Directors only.
Reflects the banking industry's competitive salary package
and the extent to which the Bank’s objectives have been met
for the financial year.
- Part of gross salary package for Executive Directors only.
Reflects the banking industry's competitive salary package
and the extent to which the Bank’s objectives have been met
for 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 on the day of the Annual General Meeting
(‘AGM’) to Non-Executive Directors only.
- Allowances paid to Non-Executive Directors only, for
attending Board and Board Committee Meetings.
Other allowances
Productivity bonus
Director fees
Sitting
allowances
Timing
Paid monthly during the financial
year.
Paid at periodic intervals during the
financial year.
Paid annually in arears.
Paid annually on the day of the AGM.
Paid after each Meeting.
7.
Changes on the Board
Dr. Adaora Umeoji, OON exited from the board effective 24 February 2023 in compliance with CBN regulations on Directors' tenor. She was also re-appionted
to the Board effective 2 August, 2023 following subsequent approval by the CBN.
Dr. Juliet Ehimuan was appointed to the Board effective 29 August, 2023.
Dr. Temitope Fasoranti retired from the Board effective 29 December, 2023.
4 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Directors' Report
for the Year Ended 31 December 2023
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 statments. In the opinion of the directors, the market value of
the Group's property and equipment is not less than the value shown in the financial statements.
11.
Shareholding analysis
The shareholding pattern of the Bank as at 31 December 2023 is as stated below:
Share range
1-10,000
10,001 - 50,000
50,001 - 1,000,000
1,000,001 - 5,000,000
5,000,001 - 10,000,000
10,000,001 - 50,000,000
50,000,001 - 1,000,000,000
Above 1,000,000,000
No. of
Shareholders
Percentage of
Shareholders
542,071
79,281
22,650
1,265
151
151
65
3
645,637
83.9600
12.2800
3.5100
0.2000
0.0200
0.0200
0.0100
0.0000
%
%
%
%
%
%
%
%
%100
The shareholding pattern of the Bank as at 31 December 2022 is as stated below
Share range
1-10,000
10,001 - 50,000
50,001 - 1,000,000
1,000,001 - 5,000,000
5,000,001 - 10,000,000
10,000,001 - 50,000,000
50,000,001 - 1,000,000,000
Above 1,000,000,000
12.
Substantial interest in shares
No. of
Shareholders
Percentage of
Shareholders
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
Number of
holdings
1,591,364,537
1,637,601,326
3,854,576,850
2,612,484,842
1,087,361,826
3,085,943,442
11,633,370,085
5,893,790,879
31,396,493,787
Number of
holdings
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
Percentage
Holdings (%)
5.07
5.22
12.28
8.32
3.46
9.83
37.05
18.77
%
%
%
%
%
%
%
%
%100
Percentage
Holdings (%)
5.08
5.26
12.64
8.74
3.91
11.75
37.24
15.38
%
%
%
%
%
%
%
%
%100
According to the register of members as at 31 December 2023, the following shareholders held more than 5% of the share capital of the Bank.
Jim Ovia, CFR
Number of Shares
Held
3,552,949,395
Number of Shares
Held
%
11.32
According to the register of members as at 31 December 2022, the following shareholders held more that 5% of the issued share capital of the Bank.
Jim Ovia, CFR
Number of Shares
Held
3,546,199,395
Number of Shares
Held
%
11.29
5 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Directors' Report
for the Year Ended 31 December 2023
13.
Donation and charitable gifts
The Bank made contributions to charitable and non-political organisations amounting to N5,673 million during the year ended 31 December 2023 (31
December 2022: N1,671 million).
The beneficiaries are as follows:
Educational institutions
Charitable organisations
State government infrastructure/security trust funds
Religious organisations
Conference and seminars
Health/medical initiatives
Sport organisations
2023 Microsoft office secured productive enterprise
Professional associations
Other donations individually below N5million
14.
Events after the reporting period
31 December 2023
N' Million
1,403
1,195
1,227
456
412
106
75
23
27
749
5,673
There were no signifcant events after the reporting date that could affect the reported amount of assets and liabilities as of the reporting date.
15.
Disclosure of customer complaints in financial statements for the year ended 31 December 2023
Description
In millions of Naira
Number
31 December 2023 31 December 2022
Amount claimed
31 December 2023
N.'m
31 December 2022
N.'m
Amount refunded
31 December 2023 31 December 2022
N.'m
N.'m
Pending complaints brought
forward
Received Complaints
Resolved Complaints
Unresolved Complaints
16.
Human resources
(i) Employment of disabled persons
169,797
355,210
423,360
166,314
475,499
472,016
31,839
16,915
32,508
57,515
17,577
43,253
13
3,694
15,486
13
1,982
22,373
101,647
169,797
16,246
31,839
-
-
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 used
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.
6 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Statement of Corporate Responsibility in Relation to the Financial Statements
for the Year Ended 31 December 2023
In line with the provision S. 405 of CAMA 2020 we have reviewed the audited financial statements of the Bank for the year ended 31 December 2023 and
based on our knowledge confirm as follows:
(i) The audited financial statements do not contain any untrue statement of material fact or omit to state a material fact which could make the statements
misleading.
(ii)The audited financial statements and all other financial information included in the financial statmements 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 2023.
(iii) The Bank's internal controls has beeen 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 2023.
(v) That we have disclosed to the Bank's Auditors and the Audit Committee the following information:
(a) there are no material weaknesses in the design or operation of the Bank's internal controls which could adversely affect the Bank's ability to record
process and summarise and report financial data, and have discussed with the auditors any weakness 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.
31 January 2024
Mukhtar Adam, PhD
Chief Financial Officer
FRC/2013/MULTI/00000003196
Dr. Ebenezer Onyeagwu
Group Managing Director / CEO
FRC/2013/ICAN/00000003788
8
Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Corporate Governance Report
for the Year Ended 31 December 2023
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 year under review, the Directors and other key personnel of the Bank complied with the following Codes of Corporate Governance, which the
Bank subscribes to:
a)
b)
c)
The Central Bank of Nigeria (CBN) issued Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014 together with the Guidelines
issued in pursuant to the code.
The Securities and Exchange Commission (SEC) issued Code of Corporate Governance for public companies.
The National Code of Corporate Governance for Public Companies which became effective in January 2019.
In addition to the above Codes, the Bank complies with relevant disclosure requirements in other jurisdictions where it operates.
3. Shareholders
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 for 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 disciplines 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 year under review.
The Board has a Charter which regulates its operations. The Charter, recently reviewed, has been approved by the Central Bank of Nigeria in line with the
CBN Code of Corporate Governance.
5. Board structure
The Board is made up of a Non-Executive Chairman, seven (7) Non-Executive Directors and five (5) Executive Directors including the GMD/CEO. Four(4) of the
Non-Executive Directors are Independent Directors, appointed in compliance with the Central Bank of Nigeria (CBN) circular on Appointment of Independent
Directors by Banks.
The Group Managing Director/Chief Executive is responsible for the day to day running of the Bank and oversees the Group structure, assisted by the
Executive Committee (EXCO). EXCO comprises the Executive Directors, Deputy Managing Director as well as the Group Managing Director/Chief Executive as
its Chairman.
6. Responsibilities of the Board
The Board is responsible for the following amongst others:
a)
b)
c)
reviewing and approving the Bank’s strategic plans for implementation by management;
reviewing 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;
9 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Corporate Governance Report
for the Year Ended 31 December 2023
g)
h)
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 to the strategic plans of the Bank and the Group;
i)
assessing its own effectiveness in fulfilling its responsibilities, including monitoring the effectiveness of individual directors.
The membership of the Board during the year is as follows:
Board of Directors
Name
Jim Ovia, CFR. - (Chairman)
Mr.Gabriel Ukpeh - (Ind.NED)
Engr. Mustafa Bello - (NED)
Date of Appointment
April 2, 2014
February 24, 2016
December 29, 2017
Dr. Al-Mujtaba Abubakar, MFR - (Ind.NED)
August 1, 2019
Dr. Omobola Ibidapo-Obe Ogunfowora - (Ind.NED)
June 30, 2021
Mr Chuks Emma Okoh - (NED)
Dr. Peter Olatunde Bamkole - (Ind. NED)
Dr. Ebenezer Onyeagwu- GMD/CEO
Dr. Adaora Umeoji,OON - (DMD)*
Dr. Temitope Fasoranti - (ED)***
Mr. Henry Oroh - (ED)
Mrs Adobi Nwapa - (ED)
Mr. Akindele Ogunranti - (ED)
Dr. Juliet Ehimuan**
April 12, 2022
April 12, 2022
April 24, 2013
October 9, 2012 and 2 August 2023
December 29,2017
August 1, 2019
April 12, 2022
April 12, 2022
August 29, 2023
*Dr. Adaora Umeoji, OON exited from the Board effective 24 February, 2023. She was reappointed to the Board on 2 August, 2023 following CBN approval.
**Dr. Juliet Ehimuan was appointed to the Board on 29 August, 2023
***Dr. Temitope Fasoranti retired from the Board on 29 December 2023.
The Board meets at least once every quarter but may hold extra-ordinary sessions to address urgent matters that require the attention of the Board.
7.
Roles of Chairman and Chief Executive
The roles of the Chairman and Chief Executive are separate and no one individual combines the two positions. The Chairman’s main responsibility is to lead
and manage the Board to ensure that it operates effectively and fully discharges its legal and regulatory responsibilities. The Chairman is responsible for
ensuring that Directors receive accurate, timely and clear information to enable the Board take informed decisions and provide advice to promote the
success of the Bank. The Chairman also facilitates the contribution of Directors and promotes effective relationships and open communications between
Executive and Non-Executive Directors, both inside and outside the Boardroom.
The Board has delegated the responsibility for the day-to-day management of the Bank to the 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 Board Governance Nomination and Remuneration Committee is charged with the responsibility of leading the process for Board appointments and for
identifying and nominating suitable candidates for the approval of the Board.
With respect to new appointments, the committee identifies, reviews and recommends candidates for potential appointment as Directors. In identifying
suitable candidates, the Committee considers candidates on merit against objective criteria and with due regard 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.
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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 facilitated by the Company Secretary, may include meetings with senior management staff and key external advisors, to assist
Directors in acquiring a detailed understanding of the Bank’s operations, its strategic plan, its business environment, the key issues the Bank faces, and to
introduce Directors to their fiduciary duties and responsibilities.
The Bank attaches great importance to training its Directors and for this purpose, continuously offers training and education from onshore and offshore
institutions to its Directors, in order to enhance their performance on the Board and the various committees to which they belong.
10
Board Committees
The Board carries out its oversight functions using its various Board Committees. This makes for efficiency and allows for a deeper attention to specific
matters for the Board.
Membership of the Committees of the Board is intended to make the best use of the skills and experience of non-executive directors in particular.
The Board has established the various Committees with well defined terms of reference and Charters defining their scope of responsibilities in such a way as
to avoid overlap or duplication of functions.
The Committees of the Board meet quarterly but may hold extraordinary sessions as the business of the Bank demands.
The following are the current standing Committees of the Board:
10.1. Board credit committee
The Committee is currently made up of six (6) members comprising three (3) Non-Executive Directors and three (3) Executive Directors of the Bank. The
Board Credit Committee is chaired by a Non-Executive Director who is well versed in credit matters. The Committee considers loan applications above the
level of Management Credit Committee. It also determines the credit policy of the Bank or changes therein.
The membership of the Committee during the year is as follows:
- Chairman
Mr. Gabriel Ukpeh
Dr. Al- Mujtaba Abubakar
Mr.Chuks Emma Okoh
Dr. Ebenezer Onyeagwu
Dr. Adaora Umeoji
Dr. Temitope Fasoranti*
*Dr. Temitope Fasoranti retired from the Board effective 29 December, 2023.
Terms of reference
To conduct a quarterly review of all collateral security for Board consideration and approval;
To recommend criteria by which the Board of Directors can evaluate the credit facilities presented from various customers;
To review the credit portfolio of the Bank;
To approve all credit facilities above Management approval limit;
To establish and periodically review the Bank’s credit portfolio in order to align organizational strategies, goals and performance;
To evaluate on an annual basis the components of total credit facilities as well as market competitive data and other factors as deemed appropriate,
and to determine the credit level based upon this evaluation;
To make recommendations to the Board of Directors with respect to credit facilities based upon performance, market competitive data, and other
factors as deemed appropriate
To recommend to the Board of Directors, as appropriate, new credit proposals, restructure plans, and amendments to existing plans;
To recommend non-performing credits for write-off by the Board;
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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 Seven (7) members: three (3) Non-Executive Directors and four (4) Executive Directors. It is chaired by a non-executive
Director. The Committee considers large scale procurement by the Bank, as well as matters relating to staff welfare, discipline, staff remuneration and
promotion.
The membership of the Committee during the year is as follows:
– Chairman
Mr. Chuks Emma Okoh
Mr. Gabriel Ukpeh
Dr. Peter Olatunde Bamkole
Dr. Ebenezer Onyeagwu
Dr. Adaora Umeoji
Mr. Henry Oroh
Mrs. Adobi Stella Nwapa
Terms of reference
Approval of large scale procurements by the Bank and other items of major expenditure by the Bank;
Recommendation of the Bank’s Capital Expenditure (CAPEX) and major Operating Expenditure (OPEX) limits for consideration by the Board;
Consideration of management requests for branch set up and other business locations;
Consideration of management request for establishment of offshore subsidiaries and other offshore business offices;
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 tax planning activities and related 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, promotion, and disciplinary actions for senior management staff;
To discharge the Board’s responsibility relating to oversight of the management of the health and welfare plans that cover the company’s employees;
Review and recommendation to the Board, salary revisions and service conditions for senior management staff, based on the recommendation of the
Executives;
Oversight of broad-based employee compensation policies and programs;
10.3. Board risk management Committee
The Board Risk Management Committee has oversight responsibility for the overall risk assessment of various areas of the Bank’s operations and compliance.
The Chief Risk Officer , 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 (an Independent Non-Executive Director), the Committee’s membership comprises the
following:
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– Chairman
Engr. Mustapha Bello
Dr. Peter Olatunde Bamkole
Dr.Omobola Ibidapo-Obe Ogunfowora
Dr. Juliet Ehimuan
Dr. Ebenezer Onyeagwu
Mr. Akindele Ogunranti
Mr. Henry Oroh
Terms of reference
The primary responsibility of the Committee is to ensure that sound policies, procedures and practices are in place for the risk-wide management of the
Bank's material risks and to report the results of the Committee's activities to the Board of Directors;
Design and implement risk management practices, specifically provide ongoing guidance and support for the refinement of the overall risk management
framework and ensuring that best practices are incorporated;
Ensure that management understands and accepts its responsibility for identifying, assessing and managing risk
Ensure and monitor risk management practices, specifically determine which enterprise risks are most significant and approve resource allocation for
risk monitoring and improvement activities, assign risk owners and approve action plans;
Periodically review and monitor risk mitigation progress and periodically review and report to the Board of Directors:
(a) the magnitude of all material business risks;
(b) the processes, procedures and controls in place to manage material risks; and
(c) the overall effectiveness of the risk management process;
Ensure the implementation of the approved cyber security policies, standards and delineation of cybersecurity responsibilities.
Ensure that cybersecurity processes are conducted in line with the business requirements, applicable laws and regulation.
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;
Provide oversight for the Bank's IT governance and Cybersecurity programme, including value delivery, strategic alignment, framework for performance
management, resource management and policies;
Review, approve and provide oversight for the bank's sustainability policy and banking principles and practices to ensure compliance with globally
accepted standards.
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, MFR – Chairman
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Dr. Omobola Ibidapo-Obe Ogunfowora
Dr. Juliet Ehimuan
Committee's terms of reference
The Board Audit and Compliance Committee have the following responsibilities as delegated by the Board of Directors:
Ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirements and acceptable ethical practices;
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Review the scope and planning of audit requirements including the review of the external audit plan;
Review the findings on management matters (Management Letter) in conjunction with the external auditors and Management’s responses thereon;
Review the effectiveness of the Bank’s system of accounting and internal control;
Make recommendations to the Board regarding the appointment, removal and remuneration of the external auditors of the Bank
Authorize the internal audit function to carry out investigations into any activities of the Bank which may be of interest or concern to the Committee;
Assist in the oversight of compliance with legal and other regulatory requirements, assessment of qualifications and independence of the external
auditors and performance of the Bank’s internal audit function as well as that of the external auditors;
Ensure that the internal audit function is firmly established and that there are other reliable means of obtaining sufficient assurance of regular review or
appraisal of the system of internal control in the Bank;
Oversee management’s processes for the identification of significant fraud risks across the Bank and ensure that adequate prevention, detection and
reporting mechanisms are in place
On a quarterly basis, obtain and review reports by the internal auditor on the strength and quality of internal controls, including any issues or
recommendations for improvement, raised during the most recent control review of the Bank;
Discuss and review the Bank’s unaudited quarterly and annual financial statements with management and external auditors to include disclosures,
management control reports, independent reports and external auditors’ reports before submission to the Board, in advance of publication
Meet separately and periodically with management, the internal auditor and the external auditors, respectively;
Review and ensure that adequate whistle - blowing procedures are in place and that a summary of issues reported is highlighted to the Board, where
necessary;
Review with external auditors, any audit scope limitations or problems encountered and management responses to them;
Review the independence of the external auditors and ensure that they do not provide restricted services to the Bank;
Appraise and recommend the appointment of internal auditor of the Bank to the Board and review his/her performance annually;
Review the response of management to the observations and recommendation of the Auditors and Bank regulatory authorities;
Agree Internal Audit Plan for the year with the Internal auditor and ensure that the internal audit function is adequately resourced and has appropriate
standing within the Bank
Undertake quarterly review of Internal Audit progress against Plan for the year as well as outstanding agreed actions including following up
Develop a comprehensive internal control framework for the Bank and obtain assurances on the operating effectiveness of the Bank’s internal control
framework;
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;
Liaise 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;
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 to 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;.
Review and discuss external suspicious activity/transaction reports (SARs) submitted by the Chief Compliance officer with a view to making
recommendations to the Board.
Review and discuss recommendations from the Compliance Group on ways to enhance the company's compliance with statutes, rules and directives of
the relevant regulatory agencies, most especially the Nigerian Financial Intelligence Unit (NFIU).
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Ensure the generation and submission, in due time, of external suspicion activity/transaction reports (SARs) and submit same to the Nigerian Financial
Intelligence Unit (NFIU) and other relevant Regulatory Authorities in accordance with the AML/CFT/CPF rules or any other relevant legislation in force at
the time.
Perform such other duties and responsibilities as the Board of Directors may assign from time to time.
10.5. Board Governance, Nomination and Remuneration Committee
The Committee is made up of six (6) Non-Executive Directors and is chaired by an Independent Non-Executive Director.
The membership of the Committee is as follows:
– (Chairman)
Dr.Omobola Ibidapo-Obe Ogunfowora
Engr. Mustafa Bello
Dr. Al-Mujtaba Abubakar, MFR
Dr. Peter Olatunde Bamkole
Mr. Chuks Emma Okoh
Dr. Juliet Ehimuan
Committee's terms of reference
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;
Determine the quantum and structure of compensation and benefits for Non-Executive Directors, Executive Directors and senior management of the
Group;
Ensure the existence of an appropriate remuneration policy and philosophy for Executive Directors, Non-Executive Directors and staff of the Group;
Review and recommend for the Board's ratification, all terminal compensation arrangements for Directors and senior management;
Recommend appropriate compensation for Non-Executive Directors for Consideration by the Board and at the Annual General Meeting;
Review and approve any recommended compensation actions for the Company's Executive Committee members, including base salary, annual
incentive bonus, long-term incentive awards, severance benefits, and perquisites;
Review and continuously assess the size and composition of the Board and Board Committees, and recommend the appropriate Board structure, size,
age, skills, competencies, composition, knowledge, experience and background in line with needs of the Group and diversity required to fully discharge
the Board’s duties;
Recommendation of membership criteria for the Group Board, Board Committees and subsidiary companies Boards.
Identification at the request of the Board of specific individuals for nomination to the Group and subsidiary companies Boards and to make
recommendations on the appointment and election of New Directors (including the Group MD) to the Board, in line with the Group’s approved Director
Selection criteria
Review of the effectiveness of the process for the selection and removal of Directors and to make recommendations where appropriate;
Ensuring that there is an approved training policy for Directors, and 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;
Monitor compliance by Directors and staff of the Group's code of ethics and business conduct;
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 to ensure leadership continuity in the Group.
Review and make recommendations on the recruitment, promotions and disciplinary actions for Executive Management level personnel.
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Ensure that board evaluation reports of subsidiaries are formally discussed and documented as a way of radiating sound governance practices across
the Group.
Ensure annual review or appraisal of the performance of the Board is conducted. This review/appraisal covers all aspects of the Board’s structure,
composition, responsibilities, individual competencies, Board operations, Board’s role in strategy setting, oversight over corporate culture, monitoring
role and evaluation of management performance and stewardship towards shareholders etc;.
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
Prof (Prince) L.F.O Obika
Mr. Michael Olusoji Ajayi
– (Chairman)
Non-Executive Directors / Director's Representatives
Dr. Al-Mujtaba Abubakar
Engr. Mustafa Bello
Committee's terms of reference
To meet with the independent auditors, chief financial officer, internal auditor and any other Bank executive both individually and/or together, as the
Committee deems appropriate at such times as the Committee shall determine to discuss and review:
The Bank's quarterly and audited financial statements, including any related notes, the Bank's specific disclosures and discussion under "Managements
Control Report” and the independent auditors' report, in advance of publication;
The performance and results of the external and internal audits, including the independent auditor's management letter, and management's responses
thereto;
The effectiveness of the Bank's system of internal controls, including computerized information systems and security; any recommendations by the
independent auditor and internal auditor regarding internal control issues and any actions taken in response thereto; and, the internal control
certification and attestation required to be made in connection with the Bank's quarterly and annual financial reports;
Such other matters in connection with overseeing the financial reporting process and the maintenance of internal controls as the committee shall deem
appropriate.
To prepare the Committee's report for inclusion in the Bank's annual report;
To report to the entire Board at such times as the Committee shall determine.
10.7. Executive committee (EXCO)
The EXCO comprises the Group Managing Director, Deputy Managing Director as well as all the Executive Directors. EXCO has the GMD/CEO as its Chairman.
The Committee meets weekly (or such other times as business exigency may require) to deliberate and take policy decisions on the effective and efficient
management of the Bank. It also serves as a first review platform for issues to be discussed at the Board level. EXCO’s primary responsibility is to ensure the
implementation of strategies approved by the Board, provide leadership to the Management team and ensure efficient deployment and management of the
Bank’s resources. Its Chairman is responsible for the day-to-day running and performance of the Bank.
10.8. Other Committees
In addition to the afore-mentioned committees, the Bank has in place, other standing management committees. They include:
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a) Management Committee (MANCO)
b)
Assets and Liabilities Committee (ALCO)
c) Management Global Credit Committee(MGCC)
d)
Sustainability Steering Committee (SSC)
e) 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 Committee meets weekly and as frequently as the need arises.
c) Management Global Credit Committee(MGCC)
The Management Global Credit Committee is responsible for ensuring that the Bank complies with the credit policy guide as established by the Board. The
Committee also makes contributions to the Board Credit Committee. The Committee can approve credit facilities to individual obligors not exceeding in
aggregate a sum as pre-determined by the Board from time to time. The Committee is responsible for reviewing and approving extensions of credit, including
one-obligor commitments that exceed an amount as may be determined by the Board. The Committee reviews the entire credit portfolio of the Bank and
conducts periodic assessment of the quality of risk assets in the Bank. It also ensures that adequate monitoring of performance is carried out. The secretary
of the committee is the Head of the Credit Administration Department.
The Committee meets weekly or at 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)
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.
e) 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 pertaining to information security and cyberthreats, 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
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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 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, operating
performance and trends. Apart from the Bank's annual report and accounts, proxy statements and formal shareholders' meetings, the Bank maintains a rich
website (with suggestion boxes) that provide information on a wide range of issues for all stakeholders.
Also, a quarterly publication of the Bank and Group performance is produced in line with the disclosure requirements of the Nigerian 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
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The remuneration policy for Executive Directors considers various elements, including the following:
Fixed remuneration, taking into account the level of responsibility, and ensuring this remuneration is competitive with remuneration paid for
equivalent posts in Banks of equivalent status both within and outside Nigeria.
Variable annual remuneration linked to the Zenith Bank financial results. The amount of this remuneration is subject to achieving specific
quantifiable targets, aligned directly with shareholders’ interest.
MONITORING COMPLIANCE WITH CORPORATE GOVERNANCE
Chief Compliance Officer
The Chief Compliance Officer monitors compliance with money laundering requirements and the implementation of the Code of Corporate Governance
of the Bank. He reports to the Board through the the Executive compliance officer(ECO).
The Chief Compliance Officer and the Company Secretary forward regular returns to the Central Bank of Nigeria and other regulatory bodies on all
whistle-blowing reports and also on corporate governance compliance.
Whistle Blowing Procedures
The Bank has a whistle-blowing procedure that ensures anonymity for whistle-blowers. The Bank has a direct link on the Bank’s website, provided for the
purpose of whistle-blowing.
Internally, the Bank has a direct 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, which all members of staff subscribe to upon assumption of duties with the Bank. The Bank
also has a Code of Conduct for Directors.
14. Foreign Subsidiaries Governance Structure
The Bank as at 31 December 2023 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 through the Group Governance Framework 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 respective jurisdiction.
The activities of the subsidiaries are closely monitored by Zenith Bank Plc using the following strategies:
Liaison and Oversight Function
The Foreign Subsidiaries Department is charged with the responsibility of overseeing the growth and implementation of the Bank’s global expansion
strategy into new territories/regions. The Department serves as an interface between the Bank and its offshore subsidiaries. It also provides guidance on
how to optimize synergy within the Group. Reports from the Group is presented to the Board at its quarterly meetings.
Representation on the Subsidiary Board
Zenith Bank Plc exercises control over the subsidiaries by maintaining adequate representation on the Board of each subsidiary. The representatives are
chosen on the basis of professional competencies, business experience and integrity as well as knowledge of the Bank’s business.
The Board of Directors of the subsidiaries are responsible for reviewing and approving the strategic plans and financial objectives as well as monitoring
the corporate performance against these objectives.
Local Board and Board 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.
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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
The Internal Control & Audit Department of Zenith Bank Plc carries out an annual audit of each of the offshore subsidiaries in line with the Group’s
Annual Audit Programme. This audit exercise covers all operational areas of the subsidiaries and the outcome is discussed with Executive Management
at the home office for timely intervention on identified lapses. It is important to note that this exercise is distinct from the daily operations audit carried
out by the respective internal audit unit within the subsidiaries
Annual Loan Review/Audit
This audit is carried out by the Loan Review & Monitoring Unit of Zenith Bank Plc. The core areas of concentration during this audit exercise include asset
quality assessment, loan performance, review of security pledged, loan conformity with credit policy, documentation check and review of central liability
report among others
Group Compliance Function
Zenith Bank Plc is committed to complying with regulatory requirements in all locations where it 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 undertakes the 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.
20 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Corporate Governance Report
for the Year Ended 31 December 2023
16.
Schedule of board and board committees meeting held during the year
The table below shows the frequency of meetings of the Board of directors, board committees and members’ attendance at these meetings during the year
under review.
Directors
Board
Board credit
committee
Finance and
general purpose
committee
Board governance,
nomination and
remuneration committee
Board risk
management
committee
Board audit and
compliance
committee
Attendance/no of meetings
Jim Ovia, CFR
Mr.Gabriel Ukpeh
Engr.Mustafa Bello
Dr. Al-Mujtaba Abubakar, MFR
Dr. O. Ibidapo-Obe Ogunfowora
Mr Peter Bamkole
Mr Chuks Emma Okoh
Dr. Juliet Ehimuan**
Dr.Ebenezer Onyeagwu
Dr.Adaora Umeoji, OON*
Dr. Temitope Fasoranti***
Mr. Henry Oroh
Mrs Adobi Nwapa
Mr. Akindele Ogunranti
Note:
10
10
10
10
10
10
10
10
2
10
4
10
10
10
10
6
N/A
6
5
6
N/A
N/A
6
N/A
6
4
6
N/A
N/A
N/A
4
N/A
4
N/A
N/A
4
4
4
N/A
4
2
N/A
4
4
N/A
4
N/A
3
4
4
4
4
4
1
N/A
N/A
N/A
N/A
N/A
N/A
4
N/A
N/A
4
3
4
4
N/A
1
4
N/A
N/A
4
N/A
4
4
N/A
4
4
4
4
3
N/A
1
N/A
N/A
N/A
N/A
N/A
N/A
* Dr. Adaora Umeoji, OON exited from the Board effective 24 February, 2023. She was reappointed to the Board on 2 August, 2023 following CBN approval.
** Dr. Juliet Ehimuan was appointed to the Board effective 29 August, 2023
*** Dr. Temitope Fasoranti retired from the Board effective 29 December, 2023
N/A - Not Applicable (Not a Committee member)
Dates for Board and Board Committee meetings held within the year to 31 December 2023
Board
meetings
26-Jan-23
02-Mar-23
28-Apr-23
02-May-23
16-Jun-23
12-Jul-23
20-Jul-23
05-Oct-23
25-Oct-23
20-Dec-23
Board credit
committee
meeting
Finance and general
purpose committee
Board Risk
Management
committee Meeting
Board Audit and
Compliance Committee
Meeting
25-Jan-23
24-Jan-23
24-Jan-23
25-Jan-23
Board Governance,
Nomination and
Remuneration
Committee
24-Jan-23
Audit committee
meeting of the
bank
25-Jan-23
26-Apr-23
26-Apr-23
26-Apr-23
25-Apr-23
25-Apr-23
25-Apr-23
15-Jun-23
19-Jul-23
04-Oct-23
24-Oct-23
18-Jul-23
18-Jul-23
19-Jul-23
18-Jul-23
19-Jul-23
24-Oct-23
24-Oct-23
23-Oct-23
23-Oct-23
23-Oct-23
21 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Corporate Governance Report
for the Year Ended 31 December 2023
17. Audit Committee
The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during the year under review.
Number of meetings held during the year:
Members
Number of Meetings attended
Mrs. Adebimpe Balogun (SR)
Prof. (Prince) L.F.O Obika (SR)
Mr. Michael Olusoji Ajayi (SR)
Engr. Mustafa Bello (INED)*
Dr.Al-mujtaba Abubakar (INED)*
SR - Shareholders representative
INED- Independent Non-Executive Director
* Changes arising from AGM Resolution
4
4
4
4
4
22 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK
PLC
RC: 150224
HEAD OFFICE
CV Zenith Heights,
Lagos.
@;I] P. 0. Box 75315,
\. Tel: (01) 2787000,
4647000
@I www.zenithbank.com
2927000,
I SWIFT:
Plot 84/87 Ajose Adeogun Street,
Victoria
ZEIBNGLA
Island,
z ZENITH
Annual Report and Financial
31 December
2023
Statements
for the year ended
Certification
of management's
assessment
on internal
control
over financial
reporting
To comply with the provisions
60-63 of Investments
Sections
statements
the Internal
regarding
2023.
December
of Section 1.1
and Securities
of SEC Guidance
Act 2007, I hereby make the following
on Implementation
of
Controls
of ZENITH BANK Pie for the year ended 31
I, Dr. Ebenezer
Onyeagwu,
certify that:
a)I have reviewed
reporting
of ZENITH BANK Pie;
this management
assessment
on internal
control
over financial
b)Based on my knowledge,
material
light of the circumstances
with respect
fact or omit to state a material
this report
to the period covered
by this report;
does not contain
fact necessary
of a
any untrue statement
made, in
to make the statements
under which such statements
were made, not misleading
c)Based on my knowledge,
included
in this report,
results
of operations
in this report;
fairly
the financial
present
in all material
statements,
and other financial
the financial
as of, and for, the periods
information
condition,
presented
respects
and cash flows of the entity
and proc�dures
relating
d)The entity's
1)are responsible
2)have designed
controls
information
by others within
being prepared;
3)have designed
to be designed
reliability
purposes
4)have evaluated
of a date within
of financial
in accordance
and I:
other certifying
officer
for establishing
controls
such internal
to be designed
internal
and procedures,
under our supervision,
or caused such internal
to .ensure
and maintaining
controls;
that material
to the entity,
those entities,
and its consolidated
is made known to us
during the period in which this report
subsidiaries,
is
particularly
such internal
under our supervision,
control
system,
to provide
and the preparation
accepted
of the entity's
reporting
with generally
the effectiveness
90 days prior to the report
accounting
internal
and presented
controls
in this report
principles;
and procedures
as
our conclusions
or caused such internal
assurance
reasonable
control
system
the
regarding
for external
of financial statements
Chairman:
Jim Ovia, CFR. \ Group Managing
Director:
Dame (Dr.)
Adaora Umeoji,
OON.
Mr. Gabriel
Non-Executives:
lbidapo-Obe
Ogunfowora
(Ph.D)
Executive
Director/CEO:
Directors:
Dr. Ebenezer
Onyeagwu I
Henry Oroh I Adobi Nwapa I Akindele
Bello \ Dr. AI-Mujtaba
Ukpeh I Engr. Mustafa
Peter Olatunde Bamkole
Abubakar
I Mr. Chuks Emma Okoh I Dr. Juliet
Deputy Managing
MFR.\ Omobola
(Ph.D)
Ogunranti
Ehimuan
THE BOARD:
z ZENITH
as of the end of the
controls
of the internal
and procedures,
by this report based on such evaluation.
other certifying
control
and I have disclosed,
to the entity's
system,
of internal
(or persons performing
board of directors
weaknesses
and material
auditors
officer
deficiencies
system which are reasonably
about the effectiveness
period covered
e)The entity's
evaluation
the entity's
1)All significant
internal
control
to record,
2)Any fraud,
who have a significant
summarize
process,
whether
and report
or not material,
role in the entity's
likely
financial
that involves
internal
affect
to adversely
information;
and
management
system.
control
based on our most recent
and the audit committee
of
the equivalent
functions):
in the design or operation
the entity's
of the
ability
or other employees
f)The entity's
not there were significant
significantly
affect
any corrective
other certifying
changes
controls
internal
actions
officer(s)
and I have identified,
in the report whether
or
or other facts that coL_ild
in internal
subsequent
controls
to the date of their evaluation
deficiencies
and material weaknesses.
including
with regard to significant
Name: Dr. Ebenezer
Onyeagwu
FRC No: FRC/2013/ICAN/00000003788
ZENITH BANK PLC
Consolidated and Separate Statements of Profit or Loss and Other Comprehensive Income
for the Year Ended 31 December 2023
6
7
8
9
10
11
26
27
37
12
13a
In millions of Naira
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/(loss):
Items that will never be reclassified to profit or loss
Fair value movements on equity instruments at FVOCI
Impact of adopting IAS 29 on 1 January 2023
Total items that will not be reclassified to profit or loss
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences for foreign operations
Fair value movement on debt securities at FVOCI
Income tax effect relating to fair value movement on debt securities at FVOCI
Other comprehensive income/(loss) for the year net of taxation
Group
Bank
Note(s)
31 December
2023
31 December
2022
31 December
2023
31 December
2022
1,144,674
(408,492)
736,182
(409,616)
540,166
(173,539)
366,627
(123,252)
926,232
(355,228)
571,004
(398,412)
448,174
(153,019)
295,155
(61,896)
326,566
243,375
172,592
233,259
109,307
566,973
242,588
(29,857)
(3,469)
(124,415)
(291,731)
795,962
(119,053)
676,909
122,252
81,408
203,660
162,942
10,280
(2,603)
374,279
132,795
212,678
35,494
(26,630)
(3,678)
(86,412)
(222,972)
284,650
(60,739)
223,911
71,080
538,286
264,063
(26,090)
(2,447)
(88,083)
(261,686)
667,715
(72,114)
595,601
8,109
-
8,109
122,252
-
122,252
(28,768)
(6,602)
-
(27,261)
-
-
-
110,098
201,645
49,790
(24,519)
(3,045)
(68,475)
(204,703)
294,050
(59,457)
234,593
8,109
-
8,109
-
-
-
122,252
717,853
8,109
242,702
Total comprehensive income for the year
1,051,188
196,650
Profit/(loss) attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive income/(loss) attributable to:
Equity holders of the parent
Non-controlling interest
676,569
340
676,909
1,050,373
815
1,051,188
224,050
(139)
223,911
196,981
(331)
196,650
595,601
-
595,601
717,853
-
717,853
234,593
-
234,593
242,702
-
242,702
Earnings per share
Basic and diluted (Naira)
14
21.55
7.14
18.97
7.47
The accompanying notes are an integral part of these consolidated and separate financial statements.
39 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Consolidated and Separate Statements of Financial Position
as at 31 December 2023
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
Investments in subsidiaries
Deferred tax asset
Current tax receivable
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
Total liabilities
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
Group
Bank
Note(s)
31 December
2023
31 December
2022
31 December
2023
31 December
2022
15
16
17
18
19
20
21
22
24
13
25
26
27
28
33
13
24
29
30
31
34
35
35
35
35
4,253,374
2,736,273
308,638
1,834,314
534,739
6,556,470
3,290,895
-
17,251
18,975
474,976
295,532
47,018
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
3,965,386
2,529,966
255,061
1,691,722
507,942
5,928,796
1,205,724
34,625
-
-
417,419
230,267
44,185
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
20,368,455
12,285,629
16,811,093
10,570,678
15,167,740
70,486
33,877
59,310
1,039,712
263,065
1,410,885
8,975,653
6,325
64,856
16,654
568,559
311,192
963,450
12,154,824
45,514
28,080
59,233
1,003,947
263,065
1,450,182
7,434,806
6,040
61,655
15,911
546,347
311,192
999,580
18,045,075
10,906,689
15,004,845
9,375,531
15,698
255,047
1,179,390
871,617
2,321,752
1,628
15,698
255,047
625,005
482,377
15,698
255,047
893,938
641,565
15,698
255,047
494,429
429,973
1,378,127
813
1,806,248
-
1,195,147
-
2,323,380
1,378,940
1,806,248
1,195,147
20,368,455
12,285,629
16,811,093
10,570,678
The accompanying notes are an integral part of these consolidated and seperate financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 31st January 2024 and signed on its behalf by:
Jim Ovia, CFR.
Chairman
FRC/2013/CIBN/00000002406
Dr. Ebenezer Onyeagwu
Group Managing Director/CEO
FRC/2013/ICAN/00000003788
Mukhtar Adam, PhD
Chief Financial Officer
FRC/2013/MULTl/00000003196
40
Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Consolidated and Separate Statements of Changes in Equity
for the Year Ended 31 December 2023
In millions of Naira
Note(s)
Share capital
Share
premium
Foreign currency
translation
reserve
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total
Non-controlling
interest
Total equity
Group
1 January 2023
Impact of adopting IAS 29 at 1 January 2023
Restated balance at 1 January 2023
Profit for the year
Other comprehensive income:
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities
Income tax effect relating to fair value
movement on debt securities at FVOCI
Transfer between reserves
Transactions with owners of the Parent
Dividends
Balance at 31 December 2023
1 January 2022
Profit for the year
Other Comprehensive income:
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities
Total comprehensive income for the year
Transfer between reserves
Transactions with owners of the Parent
Dividends
35
40
35
40
15,698
-
15,698
-
-
-
-
-
-
-
-
-
255,047
-
255,047
-
-
-
-
-
-
-
-
-
24,953
-
24,953
-
-
162,939
-
-
-
46,980
-
46,980
-
-
-
122,252
10,280
(2,603)
311,411
-
311,411
-
-
-
-
-
-
162,939
-
129,929
-
-
97,693
-
-
-
15,698
15,698
255,047
255,047
187,892
176,909
409,104
53,529
45,473
275,993
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(28,576)
-
-
(28,576)
-
-
8,109
(6,602)
1,507
-
-
-
-
-
-
35,419
-
-
-
3,729
-
3,729
-
-
-
-
-
-
-
-
-
3,729
3,729
-
-
-
-
-
-
-
95,304
-
95,304
-
-
-
-
-
-
625,005
80,936
705,941
676,569
-
-
-
-
-
1,378,127
80,936
1,459,063
676,569
-
162,939
122,252
10,280
(2,603)
-
(1,322)
676,569
(96,371)
969,437
-
-
(106,748)
(106,748)
93,982
1,179,390
2,321,751
21,846
607,203
1,278,518
224,050
224,050
-
-
-
(28,576)
8,109
(6,602)
196,981
-
-
73,458
224,050
(108,876)
-
-
-
-
-
(97,371)
(97,371)
Balance at 31 December 2022
15,698
255,047
24,953
46,980
311,411
3,729
95,304
625,005
1,378,127
813
472
1,285
340
-
3
-
-
-
343
-
-
1,628
1,144
(139)
(192)
-
-
(331)
-
-
813
1,378,940
81,408
1,460,348
676,909
-
162,942
122,252
10,280
(2,603)
969,780
-
(106,748)
2,323,380
1,279,662
223,911
(28,768)
8,109
(6,602)
196,650
-
(97,371)
1,378,940
41 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Consolidated and Separate Statements of Changes in Equity
for the Year Ended 31 December 2023
In Millions of Naira
Bank
Balance at 1 January 2023
Profit for the year
Other comprehensive income
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Dividends
Balance at 31 December 2023
Balance at 1 January 2022
Profit for the year
Other comprehensive income:
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Dividends
Balance at 31 December 2022
Note(s)
Share capital
Share
premium
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total equity
15,698
255,047
53,731
278,602
3,729
93,911
-
-
-
-
-
-
-
-
-
-
-
122,252
122,252
-
-
-
-
-
89,340
-
-
-
-
-
-
-
-
-
-
-
15,698
15,698
255,047
255,047
175,983
367,942
45,622
243,414
3,729
3,729
93,911
20,016
-
-
-
-
-
-
-
-
-
-
-
8,109
8,109
-
-
-
-
-
35,189
-
-
-
-
-
-
15,698
255,047
53,731
278,602
3,729
-
-
-
73,895
-
93,911
494,429
595,601
-
595,601
(89,340)
(106,748)
893,938
466,250
234,593
-
234,593
(109,084)
(97,330)
1,195,147
595,601
122,252
717,853
-
(106,748)
1,806,248
1,049,776
234,593
8,109
242,702
-
(97,330)
494,429
1,195,147
35
40
35
40
The accompanying notes are an integral part of these consolidated and separate financial statements.
42 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Consolidated and Separate Statements of Cash Flows
for the Year Ended 31 December 2023
In millions of Naira
Cash flows from operating activities
Group
Bank
Note(s)
31 December
2023
31 December
2022
31 December
2023
31 December
2022
Profit before tax for the year
795,962
284,650
667,715
294,050
Adjustments for:
Net impairment loss on financial and non-financial instruments
Unrealised fair value change in trading bond, bills and derivatives
Depreciation of property and equipment
Amortisation of intangible assets
Dividend income
Foreign exchange revaluation gain
Interest income
Interest expense
Gain on sale of property and equipment
(Gain)/loss on lease derecognition
Net monetary loss arising from hyperinflationary economy
Changes in operating assets and liabilities:
Net increase in loans and advances
Net increase in other assets
Net decrease/(increase) in treasury bills (FVTPL) including bills pledged
Net (increase)/decrease in investment securities including bonds pledged (FVTPL
and FVOCI)
Net increase in restricted balances (cash reserves)
Net decrease/ (increase) in due from banks with maturity greater than three
months
Net increase in customer deposits
Net increase in Other liabilities
Interest received from operating activities
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
Dividends received
8
44(xii)
26
27
11
44(xx)
6
7
44(vi)
44(xviii)
11
44(iii)
44(viii)
44(iib)
44(i)
44(x)
44(vii)
44(iv)
44(v)
44(xiiia)
44(xi)
13
44(xivb)
44(vi)
27
44(iia)
44(iia)
44(xiiib)
44(xiva)
44(XV)
44(i)
11
409,616
(149,278)
29,857
3,469
(5,661)
(111,748)
(1,144,674)
408,492
(189)
(14)
13,225
123,252
90,046
26,630
3,679
(2,223)
(25,201)
(540,166)
173,539
(2,563)
(2,028)
-
398,412
(148,190)
26,090
2,447
(19,777)
(164,655)
(926,232)
355,228
(186)
2
-
61,896
(88,394)
24,520
3,045
(17,148)
(25,320)
(448,174)
153,019
(2,451)
(2,025)
-
249,057
(50,477)
190,854
(46,983)
(3,001,963)
(258,868)
597,411
(701,432)
(2,233,798)
36,532
6,369,684
467,486
1,524,109
804,259
(413,961)
(127,862)
(543,005)
(59,586)
(76,101)
(254,630)
(2,623,642)
(222,544)
597,411
(8,872)
(418,711)
(15,661)
(2,144,031)
105,440
2,362,290
48,387
992,506
354,722
(143,859)
(24,247)
4,713,058
454,569
1,062,243
711,684
(347,349)
(62,367)
(502,442)
(55,735)
(78,553)
138
(419,705)
(21,065)
2,153,832
84,880
1,113,967
302,324
(128,805)
(7,728)
1,786,545
1,179,122
1,364,211
1,279,758
(50,281)
1,382
(24,035)
(4,547,984)
3,543,236
374,763
(859)
(820,166)
122,846
5,661
(67,245)
3,207
(4,130)
(3,060,163)
2,833,003
88,416
(2,281)
(559,328)
403,066
2,223
(40,581)
1,341
(22,674)
(2,824,475)
2,031,575
288,634
(810)
(539,842)
82,885
19,777
(64,357)
2,671
(3,461)
(2,968,565)
2,679,567
71,700
(2,031)
(206,285)
65,448
17,148
Net cash from investing activities
(1,395,437)
(363,232)
(1,004,170)
(408,165)
43 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Consolidated and Separate Statements of Cash Flows
for the Year Ended 31 December 2023
In millions of Naira
Note(s)
2023
2022
2023
2022
Group
Bank
Cash flows from financing activities
Repayment of debt securities Issued
Cash inflow from long term borrowings
Repayment of long term borrowings
Repayment of onlending facility
Repayment of principal for lease liability
Unclaimed dividend received
Dividends paid to shareholders
Net cash used in financing activities
32
31
31
30(b)
44(v)
44(xvii)
40
-
1,148,702
(1,569,493)
(48,080)
(1,543)
352
(106,748)
(46,071)
1,243,614
(1,135,414)
(59,470)
(4,011)
1,117
(97,371)
-
1,197,352
(1,569,493)
(48,080)
(979)
352
(106,748)
(46,071)
1,279,743
(1,154,340)
(59,470)
(2,927)
1,117
(97,330)
(576,810)
(97,606)
(527,596)
(79,278)
Net increase/(decrease) in cash and cash equivalents
(185,702)
718,284
(167,555)
792,315
Analysis of changes in cash and cash equivalents:
Cash and cash equivalent at the beginning of the year
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate movement on cash balances
1,940,758
(185,702)
549,455
1,134,519
718,284
87,956
1,657,186
(167,555)
528,771
776,574
792,314
88,298
Cash and cash equivalents at the end of the year
41
2,304,511
1,940,758
2,018,402
1,657,186
The accompanying notes are an integral part of these consolidated and separate financial statements.
44 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
1 General information
Zenith Bank Plc (the "Bank") was incorporated in Nigeria under the Companies and Allied Matters Act as a private limited liability company on May 30,
1990. It was granted a banking licence in June 1990, to carry on the business of commercial banking and commenced business on June 16, 1990. The
Bank is domiciled in Nigeria and was converted into a Public Limited Liability Company on May 20, 2004. The Bank’s shares were listed on October 21,
2004 on the Nigerian Stock Exchange. In August 2015, the Bank was admitted into the Premium Board of the Nigerian Stock Exchange.
The registered office adress 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 2023 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 2023 were approved and authorised for issue by the Board of Directors on 31 January 2024. 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 years 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, 2023:
(i) 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 did not have a significant impact on the accounting policies disclosed in the financial statement.
ii) Definition of Accounting Estimates – Amendments to IAS 8
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 year.
The effective date is 1 January 2023.
This amendment did not have an impact on the Group financial statements.
iii) 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 the beginning of the earliest comparative year 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 year for all deductible and taxable temporary
differences associated with right-of-use assets and lease liabilities, and decommissioning, restoration and similar liabilities, and the corresponding
amounts recognised as part of the cost of the related assets.
45 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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.
This amendment did not have a significant impact on the Group financial statements.
There are no other new standards or amendments applicable to the Group with an effective date of 1 January 2023.
(b) Standards issued but not yet effective
The following standard had been issued but was not mandatory for year ended on 31 December 2023. The Group has not early adopted the underlisted
standard in preparing the financial statements as it plans to adopt it at the effective date, if applicable.
i.
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 Non-current Liabilities with Covenants - Amendments to IAS 1
Amendments made to IAS 1 Presentation of Financial Statements in 2020 and 2022 clarified that liabilities are classified as either current or noncurrent,
depending on the rights that exist at the end of the reporting year. Classification is unaffected by the entity's expectations or events after the reporting
date (e.g. the receipt of a waiver or a breach of covenant). Covenants of loan arrangements will not affect classification of a liability as current or non-
current at the reporting date if the entity must only comply with the covenants after the reporting date. However, if the entity must comply with a
covenant either before or at the reporting date, this will affect the classification as current or non-current even if the covenant is only tested for
compliance after the reporting date. The amendments require disclosures if an entity classifies a liability as noncurrent and that liability is subject to
covenants that the entity must comply with within 12 months of the reporting date. The disclosures include: the carrying amount of the liability,
information about the covenants, and facts and circumstances, if any, that indicate that the entity may have difficulty complying with the covenants.
The amendments also clarify what IAS 1 means when it refers to the 'settlement' of a liability. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the transfer of the entity's own equity instrument can only be ignored for the purpose of classifying the liability
as current or non-current if the entity classifies the option as an equity instrument. However, conversion options that are classified as a liability must be
considered when determining the current/non-current classification of a convertible note. The amendments must be applied retrospectively in
accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Special transitional rules apply if an
entity had early adopted the 2020 amendments regarding the classification of liabilities as current or non-current.
The effective date is 1 January 2024.
The impact of this amendment on the Group's financial statement is currently under assessment.
There are no other new standards or amendments issued but not yet effective that are applicable to the Group.
46 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
(c) Material 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.
2.1 Basis of preparation
(a). Statement of compliance
The financial statements are prepared in accordance with International Financial Reporting Standard (IFRS) and in the manner required by the
Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria (Amendment) Act 2023, the Banks and other Financial
Institutions Act of Nigeria, and relevant Central Bank of Nigeria circulars. The financial statements comply with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(b) Basis of measurement
The financial statements have been prepared under the historical cost convention with the exception of the following:
Derivative financial instruments which are measured at fair value; and
Non-derivative financial instruments, carried at fair value through profit or loss, or fair value through other comprehensive income which are
measured at fair value.
(c) Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated and separate financial statements are disclosed in Note 4.
2.2
Basis of Consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity if it is exposed to, or has the rights to variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The Group reassesses whether it has control if there are
changes to one or more elements of control. This includes circumstances in which protective rights held become substantive and lead to the Group
having control over an investee.
The financial statements of subsidiaries are consolidated from the date the Group acquires control, up to the date that such effective control ceases.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (transactions with owners).
When the proportion of the equity held by Non Controlling Interests (NCIs) changes, the carrying amounts of the controlling and NCIs are adjusted to
reflect the changes in their relative interests in the Subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and
the fair value of the consideration paid or received is recognised directly in equity and attributed to the Group.
Inter-company transactions, balances and unrealised gains on transactions between companies within the Group are eliminated on consolidation.
Unrealised losses are also eliminated in the same manner as unrealised gains, but only to the extent that there is no evidence of impairment. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
In the separate financial statements, investments in subsidiaries are measured at cost 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 and are initially recognised at cost. The
Group's investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.
47 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.2
Basis of Consolidation (continued)
The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in
reserves are recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the policies adopted by the Group.
(d) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree's identifiable net assets at the acquisition date. Changes in the
Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
2.3
Translation of foreign currencies
Foreign currency transactions and balances
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in
which the entity operates (functional currency). The parent entity’s functional currency (Nigerian Naira) is adopted as the presentation currency for the
separate and consolidated financial statements. Except as otherwise indicated, financial information presented in Naira has been rounded to the nearest
million.
(b) Group companies
Except for those subsidiaries operating in a hyper-inflationary economy (as shown in note 2.27), the results and financial position of all the Group entities
that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
i)
ii)
iii)
assets and liabilities for statement of financial position presented are translated at the closing rate at the reporting date;
income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income and presented within equity as foreign currency translation
reserves.
On the disposal of a foreign operation, the Group recognises in profit or loss the cumulative amount of exchange differences relating to that foreign
operation. When a subsidiary that includes a foreign operation is partially disposed of or sold, the Group re-attributes the proportionate share of the
cumulative amount of the exchange differences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In
the case of any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative
amount of exchange differences recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at
the closing rate at the reporting date.
(c) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation
where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the functional currency using
the exchange rate at the transaction date, and those measured at fair value are translated to the functional currency at the exchange rate at the date
that the fair value was determined and are recognised in the profit or loss. When a gain or loss on non-monetary item is recognised in other
comprehensive income, any exchange component of that gain or loss shall be recognised in other comprehensive income. Conversely, when a gain or
loss on a non-monetary item is recognised in profit or loss, any exchange of that gain or loss shall be recognised in profit or loss.
Translation differences on equities measured at fair value through other comprehensive income are included in other comprehensive income and
transferred to the fair value reserve in equity.
48 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.3
Translation of foreign currencies (continued)
Foreign currency gains and losses on intra-group loans are recognised in profit or loss unless settlement of the loan is neither planned nor likely to occur
in the foreseeable future, in which case the foreign currency gains and losses are initially recognised in the foreign currency translation reserve in the
consolidated financial statements. Those gains and losses are recognised in profit or loss at the earlier of settling the loan or at the time at which the
foreign operation is disposed.
2.4
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 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
Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the instruments.
Financial instruments carried at fair value through profit or loss are initially recognised at fair value with transaction costs, which are directly attributable
to the acquisition or issue of the financial instruments, being recognised immediately through profit or loss. Financial instruments that are not carried at
fair value through profit or loss are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the
financial instruments.
Financial instruments are recognised or de-recognised on the date the Group settles the purchase or sale of the instruments (settlement date
accounting).
(b) Subsequent measurement
Subsequent to initial measurement, financial instruments are measured either at amortised cost or fair value depending on their classification category.
(c) Classification
(i) Financial assets
Subsequent to initial recognition, all financial assets within the Group are measured at:
Amortised cost;
Fair value through other comprehensive income (FVOCI); or
Fair value through profit or loss (FVTPL)
The Group's financial assets are subsequently measured at amortised cost if they meet both of the following criteria and are not designated as at FVTPL:
'Hold to collect' business model test - The asset is held within a business model whose objective is to hold the financial asset in other to collect
contractual cash flows; and
'SPPI' contractual cash flow characteristics test - The contractual terms of the financial asset give rise to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding on a specified date. Interest in this context is the consideration for the time
value of money and for the credit risk associated with the principal amount outstanding during a particular period of time.
Debt instruments are measured at amortised cost by the Group if they meet both of the following criteria and are not designated as at FVTPL:
'Hold to collect and sell' business model test: The asset is held within a business model whose objective is achieved by both holding the
financial asset in order to collect contractual cash flows and selling the financial asset; and
'SPPI' contractual cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
All other financial assets including equity investments are measured at fair value.
A financial asset is classified and measured at fair value through profit or loss (FVTPL) by the Group if the financial asset is:
49 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.5
Financial instruments (continued)
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 guarantees contracts and loan commitments
A financial guarantee contract is a contract that requires the Group (issuer) to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. Financial guarantees issued or commitments to
provide a loan at a below-market interest rate are initially measured at fair value. Subsequently, they are measured at the higher of the loss allowance
determined in accordance with IFRS 9 (see note 3.2.18) and the amount initially recognised less, when appropriate, the cumulative amount of income
recognised in accordance with the principles of IFRS 15.
The Group has issued no loan commitments that are measured at FVTPL.
Liabilities arising from financial guarantees and loan commitments are included within provisions.
The Group conducts business involving commitments to customers. The majority of these facilities are set-off by corresponding obligations of third
parties. Contingent liabilities and commitments comprise usance lines and letters of credit.
Usance and letters of credit are agreements to lend to a customer in the future subject to certain conditions. An acceptance is an undertaking by a bank
to pay a bill of exchange drawn on a customer.
Letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these
obligations in the event of the Customer’s default, the cash requirements of these instruments are expected to be considerably higher than 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;
50 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.5
Financial instruments (continued)
– how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash
flows collected); and
– the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However,
information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group’s stated objective for managing the
financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are
neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether
the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this
condition. In making the assessment, the Group considers:
– contingent events that would change the amount and timing of cash flows;
– 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 year after the Group changes its business model for managing
financial assets.
(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.
51 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.5
Financial instruments (continued)
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.
52 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.5
Financial instruments (continued)
(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 year during which the change has occurred.
Subsequent to initial recognition, the fair value of a financial instrument is based on quoted market prices or dealer price quotation for financial
instruments. If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique. Valuation techniques
include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other
instruments that are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum
use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in
setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs into valuation techniques reasonably
represent market expectations and measures of the risk-return factors inherent in the financial instrument.
See note 3.5 on fair valuation methods and assumptions.
(i) 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.
Derivative instruments
2.6
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
53 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 instrument has expired, is sold, terminated, or exercised
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 in a hedging relationship are
recognized immediately in profit or loss and are included in Trading gains/(losses).
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’.
Financial instruments for which lifetime ECL is recognised which are credit impaired are referred to as 'Stage 3 financial instruments".
Loss allowances for other assets and lease receivables are always measured at an amount equal to lifetime ECL.
The Group considers debt investment securities to have low credit risk when its credit risk rating is equivalent to the globally understood definition of
‘investment grade’.
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;
54 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.7
Impairment (continued)
• 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 4.2.
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 year 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.
• The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness.
55 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.7
Impairment (continued)
• 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 amounts of assets written off during the year ended 31 December 2023 was N13.4 billion (31 December 2022: N74.1
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. The
reclassification is applied prospectively from the reclassification date. Accordingly, any previously recognised gains, losses or interest are not reinstated.
Changes in the business model for managing financial assets are expected to be very infrequent.
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 diffculties of the borrower. Restructured loans represent loans whose repayment periods have been extended due to
changes in the business dynamics of the borrowers. For such loans, the borrowers are expected to pay the principal amounts in full within extended
repayment period and all interest, including interest for the original and extended terms.
2.10 Collateral
The Group obtains collateral where appropriate, from customers to manage their credit risk exposure to the customers. The collateral normally takes the
form of a lien over the customer’s assets and gives the Group a claim on these assets for customers in the event that the customer defaults.
The Group may also use other credit instruments, such as derivative contracts in order to reduce their credit risk.
Collateral received in the form of securities and other non-cash assets is not recorded on the statement of financial position. Collateral received in the
form of cash is recorded on the statement of financial position with a corresponding liability see note 3.2.7(a)(i)
56 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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
Motor vehicles
Office equipment
Furniture and fittings
Computer equipment
Buildings
Leasehold improvement
Aircraft
Right of use assets
Depreciation is included in profit or loss.
Not depreciated
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
25 years
Lower of lease term or the useful life for the specified class of
item
Work in progress consists of items of property and equipment that are not yet available for use. Work in progress is carried at cost less any required
impairment. Depreciation starts when assets are available for use. An impairment loss is recognised if the asset’s recoverable amount is less than cost.
The asset is reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Once the
items are available for use, they are transferred to relevant classes of property and equipment as appropriate.
Property and equipment are derecognized on disposal, or when no future economic benefits are expected from their use or disposal.
Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or loss.
Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate.
Borrowing 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 year 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)
it is technically feasible to complete the software product so that it will be available for use;
57 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
ii)
iii)
iv)
v)
vi)
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use/sell the software product are available
the expenditure attributable to the software product during its development can be reliably measured.
Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it
relates.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that the asset is available for
use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life for
computer software is 5 years.
Amortisation methods, useful lives and residual values are reviewed at each financial year-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.
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 identified asset.
The Group has elected not to recognize right-of-use assets and lease liabilities for some leases of low value assets. The Group recognizes expenses
associated with these leases as an expense on straight line basis over the lease term.
Payments associated with short term leases are recognised on a straight line basis as an expense in profit or loss. Short term leases are leases with a
lease term of 12 months or less without a purchase option.
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.
58 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.14 Leases (continued)
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and
subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a
residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised
or a termination option is reasonably certain not to be exercised.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The
assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease
liabilities and right-of-use assets recognized.
C. Group / Bank as a lessor
Lease and instalment sale contracts are primarily financing transactions in banking activities, with rentals and instalments receivable, less unearned
finance charges, being included in Loans and advances to customers in the statement of financial position. Finance charges earned are computed using
the effective interest method which reflects a constant periodic return on the investment in the finance lease. Initial direct costs paid are capitalized to
the value of the lease amount receivable and accounted for over the lease term as an adjustment to the effective interest rate method.
The Group recognizes assets held under a finance lease in its statement of financial position and present them as a receivable at an amount equal to the
net investment in the lease. Initially, the Group will recognize a finance lease receivable at the amount equal to the net investment in the lease.
Subsequently, finance income will be recognized at a constant rate on the net investment. During any ‘payment free’ period, this will result in the
accrued finance income increasing the finance lease receivable.
For finance leases, the lease payments included in the measurement of the net investment in a lease at commencement date includes variable lease
payments that depend on an index or a rate; other variable payments (e.g. those linked to future performance or use of an underlying asset) are
excluded from the measurement of the net investment and are instead recognized as income when they arise. The treatment adopted for variable lease
payments under operating leases are consistent with these requirements.
2.15 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.
Provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific to the liability.
A provision for restructuring is recognised when the Group has approved a detailed formal plan, and the restructuring either has commenced or has
been announced publicly. Future operating costs or losses are not provided for. A provision for onerous contracts is recognised when the expected
benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is
measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-occurrence,
of one or more uncertain future events not wholly within the Group’s control. Contingent liabilities are not recognised in the financial statements but are
disclosed in the notes to the financial statements.
The Group recognises liability for a levy not earlier than when the activity that triggers payment occurs. Also, the Group accrues liability on levy
progressively only if the activity that triggers payment occurs over a period of time. However, for a levy that is triggered upon reaching a minimum
threshold, no liability is recognised before the specified minimum threshold is reached.
2.16 Employee benefits
(a) Post-employment benefits
The Group operates a defined contribution plan.
59 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.16 Employee benefits (continued)
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 year in which they are approved by the Bank’s shareholders. Dividends for the year that are
declared after the end of the reporting year 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 nondistributable. Transfer to
this reserve is no longer mandatory.
(f) Statutory reserve for credit risk
The Nigerian banking regulator requires the Bank to create a reserve for the difference between impairment 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.
60 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.17 Share capital and reserves (continued)
(g) Retained earnings
Retained earnings comprise the undistributed profits from previous periods which have not been reclassified to any specified reserves.
(h) Fair value reserve
Comprises fair value movements on equity instruments carried at FVOCI.
(i) Foreign currency translation reserve
Comprises exchange differences resulting from the translation to Naira of the results and financial position of Group companies that have a functional
currency other than Naira.
2.18 Recognition of interest income and expense
Effective interest rate
Interest income and expense are recognised in profit or loss using the effective interest method. The ‘effective interest rate’ is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
– the gross carrying amount of the financial asset; or
– the amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets, the Group estimates
future cash flows considering all contractual terms of the financial instrument, but not ECL. For purchased or originated credit impaired financial assets, a
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 interest rate is applied to the gross carrying amount of the asset (when the asset is not credit impaired) or to
the amortised cost of the liability. The effective interest rate is revised as a result of periodic re-estimation of cash flows of floating rate instruments to
reflect movements in market rates of interest.
However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective
interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the
gross basis.
For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted effective interest rate to
the amortised cost of the asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of the asset improves.
For information on when financial assets are credit-impaired, see Note 2.7.2.
Presentation
Interest income calculated using the effective interest method presented in the consolidated and separate statement of profit or loss includes only
interest on financial assets and financial liabilities measured at amortised cost and FVTOCI.
Interest expense presented in the consolidated and separate statement of profit or loss and other comprehensive income includes only interest on
financial liabilities measured at amortised cost.
61 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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, foreign withdrawal charges,
commission on letters of credit, foreign currency transaction fees, placement fees and syndication fees – is recognised as the related services are
performed. If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fee is recognised on a straight-
line basis over the commitment period.
A contract with a customer that results in a recognised financial instrument in the Group’s financial statements may be partially in the scope of IFRS 9
and partially in the scope of IFRS 15. If this is the case, then the Group first applies IFRS 9 to separate and measure the part of the contract that is in the
scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fee and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.
Dividend income is recognised when the right to receive income is established. Usually, this is the ex dividend 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 maintanace fees and fees on electronic products charged
monthly. Fees recognised at a point in time include credit related fees other than those recognised over time, auction fees, commission on agency and
collection services, fees on electronic products (recognised at point in time), foreign currency transaction fees, foreign withdrawal charges and
commission on letters of credit.
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 year 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 year is recognized as an expense. Expenses that
are not related to the income earned during the reporting year, 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 year when they are incurred in cases when it is not probable to directly relate them to particular income
earned during the current reporting year and when they are not expected to generate any income during the coming years.
2.22 Current and deferred income tax
Income tax expense comprises current tax (company income tax, tertiary education tax national information technology development agency levy and
Nigeria Police Trust Fund levy) and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
The Bank had determined that interest and penalties relating to income taxes do not meet the definition of income taxes, and therefore are accounted
for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
62 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation
and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Bank measures its tax balances either based on
the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
(a) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to tax payable or receivable
in respect of previous years.
The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related
to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date and is assessed as follows:
- Company income tax is computed on taxable profits.
- Tertiary education tax is computed on assessable profits.
- National Information Technology Development Agency levy is computed on profit before tax.
- Nigeria Police Trust Fund levy is computed on net profit (i.e. profit after deducting all expenses and taxes from revenue earned by the company during
the year).
-National Agency for Science and Engineering Infrastructure is computed on profit before tax.
(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 applied. Future taxable profits are determined based on the reversal of relevant taxable
temporary differences.
If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of
existing temporary differences, are considered, based on the business plans of the Company. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability
of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset the current tax liabilities against the current 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 simultaneously.
2.23 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 year. Where there are shares that could
potentially affects the numbers of share issued, those shares are considered in calculating the diluted earnings per share. There are currently no shares
that could potentially dilute the total issued shares.
63 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
2.24 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 line/structure to management.
2.25 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities through its subsidiaries, Zenith Pensions Custodian Limited and Zenith Nominees Limited that
results in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising
thereon are excluded from these financial statements, as they are not assets of the Group. The fees earned on these activities are recognised as assets
based fees.
2.26 Deposit for Investment in AGSMEIS
The Agri-Business/Small and Medium Enterprises Investment Scheme is an initiative of Banker's committee of Nigeria. The contributed funds is meant for
supporting the Federal Government's effort at promoting agricultural businesses as well as Small and Medium Enterprises. In line with this initiative, the
Bank will contribute 5% of Profit After Tax yearly to the fund.
2.27 Hyperinflationary accounting
Hyperinflationary accounting is applied to those subsidiary operations in countries where the three-year cumulative inflation rate is approaching or
exceeding 100%. In 2023, this affected the Group's operations in Ghana and Sierra Leone. The Group applies IAS 29 Financial Reporting in
Hyperinflationary Economies to the underlying financial information of relevant subsidiaries to restate their local currency results and financial position
so as to be stated in terms of the measuring unit current at the end of the reporting period. Those restated results are translated into the Group's
presentation currency (the Nigerian Naira) for consolidation at the closing rate at the balance sheet date. Group comparatives are not restated for the
effect of hyperinflation and consequential adjustments to the opening balance sheet in relation to the hyperinflationary subsidiaries are presented in
Other comprehensive income and reported in retained earnings. The hyperinflationary gain or loss in respect of the net monetary position of the
relevant subsidiary is included in profit or loss and separately disclosed within other operating income.
When applying hyperinflationary accounting for the first time, the underlying information is restated in terms of the measuring unit current at the end of
the reporting period as if the relevant economy had always been hyperinflationary. Group comparatives are not restated for such historical adjustments.
The restatement procedures applied for transactions and balances for the Ghana subsidiary are as follows:
• Corresponding figures as of, and for, the prior year ended for the subsidiary only, were restated by applying the change in the index from the end of
the prior year to the end of the current year.
• Monetary assets and liabilities for the current year, were not restated as they already stated in terms of the measuring unit current at statement of
financial position date;
• Non-monetary assets and liabilities, and components of shareholders equity/funds, were restated by applying the change in index from date/month of
transaction
• Property, plant and equipment and intangible assets were restated by applying the change in the index from the date of transaction, to the statement
of financial position date. Depreciation and amortisation amounts are based on the restated amounts;
• Profit or loss statement items/transactions, were restated by applying the change in index during the period to statement of financial position date.
64 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 number of oversight functions. The
Group addresses the challenge of risks comprehensively through the Enterprise Risk Management (ERM) Framework by applying practices that are
supported by a governance structure consisting of Board- level and executive management committees.
As part of its risk management policy, the Group segregates duties between market-facing business units and risk management functions while
management is governed by well-defined policies, which are clearly communicated across the Group.
Risk related issues are taken into consideration in all business decisions and the Group continually strives to maintain a conservative balance between
risk and revenue consideration. Continuous education and awareness of risk management has strengthened the risk management culture across the
Group.
3.1.1 Risk Management Philosophy/Strategy
The Group considers sound risk management practice to be the foundation of a long lasting financial institution.
(a)
(b)
(c)
(d)
(e)
The Group adopt a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number
of oversight functions.
Risk management is a shared responsibility. Therefore the Group aims to build a shared perspective on risks that is grounded in consensus.
There is clear segregation of duties between market-facing business units and risk management functions.
Risk Management is governed by well-defined policies which are clearly communicated across the Group.
Risk related issues are taken into consideration in all business decisions.
3.1.2 Risk Appetite
The Group's risk appetite is reviewed by the Board of Directors annually, at a level that minimizes erosion of earnings or capital due to avoidable losses or
from frauds and operational inefficiencies.
The Group’s risk appetite describes the quantum of risk that the Group would assume in pursuit of its business objectives at any point in time. The Group
uses this risk appetite definition in aligning its overall corporate strategy, its capital allocation and risks.
The Group sets tolerance limits for identified key risk indicators (“KRIs”), which served as proxies for the risk appetite for each risk area and
business/support unit. Tolerance levels for KRIs are jointly 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 audit committee provides oversight on the systems of internal
control, financial reporting and compliance. The Board credit committee reviews the credit policies and approves all loans above the defined limits for
Executive Management. The Board Risk Management Committee sets the risk philosophy, policies and strategies as well as provides guidance on the
various risk elements and their management. The Board Risk Control Functions are supported by various management committees and sub committees
(Global Credit committee and Management Risk committee) that help it develop and implement various risk strategies. The Global Credit committee
manages the credit approval and documentation activities. It ensures that the credit policies and procedures are aligned with the Group's business
objectives and strategies. The Management Risk committee drives the management of the financial risks (Market, Liquidity and Credit Risk), operational
risks as well as strategic and reputational risks.
In addition, Zenith Group manages its risks in a structured, systematic and transparent manner through a global risk policy which embeds comprehensive
risk management processes into the organisational structure, risk measurement and monitoring activities. This structure ensures that the Group’s overall
risk exposures are within the thresholds set by the Board.
The key features of the Group’s risk management policy are:
(a)
(b)
(c)
(d)
The Board of Directors provides overall risk management direction and oversight;
The Group’s risk appetite is approved by the Board of Directors;
Risk management is embedded in the Group as an intrinsic process and is a core competence of all its employees;
The Group manages its credit, market, operational and liquidity risks in a coordinated manner within the organisation;
65 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
(e)
(f)
The Group’s risk management function is independent of the business divisions; and
The Group’s internal audit function reports to the Board Audit Committee and provides independent validation of the business units’
compliance with risk policies and procedures, and the adequacy and effectiveness of the risk management framework on an enterprise-wide
basis.
The Group continuously modifies and enhances its risk management policies and systems to reflect changes in markets, products and international best
practices. Training, individual responsibility and accountability, together with a disciplined and cautious culture of control, are an integral part of the
Group’s management of risk.
The Board of Directors ensures strict compliance with relevant laws, rules and standards issued by the industry regulators and other law enforcement
agencies, market conventions, codes of practices promoted by industry associations and internal policies.
The compliance function, under the leadership of the Chief Compliance Officer of the Bank, has put in place a robust compliance framework, which
includes:
(a)
(b)
(c)
(d)
Comprehensive compliance manual detailing the roles and responsibilities of all stakeholders in the compliance process:
Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business is conducted
professionally;
Review of the Bank's Anti-Money Laundering Policy in accordance with changes in the Money Laundering Prohibition Act 2011 and Anti-
Terrorism Act 2011 as amended; and
Incorporation of new guidelines in the Bank's "Know Your Customer" policy 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 control that captures all risks in
all aspects of the Group’s activities.
All activities in the Group have been profiled and the key risk drivers and threats in them identified. Mitigation and control techniques are then
determined to tackle each of these threats. These techniques are implemented as risk policies and procedures that drive the strategic direction and risk
appetite as specified by the Board. Techniques employed in meeting these objectives culminate in the following roles for the risk control functions of the
Group:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Develop and implement procedures and practices that translate the Board's goals, objectives, and risk tolerances into operating standards that
are well understood by staff;
Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall direction;
Risk identification, measurement, monitoring, and control procedures;
Establish effective internal controls that cover each risk management process;
Ensure that the Group’s risk management processes are properly documented;
Create adequate awareness to make risk management a part of the corporate culture of the Group;
Ensure that risk remains within the boundaries established by the Board; and
Ensure that business lines comply with risk parameters and prudent limits established by the Board;
The CBN Risk Management Guidelines prescribes quantitative and qualitative criteria for the identification of significant activities and sets a threshold of
contributions for determining significant activities in the Bank and its subsidiaries. This practice is essentially to drive the risk control focus of financial
institutions.
Zenith Bank applies a mix of qualitative and quantitative techniques in the determination of its significant activities under prescribed broad headings. The
criteria used in estimating the materiality of each activity is essentially based on the following:
(a)
(b)
The strategic importance of the activity and sector;
The contribution of the activity/sector to the total assets of the Bank;
66 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
(c)
(d)
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 financial industry in Nigeria is a dynamic and ever-evolving landscape. It encompasses banks, insurance companies, capital markets, and other
financial institutions that facilitate economic transactions. The sector contributes significantly to the national GDP and acts as a catalyst for economic
growth and development. However, due to its complexity and inherent risks, effective risk management strategies are essential to ensure the stability
and sustainability of the industry.
Emerging risks and challenges pose new threats, while trends and patterns in risk management offer valuable insights into effective strategies. It is
crucial for financial institutions to stay informed and adapt their risk management strategies and practices accordingly. Zenith Bank emphasizes the
importance of risk management as part of good governance and sound business practices by identifying, assessing, and managing its risks effectively.
Trends and patterns in risk management provide valuable guidance for financial institutions. With advancements in data analytics and predictive
modelling, institutions can now gain deeper insights into potential risks and develop more effective risk mitigation strategies. These trends also
emphasize the importance of collaboration and information sharing among industry players to stay ahead of emerging risks.
Emerging risks and challenges in Nigeria banking sector can be diverse and often interconnected. Factors such as economic volatility, regulatory
changes, technological advancements, cybersecurity threats, and geopolitical uncertainties all contribute to the complexity of the risk landscape. The
bank is prepared to address these risks and adapt its risk management strategies to mitigate potential negative impacts.
3.2
Credit Risk
Credit risk is the risk of a financial loss if an obligor does not fully honour its contractual commitments to the Group. Obligors may be borrowers, issuers,
counterparties or guarantors. Credit risk is the most significant risk facing the Bank in the normal course of business. The Bank is exposed to credit risk
not only through its direct lending activities and transactions but also through commitments to extend credit, letters of guarantee, letters of credit,
securities purchased under reverse repurchase agreements, deposits with financial institutions, brokerage activities, and transactions carrying a
settlement risk for the Bank such as irrevocable fund transfers to third parties via electronic payment systems.
The Group has robust credit standards, policies and procedures to control and monitor intrinsic and concentration risks through all credit levels of
selection, underwriting, administration and control. Some of the policies are:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Credit is only extended to suitable and well identified customers and never where there is any doubt as to the ethical standards and record of
the intending borrower;
Exposures to any industry or customer will be determined by the regulatory guidelines, clearly defined internal policies, debt service capability
and balance sheet management guidelines;
Credit is not extended to customers where the source of repayment is unknown or speculative, and also where the destination of funds is
unknown. There must be clear and verifiable purpose for the use of the funds;
Credit is not given to a customer where the ability of the customer to meet obligations is based on the most optimistic forecast of events. Risk
considerations will always have priority over business and profit considerations
The primary source of repayment for all credits must be from an identifiable cash flow from the counterparty’s normal business operations or
other financial arrangements. The realization of security remains a fall back option;
A pricing model that reflects variations in the risk profile of various credits to ensure that higher risks are compensated by higher returns is
adopted;
All insiders’ related credits are limited to regulatory and strict internal limits and are disclosed as required;
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
67 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Zenith Bank and its subsidiaries have devoted resources and harnessed their credit data to develop models that will improve the determination of
economic and financial threats resulting from credit risk. Before a sound and prudent credit decision can be taken, the credit risk engendered by the
borrower or counterparty must be accurately assessed. This is the first step in processing credit applications. As a result, some key factors are considered
in credit risk assessment and measurement: These are:
(a)
(b)
(c)
(d)
(e)
Adherence to the strict credit selection criteria, which includes defined target market, credit history, the capacity and character of customers;
Credit rating of obligor;
The likelihood of failure to pay over the period stipulated in the contract;
The size of the facility in case default occurs; and
Estimated Rate of Recovery, which is a measure of the portion of the debt that can be recovered through realisation of assets and collateral
should default occur.
3.2.2 Credit Rating Tools
The principal objective of the credit risk rating system is to produce a reliable assessment of the credit risk to which the Group is exposed. As such, all
loans and indirect credits such as guarantees and bonds as well as treasury investments undergo a formal credit analysis process that would ensure the
proper appraisal of the facility.
(a) Loans and advances and amounts due from banks
Each individual borrower is rated based on an internally developed rating model that evaluates risk based on financial, qualitative and industry-specific
inputs. The associated loss estimate norms for each grade have been developed based on the experience of the Bank and its various subsidiaries.
In order to allow for a meaningful distribution of exposures across grades with no excessive concentrations on the Group's borrower-rating and its
facility-rating scale, the Group maintains the under listed rating grade, which is applicable to both new and existing customers.
Zenith Group Rating
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
(b) Other debt instruments
Description of the grade
Investment Risk (Extremely Low Risk)
Investment Risk (Very Low Risk)
Investment Risk (Low Risk)
Upper Standard Grade (Acceptable Risk)
Lower Standard Grade (Moderately High Risk)
Non Investment Grade (High Risk)
Non Investment Grade (Very High Risk)
Non Investment Grade (Extremely High Risk)
Non Investment Grade (High Likelihood of Default)
Non Investment Grade (Lost)
Individually insignificant (unrated)
With respect to other debt instruments, the Group takes the following into consideration in the management of the associated credit risk:
i)
ii)
Internal and external research and market intelligence reports; and
Regulatory agencies reports
In addition to the above, we have put in place limits structure which is monitored from time to time in order to limit our risk exposures on these
securities.
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
68 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 reviews the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Credit assessment of the borrower’s industry, and macro-economic factors;
The purpose of credit and source of repayment;
The track record / repayment history of borrower;
Assess/evaluate the repayment capacity of the borrower;
The proposed terms and conditions and covenants;
Adequacy and enforceability of collaterals; and
Approval from appropriate authority.
69 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.2.4 Group Credit Risk Management
Zenith's approach to managing credit risk is a key element in achieving its strategic objective of maintaining and further enhancing its asset quality and
credit portfolio risk profile. The credit standards, policies and procedures, risk methodologies and framework, solid structure and infrastructure, risk
monitoring and control activities enable the Group to deal with the emerging risks and challenges with a high level of confidence and determination.
The framework for credit risk assessment at Zenith is well-defined and institutionally predicated on:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Clear tolerance limits and risk appetite set at the Board level, well communicated to the business units and periodically reviewed and
monitored to adjust as appropriate;
Well-defined target market and risk asset acceptance criteria;
Rigorous financial, credit and overall risk analysis for each customer/transaction;
Regular portfolio examination in line with key performance indicators and periodic stress testing;
Continuous assessment of concentrations and mitigation strategies;
Continuous validation and modification of early warning system to ensure proper functioning for risk identification;
Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert judgment;
Systematic credit limits management which enables the Bank to monitor its credit exposure on daily basis at country, borrower, industry,
credit risk rating and credit facility type levels;
Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups; and
Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering proper remedies.
The credit processes are supplemented by sectoral portfolio reviews, which focus on countries, regions or specific industries as well as multiple stress
testing scenarios. These are intended to identify any inherent risks in the portfolios resulting from changes in market conditions and are supplemented
by independent reviews from our Group Internal Audit.
3.2.5 Group Credit Risk Limits
The Group applies credit risk limits, among other techniques in managing credit risk. This is the practice of stipulating a maximum amount that the
individual or counterparty can obtain as loan. Internal and regulatory limits are strictly adhered to. Through this, the Group not only protects itself, but
also in a sense, protects the counterparties from borrowing more than they are capable of repaying.
The Group focuses on its concentration and intrinsic risks and further manages them to a more comfortable level. This is very important due to the
serious risk implications that intrinsic and concentration risk pose to the Group. A thorough analysis of economic factors, market forecasting and
prediction based on historical evidence is used to mitigate these risks.
The Group has in place various portfolio concentration limits (which are subject to periodic review). These limits are closely monitored and reported on
from time to time.
The Group’s internal credit approval limits for the various authorities levels are as indicated below.
Zenith Group Rating
Board Credit Committee
Management Global Credit Committee
Approval limit (% of Shareholders' Fund)
N3.5 billion and above (Not exceeding 20% of total shareholders' fund)
Below N3.5billion
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.
70 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 of activities.
Credit risk is monitored on an ongoing basis with formal weekly, monthly and quarterly reporting to keep senior management aware of shifts in credit
quality and portfolio performance along with changing external factors such as economic and business cycles.
The capabilities of the credit review team is continuously enhanced in order to improve the facility monitoring activity and assure good quality Risk
Assets Portfolio across the Group.
A specialised and focused loan recovery and workout team handles the management and collection of problematic credit facilities.
3.2.7 (a) Credit Risk Mitigation, Collateral, and other Credit Enhancements
The Group’s approach to controlling various risks begins with optimizing the diversification of its exposures. Zenith uses a variety of techniques to
manage the credit risk arising from its lending activities. These techniques are set out in the Group's internal policies and procedures. They are mainly
reflected in the application of various exposure limits: credit concentration limits by counterparty and credit concentration limits by industry, country,
region, and type of financial instrument.
Enforceable legal documentation establishes Zenith’s direct, irrevocable, and unconditional recourse to any collateral, security, or other credit
enhancements.
(i) Collateral Security
A key mitigation step employed by the Group in its credit risk management process includes the use of collateral securities to secure its loans and
advances as alternative sources of repayment during adverse conditions. All major credit facilities to our customers are to be secured and the security
instruments and documentations must be perfected, and all conditions precedent must be met before drawdown or disbursement is allowed. Collateral
analysis includes a good description of the collateral, its value, how the value was arrived at, and when the valuation was made. It is usually necessary to
review the potential adverse changes in the value of collateral security for the foreseeable future.
Collateral securities that are pledged must be in negotiable form and usually fall under the following categories:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Real estate, plant and equipment collateral (usually all asset or mortgage debenture or charge), which have to be registered and enforceable
under Nigerian law;
Collateral consisting of inventory, accounts receivable, machinery equipment, patents, trademarks, farm products, general intangibles, etc.
These require a security agreement (usually a floating debenture) which must be registered and must be enforceable under Nigerian law;
Stocks and shares of publicly quoted companies;
Domiciliation of contracts proceeds;
Documents of title to goods such as shipping documents consigned to the order of Zenith Bank or any of its subsidiaries;
Letter of lien; and
Cash collateral.
Collateral securities are usually valued and inspected prior to disbursement and on a regular basis thereafter until full repayment of the exposure. We
conduct a regular review of all collateral documentation in respect of all credits in the Bank and specific gaps in the collateral documentation addressed
immediately. Borrowers are required to confirm adherence to covenants including periodic confirmation of collateral values which are used by the Bank
to provide early warning signals of collateral value deterioration. Periodic inspections of physical collateral are performed where appropriate and where
reasonable means of doing so are available.
The type and size of collateral held as security for financial assets other than loans and advances are usually a function of the nature of the instrument.
Our debt securities, treasury and other eligible bills are normally unsecured but the Group's comfort is on the issuer’s credit rating, i.e. Federal
Government of Nigeria (FGN) and other sovereigns.
As part of its Credit risk management strategy, the Group emphasizes on the robustness of its credit analysis and diagonsis prior to disbursment of loans
and advances to its customers.
71 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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. The Group takes physical possession of properties
or other assets held as collateral and uses external agents to realise the value as soon as practicable to settle indebtedness. Any surplus funds realised
from such disposal are returned to the borrower or are otherwise dealt with in accordance with appropriate regulations. The assets in such cases are not
carried on the Group's balance sheet.
Details of collateral pledged by customers against the carrying amount of loans and advances as at 31 December 2023 are as follows:
In millions of Naira
Group
Bank
Secured against real
estate
Secured by shares of
quoted companies
Cash Collateral, lien over
fixed and floating assets
Unsecured
Total Gross amount
ECL Allowance
Net carrying amount
Group
31 December 2023
Disclosure by Collateral
Total exposure
449,911
13,967
Fair value of
collateral
3,214,994
9,198
Total exposure
319,439
13,967
Fair value of
collateral
126,676
9,199
2,533,204
2,270,506
2,203,420
1,928,631
4,058,365
7,055,447
(498,977)
6,556,470
-
5,494,698
-
5,494,698
3,876,153
6,412,979
(484,183)
5,928,796
-
2,064,506
-
2,064,506
Term loan
Overdrafts
Onlending
Total
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
Grand total: Net amount
Grand total: Amount of overcollaterization/(undercollaterization)
3,118,408
1,788
1,692,916
4,813,112
5,291,536
(336,420)
4,955,115
(142,003)
81,402
4,788
202,472
288,662
1,098,703
(125,258)
973,445
(684,783)
15,184
2,622
375,117
392,923
665,208
(37,299)
627,909
3,214,994
9,199
2,270,505
5,494,698
7,055,447
(498,977)
6,556,469
(234,986)
(1,061,772)
72 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
31 December 2023
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
232,635
930
1,202,510
1,436,076
3,522,061
(36,667)
3,485,393
73,121
1,365
99,070
173,555
348,802
(4,825)
343,977
14,286
794
195,590
210,670
443,580
(5,854)
437,726
320,042
3,089
1,497,170
1,820,301
4,314,443
(47,346)
4,267,096
Grand total: Amount of overcollaterization/(undercollaterization)
(2,049,317)
(170,422)
(227,056)
(2,446,795)
31 December 2023
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
Grand total: Amount of overcollaterization/(undercollaterization)
Term loan
Overdrafts
Onlending
Total
2,832,953
858
441,123
3,274,934
1,556,619
(98,041)
1,458,577
1,816,357
3,117
235
88,005
91,357
658,239
(46,347)
611,892
(520,535)
843
1,828
174,007
176,678
215,799
(27,160)
188,640
(11,962)
2,836,913
2,921
703,136
3,542,969
2,430,657
(171,548)
2,259,109
1,283,860
31 December 2023
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)
Term loan
Overdrafts
Onlending
Total
52,820
-
48,292
101,112
212,856
(201,712)
11,145
89,967
5,164
3,189
16,388
24,741
91,663
(74,086)
17,577
7,164
55
-
5,520
5,575
5,827
(4,285)
1,543
4,032
58,039
3,189
70,200
131,428
310,347
(280,083)
30,265
101,163
73 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
31 December 2023
Disclosure by Collateral
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
Grand total: Net amount
Grand total: Amount of overcollaterization/(undercollaterization)
31 December 2023
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
83,454
1,788
1,372,755
1,457,997
4,714,937
(326,300)
4,388,637
(2,930,640)
28,038
4,789
180,759
213,586
1,032,834
(120,584)
912,250
(698,664)
15,184
2,622
375,117
392,923
665,208
(37,299)
627,909
126,676
9,199
1,928,631
2,064,506
6,412,979
(484,183)
5,928,796
(234,986)
(3,864,290)
Term loan
Overdrafts
Onlending
Total
23,378
930
882,349
906,657
2,952,899
(26,960)
2,925,939
21,076
1,365
77,584
100,025
284,365
(1,924)
282,441
14,286
794
195,590
210,670
443,582
(5,854)
437,728
58,740
3,089
1,155,523
1,217,352
3,680,846
(34,738)
3,646,108
Grand total: Amount of overcollaterization/(undercollaterization)
(2,019,282)
(182,416)
(227,058)
(2,428,756)
31 December 2023
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
Term loan
Overdrafts
Onlending
Total
7,488
858
441,123
449,469
1,549,326
(97,678)
1,451,648
3,117
235
87,862
91,214
658,189
(45,872)
612,317
843
1,828
174,008
176,679
215,799
(27,160)
188,639
11,448
2,921
702,993
717,362
2,423,314
(170,710)
2,252,604
Grand total: Amount of overcollaterization/(undercollaterization)
(1,002,179)
(521,103)
(11,960)
(1,535,242)
31 December 2023
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)
Term loan
Overdrafts
Onlending
Total
52,588
-
48,292
100,880
212,712
(201,662)
11,050
89,830
3,845
3,189
16,303
23,337
90,279
(72,789)
17,490
5,847
55
-
5,520
5,575
5,828
(4,284)
1,544
4,031
56,488
3,189
70,115
129,792
308,819
(278,735)
30,084
99,708
74 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Details of collateral pledged by customers against carrying amount of loans and advances as at 31 December 2022 are as follows:
In millions of Naira
Group
Bank
Secured against real estate
Secured by shares of quoted companies
Cash collateral, lien over fixed and floating assets
Unsecured
Total Gross amount
ECL Allowance
Net carrying amount
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
Total exposure
319,203
54,851
2,318,640
1,431,271
4,123,966
(110,261)
4,013,705
Fair Value of
collateral
312,265
26,620
1,856,751
-
2,195,636
-
2,195,636
Total exposure
270,935
54,851
2,162,646
1,350,373
3,838,805
(103,129)
Value of
collateral
208,068
26,620
1,678,280
-
1,912,968
-
3,735,676
1,912,968
Term loan
Overdrafts
Onlending
Total
243,975
18,656
1,266,931
1,529,562
2,982,808
(62,315)
2,920,493
47,653
7,964
152,207
207,824
450,649
(39,864)
410,785
20,637
-
437,613
458,250
690,509
(8,082)
682,427
312,264
26,620
1,856,751
2,195,636
4,123,966
(110,261)
4,013,705
Grand total: Amount of overcollaterization/(undercollaterization)
(1,390,931)
(202,961)
(224,177)
(1,818,069)
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
129,049
18,233
732,826
880,108
2,078,669
(15,224)
2,063,445
33,870
3,484
137,584
174,938
373,017
(6,238)
366,778
18,912
-
436,790
455,701
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)
(1,598,858)
75 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
31 December 2022
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
Grand total: Amount of overcollaterization/(undercollaterization)
Term loan
Overdrafts
Onlending
Total
107,255
423
529,067
636,745
876,633
(34,523)
842,110
(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
655,507
905,393
(35,370)
870,023
(214,516)
31 December 2022
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
Term loan
Overdrafts
Onlending
Total
7,671
-
5,038
12,709
27,507
(12,569)
14,938
(2,229)
7,656
2,210
5,911
15,776
50,845
(32,796)
18,049
(2,273)
73
-
823
896
1,113
(25)
1,088
(192)
15,400
2,210
11,772
29,381
79,465
(45,390)
34,075
(4,694)
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
Onlending
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)
76 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
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
Grand total: Amount of overcollaterization/(undercollaterization)
31 December 2022
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
Term loan
Overdrafts
Onlending
Total
107,158
423
529,067
636,648
871,125
(33,524)
837,601
(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)
Term loan
Overdrafts
Onlending
Total
7,671
-
5,038
12,709
27,505
(12,568)
14,937
(2,228)
4,199
2,210
5,852
12,261
47,962
(30,926)
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)
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.
77 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 2023 and 31 December 2022 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 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 2023.
In millions of Naira
Trading assets
- Treasury bills
- Investment in securities
- Derivatives Asset -Hedging Instrument
- Derivatives Asset-Non Hedging Instrument
- Assets pledged as collateral
Group
Bank
Maximum
exposure to
credit risk
Maximum
exposure to
credit risk
749,606
24,293
462,376
72,363
-
749,606
19,433
462,376
45,566
-
78 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
Trading assets
- Treasury bills
- Investment in securities
- Derivatives Asset -Hedging Instrument
-Derivatives Asset - Non Hedging Instrument
- Assets pledged as collateral
Group
Bank
Maximum
exposure to
credit risk
Maximum
exposure to
credit risk
1,243,038
12,442
20,052
29,822
26,287
1,243,038
10,560
20,052
28,799
26,189
79 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 2023
In millions of Naira
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
Maximum
exposure to
credit risk
Group
Maximum
exposure to
credit risk
Bank
4,107,110
1,986,667
1,521,682
308,638
6,556,470
1,834,314
445,597
1,528,786
1,832,325
3,860,124
1,780,360
970,157
255,061
5,928,796
1,691,722
358,753
-
1,840,885
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
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
Maximum
exposure to
credit risk
Group
Maximum
exposure to
credit risk
Bank
2,116,307
1,003,500
788,133
228,375
4,013,705
1,302,811
193,465
833,849
1,113,967
2,036,327
963,630
518,338
228,375
3,735,676
1,132,796
176,289
-
995,763
80 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 2023 and 31 December 2022 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
2023 and 31 December 2022 respectively. For this table, the Group has allocated exposures to regions based on the regions the counterparties are
domiciled. Financial assets included in the table below represents other assets excluding prepayment.
In millions of Naira
31 December 2023
Group
Rest of Africa Outside Africa
Nigeria
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
3,860,124
2,529,966
308,638
127,067
1,054,597
462,376
246,986
206,307
-
35,581
483,190
-
-
-
-
1,671,666
1,536,974
-
45,564
-
26,799
389,071
50,309
6,217
Bank
Outside Africa
Rest of
Africa
Nigeria
3,965,386
2,529,966
255,061
126,766
956,400
462,376
45,565
389,137
-
-
-
1,076
33,190
-
-
651
-
-
-
1,563,880
-
-
1
4,752
Total
8,777,404
1,022,373
3,241,656
8,730,657
34,917
1,568,633
Financial Guarantees
Usance
Letters of credit
Performance bond and guarantees
Undrawn Overdraft Balance
Total
433,926
424,890
718,207
-
-
18,574
101,323
-
1,577,023
119,897
-
123,342
12,063
-
135,405
433,926
424,903
770,347
211,709
1,840,885
-
-
-
-
-
-
-
-
-
-
In millions of Naira
31 December 2022
Group
Rest of Africa Outside Africa
Nigeria
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
2,036,327
2,227,845
254,564
6,435
584,599
20,052
79,980
18,695
98
20,393
229,474
-
-
-
-
1,275,983
820,373
-
Bank
Outside Africa
Rest of
Africa
Nigeria
2,036,327
2,206,669
254,564
14,565
514,092
20,052
-
-
-
3,057
14,804
-
-
-
-
1,115,174
-
-
28,786
13
1,023
28,785
13
1
105,249
17,884
70,331
104,867
1,262
70,159
Total
5,263,857
366,537
2,167,710
5,179,921
19,136
1,185,334
Financial Guarantees
Usance
Letters of credit
Performance bond and guarantees
Undrawn overdraft
Total
276,481
341,290
329,167
89,749
1,036,687
-
22,065
55,215
-
77,280
-
-
-
-
-
276,481
279,791
323,824
89,749
969,845
-
-
1,042
-
1,042
-
-
24,876
-
24,876
81 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Risk management (continued)
3.
Gross loans and advances to customers and the impairment allowance per geographical region as at 31 December 2023
Carrying amounts presented in the table below is determined as gross loans less impairment allowances.
31 December 2023
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 2022
South South Nigeria
South West Nigeria
South East Nigeria
North Central Nigeria
North West Nigeria
North East Nigeria
Rest of Africa
Outside Africa
Group
Loans and advances to customers
Bank
Loans and advances to customers
Gross loans
531,653
5,404,929
209,958
210,427
68,967
167,680
309,739
152,094
Impairment
Allowance
(14,615)
(435,348)
(12,804)
(11,918)
(4,311)
(7,356)
(9,790)
(2,836)
Carrying
amount
517,038
4,969,581
197,154
198,509
64,656
160,324
299,949
149,258
Gross loans
531,653
5,224,294
209,958
210,427
68,967
167,680
-
-
Impairment
Allowance
(14,615)
(433,179)
(12,804)
(11,918)
(4,311)
(7,356)
-
-
Carrying
amount
517,038
4,791,115
197,154
198,509
64,656
160,324
-
-
7,055,447
(498,977)
6,556,470
6,412,979
(484,183)
5,928,796
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
277,548
3,136,204
158,058
148,610
53,605
110,809
133,599
105,534
Impairment
Allowance
(5,380)
(92,036)
(1,822)
(3,738)
(671)
(394)
(5,122)
(1,098)
Carrying
amount
272,168
3,044,168
156,236
144,872
52,934
110,415
128,476
104,435
Gross loans
277,548
3,090,175
158,058
148,610
53,605
110,809
-
-
Impairment
Allowance
(5,380)
(91,124)
(1,822)
(3,738)
(671)
(394)
-
-
Carrying
amount
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
82 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Risk management (continued)
3.
(b) Industry sectors
Gross loans and advances to customers per industry sector as at 31 December 2023
Carrying amounts presented in the table below are determined as gross loans less impairment allowances.
31 December 2023
In millions of Naira
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and construction
Finance and insurance
Government
Power
Transportation
Communication
Education
General Commerce
31 December 2022
In millions of Naira
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and construction
Finance and Insurance
Government
Power
Transportation
Communication
Education
General Commerce
Group
Loans and advances to customers
Bank
Loans and advances to customers
Gross
loans
337,124
2,111,589
148,642
1,598,503
258,090
153,750
875,619
124,580
150,809
108,612
31,547
1,156,582
Impairment
allowance
(6,566)
(175,455)
(28,439)
(157,354)
(14,077)
(2,608)
(30,322)
(9,389)
(18,448)
(461)
(521)
(55,337)
Carrying
amount
330,558
1,936,134
120,203
1,441,149
244,013
151,142
845,297
115,191
132,361
108,151
31,026
1,101,245
Gross loans
Impairment
allowance
Carrying
amount
328,984
2,109,033
126,491
1,520,684
198,922
43,032
785,577
124,580
129,314
100,876
26,455
919,031
(6,243)
(27,604)
322,741
(175,343) 1,933,690
98,887
(154,544) 1,366,140
186,749
42,693
756,042
115,191
111,697
100,658
26,139
868,169
(12,173)
(339)
(29,535)
(9,389)
(17,617)
(218)
(316)
(50,862)
7,055,447
(498,977)
6,556,470
6,412,979
(484,183) 5,928,796
Group
Loans and advances to customers
Bank
Loans and advances to customers
Gross loans
Impairment
allowance.
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
(5,853)
(59,309)
(14,382)
(10,774)
(2,784)
(667)
(1,679)
(566)
(3,286)
(317)
(257)
(10,386)
Carrying
amount
259,359
871,737
105,963
1,243,276
133,619
72,292
528,263
66,577
113,570
25,900
14,889
578,268
Gross loans
251,306
912,505
94,448
1,190,640
134,017
37,181
488,286
67,016
98,529
21,790
14,501
528,586
Impairment
allowance
(5,722)
(58,641)
(13,183)
Carrying
amount
245,584
853,864
81,265
(8,039) 1,182,601
131,317
(2,700)
36,901
(280)
487,747
(539)
66,451
(565)
95,371
(3,158)
21,648
(142)
14,272
(229)
518,655
(9,931)
4,123,966
(110,261)
4,013,705
3,838,805
(103,129) 3,735,676
83 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Group
Financial assets excluding loans and advances per industry sector as at 31 December 2023.
31 December 2023
In millions of naira
Government
Manufacturing
Finance and Insurance
Communication
Gross amount
Impairment allowance
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
4,107,110
-
-
-
4,107,110
-
2,736,344
-
-
-
2,736,344
(71)
308,667
-
-
-
308,667
(29)
-
-
1,835,249
-
1,862,577
156,646
992,817
105,033
1,835,249
(935)
3,117,073
(42,312)
Carrying amount
4,107,110
2,736,273
308,638
1,834,314
3,074,761
Financial assets excluding loans and advances per industry sector as at 31 December 2022
Derivatives
Hedging
Instrument
462,376
-
-
-
462,376
-
462,376
Derivatives
Non Hedging
Instrument
45,565
-
26,798
-
72,363
-
72,363
Other financial
assets
-
0
476,740
-
476,740
(31,143)
445,597
31 December 2022
In millions of naira
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
Government
Manufacturing
Finance and Insurance
Communication
Gross amount
Impairment allowance
2,116,307
-
-
-
2,116,307
-
2,246,947
-
-
-
2,246,947
(408)
254,583
-
98
-
254,681
(19)
-
-
1,302,886
-
1,623,788
8,279
42,454
22,163
1,302,886
(75)
1,696,684
(62,233)
Carrying amount
2,116,307
2,246,539
254,662
1,302,811
1,634,451
Derivatives
Hedging
Instrument
20,052
-
-
-
Derivatives Non
Hedging
Instrument
27,579
1,206
1,037
-
20,052
-
20,052
29,822
-
29,822
Other financial
assets
-
-
222,439
-
222,439
(28,973)
193,466
Bank
Financial assets excluding loans and advances per industry sector as at 31 December 2023
31 December 2023
In millions of naira
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
Government
Manufacturing
Finance and Insurance
Communication
Gross amount
Impairment allowance
3,965,386
-
-
-
3,965,386
-
2,530,037
-
-
-
2,530,037
(71)
255,090
-
-
-
255,090
(29)
-
-
1,692,657
-
1,692,657
(935)
660,464
143,500
86,605
104,472
995,041
(5,451)
Carrying amount
3,965,386
2,529,966
255,061
1,691,722
989,590
Derivatives
Hedging
Instrument
462,376
-
-
-
462,376
-
462,376
Derivative
Non Hedging
Instrument
45,565
-
1
-
45,566
-
45,566
Other financial
assets
-
-
425,601
-
425,601
(31,061)
394,540
84 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Financial assets excluding loans and advances per industry sector as at 31 December 2022.
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
2,036,327
-
-
-
2,036,327
-
2,206,707
-
-
-
2,206,707
(39)
254,583
-
-
-
254,583
(19)
-
-
1,132,871
-
1,132,871
(75)
463,676
6,238
39,601
21,966
531,481
(2,583)
2,036,327
2,206,668
254,564
1,132,796
528,898
Derivatives
Hedging
Instrument
20,052
-
-
-
Derivatives Non
Hedging
Instrument
27,563
1,222
14
-
20,052
-
20,052
28,799
-
28,799
Other financial
assets
-
-
205,157
-
205,157
(28,868)
176,289
31 December 2022
In millions of naira
Government
Manufacturing
Finance and Insurance
Communication
Gross amount
Impairment allowance
Carrying amount
3.2.9 Credit quality analysis
Group
31 December 2023
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of naira
AAA to A
BBB to BB
CCC to C
Unrated
Gross amount
ECL - impairment
Carrying amount
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
Derivative
Asset - Hedging
Instrument
3,867,620
-
239,490
-
4,107,110
-
2,562,050
-
174,294
-
2,736,344
(71)
308,667
-
-
-
308,667
(29)
1,509,797
133,317
48,829
143,306
2,055,135
710,549
346,662
4,727
1,835,249
(935)
3,117,073
(42,312)
4,107,110
2,736,273
308,638
1,834,314
3,074,761
-
462,376
-
-
462,376
-
462,376
Derivative
Asset -Non
Hedging
Instrument
1,733
70,109
-
521
72,363
-
72,363
Other financial
assets
70,821
291,938
62,064
51,917
476,740
(31,143)
445,597
Term loans
Overdraft
Onlending
Loans and Advances
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
3,522,061
1,556,619
212,856
348,801
658,239
91,663
Gross loans and advances
5,291,536
1,098,703
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
36,667
98,041
201,712
336,420
4,955,116
4,825
45,879
74,554
125,258
973,445
443,581
215,799
5,827
665,208
5,855
27,160
4,285
37,299
Total
4,314,443
2,430,657
310,347
7,055,447
47,347
171,080
280,550
498,977
-
-
627,909
6,556,470
85 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Credit rating for loans and advances with 12 month ECL
Term loans
Overdraft
Onlending
Loans and advances
A
AA
B
BB
BBB
CC
CCC
Below C
Unrated
Gross amount
ECL-Impairment
Carrying amount
Bank
31 December 2023
945,918
599,565
291,783
124,801
1,541,093
-
1,413
-
17,489
3,522,061
(36,667)
3,485,394
117,111
122,750
2,382
829
105,663
-
-
-
67
348,802
(4,825)
343,977
181,281
48,754
-
642
212,904
-
-
-
-
Total
1,244,310
771,069
294,165
126,272
1,859,660
-
1,413
-
17,556
443,581
(5,855)
4,314,444
(47,347)
437,726
4,267,097
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of naira
AAA to A
BBB to BB
CCC to C
Unrated
Gross amount
ECL - impairment
Carrying amount
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
3,965,386
-
-
-
3,965,386
-
2,530,037
-
-
-
2,530,037
(71)
255,090
-
-
-
255,090
(29)
1,346,978
126,350
211,466
7,863
1,692,657
(935)
618,736
370,491
5,814
-
995,041
(5,451)
3,965,386
2,529,966
255,061
1,691,722
989,590
-
462,376
-
-
462,376
-
462,376
-
45,566
-
-
45,566
-
45,566
70,228
293,308
-
62,065
425,601
(31,061)
394,540
Term loans
Overdraft
Onlending
Loans and Advances
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
2,952,899
1,549,326
212,712
284,365
658,190
90,279
Gross loans and advances
4,714,937
1,032,834
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
(26,960)
(97,680)
(201,660)
(326,300)
4,388,637
(1,924)
(45,871)
(72,789)
(120,584)
912,250
443,582
215,799
5,827
665,208
(5,855)
(27,159)
(4,285)
(37,299)
Total
3,680,846
2,423,315
308,818
6,412,979
(34,739)
(170,710)
(278,734)
(484,183)
-
-
627,909
5,928,796
Loans and advances
86 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Term loan
Overdraft
Onlending
A
AA
BB
BBB
C
CC
CCC
Below C
UNRATED
Gross amount
ECL-Impairment
Carrying amount
Group
31 December 2022
813,952
597,064
927
1,540,956
-
-
-
-
-
2,952,899
(26,960)
2,925,939
55,501
122,746
669
105,449
-
-
-
-
-
284,365
(1,924)
282,441
181,281
48,754
642
212,904
-
-
-
-
-
Total
1,050,734
768,564
2,238
1,859,309
-
-
-
-
-
443,581
(5,855)
3,680,845
(34,739)
437,726
3,646,106
Credit rating: All financial assets with credit exposure excluding loans and advances
In millions of naira
AAA to A
BBB to BB
Below B
Unrated
Gross amount
ECL - impairment
Carrying amount
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
2,036,327
2,994
-
76,986
2,116,307
-
2,206,975
37,723
-
2,249
2,246,947
(408)
254,583
-
-
98
254,681
(19)
1,128,219
89,328
3,057
82,283
1,283,859
197,408
10,354
205,060
1,302,887
(75)
1,696,680
(62,233)
2,116,307
2,246,539
254,662
1,302,812
1,634,447
-
20,052
-
-
20,052
-
20,052
312
27,266
-
2,245
29,823
-
29,823
133,177
25,152
45,498
18,612
222,439
(28,973)
193,466
In millions of Naira
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Term loans
Overdraft
Onlending
Loans and Advances
2,078,669
876,633
27,507
2,982,808
(15,224)
(34,523)
(12,569)
(62,315)
373,017
26,786
50,845
450,648
(6,238)
(830)
(32,796)
(39,865)
687,421
1,975
1,113
690,509
(8,039)
(17)
(25)
(8,081)
Total
3,139,107
905,393
79,465
4,123,965
(29,501)
(35,370)
(45,390)
(110,261)
Net loans and advances
2,920,493
410,783
682,428
4,013,704
-
-
87 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Credit rating for loans and advances with 12 month ECL
Term loan
Overdraft
Onlending
Loans and advances
A
AA
B
BB
BBB
C
CC
CCC
Below C
Unrated
Gross amount
ECL-Impairment
Carrying amount
Bank
31 December 2022
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
-
-
-
-
-
-
Total
1,055,918
525,516
71,194
1,243,940
10,658
-
46
-
-
231,836
687,421
(8,039)
3,139,107
(29,530)
679,382
3,109,578
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of naira
AAA to A
BBB to BB
CCC to C
Unrated
Gross amount
ECL - impairment
Carrying amount
Balances with
central bank
Treasury bills Assets pledged
as collateral
Due from other
banks
Investment
securities
2,036,327
-
-
-
2,036,327
-
2,206,707
-
-
-
2,206,707
(39)
254,583
-
-
-
254,583
(18)
957,055
170,984
3,057
1,775
1,132,871
(75)
480,352
51,129
-
-
531,481
(2,583)
2,036,327
2,206,668
254,565
1,132,796
528,898
Derivative
Hedging
Instruments
-
20,052
-
-
20,052
-
20,052
Derivative Non
Hedging
Instruments
312
27,265
-
1,222
28,799
-
28,799
Other financial
assets
133,162
26,478
45,493
24
205,157
(28,868)
176,289
In millions of Naira
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Term loans
Overdraft
Onlending
Loans and Advances
1,822,213
871,125
27,505
2,720,843
(11,812)
(33,524)
(12,568)
(57,904)
352,845
26,645
47,962
427,452
(5,418)
(800)
(30,926)
(37,144)
687,421
1,975
1,113
690,509
(8,039)
(17)
(25)
(8,081)
Total
2,862,479
899,745
76,580
3,838,804
(25,269)
(34,341)
(43,519)
(103,129)
Net loans and advances
2,662,939
390,308
682,428
3,735,675
-
-
88 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Term loan
Ovrdraft
On-lending
Loans and advances
A
AA
B
BB
BBB
C
CC
CCC
Below C
Unrated
Gross amount
ECL-Impairment
Carrying amount
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
263,526
20,559
-
403,336
-
-
-
-
-
-
Total
1,055,918
525,516
977
1,280,069
-
-
-
-
-
-
687,421
(8,039)
2,862,480
(25,269)
679,382
2,837,211
Credit rating for loans and advances with 12 month ECL
3.2.10 Amounts Arising from ECL
For inputs, assumptions and techniques used for estimating impairment see accounting policy in note 2.7
Retail exposures
– Internally collected data on customer
behaviour – e.g. utilisation of credit card facilities
– Affordability metrics
– External data from credit reference agencies,
including industry-standard credit scores
All exposures
– Payment record – this includes overdue status
as well as a range of variables about payment
ratios
– Utilisation of the granted limit
– Requests for and granting of forbearance
– Existing and forecast changes in business,
financial and economic conditions
3.2.11 Amounts arising from ECL
Corporate 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
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.
89 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 generates 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 Risk Committee and economic experts and consideration of a variety of external actual and forecast information, the
Group formulates a ‘base case’ view of the future direction of relevant economic variables as well as a representative range of other possible forecast
scenarios (see discussion below on incorporation of forward-looking information). The Group then uses these forecasts to adjust its estimates of PDs.
In determining the ECL for other assets, the Group applies the simplified model to estimate ECLs, adopting a provision matrix, where the receivables are
grouped based on the nature of the transactions, aging of the balances and different historical loss patterns, to determine the lifetime ECLs. Receivables
relate to amounts due for the povision of services to the Banks' customers. The provision matrix estimates ECLs on the basis of historical default rates,
adjusted for current and future economic conditions (expected changes in default rates) without undue cost and effort.
90 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.2.13 Significant increase in credit risk
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.
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 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 financial asset 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 or issuer. An existing loan or financial asset whose terms have been
modified may be derecognised and the renegotiated financial asset recognised as a new financial asset at fair value in accordance with the accounting
policy set out below.
The Group renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities) to maximise collection opportunities and
minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in default on
its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and
the debtor is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. Both
retail and corporate loans are subject to the forbearance policy. The Group Audit Committee regularly reviews reports on forbearance activities.
For financial assets modified as part of the Group’s forbearance policy, the estimate of PD reflects whether the modification has improved or restored
the Group’s ability to collect interest and principal and the Group’s previous experience of similar forbearance action. As part of this process,the Group
evaluates the borrower’s payment performance against the modified contractual terms and considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute evidence that an
exposure is credit-impaired/in default. A customer needs to demonstrate consistently good payment 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.
91 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 has 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 Risk Committee and economic experts and consideration of a variety of external
actual and forecast information, the Group formulates a ‘base case’ view of the future direction of relevant economic variables as well as a representative range
of other possible forecast scenarios. This process involves developing two or more additional economic scenarios and considering the relative probabilities of
each outcome. External information includes economic data and forecasts published by governmental bodies and monetary authorities in the countries where
the Group operates, supranational organisations such as the OECD and the International Monetary Fund, and selected private-sector and academic forecasters.
The base case represents a most-likely outcome while the other scenarios represent more optimistic and more pessimistic outcomes. Periodically, the Group
carries out stress testing of more extreme shocks to calibrate its determination of these other representative scenarios.
The Group has identified and documented key drivers of credit risk and credit losses for its financial assets and, using an analysis of historical data, has
estimated relationships between macro-economic variables and sectorial historical loan performance. Some of the macroeconomic variables considered
include Crude Oil price, Foreign Exchange rate, GDP growth rate, Inflation rate, Monetary policy rate and Crude production. However from the statistical
analysis of the various macroeconomic variables, the result infers that the key drivers vary across the different sectors. The macro economic variables used
across the different sectors are as follows:
Oil and gas portfolio - Inflation, Crude production and crude prices
Public sector Portfolio - Inflation, prime lending and crude production
Manufacturing sector Portfolio - Inflation, prime lending and crude prodction
Consumer Credit sector portfolio - Inflation, prime lending and crude production
Agriculture sector portfolio- Crude production
Others - Crude production
The economic scenarios used as at 31 December 2023 included the following key indicators for Nigeria for the years ending 31 December 2024 to 2028.
92 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
GDP growth rate (%)
Inflation rate forecast
(%)
Prime lending rate (%)
Crude Oil Production
(Million Barrels per
day-mbpd)
Crude Oil Price ($ Per
Barrels)
2024
Base 2.90
Upturn 3.40
Downturn 2.40
Base 28.75
Upturn 27.48
Downturn 30.03
Base 17.61
Upturn 17.42
Downturn 17.80
Base 1.62
Upturn 1.64
Downturn 1.60
Base 85
Upturn 86.7
Downturn 83.3
2025
Base 3.80
Upturn
Downturn
Base 25
Upturn 23.73
Downturn 26.28
Base 17.42
Upturn 17.23
Downturn 17.61
Base 1.65
Upturn 1.67
Downturn 1.63
Base 84
Upturn 85.7
Downturn 82.3
2026
Base 3.20
Upturn
Downturn
Base 25
Upturn 23.73
Downturn 26.28
Base 17.42
Upturn 17.23
Downturn 17.61
Base 1.59
Upturn 1.62
Downturn 1.57
Base 81
Upturn 82.7
Downturn 79.3
2027
Base 4.10
Upturn
Downturn
Base 25
Upturn 23.73
Downturn 26.28
Base 17.42
Upturn 17.23
Downturn 17.61
Base 1.59
Upturn 1.61
Downturn 1.57
Base 81
Upturn 82.7
Downturn 79.3
2028
Base 4.40
Upturn
Downturn
Base 25
Upturn 23.73
Downturn 26.28
Base 17.42
Upturn 17.23
Downturn 17.61
Base 1.59
Upturn 1.61
Downturn 1.57
Base 81
Upturn 82.7
Downturn 79.3
Predicted relationships between the historical loan performance of the Bank's portfolio and the macroeconomic variables have been developed by
analysing historical data over the past five years. The result of this analysis in addition to a 5-year forecast was used to determine the scalars used in
adjusting ECL.
The weightings assigned to each economic scenario as at 31 December 2023 were as follows:
Loans and advances and off-balance sheet exposures
Investment securities and placements
Base
35%
33%
Upturn
Downturn
28%
31%
37%
36%
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.
93 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 by taking into account the
credit risk management actions that the Group expects to take and that serve to mitigate ECL. These include a reduction in limits, cancellation of the
facility and/or turning the outstanding balance into a loan with fixed repayment terms.
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared risk characteristics that
include:
instrument type
credit risk gradings
collateral type
Past due information
date of initial recognition
remaining term to maturity
industry
geographic location of the borrower
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
94 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.2.18(a) 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 2022 represent allowance account for credit losses and reflect measurement basis under IFRS 9.
Group
In millions of naira
Treasury bills at amortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Foreign exchange and other movements
Closing balance
Gross amount
31 December 2023
31 December 2022
12-month ECL
12-month ECL
408
(337)
-
71
815
(400)
(8)
407
1,986,738
1,003,908
In millions of naira
12-month ECL
31 December 2023
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
12-month
ECL
31 December 2022
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
Off balance sheet exposure
(Financial Guarantees)
Balance at 1 January
Impairment/(writeback) (see note
8)
Effect of Hyperinflation
Foreign exchange and other
movements
5,811
(640)
947
872
65
2,925
738
(651)
-
-
6,614
1,634
947
872
2,375
3,436
-
20
45
-
3,221
(2,483)
5,616
998
-
-
Closing balance
Gross amount
6,990
2,990
87
10,067
5,811
1,887,760
120,383
35,891
2,044,034
1,089,149
65
8,952
738
6,614
15,866
1,113,967
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 2023
31 December 2022
12-month ECL
12-month ECL
18
10
29
308,667
198
(181)
17
228,492
95 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
12-month ECL
31 December 2023
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
12-month
ECL
31 December 2022
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
Impairment charge/(write back)
(see note 8)
Derecognized assets other than
write off
Write off
Effect of Hyperinflation
Foreign exchange and other
movements
29,501
2,542
(6,495)
35,370
(1,109)
6,728
45,390
(1,433)
(233)
110,261
-
-
25,672
1,650
(314)
26,032
(689)
1,675
94,445
(961)
(1,361)
146,149
-
-
(279)
(3,338)
3,617
-
(613)
327
286
-
19,308
132,836
248,506
400,650
4,154
7,671
26,518
38,343
-
(0)
(1,215)
3,766
-
-
-
325
-
-
-
(13,386)
-
(1,420)
(13,386)
(1,215)
2,671
-
-
(1,049)
-
-
-
354
-
-
(74,077)
-
540
(74,077)
-
(155)
Closing balance
Gross amount
47,128
170,812
281,041
498,981
29,500
35,370
4,314,443
2,430,657
310,347
7,055,447
3,139,107
905,393
45,390
79,465
110,260
4,123,965
In millions of naira
12-month ECL
31 December 2023
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
12-month ECL
31 December 2022
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
Investment securities at
amortised cost and fair value
through OCI
Balance at 1 January
Impairment Charge/(writeback)
(see note 8)
Modification of contractual
cash flows
Foreign exchange and other
movements
(3,323)
(1,992)
(9,907)
9,310
(655)
(49,008)
(9,310)
(5,256)
(62,238)
(7,903)
3,766
(371)
-
-
10,649
-
-
52,464
3,766
62,742
-
-
42,533
42,533
-
-
(2,426)
(683)
(11,595)
(14,704)
(72)
(742)
(3,456)
(4,270)
Closing balance
Gross amount
(7,741)
(1,935)
(32,636)
(42,312)
3,323
964,805
257,571
341,617
1,563,993
1,400,136
9,907
90,253
50,756
62,238
195,605
1,685,994
96 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Other financial assets
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Foreign exchange and other movements
Closing balance
Gross amount subject to simplified ECL
31 December 2023
12-month ECL
Lifetime ECL not credit-
impaired
31 December 2022
12-month ECL
Lifetime ECL not credit-
impaired
(28,973)
(2,170)
-
-
(31,143)
411,264 -
-
-
-
-
9,925
19,037
11
28,973
168,692
-
-
-
-
-
97 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Due from other banks
Balance at 1 January
Impairment/(writeback) (see note 8)
Foreign exchange and other movements
Closing balance
Gross amount
31 December 2023
31 December 2022
12-month ECL
12-month ECL
75
860
-
935
724
(649)
-
75
1,835,249
1,302,886
98 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
In millions of naira
Treasury bills at ammortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Closing balance
Gross amount
In millions of naira
Off balance sheet exposure
Balance at 1 January
Impairment/(writeback) (see note
8)
Closing balance
Gross amount
31 December 2023
31 December 2022
12-month ECL
12-month ECL
39
32
71
1,780,431
395
(356)
39
963,669
12-month
ECL
31 December 2023
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
12-month
ECL
31 December 2022
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
4,487
(988)
65
2,925
739
(651)
5,291
1,286
2,375
2,112
3,499
2,990
88
6,577
4,487
20
45
65
3,221
(2,482)
5,616
(325)
739
5,291
1,684,611
120,383
35,891
1,840,885
972,357
8,263
15,143
995,763
99 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Assets pledged as collateral at ammortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Closing balance
Gross amount
31 December 2023
31 December 2022
12-month ECL
12-month ECL
19
10
29
255,090
198
(179)
19
228,394
100 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
12-month ECL
31 December 2023
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
12-month
ECL
31 December 2022
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
Total
25,269
2,542
(5,909)
34,341
(1,109)
6,142
43,519
(1,433)
(233)
103,129
-
-
17,578
1,399
(310)
26,628
(438)
1,671
94,315
(961)
(1,361)
138,521
-
-
(264)
(1,500)
1,764
-
(613)
(107)
720
-
13,100
-
-
132,835
-
-
248,505
(13,386)
-
394,440
(13,386)
-
7,215
-
-
6,587
-
-
24,627
(73,820)
-
38,429
(73,820)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34,738
170,709
278,736
484,183
25,269
34,341
43,520
103,130
3,680,845
2,423,315
308,819
6,412,979
2,862,479
899,746
76,580
3,838,805
Loans and advances to
customers at amortised cost
Balance at 1 January
- Transfer to 12-month ECL
- Transfer to lifetime ECL not
credit-impaired
- Transfer to lifetime ECL credit-
impaired
Impairment charge (see note 8)
Write-offs
New financial assets originated
or purchased
Derecognised asset other than
write off
Effects of changes in EAD, LGD
and PD
Foreign exchange and other
movements
Closing balance
Gross amount
In millions of naira
Other financial assets
Balance at 1 January
Impairment Charge (see note 8)
Closing balance
Gross amount subject to simplified approach ECL
31 December 2023
Lifetime ECL not credit-impaired
-
31 December 2022
Lifetime ECL not credit-impaired
-
28,868
2,193
31,061
358,753
9,835
19,033
28,868
150,690
101 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Due from other Banks
Balance at 1 January
Impairment/(writeback) (see note 8)
Closing balance
Gross amount
In millions of naira
12-month ECL
Investment securities at
amortised cost and fair value
through OCI
Balance at 1 January
1,277
Impairment
Charge/(writeback)(see note 8)
901
31 December 2023
31 December 2022
12-month ECL
12-month ECL
75
860
935
58
17
75
1,692,657
1,132,871
31 December 2023
Lifetime ECL
not credit-
impaired
-
Lifetime ECL
credit-
impaired
-
Total
12-month
ECL
31 December 2022
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
2,584
666
2,867
611
-
-
-
-
538
-
-
-
-
1,307
-
-
-
1,428
-
-
-
-
-
-
-
-
-
666
1,306
1,917
1,306
2,703
2,583
520,920
Closing balance
Gross amount
2,178
538
720,663
249,308
2,735
5,636
5,451
1,277
975,608
518,217
102 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.2.18 (b) Significant changes in gross carrying amount
Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were as follows:
Group
In millions of naira
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Treasury bills at amortised cost
Gross carrying amount at 1
January
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
1,003,732
(3,284,100)
38,186
4,197,072
177
(306)
-
-
31,849
129
Closing gross carrying amount
1,986,739
-
-
-
-
-
-
-
1,003,909
941,538
(3,284,406)
(2,741,441)
38,186
4,197,072
(190,521)
2,994,157
31,978
-
1,986,739
1,003,732
-
-
-
177
-
177
-
-
-
-
-
-
Total
941,538
(2,741,441)
(190,521)
2,994,333
-
1,003,909
103 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Off balance sheet exposure
Gross carrying amount at 1 January
Transfers:
Transfer to 12 month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-
impaired
Financial assets derecognised during
the period
New financial assets originated or
purchased
Foreign exchange and other
movements
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
1,010,968
1,056
12,194
1,024,218
1,093,246
14,591
6,635
1,114,472
3,574
(44,363)
(18,901)
(1,788)
44,910
(1,786)
(547)
-
18,901
-
-
-
(1,315)
(1,960)
1,315
-
-
1,960
-
-
(388,847)
(15,528)
(1,834)
(406,208)
(411,890)
(5,266)
(12,330)
(429,486)
388,025
8,574
9,105
405,704
875,878
70,183
14,367
960,428
472,050
12,265
4,559
488,874
-
-
-
-
-
-
-
-
Closing gross carrying amount
1,887,316
121,360
35,358
2,044,034
1,089,150
8,952
15,866
1,113,968
104 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
Transfers from investment securities
Closing gross carrying amount
31 December 2023
31 December 2022
Stage 1
12-month ECL
Stage 1
12-month ECL
228,395
(156,160)
(1,001)
53,577
183,856
308,667
158,105
(127,558)
907
196,941
-
228,395
In millions of naira
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Loans and advances to customers
at amortised cost
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
Transfer from stage 3 to stage 2
Transfer from stage 2 to stage 1
Transfer from stage 3 to stage 1
Financial assets derecognised
during the period other than
write-offs
Changes in interests accrued and
other movements
New financial assets originated or
purchased
Write-offs
Foreign exchange and other
movements
3,139,107
905,393
79,466
4,123,966
2,600,349
754,708
146,821
3,501,878
(593,133)
-
(21,914)
-
-
133,119
(918,671)
470,115
-
(4,179)
-
-
(130,079)
(129,405)
123,018
-
26,093
-
-
(3,040)
(24,323)
-
-
-
-
-
-
(1,072,399)
(89,454)
(14,268)
-
-
43,018
1,644
(1,078,237)
89,454
-
(2,682)
2,550
(43,018)
-
(20,231)
-
14,268
2,682
(2,550)
-
(1,644)
(19,307)
-
-
-
-
-
-
(1,117,775)
277,621
448,011
14,498
740,130
-
-
-
-
2,513,310
852,633
82,036
3,447,979
1,676,055
124,612
13,016
1,813,683
-
62,078
-
466,734
(13,386)
40,475
(13,386)
569,287
-
-
-
-
(73,820)
-
(73,820)
-
Closing gross carrying amount
4,591,517
2,879,223
324,837
7,795,577
3,139,107
905,393
79,465
4,123,966
105 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
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
Transfer to pledged
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
1,400,136
90,253
195,605
1,685,994
1,199,579
-
-
-
1,199,579
-
-
-
(45,607)
45,607
(53,680)
53,680
-
-
-
-
-
(77,900)
77,900
-
-
-
(148,204)
-
148,204
-
(4,024)
4,024
(92,337)
(168,771)
-
(9,432)
-
(250,775)
(92,337)
(428,978)
-
(69,857)
-
(4,402)
-
-
-
(74,259)
56,201
365,743
7,069
196,632
26,339
217,574
89,609
779,949
(10,942)
483,240
-
45,000
-
43,377
(10,942)
571,617
367,912
458,720
231,911
1,058,543
-
-
-
-
Closing gross carrying amount
1,883,277
710,949
498,554
3,092,780
1,400,136
90,254
195,605
1,685,995
106 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Other financial assets
Gross carrying amount at 1 January
Transfers:
New financial assets originated or
purchased
Financial assets derecognised during the
year other than write offs
Foreign exchange and other movements
Closing gross carrying amount of assets
subject to simplified approach
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
Foreign exchange and other movements
Closing gross carrying amount
Bank
In millions of naira
Treasury bills at amortised cost
Gross carrying amount at 1 January
Transfers:
Financial assets derecognised during the
period other than write-offs
Changes in amortised cost value
New financial assets originated or
purchased
31 December 2023
31 December 2022
12-month ECL
Lifetime ECL not credit-
impaired
12-month ECL
Lifetime ECL not credit-
impaired
168,692
229,490
(448)
13,530
411,264
-
-
-
-
-
117,857
50,835
-
-
168,692
-
-
-
-
-
31 December 2023
31 December 2022
Stage 1
12-month ECL
1,302,886
(1,075,935)
556,381
1,051,917
1,835,249
Stage 1
12-month ECL
691,968
(91,034)
701,952
-
1,302,886
31 December 2023
Stage 1
12-month ECL
Total
31 December 2022
Stage 1
12-month ECL
Total
963,669
963,669
754,151
754,151
(3,020,911)
(3,020,911)
(2,554,055)
(2,554,055)
193,146
3,644,527
193,146
3,644,527
(190,521)
2,954,094
(190,520)
2,954,094
Closing gross carrying amount
1,780,431
1,780,431
963,669
963,670
107 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Off balance sheet exposure
Gross carrying amount at 1
January
Transfers:
Transfer from stage 1 to stage
2
Transfer from stage 1 to stage
3
Transfer from stage 3 to stage
2
Transfer from stage 2 to stage
3
Transfer from stage 2 to stage
1
Transfer from stage 3 to stage
1
Financial assets derecognised
during the period other than
write-offs
New financial assets originated
or purchased
Foreign exchange and other
movements
972,357
8,263
15,143
995,763
908,566
14,591
6,635
929,792
(44,320)
44,320
-
(18,894)
-
18,894
-
-
1,456
1,786
547
(634)
(1,456)
(547)
634
-
-
(1,786)
-
-
-
-
-
-
(1,304)
1,304
(1,957)
-
-
-
-
-
-
-
-
-
-
1,957
-
-
-
-
-
-
-
-
-
-
(381,858)
(4,911)
(12,330)
(399,099)
(310,594)
(15,528)
(1,834)
(327,956)
891,932
70,183
14,321
976,436
377,646
7,896
8,385
393,927
262,152
4,071
1,562
267,785
-
-
-
-
Closing gross carrying amount
1,684,611
120,383
35,891
1,840,885
972,357
8,263
15,143
995,763
108 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 2023
31 December 2022
Stage 1
12-month ECL
Stage 1
12-month ECL
228,397
(156,160)
(1,001)
183,854
255,090
158,105
(127,558)
907
196,939
228,393
Total
In millions of naira
Stage 1
12-month ECL
31 December 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Loans and advances to
customers at amortised cost
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
Transfer from stage 3 to stage
2
Transfer from stage 2 to stage
1
Transfer from stage stage 3 to
stage 1
New financial assets originated
or purchased
Financial assets derecognised
during the period other than
write-offs
Changes in interest accrued and
other movements
Write-offs
Foreign exchange and other
movements
2,862,479
899,745
76,580
3,838,804
2,343,421
752,640
141,912
3,237,973
(592,065)
592,065
-
(21,914)
-
21,914
-
-
(123,018)
123,018
1,474
(1,474)
130,079
(130,079)
-
3,040
-
(3,040)
-
-
-
-
-
-
(85,122)
85,122
-
(14,266)
-
14,266
-
-
(2,670)
2,670
2,537
(2,537)
42,999
(42,999)
-
1,644
-
(1,644)
-
-
-
-
-
-
2,186,176
861,614
83,529
3,131,319
1,652,040
125,347
13,025
1,790,412
(918,615)
(129,405)
(16,605)
(1,064,625)
(1,078,237)
(20,231)
(17,293)
(1,115,761)
277,621
448,011
14,498
740,130
-
31,665
-
450,919
(13,386)
38,283
(13,386)
520,867
-
-
-
-
-
-
-
-
(73,820)
-
(73,820)
-
Closing gross carrying amount
3,958,466
2,871,326
323,317
7,153,109
2,862,479
899,746
76,579
3,838,804
109 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of naira
Stage 1
12-month ECL
Investment securities at
amortised cost
Gross carrying amount at 1
January
Transfers:
Transfer from stage 1 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
518,217
-
(109,115)
-
209,542
12,945
Closing gross carrying amount
631,589
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 2023
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
Stage 1
12-month
ECL
31 December 2022
Stage 2
Lifetime ECL
not credit-
impaired
Stage 3
Lifetime ECL
credit-
impaired
Total
-
-
-
-
-
-
-
2,703
520,920
380,199
-
-
-
(2,703)
(109,115)
(9,263)
1,730
-
1,730
209,542
(16,683)
166,667
-
12,945
-
4,433
636,022
518,217
-
-
-
-
-
-
-
-
380,199
2,703
-
-
-
-
-
(9,263)
(16,683)
166,667
-
2,703
520,920
31 December 2023
31 December 2022
Lifetime ECL
-
150,690
208,063
-
358,753
Lifetime ECL
-
92,747
57,943
-
150,690
110 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 2023
31 December 2022
Stage 1
12-month ECL
1,132,870
(701,509)
775,049
1,692,657
Stage 1
12-month ECL
518,111
(16,651)
631,410
1,132,870
111 Zenith Bank Plc Annual Report - 31 December 2023
In millions of Naira
On-balance sheet
items
Assets pledged as
collateral
Treasury bills
Loans and
advances to
customers at
amortised cost
Debt investment
securities at
amortised cost
and FVOCI
Other financial
assets measured
at amortised cost
Due from other
Banks
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at 31 December 2023.
Group
Gross Carrying Amount
ECL Provision
Financial
Statement Items
Stage 1
Stage
2/Lifetime
ECL
Stage 3
Total
Stage 1
Stage 3
Total
Stage 1
Stage
2/Lifetime
ECL
326,815
-
-
326,815
361
-
-
361
2,526,304
-
3,961,465 1,208,287
-
211,269
2,526,304
5,381,021
1,408
43,355
-
158,474
-
127,523
1,408
329,352
%
0.13
0.09
2.36
ECL Coverage Ratio
Stage 3
Total
Stage
2/Lifetim
e ECL
%
%
%
-
-
0.11
-
10.89
-
60.41
0.06
6.12
1,918,497
453,471
1,915,101
-
-
-
-
-
-
1,918,497
3,244
9,907
102,395
115,546
0.57
-
453,471
24,904
1,915,101
252
-
-
-
0
24,904
-
6.25
252
0.01
-
-
-
-
6.02
-
0.01
Subtotal
11,101,653 1,208,287
211,269
12,521,209
73,524
168,381
229,918
471,823
0.66
13.94
108.83
3.77
Off-balance sheet
items
Loans and other
credit related
commitments
Letters of credit
Usance
Financial
guarantee and
similar contracts
Financial
guarantee and
similar contracts
Undrawn
overdraft balance
621,156
400,909
298
9,905
73
33
621,527
410,846
3,709
2,952
581,492
21,221
31,891
634,604
1,473
42,857
470
507
43,834
52
Subtotal
1,646,414
31,893
32,504
1,710,811
8,186
1
64
19
4
88
50
5
3,760
3,021
0.75
0.65
105
1,598
0.27
-
-
-
100.00
17.64
0.60
0.74
0.35
0.25
28
84
0.33
0.82
18.22
0.19
188
8,463
0.50
0.28
0.58
0.49
Total
12,748,067 1,240,180
243,773
14,232,020
81,710
168,469
230,106
480,286
0.64
13.58
94.39
3.37
* The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL.
112 Zenith Bank Plc Annual Report - 31 December 2023
In millions of Naira
On-balance sheet
items
Assets pledged as
collateral
Treasury bills
Loans and advances
to customers at
amortised cost
Debt investment
securities at
amortised cost
Other financial
assets measured at
amortised cost
Due from other
banks
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
Financial Statement
Items
Stage 1
Gross Carrying Amount
Stage 3
Stage
2/Lifetime
ECL
ECL Provision
Total
Stage 1
Stage
2/Lifetim
e ECL
Stage 3
Total
Stage 1
255,090
-
-
255,090
29
-
-
29
1,780,431
3,680,845
-
2,423,315
-
308,819
1,780,431
6,412,979
71
34,738
-
170,709
-
278,736
71
484,183
%
0.00
0.00
0.01
ECL Coverage Ratio
Stage 3
Total
Stage
2/Lifetim
e ECL
%
%
%
-
-
0.07
-
0.01
-
0.90
-
7.55
720,663
249,308
5,636
975,608
1,721
994
2,735
5,451
0.00
0.00
0.49
0.56
-
358,753
1,692,657
-
-
-
358,753
-
31,061
1,692,657
935
-
-
-
31,061
-
0.09
935
0.00
-
-
-
8.66
0.06
Subtotal
8,129,686
3,031,376
314,455
11,475,518
37,494
202,764
281,471
521,730
0.46
6.69
89.51
4.55
Off-balance sheet
items
Loans and other
credit related
commitments
Letters of credit
Usance
Performance bonds
and guarantees
Undrawn overdraft
balance
Subtotal
Total
397,582
385,141
726,543
27,229
43,254
13,635
92
5,532
30,169
424,903
433,927
770,347
2,305
581
30
1,304
1,497
12
175,345
36,265
98
211,708
582
178
-
21
67
-
3,609
2,099
109
760
1,684,610
120,383
35,891
1,840,885
3,498
2,991
88
6,577
9,814,296
3,151,759
350,346 13,316,403
40,992 205,755
281,559
528,307
0.58
0.15
-
0.33
0.21
0.42
-
-
0.09
0.49
-
0.38
0.22
0.85
0.48
0.01
-
0.36
2.48
0.25
0.36
6.53
80.37
3.97
* The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL.
113 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at 31 December 2022.
Group
Financial
Statement Items
Stage 1
Gross Carrying Amount
Stage 3
Stage
2/Lifetime
ECL
ECL Provision
Total
Stage 1
Stage
2/Lifetime
ECL
Stage 3
Total
Stage 1
In millions of Naira
On-balance sheet
items
Assets pledged as
collateral
Treasury bills
Loans and
advances to
customers at
amortised cost
Debt investment
securities at
amortised cost
Other financial
assets measured
at amortised cost
Due from other
Banks
228,492
-
-
228,492
17
-
-
17
1,003,908
3,139,107
-
905,393
-
79,465
1,003,908
4,123,965
407
29,501
-
35,370
-
45,390
407
110,261
%
0.01
0.04
0.94
1,400,136
90,253
195,605
1,685,994
3,323
9,907
49,008
62,238
0.24
-
168,692
1,302,886
-
-
-
168,692
-
28,973
1,302,886
75
-
-
-
28,973
-
75
0.01
ECL Coverage Ratio
Stage 3
Total
Stage
2/Lifetim
e ECL
%
%
%
-
-
3.91
-
0.01
-
57.12
0.04
2.67
-
-
-
-
-
-
3.69
17.18
0.01
Subtotal
7,074,529 1,164,338
275,070
8,513,937
33,323
74,250
94,398
201,971
0.47
6.38
34.32
2.37
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
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
7,896
2,952
89,749
260
Subtotal
1,090,561
8,263
15,143
1,113,967
5,812
-
-
-
65
65
27
133
2,770
1,927
0.75
0.65
40
1,055
0.27
-
-
-
100.00
100.00
0.75
0.70
0.35
0.27
538
863
0.33
0.82
18.22
0.96
738
6,615
0.53
0.48
0.79
4.87
0.59
6.34
32.78
2.17
Total
8,165,090 1,172,601
290,213
9,627,904
39,135
74,315
95,136
208,586
* The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL.
114 Zenith Bank Plc Annual Report - 31 December 2023
In millions of Naira
On-balance sheet
items
Assets pledged as
collateral
Treasury bills
Loans and
advances to
customers at
amortised cost
Debt investment
securities at
amortised cost
Other financial
assets measured
at amortised cost
Due from other
banks
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
Financial
Statement Items
Stage 1
Gross Carrying Amount
Stage 3
Stage
2/Lifetime
ECL
ECL Provision
Total
Stage 1
Stage
2/Lifetime
ECL
Stage 3
Total
Stage 1
228,394
-
-
228,394
19
-
-
19
963,669
2,862,479
-
899,746
-
76,580
963,669
3,838,805
39
25,269
-
34,341
-
43,519
39
103,129
%
0.01
-
0.88
ECL Coverage Ratio
Stage 3
Total
Stage
2/Lifetim
e ECL
%
%
%
-
-
3.82
-
0.01
-
56.83
-
2.69
518,217
-
2,703
520,920
1,277
-
150,690
1,132,871
-
-
-
150,690
1,132,871
-
75
-
-
-
1,306
2,583
0.25
-
48.32
0.50
28,868
28,868
-
6.80
-
75
0.01
-
-
-
6.80
0.01
Subtotal
5,705,630
1,050,436
79,283
6,835,349
26,679
34,341
73,693
134,713
0.47
3.27
92.95
1.97
Off-balance sheet
items
Loans and other
credit related
commitments
Letters of credit
Usance
Performance
bonds and
guarantees
Undrawn
overdraft balance
279,764
275,723
372,609
-
4
363
27
754
11,410
279,791
276,481
384,382
2,415
1,794
19
78,901
7,896
2,952
89,749
260
Subtotal
1,006,997
8,263
15,143
1,030,403
4,488
-
-
-
65
65
Total
6,712,627
1,058,699
94,426
7,865,752
31,167
34,406
74,431
140,004
27
133
40
2,442
1,927
59
0.86
0.65
0.01
-
-
-
100.00
17.64
0.35
0.87
0.70
0.02
538
863
0.33
0.82
18.22
0.96
738
5,291
0.45
0.46
0.79
4.87
0.51
3.25
78.82
1.78
* The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL.
115 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.2.19 Restructuring policy
Loans with renegotiated terms are loans that have been restructured because the Group has made concessions by agreeing to terms and conditions
that are more favorable for the customer than these provided by the Group initially. The Group implements restructuring policy in order to maximize
collections opportunities and minimize the risk of default.
The Group’s credit committee may, from time to time, grant approval for restructuring of certain facilities due to the following reasons:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Where the execution of the loan purpose and the repayment are no longer realistic in light of new cash flows;
To avoid unintended default arising from adverse business conditions;
To align loan repayment with new pattern of achievable cash flows;
Where there are proven cost over runs that may significantly impair the project repayment capacity;
Where there is temporary downturn in the customer’s business environment;
Where the customer’s going concern status is NOT in doubt or threatened; and
The revised terms of restructured facilities usually include extended maturity, changing timing of interest payments and amendments to the
terms of the loan agreement.
3.3 Market risk
Market risk is the risk of potential losses in both on- and off-balance sheet positions arising from movements in market prices. Market risks can arise
from adverse changes in interest rates, foreign exchange rates, equity prices, commodity prices and other relevant factors such as market volatilities.
The Group undertakes activities which give rise to some level of market risks exposures. The objective of market risk management activities is to
continuously identify, manage and control market risk exposure within acceptable parameters, while optimizing the return on risks taken.
3.3.1 Management of market risk
The Group has an independent Market Risk Management unit which assesses, monitors, manages and reports on market risk taking activities across the
Group. The Group enhances its Market Risk Management Framework on a continuous basis. The operations of the unit is guided by the mission of
"inculcating enduring market risk management values and culture, with a view to reducing the risk of losses associated with market risk-taking activities,
and optimizing risk-reward trade-off.”
The Group's market risk objectives, policies and processes are aimed at instituting a model that objectively identifies, measures and manages market
risks in the Group and ensure that:
(a)
(b)
(c)
(d)
(e)
The individuals who take or manage risk clearly understand it;
The Group's risk exposure is within established limits;
Risk taking decisions are in line with business strategy and objectives set by the Board of Directors;
The expected payoffs compensate for the risks taken; and
Sufficient capital, as a buffer, is available to take risk.
The Group proactively manages its market risk exposures in both the trading and non-trading books within the acceptable levels.
The Group's market risks exposures are broadly categorised into:
(i) Trading Market Risks - These are risks that arise primarily through trading activities and market making activities. These activities include position-
taking in foreign exchange and fixed income securities (Bonds and Treasury Bills).
(ii) Non Trading Market Risks -These are risks that arise from assets and liabilities that are usually on the books for a longer period of time, but where the
intrinsic value is a function of the movement of financial market parameter.
116 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.3.1 Management of market risk (continued)
'In millions of Naira
Group
Note Carrying amount
At 31 December 2023
Trading
Non-trading
Carrying amount
At 31 December 2022
Trading
Non-trading
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
Bank
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
15
16
17
18
19
19
20
21
25
28
33
29
30
31
15
16
17
18
19
19
20
21
25
28
33
29
30
31
4,253,374
2,736,273
308,638
1,834,314
462,376
72,363
6,556,470
3,290,895
445,597
15,167,740
70,486
991,354
263,065
1,410,885
-
749,606
-
-
462,376
72,363
-
24,293
-
-
70,486
-
-
-
4,253,374
1,986,667
308,638
1,834,314
-
-
6,556,470
3,266,602
445,597
15,167,740
-
991,354
263,065
1,410,885
2,201,743
2,246,540
254,662
1,302,811
20,052
29,822
4,013,705
1,728,331
193,465
8,975,653
6,325
545,938
311,192
963,450
-
1,243,038
26,287
-
20,052
29,822
-
12,442
-
-
6,325
-
-
-
2,201,743
1,003,500
228,375
1,302,811
-
-
4,013,705
1,715,889
193,465
8,975,653
-
545,938
311,192
963,450
Carrying amount
At 31 December 2023
Trading
Non-trading
Carrying amount
At 31 December 2022
Trading
Non-trading
3,965,386
2,529,966
255,061
1,691,722
462,376
45,566
5,928,796
1,205,724
394,540
12,154,824
45,514
970,792
263,065
1,450,182
-
749,606
-
-
462,376
45,566
-
19,433
-
3,965,386
1,780,360
255,061
1,691,722
-
-
5,928,796
1,186,291
394,540
2,102,394
2,206,669
254,564
1,132,796
20,052
28,799
3,735,676
622,780
176,289
-
1,243,038
26,189
-
20,052
28,799
-
10,560
-
2,102,394
963,630
228,375
1,132,796
-
-
3,735,676
612,220
176,289
-
45,514
-
-
-
12,154,824
-
970,792
263,065
1,450,182
7,434,806
6,040
526,945
311,192
999,580
-
6,040
-
-
-
7,434,806
-
526,945
311,192
999,580
117 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.3.2 Measurement of Market Risk
The Group adopts both VAR and 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 daily. 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
i. Net Open Position (NOP- for foreign exchange);
ii. Aggregate Control Limits (for Securities);
iii. Management Action Trigger (MAT);
iv. Duration;
v. Factor Sensitivities (Pv01);
vi. Permitted Instrument and Tenor Limits;
vii. 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 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.
118 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Risk management (continued)
3.
Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December 2023 and 31 December 2022. Included in the
table are the Group’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At 31 December 2023
Assets
Cash and balances with central banks
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
Naira
Dollar
GBP
Euro
Others
Total
3,883,601
2,529,966
255,061
116,854
-
45,640
2,950,511
1,176,001
389,549
8,364,360
45,513
927,150
263,065
-
122,586
-
41,737
1,466,031
462,376
24,643
3,186,826
1,561,572
6,122
5,224,605
24,748
39,632
-
1,396,823
7,820
-
11,841
62,338
-
2,005
53,878
254,903
16
534,189
224
8,547
-
56
22,873
-
-
170,697
-
20
181,007
97,346
193
330,768
-
2,268
-
376
216,493
206,307
-
18,395
-
55
184,248
201,072
49,717
713,819
-
13,022
-
13,630
4,253,374
2,736,273
308,638
1,834,315
462,376
72,363
6,556,470
3,290,895
445,597
15,167,740
70,486
990,619
263,065
1,410,885
As at 31 December 2023, 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 1.41 billion while the Naira payable at various maturities is N1,343 billion:
In millions of Naira
At 31 December 2022
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets-Hedging instrument
Derivative assets-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
Naira
Dollar
GBP
Euro
Others
Total
2,089,869
2,227,845
254,565
110
-
326
2,212,928
628,850
77,095
6,185,521
374
430,582
311,192
-
18,937
-
-
1,133,525
20,052
29,351
1,615,146
861,522
100,899
2,084,960
5,806
86,339
-
963,450
4,181
-
-
62,355
-
-
14,087
96,955
227
202,842
-
1,176
-
-
4,957
-
-
75,185
-
-
77,477
35,155
33
135,821
-
10,996
-
-
83,799
18,695
98
31,637
-
145
94,066
105,852
15,210
366,511
145
16,845
-
-
2,201,744
2,246,540
254,663
1,302,811
20,052
29,822
4,013,704
1,728,333
193,464
8,975,655
6,325
545,938
311,192
963,450
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 106% (31 December 2022: 9%, with all other variables held constant.
119 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on profit before tax and statement
of financial position size (in millions of Naira)
31 December
2023
31 December
2022
384,112
68,926
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on profit before tax and statement
of financial position size (in millions of Naira)
384,112
68,926
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on OCI and statement of financial
position size (in millions of Naira)
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on OCI and statement of financial
position size (in millions of Naira)
31 December
2023
31 December
2022
432,948
432,948
8,042
8,042
120 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December 2023 and 31 December 2022. Included in the
table are the Bank’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At 31 December 2023
Assets
Cash and balances with central banks
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 deposit
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Naira
Dollar
GBP
Euro
Others
Total
3,883,602
2,529,966
255,061
126,765
-
45,565
2,950,400
1,140,970
389,614
8,379,922
45,514
927,622
263,065
-
62,423
-
-
1,356,978
462,376
-
2,885,201
34,340
4,657
3,532,122
-
39,014
-
1,449,750
4,986
-
-
47,768
-
-
2,743
-
16
45,438
-
1,349
-
56
14,375
-
-
154,409
-
1
88,369
30,414
193
196,377
-
2,241
-
376
-
-
-
5,802
-
-
2,083
-
60
965
-
566
-
-
3,965,386
2,529,966
255,061
1,691,722
462,376
45,566
5,928,796
1,205,724
394,540
12,154,824
45,514
970,792
263,065
1,450,182
As at 31 December 2023, 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 1.4 billion while the Naira equivalent of treasury bills will mature to the respective
counter parties.
121 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of Naira
At 31 December 2022
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative Asset - Hedging Instrument
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
Naira
Dollar
GBP
Euro
Others
Total
2,086,532
2,206,669
254,565
10,020
-
326
2,212,764
593,312
75,387
6,172,467
299
429,971
311,192
-
-
10,420
-
-
1,032,923
20,052
28,328
1,481,680
15,364
100,813
1,175,734
5,596
77,361
-
999,580
-
3,208
-
-
23,240
-
-
657
-
55
15,222
-
1,176
-
-
-
2,235
-
-
56,122
-
-
38,569
14,103
33
65,964
-
10,996
-
-
-
-
-
-
10,490
145
-
2,005
-
-
5,420
145
7,440
-
-
-
2,102,395
2,206,669
254,565
1,132,795
20,197
28,654
3,735,675
622,779
176,288
7,434,807
6,040
526,944
311,192
999,580
-
The Bank’s exposure to foreign currency risk is largely concentrated in US Dollar. Movement in exchange rate between the US Dollar and the Nigerian
Naira affects reported earnings through revaluation gain or loss and statement of financial position size through increase or decrease in the revalued
amounts of assets and liabilities denominated in US Dollars. The Group's closing and average Dollar rate as at 31 December 2023 was N951.79/USD and
N674.70/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 106% (31 December 2022: 9%), with all other variables held constant.
In millions of Naira
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on profit before tax and balance
sheet size
31 December
2023
31 December
2022
443,613
68,926
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on profit before tax and statement
of financial position size (in millions of Naira)
443,613
68,627
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on OCI and statement of financial
position size (in millions of Naira)
31 December
2023
31 December
2022
432,948
8,042
US Dollar effect of 106% (31 December 2022: 9%) up or (down) movement on OCI and statement of financial
position size (in millions of Naira)
432,948
8,042
122 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Foreign exchange risk
3.3.3.1
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 savings 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 currrency gain is recognised if
the Naira depreciates, and a loss recognised if it appreciates. For the hedged items - foreign currency liabilities, a foreign currrency 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.
In millions of Naira
Total exposure to foreign exchange risk- fair value hedge
- Interest bearing borrowings
- Saving deposits
- Term deposits
Bank
507,661
340,308
330,831
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 December 2023 and 31 December 2022:
In millions of Naira
At 31 December 2023
Hedge Type: Fair Value hedge
CBN Currency Swap
Risk Category Average Strike
Price
Nominal
Amount of
Hedging
Instrument
Carrying
Amount of
Hedging
Instrument
Changes in fair value
used for calculating
Hedging
ineffectiveness
Line Item in the
statement of financial
position where the
hedging instrument is
located
Number
Assets
Assets
Foreign exchange
risk
630
1,342,024
462,376
458,478
Derivative assets
123 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of Naira
At 31 December 2023
Risk Category
Hedge Type: Fair Value hedge
Foreign exchange risk on foreign
currency interest bearing borrowing
Foreign exchange risk on savings
deposits
Foreign exchange risk on term deposits
Foriegn Exchange
Risk
Foreign Exchange
Risk
Foreign Exchange
Risk
In millions of Naira
At 31 December 2023
Fair Value hedge
Foreign exchange risk
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
Liabilities
283,954
(144,701)
Borrowings
803,311
(273,230)
Customers' deposits
256,032
(50,550)
Customers' deposits
Hedge ratio Effectiveness
recognized in
profit or loss
Hedge
ineffectiveness
recognized in
profit or loss
Line item in
profit or loss
that includes
hedge
ineffectiveness
ForeIgn
Exchange
- 100%
458,478
(10,004)Other operating
income
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.
124 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The following table shows the profile of the timing of the nominal amount of the hedging instrument
In millions of Naira
Derivative assets – Hedging
Gross settled
Receivable
Payable
In millions of Naira
Total exposure to foreign exchange risk- fair value hedge
- Interest bearing borrowings
- Term deposits
- Savings deposits
In millions of Naira
At 31 December 2023
Up to 1 month 1-3 months 3-6 months
6-12 months
115,750
(115,750)
-
-
215,280
(215,280)
556,862
(556,862)
Bank
54,851
2,162,646
1,350,373
At 31 December 2022
Risk Category Average Strike
Price
Nominal
Amount of
Hedging
Instrument
Carrying
Amount of
Hedging
Instrument
Changes in fair value
used for calculating
Hedging
ineffectiveness
Line Item in the
statement of financial
position where the
hedging instrument is
located
Hedge Type: Fair Value hedge
Number
Assets
Assets
CBN Currency Swap
Foreign exchange
risk
430
346,918
20,052
40,632
Derivative assets
125 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
In millions of Naira
At 31 December 2022
Risk Category
Hedge Type: Fair Value hedge
Foreign exchange risk on foreign
currency interest bearing borrowing
Foreign exchange risk on term deposits
Foriegn Exchange
Risk
Foreign Exchange
Risk
In millions of Naira
At 31 December 2022
Fair Value hedge
Foreign exchange risk
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
Liabilities
271,705
(24,830)
Borrowings
100,453
(14,760)
Customer's deposits
Hedge ratio Effectiveness
recognized in
profit or loss
Hedge
ineffectiveness
recognized in
profit or loss
Line item in
profit or loss
that includes
hedge
ineffectiveness
Foriegn Exchange
- 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.
126 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The following table shows the profile of the timing of the nominal amount of the hedging instrument
In millions of Naira
Derivative assets – Hedging
Gross settled
Receivable
Payable
3.3.4 Interest Rate Risk
At 31 December 2023
Less than 3
months
3-6 months
6-12 months
172,776
(172,776)
200,350
(200,350)
331,030
(331,030)
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 2023
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
Total interest rate gap
Note Carrying amount Rate sensitive
15
16
17
18
42
42
20
21
25
28
32
29
30
31
32
4,253,374
1,986,667
308,638
1,834,314
462,376
72,363
6,556,470
3,266,602
445,597
-
-
-
262,729
-
-
2,078,232
280,285
-
Non rate
sensitive
4,253,374
1,986,667
308,638
1,571,585
462,376
72,363
4,478,238
2,986,317
445,597
19,186,402
2,621,247
16,565,156
15,167,740
70,486
991,354
263,065
1,410,885
-
5,962,092
-
-
-
527,660
-
9,205,648
70,486
991,354
263,065
883,225
-
17,903,530
6,489,752
11,413,778
1,282,872
(3,868,505)
5,151,378
127 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The table shows the maturity profile of financial instruments that are rate sensitive.
At 31 December 2023
Up to 1 month
1 - 3 months
3 - 6 months
6 - 12 months
Over 1 year
Total rate
sensitive
In millions of Naira
Assets
Loans and advances to customers
Liabilities
Customer deposits
Borrowings
169,958
169,958
1,543,730
1,543,730
5,462,692
-
5,462,692
103,071
430,231
533,302
57,924
57,924
59,267
97,429
156,696
51,802
51,802
153,263
-
153,263
254,818
254,818
183,798
-
183,798
2,078,232
2,078,232
5,962,092
527,660
6,489,751
Total interest repricing gap
(5,292,734)
1,010,428
(98,772)
(101,461)
71,020
(4,411,519)
Impact of interest rate sensitivity on cash flows - Borrowings and Loans and advances to customers:
The group is primarily exposed to changes in interest rate on variable rate borrowings and variable rate loans and advances to customers. Impact on
cash flow due to +/- 108 bps movement in LIBOR, NIBOR, EURIBOR or and SOFR (holding all other variables constant) has been estimated to be:
Loans and advances: N22,445 million
Borrowings: N5,699 million.
128 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 assets
Derivatives 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 liabilties
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
42
42
20
21
25
28
32
29
30
31
32
2,201,743
1,003,501
228,474
1,302,811
20,052
29,822
4,013,705
1,715,889
193,465
10,709,462
8,975,654
6,325
545,938
311,192
963,450
-
-
0
-
-
-
-
870,276
-
-
870,276
3,145,312
284
-
-
292,215
-
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
5,830,342
6,040
545,938
311,192
671,234
-
10,802,559
3,437,812
7,364,746
(93,097)
(2,567,536)
2,474,440
The table shows the maturity profile of financial instruments that are rate sensitive.
In millions of Naira
At 31 December 2022
In millions of Naira
Assets
Loans and advances to customers
Liabilities
Customer deposits
Borrowings
Total interest repricing gap
Up to 1 month
1 - 3 months
3 - 6 months
6 - 12 months
Over 1 year
40,139
40,139
2,854,186
-
2,854,186
(2,814,047)
607,695
607,695
104,666
240,529
345,195
262,500
43,640
43,640
37,739
51,685
89,424
30,958
30,958
62,615
-
62,615
(45,784)
(31,657)
147,844
147,844
86,106
-
86,106
61,738
Total rate
sensitive
870,276
870,276
3,145,312
292,214
3,437,526
(2,567,250)
129 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Risk management (continued)
3.
Group
Interest rate sensitivity showing fair value interest rate risk
In millions of Naira
Financial assets at FVPL
Treasury bills
Bonds
Assets pledged as collateral
Total
Impact on income statement:
Favourable change at 14% reduction in interest rate (2022: 5%)
Unfavourable change at 14% increase in interest rate (2022: 5%)
FVOCI investment securities
Government bonds
Impact on other comprehensive income statement:
Favourable change at 14% reduction in interest rate (2022: 1%)
Unfavourable change at 14% increase in interest rate (2022: 1%)
31 December
2023
31 December 2022
749,606
24,293
-
1,243,038
12,442
26,189
773,899
1,281,669
108,346
(108,346)
64,083
(64,083)
1,528,786
833,849
214,030
(214,030)
8,338
(8,338)
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 2023
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
15
16
17
18
19
19
20
21
25
28
32
29
30
31
32
3,965,386
1,780,360
255,061
1,691,722
462,376
45,566
5,928,796
1,186,291
394,540
-
-
-
-
-
-
1,407,917
-
-
Non-rate
sensitive
3,965,386
1,780,360
255,061
1,691,722
462,376
45,566
4,520,879
1,186,291
394,540
15,710,098
1,407,917
14,302,181
12,154,824
45,514
970,792
263,065
1,450,182
-
4,955,730
-
-
-
527,660
-
7,199,094
45,514
970,792
263,065
922,522
-
14,884,377
5,483,390
9,400,987
825,721
(4,075,473)
4,901,194
130 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The table shows the maturity profile of financial instruments that are rate sensitive.
At 31 December 2023
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
9,257
9,257
4,955,730
-
4,955,730
124,127
124,127
-
430,231
430,231
187,942
187,942
-
97,429
97,429
90,513
736,970
736,970
349,621
349,621
-
-
-
-
-
-
Total rate
sensitive
1,407,917
1,407,917
4,955,730
527,660
5,483,390
Total interest repricing gap
(4,946,473)
(306,104)
736,970
349,621
(4,075,473)
Impact of interest rate sensitivity on cash flows - Borrowings and Loans and advances to customers:
The Bank is primarily exposed to changes in interest rate on variable rate borrowings and variable rate loans and advances to customers. Impact on cash
flow due to +/- 108 bps movement in LIBOR, NIBOR, EURIBOR or and SOFR (holding all other variables constant) has been estimated to be:
Loans and advances: N15,206 million
Borrowings: N5,699 million.
131 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 collaterals
Due from other banks
Derivative assets
Derivatives 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
42
42
20
21
25
28
29
13
30
31
32
2,102,394
963,630
228,376
1,132,796
20,052
28,799
3,735,676
612,220
176,289
9,000,232
7,434,806
6,040
526,945
311,192
999,580
-
-
-
-
-
-
-
558,051
-
-
558,051
2,673,518
-
-
-
292,215
-
2,102,394
963,330
228,376
1,132,796
20,052
28,799
3,177,625
612,220
176,289
8,441,881
4,761,287
6,040
526,945
311,192
707,365
-
9,278,563
2,965,733
6,312,829
(278,331)
(2,407,682)
2,129,052
132 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The table shows the maturity profile of financial instruments that are rate sensitive.
At 31 December 2022
Up to 1 month
1 - 3 months
3 - 6 months
6 - 12 months
Over 1 year
In millions of Naira
Assets
Loans and advances to customers
Liabilities
Customer deposits
Borrowings
Total interest repricing gap
922
922
2,673,518
-
2,673,518
(2,672,596)
557,129
557,129
-
240,529
240,529
316,600
-
-
-
51,685
51,685
(51,685)
-
-
-
-
-
-
Total rate
sensitive
558,051
558,051
2,673,518
292,214
2,965,732
(2,407,681)
-
-
-
-
-
-
Interest rate sensitivity showing fair value interest rate risk
In millions of Naira
Financial assets at FVPL
Treasury bills
Bonds
Assets pledged as collateral
Total
Impact on income statement:
Favourable change at 14% reduction in interest rate (2022: 5%)
Unfavourable change at 14% increase in interest rate (2022: 5%)
31 December
2023
31 December
2022
749,606
19,433
-
1,243,038
10,560
26,189
769,039
1,279,787
107,665
(107,665)
63,989
(63,989)
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 1400 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) 6.503% equity holding in African Finance Corporation (AFC) valued at N158.8 billion and cost N40 billion.
(ii) 3.6% equity holding in Nigerian Interbank Settlement Scheme (NIBBS) valued at N1.94 billion and cost N50 million.
(iii) 2.31% equity holding in FMDQ holdings plc valued at N2.0 billion.
(iv) 0.68% equity holding in Unified Payment Services (UPS) valued at N507 million.
(v) 0.024% equity holdings in AFREXIM valued N284 million.
(vi) 5.88% equity holding in Shared Agent Network expansion facility Limited (SANEF) valued at N50 million.
The AFC is a private sector-led investment bank and development finance institution which has the Central Bank of Nigeria (CBN) as the single major
shareholder (42.39%) with other African financial institutions and investors holding the remaining shares. The AFC operates a US Dollar-denominated
statement of financial position and provides financing in this currency.
133 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 costs 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 the 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 to be able to withstand a range of different
stress events and adequately diversify funding structure and access to funding sources. Those events are regularly reviewed and monitored by the Asset
and Liability Committee (ALCO). Alternative scenarios on liquidity positions and on risk mitigants are considered. In line with standard risk management
practice and global best practice, the Group:
(a). Conducts on a regular basis appropriate stress tests to:
i)
ii)
Identify sources of potential liquidity strain; and
Ensure that current liquidity exposures continue to conform to the liquidity risk tolerance established by the board.
(b). Analyses the separate and combined impact of possible future liquidity stresses on:
i)
ii)
iii)
Cash flows;
Liquidity position; and
Profitability.
134 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 conditions;
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 ALCO and the Treasury Group in order to avoid undue reliance on large individual depositors and
to ensure that a satisfactory overall funding mix is maintained at all times. The funding strategy is geared toward ensuring effective diversification in the
sources and tenor of funding. The Group, however places greater emphasis on demand and savings deposits as against purchased funds in order to
minimize the cost of funding.
As part of the management of liquidity risk arising from financial liabilities, the Group holds liquid assets comprising cash and cash equivalents, and debt
securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In addition, the Group maintains agreed lines of credit with
other banks.
(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.
135 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Group
Bank
At period/year end
Average for the year
Maximum for the year
Minimum for the year
31 December
2023
31 December
2022
31 December
2023
31 December
2022
71.00%
83.00%
91.00%
71.00%
75.00%
45.00%
67.00%
63.00% .
65.00%
64.00%
75.00%
56.00%
72.00%
67.00%
53.00%
62.00%
136 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
(b) Liquidity reserve
The table sets out the component of the Group's liquidity reserve. These are liquid instruments the Group uses to settle short term or current
obligations.
Group
31 December 2022
31 December 2023
In millions of naira
Gross value
Gross value
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Total
Bank
In millions of naira
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Total
269,967
2,736,344
126,199
2,773,726
5,906,236
452,135
2,246,946
1,302,886
660,485
4,662,452
Gross value
Gross value
126,449
2,530,037
126,199
989,227
3,771,912
407,487
2,206,707
1,132,871
383,973
4,131,038
137 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Risk management (continued)
3.
(c) Financial assets available to support funding
The table below sets out the availability of the Group's financial assets to support future funding
Group
'In millions of Naira
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Other financial assets
Bank
'In millions of Naira
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Other financial assets
Note
15
16
17
18
20
21
25
Note
15
16
17
18
20
21
25
(d) Financial assets pledged as collateral
Encumbered
At 31 December 2023
Unencumbered
3,983,407
-
308,638
354,150
-
-
1,100
269,967
2,736,273
-
1,480,164
6,556,470
3,290,895
444,497
Encumbered
At 31 December 2023
Unencumbered
3,838,937
-
255,061
291,279
-
-
1,100
126,449
2,529,966
-
1,400,443
5,928,796
1,205,724
393,440
Total
4,253,374
2,736,273
308,638
1,834,314
6,556,470
3,290,895
445,597
Total
3,965,386
2,529,966
255,061
1,691,722
5,928,796
1,205,724
394,540
Encumbered
At 31 December 2022
Unencumbered
1,749,608
-
254,662
115,315
1,770
-
-
452,136
2,246,540
-
1,187,496
4,011,935
1,728,331
193,464
Encumbered
At 31 December 2022
Unencumbered
1,694,907
-
254,564
115,315
-
-
-
407,488
2,206,669
-
1,017,481
3,735,676
622,780
176,829
Total
2,201,744
2,246,540
254,662
1,302,811
4,013,705
1,728,331
193,464
Total
2,102,395
2,206,669
254,564
1,132,796
3,735,676
622,780
176,829
The total financial assets recognized in the statement of financial position that have been pledged as collateral for liabilities as at 31 December 2023 and
31 December 2022 are shown above. Financial assets are pledged as collateral as part of sales and repurchases, borrowing transaction and collection
agency transactions under terms that are usual for such activities.
The Group does not hold any financial assets accepted as collateral that the Group is permitted to sell or repledge in the absence of default.
3.4.4 Liquidity gap analysis
The table below presents the cash flows of the Group's financial assets and liabilities and other liabilities by their remaining contractual maturities at the
statement of financial position date. The amounts disclosed in the table are the contractual undiscounted cash flows, whereas the Group manages the
inherent liquidity risk based on expected undiscounted cash flows.
The Group's loan disbursement processes are centralized and controlled by Credit Risk Management Group (CRMG) of each banking subsidiary. All loan
commitments advised to customers in offer letters are contingent on the satisfaction of conditions precedent to draw down and availability of funds.
Additionally, the Group retains control of drawings on approved loan facilities, through a referral method, where any such drawings must be sanctioned
before it is processed. This ensures that the Group's commitments on any loan are to the extent of the drawn amount at any point in time.
The liquidity analysis of lease liability is disclosed in note 29c.
138 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Group
At 31 December 2023
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
Deriva ve Asset - Hedging Instrument
Gross settled:
Receivable
Payable
Derivative Asset -Non Hedging Instrument
Gross settled:
Receivable
Payable
Net settled
Derivative liabilities
Gross settled:
Receivable
Payable
Net settled
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
28
29
30
31
19
33
414,436
727,947
6,785
1,694,780
1,190,084
163,318
409,077
-
360,019
1,015
123,941
808,188
479,801
1,311
-
590,643
17,269
13,353
1,400,530
431,711
19
-
1,197,269
105,741
5,891
1,016,031
213,007
1,480
3,838,939
-
401,200
-
3,964,784
3,018,662
65,489
4,253,374
2,875,878
532,009
1,837,965
8,379,617
4,306,499
477,376
4,253,374
2,736,273
308,638
1,834,314
6,556,470
3,290,895
445,597
4,606,426
1,774,275
2,453,525
2,539,419
11,289,074
22,662,719
19,425,562
13,124,934
618,196
3,056
83,846
830,978
354,262
21,165
498,553
671,685
170
22,107
313,032
374,588
8,555
20,692
94,290
192,136
20,166
222,819
503,441
15,194,321
1,001,348
289,839
1,493,162
15,167,740
991,354
263,065
1,410,885
7,187,769
495,526
381,958
320,194
504,624
10,875,031
9,377,460
-
115,750
115,750
-
-
-
-
215,280
215,280
-
556,863
556,863
33,618
-
193,523
192,525
654
-
-
-
265,118
386,048
431,214
1,113,725
318
27,936
28,254
200
-
200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
887,893
887,893
-
462,376
462,376
227,794
192,525
72,363
72,363
2,196,104
-
518
27,936
70,486
70,486
28,454
37,911
139 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
Liabilities
Non-derivative liabilities
Customer's deposits
Other financial Liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets- Hedging instruments
Gross settled:
Receivable
Payable
15
16
17
18
20
21
25
28
29
30
31
32
19
Net settled
Derivative assets-Non Hedging Instrument 33
Gross settled:
Receivable
Payable
Net settled
Derivative liabilities
Gross settled:
Receivable
Payable
Net settled
33
Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year
Carrying amount
Gross
nominal
inflow/
(outflow)
463,163
323,828
4,595
1,263,202
981,044
70,368
168,268
938
460,101
85,164
28,666
557,865
234,430
713
-
613,895
35,375
11,375
511,134
211,719
30
-
1,028,194
21,161
-
592,972
141,728
76
1,697,512
-
302,153
-
1,776,619
1,524,161
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
9,935,446
11,942,707
8,183,517
396,598
2,771
35,146
-
402,334
124,131
23,000
225,342
-
202,080
385
18,092
370,726
-
113,935
9,569
29,871
229,298
-
84,476
16,503
276,278
130,980
-
6,473,275
547,186
350,012
757,153
-
8,975,654
545,938
311,192
963,449
-
7,187,769
495,526
381,958
320,194
504,624 10,875,031
9,377,460
-
614
(614)
-
-
-
-
-
-
95,466
(95,466)
-
250,838
(250,838)
-
-
135,645
(105,614)
66,063
(27,258)
104,297
(63,881)
134,410
(134,400)
13
13
48
252
-
22,659
43,405
-
27,243
58,114
-
731
39,781
-
-
-
-
11
46
242
-
-
-
-
-
-
-
-
-
-
-
-
346,918
(346,918)
-
440,415
(331,153)
326
-
50,633
141,300
299
-
20,052
20,052
-
29,822
29,822
326
-
6,325
6,325
299
140 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
At 31 December 2023
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
Derivative Asset - Hedging Instrument
Gross settled:
Receivable
Payable
Derivative Asset - Non Hedging
Instrument
Gross settled:
Receivable
Payable
Net settled
Derivative liabilities
Gross settled:
Receivable
Payable
Net settled
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
Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal
Carrying amount
inflow/
(outflow)
15
16
17
18
20
21
25
28
29
30
31
32
19
33
126,449
591,229
6,784
1,627,792
1,029,508
12,596
359,405
-
308,931
1,015
57,914
708,219
38,915
-
-
578,665
17,269
9,636
1,338,411
26,789
-
-
1,186,105
96,036
-
961,477
63,549
-
3,838,937
-
357,327
-
3,634,750
1,759,521
66,196
3,965,386
2,664,930
478,431
1,695,342
7,672,365
1,901,370
425,601
3,965,386
2,529,966
255,061
1,691,722
5,928,796
1,205,724
394,540
3,753,763
1,114,994
1,970,770
2,307,167
9,656,731
18,803,425
15,971,195
10,996,341
606,172
3,056
71,617
-
551,419
354,204
21,165
550,067
-
556,190
56
22,107
313,032
-
74,331
576
20,692
94,290
-
30
18,899
222,819
503,441
-
12,178,311
979,907
289,839
1,532,447
-
12,154,824
970,792
263,065
1,450,182
-
11,677,186
1,476,855
891,385
189,889
745,189
14,980,504
14,838,863
-
115,750
115,750
-
-
-
-
215,280
215,280
-
556,863
556,863
-
-
-
-
14
14
-
192,525
192,525
-
-
-
-
223
45,141
200
-
-
-
-
-
-
-
-
-
223
45,091
200
-
-
-
-
-
-
-
-
-
-
-
887,893
887,893
-
462,376
462,376
192,525
192,525
45,564
-
14
14
45,566
45,566
45,564
-
-
-
45,514
45,514
Note Up to 1 month 1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year Gross nominal
Carrying amount
inflow/
(outflow)
15
16
17
18
20
21
25
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
-
-
1,020,587
21,161
-
569,863
28,407
-
1,694,907
-
302,153
-
1,671,708
962,816
54,467
2,102,395
2,386,071
448,350
1,133,163
4,172,344
1,067,761
205,157
2,102,394
2,206,669
254,565
1,132,796
3,735,676
622,780
176,289
2,977,657
1,039,803
1,171,712
1,640,018
4,686,051
11,515,241
10,231,169
141 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
At 31 December 2022
In millions of Naira
Liabilities
Non-derivative liabilities
Customer's deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets-Hedging instruments
Gross settled:
Receivable
Payable
Net settled
Derivative assets-Non Hedging Instrument
Gross settled:
Receivable
Payable
Net settled
Derivative liabilities
Gross settled:
Receivable
Payable
Net settled
Note Up to 1 month 1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year Gross nominal
Carrying amount
inflow/
(outflow)
30
29
30
31
32
19
33
6,921,203
385,106
2,771
35,146
-
314,782
124,060
23,000
225,342
-
166,668
282
18,092
384,559
-
42,783
9,439
29,871
251,594
-
-
16,034
276,278
130,980
-
7,445,436
534,921
350,012
1,027,621
-
7,434,806
526,945
311,192
999,580
-
7,344,226
687,184
569,601
333,687
423,292
9,357,990
9,272,523
-
614
(614)
13
-
-
-
13
-
95,466
(95,466)
-
250,838
(250,838)
48
252
135,651
(105,620)
66,063
(27,258)
104,297
(63,881)
134,410
(134,410)
13
13
48
252
-
22,659
43,405
-
27,243
58,114
-
731
39,781
-
-
-
-
11
46
242
-
-
-
-
-
-
-
-
-
-
-
-
346,918
(346,918)
-
20,052
(20,052)
326
326
440,421
(331,169)
326
-
50,633
(882,182)
299
28,799
28,799
326
-
5,741
5,741
299
142 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Liquidity gap analysis (continued)
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. The principal
difference is on demand deposits from customers which are expected to remain stable or increase.
As part of the management of liquidity risk arising from financial liabilities, the Group holds liquid assets comprising cash and cash equivalents, and debt
securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In addition, the Group maintains agreed lines of credit with
other banks and holds unencumbered assets that are eligible for use as collateral with central banks (these amounts are referred to as the ‘Group’s
liquidity reserves’).
Group
At 31 December 2023
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
Undrawn overdraft
Total
433,926
566,807
831,593
211,709
2,044,035
2,916
48,735
160,356
17,883
229,890
374,675
423,055
213,880
155,255
1,166,865
56,335
94,891
228,236
38,325
417,788
-
125
217,133
245
217,504
-
-
11,988
-
11,988
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
Undrawn overdraft
276,481
363,355
384,381
89,749
20,056
58,461
71,184
10,840
Total
1,113,966
160,541
239,026
273,698
99,505
61,558
673,787
17,399
23,577
144,771
17,352
203,099
-
7,619
51,272
-
58,891
-
-
17,650
-
17,650
143 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
At 31 December 2023
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
Undrawn overdraft
Total
433,926
770,347
424,903
211,709
1,840,885
2,916
180,996
497
17,883
202,292
374,675
197,641
412,952
155,255
1,140,522
56,335
179,427
11,455
38,325
285,542
-
200,296
-
245
200,541
-
11,988
-
-
11,988
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
Undrawn overdraft
Total
3.5
Fair value of financial assets and liabilities
276,481
279,791
349,741
89,749
995,762
20,056
33,202
73,320
10,840
137,418
239,026
235,279
74,684
61,558
610,547
17,399
11,310
134,513
17,352
180,574
-
-
49,574
-
49,574
-
-
17,650
-
17,650
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.
144 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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.
31 December 2023
In millions of Naira
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
Note
Carrying
value
Total Fair
value
Fair value hierarchy
Level 1
Level 2
Level 3
16
21
19
19
17
21
21
16
17
21
33
749,606
24,293
462,376
72,363
-
749,606
24,293
462,376
72,363
-
189,849
23,231
-
36
-
216,134
1,528,786
216,134
1,528,786
-
1,528,786
1,986,667
308,638
1,521,682
1,940,525
295,253
1,481,904
884,461
267,246
1,051,810
559,757
1,062
462,376
72,327
-
209,394
-
881,770
28,007
136,819
-
-
-
-
-
6,741
-
174,294
-
293,275
70,486
70,486
-
70,486
-
The carrying values of the following assets and liabilities (which are measured at amortized cost) 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
Onlending
Borrowings
See additional disclosures on valuation methods in Note 3.5d
145 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
31 December 2022
In millions of Naira
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
Note
Carrying
value
Total Fair
value
Fair value hierarchy
Level 1
Level 2
Level 3
16
21
19
19
21
21
16
17
21
33
1,243,039
12,441
20,052
29,822
26,287
1,243,039
12,441
20,052
29,822
26,287
129,703
11,455
-
-
9,997
1,113,336
825
20,052
29,822
16,290
-
-
-
-
-
93,883
833,549
93,883
833,549
-
833,549
-
-
93,883
-
1,003,501
228,376
794,422
1,002,865
228,394
762,668
835,073
222,646
465,654
167,792
5,749
194,226
-
-
102,788
6,325
6,325
-
6,325
-
146 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
Bank
The table below sets out the Bank's classification of each class of its financial assets and liabilities.
31 December 2023
In millions of Naira
Assets
Carried at FVTPL:
Treasury bills
Investment securities (Fixed income)
Derivative Asset - Hedging Instrument
Derivative Asset -Non Hedging Instrument
Carried at FVOCI:
Equity securities (Unquoted)
Carried at amortized cost:
Treasury bills
Assets pledged as collateral
Investment securities
Liabilities
Carried at FVTPL
Derivative liabilities
Note
Carrying
value
Total Fair
value
Fair value hierarchy
Level 1
Level 2
Level 3
16
21
19
19
21
16
17
21
33
749,606
19,433
462,376
45,566
749,606
19,433
462,376
45,566
189,849
18,371
-
-
559,757
1,062
462,376
45,566
-
-
-
-
216,134
216,134
-
209,393
6,741
1,780,360
255,061
970,157
1,766,231
245,452
934,586
884,461
217,445
797,767
881,770
28,007
136,819
45,514
45,514
-
45,514
-
-
-
-
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
Onlending
Borrowings
See additional disclosures on valuation methods in Note 3.5d
147 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
31 December 2022
In millions of Naira
Assets
Carried at FVTPL:
Treasury bills
Investment securities (Fixed income)
Derivative assets
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
Note
Carrying
value
Total Fair
value
Fair value hierarchy
Level 1
Level 2
Level 3
16
21
19
19
17
21
16
17
21
33
32
1,243,038
10,560
20,052
28,799
26,189
93,883
963,630
228,376
518,337
1,243,038
10,560
20,052
28,799
26,189
93,883
963,669
228,394
501,399
6,040
6,040
-
-
129,703
10,433
-
-
9,899
-
795,877
222,646
442,388
-
-
3.5.b Financial instruments measured at fair value- Reconciliation of level 3.
Group and Bank
In millions of Naira
At 1 January 2022
Transfer due to non-availability of observable data
Gain recognised through other comprehensive income of equity investments
At 31 December 2022
Reconciliation of Level 3 items
At 1 January 2023
Transfer out due to availability of data
Gain recognised through other comprehensive income of equity investments
At 31 December 2023
1,113,336
127
20,052
28,799
16,290
-
167,792
5,749
59,011
6,040
-
21
-
-
-
-
-
93,883
-
-
-
-
-
85,574
200
8,109
93,883
93,883
(89,359)
2,217
6,741
There was a transfer between fair value hierarchy during the year from level 3 to level 2 because of the availability of observable market data arising
from issue of AFC shares during that period.
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 2023 and 31 December 2022 in measuring financial
instruments categorized as level 3 in the fair value hierarchy.
Type of financial
instrument
Fair values at 31
December 2023
Valuation technique
Significant unobservable
input
Unquoted equity
investment
N6.7 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
148 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
FMDQ
NIBSS
UPSL
AFREXIM
At 31 December 2023
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
3,706
1,935
361
437
Highest value Actual value
4,096
2,321
337
526
3,742
2,115
350
478
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 December
2023
31 December 2022
595
(246)
4,897
(4,394)
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
149 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The Group uses widely recognised valuation models for determining the fair value of common and simple financial instruments, such as interest rate and
currency swaps that use only observable market data and require little management judgement and estimation. Observable prices or model inputs are
usually available in the market for listed debt and equity securities, exchange-traded derivatives, and simple OTC derivatives such as interest rate swaps.
Availability of observable market prices and model inputs reduces the need for management judgement and estimation and 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 a 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. Parental support and guidance are given at the Group level at
which the risk level in relation to capital level and adequacy is closely monitored. The Group meets 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 and provides 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
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.
150 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
The table below shows the computation of the Group's capital adequacy ratio for the year ended 31 December 2023 as well 31 December 2022. During
those two periods, the individual entities within the Group complied with all of the externally imposed capital requirements.
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 December
2023
Basel II
31 December 2022
31 December 2023 31 December 2022
Basel II
Basel II
Basel II
15,698
255,047
409,104
3,729
1,179,390
1,628
1,864,596
(17,251)
(47,018)
-
-
15,698
255,047
311,411
3,729
625,005
813
15,698
255,047
367,942
3,729
893,938
-
15,698
255,047
278,602
3,729
494,429
-
1,211,704
1,536,354
1,047,505
(18,343)
(25,251)
-
-
-
(44,185)
(17,313)
-
-
(23,958)
(17,313)
-
Adjusted Total qualifying Tier 1 capital
1,800,327
1,168,110
1,474,856
1,006,234
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
364,801
364,801
-
364,801
72,923
72,923
-
72,923
175,983
175,983
(17,313)
158,670
53,731
53,731
(17,313)
36,418
2,165,128
1,241,033
1,633,526
1,042,652
7,882,270
214,752
1,894,809
9,991,831
4,961,579
142,290
1,163,701
6,267,570
6,672,311
153,007
1,667,274
8,492,592
4,335,844
94,041
1,058,784
5,488,669
Risk-weighted Capital Adequacy Ratio (CAR)
%22
%20
%19
%19
3.7
Operational risk
Operational Risk is the risk of loss resulting from inadequate and /or failed internal processes, people, and systems or from external events, including
legal risk and any other risks. Operational risk exists in all products, processes and business activities.
The Group has a broad Operational Risk management framework which defines the set of activities designed to proactively identify, assess, and manage
all operational risk components by aligning the people, technology and processes with best risk management practices towards enhancing stake holders'
value and sustaining industry leadership.
Operational risk objectives include the following:
(a)
(b)
(c)
To provide clear and consistent direction in all operations of the Group.
To provide a standardised framework and appropriate guidelines for creating and managing all operational risk exposures; and
To enable the Group identify and analyse events (both internal and external) that impact on its business.
The Operational Risk unit constantly conducts reviews to identify and assess the operational risk inherent in all material products, activities, processes,
and systems. It also ensures that all business units within the Group 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.
151 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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 processes
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 a measure which indicate the risk profile of the bank and any change thereof. KRIs act as early warning
indicators and are used to monitor and predict potential operational loss events. KRIs are used in conjunction with system of thresholds. When the
threshold or tolerance level for any KRI is breached, it triggers review, escalation, or management action. Risk indicators help keep the operational risk
management dynamic and risk profile current.
Loss Incident Reporting – Loss incidents are reported by all business units using the Loss incident reporting template. The discipline of collecting loss data
is not only needed to understand the dimensions of risk the Bank faces but also used to motivate staff to consider and more actively control key
elements of risk. The Bank-wide data collection promotes a dialogue within the Bank about determining the major operational risk exposures and
reinforces more qualitative efforts to manage operational risk within each of the business lines.
Operational Risk Capital Computation – The bank, based on Central Bank of Nigeria guideline, adopted basic indicator approach (BIA) in the calculation of
its Operational Risk Capital adequacy. The estimated operational Risk Capital Charge is reported to the Board and management for capital planning and
decision making.
Business Continuity Management (BCM)
In line with ISO 22301 Standards, the bank has a robust documented Business Continuity Plan. The primary objective of this plan is to protect the bank in
the event of an undesired 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 recovers 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 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.
152 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
3.8
Strategic risk
Strategic risk is a possible source of loss that might arise from the pursuit of an unsuccessful business plan. Strategic risk examines the impact of design
and implementation of business models and decisions on earnings and capital as well as the organisation's responsiveness to industry changes. Processes
and procedures have been established to ensure that the right models are employed and appropriately communicated to all decision makers in the
Group on issues relating to strategic risk management. This has essentially driven the Group’s sound banking culture and performance record to date.
3.9
Legal risk
Legal risk is defined as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil) incurred during operations by the
inability of the organisation to enforce its rights, or by failure to address identified concerns to the appropriate authorities where changes in the law are
proposed.
The Group manages this risk by monitoring new legislation, creating awareness of legislation among employees, identifying significant legal risks as well
as assessing the potential impact of these.
Legal risks management in the Group is also being enhanced by appropriate product risk review and management of contractual obligations via well
documented Service Level Agreements and other contractual documents.
3.10 Reputational risk
Reputational risk is defined as the risk of indirect losses arising from a decline in the bank’s reputation among one or multiple bank stakeholders. The risk
can expose the Group to litigation, financial loss or damage to its reputation. The Group's reputation risk management philosophy involves anticipating,
acknowledging, and responding to changing values and behaviours on the part of a range of stakeholders. Accordingly, the following are the roles and
responsibilities:
(a)
(b)
(c)
Board and senior management oversee the proper set-up and effective functioning of the reputational risk management framework.
Enterprise Risk Management Policy/Strategy (ERSP) is responsible for supporting the Board and senior management in overseeing the
implementation of reputational risk management framework; and
Corporate Communications is responsible for managing both the internal and external communications that may impact the reputation of the
Bank.
The process of reputation risk management within the Bank encompasses the following steps:
i.
ii.
iii.
iv.
v.
vi.
Identification: Recognizing potential reputational risk as a primary and consequential risk.
Assessment: Conducting qualitative assessment of reputational risk based on the potential events that have been identified as reputational
risk.
Monitoring: Undertaking frequent monitoring of the reputational risk drivers.
Mitigation and Control: Establishing preventive measures and controls for management of reputational risk and tracking mitigation actions.
Independent review: Subjecting the reputational risk measures and mitigation techniques to regular independent review by internal auditors
and/or external auditors; and
Reporting: Generating regular, action-oriented reports for management review.
3.11 Taxation risk
Taxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss as a result of non-compliance with tax laws.
The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Group to comply with taxation laws and,
where required, seeking the advice of tax specialists.
153 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
3.
Risk management (continued)
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
regulations.
The Group maintains zero tolerance posture for any regulatory breach in all its areas of operations.
154 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 period. 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
Modification of debt securities issued by the Government of Ghana and Ghana Cocoa Board
In assessing the modification gain for investments that are within the scope of the Government of Ghana's Domestic Debt Exchange Programme and
Cocoa Bill Exchange Programme, modification gain/loss is calculated as the difference between the carrying value of the old investments and the fair
value of new investments calculated as the present value of future cash flows using an appropriate discount rate.
Management applied a range of valuation assumptions to arrive at the appropriate discount rate due to the current complexities in Ghana's bond
market.
Detailed information about the judgements and estimates made by the Group in the above area is set out in note 3.2.18 and note 21.
4.2 Impairment losses on loans and advances
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:
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 estimates made 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 loans and advances of changes in macroeconomic risk drivers and how credit losses
respond to 10% decrease and increase in macro-variables.
31 December 2023
In millions of Naira
Gross loans balance
Loss allowance
4.3 Determining fair values
10% increase
No change
6,412,979
459,318
6,412,979
484,183
10% decrease
6,412,979
504,464
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) Level 1 : Quoted market price (unadjusted) in an active market for an identical instrument.
ii) Level 2 : Valuation techniques based on observable inputs, either directly - i.e, as prices - or indirectly - i.e derived from prices. This category includes
instruments such as forward contracts, swaps etc. valued using; quoted market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or
indirectly observable from market data.
iii) Level 3 : Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes
inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes
instrument that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to
reflect differences between the instruments. See note 3.5c for sensitivity analysis on unquoted equity investments.
155 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
4.4 Deferred tax assets and liabilities
The deferred tax assets and liabilities recognized by the Group are 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.
4.5 Uncertain Tax Position regarding the tax treatment of unrealised exchange gains on foreign currency assets.
At each reporting date, the Bank translates its foreign currency deominated assets into the presentation currency (Naira). This leads to the recognition of
unrealised exchange differences in the income statement. Based on the tax laws, the unrealised exchange differences are disallowed for tax purposes
and results in differences between the tax base and the carrying amount of the assets. The tax treatment of the unrealised exchange differences is
considered uncertain in terms of if this creates a temporary or permanent difference for deferred tax purposes. Also, uncertainty arise as to the tax rate
that will be applied on the unrealised gain if it eventually becomes realised.
The Directors have consulted widely on this uncertain tax position and have reflected the effect of the uncertainty by measuring the estimated tax
liability using the expected value method. The Directors have considered the range of possible outcomes and estimated the deferred tax liability as the
sum of the probability-weighted amounts within that range of the possible outcomes. The expected deferred tax liability has been appropriately factored
in our deferred tax computation.
It is anticipated that the reasonable possible outcome of the deferred tax liability sits within a range of 0% and 35% of the unrealized exchange
difference.
4.6 Hyperinflation accounting
The results of the Group’s operations with a functional currency of the Ghana cedis have been prepared in accordance with IAS 29 ‘Financial Reporting in
Hyperinflationary Economies’ as if the economy had always been hyperinflationary. The results of those operations for the year ended 31 December
2023 are stated in terms of current purchasing power using the Consumer Price Index as at 31 December 2023. In accordance with IAS 21 ‘The Effects of
Changes in Foreign Exchange Rates’, the results have been translated and presented in Nigerian Naira at the prevailing rate of exchange on 31 December
2023.
The Group’s comparative information presented in Nigerian Naira has not been restated.
Sierra Leone
The effects of hyperinflation accounting in Sierra Leone have not been deemed significant for group reporting purposes, therefore the Group's
operations with a functional currency of Sierra Leonean Leone have not been adjusted for the impacts of hyperinflation.
Impact of Hyperinflation
The application of the hyperinflation accounting procedures to the Group's operations in Ghana resulted in a N6.57 billion decrease in the Group profit
before tax in 2023. Included in this is a net monetary loss of N13.225 billion.
Other effects on the Group consolidated financial statements for 2023 are:
- Total assets increased by N42.13 billion driven by non-monetary assets;
- Opening retained profit decreased by N80.94 billion reflecting the impact of adjusting the historical cost of non-monetary assets and liabilities from the
date of their initial recognition to 1 January 2023 for the effect of inflation;
- Net revenue increased by NGN 6.93 billion;
The CPI for Ghana was 200.5 (2022: 162.8) with an increase in the year of 37.7 (2022: 25.94).
156 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
5.
Segment Analysis
The Group's strategic divisions offer different products and services, and are managed seperately based on the Group's management and internal reporting
structure.
The Group's operations are primarily organised on the basis of its products and service offerings in Nigeria, while the banking operations outside Nigeria are
reported seperately for Africa and Europe. The following summary describes each of the Group's reportable segments:
(a) Corporate, Public, Retail Banking, Pension Custodial services and Nominee - Nigeria
This segment provides a broad range of banking and pension custodial services to a diverse group of corporations, financial institutions, investment funds,
governments and individuals.
(b) Outside Nigeria Banking - Africa and Europe
This segment provide a broad range of banking services to a diverse group of corporations, financial institutions, investment funds, governments and
individuals outside Nigeria. The reportable segment 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 Board of Directors, 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.
No single external cutomer accounts for 10% or more of the Group's revenue. The measurement policies the Group uses for segment reporting are the same
as those used in its financial statements. There have been no changes from prior periods in the measurement methods used to determine reported segment
profit or loss.
(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.
157 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
5. Segment Analysis (continued)
Information regarding each reportable segment is included in the tables below. The tables also show the reconciliation of the amounts in the statement of profit or loss and statement of financial position for the reportable segments to
the amounts in the Group's statement of profit or loss and statement of financial position.
In millions of Naira
31 December 2023
Interest and similar income
Total Income on fee and commission
Other operating income
Trading gains
Total revenue
Revenue:
Derived from external customers
Derived from other business segments
Total revenue
Interest expense
Impairment loss on financial assets
Depreciation charge
Amortisation charge
Fees and commission expense
Admin and operating expenses
Profit / (loss) before tax
Tax expense
Profit / (loss) after tax
Nigeria Corporate
retail and
pensions
custodian
services
Outside Nigeria
Total (Outside
Nigeria)
Total reportable
segments
Eliminations
Consolidation
Africa---------------- Europe
928,913
152,508
264,192
538,286
1,883,899
1,850,590
33,309
1,883,899
(355,230)
(398,476)
(26,231)
(2,510)
(70,092)
(353,478)
677,882
(75,021)
602,861
130,331
23,568
(6,339)
27,007
174,567
99,866
5,902
(854)
1,680
106,594
174,568
106,594
-
174,568
(32,828)
(10,341)
(2,901)
(588)
(2,575)
(42,949)
82,385
(31,205)
51,180
106,594
(34,941)
(520)
(725)
(371)
(20,936)
49,101
(12,116)
36,985
-
-
230,197
29,470
(7,193)
28,687
281,161
281,162
-
281,162
(67,769)
(10,861)
(3,626)
(959)
(2,575)
(63,885)
131,486
(43,321)
1,159,110
181,978
256,999
566,973
2,165,060
2,131,752
33,309
2,165,061
(422,999)
(409,337)
(29,857)
(3,469)
(72,667)
(417,363)
809,368
(118,342)
88,165
691,026
(14,436)
(4,463)
(14,411)
-
(33,310)
1,144,674
177,515
242,588
566,973
2,131,750
-
(33,309)
2,131,752
-
(33,309)
2,131,752
14,507
(279)
-
-
4,459
1,217
(13,406)
(711)
(14,117)
(408,492)
(409,616)
(29,857)
(3,469)
(68,208)
(416,146)
795,962
(119,053)
676,909
158 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
5. Segment Analysis (continued)
In millions of Naira
31 December 2023
Expenditure on non-current assets
In millions of Naira
31 December 2023
Total assets
Other measures of assets
Loans and advances to customers
Treasury bills
Investment securities
Total liabilities
Other measures of liabilities
Customer deposits
Borrowings
Nigeria
Corporate retail
and pensions
custodian
services
Outside Nigeria
Total (Outside
Nigeria)
Total reportable
segments
Eliminations
Consolidation
Africa---------------- Europe
65,409
10,773
262
11,035
76,444
-
76,444
Nigeria Corporate
retail and
pensions
custodian
services
Outside Nigeria
Total (Outside
Nigeria)
Total reportable
segments
Eliminations
Consolidation
Africa---------------- Europe
16,843,187
1,279,688
2,531,841
3,811,529
20,654,716
(286,261)
20,368,455
5,928,907
2,529,966
1,234,116
197,615
206,307
334,831
482,875
1,721,948
15,009,095
1,075,664
2,212,021
12,154,824
1,028,018
2,203,674
1,450,182
13,631
-
-
680,490
206,307
2,056,779
6,609,397
2,736,273
3,290,895
(52,927)
-
-
6,556,470
2,736,273
3,290,895
3,287,685
18,296,780
(251,705)
18,045,075
3,231,692
15,386,516
(218,776)
15,167,740
13,631
1,463,813
(52,928)
1,410,885
159 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
5. Segment Analysis (continued)
In millions of Naira
31 December 2022
Interest and similar income
Total Income on fee and commission
Other operating income
Trading gains
Total revenue
Revenue:
Derived from external customers
Derived from other business segments
Total revenue
Interest expense
Impairment loss on financial assets
Depreciation charge
Amortisation charge
Fees and commission expense
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
Nigeria Corporate retail and
pensions custodian services
Outside Nigeria
Total reportable
segments
Eliminations
Consolidation
Africa---------------- Europe
59,239
9,651
1,791
8,694
79,375
33,883
4,515
(1,062)
2,236
39,572
79,647
39,572
-
79,647
(17,785)
(58,867)
(1,509)
(314)
(1,041)
(22,381)
(22,249)
5,695
(16,554)
39,572
(6,432)
(1,322)
(485)
(233)
(10,524)
20,575
(4,317)
16,258
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
543,594
157,222
50,522
212,575
963,913
119,219
-
119,219
(24,217)
(60,189)
(1,994)
(547)
(1,041)
(32,905)
(1,674)
1,378
(296)
(3,428)
(6)
(15,028)
103
(18,359)
-
(18,637)
(18,637)
3,700
(1,042)
-
-
-
454
(15,525)
-
(15,525)
540,166
157,216
35,494
212,678
945,554
945,554
-
945,554
(173,539)
(123,252)
(26,630)
(3,678)
(24,421)
(309,384)
284,650
(60,739)
223,911
450,472
143,056
49,793
201,645
844,966
826,335
18,637
844,972
(153,022)
(62,020)
(24,636)
(3,131)
(23,380)
(276,933)
301,849
(62,117)
239,732
160 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
5. Segment Analysis (continued)
In millions of Naira
31 December 2022
Expenditure on non-current assets
In millions of Naira
31 December 2022
Total assets
Other measures of assets
Loans and advances to customers
Treasury bills
Investment securities
Total liabilities
Other measures of liabilities
Customer deposits
Borrowings
Nigeria Corporate retail and
pensions custodian services
Outside Nigeria
Total reportable
segments
Africa---------------- Europe
Eliminations
Consolidation
71,501
Nigeria Corporate retail and
pensions custodian services
10,600,730
3,735,839
2,206,935
648,654
9,378,927
7,434,806
999,580
-
-
-
-
-
-
-
-
3,259
398
3,657
Outside Nigeria
Total reportable
segments
Africa---------------- Europe
510,386
1,445,532
1,955,918
90,043
39,603
155,125
451,702
223,953
924,555
1,313,009
436,541
1,303,257
-
-
-
313,996
39,603
1,079,680
1,764,712
9,174,604
999,580
-
-
-
-
-
-
-
-
-
75,158
Eliminations
Consolidation
(271,019)
12,285,629
(36,130)
-
-
4,013,705
2,246,538
1,728,334
(236,950)
10,906,689
(198,951)
8,975,653
(36,130)
963,450
* Revenues are allocated based on the location of the operations.
** Capital expenditure consists of expenditure on intangible assets and property and equipment during the year.
161 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
6.
Interest and similar income
Loans and advances to customers
Placement with banks and discount houses
Treasury bills
Promissoy notes
Commercial papers
Government and other bonds
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
671,920
81,822
178,967
3,205
21,406
187,354
1,144,674
370,446
12,270
43,609
1,332
2,766
109,743
540,166
635,806
39,796
145,646
3,204
21,090
80,690
926,232
346,320
3,968
32,972
1,330
2,726
60,858
448,174
Interest and similar income represents interest income on financial assets measured at amortised cost.
Interest income accrued on impaired financial assets amount to N29,093 million and N5,484 million (31 December 2022: N5,228 million and N4,667million)
for Group and Bank respectively.
7.
Interest and similar expense
Current accounts
Savings accounts
Time deposits
Borrowed funds
Leases
96,807
85,593
124,348
99,166
2,578
408,492
37,926
32,150
52,634
48,747
2,082
173,539
85,898
84,995
79,858
103,443
1,034
355,228
34,405
31,885
38,269
46,391
2,069
153,019
Total interest expense are calculated using the effective interest rate method reported above and does not include interest expense on financial liabilities
carried at fair value through profit or loss.
8.
Impairment 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)
Asset 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)
400,650
7,903
(337)
2,173
860
10
38,343
62,742
(400)
19,037
(649)
(180)
394,440
2,867
32
2,193
860
10
38,429
1,918
(356)
19,033
17
(180)
411,259
118,893
400,402
58,861
1,633
(3,276)
998
3,361
1,286
(3,276)
(326)
3,361
409,616
123,252
398,412
61,896
162 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
9.
Net income on fee and commission
Credit related fees
Commission on turnover
Account maintenance fee
Income from financial guarantee contracts issued
Fees on electronic products
Foreign currency transaction fees and commission
Asset based management fees
Auction fees income
Corporate finance fees
Foreign withdrawal charges
Commission on letters of credit
Commission on agency and collection services
Total fee and commission income
Fees and commission expense
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
3,980
2,054
47,201
16,247
51,818
4,190
10,956
695
128
19,718
12,068
8,460
6,609
1,165
41,557
10,536
45,739
3,389
9,595
622
1,691
15,551
8,541
12,221
3,045
-
44,969
8,157
46,294
3,072
-
695
128
19,718
7,596
7,498
1,406
-
40,860
6,829
43,275
3,258
-
622
1,691
15,535
8,303
11,699
177,515
(68,208)
109,307
157,216
(24,421)
132,795
141,172
(70,092)
71,080
133,478
(23,380)
110,098
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 N110,083 million and N84,361 million for Group and Bank (31 December 2022:
N107,982 million and N84,636 million) respectively while an amount of N71,025 million and N56,811 million (31 December 2022: N49,235 million and
N48,840 million) was recognised over the service period.
10.
Trading gains
Gain/(loss) on other trading books
Gain on treasury bills FVTPL
Gain/(loss) on bonds at FVTPL
Interest income on trading bonds
463,371
98,912
1,100
3,590
566,973
(1,325)
214,508
(910)
405
212,678
438,360
98,135
(1,799)
3,590
538,286
(9,238)
210,932
(454)
405
201,645
Included in gain on other trading books is N4.05 billion gains on derivatives for Group and Bank respectively.(31 December 2022: Group N47.9 billion and
Bank N42.8 billion).
Inns of Naira
In millions of Naira
Hedge ineffectiveness recognized comprises:
Fair value hedging
FV gains on the derivatives designated as hedging instruments
- (spot component only)
- Losses on the hedged items attributable to the hedged risk
-Fair value hedge ineffectiveness
458,478
(468,482)
(10,004)
40,632
(39,590)
1,042
458,478
(468,482)
(10,004)
40,632
(39,590)
1,042
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
163 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
10.
Trading gains (continued)
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
income to net off the recognised losses on the hedged item attributable to the hedged risk. Gain/(loss) on other trading books includes N410 billion net gain
on matured swap and forward transactions.
11.
Other operating income
Dividend Income from equity instruments (See note a below)
Gain on disposal of property and equipment (see note 44(vi))
Income on cash handling
Loan recovery (see note c below)
Foreign currency revaluation gain (see note b below)
Net monetary loss arising from hyperinflationary economy (see note d below)
5,661
189
27
20,954
228,982
(13,225)
242,588
2,223
2,563
476
5,030
25,202
-
35,494
19,777
186
-
15,290
228,810
-
264,063
17,148
2,451
445
4,426
25,320
-
49,790
a)
b)
c)
d)
Dividend income from equity investments represent dividend received from subsidiaries of N14,116 million and N5,661 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).
This represents amount recovered for previously written-off facilities. The amount is recognised on a cash basis only.
Net monetary loss arising from hyperinflationary economy relates to the remeasurement of monetary items in Ghana following its designation as a
hyperinflationary economy.
164 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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
General running expenses
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
5,989
1,337
28,048
9,387
3,857
33,596
3,495
11,450
24,876
5,258
41,171
3,220
10,139
5,155
5,049
7,246
21
5,765
57,383
9,262
15,890
4,137
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
4,759
700
26,234
8,173
3,299
28,678
2,496
11,205
24,845
4,055
36,009
2,485
6,594
4,289
2,925
5,321
21
5,673
57,383
8,843
15,723
1,976
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
291,731
222,972
261,686
204,703
Lease expense for the year ended 31 December 2023 amounting to N3,495 million and N2,496 million, (31 December 2022: N593 million and N583 million)
respectively were recognised. They represent the amount of straight line amortisation on short term lease in which the Group/Bank has applied the
recognition exception.
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 N143 million. These non-audit services were for the following:
assessment of risk management practices (N67 million) and assessment of compliance with whistle blowing guidelines (N14 million), review of the Bank's
corporate governance (N31 million), trainings (N15 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.
Included in training and development is a total N657 million which the bank paid as contribution to the industrial training fund.
165 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 (NASENI)
National Fiscal Stabilization Levy & Financial Sector Recovery
Effect of hyperinflation
Prior period underprovision/(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 the tax expense
Profit before income tax
Tax calculated at the weighted average Group rate of 30% (2022: 30%)
Tax effect of adjustments on taxable income
Effect of difference of rate across different tax jurisdictions
Non-deductable expenses
Tax exempt income
Balancing charge
Effect of tax laws arising from current period
Origination of Temporary differences
Information technology levy
Capital allowance utilised
Tertiary education tax
Prior period underprovision/(Reversal of prior period over provision)
National Fiscal Stabilization Levy & Financial Sector Recovery Levy
Police trust fund levy
NASENI
Total tax expense
In millions of Naira
(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
(d) The movement in the current income tax receivable balance is as follows:
At start of the year
Tax paid
Current income tax charge (see note 13a)
At end of the year
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
55,792
6,775
3,127
33
1,670
8,177
1,622
712
77,908
41,145
119,053
119,053
795,962
238,789
(6,450)
32,068
(228,282)
13,051
-
61,408
6,776
(12,050)
3,126
737
8,177
33
1,670
119,053
68,156
3,026
6,775
15
735
-
-
(6,513)
72,194
(11,455)
60,739
60,739
284,650
85,395
(889)
35,802
(27,207)
5,610
(146)
(11,455)
3,026
(30,408)
6,775
(6,513)
-
15
735
60,739
16,824
6,677
2,876
33
1,670
-
-
712
28,792
43,322
72,114
72,114
667,715
200,315
-
56,730
(228,282)
112
-
43,322
6,676
(12,050)
2,876
712
-
33
1,670
72,114
51,370
2,940
6,595
15
735
-
-
(6,513)
55,142
4,315
59,457
59,457
294,050
88,215
-
17,658
(26,734)
2,640
-
4,315
2,940
(30,408)
6,595
(6,513)
-
15
735
59,457
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
64,856
(85,514)
54,535
33,877
-
42,348
(23,373)
18,975
16,909
(24,247)
72,194
64,856
61,655
(62,367)
28,792
28,080
14,241
(7,728)
55,142
61,655
-
-
-
-
-
-
-
-
-
-
-
-
166 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
14.
Earnings per share (EPS)
Basic earnings per share
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue
during the year.
Profit attributable to shareholders of the Bank (N'million)
676,569
224,050
595,601
234,593
Number of issued shares at the end of the year (millions)
Weighted average number of ordinary shares in issue (millions)
Basic and diluted earnings per share (Naira)
31,396
31,396
21.55
31,396
31,396
7.14
31,396
31,396
18.97
31,396
31,396
7.47
Basic and diluted earnings per share are the same, as the Bank has no potentially dilutive ordinary shares.
167 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
15.
Cash and balances with central banks
Cash
Operating accounts and deposits with central banks
Mandatory reserve deposits with central bank (cash reserve)
Special cash reserve requirement
Current
Non-current
16.
Treasury bills
Treasury bills (FVTPL)
Treasury bills (Amortized cost)
ECL Allowance on treasury bills (Amortized cost) (see note 3.2.18)
Classified as:
Current
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
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
146,264
123,703
3,902,718
80,689
85,437
366,699
1,668,919
80,689
105,262
21,187
3,758,248
80,689
66,067
341,420
1,614,217
80,689
4,253,374
2,201,744
3,965,386
2,102,394
269,967
3,983,407
452,136
1,749,608
126,449
3,838,937
407,488
1,694,906
4,253,374
2,201,744
3,965,386
2,102,394
749,606
1,986,738
(71)
1,243,038
1,003,908
(408)
749,606
1,780,431
(71)
1,243,038
963,669
(39)
2,736,273
2,246,538
2,529,966
2,206,668
2,736,273
2,246,538
2,529,966
2,206,668
2,736,273
2,246,538
2,529,966
2,206,668
209,246
232,218
209,246
232,218
209,246
232,218
209,246
232,218
217,446
91,221
(29)
308,638
119,145
135,536
(18)
254,663
163,869
91,221
(29)
255,061
119,047
135,536
(18)
254,565
Included in assets pledged as collateral for Group/Bank are treasury bills at amortised cost of N91.22 billion and bonds at amortised cost of N217.45 billion
(Group) and N163.87 billion (Bank) (31 December 2022: treasury bills N109,346 million and bonds 119,047 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) N4 billion (31 December
2022: N3.74 billion), being collateralized, Financial Market dealers Quotation (FMDQ) N11.19 billion (31 December 2022: 1.81 billion), E-Transact N50 million
(31 December 2022: N47 million), V-pay: N50 million (31 December 2022: N47 million), Interswitch: N2.4 billion (31 December 2022: N2,247 billion), System
specs / Remitta N2.5 billion (31 December 2022: N2.3 billion), CBN Settlement clearing N15 billion (31 December 2022: N14.78 billion), CBN Real Sector
Support Fund: N23 billion (31 December 2022: N21.67 billion), Federal Inland Revenue Service: N9 billion (31 December 2022: N8.43 billion) and Bank of
Industries (BOING) N34 billion (31 December 2022: N31.88 billion).
Zenith Bank UK pledged securities totalling N53.58billion to JP Morgan Chase (31 December 2022: Zenith Bank UK pledged securities totalling N52.07 billion
to JP Morgan Chase and Barclays Bank and Zenith Bank Ghana Pledged securities totalling N3.86 billion to pension funds management companies,
institutional investors and high net worth customers).
Assets exchanged under repurchase agreement as at 31 December 2023 are with the following counterparties (note 31):
168 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Assets pledged as collateral (continued)
17.
Counterparties
ABSA (see note 31)
Access Bank
Carrying value
of asset
Carrying value
of liability
Carrying value
of asset
Carrying value
of liability
Group
Bank
147,093
14,296
161,389
95,179
13,000
108,179
147,093
14,296
161,389
95,179
13,000
108,179
Assets exchanged under repurchase agreement as at 31 December 2022 are with the following counterparties (note 31):
Counterparties
Carrying value
of asset
Carrying value
of liability
Carrying value
of asset
Carrying value
of liability
ABSA (see note 31)
Standard Bank London (see note 31)
In millions of Naira
Classified as:
Current
Non-current
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
Group
Bank
51,492
130,770
182,262
46,340
63,456
109,796
113,809
50,477
164,286
46,340
63,456
109,796
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
108,792
199,845
142,905
111,758
308,637
254,663
99,087
155,974
255,061
142,807
111,758
254,565
-
837,559
997,690
(935)
-
907,358
395,528
(75)
-
922,922
769,735
(935)
-
957,902
174,969
(75)
1,834,314
1,302,811
1,691,722
1,132,796
1,834,314
1,302,811
1,691,722
1,132,796
Included in balances with banks outside Nigeria are the amount of N254.47 billion and N363.72 billion for the Group and Bank respectively (31 December
2022: N45.02 billion and N113.9 billion) which represent 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).
Due from banks with maturity greater than 3 months and restricted balances:
272,851
46,407
363,715
115,315
19.
Derivative assets
Instrument types(fair value)
Forward and Swap Contracts
Futures contracts
Instrument types (Notional amount):
Forward and Swap contracts
Futures contracts
Total
a) Hedging derivative assets
489,167
45,572
534,739
49,548
326
49,874
462,376
45,566
507,942
891,925
190,854
960,894
24,624
889,583
190,834
1,082,779
985,518
1,080,417
48,525
326
48,851
924,485
37,659
962,144
169 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
19.
Derivative assets (continued)
The 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. As at 31 December 2023, the mark-to-market value of these hedged asset is N462 bn.
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.
In millions of Naira
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
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
1,098,703
5,291,536
665,208
450,649
2,982,808
690,509
7,055,447
(498,977)
4,123,966
(110,261)
1,032,834
4,714,937
665,208
6,412,979
(484,183)
427,453
2,720,843
690,509
3,838,805
(103,129)
6,556,470
4,013,705
5,928,796
3,735,676
2,855,923
3,700,547
2,133,065
1,880,640
2,790,053
3,138,743
1,958,733
1,776,943
6,556,470
4,013,705
5,928,796
3,735,676
Movement in ECL Allowance as at 31 December 2023 is presented in Note 3.2.18.
As at 31 December 2023, the Bank's only exposure to USD LIBOR is N627 bn in the loan book. These are legacy loan facitlities from prior period and
syndicated facilities. All new financial instrument transactions are quoted in SOFR. The applicable rate to be applied on the legacy syndicated facilities are
communicated by the lead syndicate and which will be obtained from the synthetic USD LIBOR issued by ICE pending the completion of reassessment of
SOFR.
The following tables show the total amounts of unreformed non-derivative financial assets as at 31 December 2023. The amounts of these assets are shown
at their gross carrying amounts.
In millions of Dollars
31 December 2023
Loans and advances to customers
Multilateral loans
In millions of Dollars
31 December 2022
USD
Carrying
value at
31 December 2023
LIBOR
Of which have
yet to be
transitioned as at
31 December 2023
NGN
Carrying
value at
31 December 2023
NIBOR
Of which have
yet to be
transitioned as at
31 December 2023
Assets
Assets
Assets
Assets
1,469
1,469
USD
Carrying
value at
31 December 2022
659
659
9,718
9,718
9,718
9,718
LIBOR
Of which have
yet to be
transitioned as at
31 December 2022
NGN
Carrying
value at
31 December 2022
NIBOR
Of which have
yet to be
transitioned as at
31 December 2022
Assets
Assets
Assets
Assets
170 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Loans and advances to customers
Multilateral loans
1,228
1,228
873
873
13,528
13,528
13,528
13,528
171 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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
At fair value through other comprehensive income (see note (i) below)
Modification of financial assets
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
1,563,994
1,528,786
(42,312)
852,145
833,849
(63,986)
3,050,468
24,293
1,622,008
12,443
975,608
-
(5,451)
970,157
19,433
520,921
-
(2,583)
518,338
10,560
3,074,761
1,634,451
989,590
528,898
216,134
93,883
216,134
3,290,895
1,728,334
1,205,724
93,883
622,781
The following table provides summary information on investment securities issued by the Government of Ghana with lifetime ECL whose cash flows were
modified during the period and their respectve effect on the Group's financial performance:
Amortised cost before modification
Net modification loss
250,775
(2,523)
-
-
-
-
-
-
Movement in gross carrying amount and impairment allowance on investment securities are presented in Note 3.2.18
Classified as:
Current
Non-current
314,392
2,976,503
101,339
1,626,995
309,532
896,192
3,290,895
1,728,334
1,205,724
77,887
544,894
622,781
i.
ii.
iii.
The Group holds equity investments in unquoted entities which the Group has elected to carry at fair value through other comprehensive income.
These investments are held for strategic purposes rather than for trading purposes see note 3.3.5.
The Group and Bank debt securities measured at FVTPL comprise sovereign bonds (31 December 2023: N6.71 billion and N1.85 billion respectively; 31
December 2022; N12.44 billion and N3.25 billion respectively).
The Group's debt securities measured at amortised cost can be analysed as follows:
Sovereign (Federal)
Sub-sovereign (State)
Corporate bonds
Promissory note
Commercial papers
1,061,763
34,765
196,509
43,539
227,418
660,485
32,996
120,438
18,464
19,762
1,563,994
852,145
580,306
34,765
89,580
43,539
227,418
975,608
383,973
31,636
67,798
18,425
19,089
520,921
172 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
22.
Investment in subsidiaries
(a). 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 Limited
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 Limited
Jurisdiction of
Incorporation
Ghana
United Kingdom
Sierra Leone
Gambia
Nigeria
Nigeria
Jurisdiction of
Incorporation
Ghana
United Kingdom
Sierra Leone
Gambia
Nigeria
Nigeria
Principal place of
business
31 December 2023
Ownership interest %
31 December 2023
Ghana
United Kingdom
Sierra Leone
Gambia
Nigeria
Nigeria
99.42%
100.00%
99.99%
99.96%
99.00%
99.00%
7,066
21,482
2,059
1,038
1,980
1,000
34,625
Principal place of
business
31 December 2022
Ownership interest %
31 December 2022
Ghana
United Kingdom
Sierra Leone
Gambia
Nigeria
Nigeria
99.42%
100.00%
99.99%
99.96%
99.00%
99.00%
7,066
21,482
2,059
1,038
1,980
1,000
34,625
173 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
22. Investment in subsidiaries (continued)
(b) Condensed results of consolidated entities
31 December 2023
Condensed statement of profit or loss
Operating income
Expenses
(Impairment charge)/writeback for financial and non-financial assets
Profit before tax
Taxation
Profit for the year
Condensed statement of financial position
Assets
Cash and cash equivalents
Treasury bills
Assets pledged as collateral
Due From Other Banks
Derivative asset held for risk management
Loans and advances
Investment securities
Investment in subsidiaries
Current tax receivable
Deferred tax asset
Other assets
Property and equipment
Intangible assets
Zenith Group
Intra-group
transactions and
balances
Zenith Bank Plc
Zenith Bank
Ghana
Zenith Bank UK
Zenith Bank
Sierra Leone
Zenith Bank
Gambia
Zenith Pension
Custodian
Zenith Nominee
Limited
2,131,750
(926,172)
(409,616)
795,962
(119,053)
676,909
4,253,374
2,736,273
308,638
1,834,314
534,739
6,556,470
3,290,895
-
18,975
17,251
474,976
295,532
47,018
(33,310)
20,183
(279)
(13,406)
(711)
(14,117)
-
-
-
(218,774)
(35)
(52,927)
-
(34,625)
-
(3,110)
(1,371)
-
-
1,869,753
(803,626)
(398,412)
667,715
(72,114)
595,601
3,965,386
2,529,966
255,061
1,691,722
507,942
5,928,796
1,205,724
34,625
-
-
417,419
230,267
44,185
160,233
(75,059)
(9,968)
75,206
(29,318)
45,888
275,667
174,294
-
78,567
24,538
179,719
293,276
-
18,433
17,338
52,350
60,057
1,369
106,594
(56,973)
(520)
49,101
(12,116)
36,985
32
-
53,577
262,727
2,294
482,875
1,721,948
-
542
2,816
2,799
1,496
735
20,368,455
(310,842)
16,811,093
1,175,608
2,531,841
8,799
(3,921)
(200)
4,678
(1,171)
3,507
5,709
-
-
12,415
-
9,084
34,381
-
-
173
677
804
409
63,652
5,535
(2,861)
(173)
2,501
(716)
1,785
6,580
32,013
-
6,979
-
8,812
7,174
-
-
29
892
2,367
86
64,932
13,587
(3,779)
29
9,837
(2,823)
7,014
-
-
-
557
-
111
26,003
-
-
-
2,146
540
216
29,573
559
(136)
(93)
330
(84)
246
-
-
-
121
-
-
2,389
-
-
5
64
1
18
2,593
174 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Zenith Group
Elimination
entries
Zenith Bank Plc
Zenith Bank
Ghana
Zenith Bank UK
Zenith Bank
Sierra Leone
Zenith Bank
Gambia
Zenith Pension
Custodian
Zenith Nominee
Limited
31 December 2023
Liabilities & Equity
Customer deposits
Derivative liabilities
Current income tax
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Equity and reserves
15,167,740
70,486
33,877
59,310
1,039,712
263,065
1,410,885
2,323,380
(218,776)
24,468
-
(3,110)
(1,365)
-
(52,928)
(34,627)
12,154,824
45,514
28,080
59,233
1,003,947
263,065
1,450,182
1,806,247
937,694
-
-
3,110
24,849
-
13,631
171,821
2,203,674
504
-
-
7,843
-
-
319,821
20,368,455
(286,338)
16,811,092
1,151,105
2,531,842
Condensed statement of cash flow
Net cash (used in)/from operating activities
Net cash (used in)/from financing activities
Net cash (used in)/from investing activities
1,786,545
(576,810)
(1,395,437)
625,030
(44,243)
(390,184)
1,364,211
(527,596)
(1,004,170)
Increase / (decrease) in cash and cash equivalents
(185,702)
190,603
(167,555)
183,276
18,557
(75,017)
126,816
(389,240)
(17,528)
70,223
(336,545)
Cash and cash equivalents
At start of year
Exchange rate movements on cash and cash equivalents
At end of year
1,940,758
549,455
2,304,511
(483,288)
20,684
(272,001)
1,657,186
528,771
2,018,402
234,695
-
361,511
476,175
-
139,630
Increase / (decrease) in cash and cash equivalents
(185,702)
193,206
(167,555)
126,816
(336,545)
(1,375)
(3,385)
44,608
-
2,096
-
1,567
-
-
15,382
63,653
(2,365)
-
990
(1,375)
35,327
-
33,952
45,716
-
820
-
1,576
-
-
16,820
64,932
(5,552)
-
2,167
(3,385)
20,592
-
17,207
-
-
2,798
77
1,057
-
-
25,640
29,572
11,078
(6,000)
539
5,617
55
-
5,672
5,617
-
-
83
-
238
-
-
2,276
2,597
107
-
15
122
16
-
138
122
175 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
31 December 2022
Condensed statement of profit or loss
Operating income
Expenses
Impairment charge for financial and non-financial assets
Profit/(loss) before tax
Taxation
Profit for the year
Condensed statement of financial position
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due From Other Banks
Derivative asset held for risk management
Loans and advances
Investment securities
Investment in subsidiaries
Deferred tax asset
Other assets
Property and equipment
Intangible assets
Zenith Group
Intra-group
transactions and
balances
Zenith Bank Plc
Zenith Bank
Ghana
Zenith Bank UK
Zenith Bank
Sierra Leone
Zenith Bank
Gambia
Zenith Pension
Custodian
Zenith Nominee
Limited
945,554
(537,652)
(123,252)
284,650
(60,739)
223,911
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
(18,637)
3,112
-
(15,525)
-
(15,525)
-
-
-
(198,949)
-
(36,130)
-
(34,625)
-
(1,326)
-
-
833,087
(477,141)
(61,896)
294,050
(59,457)
234,593
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
70,786
(39,812)
(58,749)
(27,775)
6,753
(21,022)
92,246
22,789
98
63,175
-
85,764
135,912
-
15,017
17,248
13,023
458
39,572
(16,659)
(2,368)
20,545
(4,317)
16,228
16
-
-
290,321
1,023
223,953
924,555
-
3,241
773
1,192
458
12,285,629
(271,030)
10,570,678
445,730
1,445,532
5,790
(2,871)
(90)
2,829
(709)
2,120
3,337
-
-
8,667
-
2,510
15,762
-
61
304
470
53
31,164
3,072
(1,445)
(24)
1,603
(349)
1,254
3,751
16,814
-
6,022
-
1,769
3,451
-
6
310
1,315
62
33,500
11,470
(2,750)
(63)
8,657
(2,524)
6,133
-
267
-
763
-
163
23,691
-
13
2,385
266
247
27,795
415
(86)
(62)
267
(136)
131
-
-
-
16
-
-
2,182
-
5
37
5
15
2,260
176 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
31 December 2022
Liabilities & Equity
Customer deposits
Derivative liabilities
Current income tax
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Equity and reserves
Condensed statement of cash flow
Net cash (used in)/from operating activities
Net cash (used in)/from financing activities
Net cash (used in)/from investing activities
Increase / (decrease) in cash and cash equivalents
Cash and cash equivalents
At start of year
Exchange rate movements on cash and cash equivalents
At end of year
Zenith Group
Intra-group
transactions and
balances
Zenith Bank Plc
Zenith Bank
Ghana
Zenith Bank UK
Zenith Bank
Sierra Leone
Zenith Bank
Gambia
Zenith Pension
Custodian
Zenith Nominee
Limited
8,975,653
6,325
64,856
16,654
568,559
311,192
963,450
1,378,940
(198,951)
-
-
-
(1,324)
-
(36,130)
(34,627)
7,434,806
6,040
61,655
15,911
546,347
311,192
999,580
1,195,147
388,556
75
(545)
743
11,511
-
-
45,390
1,303,257
210
564
-
8,978
-
-
132,523
12,285,629
(271,032)
10,570,678
445,730
1,445,532
1,179,123
(97,606)
(363,231)
718,286
(137,609)
5,323
120,212
(12,074)
1,279,759
79,278
(408,165)
792,316
158,905
(14,549)
(91,331)
53,025
(142,081)
(3,102)
12,344
(132,839)
1,134,519
87,954
1,940,759
171,527
-
159,453
776,574
88,295
88,295
125,771
(343)
178,453
48,266
-
(84,573)
23,831
-
444
-
655
-
-
6,237
31,167
13,619
-
441
14,060
1,680
-
15,730
24,154
-
291
-
1,443
-
-
7,614
33,502
1,985
-
1,354
3,339
9,084
-
12,423
3,339
-
-
2,382
-
786
-
-
24,626
27,794
4,226
(6,000)
2,251
477
1,486
-
1,963
477
-
-
65
-
163
-
-
2,030
2,258
329
-
(337)
(8)
131
2
125
(8)
Increase / (decrease) in cash and cash equivalents
718,286
(12,074)
792,316
53,025
(132,839)
14,050
177 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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.
Investments 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 2023 (31 December 2022: Nil).
178 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
24.
Deferred tax balances
Deferred tax assets
(i) Deferred tax asset
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
Unutilised capital allowances
ECL allowance on not-credit impaired financial instruments
Tax loss carry forward
Other assets
Lease liability
Fair value reserve
Total deferred tax asset
(5)
50,412
-
18,381
3,402
1,904
74,094
32
21,149
6
587
2,898
2,701
27,373
-
50,331
-
-
3,402
-
53,733
-
6,132
-
-
2,898
-
9,030
Set-off of deferred tax asset against deferred tax liabilities pursuant to set-off
provisions (see (ii) below)
(56,843)
(9,030)
(53,733)
(9,030)
Net deferred tax asset
17,251
18,343
-
-
(ii) Deferred tax liability
Property and equipment
Right of use asset
Foreign exchange differences
Total deferred tax liability
Set-off of deferred tax liabilities pursuant to set-off provisions (see
(i) above)
26,850
3,402
85,901
116,153
(56,843)
17,296
3,161
5,227
25,684
(9,030)
23,663
3,402
85,901
112,966
(53,733)
16,553
3,161
5,227
24,941
(9,030)
Net deferred tax liability
59,310
16,654
59,233
15,911
Group
31 December 2023
Movements in temporary differences during the year
Asset
Other assets
Unutilized capital allowances
ECL Allowance on not-credit impaired financial instruments
Tax loss carry forward
Fair value reserve
Lease liability
1 January 2023
Recognised in
profit or loss
Recognised in
OCI
31 December 2023
587
32
21,149
6
2,701
2,898
27,373
17,794
(37)
29,263
(6)
1,806
504
49,324
-
-
-
-
(2,603)
-
(2,603)
18,381
(5)
50,412
-
1,904
3,402
74,094
179 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
24.
Deferred tax balances (continued)
31 December 2023
Movements in temporary differences during the year
Liabilities
Property and equipment
Right of use asset
Foreign exchange differences
Bank
31 December 2023
Movements in temporary differences during the year
Asset
ECL Allowance on not-credit impaired financial instruments
Fair value reserves
31 December 2023
Movements in temporary differences during the year
Liability
Property and equipment
Right of use asset
Foreign exchange differences
1 January 2023
Recognised in
profit or loss
Recognised in OCI31 December 2023
17,296
3,161
5,227
25,684
9,554
241
80,674
90,469
-
-
-
-
26,850
3,402
85,901
116,153
1 January 2023
Recognised in
profit or loss
31 December 2023
6,132
2,898
9,030
44,199
504
44,703
50,331
3,402
53,733
1 January 2023
Recognised in
profit or loss
31 December 2023
16,553
3,161
5,227
24,941
7,110
241
80,674
88,025
23,663
3,402
85,901
112,966
Zenith Bank plc (the parent) and Zenith Bank Ghana have deferred tax assets and deferred tax liabilities which have been presented on a net basis in the
financial statements. Each entity has the legal right to settle current tax amounts on a net basis and the deferred tax amounts are levied by the same tax
authority.
The Group’s deferred tax asset is largely attributable to Zenith bank Ghana, which suferred a loss in prior year. The Group has recognised all of its
deferred tax asset as at 31 December 2023. The Group, therefore, has no unrecognised deferred tax asset. The Group will continue to assess the
recoverability of its deferred tax asset and ensure that only amounts considered recoverable are recognised in the books and presented in the statement
of financial position.
25.
Other assets
Non-financial assets
Prepayments
Other non-financial assets*
Gross other non-financial assetss
Less impairment (see note (i) below)
Net other non-financial assets
Other financial assets
E-card and settlement receivables
Intercompany receivables
Deposits 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)
18,862
10,602
29,464
(85)
29,379
348,566
-
65,476
62,698
-
476,740
(31,143)
445,597
474,976
9,803
13,615
23,418
(3,361)
20,057
127,583
-
53,747
41,109
-
222,439
(28,973)
193,466
213,523
12,985
9,979
22,964
(85)
22,879
345,486
651
65,476
13,268
720
425,601
(31,061)
394,540
417,419
7,363
13,501
20,864
(3,361)
17,503
125,569
542
53,747
24,579
720
205,157
(28,868)
176,289
193,792
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.
180 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
25.
Other assets (continued)
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
*Other non-financial assets comprise withholding tax receivables and stock in trade relating to telecommunication products.
**Other receivables comprises of mobile electronic funds receivable from customer.
Classified as:
Current
Non-current
409,500
65,476
157,545
55,978
474,976
213,523
351,223
66,196
417,419
139,324
54,468
193,792
See note 3.2.18 for movement in impairment allowance for other financial assets as at 31 December 2023
(i) Movement in impairment allowance for non-financial assets
.
At start of the year
Charge for the year (see note 8)
At end of the period
3,361
(3,276)
85
-
3,361
3,361
3,361
(3,276)
85
-
3,361
3,361
(ii) Provision matrix
The table below summarises the provision matrix of the Bank as at 31 December 2023. The loss allowance recorded by the other subsidiaries on their other
financial assets is considered insignificant to the Group.
31 December 2023
Assets
Receivables*
Expected loss rate
ECL
31 December 2022
Assets
Receivables*
Expected loss rate
ECL
0-30 days
31-60 days
61-90 days
91-180days
Above 180 days
Total
342,066
4.27
%
14,607
86
%
8.77
8
179
%
13.15
24
100.00
-
%
-
16,422
%
100.00
16,422
358,753
-
31,061
0-30 days
31-60 days
61-90 days
91-180days
Above 180 days
Total
124,077
2.35
%
2,918
555
%
4.71
26
145
%
7.07
10
1,813
%
100.00
1,813
24,101
%
100.00
24,101
150,691
-
28,868
*The receivables exclude the deposit for shares, intercompany receivables and deposit for AGSMEIS which are not subject to impairment by the simplified
approach.
181 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment
(a) Property and equipment movement
Group
31 December 2023
Cost
At 1 January 2023
Additions
Reclassifications from WIP
Modifications
Impact of Hyperinflation
Disposals/Write off
Exchange difference
At 31 December 2023
Accumulated Depreciation
At 1 January 2023
Charge for the year
Reclassifications/transfer from WIP
Disposals
Impact of Hyperinflation
Exchange difference
At 31 December 2023
Net book amount
At 31 December 2023
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Aircraft
Motor vehicles
Right-of-use
assets - Buildings
Work in progress
Total
38,847
2,709
440
-
-
-
-
41,996
66,062
3,693
3,812
-
25,355
(67)
836
99,691
26,453
1,067
149
-
1,698
(169)
1,501
30,699
110,885
7,286
2,258
-
3,400
(1,771)
1,065
123,123
47,878
12,511
1,650
-
1,338
(258)
338
63,457
25,704
-
-
-
-
-
-
25,704
34,393
8,328
269
-
3,623
(2,030)
388
44,971
28,729
2,128
-
755
16,889
(111)
2,719
51,109
43,419
14,687
(9,224)
-
2,149
(904)
133
50,260
422,370
52,409
(646)
755
54,452
(5,310)
6,980
531,010
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Aircraft
Motor vehicles
Right-of-use
assets Buildings
Work in progress
Total
-
-
-
-
-
-
-
11,337
1,570
47
(64)
3,407
164
16,461
21,920
2,141
(76)
(169)
1,218
1,170
26,204
88,358
9,979
45
(1,727)
2,763
794
100,212
38,917
6,760
(16)
(257)
1,125
288
46,817
357
1,100
-
-
-
-
1,457
22,708
5,377
-
(1,789)
2,193
279
28,768
7,932
2,930
-
(45)
2,920
1,823
15,560
-
-
-
-
-
-
-
191,528
29,857
-
(4,051)
13,626
4,518
235,478
41,996
83,230
4,495
22,911
16,640
24,247
16,203
35,549
50,260
295,532
Expenses relating to short term lease and low value lease assets can be seen in note 12 as lease expense
There were no impairment losses on any class of property and equipment during the year (31 December 2022: Nil).
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2022: Nil).
All property and equipment are non-current. None of the Bank's assets were financed from borrowings, consequently no borrowing cost has been capitalized as part of asset cost.
182 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment (continued)
For accounting policy and judgements on right of use see note 2.14. The Group has no ROU in respect of leases that are yet to commence.
There are no restrictions on the title of the properties and none of them are pledged as securities for liabilities.
183 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment (continued)
Group
31 December 2022
Cost
At 1 January 2022
Additions
Reclassifications from WIP
Modifications
Disposals
Exchange difference
At 31 December 2022
Accumulated Depreciation
At 1 January 2022
Charge for the year
Reclassifications/Transfers from WIP
Disposals
Exchange difference
At 31 December 2022
Net book amount
At 31 December 2022
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Right of use
asset - Aircraft
Motor vehicles Right-of-use
Aircraft
assets
Buildings
Work in
progress
Total
36,431
2,422
(6)
-
-
-
38,847
67,888
2,475
(848)
-
-
(3,453)
66,062
24,945
1,656
1,512
-
(981)
(679)
103,908
8,144
793
-
(1,035)
(925)
26,453
110,885
40,866
5,392
2,462
-
(548)
(294)
47,878
12,600
-
-
-
(12,600)
-
-
26,760
8,868
679
-
(1,267)
(645)
34,395
27,104
3,772
-
675
(172)
(2,650)
28,729
-
25,704
-
-
-
-
25,704
35,898
12,584
(4,592)
-
(33)
(439)
43,419
376,400
71,017
-
675
(16,636)
(9,085)
422,372
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Right of use
asset - Aircraft
Motor vehicles Right-of-use
Aircraft
assets
Buildings
Work in
progress
Total
-
-
-
-
-
-
10,398
1,354
(81)
(7)
(326)
11,338
20,950
2,142
52
(680)
(549)
21,915
78,646
11,264
47
(966)
(639)
88,352
34,727
4,865
(18)
(509)
(149)
38,916
38,847
54,724
4,538
22,533
8,962
5,250
735
-
(5,985)
-
-
-
20,554
3,601
1
(1,058)
(378)
22,720
5,867
2,312
-
(175)
(72)
7,932
-
357
-
-
-
357
-
-
-
-
-
-
176,392
26,630
-
(9,380)
(2,113)
191,529
11,675
20,799
25,347
43,419
230,843
184 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment (continued)
Bank
31 December 2023
Cost
At 1 January 2023
Additions
Reclassifications /transfer from WIP
Disposals
Modifications
At 31 December 2023
Accumulated Depreciation
At 1 January 2023
Charge for the year
Reclassifications/transfer from WIP
Disposals
At 31 December 2023
Net book amount
At 31 December 2023
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Aircraft
Motor vehicles Right-of-use
assets -
Buildings
Work in
progress
Total
38,847
2,709
440
-
-
41,996
58,555
3,679
3,812
(67)
-
65,979
24,261
969
147
(169)
-
108,297
6,556
2,258
(1,730)
-
25,208
115,381
46,334
9,763
1,522
(240)
-
57,379
25,704
-
-
-
-
25,704
32,073
7,304
251
(1,944)
-
37,684
20,829
1,685
-
(81)
755
23,188
42,408
9,600
(8,429)
(904)
-
42,675
397,308
42,265
-
(5,135)
755
435,193
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Aircraft
Motor vehicles Right-of-use
assets -
Buildings
Work in
progress
Total
-
-
-
-
-
10,479
1,205
47
(64)
11,667
20,428
1,791
(76)
(169)
21,974
86,525
9,496
45
(1,701)
94,365
37,768
6,045
(16)
(240)
43,557
357
1,100
-
-
1,457
21,583
4,576
-
(1,724)
24,435
5,595
1,877
-
-
7,472
-
-
-
-
-
182,734
26,090
-
(3,898)
204,926
41,996
54,312
3,234
21,016
13,822
24,247
13,249
15,716
42,675
230,267
Expenses relating to short term lease and low value lease assets can be seen in note 12 as lease expense.
There were no impairment losses on any class of property and equipment during the year (31 December 2022: Nil).
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2022: Nil).
All property and equipment are non-current. None of the Bank's assets were financed from borrowings, consequently no borrowing cost has been capitalized as part of asset cost.
For accounting policy and judgements on right of use, see note 2.14 and the bank has NIL ROU in respect of leases that are yet to commence.
185 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment (continued)
There are no restrictions on the title of the properties and none of them are pledged as securities for liabilities.
186 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
Property and equipment (continued)
26.
Bank
31 December 2022
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Right of use
asset - Aircraft
Motor vehicles Right-of-use
Aircraft
assets -
Buildings
Work in
progress
Total
Cost
At 1 January 2022
Additions
Reclassifications from WIP
Disposals
Modifications
At 31 December 2022
36,431
2,422
(6)
-
-
38,847
57,158
2,246
(849)
-
-
58,555
21,631
1,177
1,488
(35)
-
100,500
7,772
698
(673)
-
24,261
108,297
38,795
5,114
2,468
(43)
-
46,334
12,600
-
-
(12,600)
-
-
24,672
7,986
406
(991)
-
32,073
16,761
3,394
-
-
675
20,829
-
25,704
-
-
-
25,704
34,677
11,937
(4,205)
-
-
42,408
343,224
67,751
-
(14,342)
675
397,308
Land
Buildings
Leasehold
improvements
Furniture,
fittings and
equipment
Computer
equipment
Right of use
asset - Aircraft
Motor vehicles Right-of-use
Aircraft
assets -
Buildings
Work in
progress
Total
Accumulated Depreciation
At 1 January 2022
Charge for the year
Reclassifications/transfer from WIP
Disposals
At 31 December 2022
-
-
-
-
-
9,429
1,132
(81)
-
10,479
18,479
1,925
52
(28)
20,428
76,179
10,924
49
(627)
86,525
33,213
4,609
(20)
(34)
37,768
Net book amount
At 31 December 2022
38,847
48,076
3,833
21,772
8,566
5,250
735
-
(5,985)
-
-
19,185
3,231
-
(833)
21,583
3,989
1,606
-
-
5,595
-
357
-
-
357
-
-
-
-
-
165,724
24,519
-
(7,507)
182,736
10,490
15,234
25,347
42,408
214,572
187 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
26.
Property and equipment (continued)
(b) Right of use amounts and lease liability amounts recognised in the statement of financial position
In millions of Naira
Right-of-use assets
Buildings (see note 26)
31 December 2023
31 December 2022
31 December 2023
31 December 2022
35,549
35,549
20,797
20,797
15,715
15,715
15,234
15,234
Additions to the right-of-use asset for during the year ended 31 December 2023 was N1,207 million and N1,003 million (31 December 2022: N3,772
million and N3,394 million respectively ).
In millions of Naira
Lease liabilities
Current
Non-current
31 December 2023
31 December 2022
31 December 2023
31 December 2022
3,515
17,385
20,900
419
14,571
14,990
300
10,008
10,308
24
8,892
8,916
(c) Amounts recognised in the income statement
31 December 2023
31 December 2022
31 December 2023
31 December 2022
In millions of Naira
Depreciation charge of
right-of-use asset
Aircraft (see note 26)
Buildings (see note 26)
Interest expense (included in
finance cost)
Lease expense
-
2,930
2,930
2,578
3,495
735
2,312
3,047
2,082
593
-
1,877
1,877
1,034
2,496
735
1,606
2,341
2,069
583
The total cash outflow of leases as at 31 December 2023 was N1,601 million and N1,191 million respectively (31 December 2022: 3,826 million and
N3,255 million respectively).
188 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
27.
Intangible assets
Computer Software
Cost
At start of the year
Additions
Disposal
Impact of hyperinflation
Exchange difference
At the end of the year
Accumulated amortization
At start of the year
Charge for the year
Disposal
Impact of hyperinflation
Exchange difference
At the end of the year
Carrying amount at the end of the year
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
49,274
24,035
-
2,449
2,288
78,046
24,024
3,469
-
1,839
1,696
31,028
47,018
48,353
4,130
(2,884)
-
(324)
49,275
23,352
3,678
(2,884)
-
(122)
24,024
25,251
45,115
22,674
-
-
-
67,789
21,157
2,447
-
-
-
23,604
44,185
41,654
3,461
-
-
-
45,115
18,112
3,045
-
-
-
21,157
23,958
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.
189 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
28.
Customers' deposits
Demand
Savings
Term
Classified as:
Current
Non-current
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
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
(a) ECL allowance for off balance sheet exposure
In millions of Naira
Bonds and guarantee contracts
Undrawn portion of loan commitments
Letters of credit
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
6,875,307
5,047,056
3,245,377
4,880,784
2,717,049
1,377,820
5,290,857
4,955,730
1,908,237
3,844,612
2,673,518
916,676
15,167,740
8,975,653
12,154,824
7,434,806
14,975,471
192,269
8,975,653
690,509
12,154,824
665,208
7,434,806
690,509
15,167,740
9,666,162
12,820,032
8,125,315
354,178
22,052
353,851
30,116
20,900
-
198,756
4,089
7,412
113,680
19,614
111,953
29,764
14,990
1,908
107,619
30,979
115,431
991,354
545,938
10,143
2,864
25,284
10,067
48,358
5,765
2,507
7,735
6,614
22,621
354,150
21,330
353,797
30,116
10,308
-
197,002
4,089
-
970,792
9,573
1,796
15,209
6,577
33,155
1,039,712
568,559
1,003,947
1,029,704
10,008
556,023
12,536
993,939
10,008
1,039,712
568,559
1,003,947
1,597
3,105
5,365
10,067
1,054
863
4,697
6,614
109
2,858
3,610
6,577
113,680
19,244
108,689
29,764
8,916
1,908
106,268
30,975
107,501
526,945
5,503
1,926
6,683
5,290
19,402
546,347
539,225
7,122
546,347
59
863
4,369
5,291
190 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
29.
Other liabilities (continued)
(c) Lease liability
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
This relates to lease rental for properties used by the Group. The net carrying amount of leased assets, included within property and equipment is N35.55
billion and N15.72 billion as at 31 December 2023. (31 December 2022: N20.8 billion and N15.2 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
The table below shows the movement in lease liability during the year.
As at 1 January
Reclassification
Additions
Lease Termination
Principal repayment
Modification
Interest expense
Interest paid
Foreign exchange difference
At end of the year
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 SSB Intervention Fund (v)
Excess Crude Loan Facilty Deposit (vi)
Real Sector Support Facility (vii)
Non-Oil Export Stimulation Facility (viii)
National Food Security Programme (ix)
Accelerated Agricultural Development Scheme (x)
Classified as:
Current
Non-current
3,697
11,063
15,220
29,980
14,990
-
1,269
(80)
(1,543)
755
2,578
(224)
3,155
20,900
12,653
25,024
1,585
544
122,418
68,031
13,417
5,258
11,657
2,478
263,065
1,252
8,572
13,141
22,965
24,102
1,491
1,255
(4,011)
(3,493)
675
2,082
(333)
(1,631)
14,990
27,848
29,772
2,380
1,349
126,917
74,007
15,546
11,538
16,790
5,045
311,192
64,212
198,853
71,023
240,169
263,065
311,192
524
3,679
15,220
19,423
8,916
-
874
(80)
(979)
755
1,034
(212)
-
10,308
12,653
25,024
1,585
544
122,418
68,031
13,417
5,258
11,657
2,478
263,065
64,212
198,853
263,065
857
2,921
13,114
16,892
16,708
1,367
-
(8,640)
(2,927)
674
2,069
(335)
-
8,916
27,848
29,772
2,380
1,349
126,917
74,007
15,546
11,538
16,790
5,045
311,192
71,023
240,169
311,192
191 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
30.
On lending facilities (continued)
Movement
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
311,192
-
(48,080)
5,731
(5,778)
263,065
369,241
-
(59,470)
6,278
(4,857)
311,192
311,192
-
(48,080)
5,731
(5,778)
263,065
369,241
-
(59,470)
6,278
(4,857)
311,192
192 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
30.
On lending facilities (continued)
(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 (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.
(iii) The purpose of granting new loans and refinancing / restructuring existing loans to companies in the power and aviation industries is to support Federal
Government's focus on the sectors. The facility is secured by Irrevocable Standing Payment Order (ISPO). The maximum tenor for term loans under the
programme is 15 years while the tenor for working capital is one year, with option to renew the facility annually subject to a maximum tenor of five years.
The facility attracts an interest rate of 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.
(iv) 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.
(v) The Salary Bailout Scheme was approved by the Federal Government to assist State Governments in the settlement of outstanding salaries owed their
workers. Funds are disbursed to Banks nominated by beneficiary States at 2% for onlending to the beneficiary states at 9%. The loans have a tenor of 20
years. Repayments are deducted at source, by the Accountant General of the Federation, as a first line charge against each beneficiary state’s monthly
statutory allocation. This facility is not secured..
(vi) Excess Crude Account (ECA) facilities are loans of N10 billion to each State with a tenor of 10-years priced at 9% per annum interest rate to the
beneficiaries. Repayments are deducted at source, by the Accountant General of the Federation, as a first line charge against each beneficiary state’s
monthly statutory allocation. This facility is not secured. The fund is disbursed to the bank at 2% interest rate.
(vii) The Real Sector Support Facility (RSSF): The Central Bank of Nigeria, as part of the efforts to unlock the potential of the real sector to engender output
growth, productivity and job creation has established a N300 billion Real Sector Support Facility (RSSF). The facility is disbursed to large enterprises and
startups with financing needs of N500 million up to a maximum of N10.0 billion. The activities targeted by the Facility are manufacturing, agricultural value
chain and selected service subsectors. The funds are received from the CBN at 2%, and disbursed at 9% to the beneficiary.
(viii) Non-oil Export Stimulation Facility (NESF): This Facility was established by the Central Bank of Nigeria to diversify the economy away from the oil sector,
after the fall in crude prices. The Central Bank invested N500billion debenture, issued by Nigerian Export-Import Bank (NEXIM). The facility disbursed per
customer shall not exceed 70% of total cost of project, or subject to a maximum of N5billion. Funds disbursed to the Bank from CBN are at a cost of 2% which
are then disbursed to qualifying customers at the rate of 9% per annum.
(ix) The National Food Security Programme (NFSP) was launced in 2001. The main objective of this programme was to improve food security by promoting
sustainable agaricultural practices, providing credit facilities to farmers, and distributing agricultural inputs. The fund was disbursed to the Bank as 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 annum. Each state is allowed a facility of N1.5billion at
9% per annum and repayments are made via ISPO deductions.
193 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
31.
Borrowings
Long term borowings comprise:
Due to BUNGESA (iv)
Due to KEXIM
Due to AFREXIM (i)
Due to COMMERZ
Due to AREDIN (iv)
Due to ABSA bank (iii)
Due to ICBC (Standard Bank London)
Due to AXENDO
Due to Mashreq (iv)
Due to IFC (ii)
Due to Africa Trade (iv)
Due to CAIXA (iv)
Due to EMIRATESNB
Due to Standard Chartered Bank UK
Due to WILBENTRAD (iv)
Due to CITILON (iv)
Due to SUMITOMOBN (iv)
Due to ADMSTF (iv)
Due to ZENUK (iv)
Interbank takings (v)
Due to banks for clean letters of credit (vi)
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
50,065
-
283,954
-
17,784
249,786
-
46,122
98,508
243,705
48,921
186,372
-
-
23,338
28,898
49,216
18,369
-
13,000
52,847
51,938
3,859
30,943
49,064
-
105,677
63,459
-
124,209
116,909
-
151,200
16,493
67,869
33,790
36,207
46,578
12,979
23
-
52,253
50,065
-
283,954
-
17,784
249,786
-
46,122
98,508
243,705
48,921
186,372
-
-
23,338
28,898
49,216
18,369
29,676
13,000
62,468
1,410,885
963,450
1,450,182
51,938
3,859
30,943
49,064
-
105,677
63,459
-
124,209
116,909
-
151,200
16,493
67,869
33,790
36,207
46,578
12,979
13,856
-
74,550
999,580
The Group has not had any defaults of principal, interest,or other breaches with respect to the debt securities during the year (31 December 2022: nil). The
assets exchanged under repurchase agreements with counterparties are disclosed in note 17.
Classified as:
Current
Non-current
Movement in borrowings
At the beginning of the year
Addition during the year
Interest expense
Interest paid
Repayments (principal)
Foreign exchange difference
At the end of the year
1,001,635
409,250
846,540
116,910
1,040,932
409,250
1,410,885
963,450
1,450,182
882,670
116,910
999,580
963,450
1,148,702
93,435
(97,895)
(1,569,493)
872,686
750,469
1,243,614
40,609
(20,917)
(1,135,414)
85,089
999,580
1,197,352
97,712
(97,569)
(1,569,493)
822,600
769,395
1,279,743
38,254
(20,917)
(1,154,340)
87,445
1,410,885
963,450
1,450,182
999,580
194 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
31.
Borrowings (continued)
Details of Borrowings
i.
Due to AFREXIM (African Export-Import Bank)
The outstanding balance of N283.95 billion (US $300.00 million) due to AFREXIM represents the amount payable by the Bank from 5year amortized term loan
received in 2023, with a one-year moratorium. The $300m facility will mature in December 2027.
ii.
Due to IFC (International Finance Corporation)
The amount of N243.71 billion (US $250million) represents the amount payable by the bank on 3-year term loan granted by IFC in two tranches of $150m &
$100m. Interest is payable semi-annually and the facility will mature in June 2025.
iii
Due to ABSA (Amalgamated Banks of South Africa)
The amount of N95.18 billion (US $100 million) represents the amount payable by the Bank on a 6 months repurchase facility granted by ABSA with a
maturity date of February 2024. Interest is payable quarterly.
iv
Trade loans
These are trade loans due to various financial institutions with tenors ranging between 3 months and 1 year. The interest rates are referenced to the SOFR.
v
Interbank takings
The tenure is 1 working day.
vi
Due to banks for clean letters of credit
The amount represents a clean line from various international banks for letter of credit.
195 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
32.
Debt Securities issued
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
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 did not have any defaults of principal, interest or other breaches with respect to the debt securities during the year (31 December 2022: Nil).
Movement in debt securities issued
At start of the year
Revaluation loss for the year
Interest expense
Principal repayment
Interest paid
Foreign exchange
At end of the year
Derivative liabilities
33.
Instrument types (Fair value):
Forward and swap contracts
Futures contracts
Instrument types (Notional Amount)
Forward and swap contracts
Futures contracts
Classified as:
Current
34.
Share capital
-
-
-
-
-
-
-
504
69,982
70,486
518
96,131
96,649
45,799
-
1,860
(46,071)
(1,699)
111
-
6,026
299
6,325
229,332
6,262
235,594
-
-
-
-
-
-
-
-
45,514
45,514
14
96,131
96,145
45,799
-
1,860
(46,071)
(1,699)
111
-
5,741
299
6,040
191,737
11,589
203,326
70,486
6,325
45,514
6,040
Issued and fully paid
31,396,493,787 ordinary shares of 50k each (December 2022: 31,396,493,787)
15,698
15,698
15,698
15,698
Issued
Ordinary
15,698
15,698
15,698
15,698
196 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
Share premium, retained earnings and other reserves
35.
(a) There was no movement in the Share premium account during the current and prior year.
Share premium
255,047
255,047
255,047
255,047
The nature and purpose of the reserves in equity are as follows:
(b) Share premium: Premiums from the issue of shares are reported in share premium
(c) Retained earnings: Retained earnings represent undistributed profits, net of statutory appropriations attributable to the ordinary shareholders.
(d) Statutory reserve: This 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 N89.34 billion (2022: N35.19 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) Fair value reserve: Comprises fair value movements on equity and debt instruments that are carried at fair value through Other Comprehensive Income.
(g) Foreign currency translation reserve: Comprises exchange differences resulting from the translation to Naira of the results and financial position of
Group companies that have a functional currency other than Naira.
(h) 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 2023, the Bank has made a cumulative credit risk reserve of N93.91 billion, while the cumulative amount made by the Group is N93.98
billion (31 December 2022: Group N95.30 billion and Bank N93.91 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.
Movement in Non-controlling interest
At start of the year
Impact of adopting IAS 29 on 1 January 2023
Profit for the year
Foreign currency translation differences
At end of the year
31 December 2023
813
31 December 2022
1,144
472
340
3
1,628
-
(139)
(192)
813
197 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
36.
Pension contribution
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
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 respective jurisdictions. The
contribution by the Group and the Bank during the year were N6.01 billion and N2.79 billion respectively (31 December 2022: N3.89 billion and N2.98
billion).
198 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
37.
Personnel expenses
Compensation for the staff are as follows:
Salaries and wages
Other staff costs*
Pension contribution
92,637
25,766
6,012
124,415
74,102
8,423
3,887
86,412
71,627
13,670
2,786
88,083
58,576
6,916
2,983
68,475
*Other staff costs comprise benefits to staff other than salaries and pension. These benefits include productivity expenses, medical expenses and staff
professional subscriptions.
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number
Number
Number
Number
6
572
7,587
8,165
6
449
7,622
8,077
6
519
6,154
6,679
6
399
6,295
6,700
The table below shows the number of employees, whose earnings during the year, fell within the ranges shown below:
N300,001 - N2,000,000
N2,000,001 - N2,800,000
N2,800,001 - N4,000,000
N4,000,001 - N6,000,000
N6,000,001 - N8,000,000
N8,000,001 - N9,000,000
N9,000,001 - and above
(b) Directors' emoluments
Directors' renumeration excluding certain benefits are as follows:
Executive compensation
Fees and sitting allowances
Retirement Benefit costs
Fees and other emoluments disclosed above include amounts paid to:
The Chairman
The highest paid director
Number
183
91
1,795
172
1,462
42
4,420
Number
257
61
2,601
683
717
58
3,700
Number
-
-
1,719
31
1,406
-
3,523
Number
-
-
2,487
456
518
13
3,226
8,165
8,077
6,679
6,700
2,575
1,039
1,826
5,440
1,563
602
3,279
5,444
2,575
358
1,826
4,759
46
2,168
1,563
312
3,279
5,154
39
285
The number of directors who received fees and other emoluments (excluding pension contributions and reimbursable expenses) in the following ranges
was:
N5,500,001 and above
38.
Group subsidiaries and related party transactions
Parent:
Number
14
Number
15
Number
14
Number
15
The Group is controlled by Zenith Bank Plc (incorporated in Nigeria) which is the parent company and whose shares are widely held.
199 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
38.
Group subsidiaries and related party transactions (continued)
Subsidiaries:
The amount of N7,649 billion (31 December 2022: N6,266 billion) represents the total pension assets under custody held by the Bank’s subsidiary, Zenith
Pensions Custodian Limited under the custodial business and guaranteed by the bank as required by the National Pensions Commission of Nigeria . Included
in the amount above is N130 billion which represents the amount of the Group’s cash held by the subsidiary under custody. 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, are eliminated on consolidation and are not separately disclosed in the consolidated financial
statements. The Group's effective interests and investments in subsidiaries as at 31 December 2023 are shown below.
Entity
Zenith Bank (Ghana) Limited
Zenith Bank (UK) Limited
Zenith Bank (Sierra Leone) Limited
Zenith Bank (The Gambia ) Limited
Zenith Pension Custodians Limited
Zenith Nominees Limited
31 December 2023
Effective
Holding
%
99.42
100.00
99.99
99.96
99.00
99.00
Nominal share
capital held
7,066
21,482
2,059
1,038
1,980
1,000
Transactions and balances with subsidiaries
In millions of naira
Receivable from
Payable to
Income
received from
Expense paid
to
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra Leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
31 December 2022
Transactions and balances with subsidiaries
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
198,112
16
565
71
-
29,676
3,225
-
4,503
-
16,411
-
-
-
6,000
4,866
-
-
-
-
31 December 2022
Receivable from
Payable to
Income
earned from
Expense paid
to
158,211
24
442
796
-
36,212
9,968
-
-
708
4,643
6,897
-
-
6,000
-
-
-
-
697
Amounts payable to subsidiairies relate to short term borrowings mostly from Zenith bank UK. The balances with related parties relate to deposits with
Zenith Bank UK and salaries of seconded staff of Zenith Bank PLC receivable from the subsidiaries. Transactions during the year relate to dividends received
from subsidiaries and interest expense on borrowings with Zenith Bank UK.
Significant restrictions
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the supervisory
frameworks within which banking subsidiaries operate. The supervisory frameworks require banking subsidiaries to keep certain levels of regulatory capital
and liquid assets, limit their exposure to other parts of the Group and comply with other ratios. See notes 3.4 and 3.6 for disclosures on liquidity and capital
adequacy requirements respectively. The carrying amounts of banking subsidiaries' assets and liabilities are N3,751 billion and N3,266 billion respectively (31
December 2022: N1,986 billion and N1,767 billion respectively).
Non-controlling interest in subsidiaries
The Group does not have any subsidiary that has material non-controlling interest.
200 Zenith Bank Plc Annual Report - 31 December 2023
38.
Group subsidiaries and related party transactions (continued)
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
Key management compensation
Salaries and other short-term benefits
Retirement benefit cost
Allowances
At the end of the year
Loans and advances to key management personnel
At start of the year
Granted during the year
Repayment during the year
At end of the year
Interest earned
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
2,575
1,826
1,039
5,440
3,245
272
(667)
2,850
50
1,861
3,279
602
5,742
2,902
445
(102)
3,245
261
2,575
1,826
358
4,759
1,692
272
(667)
1,297
50
1,861
3,279
312
5,452
1,432
310
(50)
1,692
69
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 2023
Name of company
Directors
Quantum Fund Management
Relationship/Name
Zenith General Insurance Company Limited
Sirius Lumina Limited
Cyberspace Network
Quantum Zenith Trustees & Inv. Ltd
31 December 2022
Name of company
Directors
Quantum Fund Management
Zenith General Insurance Company Limited
Cyberspace Network
Zenith Trustees Ltd
Oviation Limited
Sirius Lumina Ltd
At end of the year
Common significant
shareholder/JimOvia
Common
directorship/JimOvia
Common significant
shareholder/JimOvia
Common significant
shareholder/JimOvia
Common significant
shareholder
Relationship/Name
Common significant
shareholder/JimOvia
Common
directorship/JimOvia
Common significant
shareholder/JimOvia
Common significant
shareholder/JimOvia
Common
directorship/Jim Ovia
Director/Prof. Sam
Enwemeka
Loans
Deposits
Interest
received
Interest paid
679
48
-
-
-
-
-
727
Loans
1,588
-
-
-
-
-
-
1,588
3,134
3
957
1
466
11
-
4,572
Deposits
3,298
10
1,026
763
7
3,497
1
8,602
50
-
-
-
-
-
-
50
Interest
received
69
-
-
-
-
-
-
69
31
-
-
-
-
-
-
31
Interest paid
-
-
-
-
-
-
-
-
Loans granted to related parties are secured over real estate and other assets of the respective borrowers. Loans granted to related parties are performing.
No life time impairment has been recognised in respect of loans granted to related parties (31 December 2022: Nil).
During the year, Zenith Bank Plc paid N1.65 billion as insurance premium to Zenith General Insurance Limited (31 December 2022: N795 million) and N886
million to prudential Zenith (31 December 2022: NIL). These expenses were reported as operating expenses.
The Bank paid N3.99 billion (31 December 2022:N3.33 billion) to Cyberspace Network for various Information technology services rendered during the year.
201 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 N1 trillion (31 December 2022: N967 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 N489 million (31 December 2022: N629 billion) in respect of authorized and
contracted capital projects.
Break down of capital commitments
Property and equipment:
Motor vehicles, Furniture and equipment
Property
Intangible assets:
Information technology
Group
31 December 2023
31 December 2022
55
434
-
489
191
104
334
629
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:
In millions of Naira
Performance bonds and guarantees
Usance (see note ii below)
Letters of credit (see note ii below)
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
740,714
433,926
555,368
384,382
276,481
363,355
770,347
433,926
424,903
1,730,008
1,024,218
1,629,176
349,742
276,481
279,791
906,014
Pension Funds (See Note iii below)
7,648,625
6,265,755
7,648,625
6,265,755
i.
ii.
iii.
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 2023, performance bonds and guarantees worth N12.19 billion (31 December
2022: N7.5 billion) are secured by cash while others are otherwise secured.
Usance and letters of credit are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made
for a fixed period, or have no specific maturity dates, but are cancellable by the Group (as lender) subject to notice requirements. These Letters of
credit are provided at market-related interest rates. Usance and letters of credit are secured by different types of collaterals similar to those
accepted for actual credit facilities.
The amount of N7,649 billion (31 December 2022: N6,266 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 N130.2 billion (31 December 2022: N114.4
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. Other than the Guarantee on the pension assets held by our subsidiary, Zenith Pension Custodian Limited, the Group does
not have any contingent liabilities in respect of related parties. The Group and Bank has undrawn loan commitments of N211.71 billion (31
December 2022: N89.75 billion).
202 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
39.
Contingent liabilities and commitments (continued)
40.
Dividend payable
Dividend proposed
Number of share 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 period
Interim Dividend paid during the period
Total dividend paid during the year
15,698
31,396
0.50
0.50
3.50
91,050
15,698
106,748
100,467
31,396
3.20
0.30
2.90
87,952
9,419
97,371
15,698
31,396
0.50
0.50
3.50
91,050
15,698
106,748
100,467
31,396
3.20
0.30
2.90
87,910
9,419
97,330
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,
paid an interim dividend of N0.50 per share and proposed a final divdend of N3.50 per share (31 December 2022: Interim dividend: N0.30, final: N2.90) from
the retained earnings account as at 31 December 2023. 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 2023 and 31 December 2022
respectively.
Dividends are paid to shareholders' net of withholding tax at the rate of 10% in compliance with extant tax laws.
Cash and cash equivalents
41.
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.
Cash and balances with central banks (less mandatory reserve deposits) (see note 15)
Treasury bills (3 months tenor) (see note 16)
Due from other banks(see note 18)
269,967
209,246
1,825,298
452,136
232,218
1,256,404
126,449
209,246
1,682,707
407,487
232,218
1,017,481
2,304,511
1,940,758
2,018,402
1,657,186
42.
Compliance with Banking Regulations
During the year, the bank paid the following penalties to Central Bank of Nigeria.
S/N
1
2
3
4
Description
Late rendition of CBN returns
Employment of prospective employees before CBN approval
Outstanding Auditors'recommendation.
Spot checks on compliance on politically exposed persons
Total
Amount paid in Naira
5,000,000
10,000,000
2,000,000
4,000,000
21,000,000
203 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
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 non-
distributable regulatory credit risk reserve.
(ii) Where Prudential Provisions is less than IFRS provisions, the IFRS determined provision is charged to the statement of comprehensive income. The
cumulative balance in the regulatory credit 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 at 31 December
2023, the Bank holds a total of N93,911 million in its credit risk reserves.
Provision for loan losses per prudential guidelines
In millions of Naira
Loans and advances:
-Lost
-Doubtful
Sub-standard
-Watchlist
-Performing
-Other known losses
(a)
Impairment assessment under IFRS
Loans and advances
12 months ECL credit
Life time ECL not impaired
Life time ECL credit impaired
(b)
Due from Banks - 12 months ECL (c)
Treasury bills - 12 months ECL (d)
Asset pledged as collateral- 12 months ECL (e)
Investment securities- 12 months ECL (f)
Other financial assets- ECL allowance (g)
Other non-financial assets (h)
Off Balance Sheet Exposures- 12 months ECL (i)
(m)=(b)+(c)+(d)+(e)+(f)+(g)+(h)+(i)
Difference (n)=(a)-(m)
As as 31 December 2023, the Bank holds a total of N93,911 million in its credit risk reserves.
Bank
31 December 2023 31 December 2022
61,483
90,107
5,002
276,808
102,402
6,805
542,607
34,739
170,708
278,736
484,183
935
71
29
5,451
31,061
85
6,577
528,392
14,215
74,968
1,901
1,069
96,484
62,850
-
237,272
25,268
34,341
43,518
103,127
75
39
18
2,583
28,868
3,361
5,290
143,361
93,911
204 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
44.
Statement of cash flow workings
(i) Investment securities (see note 17 & 21)
31 December 2023
At 1 January 2023
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
Impact of hyperinflation
Foreign exchange difference
Balance as at 31 December 2023
Recognised in cash flow statement
31 December 2022
At 1 January 2022
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
31
31 December 2023
Investment
securities (including
pledged
instruments) at
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
907,188
(7,283)
820,166
(122,846)
-
-
211,964
(70,091)
-
-
940,273
-
-
-
-
129,929
-
-
(2,421)
-
637,367
(2,877)
539,842
(82,885)
-
-
104,984
(62,434)
-
-
(1,739,098)
(1,769,213)
(1,133,997)
-
(701,432)
-
104,443
-
-
-
-
122,252
-
-
-
-
(235,567)
(8,872)
Investment securities
(including pledged
instruments) at
amortised cost
Investment
securities (including
pledged
instruments) at
amortized cost and
FVOCI
Investment
securities (including
pledged
instruments) at
amortised cost
Investment
securities (including
pledged
instruments) at
amortized cost and
FVOCI
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
In millions of Naira
(iia) Treasury bills (Amortised cost) (see note 16 & 17)
31 December 2023
Treasury bills (including pledged instrumets) at armotised cost as 1
January
Change in ECL allowance
Interest income
Additions
Redemptions
Interest received
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
(989,891)
(748,022)
(950,021)
(648,637)
(337)
(178,967)
(4,547,984)
3,543,236
305,302
(400)
(43,609)
(3,060,163)
2,833,003
29,300
32
(145,646)
(2,824,475)
2,031,575
226,200
(356)
(32,972)
(2,968,565)
2,679,567
20,942
Balance as at 31 December 2023
(1,868,641)
(989,891)
(1,662,335)
(950,021)
-
-
-
-
205 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
44.
Statement of cash flow workings (continued)
(iib) Treasury bills (FVTPL) (see note 16)
31 December 2023
Treasury bills fair value through profit or loss (including pledged
instruments) as at 1 January
Unrealised fair value gain
Balance as at end of year
Recognised in Cashflow
(iii) Loans and advances (see note 20)
31 December 2023
Loans and advances at 1 January
Changes in ECL allowance
Interest Income
Interest received
Exchange difference
Impact of hyperinflation
Balance as at end of year
Recognised in Cash flow
(iv) Customer deposits
31 December 2023
As at 1 January
Interest expense
Interest paid
Exchange difference
Balance as at end of year
Recognised in Cash flow
(v) Other liabilities (see note 29)
31 December 2023
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
Impact of hyperinflation
Lease terminations
Balance as at end of year
Net cash movement in operating activties
(vi) Gain on disposal of property and equipment
31 December 2023
Cost (see note 25)
Accumulated depreciation (see note 25)
Net book value
Sales proceed
Profit on Disposal (see note 10)
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
1,159,965
954,462
1,159,965
952,131
187,052
(749,606)
597,411
129,402
(1,159,965)
(76,101)
187,052
(749,606)
597,411
129,281
(1,159,965)
(78,553)
4,013,705
(400,650)
671,919
(722,437)
-
(8,029)
(6,556,471)
3,355,728
(38,343)
370,446
(342,562)
125,432
-
(4,013,705)
3,735,676
(394,440)
635,806
(671,888)
-
-
(5,928,796)
3,099,452
(38,429)
346,320
(298,466)
124,357
-
(3,735,676)
(3,001,963)
(543,004)
(2,623,642)
(502,442)
(8,975,653)
(306,748)
310,064
174,281
15,167,740
(6,472,054)
(122,710)
116,053
(134,652)
8,975,653
(7,434,806)
(250,751)
243,790
-
12,154,825
(5,169,199)
(104,559)
101,000
(108,216)
7,434,806
6,369,684
2,362,290
4,713,058
2,153,832
(568,559)
(1,633)
(755)
(1,269)
(2,577)
224
1,543
(3,156)
(352)
4,228
80
1,039,712
467,486
(5,244)
4,051
(1,193)
1,382
189
(487,432)
(998)
(675)
(1,491)
(2,082)
333
4,011
(39,361)
(1,117)
-
8,640
568,559
48,387
(644)
-
(644)
3,207
2,563
(546,347)
(1,286)
(755)
(875)
(1,034)
212
979
-
(352)
-
80
1,003,947
454,569
(5,055)
3,900
(1,155)
1,341
186
(427,876)
326
(675)
(1,363)
(2,069)
333
2,927
(40,993)
(1,117)
-
8,640
546,347
84,480
(220)
-
(220)
2,671
2,451
206 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
44.
Statement of cash flow workings (continued)
(vii) Due from Banks (greater than 90 days)
31 December 2023
As at 1 January
Changes in ECL allowance
Interest income
Interest received
Foreign exchange difference
Balance as at end of year
Recognised in cash flow statement
(viii) Other assets
31 December 2023
As at 1 January
Changes in ECL allowance
Withholding tax receivable utilised
Reclassification
Impact of hyperinflation
Balance as at end of year
Net cash movement in operating activities
(ix) Net movement in Derivatives
Derivative assets
31 December 2023
As at 1 January
Balance as at end of year
Derivative liabilities
31 December 2023
As at 1 January
Balance as at end of year
Recognised in cash flow
Net movement in derivatives
(x) Restricted balances (Cash Reserve)
31 December 2023
Opening Balance
Mandatory Reserve deposit with Central Bank
Special Cash Reserve
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
46,407
(860)
81,822
(81,822)
-
(9,015)
36,532
213,523
1,103
-
646
837
(474,977)
(258,868)
(49,874)
534,739
484,865
(6,325)
70,486
64,161
420,704
29,986
649
12,270
(12,159)
-
(46,407)
(15,661)
168,210
(22,398)
8,125
-
-
(213,523)
(59,586)
(56,187)
49,874
(6,313)
(14,674)
6,325
(8,349)
2,036
115,315
(860)
39,796
(39,796)
-
(9,015)
105,440
193,792
1,083
-
-
-
(417,419)
(222,544)
(48,851)
507,942
459,091
(6,040)
45,514
39,474
419,617
94,157
(17)
3,967
(3,857)
-
(115,315)
(21,066)
152,326
(22,394)
8,125
-
-
(193,792)
(55,735)
(57,476)
48,851
(8,625)
(15,170)
6,040
(9,130)
505
1,749,608
3,902,717
80,689
1,330,897
(1,668,919)
80,689
1,694,906
3,758,248
80,689
1,275,201
(1,614,217)
80,689
Recognised in cashflow
(2,233,798)
(418,711)
(2,144,031)
(419,705)
(xi) Interest paid
31 December 2023
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)
(310,064)
(5,778)
(224)
(97,895)
-
(413,961)
(116,053)
(4,857)
(333)
(20,917)
(1,699)
(143,859)
(243,790)
(5,778)
(212)
(97,569)
-
(347,349)
(101,000)
(4,857)
(333)
(20,917)
(1,698)
(128,805)
207 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
44.
Statement of cash flow workings (continued)
(xii) Unrealised fair value change
31 December 2023
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 2023
Due from other banks (see note 41(vii))
Loans and advances (see note 41(iii))
(xiiib) Interest received from treasury bills and investment
securities
31 December 2023
Treasury bills (see note 41(ii))
Investment securities (see note 41(i))
(xiva) Acquisition of Right of use asset
31 December 2023
Addition to right of use (see note 26)
Lease liability addition (see note 44(v))
(xivb) Additions to property,plant and equipment other than right
of use
31 December 2023
Addition to property, plant and equipment (see note 26)
Addition to right of use asset (see note 26)
(xv)Addition to investment securities
31 December 2023
Investment securities at amortized cost
Investment securities at FVOCI
(xvi)Lease Modification
31 December 2023
Right of use
Lease Liability
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
-
(187,052)
(420,704)
458,478
(149,278)
1,802
(129,402)
(2,036)
39,590
(90,046)
-
(187,052)
(419,616)
458,478
(148,190)
1,802
(129,281)
(505)
39,590
(88,394)
81,822
722,437
804,259
12,160
342,562
354,722
39,796
671,888
711,684
3,858
298,466
302,324
305,302
69,461
374,763
(2,128)
1,269
(859)
29,300
59,116
88,416
(3,772)
1,491
(2,281)
226,200
62,434
288,634
(1,685)
875
(810)
20,942
50,758
71,700
(3,394)
1,363
(2,031)
(52,409)
2,128
(50,281)
(71,017)
3,772
(67,245)
(42,269)
1,685
(40,584)
(67,751)
3,394
(64,357)
(820,166)
-
(820,166)
(599,128)
(200)
(599,328)
(539,842)
-
(539,842)
(206,085)
(200)
(206,285)
755
(755)
-
-
-
675
(675)
-
-
-
755
(755)
-
-
-
675
(675)
-
-
-
208 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
In millions of Naira
Group
Bank
31 December
2023
31 December
2022
31 December
2023
31 December
2022
-
-
-
-
-
-
-
-
(xvii)Unclaimed dividend received
31 December 2023
As at 1 January
Balance as at 31 Dec 2022
(xviii)Lease derecognition
31 December 2023
Right of use- cost
Right of use-Accumulated depreciation
lease liability
(xix)Dividend received
31 December 2023
Dividend Income
Dividend receivable
(xx) Foreign exchange revaluation loss
31 December 2023
Cash and bank balances
Due to other banks
Loans and advances
Investment securities
Other assets
Customer deposits
Other liabilities less finance lease
Leases
Borrowings
Debt securities issued
Hedging ineffectiveness
(29,764)
30,116
352
66
-
(80)
(14)
5,661
-
5,661
(42,723)
(486,389)
-
-
-
-
-
3,156
872,686
-
(458,478)
(111,748)
(28,647)
29,764
1,117
12,773
(6,160)
(8,640)
(2,027)
-
-
-
(812)
(87,142)
(125,432)
(1,716)
(8,125)
113,055
40,993
(1,632)
45,499
111
-
(25,201)
(29,764)
30,116
352
81
-
(79)
2
19,777
-
19,777
(42,531)
(486,246)
-
-
-
-
-
-
822,600
-
(458,478)
(164,655)
(28,647)
29,764
1,117
12,600
(5,985)
(8,640)
(2,025)
-
-
-
(812)
(87,483)
(124,358)
(1,716)
(8,125)
108,215
40,993
-
47,855
111
-
(25,320)
209 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2023
45.
Comparatives
Certain disclosures and some prior year figures have been re-presented to conform with current year presentation.
210 Zenith Bank Plc Annual Report - 31 December 2023
OTHER NATIONAL DISCLOSURES
ZENITH BANK PLC
Value Added Statement
In millions of Naira
Group
Value Added
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
Salaries and benefits
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)
31 December
2023
31 December
2023
%
31 December 2022 31 December
2022
%
2,131,750
(302,912)
(173,788)
1,655,050
(409,616)
1,245,434
(262,775)
(28,956)
953,703
124,415
119,053
33,326
676,909
956,351
(132,589)
(76,169)
747,593
(123,252)
624,341
(206,841)
(16,131)
401,369
86,412
60,739
30,308
233,910
100
16
15
3
71
100
22
15
8
58
Total Value Added
953,703
100
401,369
100
Value added represents the additional wealth which the group has been able to create by its own and employees efforts.
212 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Value Added Statement
In millions of Naira
Bank
Gross Income
Interest and fee expense
-Local
-Foreign
Impairment loss on financial and non-financial instruments
Bought-in material and services
-Local
-Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Bank
Replacement of property and equipment/intagible assets
Profit for the year (including staturory reserves and small scale industry)
Total Value Added
31 December
2023
31 December
2023
%
31 December 2022 31 December
2022
%
1,869,753
(321,877)
(103,443)
1,444,433
(398,412)
1,046,021
(261,686)
-
784,335
88,083
72,114
28,537
595,601
784,335
833,087
(136,285)
(40,112)
656,690
(61,896)
594,794
(204,704)
-
390,088
68,475
59,457
27,564
234,593
390,089
100
11
9
4
76
100
100
18
7
8
60
100
Value added represents the additional wealth which the Bank has been able to create by its own and employees efforts.
213 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Five-Year Financial Summary
In millions of Naira
31 December 2023 31 December 2022 31 December 2021 31 December 2020 31 December 2019
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
Current tax receivable
Deferred tax
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
Attributable to equity holders of the parent
Non-controlling interest
Total shareholders' equity
Financed by:
4,253,374
2,736,273
308,638
1,834,314
534,739
6,556,470
3,290,895
18,975
17,251
474,976
295,532
47,018
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
1,591,768
1,577,875
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
20,368,455
12,285,629
9,447,843
8,481,272
6,346,879
15,167,740
70,486
33,877
59,310
1,039,712
263,065
1,410,885
-
8,975,653
6,325
64,856
16,654
568,559
311,192
963,450
-
18,045,075
10,906,689
2,323,380
1,378,940
15,698
255,047
1,179,390
871,617
2,321,752
1,628
2,323,380
15,698
255,047
625,005
482,377
1,378,127
813
1,378,940
6,472,054
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
1,278,518
1,144
1,279,662
5,339,911
11,076
11,690
-
703,292
384,573
870,080
43,177
7,363,799
1,117,473
15,698
255,047
521,293
324,461
1,116,499
974
1,117,473
4,262,289
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
214 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Five Year Financial Summary
In millions of Naira
31 December 2023 31 December 2022 31 December 2021 31 December 2020 31 December 2019
Statements of Profit or Loss and Other Comprehensive Income
Gross earnings
Share of profit/(loss) of associate
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
Impact of applying IAS 29 on 1 January 2023
Fair value movement on equity instruments
Fair value movements on debt securities at FVOCI
Income tax effect relating to fair value movement on debt
securities at FVOCI
2,131,750
-
(408,492)
(517,680)
(409,616)
795,962
(119,053)
676,909
162,942
-
122,252
10,280
(2,603)
945,554
-
(173,539)
(364,113)
(123,252)
284,650
(60,739)
223,911
(28,768)
-
8,109
(6,602)
-
765,558
-
(106,794)
(318,458)
(59,932)
280,374
(35,816)
244,558
8,485
-
5,599
(2,227)
-
696,450
-
(121,131)
(279,924)
(39,534)
255,861
(25,296)
230,565
-
-
16,295
1,981
(355)
662,251
-
(148,532)
(246,393)
(24,032)
243,294
(34,451)
208,843
(8,498)
-
13,870
518
(66)
Total Comprehensive income
969,780
196,650
256,415
248,486
214,667
Earnings per share
Basic and diluted (kobo)
2,155
714
778
734
665
215 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Five Year Financial Summary
In millions of Naira
31 December 2023 31 December 2022 31 December 2021 31 December 2020 31 December 2019
Bank
Statement of Financial Position
Assets
Cash and balances with central banks
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
Reserves
Attributable to equity holders of the parent
Total shareholder's equity
3,965,386
2,529,966
255,061
1,691,722
507,942
5,928,796
1,205,724
34,625
-
-
417,419
230,267
44,185
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
1,503,245
1,393,421
298,530
532,377
41,729
2,639,797
333,126
34,625
-
4,733
159,625
169,080
14,699
879,449
822,449
431,728
482,070
92,722
2,239,472
189,358
34,625
-
11,223
71,412
165,456
15,109
16,811,093
10,570,678
7,872,292
7,124,987
5,435,073
12,154,824
45,514
28,080
59,233
1,003,947
263,065
1,450,182
-
15,004,845
1,806,248
15,698
255,047
893,938
641,565
1,806,248
1,806,248
7,434,806
6,040
61,655
15,911
546,347
311,192
999,580
-
9,375,531
1,195,147
15,698
255,047
494,429
429,973
1,195,147
1,195,147
5,169,199
15,170
14,241
11,596
427,876
369,241
769,395
45,799
6,822,517
1,049,775
15,698
255,047
466,250
312,781
1,049,776
1,049,776
4,298,258
11,076
9,117
-
599,464
384,573
874,090
43,177
3,486,887
14,762
6,627
-
386,061
392,871
329,778
39,092
6,219,755
4,656,078
905,232
778,995
15,698
255,047
382,292
252,195
905,232
905,232
15,698
255,047
302,028
206,222
778,995
778,995
216 Zenith Bank Plc Annual Report - 31 December 2023
ZENITH BANK PLC
Five Year Financial Summary
In millions of Naira
31 December 2023 31 December 2022 31 December 2021 31 December 2020 31 December 2019
Statements of Profit or Loss and Other Comprehensive Income
Gross earnings
Interest expense
Other operating expenses
Impairments
Profit before tax
Taxation
Profit after taxation
Other comprehensive income
Fair value movements on equity instruments
Total Comprehensive income
Earning per share
Basic and diluted (kobo)
1,869,753
(355,228)
(448,398)
(398,412)
667,715
(72,114)
595,601
122,252
122,252
717,853
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
242,702
238,732
595,921
(102,111)
(246,566)
(37,237)
210,007
(12,155)
197,852
16,295
16,295
214,147
564,687
(126,237)
(215,037)
(23,393)
200,020
(22,017)
178,003
13,870
13,870
191,873
1,897
747
743
630
567
217 Zenith Bank Plc Annual Report - 31 December 2023