Zenith Bank Plc
Annual Report 2024

Plain-text annual report

ZENITH BANK PLC Annual Report - 31 December 2024 ZENITH BANK PLC DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS DIRECTORS Jim Ovia, CFR Chairman Mr. Chuks Emma Okoh Non-Executive Director Engr. Mustafa Bello Non-Executive Director Dr. Juliet Ehimuan Non-Executive Director Mr. Gabriel Ukpeh**** 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 Ms. Pamela Yough** Non-Executive Director Dr. Ebenezer Onyeagwu***** Former Group Managing Director/CEO Dr. Adaora Umeoji, OON* Group Managing Director/CEO Mr. Henry Oroh Executive Director Mrs. Adobi Nwapa Executive Director Mr. Akindele Ogunranti Executive Director Mr. Lawani Adamu*** Executive Director Mr. Louis Odom*** Executive Director *Dr. Adaora Umeoji, OON was appointed as the Group Managing Director/CEO effective 1 June 2024 following the retirement of Dr. Ebenezer Onyeagwu from the Board effective 31 May 2024. **Ms. Pamela Mimi Yough was appointed to the Board effective 30 April, 2024. ***Mr. Lawani Adamu & Mr. Louis Odom were appointed to the Board effective 24 April, 2024. **** Mr. Gabriel Ukpeh retired from the Board effective 8 March, 2024. *****Dr. Ebenezer Onyeagwu retired from the Board effective 31 May 2024. COMPANY SECRETARY Michael Osilama Otu Esq. REGISTERED OFFICE Zenith Bank Plc Zenith Heights Plot 84/87, Ajose Adeogun Street Victoria Island, Lagos. AUDITOR 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 2024 ZENITH BANK PLC Index Note Page Note Page Directors, Officers and Professional Advisers 1 6 Interest and similar income 146 Directors' Report 3 7 Interest and similar expense 146 Statement of Corporate Responsibility in Relation to the Financial Statements 9 8 Impairment charge on financial and non-financial instruments 146 Corporate Governance Report 10 9 Net income on fee and commission 147 Statement of Directors' Responsibilities in Relation to the Financial Statements 25 10 Trading gains 147 Report of the Audit Committee 26 11 Other operating income 148 Management's Annual Assessment of, and Report on, Zenith Bank Plc's Internal Control over Financial Reporting 27 11 Other operating income 148 Chief Finance Officer's Certification of management’s assessment on internal control over financial reporting 27 11 Other operating income 148 Chief Executive Officer's Certification of management’s assessment on internal control over financial reporting 27 11 Other operating income 148 Independent Practitioner’s Report 27 11 Other operating income 148 Independent Auditor's Report 27 12 Operating expenses 149 Consolidated and Separate Statements of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2024 34 13 Taxation 150 Consolidated and Separate Statements of Financial Position as at 31 December 2024 35 14 Earnings per share (EPS) 151 Consolidated and Separate Statements of Changes in Equity for the Year Ended 31 December 2024 36 15 Cash and balances with central banks 152 Consolidated and Separate Statements of Cash Flows for the Year Ended 31 December 2024 38 16 Treasury bills 152 Notes to the Consolidated and Separate Financial Statements 40 17 Assets pledged as collateral 152 18 Due From Other Banks 153 1 General information 40 19 Derivative assets 153 2.0a Changes in accounting policies 40 20 Loans and advances 154 2.0b Material accounting policies 42 21 Investment Securities 154 2.1 Basis of preparation 42 22a Investment in subsidiaries 155 2.2 Basis of Consolidation 42 22b Condensed results of consolidated entities 156 2.3 Translation of foreign currencies 43 23 Investments in associates 160 2.4 Cash and cash equivalents 44 24 Deferred tax balances 161 2.5 Financial instruments 44 25 Other assets 162 2.6 Derivative instruments 48 26 Property and equipment 164 2.7 Impairment 49 27 Intangible assets 171 2.8 Reclassification of financial instruments 51 28 Customers' deposits 172 2.9 Restructuring of financial instruments 51 29 Other liabilities 172 2.10 Collateral 51 30 On lending facilities 173 2.11 Property and equipment 52 31 Borrowings 176 2.12 Intangible assets 52 Debt Securities issued 178 2.13 Impairment of non-financial assets 53 32 Derivative liabilities 178 2.14 Leases 53 33 Share capital 178 2.15 Provisions 54 34 Share premium, retained earnings and other reserves 179 2.16 Employee benefits 54 35 Pension contribution 180 2.17 Share capital and reserves 55 36 Personnel expenses 181 2.18 Recognition of interest income and expense 56 37 Group subsidiaries and related party transactions 181 2.19 Fees, commission and other income 57 38 Contingent liabilities and commitments 184 2.20 Net trading gains 57 39 Dividend paid 185 2.21 Operating expenses 57 40 Cash and cash equivalents 185 2.22 Current and deferred income tax 57 41 Compliance with Banking Regulations 185 2.23 Earnings per share 58 42 Prudential Adjustments 186 2.24 Segment reporting 59 43 Statement of cash flow workings 187 2.25 Fiduciary activities 59 44 Comparatives 191 2.26 Deposit for investment in AGSMEIS 59 45 Events after the reporting period 191 2.27 Hyperinflationary accounting 59 45 Events after the reporting period 191 3 Risk management 60 Other National Disclosures 192 4 Critical accounting estimate and judgements 139 Value Added Statement 193 5 Segment Analysis 141 Five Year Financial Summary 195 2 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 The directors present their report on the affairs of ZENITH BANK PLC ("the Bank"), together with the financial statements and the independent auditor's report for the year ended 31 December 2024. 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 Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, Zenith Bank (The Gambia) Limited, Zenith Pensions Custodian Limited and Zenith Nominees Limited. During the year, the Bank opened 7 new branches. As at 31 December 2024 the Group had 454 branches, 167 cash centers; 2,134 ATM terminals; 475,524 POS terminals and 27,941,582 cards issued to its customers. (31 December 2023: 447 branches, 166 cash centers, 2,102 ATM terminals, 414,192 POS terminals and 25,653,330 cards issued). 3. Operating results Gross earnings of the Group increased by 86% and profit before tax increased by 67% . Highlights of the Group’s operating results for the year under review are as follows: 31 December 2024 N' Million 31 December 2023 N' Million Gross earnings 3,970,959 2,131,750 Profit before tax 1,326,851 795,962 Income tax expense (293,956) (119,053) Profit after tax 1,032,895 676,909 Non- controlling interest (184) (340) Profit attributable to the equity holders of the parent 1,032,711 676,569 Appropriations Transfer to statutory reserve 140,424 97,693 Transfer to credit risk reserve 10,200 (1,322) Transfer to retained earnings 882,087 580,198 1,032,711 676,569 Basic and diluted earnings per share (Naira) 32.87 21.55 4. Dividends The Board of Directors, pursuant to the powers vested in it by the provisions of section 426 of the Companies and Allied Matters Act (CAMA 2020) of Nigeria, proposed a final dividend of N4.00 per share which in addition to the N1.00 per share as interim dividend amounts to N5.00 per share (2023: Interim dividend of N0.50 per share, final dividend of N3.50 and a total dividend per share of N4.00) from the retained earnings accounts as at 31 December 2024. 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. 3 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 5. Capital raise exercise In compliance with the Central Bank of Nigeria’s (CBN) directive on minimum capital requirements, Zenith Bank Plc conducted a capital raise exercise through a combination of rights and public offers, generating N343 billion. The total number of additional shares raised by the bank through the capital raise exercise is 9,673,336,214. This brings the total number of issued shares of the bank from a previous 31,396,493,787 units to a current 41,069,830,001 units. As of December 31, 2024, the CBN has verified these shares, and the Securities and Exchange Commission (SEC) has approved their inclusion in the financial statements, pending approval for final allotment. This successful capital raise enhances the bank’s financial stability and supports our strategic growth objectives. 6. Directors' shareholding The direct and indirect interests of directors in the issued share capital of Zenith Bank Plc as recorded in the register of directors shareholding and/or as notified by the directors for the purposes of sections 301 and 302 of the Companies and Allied Matters Act (CAMA 2020) and the listing requirements of the Nigerian Stock Exchange is as follows: Interests in shares Number of Shareholding 31 December 2024 31 December 2023 Director Designation Direct Indirect Direct Indirect Jim Ovia, CFR. Chairman / Non-Executive Director 3,552,949,395 1,529,851,344 3,552,949,395 1,529,851,344 Mr. Chuks Emma Okoh Non-Executive Director 371,124 - 203,412 - Mr.Gabriel Ukpeh**** Non Executive Director 32,660 - 32,660 - Dr Juliet Ehimuan Non-Executive Director 128,906 - 128,906 - Engr. Mustafa Bello Non Executive Director/Independent - - - - Dr. Al-Mujtaba Abubakar,MFR Non Executive Director / Independent - - - - Dr. Omobola Ibidapo-Obe Ogunfowora Non Executive Director / Independent - - - - Dr. Peter Olatunde Bamkole Non Executive Director / Independent - - - - Ms. Pamela Mimi Yough** Non-Executive Director 22,878 - - - Dr. Ebenezer Onyeagwu***** Former Group Managing Director 90,176,078 - 90,176,078 - Dr. Adaora Umeoji,OON.* Group Managing Director 90,192,856 1,710,123 90,000,000 1,710,123 Mr. Henry Oroh Executive Director 14,813,703 - 14,813,703 - Mrs. Adobi Nwapa Executive Director 15,008,206 - 15,008,206 - Mr. Akindele Ogunranti Executive Director 6,885,601 - 6,885,601 - Mr. Lawani Adamu*** Executive Director 3,133,245 - 3,133,245 - Mr. Louis Odom*** Executive Director 2,424,557 - 2,424,557 - - - - - - - - - - *Dr. Adaora Umeoji,OON was appointed as the Group Managing Director/CEO on 1 June 2024 following the retirement of Dr. Ebenezer Onyeagwu from the Board. ** Ms. Pamela Mimi Yough was appointed to the Board on 30 April, 2024. ***Mr. Adamu Lawani and Mr. Louis Odom were appointed to the Board on 24 April, 2024. ****Mr. Gabriel Ukpeh retired from the Board effective 8 March, 2024. *****Dr. Ebenezer Onyeagwu retired from the Board effective 31 May 2024. 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). 4 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 7. Directors' Remuneration The Bank ensures that remuneration paid to its Directors complies with the provisions of the Code of Corporate Governance issued by its regulators. In compliance with Section 34(5) of the Code of Corporate Governance for Public Companies as issued by Securities and Exchange Commission, the Bank makes disclosure of the remuneration paid to its directors as follows: Type of package Fixed Description Timing 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. Paid monthly during the financial year. Other allowances - 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 at periodic intervals during the financial year. Productivity bonus -Paid to Executive directors only and tied to performance of the line report. It is also a function of the extent to which the Bank's objectives have been met for the financial year. Paid annually in arears. Director fees - Paid annually on the day of the Annual General Meeting (‘AGM’) to Non-Executive Directors only. Paid annually on the day of the AGM. Sitting allowances - Allowances paid to Non-Executive Directors only, for attending Board and Board Committee Meetings. Paid after each Meeting. 8. Changes on the Board Dr. Adaora Umeoji, OON was appointed as the Group Managing Director effective 1 June 2024. Ebenezer Onyeagwu retired from the Board effective 31 May 2024. Mr. Gabriel Ukpeh retired from the Board effective 8 March 2024. Ms. Pamela Yough was appointed to the Board effective 30 April 2024. Mr. Adamu Lawani and Mr. Louis Odom were appointed to the Board effective 24 April 2024. 9. Directors' interests in contracts For the purpose of section 303(1) and (3) of Companies and Allied Matters Act of Nigeria, (CAMA 2020), information relating to related parties transactions are contained in Note 37 to the financial statements. 10. 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. 11. 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. 12. Shareholding analysis The shareholding pattern of the Bank as at 31 December 2024 is as stated below: Share range No. of Shareholders Percentage of Shareholders Number of holdings Percentage Holdings (%) 1-10,000 549,184 % 84.0955 1,596,169,135 % 5.08 10,001 - 50,000 79,586 % 12.1869 1,644,208,132 % 5.24 50,001 - 1,000,000 22,675 % 3.4722 3,850,300,830 % 12.26 1,000,001 - 5,000,000 1,233 % 0.1888 2,509,553,999 % 7.99 5,000,001 - 10,000,000 152 % 0.0233 1,064,997,545 % 3.39 10,000,001 - 50,000,000 157 % 0.0240 3,224,352,248 % 10.27 50,000,001 - 1,000,000,000 58 % 0.0089 11,535,196,576 % 36.74 Above 1,000,000,000 3 % 0.0005 5,971,715,322 % 19.02 653,048 % 100 31,396,493,787 % 100 5 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 The bank issued additional 9,673,336,214 shares through a combination of right issue and public offer. This has moved the total number of shares to 41,069,830,001. Approval for the allotment of the newly issued share was outstanding as at 31st December 2024. The allotment of the newly issued shares were approved by the securities & exchange commission on 23 January, 2025. The shareholding pattern of the Bank as at 31 December 2023 is as stated below Share range No. of Shareholders Percentage of Shareholders Number of holdings Percentage Holdings (%) 1-10,000 542,071 % 83.9600 1,591,364,537 % 5.07 10,001 - 50,000 79,281 % 12.2800 1,637,601,326 % 5.22 50,001 - 1,000,000 22,650 % 3.5100 3,854,576,850 % 12.28 1,000,001 - 5,000,000 1,265 % 0.2000 2,612,484,842 % 8.32 5,000,001 - 10,000,000 151 % 0.0200 1,087,361,826 % 3.46 10,000,001 - 50,000,000 151 % 0.0200 3,085,943,442 % 9.83 50,000,001 - 1,000,000,000 65 % 0.0100 11,633,370,085 % 37.05 Above 1,000,000,000 3 % - 5,893,790,879 % 18.77 645,637 % 100 31,396,493,787 % 100 13. Substantial interest in shares According to the register of members as at 31 December 2024, the following shareholders held more than 5% of the share capital of the Bank. Number of Shares Held Number of Shares Held Jim Ovia, CFR 3,552,949,395 % 11.32 According to the register of members as at 31 December 2023, the following shareholders held more that 5% of the issued share capital of the Bank. Number of Shares Held Number of Shares Held Jim Ovia, CFR 3,552,949,395 % 11.32 14. Donation and charitable gifts The Bank made contributions to charitable and non-political organisations amounting to N4,750 million during the year ended 31 December 2024 (31 December 2023: N5,673 million). The beneficiaries are as follows: 31 December 2024 N' Million State government infrastructure/security trust funds 2,548 Conferences and seminars 951 Sport organisations 276 Educational institutions 259 Charitable organisations 164 Various Professional Associations 83 Religious organisation 58 Health/medical initiatives 53 Other donations individually below N5million 358 4,750 6 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 15. Events after the reporting period On January 23, 2025, the bank received approval for the allotment of its newly issued shares. The total number of additional shares raised by the bank through the capital raise exercise is 9,673,336,214. This brings the total number of issued shares of the bank from a previous 31,396,493,787 units to a current 41,069,830,001 units. See below analysis of the newly allotted shares: Share range No. of Shareholders (Right) No of shares (Right) No. of Applicants No. of Shares (Public offer) Total no of Shareholders Total no of issued shares 1 - 50,000 38,169 410,937,059 116,643 815,302,250 154,812 1,226,239,309 50,001 - 100,000 637 85,569,449 5,700 465,710,250 6,337 551,279,699 100,001 - 500,000 660 410,622,233 3,834 877,405,500 4,494 1,288,027,733 500,001 - 1,000,000 121 97,269,348 756 649,132,500 877 746,401,848 1,000,001 - 5,000,000 115 353,919,902 411 915,262,500 526 1,269,182,402 5,000,001 - 10,000,000 19 177,806,321 30 214,104,000 49 391,910,321 10,000,001 - 50,000,000 23 633,280,993 21 391,340,750 44 1,024,621,743 50,000,001 and above 14 3,063,343,659 2 112,329,500 16 3,175,673,159 39,758 5,232,748,964 127,397 4,440,587,250 167,155 9,673,336,214 16. Disclosure of customer complaints in financial statements for the year ended 31 December 2024 Description Number Amount claimed Amount refunded In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 31 December 2024 31 December 2023 N.'m N.'m N.'m N.'m Pending complaints brought forward 101,647 169,797 16,246 31,839 1,048 13 Received Complaints 102,140 355,210 181,921 16,915 63,873 3,694 Resolved Complaints 202,384 423,360 125,889 32,508 64,921 15,486 Unresolved Complaints 1,403 101,647 72,278 16,246 - - 17. Human resources (i) Employment of disabled persons The Group maintains a policy of giving fair consideration to the application for employment made by disabled persons with due regard to their abilities and aptitude. The Group’s policy prohibits discrimination against disabled persons in the recruitment, training and career development of its employees. In the event of members of staff becoming disabled, efforts will be made to ensure that their employment continues and appropriate training arranged to ensure that they fit into the Group's working environment. (ii) Health, safety and welfare at work The Group enforces strict health and safety rules and practices at the work environment, which are reviewed and tested regularly. The COVID-19 pandemic also presented an opportunity for the Group to enhance its health and safety protocols in all its operating locations. The Group has retained Hospitals 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. 7 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Directors' Report for the Year Ended 31 December 2024 (iii)Employee training and development The Group ensures, through various fora, that employees are informed on matters concerning them. Formal and informal channels are also employed in communication with employees with an appropriate two-way feedback mechanism. In acordance with the Group's policy of continuous development, training facilities are provided in well-equipped training centres. These are complemented by on-the-job training. (iv) Gender analysis of staff The average number of employees of the Bank during the year by gender and level is as follows; (a) Analysis of total employees Gender Gender Number Percentage Male Female Total Male Female Employees 3,614 4,090 7,704 % 47 % 53 3,614 4,090 7,704 % 47 % 53 9 (b) Analysis of Board and top management staff Gender Gender Number Percentage Male Female Total Male Female Board members (Executive and Non-executive directors) 9 5 14 % 64 % 36 Top management staff (AGM-GM) 63 29 92 % 68 % 32 72 34 106 % 68 % 32 (c) Further analysis of board and top management staff Gender Gender Number Percentage Male Female Total Male Female Assistant general managers 31 16 47 % 66 % 34 Deputy general managers 22 9 31 % 71 % 29 General managers 10 4 14 % 71 % 29 Board members (Non-executive directors) 5 3 8 % 63 % 38 Executive Directors (excluding MD) 4 1 5 % 80 % 20 Managing Director/CEO - 1 1 % - % 100 72 34 106 % 68 % 32 18. Auditors The auditors, Messrs Pricewaterhousecoopers, having satisfied the relevant corporate governance rules on their tenure in office, have indicated their willingness to continue in office as auditors to the Bank. In accordance with section 401 (2) of the Companies and Allied Matters Act of Nigeria 2020, therefore, the auditors will be reappointed at the next annual general meeting of the Bank without any resolution being passed. By order of the Board ; Michael Osilama Otu Esq. Company Secretary January 30, 2025 FRC/2013/MULTI/00000001084 8 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Statement of Corporate Responsibility in Relation to the Financial Statements for the Year Ended 31 December 2024 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 2024 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 2024. (iii) The Bank's internal controls have been designed to ensure that all material information relating to the Bank and its subsidiaries is received and provided to the Auditors in the course of the audit. (iv) The Bank's internal controls were evaluated within 90 days of the financial reporting date and are effective as of 31 December 2024. (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. 30 January 2025 Durosinmi Abiodun Akanbi Chief Financial Officer FRC/2013/ICAN/00000001308 Dame (Dr.) Adaora Umeoji, OON Group Managing Director / CEO FRC/2024/PRO/DIR/003/967545 9 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 1. Introduction Corporate Governance is central to our business. The Bank conducts its business in line with the highest level of Corporate Governance and best practice. These governance practices are replicated across our subsidiary companies and 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) The Central Bank of Nigeria (CBN) issued Corporate Governance Guidelines for Commercial, Merchant, Non-interest, and Payment Services Banks in Nigeria. b) The Securities and Exchange Commission (SEC) issued Code of Corporate Governance for public companies. c) 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 the Subsidiary companies 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 is reviewed from time to time 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 six (6) Executive Directors including the GMD/CEO. Three (3) of the Non-Executive Directors are Independent Directors, appointed in compliance with the Central Bank of Nigeria (CBN) circular on Appointment of Independent Directors by Banks. The Group Managing Director/Chief Executive is responsible for the day to day running of the Bank, assisted by the Executive Committee (EXCO). EXCO comprises the Executive Directors, and the Group Managing Director/Chief Executive as its Chairman. 6. Responsibilities of the Board The Board is responsible for the following amongst others: a) reviewing and approving the Bank’s strategic plans for implementation by management; b) reviewing and approving the Bank’s financial statements; c) reviewing and approving the Bank’s financial objectives, business plans and budgets, including capital allocations and expenditures; d) monitoring corporate performance against the strategic plans and business, operating and capital budgets; e) implementing the Bank’s succession planning; f) approving acquisitions and divestitures of business operations, strategic investments and alliances and major business development initiatives; g) approving delegation of authority for any unbudgeted expenditure; 10 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 h) setting the tone for and supervising the Corporate Governance Structure of the Bank, including corporate structure of the Bank and the Board and any changes 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 Date of Appointment Jim Ovia, CFR. - (Chairman) April 2, 2014 Mr.Gabriel Ukpeh - (Ind.NED)***** February 24, 2016 Engr. Mustafa Bello - (NED) 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) April 12, 2022 Dr. Peter Olatunde Bamkole - (Ind. NED) April 12, 2022 Dr. Ebenezer Onyeagwu- GMD/CEO**** April 24, 2013 Dr. Adaora Umeoji,OON - (GMD)* August 2, 2023 Mr. Henry Oroh - (ED) August 1, 2019 Mrs Adobi Nwapa - (ED) April 12, 2022 Mr. Akindele Ogunranti - (ED) April 12, 2022 Dr. Juliet Ehimuan August 29, 2023 Mr. Lawani Adamu*** April 24, 2024 Mr Louis Odom*** April 24, 2024 Ms. Pamela Yough** April 30, 2024 *Dr. Adaora Umeoji, OON was appointed as the Group Managing Director effective 1 June 2024. **Ms. Pamela Mimi Yough was appointed to the Board on 30 April, 2024 ***Mr. Lawani Adamu and Mr. Louis Odom was appointed to the Board on 24 April, 2024. ****Dr.Ebenezer Onyeagwu retired from the Board effective 31 May 2024 *****Mr. Gabriel Ukpeh retired from the Board effective 8 March, 2024 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. 11 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 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. 12 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 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 seven (7) members comprising four (4) Non-Executive Directors and three (3) Executive Directors of the Bank. The Board Credit Committee is chaired by a Non-Executive Director who is well versed in credit matters. The Committee considers loan applications above the level of Management Credit Committee. It also determines the credit policy of the Bank or changes therein. The membership of the Committee during the year is as follows: Mr. Chuks Emma Okoh - Chairman Dr. Al- Mujtaba Abubakar Dr.Peter Bamikole Ms. Pamela Mimi Yough Mr. Adamu Lawani Mr. Henry Oroh Dr. Adaora Umeoji 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 for 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; 13 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024  To perform such other duties and responsibilities as the Board of Directors may assign from time to time. 10.2. Finance and General Purpose Committee This Committee is made up of six (6) members: three (3) Non-Executive Directors and three (3) Executive Directors. It is chaired by a non-executive Director. The Committee considers large scale procurement by the Bank, as well as matters relating to staff welfare, discipline, staff remuneration and promotion. The membership of the Committee during the year is as follows: Dr. Peter Olatunde Bamkole – Chairman Dr. Omobola Ibidapo-Obe Ogunfowora Dr. Juliet Ehimuan Mr. Adamu Lawani Mrs. Adobi Stella Nwapa Dr. Adaora Umeoji 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 (a Non-Executive Director), the Committee’s membership comprises the following: 14 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 Engr. Mustapha Bello – Chairman Dr. Peter Olatunde Bamkole Dr.Omobola Ibidapo-Obe Ogunfowora Dr. Juliet Ehimuan Mr. Louis Odom Mr. Akindele Ogunranti Mr. Henry Oroh Dr. Adaora Umeoji 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 Engr. Mustafa Bello Dr. Omobola Ibidapo-Obe Ogunfowora Mr. Chuks Okoh 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; 15 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024  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). 16 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024  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 five (5) Non-Executive Directors and is chaired by an Independent Non-Executive Director. The membership of the Committee is as follows: Dr.Omobola Ibidapo-Obe Ogunfowora – (Chairman) Engr. Mustafa Bello Dr. Al-Mujtaba Abubakar, MFR Mr. Chuks Okoh Dr. Juliet Ehimuan Ms. Pamela Mimi Yough 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. 17 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024  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 – (Chairman) Prof (Prince) L.F.O Obika Mr. Michael Olusoji Ajayi 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. 18 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 10.8. Other Committees In addition to the afore-mentioned committees, the Bank has in place, other standing management committees. They include: a) Management Committee (MANCO) b) Assets and Liabilities Committee (ALCO) c) Management Global Credit Committee(MGCC) d) 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. 19 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 Membership of the Committee The membership of the Information Security Steering Committee comprises of: 1. Group Managing Director / CEO 2. Executive Directors 3. Chief Information Officer 4. Chief Inspector 5. Chief Risk Officer(CRO) 6. Chief Financial Officer(CFO) 7. Head of InfoTech - Software 8. Head of InfoTech – Engineering 9. Group Head Retail 10. Chief Information Security Officer(CISO) 11. Head of IT Audit 12. Information Security Officer 13. Head of Risk Management 14. Head of Card Services 15. Representatives of Marketing Group 11. Policy on trade in the Bank's securities The Bank has 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. 20 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024  Directors are also sponsored for training programmes that they require to enhance their duties to the Bank.  During the year under review, in addition to other programmes, all Directors attended the CFT/AML training programme to keep them abreast of recent trends in CFT and money laundering. Executive Directors The remuneration policy for Executive Directors considers various elements, including the following:  Fixed remuneration, taking into account the level of responsibility, and ensuring this remuneration is competitive with remuneration paid for equivalent posts in Banks of equivalent status both within and outside Nigeria.  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 2024 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. 21 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 Subsidiary Board Committees The Subsidiary Board meets at least every quarter and exercises oversight function on the business of each location through the following committee structure.  Board Credit Committee which is charged with the responsibility of considering the approval of new loans and renewal of existing ones above the threshold set for the Management Credit Committee. It also determines the credit policy or changes therein.  Board Risk Management Committee which has oversight responsibility for the overall risk management of various areas of the Bank’s operations and compliance. This includes advising the Board on risk-related matters arising from its business.  Board Audit and Compliance Committee is responsible for the review of accounting and reporting policies to ensure compliance with regulatory and financial reporting requirements. The Board, through the committee exercise oversight on the Compliance and AML/CFT activities of the Bank. Overall, it monitors the effectiveness of the Bank’s system of internal control to safeguard its assets for shareholders.  Board Governance, Nomination and Remuneration Committee (BGNRC) saddled with the responsibility of determining a fair, reasonable and competitive renumeration structure for senior management of the Bank as well as administering the Governance structure for the Bank.  Board Staff Welfare, Finance & General Purpose Committee has the responsibility of approving large scale procurements by the Bank, as well as matters relating to staff welfare, discipline, staff remuneration and promotion. Management of Subsidiaries Zenith Bank Plc appoints one of its senior management staff to act as the Managing Director of each subsidiary. Other key staff are seconded to assist the managing director in the supervision of critical departments of the Bank. The objective of this management structure is to ensure that the core values and principles of the Zenith Bank brand are instilled seamlessly across its offshore subsidiaries. It also offers the Group an opportunity to adopt a uniform culture of best practices in the area of corporate governance, technology, controls and customer service excellence. Monthly and Quarterly Reports The subsidiaries furnish Zenith Bank Plc with monthly and quarterly reports on their business and operational activities. These reports covers the subsidiaries’ financial performance, risk assessment, regulatory and compliance matters amongst others. The reports are analyzed and presented to Executive Management and the Group Board of Directors for decision making and fulfilment of its oversight function. Group Performance & Strategy Review/Budget Session The Managing Directors and senior management team of the respective Subsidiaries of the Bank attend the annual Group’s Performance & Strategy Review/Budget Session during which their performances are analyzed and recommendations made towards achieving continuous improvement in financial, social and environmental performance. The annual budget of the subsidiaries are discussed at this session. This session also serves as a forum for sharing business ideas, tapping into identified synergy within the Group and disseminating information on relevant best practices that could enhance our sustained growth in the Banking landscape. Annual Internal Control Audit 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. 22 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 15. Complaints Management Policy The Bank has put in place a complaints management policy framework to resolve complaints arising from issues covered under the Investments and Securities Act, 2007 (ISA). This can be found on the Bank's website. 16. Report of Fraud and Forgeries This report details the fraud and forgery incidents that took place during the specified year, summarizing both attempted and successful cases. 31 December 2024 31 December 2023 Number of fraud cases 497 523 Amount involved (N'millions) 7,746 894.4 Amount involved ($'millions) 62 0.61 Actual loss (N'millions) 5,261 383.38 Actual loss ($'millions) 0.049 0.6 17. Schedule of board and board committees meeting held during the period The table below shows the frequency of meetings of the Board of directors, board committees and members’ attendance at these meetings during the year under review. Directors Board Board credit committee Finance and general purpose committee Board governance, nomination and remuneration committee Board risk management committee Board audit and compliance committee Attendance/no of meetings 8 5 4 4 4 4 Jim Ovia, CFR 8 N/A N/A N/A N/A N/A Mr.Gabriel Ukpeh* 2 1 1 1 N/A 1 Engr.Mustafa Bello 8 N/A N/A 4 4 4 Dr. Al-Mujtaba Abubakar, MFR 8 5 N/A 4 1 4 Dr. O. Ibidapo-Obe Ogunfowora 8 N/A 4 4 4 4 Mr Peter Bamkole 8 4 4 2 4 2 Mr Chuks Emma Okoh 8 5 2 4 N/A 2 Dr. Juliet Ehimuan 8 N/A N/A 4 4 4 Ms. Pamela Yough*** 4 2 N/A 2 N/A N/A Dr.Ebenezer Onyeagwu**** 5 2 2 N/A 2 N/A Dr.Adaora Umeoji, OON***** 8 5 4 N/A 2 N/A Mr. Henry Oroh 8 4 2 N/A 4 N/A Mrs. Adobi Nwapa 8 N/A 4 N/A N/A N/A Mr. Akindele Ogunranti 8 N/A N/A N/A 4 N/A Mr. Adamu Lawani** 4 2 N/A N/A N/A N/A Mr. Louis Odom** 4 N/A N/A N/A 2 N/A Note: * Mr. Gabriel Ukpeh retired from the Board effcetive 8 March, 2024. ** Mr. Adamu Lawani and Mr. Louis Odom was appointed to the Board effective 24 April, 2024. *** Ms. Pamela Yough was appointed to the Board effective 30 April, 2024. **** Dr. Ebenezer Onyeagwu retired from the Board effective 31 May, 2024. ***** Dr. Adaora Umeoji was appointed as Group Managing Director/CEO effective 1 June, 2024 N/A - Not Applicable (Not a Committee member) Dates for Board and Board Committee meetings held within the year to 31 December 2024 23 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Corporate Governance Report for the Year Ended 31 December 2024 Board meetings Board credit committee meeting Finance and general purpose committee Board Risk Management committee Meeting Board Audit and Compliance Committee Meeting Board Governance, Nomination and Remuneration Committee Audit committee meeting of the bank 25-Jan-24 31-Jan-24 30-Jan-24 29-Jan-24 29-Jan-24 30-Jan-24 29-Jan-24 30-Jan-24 19-Mar-24 25-Apr-24 24-Apr-24 23-Apr-24 23-Apr-24 22-Apr-24 23-Apr-24 22-Apr-24 08-May-24 27-Jun-24 23-Jul-24 19-Jul-24 18-Jul-24 18-Jul-24 22-Jul-24 18-Jul-24 22-Jul-24 11-Sep-24 30-Oct-24 29-Oct-24 28-Oct-24 28-Oct-24 21-Oct-24 25-Oct-24 21-Oct-24 18. Audit Committee The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during the year under review. Number of meetings held during the year: Members Number of Meetings attended Mrs. Adebimpe Balogun (SR) 4 Prof. (Prince) L.F.O Obika (SR) 4 Mr. Michael Olusoji Ajayi (SR) 4 Engr. Mustafa Bello (INED) 4 Dr.Al-mujtaba Abubakar (INED) 4 SR - Shareholders representative INED- Independent Non-Executive Director 24 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Statement of Directors' Responsibilities in Relation to the Financial Statements for the Year Ended 31 December 2024 The Directors accept responsibility for the preparation of the consolidated and separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act, (CAMA 2020) of Nigeria, Financial Reporting Council of Nigeria Act, 2011, the Banks and Other Financial Institutions Act, (BOFIA),2020 relevant Central Bank of Nigeria (CBN) Guidelines and Circulars. The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act, (CAMA 2020) of Nigeria and for such internal control as the directors determines necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error. The Directors have assessed the Bank's and Group's ability to continue as a going concern and have no reason to believe that the Bank and the Group will not remain a going concern for at least a year from the date of approval of the financial statements. SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: Jim Ovia, CFR. Chairman FRC/2013/CIBN/00000002406 30 January, 2025 Dame (Dr.) Adaora Umeoji, OON Group Managing Director / CEO FRC/2024/PRO/DIR/003/967545 30 January, 2025 25 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Report of the Audit Committee for the Year Ended 31 December 2024 In compliance with Section 407(1) Companies and Allied Matters Act of Nigeria 2020, we have reviewed the consolidated and separate financial statements of Zenith Bank Plc for the year ended 31 December 2024 and hereby state as follows: 1. The scope and planning of the audit were adequate in our opinion; 2. The accounting and reporting policies of the Group and Bank conformed with the statutory requirements and agreed ethical practices; 3. The internal control and internal audit functions were operating effectively; and 4. The external auditor's findings as stated in the management letter are being dealt with satisfactorily by the management. 5. Related party balances and transactions have been disclosed in Note 37 to the financial statements in accordance with requirements of the International Financial Reporting Standards (IFRS) and directives issued by the Central Bank of Nigeria (CBN) as contained in the Prudential Guidelines for Deposit Money Banks in Nigeria and Circular on Disclosure of insider related credits in financial statements BSD/1/2004. Dated 27th January, 2025. Mrs. Adebimpe Balogun Chairman Audit Committee FRC/2017/CITN/00000017467 MEMBERS OF THE COMMITTEE Shareholders Representative 1. Mrs Adebimpe Balogun - Chairman 2. Mr. Michael Olusoji Ajayi 3. Prof. (Prince) L.F.O Obika Directors· Representative Non-Executive Director 1.Dr. Al-Mujtaba Abubakar, MFR 2. Engr. Mustafa Bello 26 Zenith Bank Plc Annual Report - 31 December 2024 z ZENITH 1) All significant deficiencies and material weaknesses in the design or operation of the internal control system which are reasonably likely to adversely affect the entity's ability to record, process, SL.Jmmarize and report financial information; and 2) Any fraud, whether or not material, that involves management or other employees who have a significant role in the entity's internal control system. n The entity's other significant certifying officer(s) and I have identified, in the report whether or not there were significant changes in internal controls or other facts that could significantly affect internal controls subsequent lo the date of their evaluation including any corrective actions with regard to significant deficiencies and material weaknesses. Name: Durosinmi Abiodun FRC No: FRC/2013/ICAN/00000001308 Date: 30/01/2025 Designation: Chief Financial Officer Signature: _________ _ z ZENITH 1) All significant deficiencies and material weaknesses iin the design or operation of the internal control system which are reasonably likely to adversely affect the entity's ability to record, process, summarize and report financial information; and 2) Any fraud, whether or not material, that involves management or other employees who have a significant role in the entity's internal control system. D The entity's other certifying officer(s) and I have identified, in the report whether or not there were significant changes in internal controls or other facts that could significantly affect internal controls subsequent to the date of their evaluation including any corrective actions with regard to significant deficiencies and material weaknesses. Name: Dame (Dr.) Adaora Umeoji FRC No: FRC/2024/PRODIR/003/967545 Date: 3 0/01/2025 Designation: Group Managing Director/ CEO Signature: ZENITH BANK PLC Consolidated and Separate Statements of Profit or Loss and Other Comprehensive Income for the Year ended 31 December 2024 Group Bank In millions of Naira Note(s) 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Interest and similar income 6 2,721,377 1,144,674 2,284,763 926,232 Interest and similar expense 7 (992,474) (408,492) (839,111) (355,228) Net interest income 1,728,903 736,182 1,445,652 571,004 Impairment charge on financial and non-financial instruments 8 (658,805) (409,616) (668,913) (398,412) Net interest income after impairment loss on financial and non-financial instruments 1,070,098 326,566 776,739 172,592 Net income on fees and commission 9 206,867 109,307 149,861 71,080 Trading gains 10 1,100,002 566,973 1,053,127 538,286 Other operating (loss)/income 11 (206,764) 242,588 (146,665) 264,063 Depreciation of property and equipment 26 (44,228) (29,857) (33,198) (26,090) Amortisation of intangible assets 27 (8,318) (3,469) (5,860) (2,447) Personnel expenses 36 (204,170) (124,415) (128,644) (88,083) Operating expenses 12 (586,636) (291,731) (532,071) (261,686) Profit before tax 1,326,851 795,962 1,133,289 667,715 Income tax expense 13a (293,956) (119,053) (197,131) (72,114) Profit for the year after tax 1,032,895 676,909 936,158 595,601 Other comprehensive income: Items that will never be reclassified to profit or loss Fair value movements on equity instruments at FVOCI 151,011 122,252 151,011 122,252 Impact of adopting IAS 29 on 1 January 109,202 81,408 - - Total items that will not be reclassified to profit or loss 260,213 203,660 151,011 122,252 Items that are or may be reclassified to profit or loss: Foreign currency translation differences for foreign operations 220,288 162,942 - - Fair value movement on debt securities at FVOCI 6,046 10,280 - - Income tax effect relating to fair value movement on debt securities at FVOCI (2,841) (2,603) - - Other comprehensive income for the year net of taxation 483,706 374,279 151,011 122,252 Total comprehensive income for the year 1,516,601 1,051,188 1,087,169 717,853 Profit attributable to: Equity holders of the parent 1,032,711 676,569 936,158 595,601 Non-controlling interest 184 340 - - 1,032,895 676,909 936,158 595,601 Total comprehensive income attributable to: Equity holders of the parent 1,515,864 1,050,373 1,087,169 717,853 Non-controlling interest 737 815 - - 1,516,601 1,051,188 1,087,169 717,853 Earnings per share Basic and diluted (Naira) 14 32.87 21.55 29.79 18.97 The accompanying notes are an integral part of these consolidated and separate financial statements. 34 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Consolidated and Separate Statements of Financial Position as at 31 December 2024 Group Bank In millions of Naira Note(s) 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Assets Cash and balances with central banks 15 5,888,216 4,253,374 5,249,789 3,965,386 Treasury bills 16 2,678,929 2,736,273 2,437,464 2,529,966 Assets pledged as collateral 17 266,866 308,638 89,062 255,061 Due from other banks 18 4,935,707 1,834,314 4,442,436 1,691,722 Derivative assets 19 280,626 534,739 271,213 507,942 Loans and advances 20 9,965,364 6,556,470 8,708,775 5,928,796 Investment securities 21 5,098,044 3,290,895 2,248,587 1,205,724 Investments in subsidiaries 22 - - 34,625 34,625 Deferred tax asset 24 21,542 17,251 1,756 - Current tax receivable 13 6,869 18,975 - - Other assets 25 326,725 474,976 184,136 417,419 Property and equipment 26 400,441 295,532 290,273 230,267 Intangible assets 27 88,196 47,018 80,203 44,185 Total assets 29,957,525 20,368,455 24,038,319 16,811,093 Liabilities Customers' deposits 28 21,959,369 15,167,740 17,163,424 12,154,824 Derivative liabilities 32 9,258 70,486 4,465 45,514 Current income tax payable 13 256,168 33,877 248,613 28,080 Deferred tax liabilities 24 5,502 59,310 - 59,233 Other liabilities 29 1,402,045 1,039,712 1,323,440 1,003,947 On lending facilities 30 250,725 263,065 250,725 263,065 Borrowings 31 2,045,185 1,410,885 1,951,616 1,450,182 Total liabilities 25,928,252 18,045,075 20,942,283 15,004,845 Capital and reserves Share capital 33 20,535 15,698 20,535 15,698 Share premium 34 594,113 255,047 594,113 255,047 Retained earnings 34 2,015,513 1,179,390 1,538,189 893,938 Other reserves 34 1,396,747 871,617 943,199 641,565 Attributable to equity holders of the parent 4,026,908 2,321,752 3,096,036 1,806,248 Non-controlling interest 34 2,365 1,628 - - Total shareholders' equity 4,029,273 2,323,380 3,096,036 1,806,248 Total liabilities and equity 29,957,525 20,368,455 24,038,319 16,811,093 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 30th January 2025 and signed on its behalf by: Jim Ovia, CFR. Chairman FRC/2013/CIBN/00000002406 Dame (Dr.) Adaora Umeoji, OON Group Managing Director/CEO FRC/2024/PRO/DIR/003/967545 Durosinmi Abiodun Akanbi Chief Financial Officer FRC/2013/ICAN/00000001308 35 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Consolidated and Separate Statements of Changes in Equity for the Year Ended 31 December 2024 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 2024 15,698 255,047 187,892 176,909 409,104 3,729 93,982 1,179,391 2,321,752 1,628 2,323,380 Profit for the year - - - - - - - 1,032,711 1,032,711 184 1,032,895 Other comprehensive income: - - - - - - - - - - - Impact of adopting IAS 29 at 1 January 2024 - - - - - - - 108,646 108,646 556 109,202 Foreign currency translation differences - - 220,291 - - - - - 220,291 (3) 220,288 Fair value movements on equity instruments - - - 151,011 - - - - 151,011 - 151,011 Fair value movements on debt securities - - - 6,046 - - - - 6,046 - 6,046 Income tax effect relating to fair value movement on debt securities at FVOCI - - - (2,841) - - - - (2,841) - (2,841) Total Comprehensive Income - - 220,291 154,216 - - - 1,141,357 1,515,864 737 1,516,601 Issue of shares 34 4,837 339,066 - - - - - - 343,903 - 343,903 Share issue cost 34 - - - - - - - (13,329) (13,329) - (13,329) Transfer between reserves 34 - - - - 140,424 - 10,200 (150,624) - - - Transactions with owners of the Parent Dividends 39 - - - - - - - (141,284) (141,284) - (141,284) Balance at 31 December 2024 20,535 594,113 408,183 331,125 549,528 3,729 104,182 2,015,513 4,026,908 2,365 4,029,273 1 January 2023 15,698 255,047 24,953 46,980 311,411 3,729 95,304 625,005 1,378,127 813 1,378,940 Profit for the year - - - - - - - 676,569 676,569 340 676,909 Other Comprehensive income: Impact of adopting IAS 29 at 1 January 2023 - - - - - - - 80,936 80,936 472 81,408 Foreign currency translation differences - - 162,939 - - - - - 162,939 3 162,942 Fair value movements on equity instruments - - - 122,252 - - - - 122,252 - 122,252 Fair value movements on debt securities - - - 10,280 - - - - 10,280 - 10,280 Income tax effect relating to fair value movement on debt securities at FVOCI - - - (2,603) - - - - (2,603) - (2,603) Total comprehensive income for the year - - 162,939 129,929 - - - 757,505 1,050,373 815 1,051,188 Transfer between reserves 35 - - - - 97,693 - (1,322) (96,371) - - - Transactions with owners of the Parent Dividends 40 - - - - - - - (106,748) (106,748) - (106,748) Balance at 31 December 2023 15,698 255,047 187,892 176,909 409,104 3,729 93,982 1,179,391 2,321,752 1,628 2,323,380 36 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Consolidated and Separate Statements of Changes in Equity for the year ended 31 December 2024 In Millions of Naira Note(s) Share capital Share premium Fair value reserve Statutory reserve SMIEIS reserve Credit risk reserve Retained earnings Total equity Bank Balance at 1 January 2024 15,698 255,047 175,983 367,942 3,729 93,911 893,938 1,806,248 Profit for the year - - - - - - 936,158 936,158 Other comprehensive income Fair value movements on equity instruments - - 151,011 - - - - 151,011 Total comprehensive income for the period - - 151,011 - - - 936,158 1,087,169 Issue of shares 4,837 339,066 - - - - - 343,903 Transfer between reserves 34 - - - 140,424 - 10,200 (150,624) - Dividends 39 - - - - - - (141,284) (141,284) Balance at 31 December 2024 20,535 594,113 326,994 508,366 3,729 104,111 1,538,190 3,096,038 Balance at 1 January 2023 15,698 255,047 53,731 278,602 3,729 93,911 494,429 1,195,147 Profit for the year - - - - - - 595,601 595,601 Other comprehensive income: Fair value movements on equity instruments - - 122,252 - - - - 122,252 Total comprehensive income for the period - - 122,252 - - - 595,601 717,853 Transfer between reserves 34 - - - 89,340 - - (89,340) - Dividends 39 - - - - - - (106,748) (106,748) Balance at 31 December 2023 15,698 255,047 175,983 367,942 3,729 93,911 893,938 1,806,248 The accompanying notes are an integral part of these consolidated and separate financial statements. 37 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Consolidated and Separate Statements of Cash Flows for the Year Ended 31 December 2024 Group Bank In millions of Naira Note(s) 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Cash flows from operating activities Profit before tax for the year 1,326,851 795,962 1,133,289 667,715 Adjustments for: Net impairment loss on financial and non-financial instruments 8 658,805 409,616 668,913 398,412 Unrealised fair value change in trading bond, bills and derivatives 43(xii) (261,785) 495,591 (257,165) (493,766) Depreciation of property and equipment 26 44,228 29,857 33,198 26,090 Amortisation of intangible assets 27 8,318 3,469 5,860 2,447 Dividend income 11 (8,645) (5,661) (14,645) (19,777) Foreign exchange revaluation (gain)/loss 44(xx) (1,099,619) 358,103 (736,639) 308,353 Interest income 6 (2,828,801) (1,144,674) (2,284,763) (926,232) Interest expense 7 993,011 408,492 839,111 355,228 Loss /(Gain) on sale of property and equipment 43(vi) 994 (189) 1,013 (186) (Gain)/loss on lease derecognition 43(xviii) - (14) - 2 Net monetary loss arising from hyperinflationary economy 11 33,783 10,485 - - Recognition of utilized withholding tax (8,866) - (8,866) - Gain/(loss) on modification of financial asset 42,518 - - - (1,099,208) 369,854 (620,694) 318,286 Changes in operating assets and liabilities: Net (increase) in loans and advances 43(iii) (3,853,588) (3,001,962) (3,225,860) (2,623,642) Net decrease/ (increase) in other assets 43(viii) 141,599 (258,867) 211,213 (222,544) Net decrease/(increase) in treasury bills (FVTPL) including bills pledged 43(iib) (559,300) 451,645 (559,300) 451,645 Net (increase)/decrease in investment securities including bonds pledged (FVTPL and FVOCI) 43(i) (18,462) (9,545) (16,669) (6,666) Net (increase) in restricted balances (cash reserves) 43(x) (1,372,721) (2,233,799) (1,094,650) (2,144,031) Net (increase)/decrease in due from banks with maturity greater than three months 43(vii) (840,238) 37,147 (1,240,144) 106,055 Net increase in derivatives 43(ix) 464,253 43,549 462,428 42,811 Net increase in customer deposits 43(iv) 6,809,014 6,195,403 5,001,368 4,713,057 Net increase in Other liabilities 43(v) 313,904 470,960 276,602 454,570 (14,747) 2,064,385 (805,706) 1,089,541 Interest received from operating activities 43(xiiia) 1,471,304 803,644 1,319,580 711,069 Interest paid 43(xi) (639,393) (310,064) (481,431) (243,790) Tax paid 13 (101,135) (107,535) (28,723) (62,367) Net cash flows generated from operations 716,029 2,450,430 3,720 1,494,453 Cash flows from investing activities Purchase of property and equipment 43(xivb) (101,993) (50,281) (92,728) (40,580) Proceeds from Sale of property and equipment 43(vi) 3,520 1,382 1,647 1,341 Purchase of intangible assets 27 (49,371) (24,035) (43,444) (22,674) Additions to treasury bills 43(iia) (798,943) (4,547,984) (705,643) (2,824,475) Disposal of treasury bills 43(iia) 2,092,066 3,836,384 1,730,853 2,245,622 Interest received from treasury bills and investment securities 43(xiiib) 443,331 85,081 180,678 62,434 Acquisition of Right of Use Asset 43(xiva) (131) (859) (64) (811) Additions to other Investment securities 43(XV) (2,011,587) (2,378,357) (1,087,128) (539,842) Disposal of other Investment securities 43(i) 414,354 980,761 376,950 82,885 Dividends received 11 8,645 5,661 14,645 19,777 Net cash (used in)/from investing activities (109) (2,092,246) 375,766 (1,016,323) 38 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Consolidated and Separate Statements of Cash Flows for the Year Ended 31 December 2024 Group Bank In millions of Naira Note(s) 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Cash flows from financing activities Proceeds on share issue 33 343,903 - 343,903 - Cash inflow from long term borrowings 31 2,860,580 1,148,702 2,771,322 1,197,352 Repayment of long term borrowings 31 (2,735,376) (1,569,493) (2,735,376) (1,569,493) Interest paid on long term borrowing 31 (192,475) (97,895) (160,647) (97,569) Cash inflow from onlending facility 30 16,860 - 16,860 - Repayment of onlending facility 30 (31,812) (48,080) (31,812) (48,080) Interest paid on onlending facility 30 (1,357) (5,778) (1,357) (5,778) Repayment of principal for lease liability 43(v) (4,899) (1,543) (1,088) (979) Interest paid on lease liability 43(v) (485) (224) (484) (212) Unclaimed dividend received 43(xv) 484 352 484 352 Dividends paid to shareholders 39 (141,284) (106,748) (141,284) (106,748) Share issue cost (13,329) - - - Net cash from/(used in) financing activities 100,810 (680,707) 60,521 (631,155) Net increase/(decrease) in cash and cash equivalents 816,730 (322,523) 440,007 (153,025) Analysis of changes in cash and cash equivalents: Cash and cash equivalent at the beginning of the year 2,304,511 1,940,758 2,018,402 1,657,186 Net increase/(decrease) in cash and cash equivalents 816,730 (322,523) 440,007 (153,025) Effect of exchange rate movement on cash balances 1,671,032 686,276 1,017,461 514,241 Cash and cash equivalents at the end of the year 40 4,792,273 2,304,511 3,475,870 2,018,402 The accompanying notes are an integral part of these consolidated and separate financial statements. 39 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 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 2024 were approved and authorised for issue by the Board of Directors on 28 February 2025. 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) New and amended IFRS Accounting Standards that are effective for the current year Except as noted below, the Group has consistently applied the accounting policies as set out in Note 2(b) to all periods presented in these consolidated and separate financial statements. The Group has adopted the following new standards and amendments including any consequential amendments to other standards with initial date of application of January 1, 2024: 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. 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 2024. (b) Standards issued but not yet effective The following standard had been issued but was not mandatory for year ended on 31 December 2024. 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. IFRS 18 ‘Presentation and Disclosure in Financial Statements’ 40 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 In April 2024, the IASB issued IFRS 18 ‘Presentation and Disclosure in Financial Statements’, effective for annual reporting periods beginning on or after 1 January 2027. The new accounting standard aims to give users of financial statements more transparent and comparable information about an entity’s financial performance. It will replace IAS 1 ‘Presentation of Financial Statements’ but carries over many requirements from that IFRS Accounting Standard unchanged. In addition, there are three sets of new requirements relating to the structure of the income statement, management-defined performance measures and the aggregation and disaggregation of financial information. While IFRS 18 will not change recognition criteria or measurement bases, it might have a significant impact on presenting information in the financial statements, in particular the income statement. The Group is currently assessing any impacts as well as data readiness before developing a more detailed implementation plan. ii Amendments to IAS 21 ‘Lack of Exchangeability’ In August 2023, the IASB published amendments to IAS 21 ‘Lack of Exchangeability’ effective from 1 January 2025. The Group is undertaking an assessment of the potential impact, which is not expected to be significant. iii Amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ In May 2024, the IASB issued amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’, effective for annual reporting periods beginning on, or after, 1 January 2026. In addition to guidance as to when certain financial liabilities can be deemed settled when using an electronic payment system, the amendments also provide further clarification regarding the classification of financial assets that contain contractual terms that change the timing or amount of contractual cash flows, including those arising from ESG-related contingencies, and financial assets with certain non-recourse features. The Group is undertaking an assessment of the potential impact. There are no other new standards or amendments issued but not yet effective that are applicable to the Group. 41 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 (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 the IFRS Accounting Standards 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 IFRS Accounting Standards 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. 42 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) assets and liabilities for statement of financial position presented are translated at the closing rate at the reporting date; ii) income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and iii) all resulting exchange differences are recognised in other comprehensive income and presented within equity as foreign currency translation reserves. On the disposal of a foreign operation, the Group recognises in profit or loss the cumulative amount of exchange differences relating to that foreign operation. When a subsidiary that includes a foreign operation is partially disposed of or sold, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In the case of any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of exchange differences recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate at the reporting date. (c) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at 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. 43 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 In the statement of financial position, cash and balances with central bank comprises cash on hand and balances with central bank. 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. 44 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 2.5 Financial instruments (continued) A financial asset is classified and measured at fair value through profit or loss (FVTPL) by the Group if the financial asset is:  A debt instrument that does not qualify to be measured at amortised cost or FVOCI;  An equity investment which the Group has not irrevocably elected to classify as at FVOCI and present subsequent changes in fair value in OCI;  A financial asset where the Group has elected to measure the asset at FVTPL under the fair value option. (ii) Financial liabilities Financial liabilities are either classified by the Group as:  Financial liabilities at amortised cost; or  Financial liabilities as at fair value through profit or loss (FVTPL). Financial liabilities are measured at amortised cost by the Group unless either:  The financial liability is held for trading and is therefore required to be measured at FVTPL, or  The Group elects to measure the financial liability at FVTPL (using the fair value option). (iii) Financial 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; 45 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 46 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 47 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 period during which the change has occurred. Subsequent to initial recognition, the fair value of a financial instrument is based on quoted market prices or dealer price quotation for financial instruments. If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs into valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. See note 3.5 on fair valuation methods and assumptions. (i) Assets pledged as collateral Financial assets transferred to external parties and which do not qualify for de-recognition are reclassified in the statement of financial position from treasury bills and investment securities to assets pledged as collateral, if the transferee has received the right to sell or re-pledge them in the event of default from agreed terms. Assets pledged as collateral are initially recognised at fair value, and are subsequently measured at amortised cost or fair value as appropriate. These transactions are performed in accordance with the usual terms of securities lending and borrowing. (j) Assets under repurchase agreement Assets under repurchase agreement are transactions in which the Group sells a security and simultaneously agrees to repurchase it (or an asset that is substantially the same as the one sold) at a fixed price on a future date. The Group continues to recognise the securities in their entirety in the statement of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognised as a financial asset and a financial liability is recognised for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred assets during the term of the arrangement. 2.6 Derivative instruments 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 48 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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; 49 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 period but determines at the current reporting date that criteria for recognizing the lifetime ECL is no longer met i.e. cured, the Group measures the loss allowance at an amount equal to 12-month ECL at the current reporting date. However, the Group observes the following backward transfer criteria (probationary period) to monitor if the criteria for recognizing the lifetime ECL has decreased significantly before the backward transfer can be effected on the credit rating of the customer; 90 days probationary period to move a financial instrument from Lifetime ECL not credit-impaired (Stage 2 financial instruments) to 12 months ECL (Stage 1 financial instruments); 90 days probationary period to move a financial instrument from Lifetime ECL credit-impaired (Stage 3 financial instruments) to Lifetime ECL not impaired (Stage 2 financial instruments); 180 days probationary period to move a loan from Lifetime ECL credit-impaired (Stage 3 financial instruments) to 12 months ECL (Stage 1 financial instruments). The Group also considers other qualitative criteria where necessary. Impairment gains arising from backward transfers will be recognized as part of ‘impairment losses on financial instruments.’ 2.7.2 Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired referred to as 'Stage 3 financial instruments. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: • Significant financial difficulty of the borrower or issuer; • A breach of contract such as a default or past due event; • The restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; • It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or • The disappearance of an active market for a security because of financial difficulties. A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a loan that is overdue for 90 days or more is considered impaired. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Group considers the following factors. • The market’s assessment of creditworthiness as reflected in the bond yields. • The rating agencies’ assessments of creditworthiness. • The country’s ability to access the capital markets for new debt issuance. • The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. 50 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 was N94.9 billion (31 December 2023: N13.4 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) 51 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 In certain cirumstances, property may be repossessed following the foreclosure on loans that are in default. These repossessd collateral are sold as soon as practicable. Repossessed properties are measured at the lower of carrying amount of the related loan and fair value less cost to sell and reported within 'Other asset'. 2.11 Property and equipment Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Where significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred. Property and equipment are depreciated on the straight line basis to their residual values over the estimated useful lives of the assets. Land is not depreciated. Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual values over their estimated useful lives as follows: Item Land Not depreciated Motor vehicles 4 years Furniture, fittings and equipment 5 years Computer equipment 3 years Buildings 50 years Leasehold improvement Over the remaining lease period Aircraft 25 years Right of use assets: Buildings Lower of lease term or the useful life for the specified class of item Depreciation is included in profit or loss. Work in progress consists of items of property and equipment that are not yet available for use. Work in progress is carried at cost less any required impairment. Depreciation starts when assets are available for use. An impairment loss is recognised if the asset’s recoverable amount is less than cost. The asset is reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Once the items are available for use, they are transferred to relevant classes of property and equipment as appropriate. Property and equipment are derecognized on disposal, or when no future economic benefits are expected from their use or disposal. Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or loss. Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset is capitalized as part of the cost of the asset. Other costs relating to borrowings which the group undertakes in the normal course of business are expensed in the 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; ii) management intends to complete the software product and use or sell it; 52 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 iii) there is an ability to use or sell the software product; iv) it can be demonstrated how the software product will generate probable future economic benefits v) adequate technical, financial and other resources to complete the development and to use/sell the software product are available vi) the expenditure attributable to the software product during its development can be reliably measured. Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that the asset is available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life for computer software is 5 years. Amortisation methods, useful 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 years 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. 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. 53 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 2.14 Leases (continued) 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. 54 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 55 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 56 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 57 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 period. Where there are shares that could potentially affects the numbers of share issued, those shares are considered in calculating the diluted earnings per share. There are currently no shares that could potentially dilute the total issued shares. 58 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 59 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) The Group adopt a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number of oversight functions. (b) Risk management is a shared responsibility. Therefore the Group aims to build a shared perspective on risks that is grounded in consensus. (c) There is clear segregation of duties between market-facing business units and risk management functions. (d) Risk Management is governed by well-defined policies which are clearly communicated across the Group. (e) 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) The Board of Directors provides overall risk management direction and oversight; (b) The Group’s risk appetite is approved by the Board of Directors; (c) Risk management is embedded in the Group as an intrinsic process and is a core competence of all its employees; (d) The Group manages its credit, market, operational and liquidity risks in a coordinated manner within the organisation; 60 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (e) The Group’s risk management function is independent of the business divisions; and (f) The Group’s internal audit function reports to the Board Audit Committee and provides independent validation of the business units’ compliance with risk policies and procedures, and the adequacy and effectiveness of the risk management framework on an enterprise-wide basis. The Group continuously modifies and enhances its risk management policies and systems to reflect changes in markets, products and international best practices. Training, individual responsibility and accountability, together with a disciplined and cautious culture of control, are an integral part of the Group’s management of risk. The Board of Directors ensures strict compliance with relevant laws, rules and standards issued by the industry regulators and other law enforcement agencies, market conventions, codes of practices promoted by industry associations and internal policies. The compliance function, under the leadership of the Chief Compliance Officer of the Bank, has put in place a robust compliance framework, which includes: (a) Comprehensive compliance manual detailing the roles and responsibilities of all stakeholders in the compliance process: (b) Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business is conducted professionally; (c) 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 (d) 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) 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; (b) Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall direction; (c) Risk identification, measurement, monitoring, and control procedures; (d) Establish effective internal controls that cover each risk management process; (e) Ensure that the Group’s risk management processes are properly documented; (f) Create adequate awareness to make risk management a part of the corporate culture of the Group; (g) Ensure that risk remains within the boundaries established by the Board; and (h) 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) The strategic importance of the activity and sector; (b) The contribution of the activity/sector to the total assets of the Bank; 61 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (c) The net income of the sector; and (d) 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 Nigerian economy, measured by Gross Domestic Product (GDP), grew by 3.46% (year-on-year) in real terms in the third quarter of 2024. The growth in the third quarter 2024 was due to performance in the services sector while the oil & gas sector contributed to the growth with average daily crude oil production of 1.47 million barrels per day. The International Monetary Fund (IMF) maintained Nigeria growth forecast at 3.2% for 2025. The year (2025) witnessed significant volatility in the foreign exchange of naira against the dollar, from about N977/US$ in Q4 2024 to 1,535/US$ as of 31 December 2024. The CBN narrowed the spread between the various foreign exchange segments of the market, an indication of price discovery and improved market efficiency, thus reducing opportunities for arbitrage and speculation. Nigeria’s external reserves stood at US$40 billion as at end December 2024. In March 2024, the Central Bank of Nigeria (CBN) announced an increase in the capital requirements for banks operating in Nigeria across the different license categories. The CBN has set a timeline of 24 months for banks to comply with the new requirements commencing April 1, 2024, and terminating on March 31, 2026. Consequently, zenith bank has successfully carried out a capital raise exercise through rights issue and public offer between August and September 2024. Verification and allotment of shares by SEC are being done. We hope these processes will be completed soon. Also, the Central Bank of Nigeria (CBN) is engaging at the highest level to facilitate Nigeria’s removal from the Financial Action Task Force’s (FATF) “grey list,” an anti-money laundering watch list by May 2025. The Monetary Policy Committee of the CBN at its November 2024 meeting raised the MPR by 125 basis points to 27.50 per cent, up from 26.25 per cent with asymmetric corridor around the MPR of +500/-100 basis points. The Committee also retained CRR at 50% and Liquidity Ratio at 30%. The Committee noted the persistence of food inflation, which continues to undermine price stability. We anticipate that the CBN may continue to raise or maintain interest rates in the near term if inflationary pressures persist. Headline inflation rose to 34.80% in December 2024 up from 34.19% in June 2024, the highest since April 1996. The largest drivers of inflation were food (39.12%) while core inflation stood at 28.75%. This was driven by rising cost of production due to high energy and electricity prices, persistent disruptions to power supply, continued insecurity in food producing areas and the impact of the Ukraine/Russia war on the supply of fertilizer inputs wheat and other grains. Upside remains the recapitalization of Banks and stability in the prices of crude oi in the global commodity markets. While the downside risk to outlook remains deteriorating security conditions, civil unrest, ongoing and expected shocks from the global economy especially from supply blockages of essential products from both Russia and Ukraine, impact of declining crude oil revenue in spite of higher crude oil prices, currency depreciation, hike in electricity tariff, potential increase in fuel pump price, etc. In spite of these challenges, Zenith Bank remains resilient and focused on maintaining its leading role in the Nigerian Banking Industry. The bank intends to realize the opportunities that exists within the headwinds as we reassess the risk environment and operating model continuously. . 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) 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; (b) 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; (c) 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 and sources of repayment; 62 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (d) 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 (e) 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; (f) 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; (g) All insiders’ related credits are limited to regulatory and strict internal limits and are disclosed as required; (h) The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff and are implemented. 3.2.1 Credit Metrics and Measurement Tools Zenith Bank and its subsidiaries have devoted resources and harnessed their credit data to develop models that will improve the determination of economic and financial threats resulting from credit risk. Before a sound and prudent credit decision can be taken, the credit risk engendered by the borrower or counterparty must be accurately assessed. This is the first step in processing credit applications. As a result, some key factors are considered in credit risk assessment and measurement: These are: (a) Adherence to the strict credit selection criteria, which includes defined target market, credit history, the capacity and character of customers; (b) Credit rating of obligor; (c) The likelihood of failure to pay over the period stipulated in the contract; (d) The size of the facility in case default occurs; and (e) Estimated Rate of Recovery, which is a measure of the portion of the debt that can be recovered through realisation of assets and collateral should default occur. 3.2.2 Credit Rating Tools The principal objective of the credit risk rating system is to produce a reliable assessment of the credit risk to which the Group is exposed. As such, all loans and indirect credits such as guarantees and bonds as well as treasury investments undergo a formal credit analysis process that would ensure the proper appraisal of the facility. (a) Loans and advances and amounts due from banks Each individual borrower is rated based on an internally developed rating model that evaluates risk based on financial, qualitative and industry-specific inputs. The associated loss estimate norms for each grade have been developed based on the experience of the Bank and its various subsidiaries. In order to allow for a meaningful distribution of exposures across grades with no excessive concentrations on the Group's borrower-rating and its facility-rating scale, the Group maintains the under listed rating grade, which is applicable to both new and existing customers. Zenith Group Rating Description of the grade AAA Investment Risk (Extremely Low Risk) AA Investment Risk (Very Low Risk) A Investment Risk (Low Risk) BBB Upper Standard Grade (Acceptable Risk) BB Lower Standard Grade (Moderately High Risk) B Non Investment Grade (High Risk) CCC Non Investment Grade (Very High Risk) CC Non Investment Grade (Extremely High Risk) C Non Investment Grade (High Likelihood of Default) D Non Investment Grade (Lost) Unrated Individually insignificant (unrated) (b) Other debt instruments With respect to other debt instruments, the Group takes the following into consideration in the management of the associated credit risk: i) Internal and external research and market intelligence reports; and ii) Regulatory agencies reports 63 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) In addition to the above, we have put in place limits structure which is monitored from time to time in order to limit our risk exposures on these securities. Control mechanisms for the credit risk rating system Zenith’s credit risk rating system is reviewed periodically to confirm that the rating criteria and procedures are appropriate given the current portfolio and external conditions. Hence, in accordance with the Groups model risk policy, all models that materially impact the risk rating process are reviewed. Furthermore, the ratings accorded to customers are regularly reviewed, incorporating new financial information available and the experience in the development of the banking relationship. The regularity of the reviews increases in the case of clients who reach certain levels in the automated warning systems. The rating system is currently undergoing external review with a view to enhancing its robustness. 3.2.3 Credit Processes Zenith operates a centralised credit approval process system. Credits are originated from the branches/business groups and subjected to reviews at various levels before they are presented along with all documents and information defined for the proper assessment and decision of Credit to the Global Credit Committee for consideration. All Credits presented for approval are required to be in conformity with the documented and communicated Risk Acceptance Criteria(RAC). As part of credit appraisal process, the Group reviews the following: (a) Credit assessment of the borrower’s industry, and macro-economic factors; (b) The purpose of credit and source of repayment; (c) The track record / repayment history of borrower; (d) Assess/evaluate the repayment capacity of the borrower; (e) The proposed terms and conditions and covenants; (f) Adequacy and enforceability of collaterals; and (g) Approval from appropriate authority. 64 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Clear tolerance limits and risk appetite set at the Board level, well communicated to the business units and periodically reviewed and monitored to adjust as appropriate; (b) Well-defined target market and risk asset acceptance criteria; (c) Rigorous financial, credit and overall risk analysis for each customer/transaction; (d) Regular portfolio examination in line with key performance indicators and periodic stress testing; (e) Continuous assessment of concentrations and mitigation strategies; (f) Continuous validation and modification of early warning system to ensure proper functioning for risk identification; (g) Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert judgment; (h) 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; (i) Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups; and (j) Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering proper remedies. The credit processes are supplemented by sectoral portfolio reviews, which focus on countries, regions or specific industries as well as multiple stress testing scenarios. These are intended to identify any inherent risks in the portfolios resulting from changes in market conditions and are supplemented by independent reviews from our Group Internal Audit. 3.2.5 Group Credit Risk Limits The Group applies credit risk limits, among other techniques in managing credit risk. This is the practice of stipulating a maximum amount that the individual or counterparty can obtain as loan. Internal and regulatory limits are strictly adhered to. Through this, the Group not only protects itself, but also in a sense, protects the counterparties from borrowing more than they are capable of repaying. The Group focuses on its concentration and intrinsic risks and further manages them to a more comfortable level. This is very important due to the serious risk implications that intrinsic and concentration risk pose to the Group. A thorough analysis of economic factors, market forecasting and prediction based on historical evidence is used to mitigate these risks. The Group has in place various portfolio concentration limits (which are subject to periodic review). These limits are closely monitored and reported on from time to time. The Group’s internal credit approval limits for the various authorities levels are as indicated below. Zenith Group Rating Approval limit (% of Shareholders' Fund) Board Credit Committee N5 billion and above (Not exceeding 20% of total shareholders' fund) Management Global Credit Committee Below N5 billion These internal approval limits are set and approved by the Group Board and are reviewed regularly as the state of affairs of the Group and the wider financial environment demand. 65 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Real estate, plant and equipment collateral (usually all asset or mortgage debenture or charge), which have to be registered and enforceable under Nigerian law; (b) 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; (c) Stocks and shares of publicly quoted companies; (d) Domiciliation of contracts proceeds; (e) Documents of title to goods such as shipping documents consigned to the order of Zenith Bank or any of its subsidiaries; (f) Letter of lien; and (g) 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. 66 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. One major measure adopted by the bank is restructuring of credit facilities to terms more favourable to the customer and at the same time guarantee full recovery of the loans. Fore closure of collateral is usually the last measure adopted by the bank in the realization of its funds. The Group’s policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by the Group since the prior period. The Group did not take legal repossession of any collateral in the year. Details of collateral pledged by customers against the carrying amount of loans and advances as at 31 December 2024 are as follows: In millions of Naira Group Bank Total exposure Fair value of collateral Total exposure Fair value of collateral Secured against real estate 603,062 816,116 394,840 313,272 Secured by shares of quoted companies 26,744 12,051 26,744 12,051 Cash Collateral, lien over fixed and floating assets 5,129,785 3,912,017 4,549,166 3,298,165 Unsecured 5,234,225 - 4,751,910 - Total Gross amount 10,993,816 4,740,184 9,722,660 3,623,488 ECL Allowance (1,028,452) - (1,013,885) - Net carrying amount 9,965,364 4,740,184 8,708,775 3,623,488 Group 31 December 2024 Term loan Overdrafts Onlending Total Disclosure by Collateral Property/Real estate 615,966 193,705 4,257 813,928 Equities 4,917 7,134 - 12,051 Cash Collateral, lien over fixed and floating assets 3,352,041 525,437 36,727 3,914,205 Grand total: Fair value of collateral 3,972,924 726,276 40,984 4,740,184 Grand total: Gross loans 8,912,221 2,003,446 78,149 10,993,816 Grand total: ECL Allowance (798,818) (223,113) (6,521) (1,028,452) Grand total: Net amount 8,113,403 1,780,333 71,628 9,965,364 Grand total: Amount of overcollaterization/(undercollaterization) (4,140,479) (1,054,057) (30,644) (5,225,180) 67 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 Term loan Overdrafts Onlending Total Against 12 months ECL loans and advances Property/Real estate 361,852 176,601 3,093 541,546 Equities 4,709 3,080 - 7,789 Cash Collateral, lien over fixed and floating assets 1,829,616 191,916 31,334 2,052,866 Fair value of collateral 2,196,177 371,597 34,427 2,602,201 Gross loans 6,005,480 1,214,301 67,065 7,286,846 ECL Allowance (124,852) (25,236) (1,275) (151,363) Net amount 5,880,628 1,189,065 65,790 7,135,483 Grand total: Amount of overcollaterization/(undercollaterization) (3,684,451) (817,468) (31,363) (4,533,282) 31 December 2024 Term loan Overdrafts Onlending Total Against lifetime ECL not credit-impaired loans and advances Property/Real estate 240,094 6,703 337 247,134 Equities 18 - - 18 Cash Collateral, lien over fixed and floating assets 1,494,475 314,042 2,230 1,810,747 Fair value of collateral 1,734,587 320,745 2,567 2,057,899 Gross loans 2,715,685 643,543 3,107 3,362,335 ECL Allowance (537,863) (95,906) (1,984) (635,753) Net amount 2,177,822 547,637 1,123 2,726,582 Grand total: Amount of overcollaterization/(undercollaterization) (443,235) (226,892) 1,444 (668,683) 31 December 2024 Term loan Overdrafts Onlending Total Against lifetime ECL credit-impaired loans and advances Property/Real estate 14,019 10,401 826 25,246 Equities 190 4,055 - 4,245 Cash Collateral, lien over fixed and floating assets 27,950 19,478 3,163 50,591 Fair value of collateral 42,159 33,934 3,989 80,082 Gross loans 191,056 145,602 7,977 344,635 ECL Allowance (136,103) (101,971) (3,262) (241,336) Net amount 54,953 43,631 4,715 103,299 Grand total: Amount of overcollaterization/(undercollaterization) (12,794) (9,697) (726) (23,217) 68 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank 31 December 2024 Term loan Overdrafts Onlending Total Disclosure by Collateral Property/Real estate 266,389 42,627 4,257 313,273 Equities 4,917 7,134 - 12,051 Cash Collateral, lien over fixed and floating assets 2,788,302 473,135 36,727 3,298,164 Grand total: Fair value of collateral 3,059,608 522,896 40,984 3,623,488 Grand total: Gross loans 7,821,586 1,822,925 78,149 9,722,660 Grand total: ECL Allowance (789,286) (218,078) (6,521) (1,013,885) Grand total: Net amount 7,032,300 1,604,847 71,628 8,708,775 Grand total: Amount of overcollaterization/(undercollaterization) (3,972,692) (1,081,951) (30,644) (5,085,287) 31 December 2024 Term loan Overdrafts Onlending Total Against 12 months ECL loans and advances Property/Real estate 42,752 36,377 3,093 82,222 Equities 4,709 3,080 - 7,789 Cash Collateral, lien over fixed and floating assets 1,270,170 146,331 31,334 1,447,835 Fair value of collateral 1,317,631 185,788 34,427 1,537,846 Gross loans 4,927,972 1,037,700 67,065 6,032,737 ECL Allowance (116,067) (20,846) (1,275) (138,188) Net amount 4,811,905 1,016,854 65,790 5,894,549 Grand total: Amount of overcollaterization/(undercollaterization) (3,494,274) (831,066) (31,363) (4,356,703) 31 December 2024 Term loan Overdrafts Onlending Total Against lifetime ECL not credit-impaired loans and advances Property/Real estate 222,673 2,842 337 225,852 Equities 18 - - 18 Cash Collateral, lien over fixed and floating assets 1,490,181 307,497 2,230 1,799,908 Fair value of collateral 1,712,872 310,339 2,567 2,025,778 Gross loans 2,705,303 643,072 3,107 3,351,482 ECL Allowance (537,116) (95,633) (1,984) (634,733) Net amount 2,168,187 547,439 1,123 2,716,749 Grand total: Amount of overcollaterization/(undercollaterization) (455,315) (237,100) 1,444 (690,971) 31 December 2024 Term loan Overdrafts Onlending Total Against lifetime ECL credit-impaired loans and advances Property/Real estate 963 3,408 826 5,197 Equities 190 4,055 - 4,245 Cash Collateral, lien over fixed and floating assets 27,950 19,307 3,163 50,420 Fair value of collateral 29,103 26,770 3,989 59,862 Gross loans 188,311 142,153 7,977 338,441 ECL Allowance (136,103) (101,599) (3,262) (240,964) Net amount 52,208 40,554 4,715 97,477 Grand total: Amount of overcollaterization/(undercollaterization) (23,105) (13,784) (726) (37,615) 69 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Details of collateral pledged by customers against carrying amount of loans and advances as at 31 December 2023 are as follows: In millions of Naira Group Bank Total exposure Fair Value of collateral Total exposure Value of collateral Secured against real estate 449,911 3,214,994 319,439 126,676 Secured by shares of quoted companies 13,967 9,199 13,967 9,199 Cash collateral, lien over fixed and floating assets 2,533,205 2,270,505 2,203,420 1,928,631 Unsecured 4,058,365 - 3,876,153 - Total Gross amount 7,055,448 5,494,698 6,412,979 2,064,506 ECL Allowance (498,977) - (484,183) - Net carrying amount 6,556,471 5,494,698 5,928,796 2,064,506 Group 31 December 2023 Term loan Overdrafts Onlending Total Disclosure by Collateral Property/Real estate 3,118,408 81,402 15,184 3,214,994 Equities 1,788 4,788 2,622 9,198 Cash Collateral, lien over fixed and floating assets 1,692,916 202,472 375,118 2,270,506 Grand total: Fair value of collateral 4,813,112 288,662 392,924 5,494,699 Grand total: Gross loans 5,291,535 1,098,703 665,210 7,055,449 Grand total: ECL Allowance (336,420) (125,258) (37,299) (498,977) Grand total: Net amount 4,955,115 973,446 627,911 6,556,473 Grand total: Amount of overcollaterization/(undercollaterization) (142,003) (684,784) (234,986) (1,061,773) 31 December 2023 Term loan Overdrafts Onlending Total Against 12 months ECL loans and advances Property/Real estate 232,635 73,121 14,286 320,042 Equities 930 1,365 794 3,089 Cash Collateral, lien over fixed and floating assets 1,202,510 99,070 195,589 1,497,169 Fair value of collateral 1,436,075 173,556 210,669 1,820,300 Gross loans 3,522,061 348,802 443,581 4,314,444 ECL Allowance (36,667) (4,825) (5,855) (47,347) Net amount 3,485,394 343,977 437,726 4,267,097 Grand total: Amount of overcollaterization/(undercollaterization) (2,049,318) (170,422) (227,057) (2,446,797) 70 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2023 Term loan Overdrafts Onlending Total Against lifetime ECL not credit-impaired loans and advances Property/Real estate 2,832,953 3,117 843 2,836,913 Equities 858 235 1,828 2,921 Cash Collateral, lien over fixed and floating assets 441,123 88,005 174,007 703,135 Fair value of collateral 3,274,934 91,357 176,678 3,542,969 Gross loans 1,556,619 658,239 215,799 2,430,657 ECL Allowance (98,041) (46,347) (27,160) (171,548) Net amount 1,458,577 611,892 188,640 2,259,109 Grand total: Amount of overcollaterization/(undercollaterization) 1,816,357 (520,535) (11,962) 1,283,860 31 December 2023 Term loan Overdrafts Onlending Total Against lifetime ECL credit-impaired loans and advances Property/Real estate 52,820 5,164 55 58,039 Equities - 3,189 - 3,189 Cash Collateral, lien over fixed and floating assets 48,292 16,388 5,521 70,201 Fair value of collateral 101,112 24,741 5,576 131,429 Gross loans 212,855 91,662 5,830 310,347 ECL Allowance (201,712) (74,086) (4,284) (280,082) Net amount 11,143 17,576 1,546 30,265 Grand total: Amount of (undercollaterization)/overcollaterization 89,969 7,165 4,030 101,164 Bank 31 December 2023 Term loan Overdrafts Onlending Total Disclosure by Collateral Property/Real estate 83,454 28,038 15,184 126,676 Equities 1,788 4,789 2,622 9,199 Cash Collateral, lien over fixed and floating assets 1,372,755 180,759 375,117 1,928,631 Grand total: Fair value of collateral 1,457,997 213,586 392,923 2,064,506 Grand total: Gross loans 4,714,937 1,032,834 665,208 6,412,979 Grand total: ECL Allowance (326,300) (120,584) (37,299) (484,183) Grand total: Net amount 4,388,637 912,250 627,909 5,928,796 Grand total: Amount of overcollaterization/(undercollaterization) (2,930,640) (698,664) (234,986) (3,864,290) 71 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2023 Term loan Overdrafts Onlending Total Against 12 months ECL loans and advances Property/Real estate 23,378 21,076 14,286 58,740 Equities 930 1,365 794 3,089 Cash Collateral, lien over fixed and floating assets 882,349 77,584 195,590 1,155,523 Fair value of collateral 906,657 100,025 210,670 1,217,352 Gross loans 2,952,899 284,365 443,582 3,680,846 ECL Allowance (26,960) (1,924) (5,854) (34,738) Net amount 2,925,939 282,441 437,728 3,646,108 Grand total: Amount of overcollaterization/(undercollaterization) (2,019,282) (182,416) (227,058) (2,428,756) 31 December 2023 Term loan Overdrafts Onlending Total Against lifetime ECL not credit-impaired loans and advances Property/Real estate 7,488 3,117 843 11,448 Equities 858 235 1,828 2,921 Cash Collateral, lien over fixed and floating assets 441,123 87,862 174,008 702,993 Fair value of collateral 449,469 91,214 176,679 717,362 Gross loans 1,549,326 658,189 215,799 2,423,314 ECL Allowance (97,678) (45,872) (27,160) (170,710) Net amount 1,451,648 612,317 188,639 2,252,604 Grand total: Amount of overcollaterization/(undercollaterization) (1,002,179) (521,103) (11,960) (1,535,242) 31 December 2023 Term loan Overdrafts Onlending Total Against lifetime ECL credit-impaired loans and advances Property/Real estate 52,588 3,845 55 56,488 Equities - 3,189 - 3,189 Cash Collateral, lien over fixed and floating assets 48,292 16,303 5,520 70,115 Fair value of collateral 100,880 23,337 5,575 129,792 Gross loans 212,712 90,279 5,828 308,819 ECL Allowance (201,662) (72,789) (4,284) (278,735) Net amount 11,050 17,490 1,544 30,084 Grand total: Amount of overcollaterization/(undercollaterization) 89,830 5,847 4,031 99,708 (ii) Balance Sheet Netting Arrangements Risk reduction by way of current account set-off is recognised for exposures to highly rated and creditworthy customers. Customers are required to enter into formal agreements giving Zenith Bank Plc the right to set-off gross credit and debit balances in their nominated accounts to determine the Groups net exposure. Cross-border set-offs are not permitted. (iii) Guarantees and Standby Letters of Credit Guarantees and Standby Letters of Credit are perceived to have comparable level of credit risk as loans and advances. In accordance with the Group’s credit policies, banks and creditworthy companies and individuals with high net worth are accepted as guarantors, subject to credit risk assessment. Furthermore, Zenith Bank Plc. only recognises unconditional irrevocable guarantees or standby letters of credit provided they are not related to the underlying obligor. 72 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 and 31 December 2023 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 2024. In millions of Naira Group Bank Maximum exposure to credit risk Maximum exposure to credit risk Trading assets - Treasury bills 1,656,226 1,656,226 - Investment in securities 41,891 35,238 - Derivatives Asset -Hedging Instrument 251,523 251,523 - Derivatives Asset-Non Hedging Instrument 29,104 19,690 - Assets pledged as collateral - - 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 Group Bank Maximum exposure to credit risk Maximum exposure to credit risk Trading assets - Treasury bills 749,606 749,606 - Investment in securities 24,293 19,433 - Derivatives Asset -Hedging Instrument 462,376 462,376 -Derivatives Asset - Non Hedging Instrument 72,363 45,566 - Assets pledged as collateral - - 73 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 Maximum exposure to credit risk Maximum exposure to credit risk In millions of Naira Group Bank Financial assets measured at amortised cost - Balances with central bank 5,721,839 5,153,964 - Treasury bills 1,022,703 781,238 - Investment in securities 2,739,998 1,846,205 - Assets pledged as collateral 266,865 89,061 - Loans and advances to customers 9,965,364 8,708,776 - Due from banks 4,935,710 4,442,437 - Other financial assets 237,026 114,288 Financial assets measured through other comprehensive income - Investment in securities 1,949,011 - Off balance sheet exposures 4,858,039 4,741,303 The following table contains an analysis of the maximum credit risk exposure from financial assets subject to impairment as at 31 December 2023 Maximum exposure to credit risk Maximum exposure to credit risk In millions of Naira Group Bank Financial assets measured at amortised cost - Balances with central bank 4,107,110 3,860,124 - Treasury bills 1,986,667 1,780,360 - Investment in securities 1,521,682 970,157 - Assets pledged as collateral 308,638 255,061 - Loans and advances to customers 6,556,470 5,928,796 - Due from banks 1,834,314 1,691,722 - Other financial assets 445,597 394,540 Financial assets measured through other comprehensive income - Investment in securities 1,528,786 - Off balance sheet exposures 2,044,034 1,840,885 74 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 and 31 December 2023 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 2024 and 31 December 2023 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 Group Bank 31 December 2024 Nigeria Rest of Africa Outside Africa Nigeria Rest of Africa Outside Africa Balances with central bank 5,153,964 567,877 - 5,153,964 - - Treasury bills 2,437,464 241,465 - 2,437,464 - - Assets pledged as collateral 89,061 - 177,804 89,061 - - Due from other banks 4,447,704 124,328 363,678 4,442,437 - - Investment securities 1,958,127 798,147 1,974,625 1,799,941 81,502 - Derivative Asset - Hedging Instrument 251,523 - - 251,523 - - Derivative Asset-Non Hedging Instrument 19,690 7,062 2,351 19,690 - - Other financial assets 104,822 124,348 7,855 106,423 1,486 6,379 Total 14,462,355 1,863,227 2,526,313 14,300,503 82,988 6,379 Financial Guarantees Usance 2,567,161 - - 2,801,850 - - Letters of credit 274,043 49,850 33,844 33,994 - - Performance bond and guarantees 1,549,747 112,272 10,236 1,644,573 - - Undrawn Overdraft Balance 260,887 - - 260,887 - - Total 4,651,838 162,122 44,080 4,741,304 - - In millions of Naira Group Bank 31 December 2023 Nigeria Rest of Africa Outside Africa Nigeria Rest of Africa Outside Africa Balances with central bank 3,860,124 246,986 - 3,860,124 - - Treasury bills 2,529,966 206,307 - 2,529,966 - - Assets pledged as collateral 308,638 - - 255,061 - - Due from other banks 127,067 35,581 1,671,666 126,766 1,076 1,563,880 Investment securities 1,054,597 483,190 1,536,974 956,400 33,190 - Derivative Asset - Hedging Instrument 462,376 - - 462,376 - 1 Derivative Asset- Non Hedging instrument 45,564 - 26,799 45,565 - - Other financial assets 389,071 50,309 6,217 389,137 651 4,752 Total 8,777,403 1,022,373 3,241,656 8,625,395 34,917 1,568,633 Financial Guarantees Usance 433,926 - - 433,926 - - Letters of credit 424,890 18,574 123,342 424,903 - - Performance bond and guarantees 718,207 101,323 12,063 770,347 - - Undrawn overdraft 211,708 - - 211,709 - - Total 1,788,731 119,897 135,405 1,840,885 - - 75 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Gross loans and advances to customers and the impairment allowance per geographical region as at 31 December 2024 Carrying amounts presented in the table below is determined as gross loans less impairment allowances. 31 December 2024 Group Bank Loans and advances to customers Loans and advances to customers Gross loans Impairment Allowance Carrying amount Gross loans Impairment Allowance Carrying amount South South Nigeria 491,017 (23,195) 467,822 490,259 (23,163) 467,096 South West Nigeria 8,447,985 (835,920) 7,612,065 8,335,139 (833,393) 7,501,746 South East Nigeria 190,738 (36,250) 154,488 190,738 (36,250) 154,488 North Central Nigeria 505,612 (48,598) 457,014 503,531 (48,510) 455,021 North West Nigeria 59,633 (11,753) 47,880 59,409 (11,744) 47,665 North East Nigeria 143,585 (60,825) 82,760 143,584 (60,825) 82,759 Rest of Africa 778,386 (11,169) 767,217 - - - Outside Africa 376,860 (742) 376,118 - - - 10,993,816 (1,028,452) 9,965,364 9,722,660 (1,013,885) 8,708,775 31 December 2023 Group Bank Loans and advances to customers Loans and advances to customers Gross loans Impairment Allowance Carrying amount Gross loans Impairment Allowance Carrying amount South South Nigeria 531,653 (14,615) 517,038 531,653 (14,615) 517,038 South West Nigeria 5,404,929 (435,348) 4,969,581 5,224,294 (433,179) 4,791,115 South East Nigeria 209,958 (12,804) 197,154 209,958 (12,804) 197,154 North Central Nigeria 210,427 (11,918) 198,509 210,427 (11,918) 198,509 North West Nigeria 68,967 (4,311) 64,656 68,967 (4,311) 64,656 North East Nigeria 167,680 (7,356) 160,324 167,680 (7,356) 160,324 Rest of Africa 309,739 (9,790) 299,949 - - - Outside Africa 152,094 (2,836) 149,258 - - - 7,055,447 (498,977) 6,556,469 6,412,979 (484,183) 5,928,796 76 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (b) Industry sectors Gross loans and advances to customers per industry sector as at 31 December 2024 Carrying amounts presented in the table below are determined as gross loans less impairment allowances. 31 December 2024 In millions of Naira Group Bank Loans and advances to customers Loans and advances to customers Gross loans Impairment allowance Carrying amount Gross loans Impairment allowance Carrying amount Agriculture 335,680 (22,468) 313,212 281,225 (21,481) 259,744 Oil and gas 4,105,443 (560,706) 3,544,737 3,996,809 (558,922) 3,437,887 Consumer Credit 336,532 (28,553) 307,979 180,604 (25,637) 154,967 Manufacturing 2,647,825 (114,193) 2,533,632 2,565,081 (113,002) 2,452,079 Real estate and construction 150,686 (3,615) 147,071 46,204 (1,370) 44,834 Finance and insurance 440,168 (9,707) 430,461 270,305 (8,465) 261,840 Government 1,021,000 (136,269) 884,731 812,815 (135,080) 677,735 Power 217,051 (62,567) 154,484 214,583 (62,463) 152,120 Transportation 229,748 (29,661) 200,087 154,193 (28,998) 125,195 Communication 379,310 (5,054) 374,256 370,764 (4,793) 365,971 Education 31,838 (739) 31,099 28,899 (613) 28,286 General Commerce 1,098,535 (54,920) 1,043,615 801,178 (53,061) 748,117 10,993,816 (1,028,452) 9,965,364 9,722,660 (1,013,885) 8,708,775 31 December 2023 In millions of Naira Group Bank Loans and advances to customers Loans and advances to customers Gross loans Impairment allowance. Carrying amount Gross loans Impairment allowance Carrying amount Agriculture 337,124 (6,566) 330,558 328,984 (6,243) 322,741 Oil and gas 2,111,589 (175,455) 1,936,134 2,109,033 (175,345) 1,933,690 Consumer Credit 148,642 (28,439) 120,203 126,491 (27,604) 98,887 Manufacturing 1,598,506 (157,356) 1,441,149 1,520,684 (154,544) 1,366,140 Real estate and construction 258,090 (14,077) 244,013 198,922 (12,173) 186,749 Finance and Insurance 153,750 (2,608) 151,142 43,032 (339) 42,693 Government 875,619 (30,322) 845,297 785,577 (29,535) 756,042 Power 124,580 (9,389) 115,191 124,580 (9,389) 115,191 Transportation 150,809 (18,448) 132,361 129,314 (17,617) 111,697 Communication 108,612 (461) 108,151 100,876 (218) 100,658 Education 31,547 (521) 31,026 26,455 (316) 26,139 General Commerce 1,156,582 (55,337) 1,101,245 919,031 (50,862) 868,169 7,055,447 (498,977) 6,556,470 6,412,979 (484,183) 5,928,796 77 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Group Financial assets excluding loans and advances per industry sector as at 31 December 2024. 31 December 2024 In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivatives Hedging Instrument Derivatives Non Hedging Instrument Other financial assets Government 5,721,841 2,678,967 266,877 - 3,890,005 251,523 27,123 - Manufacturing - - - - 6,798 - - - Finance and Insurance - - - 4,688,870 811,594 - 1,979 288,660 Communication - - - 259,425 40,713 - - - Gross amount 5,721,841 2,678,967 266,877 4,948,295 4,749,110 251,523 29,102 288,660 Impairment allowance - (38) (11) (12,588) (18,210) - - (51,443) Carrying amount 5,721,841 2,678,929 266,866 4,935,707 4,730,900 251,523 29,102 237,217 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 Derivatives Hedging Instrument Derivatives Non Hedging Instrument Other financial assets Government 4,107,110 2,736,344 308,667 - 1,862,577 462,376 45,565 - Manufacturing - - - - 156,646 - - - Finance and Insurance - - - 1,835,249 992,817 - 26,798 476,740 Communication - - - - 105,033 - - - Gross amount 4,107,110 2,736,344 308,667 1,835,249 3,117,073 462,376 72,363 476,740 Impairment allowance - (71) (29) (935) (42,312) - - (31,143) Carrying amount 4,107,110 2,736,273 308,638 1,834,314 3,074,761 462,376 72,363 445,597 Bank Financial assets excluding loans and advances per industry sector as at 31 December 2024 31 December 2024 In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivatives Hedging Instrument Derivative Non Hedging Instrument Other financial assets Government 5,153,964 2,437,502 89,073 - 1,789,447 251,523 17,710 - Manufacturing - - - - 4,721 - - - Finance and Insurance - - - 4,455,005 52,678 - 1,980 165,617 Communication - - - - 39,602 - - - Gross amount 5,153,964 2,437,502 89,073 4,455,005 1,886,448 251,523 19,690 165,617 Impairment allowance - (38) (11) (12,569) (5,005) - - (51,329) Carrying amount 5,153,964 2,437,464 89,062 4,442,436 1,881,443 251,523 19,690 114,288 78 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 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 Derivatives Hedging Instrument Derivatives Non Hedging Instrument Other financial assets Government 3,860,124 2,530,037 255,090 - 660,464 462,376 45,565 - Manufacturing - - - - 143,500 - - - Finance and Insurance - - - 1,692,657 86,605 - 1 425,601 Communication - - - - 104,472 - - - Gross amount 3,860,124 2,530,037 255,090 1,692,657 995,041 462,376 45,566 425,601 Impairment allowance - (71) (29) (935) (5,451) - - (31,061) Carrying amount 3,860,124 2,529,966 255,061 1,691,722 989,590 462,376 45,566 394,540 3.2.9 Credit quality analysis Group 31 December 2024 Credit rating - 12 month ECL: All financial assets excluding loans and advances In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A 5,172,502 2,437,502 266,877 3,641,151 3,394,551 - 2,351 71,854 BBB to BB - 34,144 - 1,027,450 873,665 251,523 19,690 33,700 CCC to C - - - 42,828 35,362 - - - Unrated 549,337 207,321 - 236,869 445,500 - 7,062 183,106 Gross amount 5,721,839 2,678,967 266,877 4,948,298 4,749,078 251,523 29,103 288,660 ECL - impairment - (38) (11) (12,588) (18,210) - - (51,443) Carrying amount 5,721,839 2,678,929 266,866 4,935,710 4,730,868 251,523 29,103 237,217 Loans and Advances Term loans Overdraft Onlending Total 12 months ECL 6,005,480 1,214,301 67,065 7,286,846 Lifetime ECL not credit impaired 2,715,685 643,541 3,107 3,362,333 Lifetime ECL credit impaired 191,056 145,602 7,979 344,637 Gross loans and advances 8,912,221 2,003,444 78,151 10,993,816 Less allowances for impairment 12 - months ECL 124,852 25,236 1,275 151,363 - - Lifetime ECL not credit impaired 537,863 95,904 1,984 635,751 Lifetime ECL credit impaired 136,103 101,971 3,264 241,338 Total allowances for impairment 798,818 223,111 6,523 1,028,452 Net loans and advances 8,113,403 1,780,333 71,628 9,965,364 79 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Credit rating for loans and advances with 12 month ECL Loans and advances Term loans Overdraft Onlending Total A 946,423 303,967 15,811 1,266,201 AA 748,027 193,383 4,271 945,681 B 17,360 7,746 - 25,106 BB 802,533 15,786 - 818,319 BBB 3,283,690 539,408 46,983 3,870,081 CC - - - - CCC (53) - - (53) Below C - - - - Unrated 207,499 154,012 - 361,511 Gross amount 6,005,479 1,214,302 67,065 7,286,846 ECL-Impairment (124,852) (25,236) (1,275) (151,363) Carrying amount 5,880,627 1,189,066 65,790 7,135,483 Bank 31 December 2024 Credit rating - 12 month ECL: All financial assets excluding loans and advances In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A 5,153,964 2,437,502 89,073 3,008,105 1,619,327 - - 71,854 BBB to BB - - - 871,933 258,423 251,523 19,690 33,700 CCC to C - - - 557,970 8,698 - - - Unrated - - - 16,998 - - - 60,063 Gross amount 5,153,964 2,437,502 89,073 4,455,006 1,886,448 251,523 19,690 165,617 ECL - impairment - (38) (11) (12,569) (5,005) - - (51,329) Carrying amount 5,153,964 2,437,464 89,062 4,442,437 1,881,443 251,523 19,690 114,288 Loans and Advances Term loans Overdraft Onlending Total 12 months ECL 4,927,972 1,037,700 67,065 6,032,737 Lifetime ECL not credit impaired 2,705,303 643,072 3,107 3,351,482 Lifetime ECL credit impaired 188,311 142,153 7,977 338,441 Gross loans and advances 7,821,586 1,822,925 78,149 9,722,660 Less allowances for impairment 12 - months ECL (116,067) (20,846) (1,275) (138,188) - - Lifetime ECL not credit impaired (537,116) (95,633) (1,984) (634,733) Lifetime ECL credit impaired (136,103) (101,599) (3,262) (240,964) Total allowances for impairment (789,286) (218,078) (6,521) (1,013,885) Net loans and advances 7,032,300 1,604,847 71,628 8,708,775 80 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Loans and advances Term loan Onlending Overdraft Total A 925,477 297,161 15,811 1,238,449 AA 747,887 193,383 4,271 945,541 BB 10,363 7,748 - 18,111 BBB 3,244,245 539,408 46,983 3,830,636 C - - - - CC - - - - CCC - - - - Below C - - - - UNRATED - - - - Gross amount 4,927,972 1,037,700 67,065 6,032,737 ECL-Impairment (116,067) (20,846) (1,275) (138,188) Carrying amount 4,811,905 1,016,854 65,790 5,894,549 Group 31 December 2023 Credit rating: All financial assets with credit exposure excluding loans and advances In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Asset - Hedging Instrument Derivative Asset -Non Hedging Instrument Other financial assets AAA to A 3,867,620 2,562,050 308,667 1,509,797 2,055,135 - 1,733 70,821 BBB to BB - - - 133,317 710,549 462,376 70,109 291,938 Below B 239,490 174,294 - 48,829 346,662 - - 62,064 Unrated - - - 143,306 4,727 - 521 51,917 Gross amount 4,107,110 2,736,344 308,667 1,835,249 3,117,073 462,376 72,363 476,740 ECL - impairment - (71) (29) (935) (42,312) - - (31,143) Carrying amount 4,107,110 2,736,273 308,638 1,834,314 3,074,761 462,376 72,363 445,597 In millions of Naira Loans and Advances Term loan Overdraft Onlending Total 12 months ECL 3,522,061 348,802 443,581 4,314,444 Lifetime ECL not credit impaired 1,556,619 658,239 215,799 2,430,657 Lifetime ECL credit impaired 212,855 91,662 5,830 310,347 Gross loans and advances 5,291,535 1,098,703 665,210 7,055,448 Less allowances for impairment 12 - months ECL 36,667 4,825 5,855 47,347 - - Lifetime ECL not credit impaired 98,041 46,347 27,160 171,548 Lifetime ECL credit impaired 201,712 74,086 4,284 280,082 Total allowances for impairment 336,420 125,258 37,299 498,977 Net loans and advances 4,955,115 973,445 627,911 6,556,471 81 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Credit rating for loans and advances with 12 month ECL Loans and advances Term loan Overdraft Onlending Total A 945,918 117,111 181,281 1,244,310 AA 599,565 122,750 48,754 771,069 B 291,783 2,382 - 294,165 BB 124,801 829 642 126,272 BBB 1,541,093 105,663 212,904 1,859,660 C - - - - CC - - - - CCC 1,413 - - 1,413 Below C - - - - Unrated 17,489 67 - 17,556 Gross amount 3,522,061 348,802 443,581 4,314,444 ECL-Impairment (36,667) (4,825) (5,855) (47,347) Carrying amount 3,485,394 343,977 437,726 4,267,097 Bank 31 December 2023 Credit rating - 12 month ECL: All financial assets excluding loans and advances In millions of naira Balances with central bank Treasury bills Assets pledged as collateral Due from other banks Investment securities Derivative Hedging Instruments Derivative Non Hedging Instruments Other financial assets AAA to A 3,965,386 2,530,037 255,090 1,346,978 618,736 - - 70,228 BBB to BB - - - 126,350 370,491 462,376 45,566 293,308 CCC to C - - - 211,466 5,814 - - - Unrated - - - 7,863 - - - 62,065 Gross amount 3,965,386 2,530,037 255,090 1,692,657 995,041 462,376 45,566 425,601 ECL - impairment - (71) (29) (935) (5,451) - - (31,061) Carrying amount 3,965,386 2,529,966 255,061 1,691,722 989,590 462,376 45,566 394,540 In millions of Naira Loans and Advances Term loans Overdraft Onlending Total 12 months ECL 2,952,899 284,365 443,582 3,680,846 Lifetime ECL not credit impaired 1,549,326 658,190 215,799 2,423,315 Lifetime ECL credit impaired 212,712 90,279 5,827 308,818 Gross loans and advances 4,714,937 1,032,834 665,208 6,412,979 Less allowances for impairment 12 - months ECL (26,960) (1,924) (5,855) (34,739) - - Lifetime ECL not credit impaired (97,680) (45,871) (27,159) (170,710) Lifetime ECL credit impaired (201,660) (72,789) (4,285) (278,734) Total allowances for impairment (326,300) (120,584) (37,299) (484,183) Net loans and advances 4,388,637 912,250 627,909 5,928,796 82 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Loans and advances Term loan Ovrdraft On-lending Total A 813,952 55,501 181,281 1,050,734 AA 597,064 122,746 48,754 768,564 B 927 669 642 2,238 BB 1,540,956 105,449 212,905 1,859,310 BBB - - - - C - - - - CC - - - - CCC - - - - Below C - - - - Unrated - - - - Gross amount 2,952,899 284,365 443,582 3,680,846 ECL-Impairment (26,960) (1,924) (5,855) (34,739) Carrying amount 2,925,939 282,441 437,727 3,646,107 Credit rating for loans and advances with 12 month ECL 3.2.10Amounts Arising from ECL For inputs, assumptions and techniques used for estimating impairment see accounting policy in note 2.7 3.2.11Amounts arising from ECL Corporate exposures Retail exposures All exposures – Information obtained during periodic review of customer files – e.g. audited financial statements, management accounts, budgets and projections. Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt service coverage, compliance with covenants, quality of management, senior management changes – Data from credit reference agencies, press articles, changes in external credit ratings – Quoted bond and credit default swap (CDS) prices for the borrower where available – Actual and expected significant changes in the political, regulatory and technological environment of the borrower or in its business activities – Internally collected data on customer behaviour – e.g. utilisation of credit card facilities – Affordability metrics – External data from credit reference agencies, including industry-standard credit scores – 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 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. 83 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.2.12Internal 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. 3.2.13Significant 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). 84 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.2.14Modified 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. An existing loan whose terms have been modified may be derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with the accounting policy set out in the accounting policy. The Group renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities) to maximise collection opportunities and minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms. The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. Both retail and corporate loans are subject to the forbearance policy. The 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. 85 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.2.15Definition 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. 3.2.16Incorporation 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 production  Consumer Credit sector portfolio - Inflation, prime lending and crude production  Agriculture sector portfolio- Crude production  Others - Crude production 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 2024 were as follows: Base Upturn Downturn Loans and advances and off-balance sheet exposures 37% 32% 31% Investment securities and placements 37% 32% 31% 86 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.2.17Measurement of ECL The key inputs into the measurement of ECL of financial assets (treasury bills, assets pledged as collateral, due from other banks, loans and advances and investment securities) are the term structure of the following variables:  probability of default (PD);  loss given default (LGD)  exposure at default (EAD) ECL for exposures in stage 1 (12-months ECL) is calculated by multiplying the 12-months PD by LGD and EAD. Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD. These parameters are generally derived from internally developed statistical models and other historical data and they are adjusted to reflect forward- looking information as described above. PD is an estimate of the likelihood of default over a given time horizon, which are calculated based on statistical rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures. These statistical models are based on internally compiled data comprising both quantitative and qualitative factors. Where it is available, market data may also be used to derive the PD for large corporate counterparties. If a counterparty or exposure migrates between rating classes, then this will lead to a change in the estimate of the associated PD. The methodology of estimating PD is discussed in note 3.2.12. LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the financial asset. LGD estimates are recalibrated for different economic scenarios and, for lending, to reflect possible changes in the economies. They are calculated on a discounted cash flow basis using the effective interest rate as the discount. EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract including amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EAD includes the amount drawn,as well as potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-looking forecasts. For financial guarantees, the EAD represents the amount of the guaranteed exposure when the financial guarantee becomes payable. For some financial assets, EAD is determined by modelling the range of possible exposure outcomes at various points in time using scenario and statistical techniques. As described above, and subject to using a maximum of a 12-month PD for financial assets for which credit risk has not significantly increased, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower’s extension options) over which it is exposed to credit risk, even if, for risk management purposes, the Group considers a longer period. The maximum contractual period extends to the date at which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee. For overdrafts and revolving facilities that include both a loan and an undrawn commitment component, the Group measures ECL over a period longer than the maximum contractual period if the Group’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the Group’s exposure to credit losses to the contractual notice period.These facilities do not have a fixed term or repayment structure and are managed on a collective basis. The Group can cancel them with immediate effect but this contractual right is not enforced in the normal day-to-day management, but only when the Group becomes aware of an increase in credit risk at the facility level. This longer period is estimated 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. 87 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2023 represent allowance account for credit losses and reflect measurement basis under IFRS 9. Group 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Treasury bills at amortised cost Balance at 1 January 71 407 Impairment Charge/(writeback) (see note 8) (33) (336) Closing balance 38 71 Gross amount 1,022,741 1,986,738 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Off balance sheet exposure (Financial Guarantees) Balance at 1 January 6,991 2,990 86 10,067 5,811 65 738 6,614 Impairment/(writeback) (see note 8) 38,251 (2,611) 4,756 40,396 (640) 2,925 (651) 1,634 Effect of Hyperinflation 2,616 2,616 947 947 Foreign exchange and other movements 1,021 4 2 1,027 872 - - 872 Closing balance 48,879 383 4,844 54,106 6,990 2,990 87 10,067 Gross amount 4,829,546 15,325 13,167 4,858,038 1,887,760 120,383 35,891 2,044,034 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Assets pledged as collateral at amortised cost Balance at 1 January 29 19 Impairment Charge/(writeback) (see note 8) (18) 10 Closing Balance 11 30 Gross amount 266,877 308,667 88 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Loans and advances to customers at amortised cost Balance at 1 January 47,347 171,548 280,083 498,978 29,501 35,370 45,390 110,261 - Transfer to 12-month ECL 7,807 (5,344) (2,463) - 2,542 (1,109) (1,433) - - Transfer to lifetime ECL not credit-impaired (1,140) 1,466 (326) - (6,495) 6,728 (233) - - Transfer to lifetime ECL credit- impaired (400) (2,912) 3,312 - (279) (3,338) 3,617 - Impairment charge/(write back) (see note 8) 96,622 441,417 56,135 594,174 19,308 132,836 248,506 400,650 Derecognized assets other than write off - - - - - - - - Write off - - (96,484) (96,484) - - (13,386) (13,386) Effect of Hyperinflation (5,016) - - (5,016) (1,215) - - (1,215) Foreign exchange and other movements 6,142 29,577 1,081 36,800 3,985 1,061 (2,379) 2,667 Closing balance 151,362 635,752 241,338 1,028,452 47,347 171,547 280,081 498,977 Gross amount 7,286,846 3,362,335 344,635 10,993,816 4,314,443 2,430,657 310,347 7,055,447 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Investment securities at amortised cost and fair value through OCI Balance at 1 January (7,557) (1,934) (32,610) (42,101) (3,323) (9,907) (49,008) (62,238) Transfer to lifetime ECL credit- impaired - - 9,310 (9,310) Impairment Charge/(writeback) (see note 8) 10,111 758 (1,432) 9,437 (1,992) (655) (5,256) (7,903) Financial assets derecognised during the year other than write-offs - 27,409 27,409 - - Modification of contractual cash flows - - - - 42,533 42,533 Foreign exchange and other movements (4,200) (881) (7,842) (12,923) (2,426) (683) (11,595) (14,704) Closing balance (1,646) (2,057) (14,475) (18,178) (7,741) (1,935) (32,636) (42,312) Gross amount 4,213,697 17,275 476,214 4,707,186 964,805 257,571 341,617 1,563,993 89 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired 12-month ECL Lifetime ECL not credit- impaired Other financial assets Balance at 1 January (31,143) - (28,970) - Impairment Charge/(writeback) (see note 8) (20,259) - (2,173) - - Foreign exchange and other movements (41) - - - Closing balance (51,443) - (31,143) - Gross amount subject to simplified ECL 223,179 - 411,264 - 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Due from other banks Balance at 1 January (935) (75) Impairment/(writeback) (see note 8) (11,653) (860) Foreign exchange and other movements - - Closing balance (12,588) (935) Gross amount 4,948,297 1,835,249 Bank 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Treasury bills at ammortised cost Balance at 1 January 71 39 Impairment Charge/(writeback) (see note 8) (33) 32 Closing balance 38 71 Gross amount 781,276 1,780,431 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Off balance sheet exposure Balance at 1 January 3,499 2,990 88 6,577 4,487 65 739 5,291 Impairment/(writeback) (see note 8) 39,165 (2,611) 4,756 41,310 (988) 2,925 (651) 1,286 Closing balance 42,664 379 4,844 47,887 3,499 2,990 88 6,577 Gross amount 4,712,810 15,325 13,167 4,741,303 1,684,611 120,383 35,891 1,840,885 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Assets pledged as collateral at ammortised cost Balance at 1 January 29 19 Impairment Charge/(writeback) (see note 8) (18) 10 Closing balance 11 29 Gross amount 89,073 255,090 90 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Loans and advances to customers at amortised cost Balance at 1 January 34,738 170,709 278,736 484,183 25,269 34,341 43,519 103,129 - Transfer to 12-month ECL 7,803 (5,340) (2,463) - 2,542 (1,109) (1,433) - - Transfer to lifetime ECL not credit-impaired (1,140) 1,231 (91) - (5,909) 6,142 (233) - - Transfer to lifetime ECL credit- impaired (136) (2,908) 3,044 - (264) (1,500) 1,764 - Impairment charge (see note 8) 96,923 441,338 56,136 594,397 13,100 132,835 248,505 394,440 Write-offs - - (94,398) (94,398) - - (13,386) (13,386) 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 - 29,703 - 29,703 Closing balance 138,188 634,733 240,964 1,013,885 34,738 170,709 278,736 484,183 Gross amount 6,032,737 3,351,482 338,441 9,722,660 3,680,846 2,423,314 308,819 6,412,979 31 December 2024 31 December 2023 In millions of naira Lifetime ECL not credit-impaired Lifetime ECL not credit-impaired Other financial assets - - Balance at 1 January 31,061 28,868 Impairment Charge (see note 8) 20,268 2,193 Closing balance 51,329 31,061 Gross amount subject to simplified approach ECL 98,654 358,753 91 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 In millions of naira 12-month ECL 12-month ECL Due from other Banks Balance at 1 January 935 75 Impairment/(writeback) (see note 8) 11,634 860 Closing balance 12,569 935 Gross amount 4,455,006 1,692,657 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Investment securities at amortised cost and fair value through OCI - - Balance at 1 January 2,178 538 2,735 5,451 1,277 - 1,307 2,584 - - - - - - Impairment Charge/(writeback)(see note 8) (1,406) (472) 1,432 (446) 901 538 1,428 2,867 - - - - - - - - Closing balance 772 66 4,167 5,005 2,178 538 2,735 5,451 Gross amount 1,841,160 1,353 8,698 1,851,211 720,663 249,308 5,636 975,607 92 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Treasury bills at amortised cost Gross carrying amount at 1 January 1,986,738 - - 1,986,738 1,003,732 177 - 1,003,909 Financial assets derecognised during the year other than write-offs (1,913,238) - - (1,913,238) (3,284,100) (306) - (3,284,406) Changes in amortised cost value 150,529 - - 150,529 38,186 - - 38,186 New financial assets originated or purchased 726,625 - - 726,625 4,197,072 - - 4,197,072 Foreign exchange and other movements 72,087 - - 72,087 31,849 129 - 31,978 Closing gross carrying amount 1,022,741 - - 1,022,741 1,986,739 - - 1,986,739 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Off balance sheet exposure Gross carrying amount at 1 January 1,887,316 121,360 35,358 2,044,034 1,010,968 1,056 12,194 1,024,218 Transfers: Transfer to 12 month ECL 8,985 (7,692) (1,293) - 3,574 (1,788) (1,786) - Transfer to lifetime ECL not credit- impaired (184,673) 185,273 (600) - (44,363) 44,910 (547) - Transfer to lifetime ECL credit- impaired (1,073) (85) 1,158 - (18,901) - 18,901 - Financial assets derecognised during the year (731,602) (89,939) (35,985) (857,526) (411,890) (5,266) (12,330) (429,486) New financial assets originated or purchased 4,251,708 13,773 9,809 4,275,290 875,878 70,183 14,367 960,428 Foreign exchange and other movements (401,115) (207,365) 4,721 (603,759) 472,050 12,265 4,559 488,874 Closing gross carrying amount 4,829,546 15,325 13,168 4,858,039 1,887,316 121,360 35,358 2,044,034 93 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 Stage 1 Stage 1 In millions of naira 12-month ECL 12-month ECL Assets pledged as collateral at amortised cost Gross carrying amount at 1 January 308,667 228,395 Transfers: Financial assets derecognised during the period other than write-offs (99,568) (156,160) Changes in amortised cost value 8,903 (1,001) New financial assets originated or purchased 90,609 53,577 Transfers from investment securities (75,352) 183,856 Foreign exchange and other movements 33,618 - Closing gross carrying amount 266,877 308,667 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Loans and advances to customers at amortised cost Gross carrying amount at 1 January 4,314,443 2,430,656 310,348 7,055,447 3,139,107 905,393 79,466 4,123,966 Transfers: Transfer from stage 1 to stage 2 166,236 (162,745) (3,491) - (593,133) 470,115 123,018 - Transfer from stage 1 to stage 3 (173,124) 173,563 (439) - - - - - Transfer from stage 2 to stage 3 (10,244) (45,109) 55,353 - (21,914) (4,179) 26,093 - Transfer from stage 3 to stage 2 - - - - - - - - Transfer from stage 2 to stage 1 - - - - - - - - Transfer from stage 3 to stage 1 - - - - 133,119 (130,079) (3,040) - Financial assets derecognised during the period other than write-offs (1,941,725) (1,387,334) (119,760) (3,448,819) (918,671) (129,405) (24,323) (1,072,399) New financial assets originated or purchased 4,431,965 2,211,380 115,686 6,759,031 2,513,310 852,633 82,036 3,447,979 Write-offs - - (94,398) (94,398) - - (13,386) (13,386) Foreign exchange and other movements 499,295 141,924 81,336 722,555 62,625 466,178 40,484 569,287 Closing gross carrying amount 7,286,846 3,362,335 344,635 10,993,816 4,314,443 2,430,656 310,348 7,055,447 94 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Investment securities at amortised cost and fair value through OCI Gross carrying amount at 1 January 1,883,277 710,949 498,554 3,092,780 1,400,136 90,253 195,605 1,685,994 Transfers: Transfer from stage 1 to stage 2 44,339 (44,339) - - (45,607) 45,607 - - Transfer from stage 1 to stage 3 - - - - - - - - Transfer from stage 2 to stage 3 - - - - - (77,900) 77,900 - Transfer to pledged - - - - (92,337) - - (92,337) Financial assets derecognised during the period other than write-offs (113,339) (203,632) 2,185 (314,786) (168,771) (9,432) (250,775) (428,978) Changes in amortised cost value 8,983 16 - 8,999 56,201 7,069 26,339 89,609 New financial assets originated or purchased 622,379 (4,124) 33,728 651,984 365,743 196,632 217,574 779,949 Modification of contractual cash flows of financial assets - - (42,518) (42,518) - - - - Transfer to assets pledged 75,352 - - 75,352 - - - - Foreign exchange and other movements 1,692,738 (441,594) (15,735) 1,235,409 367,912 458,720 231,911 1,058,543 Closing gross carrying amount 4,213,729 17,276 476,214 4,707,219 1,883,277 710,949 498,554 3,092,780 95 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 In millions of naira 12-month ECL Lifetime ECL not credit- impaired 12-month ECL Lifetime ECL not credit- impaired Other financial assets Gross carrying amount at 1 January - 411,263 168,692 - Transfers: New financial assets originated or purchased - 55,695 229,490 - Financial assets derecognised during the period other than write offs - (260,197) (448) - Foreign exchange and other movements - 16,417 13,530 - Closing gross carrying amount of assets subject to simplified approach - 223,179 411,264 - 31 December 2024 31 December 2023 Stage 1 Stage 1 In millions of naira 12-month ECL 12-month ECL Due from other banks Gross carrying amount at 1 January 1,835,249 1,302,886 Transfers: Financial assets derecognised during the period other than write-offs (782,772) (1,075,935) New financial assets originated or purchased 2,489,304 556,381 Foreign exchange and other movements 1,406,514 1,051,917 Closing gross carrying amount 4,948,295 1,835,249 Bank 31 December 2024 31 December 2023 Stage 1 Stage 1 In millions of naira 12-month ECL Total 12-month ECL Total Treasury bills at amortised cost Gross carrying amount at 1 January 1,780,431 1,780,431 963,669 963,669 Transfers: Financial assets derecognised during the period other than write-offs (1,876,309) (1,876,309) (3,283,800) (3,283,800) Changes in amortised cost value 150,529 150,529 38,154 38,154 New financial assets originated or purchased 726,625 726,625 4,062,409 4,062,409 Closing gross carrying amount 781,276 781,276 1,780,431 1,780,431 96 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Off balance sheet exposure Gross carrying amount at 1 January 1,684,611 120,383 35,891 1,840,885 972,357 8,263 15,143 995,763 Transfers: Transfer from stage 1 to stage 2 (184,673) 184,673 - - (44,320) 44,320 - - Transfer from stage 1 to stage 3 (1,073) - 1,073 - (18,894) - 18,894 - Transfer from stage 3 to stage 2 - 600 (600) - - 547 (547) - Transfer from stage 2 to stage 3 - (85) 85 - - (634) 634 - Transfer from stage 2 to stage 1 7,692 (7,692) - - 1,456 (1,456) - - Transfer from stage 3 to stage 1 1,293 - (1,293) - 1,786 - (1,786) - Financial assets derecognised during the period other than write-offs (812,567) (89,068) (35,836) (937,471) (381,858) (4,911) (12,330) (399,099) New financial assets originated or purchased 4,204,304 14,406 9,265 4,227,975 891,932 70,183 14,321 976,436 Foreign exchange and other movements (186,774) (207,892) 4,581 (390,085) 262,152 4,071 1,562 267,785 Closing gross carrying amount 4,712,813 15,325 13,166 4,741,304 1,684,611 120,383 35,891 1,840,885 97 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 Stage 1 Stage 1 In millions of naira 12-month ECL 12-month ECL Assets pledged as collateral at amortised cost Gross carrying amount at 1 January 255,090 228,397 Transfers: Transfer (to)/from investment securities (75,352) - Financial assets derecognised during the period other than write-offs (99,568) (156,160) Changes in amortised cost value 8,903 (1,001) New financial assets originated or purchased - 183,854 Closing gross carrying amount 89,073 255,090 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Loans and advances to customers at amortised cost Gross carrying amount at 1 January 3,680,845 2,423,315 308,819 6,412,979 2,862,479 899,745 76,580 3,838,804 Transfers: Transfer from stage 1 to stage 2 (173,124) 173,124 - - (592,065) 592,065 - - Transfer from stage 1 to stage 3 (8,212) - 8,212 - (21,914) - 21,914 - Transfer from stage 2 to stage 3 - (40,606) 40,606 - - (123,018) 123,018 - Transfer from stage 3 to stage 2 - 439 (439) - - 1,474 (1,474) - Transfer from stage 2 to stage 1 157,608 (157,608) - - 130,079 (130,079) - - Transfer from stage stage 3 to stage 1 3,491 - (3,491) - 3,040 - (3,040) - New financial assets originated or purchased 4,289,478 2,210,585 115,686 6,615,749 2,186,176 861,614 83,529 3,131,319 Financial assets derecognised during the period other than write-offs (1,941,725) (1,387,334) (110,266) (3,439,325) (918,615) (129,405) (16,605) (1,064,625) Write-offs - - (94,398) (94,398) - - (13,386) (13,386) Foreign exchange and other movements 24,377 129,566 73,712 227,655 31,665 450,919 38,283 520,867 Closing gross carrying amount 6,032,738 3,351,481 338,441 9,722,660 3,680,846 2,423,314 308,819 6,412,979 98 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 In millions of naira 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total 12-month ECL Lifetime ECL not credit- impaired Lifetime ECL credit- impaired Total Investment securities at amortised cost Gross carrying amount at 1 January 720,663 249,308 5,636 975,607 518,217 - 2,703 520,920 Transfers: Transfer from stage 1 to stage 2 44,339 (44,339) - - (45,607) 45,607 - - Transfer from/(to) assets pledged as collateral 75,352 - - 75,352 - - - - Transfer to pledge - - - - (92,337) - - (92,337) Financial assets derecognised during the period other than write-offs (94,980) (203,632) 2,185 (296,427) (82,885) - - (82,885) Changes in amortised cost value 8,983 16 - 8,999 56,201 7,069 57 63,327 New financial assets originated or purchased 1,086,802 - 326 1,087,128 343,210 196,632 - 539,842 Modification of contractual cash flows of financial assets - - (2,986) (2,986) - - - - Foreign exchange and other movements - - 3,537 3,537 23,864 - 2,876 26,740 Closing gross carrying amount 1,841,159 1,353 8,698 1,851,210 720,663 249,308 5,636 975,607 31 December 2024 31 December 2023 In millions of naira Lifetime ECL Lifetime ECL Other financial assets - - Gross carrying amount at 1 January 358,753 150,690 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 - - Financial assets derecognised during the period other than write-offs (260,099) 208,063 New financial assets originated or purchased - - New financial assets originated or purchased - - Modification of contractual cash flows of financial assets - - Changes in interest accruals - - Write-offs - - Closing gross carrying amount of assts subject to simplified approach 98,654 358,753 31 December 2024 31 December 2023 Stage 1 Stage 1 In millions of naira 12-month ECL 12-month ECL Due from other banks Gross carrying amount at 1 January 1,692,657 1,132,870 Transfers: Financial assets derecognised during the period other than write-offs (781,908) (701,509) New financial assets originated or purchased 2,558,035 775,049 Foreign exchange and other movements 986,222 486,247 Closing gross carrying amount 4,455,006 1,692,657 99 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at 31 December 2024. Group Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetim e ECL Stage 3 Total In millions of Naira % % % % On-balance sheet items Assets pledged as collateral 266,877 - - 266,877 11 - - 11 - - - - Treasury bills 1,022,741 - - 1,022,741 38 - - 38 - - - - Loans and advances to customers at amortised cost 7,286,846 3,362,335 344,635 10,993,816 151,362 635,752 241,338 1,028,452 2.08 18.91 70.03 9.35 Debt investment securities at amortised cost and FVOCI 4,213,729 17,276 476,214 4,707,219 1,645 2,057 14,475 18,177 0.04 11.91 3.04 0.39 Other financial assets measured at amortised cost - 223,179 - 223,179 - 51,439 - 51,439 - 23.05 - 23.05 Due from other Banks 4,948,295 - - 4,948,295 12,588 - - 12,588 0.25 - - 0.25 Subtotal 17,738,488 3,602,790 820,849 22,162,127 165,644 689,248 255,813 1,110,705 0.93 19.13 31.16 5.01 Off-balance sheet items Loans and other credit related commitments Letters of credit 357,738 - - 357,738 106 - - 106 0.03 - - 0.03 Usance 2,549,524 10,878 6,759 2,567,161 47,237 379 3,437 51,053 1.85 3.48 50.85 1.99 Financial guarantee and similar contracts Financial guarantee and similar contracts 1,666,752 3,003 2,499 1,672,254 128 - 8 136 0.01 - 0.32 0.01 Undrawn overdraft balance 255,532 1,444 3,910 260,886 1,406 6 1,399 2,811 0.55 0.39 35.78 1.08 Subtotal 4,829,546 15,325 13,168 4,858,039 48,877 385 4,844 54,106 1.01 2.51 36.79 1.11 Total 22,568,034 3,618,115 834,017 27,020,166 214,521 689,633 260,657 1,164,811 0.95 19.06 31.25 4.31 * The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL. 100 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetim e ECL Stage 3 Total Stage 1 Stage 2/Lifetim e ECL Stage 3 Total In millions of Naira % % % % On-balance sheet items Assets pledged as collateral 89,073 - - 89,073 11 - - 11 0.01 - - 0.01 Treasury bills 781,276 - - 781,276 38 - - 38 0.00 - - - Loans and advances to customers at amortised cost 6,032,738 3,351,481 338,441 9,722,660 138,188 634,733 240,965 1,013,886 2.29 18.94 71.20 10.43 Debt investment securities at amortised cost 1,841,159 1,353 8,698 1,851,210 772 66 4,167 5,005 0.04 4.88 47.91 0.27 Other financial assets measured at amortised cost - 98,654 - 98,654 - 51,329 - 51,329 - 52.03 - 52.03 Due from other banks 4,455,006 - - 4,455,006 12,569 - - 12,569 0.28 - - 0.28 Subtotal 13,199,252 3,451,488 347,139 16,997,879 151,578 686,128 245,132 1,082,838 1.15 19.88 70.61 6.37 Off-balance sheet items Loans and other credit related commitments Letters of credit 33,994 - - 33,994 106 - - 106 0.31 - - 0.31 Usance 2,784,213 10,878 6,759 2,801,850 41,024 374 3,436 44,834 1.47 3.44 50.84 1.60 Performance bonds and guarantees 1,639,071 3,003 2,499 1,644,573 128 - 8 136 0.01 - 0.32 0.01 Undrawn overdraft balance 255,533 1,444 3,910 260,887 1,406 6 1,399 2,811 0.55 0.42 35.78 1.08 Subtotal 4,712,811 15,325 13,168 4,741,304 42,664 380 4,843 47,887 0.91 2.48 36.78 1.01 Total 17,912,063 3,466,813 360,307 21,739,183 194,242 686,508 249,975 1,130,725 1.08 19.80 69.38 5.20 * The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL. 101 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 ECL Coverage Ratio Financial Statement Items Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetim e ECL Stage 3 Total In millions of Naira % % % % On-balance sheet items Assets pledged as collateral 308,667 - - 308,667 29 - - 29 0.01 - - 0.01 Treasury bills 1,986,738 - - 1,986,738 71 - - 71 - - - - Loans and advances to customers at amortised cost 4,314,444 2,430,657 310,347 7,055,448 47,128 170,811 281,040 498,979 1.09 7.03 90.56 7.07 Debt investment securities at amortised cost 1,883,276 710,949 498,555 3,092,780 7,741 1,934 32,637 42,312 0.41 - - 1.37 Other financial assets measured at amortised cost 411,264 - - 411,264 31,143 - - 31,143 - - - 7.57 Due from other Banks 1,835,249 - - 1,835,249 935 - - 935 0.05 - - 0.05 Subtotal 10,739,638 3,141,606 808,902 14,690,146 87,047 172,745 313,677 573,469 0.81 5.50 38.78 3.90 Off-balance sheet items Loans and other credit related commitments Letters of credit 385,141 43,254 5,532 433,927 2,305 1,304 - 3,609 0.60 3.01 - 0.60 Usance 518,020 43,254 5,532 566,806 1,638 876 21 2,535 0.32 2.03 100.00 0.45 Financial guarantee and similar contracts Performance bonds and guarantees 787,789 13,635 30,169 831,593 2,466 632 65 3,163 0.31 4.64 0.22 0.38 Undrawn overdraft balance 175,345 36,265 98 211,708 582 178 - 760 0.33 0.49 - 0.36 Subtotal 1,866,295 136,408 41,331 2,044,034 6,991 2,990 86 10,067 0.37 2.19 0.21 0.49 Total 12,605,933 3,278,014 850,233 16,734,180 94,038 175,735 313,763 583,536 0.75 5.36 36.90 3.49 * The Group adopted the simplified approach in estimating the ECL for other financial asset. Under this approach, all ECL allowance are lifetime ECL. 102 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank Gross Carrying Amount ECL Provision ECL Coverage Ratio Financial Statement Items Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetime ECL Stage 3 Total Stage 1 Stage 2/Lifetim e ECL Stage 3 Total In millions of Naira % % % % On-balance sheet items Assets pledged as collateral 255,089 - - 255,089 29 - - 29 0.01 - - 0.01 Treasury bills 1,780,431 - - 1,780,431 71 - - 71 - - - - Loans and advances to customers at amortised cost 3,680,845 2,423,315 308,819 6,412,979 34,738 170,709 278,736 484,183 0.94 7.04 90.26 7.55 Debt investment securities at amortised cost 720,663 249,308 5,637 975,608 1,278 538 3,635 5,451 0.18 0.22 48.53 0.56 Other financial assets measured at amortised cost - 358,753 - 358,753 - 31,061 - 31,061 - 6.80 - 6.80 Due from other banks 1,692,657 - - 1,692,657 935 - - 935 0.06 - - 0.06 Subtotal 8,129,685 3,031,376 314,456 11,475,517 37,051 202,308 282,371 521,730 0.46 6.67 89.80 4.55 Off-balance sheet items Loans and other credit related commitments Letters of credit 397,582 27,229 92 424,903 2,305 1,304 - 3,609 0.58 4.79 - 0.85 Usance 385,141 43,254 5,532 433,927 581 1,497 21 2,099 0.15 3.46 0.38 0.48 Performance bonds and guarantees 726,543 13,635 30,169 770,347 30 12 67 109 - 0.09 0.22 0.01 Undrawn overdraft balance 175,345 36,265 98 211,708 582 178 - 760 0.33 0.49 - 0.36 Subtotal 1,684,611 120,383 35,891 1,840,885 3,498 2,991 88 6,577 0.21 2.48 0.25 0.36 Total 9,814,296 3,151,759 350,347 13,316,402 40,549 205,299 282,459 528,307 0.41 6.51 80.62 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. 103 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Where the execution of the loan purpose and the repayment are no longer realistic in light of new cash flows; (b) To avoid unintended default arising from adverse business conditions; (c) To align loan repayment with new pattern of achievable cash flows; (d) Where there are proven cost over runs that may significantly impair the project repayment capacity; (e) Where there is temporary downturn in the customer’s business environment; (f) Where the customer’s going concern status is NOT in doubt or threatened; and (g) The revised terms of restructured facilities usually include extended maturity, changing timing of interest payments and amendments to the terms of the loan agreement. 3.3 Market risk Market risk is the risk of potential losses in both on- and off-balance sheet positions arising from movements in market prices. Market risks can arise from adverse changes in interest rates, foreign exchange rates, equity prices, commodity prices and other relevant factors such as market volatilities. The Group undertakes activities which give rise to some level of market risks exposures. The objective of market risk management activities is to continuously identify, manage and control market risk exposure within acceptable parameters, while optimizing the return on risks taken. 3.3.1 Management of market risk The Group has an independent Market Risk Management unit which assesses, monitors, manages and reports on market risk taking activities across the Group. The Group enhances its Market Risk Management Framework on a continuous basis. The operations of the unit is guided by the mission of "inculcating enduring market risk management values and culture, with a view to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-off.” The Group's market risk objectives, policies and processes are aimed at instituting a model that objectively identifies, measures and manages market risks in the Group and ensure that: (a) The individuals who take or manage risk clearly understand it; (b) The Group's risk exposure is within established limits; (c) Risk taking decisions are in line with business strategy and objectives set by the Board of Directors; (d) The expected payoffs compensate for the risks taken; and (e) Sufficient capital, as a buffer, is available to take risk. The Group proactively manages its market risk exposures in both the trading and non-trading books within the acceptable levels. The Group's market risks exposures are broadly categorised into: (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. 104 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.3.1 Management of market risk (continued) 'In millions of Naira Group At 31 December 2024 At 31 December 2023 Note Carrying amount Trading Non-trading Carrying amount Trading Non-trading Assets Cash and balances with central bank 15 5,888,216 - 5,888,216 4,253,374 - 4,253,374 Treasury bills 16 2,678,929 1,656,226 1,022,703 2,736,273 749,606 1,986,667 Assets pledged as collateral 17 266,865 - 266,865 308,638 - 308,638 Due from other banks 18 4,935,707 - 4,935,707 1,834,314 - 1,834,314 Derivative Asset - Hedging Instrument 19 251,523 251,523 - 462,376 462,376 - Derivative Asset -Non Hedging Instrument 19 29,103 29,103 - 72,363 72,363 - Loans and advances 20 9,965,364 - 9,965,364 6,556,470 - 6,556,470 Investment securities 21 5,098,043 41,891 5,056,152 3,290,895 24,293 3,266,602 Other financial assets 25 237,217 - 237,217 445,597 - 445,597 Liabilities Customer deposits 28 21,959,367 - 21,959,367 15,167,740 - 15,167,740 Derivative liabilities 32 9,258 9,258 - 70,486 70,486 - Other financial liabilities 29 1,269,462 - 1,269,462 991,354 - 991,354 On-lending facilities 30 250,727 - 250,727 263,065 - 263,065 Borrowings 31 2,045,184 - 2,045,184 1,410,885 - 1,410,885 Bank At 31 December 2024 At 31 December 2023 Carrying amount Trading Non-trading Carrying amount Trading Non-trading Assets Cash and balances with central bank 15 5,249,789 - 5,249,789 3,965,386 - 3,965,386 Treasury bills 16 2,437,464 1,656,226 781,238 2,529,966 749,606 1,780,360 Assets pledged as collateral 17 89,061 - 89,061 255,061 - 255,061 Due from other banks 18 4,442,437 - 4,442,437 1,691,722 - 1,691,722 Derivative Asset - Hedging Instrument 19 251,523 251,523 - 462,376 462,376 - Derivative Asset -Non Hedging Instrument 19 19,690 19,690 - 45,566 45,566 - Loans and advances 20 8,708,775 - 8,708,775 5,928,796 - 5,928,796 Investment securities 21 2,248,587 35,238 2,213,349 1,205,724 19,433 1,186,291 Other financial assets 25 114,288 - 114,288 394,540 - 394,540 Liabilities Customer deposits 28 17,163,424 - 17,163,424 12,154,824 - 12,154,824 Derivative liabilities 32 4,465 4,465 - 45,514 45,514 - Other financial liabilities 29 1,226,971 - 1,226,971 970,792 - 970,792 On-lending facilities 30 250,725 - 250,725 263,065 - 263,065 Borrowings 31 1,951,616 - 1,951,616 1,450,182 - 1,450,182 105 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 106 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Group The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December 2024 and 31 December 2023. Included in the table are the Group’s financial instruments at carrying amounts, categorised by currency. In millions of Naira At 31 December 2024 Naira Dollar GBP Euro Others Total Assets Cash and balances with central banks 5,186,881 146,324 16,215 35,012 503,784 5,888,216 Treasury bills 2,437,464 - - - 241,465 2,678,929 Assets pledged as collaterals 89,061 177,804 - - - 266,865 Due from other banks 345,392 3,838,382 186,713 443,249 121,970 4,935,707 Derivative assets-hedging instruments - 251,523 - - - 251,523 Derivative assets-non hedging instruments 499 21,542 - - 7,062 29,103 Loans and advances to customers 4,186,443 5,061,929 70,031 267,420 379,541 9,965,364 Investment securities 2,053,093 2,276,000 377,766 79,766 311,419 5,098,044 Other financial assets 106,276 7,888 - - 123,053 237,217 Liabilities Customer's deposits 9,996,787 9,435,325 830,890 452,463 1,243,904 21,959,369 Derivative liabilities 499 3,966 - - 4,793 9,258 Other financial liabilities 261,558 933,884 26,708 27,044 20,268 1,269,462 On-lending facilities 250,725 - - - - 250,725 Borrowings 824,246 1,119,271 405 532 100,731 2,045,185 As at 31 December 2024, 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 810 million while the Naira payable at various maturities is: In millions of Naira At 31 December 2023 Naira Dollar GBP Euro Others Total Assets Cash and balances with central banks 3,883,601 122,586 7,820 22,873 216,494 4,253,374 Treasury bills 2,529,966 - - - 206,307 2,736,273 Assets pledged as collaterals 255,061 41,737 11,840 - - 308,638 Due from other banks 116,854 1,466,031 62,338 170,697 18,394 1,834,314 Derivative assets-Hedging instrument - 462,376 - - - 462,376 Derivative assets-Non Hedging instrument 45,640 24,643 2,005 20 55 72,363 Loans and advances to customers 2,950,511 3,186,826 53,878 181,007 184,248 6,556,470 Investment securities 1,176,001 1,161,572 254,903 97,346 201,073 3,290,895 Other financial assets 389,549 6,122 16 193 49,717 445,597 Liabilities Customer's deposits 8,364,360 5,224,605 534,189 330,768 713,818 15,167,740 Derivative liabilities 45,513 24,748 225 - - 70,486 Other financial liabilities 927,150 39,632 8,547 2,268 13,757 991,354 On-lending facilities 263,065 - - - - 263,065 Borrowings - 1,396,823 56 376 13,630 1,410,885 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 63% (31 December 2023: 106%, with all other variables held constant. 107 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2024 31 December 2023 US Dollar effect of 63% (31 December 2023: 106%) up movement on profit before tax and statement of financial position size (in millions of Naira) 181,302 198,027 31 December 2024 31 December 2023 US Dollar effect of 63% (31 December 2023: 106%) up movement on OCI and statement of financial position size (in millions of Naira) 226,358 96,805 108 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December 2024 and 31 December 2023. Included in the table are the Bank’s financial instruments at carrying amounts, categorised by currency. In millions of Naira At 31 December 2024 Naira Dollar GBP Euro Others Total Assets Cash and balances with central banks 5,186,881 33,200 13,904 15,804 - 5,249,789 Treasury bills 2,437,464 - - - - 2,437,464 Assets pledged as collaterals 89,062 - - - - 89,062 Due from other banks 342,868 3,628,636 84,342 379,535 7,055 4,442,436 Derivative assets-Hedging instruments - 251,523 - - - 251,523 Derivative assets-non hedging instruments 499 19,191 - - - 19,690 Loans and advances to customers 4,186,230 4,477,234 2,147 42,982 182 8,708,775 Investment securities 2,025,918 222,669 - - - 2,248,587 Other financial assets 106,400 7,888 - - - 114,288 Liabilities Customer's deposit 9,998,949 6,835,603 67,782 258,229 2,861 17,163,424 Derivative liabilities 499 3,966 - - - 4,465 Other financial liabilities 238,963 952,219 3,172 27,254 5,363 1,226,971 On-lending facilities 250,725 - - - - 250,725 Borrowings 824,246 1,126,434 405 531 - 1,951,616 As at 31 December 2024, 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 810 million while the Naira equivalent of treasury bills will mature to the respective counter parties. 109 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) In millions of Naira At 31 December 2023 Naira Dollar GBP Euro Others Total Assets Cash and balances with central banks 3,883,601 62,423 4,986 14,376 - 3,965,386 Treasury bills 2,529,966 - - - - 2,529,966 Assets pledged as collaterals 255,061 - - - - 255,061 Due from other banks 126,765 1,356,978 47,768 154,409 5,802 1,691,722 Derivative Asset - Hedging Instrument - 462,376 - - - 462,376 Derivative Asset -Non Hedging Instrument 45,565 - - 1 - 45,566 Loans and advances to customers 2,950,400 2,885,201 2,743 88,369 2,083 5,928,796 Investment securities 1,140,970 34,340 - 30,414 - 1,205,724 Other financial assets 389,614 4,657 16 193 60 394,540 Liabilities Customer's deposits 8,379,922 3,532,122 45,438 196,377 965 12,154,824 Derivative liabilities 45,514 - - - - 45,514 Other financial liabilities 927,622 39,014 1,349 2,241 566 970,792 On-lending facilities 263,065 - - - - 263,065 Borrowings - 1,449,750 56 376 - 1,450,182 Debt securities issued - - - - - - 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 2024 was N1,549/USD and N1,546.85/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 63% (31 December 2023: 106%), with all other variables held constant. In millions of Naira 31 December 2024 31 December 2023 US Dollar effect of 63% (31 December 2023: 106%) up movement on profit before tax and balance sheet size (174,360) (228,702) 31 December 2024 31 December 2023 US Dollar effect of 63% (31 December 2023: 106%) up movement on OCI and statement of financial position size (in millions of Naira) 225,136 96,282 110 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 3.3.3.1 Foreign exchange risk 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 Bank Total exposure to foreign exchange risk- fair value hedge - Interest bearing borrowings 35,238 - Saving deposits 251,523 - Term deposits 19,690 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 2024 and 31 December 2023: In millions of Naira At 31 December 2024 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 Foriegn Exchange risk 1,228 872,255 248,529 265,522 Derivative assets 111 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) In millions of Naira At 31 December 2024 Risk Category Carrying amount of hedged item Change in fair value for calculating hedge ineffectiveness Line item in the statement of financial position where the hedging instrument is located Hedge Type: Fair Value hedge Liabilities Foreign exchange risk on savings deposits Foreign exchange risk 1,061,065 (275,920) Customers' deposits In millions of Naira At 31 December 2024 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 Fair Value hedge Foreign exchange risk Foriegn Exchange - % 100 265,522 (10,398)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. 112 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) The following table shows the profile of the timing of the nominal amount of the hedging instrument At 31 December 2024 In millions of Naira Up to 1 month 1-3 months 3-6 months 6-12 months Derivative assets – Hedging - Gross settled Receivable 266,103 - 606,152 - Payable (266,103) - (606,152) - In millions of Naira Bank Total exposure to foreign exchange risk- fair value hedge - Interest bearing borrowings 144,701 - Term deposits 273,230 - Savings deposits 50,550 In millions of Naira At 31 December 2023 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 Foriegn Exchange risk 630 1,342,024 462,376 458,478 Derivative assets In millions of Naira At 31 December 2023 Risk Category Carrying amount of hedged item Change in fair value for calculating hedge ineffectiveness Line item in the statement of financial position where the hedging instrument is located Hedge Type: Fair Value hedge Liabilities Foreign exchange risk on foreign currency interest bearing borrowing Foriegn Exchange risk 283,954 (144,701) Borrowings Foreign exchange risk on savings deposits Foreign Exchange risk 803,311 (273,230) Customer's deposits Foreign exchange risk on term deposits Foreign Exchange risk 256,032 50,550 Customer's deposits 113 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) In millions of Naira At 31 December 2023 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 Fair Value hedge Foreign exchange risk Foriegn Exchange - 100% 458,478 (10,004) 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. 114 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) The following table shows the profile of the timing of the nominal amount of the hedging instrument At 31 December 2023 In millions of Naira Less than 3 months 3-6 months 6-12 months Derivative assets – Hedging Gross settled Receivable 172,776 200,350 331,030 Payable (172,776) (200,350) (331,030) 3.3.4 Interest Rate Risk The Group is exposed to a considerable level of interest rate risk especially on the banking book (i.e. the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates).The Group has a significant portion of its liabilities in non-rate sensitive liabilities. This helps it in minimizing the impact of the exposure to interest rate risks. The Group also enjoys some form of flexibility in adjusting both lending and deposits rates to reflect market realities. Group The table below summarizes the Group's interest rate gap position: At 31 December 2024 In millions of Naira Note Carrying amount Rate sensitive Non rate sensitive Assets Cash and balances with central banks 15 5,888,216 - 5,888,216 Treasury and other eligible bills (Amortized cost) 16 1,022,703 - 1,022,703 Assets pledged as collateral (Amortised cost) 17 266,865 177,804 89,061 Due from other banks 18 4,935,710 756,564 4,179,146 Derivative Asset - Hedging Instrument 41 251,523 - 251,523 Derivative Asset -Non Hedging Instrument 41 29,103 7,062 22,041 Loans and advances to customers 20 9,965,364 3,577,488 6,387,876 Investment securities (Amortized cost and Fair value through OCI) 21 5,056,153 2,280,706 2,775,447 Other financial assets 25 237,217 - 237,217 27,652,854 6,799,624 20,853,230 Liabilities Customer deposits 28 21,959,369 9,412,078 12,547,291 Derivative liabilities 9,258 - 9,258 Other financial liabilities 29 1,269,462 - 1,269,462 On-lending facilities 30 250,725 - 250,725 Borrowings 31 2,045,185 928,224 1,116,961 Debt securities issued - - - 25,533,999 10,340,302 15,193,697 Total interest rate gap 2,118,855 (3,540,678) 5,659,533 115 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) The table shows the maturity profile of financial instruments that are rate sensitive. At 31 December 2024 Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive In millions of Naira Assets Assets pledged as collateral - - 15,759 54,976 107,069 177,804 Due from other banks - - - - 756,564 756,564 Loans and advances to customers 85,006 312,011 200,181 776,264 2,204,026 3,577,488 Investment securities (Amortized cost and fair value through OCI) 106,231 541,210 321,783 321,784 989,698 2,280,706 191,237 853,221 537,723 1,153,024 4,057,357 6,792,562 Liabilities Customer deposits 8,294,387 350,009 200,662 320,130 246,890 9,412,078 Borrowings 187,699 740,525 - - - 928,224 8,482,086 1,090,534 200,662 320,130 246,890 10,340,302 Total interest repricing gap (8,290,849) (237,313) 337,061 832,894 3,810,467 (3,547,740) At 31 December 2023 Note Carrying amount Rate sensitive Non rate sensitive In millions of Naira Assets Cash and balances with central banks 15 4,253,374 - 4,253,374 Treasury and other eligible bills (Amortized cost) 16 1,986,667 - 1,986,667 Assets pledged as collateral (Amortised cost) 17 308,638 - 308,638 Due from other banks 18 1,834,314 262,728 1,571,586 Derivative assets 41 462,376 - 462,376 Derivatives Asset- Non Hedging instrument 41 72,363 - 72,363 Loans and advances to customers 20 6,556,470 2,078,232 4,478,238 Investment securities (Amortized cost and Fair value through OCI) 21 3,266,602 280,285 2,986,317 Other financial assets 25 445,597 - 445,597 19,186,401 2,621,245 16,565,156 Liabilities Customer deposits 28 15,167,740 5,962,092 9,205,648 Derivative liabilties 70,486 - 70,486 Other financial liabilities 29 991,354 - 991,354 On-lending facilities 30 263,065 - 263,065 Borrowings 31 1,410,885 527,660 883,225 Debt securities issued - - - 17,903,530 6,489,752 11,413,778 Total interest rate gap 1,282,871 (3,868,507) 5,151,378 The table shows the maturity profile of financial instruments that are rate sensitive. In millions of Naira 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 169,958 269,198 245,866 788,772 604,438 2,078,232 169,958 269,198 245,866 788,772 604,438 2,078,232 Liabilities Customer deposits 5,462,692 103,071 59,267 153,263 183,799 5,962,092 Derivative liabilities - 430,231 97,429 - - 527,660 5,462,692 533,302 156,696 153,263 183,799 6,489,752 Total interest repricing gap (5,292,734) (264,104) 89,170 635,509 420,639 (4,411,520) 116 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Group Interest rate sensitivity showing fair value interest rate risk 31 December 2024 31 December 2023 In millions of Naira Financial assets at FVPL Treasury bills 1,656,226 749,606 Bonds 41,891 24,293 Assets pledged as collateral - - Total 1,698,117 773,899 Impact on income statement: Favourable change at 47% reduction in interest rate (2023: 14%) 160,841 108,346 Unfavourable change at 47% increase in interest rate (2023: 14%) (160,841) (108,346) FVOCI investment securities Government bonds 1,949,011 1,528,786 Impact on other comprehensive income statement: Favourable change at 17% reduction in interest rate (2023: 14%) 13,144 214,030 Unfavourable change at 17% increase in interest rate (2023: 14%) (13,144) (214,030) 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 2024 In millions of Naira Note Carrying amount Rate sensitive Non-rate sensitive Assets Cash and balances with central banks 15 5,249,789 - 5,249,789 Treasury and other eligible bills (Amortized cost) 16 781,238 - 781,238 Assets pledged as collateral 17 89,062 - 89,062 Due from other banks 18 4,442,436 756,564 3,685,872 Derivative Asset - Hedging Instrument 19 251,523 - 251,523 Derivative Asset -Non Hedging Instrument 19 19,690 - 19,690 Loans and advances to customers 20 8,708,775 2,689,259 6,019,516 Investment securities (Amortized cost and Fair value through OCI) 21 2,213,349 - 2,213,349 Other financial assets 25 114,288 - 114,288 21,870,150 3,445,823 18,424,327 Liabilities Customer deposits 28 17,163,424 7,377,305 9,786,119 Derivative liabilities 4,465 - 4,465 Other financial liabilities 29 1,226,971 - 1,226,971 On-lending facilities 30 250,725 - 250,725 Borrowings 31 1,951,616 928,224 1,023,392 Debt securities issued - - - 20,597,201 8,305,529 12,291,672 Total interest rate gap 1,272,949 (4,859,706) 6,132,655 117 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) The table shows the maturity profile of financial instruments that are rate sensitive. At 31 December 2024 In millions of Naira Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Total rate sensitive Assets Due from other banks - - - - 756,564 756,564 Loans and advances to customers 45,518 113,300 38,436 635,113 1,856,892 2,689,259 45,518 113,300 38,436 635,113 2,613,456 3,445,823 Liabilities Customer deposits 7,377,305 - - - - 7,377,305 Borrowings 187,698 740,526 - - - 928,224 7,565,003 740,526 - - - 8,305,529 Total interest repricing gap (7,519,485) (627,226) 38,436 635,113 2,613,456 (4,859,706) At 31 December 2023 In millions of Naira Note Carrying amount Rate sensitive Non rate sensitive Assets Cash and balances with central banks 15 3,965,385 - 3,965,385 Treasury and other eligible bills (Amortized cost) 16 1,780,360 - 1,780,360 Assets pledged as collaterals 17 255,061 - 255,061 Due from other banks 18 1,691,722 - 1,691,722 Derivative assets 41 462,376 - 462,376 Derivatives Asset- Non Hedging instrument 41 45,566 - 45,566 Loans and advances to customers 20 5,928,796 1,407,917 4,520,879 Investment securities (Amortized cost and Fair value through OCI) 21 1,186,291 - 1,186,291 Other financial assets 25 394,540 - 394,540 15,710,097 1,407,917 14,302,180 Liabilities Customer deposits 28 12,154,824 4,955,730 7,199,094 Derivative liabilities 29 45,514 - 45,514 Other financial liabilities 13 970,792 - 970,792 On-lending facilities 30 263,065 - 263,065 Borrowings 31 1,450,182 527,660 922,522 Debt securities issued - - - 14,884,377 5,483,390 9,400,988 Total interest rate gap 825,720 (4,075,473) 4,901,192 118 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 9,257 124,127 187,942 736,970 349,621 1,407,917 9,257 124,127 187,942 736,970 349,621 1,407,917 Liabilities Customer deposits 4,955,730 - - - - 4,955,730 Borrowings - 430,231 97,429 - - 527,660 4,955,730 430,231 97,429 - - 5,483,390 Total interest repricing gap (4,946,473) (306,104) 90,513 736,970 349,621 (4,075,473) Interest rate sensitivity showing fair value interest rate risk 31 December 2024 31 December 2023 In millions of Naira Financial assets at FVPL Treasury bills 1,656,226 749,606 Bonds 35,238 19,433 Assets pledged as collateral - - Total 1,691,464 769,039 Impact on income statement: Favourable change at 47% reduction in interest rate (2023: 14%) 160,841 107,665 Unfavourable change at 47% increase in interest rate (2023: 14%) (160,841) (107,665) 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 750 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) 6.444% equity holding in African Finance Corporation (AFC) valued at N358.28 billion and cost N40 billion. (ii) 3.6% equity holding in Nigerian Interbank Settlement Scheme (NIBBS) valued at N2.64 billion and cost N50 million. (iii) 2.31% equity holding in FMDQ holdings plc valued at N4.99 billion. (iv) 0.79% equity holding in Unified Payment Services (UPS) valued at N639.2 million. (v) 0.024% equity holdings in AFREXIM valued N521.33 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 (39.9%) 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. 119 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Projecting cash flows and considering the level of liquid assets necessary in relation thereto. (b) Monitoring balance sheet liquidity ratios against internal and regulatory requirements. (c) Maintaining a diverse range of funding sources with adequate back-up facilities. (d) Managing the concentration and profile of debt maturities. (e) Monitoring deposit concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory overall funding mix. (f) Maintaining up-to-date liquidity and funding contingency plans. These plans 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) Identify sources of potential liquidity strain; and ii) Ensure that current liquidity exposures continue to conform to the liquidity risk tolerance established by the board. (b). Analyses the separate and combined impact of possible future liquidity stresses on: i) Cash flows; ii) Liquidity position; and iii) Profitability. 120 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Changes in market conditions; (b) Changes in the nature, scale or complexity of the Bank's business model and activities; and (c) The Group's practical experience in periods of stress. The Group considers the potential impact of idiosyncratic Institution-Specific, market-wide and combined alternative scenarios while carrying out the test to ensure that all areas are appropriately covered. In addition, the Group also considers the impact of severe stress scenarios. Contingency Funding Plan The Group maintains a contingency funding plan which sets out strategies for addressing liquidity. The Plan: (a) outlines strategies, policies and plans to manage a range of stresses. (b) establishes a clear allocation of roles and clear lines of management responsibility. (c) is formally documented. (d) includes clear invocation and escalation procedures. (e) is regularly tested and the result shared with the ALCO and Board. (f) outlines that Group's operational arrangements for managing a huge funding run. (g) is sufficiently robust to withstand simultaneous disruptions in a range of payment and settlement. (h) 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. 121 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Group Bank 31 December 2024 31 December 2023 31 December 2024 31 December 2023 At period/year end 83.00% 71.00% 48.00% 45.00% Average for the period/year 71.00% 64.00% . 46.00% 48.00% Maximum for the period/year 83.00% 72.00% 48.00% 50.00% Minimum for the period/year 73.00% 55.00% 45.00% 45.00% (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 2024 31 December 2023 In millions of naira Gross value Gross value Cash and balances with central banks 532,088 269,967 Treasury bills 2,678,967 2,736,344 Balances with other banks 345,392 116,854 Investment securities 4,749,077 2,775,456 Total 8,305,524 5,898,621 Bank In millions of naira Gross value Gross value Cash and balances with central banks 95,825 126,449 Treasury bills 2,437,502 2,503,037 Balances with other banks 342,868 126,765 Investment securities 1,886,448 989,405 Total 4,762,643 3,772,656 122 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (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 At 31 December 2024 At 31 December 2023 Note Encumbered Unencumbered Total Encumbered Unencumbered Total Cash and balances with central banks 15 5,356,128 532,088 5,888,216 3,983,407 269,967 4,253,374 Treasury bills 16 - 2,678,929 2,678,929 - 2,736,273 2,736,273 Assets pledged as collateral 17 266,866 - 266,866 308,638 - 308,638 Due from other banks 18 134,535 4,801,172 4,935,707 354,150 1,480,164 1,834,314 Derivative Assets 18 - 280,626 280,626 - 534,739 534,739 Loans and advances 20 - 9,965,364 9,965,364 - 6,556,470 6,556,470 Investment securities 21 - 5,098,044 5,098,044 - 3,290,895 3,290,895 Other financial assets 25 - 237,217 237,217 1,100 444,497 445,597 Bank 'In millions of Naira At 31 December 2024 At 31 December 2023 Note Encumbered Unencumbered Total Encumbered Unencumbered Total Cash and balances with central banks 15 4,933,588 316,202 5,249,789 3,838,937 126,449 3,965,386 Treasury bills 16 - 2,437,464 2,437,464 - 2,529,966 2,529,966 Assets pledged as collateral 17 89,062 - 89,062 255,061 - 255,061 Due from other banks 18 537,606 3,904,830 4,442,436 354,150 1,337,572 1,691,722 Derivative assets 20 - 271,213 271,213 - 507,942 507,942 Loans and advances 20 - 8,708,775 8,708,775 - 5,928,796 5,928,796 Investment securities 21 - 2,248,587 2,248,587 - 1,205,724 1,205,724 Other financial assets 25 - 114,288 114,288 1,100 393,440 394,540 (d) Financial assets pledged as collateral The total financial assets recognized in the statement of financial position that have been pledged as collateral for liabilities as at 31 December 2024 and 31 December 2023 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. 123 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Group At 31 December 2024 In millions of Naira Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inflow/ (outflow) Carrying amount Assets Non-derivative assets Cash and balances with central banks 15 347,241 - - - 5,540,975 5,888,216 5,888,216 Treasury bills 16 693,937 306,605 1,210,599 697,103 - 2,908,244 2,678,929 Assets pledged as collateral 17 5,819 - - 5,819 378,334 389,972 266,866 Due from other banks 18 3,467,191 503,411 392,970 508,792 182,550 5,054,914 4,935,707 Loans and advances to customers 20 755,313 1,808,389 1,644,495 3,571,851 6,669,480 14,449,528 9,965,364 Investment securities 21 127,557 706,460 368,974 508,030 4,814,170 6,525,191 5,098,044 Other financial assets 25 215,734 7,330 43 72 65,481 288,660 237,217 5,612,793 3,332,194 3,617,081 5,291,667 17,650,990 35,504,725 29,070,344 Liabilities Non-derivative liabilities Customer's deposits 28 19,087,730 1,214,660 621,924 878,854 250,414 22,053,582 21,959,369 Other financial liabilities 29 690,565 537,163 2,173 1,465 44,908 1,276,275 1,269,462 On-lending facilities 30 199,313 37,435 2,637 9,296 2,850 251,530 250,725 Borrowings 31 29,767 759,043 734,555 232,115 447,541 2,203,021 2,045,185 20,007,376 2,548,300 1,361,289 1,121,730 745,715 25,784,409 25,524,742 Derivave Asset - Hedging Instrument 19 Gross settled: - - - - - - - Receivable 161,697 - 606,152 - - 767,849 251,523 Payable 161,697 - 606,152 - - 767,849 251,523 Derivative Asset -Non Hedging Instrument Gross settled: Receivable 238,996 168 1,111 172,464 2 412,741 28,604 Payable 245,474 - - 171,978 - 417,452 28,604 Net settled - 499 - - - 499 499 Derivative liabilities -Hedging Instrument 32 Gross settled: Receivable 81,307 - - - - 81,307 2,994 Payable 81,307 - - - - 81,307 2,994 Derivative liabilities -Non Hedging Instrument Gross settled: - - - - - - - Receivable 64,766 252 - 1,451 235 66,704 5,765 Payable 61,911 - - - - 61,911 5,765 Net settled - 499 - - - 499 499 124 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) At 31 December 2023 In millions of Naira Note Up to 1 month 1 - 3 months 3 - 6 months6 - 12 months Over 1 year Gross nominal inflow/ (outflow) Carrying amount Assets Non-derivative assets Cash and balances with central banks 15 414,436 - - - 3,838,939 4,253,375 4,253,374 Treasury bills 16 727,947 360,019 590,643 1,197,269 - 2,875,878 2,736,273 Assets pledged as collateral 17 6,785 1,015 17,269 105,741 401,200 532,010 308,638 Due from other banks 18 1,694,780 123,941 13,353 5,891 - 1,837,965 1,834,314 Loans and advances to customers 20 1,190,084 808,188 1,400,530 1,016,031 3,964,754 8,379,587 6,556,470 Investment securities 21 163,318 479,801 431,711 213,007 3,018,662 4,306,499 3,290,895 Other financial assets 25 409,077 1,311 19 1,480 65,489 477,376 445,597 4,606,427 1,774,275 2,453,525 2,539,419 11,289,074 22,662,719 19,425,562 Liabilities Non-derivative liabilities Customer's deposits 28 13,124,934 830,978 671,685 374,588 192,136 15,194,321 15,167,740 Other financial Liabilities 29 618,211 354,262 170 8,555 18,387 999,585 991,354 On-lending facilities 30 3,056 21,165 22,107 20,692 222,819 289,839 263,065 Borrowings 31 83,846 498,553 313,032 94,290 503,441 1,493,162 1,410,885 Debt securities issued - - - - - - - 13,830,047 1,704,958 1,006,994 498,126 936,783 17,976,908 17,976,908 Derivative assets- Hedging instruments 19 Gross settled: - - - - - - - Receivable 115,750 - 215,280 556,863 - 887,893 462,376 Payable 115,750 - 215,280 556,863 - 887,893 462,376 Net settled - - - - - - - Derivative assets-Non Hedging Instrument 32 Gross settled: Receivable 33,618 193,523 654 - - 227,794 72,363 Payable 193,523 - - - 193,523 72,363 Net settled 265,118 386,048 431,214 1,113,725 - 2,196,104 1,069,478 Derivative liabilities 32 Gross settled: - - - - - - - Receivable 318 200 - - - 518 70,486 Payable 27,936 - - - - 27,936 70,486 Net settled 28,254 200 - - - 28,454 37,911 125 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank At 31 December 2024 In millions of Naira Note Up to 1 month 1 - 3 months 3 - 6 months6 - 12 months Over 1 year Gross nominal inflow/ (outflow) Carrying amount Assets Non-derivative assets Cash and balances with central banks 15 316,202 - - - 4,933,588 5,249,789 5,249,789 Treasury bills 16 643,282 133,413 1,205,610 677,461 - 2,659,766 2,437,464 Assets pledged as collateral 17 5,819 - - 5,819 200,530 212,168 89,062 Due from other banks 18 3,273,170 226,524 382,373 499,015 179,545 4,560,626 4,442,436 Loans and advances to customers 20 521,153 1,537,237 1,468,394 3,412,344 6,246,768 13,185,896 8,708,775 Investment securities 21 19,593 160,709 29,899 164,047 3,287,979 3,662,228 2,248,587 Other financial assets 25 92,681 6,739 - - 66,196 165,616 114,288 4,871,899 2,064,623 3,086,276 4,758,686 14,914,606 29,696,089 23,290,401 Liabilities Non-derivative liabilities Customer's deposits 28 15,597,528 737,263 360,065 525,011 - 17,219,867 17,163,424 Other financial liabilities 29 677,992 537,634 94 736 18,674 1,235,130 1,226,971 On-lending facilities 30 199,313 37,435 2,637 9,296 2,852 251,533 250,725 Borrowings 31 4,589 704,630 733,744 232,115 447,540 2,122,618 1,951,616 Debt securities issued - - - - - - - 16,479,422 2,016,962 1,096,540 767,157 469,067 20,829,148 20,592,736 Derivative Asset - Hedging Instrument 19 Gross settled: - - - - - - - Receivable 161,697 - 606,152 - - 767,849 251,523 Payable (161,697) - 606,152 - - 444,455 251,523 Derivative Asset - Non Hedging Instrument Gross settled: Receivable 150,221 - - 171,978 - 322,199 19,191 Payable 150,221 - - 171,978 - 322,199 19,191 Net settled - 499 - - - 499 499 Derivative liabilities - Hedging Instrument 32 Gross settled: Receivable 81,307 - - - - 81,307 2,994 Payable 81,307 - - - - 81,307 2,994 Derivative liabilities- Non Hedging Instrument Gross settled: Receivable 61,911 - - - - 61,911 972 Payable 61,911 - - - - 61,911 972 Net settled - 499 - - - 499 499 126 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) At 31 December 2023 In millions of Naira Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inflow/ (outflow) Carrying amount Assets Non-derivative assets Cash and balances with central banks 15 126,449 - - - 3,838,937 3,965,385 3,965,385 Treasury bills 16 591,229 308,931 578,665 1,186,105 - 2,664,930 2,529,966 Assets pledged as collateral 17 6,785 1,015 17,269 96,036 357,327 478,432 255,061 Due from other banks 18 1,627,792 57,914 9,636 - - 1,695,342 1,691,722 Loans and advances to customers 20 1,029,508 708,219 1,338,411 961,477 3,634,750 7,672,365 5,928,796 Investment securities 21 12,596 38,915 26,789 63,549 1,759,521 1,901,370 1,205,724 Other financial assets 25 359,405 - - - 66,196 425,601 394,540 3,753,764 1,114,994 1,970,770 2,307,167 9,656,730 18,803,426 15,971,195 At 31 December 2023 In millions of Naira Note Up to 1 month 1 - 3 months 3 - 6 months 6 - 12 months Over 1 year Gross nominal inflow/ (outflow) Carrying amount Liabilities Non-derivative liabilities Customer's deposits 30 10,996,341 551,419 556,190 74,331 30 12,178,311 12,154,824 Other financial liabilities 29 606,172 354,204 56 576 18,899 979,907 970,792 On-lending facilities 30 3,056 21,165 22,107 20,692 222,819 289,839 263,065 Borrowings 31 71,617 550,067 313,032 94,290 503,441 1,532,447 1,410,885 Debt securities issued - - - - - - - 11,677,186 1,476,855 891,385 189,889 745,189 14,980,504 14,799,566 Derivative assets-Hedging instruments 19 Gross settled: - - - - - - - Receivable 115,750 - 215,280 556,863 - 887,893 462,376 Payable 115,750 - 215,280 556,863 - 887,893 462,376 Net settled - - - - - - - Derivative assets-Non Hedging Instrument Gross settled: Receivable 192,525 192,525 45,566 Payable 192,525 192,525 45,566 Net settled 223 45,141 200 45,564 45,564 Derivative liabilities 32 Gross settled: - - - - - - - Receivable 14 - - - - 14 - Payable 14 - - - - 14 - Net settled - 233 45,091 200 - 45,514 45,514 127 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 Issued financial guarantee contracts Derivative financial liabilities and financial assets Undiscounted cash flows, which include estimated interest payments. Earliest possible contractual maturity. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called. Contractual undiscounted cash flows. The amounts shown are the gross nominal inflows and outflows for derivatives that have simultaneous gross settlement (e.g., forward exchange contracts and currency swaps) and the net amounts for derivatives that are net settled. 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 2024 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 2,567,161 298,646 130,186 2,369,115 3,903 - Letters of Credit 357,738 145,217 146,319 49,853 16,348 - Performance bonds and Guarantees 1,672,254 87,974 215,190 521,426 547,146 300,519 Undrawn overdraft 260,887 33,512 62,621 115,745 47,076 1,932 Total 4,858,040 565,349 554,316 3,056,139 614,473 302,451 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 433,926 2,916 374,675 56,335 - - Letters of Credit 566,807 48,735 423,055 94,891 125 - Performance bonds and Guarantees 831,593 160,356 213,880 228,236 217,133 11,988 Undrawn overdraft 211,709 17,883 155,255 38,325 245 - Total 2,044,035 229,890 1,166,865 417,788 217,504 11,988 128 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) Bank At 31 December 2024 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 2,801,850 298,646 130,186 2,369,115 3,903 - Letters of Credit 33,994 33,994 - - - - Performance bonds and Guarantees 1,644,573 60,292 215,190 521,426 547,146 300,519 Undrawn overdraft 260,887 33,512 62,621 115,745 47,076 1,932 Total 4,741,304 426,444 407,997 3,006,286 598,125 302,451 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 433,926 2,916 374,675 56,335 - - Letters of Credit 770,347 180,996 197,641 179,427 200,296 11,988 Performance bonds and Guarantees 424,903 497 412,952 11,455 - - Undrawn overdraft 211,709 17,883 155,255 38,325 245 - Total 1,840,885 202,292 1,140,522 285,542 200,541 11,988 3.5 Fair value of financial assets and liabilities IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group's market assumptions. These two types of inputs have created the following fair value hierarchy. i) Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. ii) 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. 129 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 Fair value hierarchy In millions of Naira Note Carrying value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills 16 1,656,226 1,656,222 684,366 971,856 - Investment securities (Fixed income) 21 41,891 41,891 41,891 - - Derivative Asset - Hedging Instrument 19 251,523 251,523 - 251,523 - Derivative Asset -Non Hedging Instrument 19 29,104 29,104 7,063 22,041 - Asset pledged as collateral 17 - - - - Carried at FVOCI: Equity securities (Unquoted) 21 367,144 367,144 358,283 8,860 Debt securities 21 1,949,011 1,949,011 1,949,011 - - Carried at amortized cost: Treasury bills 16 1,022,703 1,016,226 942,295 73,931 - Assets pledged as collateral 17 266,865 253,638 253,638 - - Investment securities 21 2,739,998 2,629,572 2,016,215 613,357 - Liabilities Carried at FVTPL Derivative liabilities 32 9,258 9,258 9,258 - 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 130 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2023 Fair value hierarchy In millions of Naira Note Carrying value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills 16 749,606 749,606 189,849 559,757 - Investment securities (Fixed income) 21 24,293 24,293 23,231 1,062 - Derivative Asset Hedging Instrument 19 462,376 462,376 - 462,376 - Derivative Asset -Non Hedging Instrument 19 72,364 72,364 36 72,328 - Carried at FVOCI: Equity securities (Unquoted) 21 216,134 216,134 - 209,394 6,741 Debt securities 21 1,528,786 1,528,786 1,528,786 - - Carried at amortized cost: Treasury bills 16 1,986,667 1,940,525 884,461 881,770 174,294 Assets pledged as collateral 17 308,638 295,253 267,246 28,007 - Investment securities 21 1,521,681 1,481,904 1,051,596 136,819 293,275 Liabilities Carried at FVTPL Derivative liabilities 32 70,486 70,486 - 70,486 - 131 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 Fair value hierarchy In millions of Naira Note Carrying value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills 16 1,656,226 1,656,222 684,366 971,856 - Investment securities (Fixed income) 21 35,238 35,238 35,238 - - Derivative Asset - Hedging Instrument 19 251,523 251,523 - 251,523 - Derivative Asset -Non Hedging Instrument 19 19,690 19,690 - 19,690 - Carried at FVOCI: Equity securities (Unquoted) 21 367,114 367,144 - 358,283 8,860 Carried at amortized cost: Treasury bills 16 781,238 774,761 700,830 73,931 - Assets pledged as collateral 17 89,061 75,834 75,834 - - Investment securities 21 1,846,205 1,739,883 1,572,025 167,858 - Liabilities Carried at FVTPL Derivative liabilities 32 4,465 4,465 - 4,465 - 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 132 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) 31 December 2023 Fair value hierarchy In millions of Naira Note Carrying value Total Fair value Level 1 Level 2 Level 3 Assets Carried at FVTPL: Treasury bills 16 749,606 749,606 189,849 559,757 - Investment securities (Fixed income) 21 19,433 19,433 18,371 1,062 - Derivative assets 19 462,376 462,376 - 462,376 - Derivative Asset -Non Hedging Instrument 19 45,566 45,565 - 45,565 - Carried at FVOCI: Equity securities (Unquoted) 21 216,134 216,134 - 209,394 6,741 Treasury bills 16 1,780,360 1,766,231 884,461 881,770 - Assets pledged as collateral 17 255,061 245,452 217,445 28,007 - Investment securities 21 970,157 934,586 797,767 136,819 - Liabilities Carried at FVTPL Derivative liabilities 32 45,514 45,514 - 45,514 - Carried at amortized cost: Debt securities issued 3.5.b Financial instruments measured at fair value- Reconciliation of level 3. Group and Bank In millions of Naira At 1 January 2023 93,883 Transfer due to non-availability of observable data 21 (89,359) Gain recognised through other comprehensive income of equity investments 2,217 At 31 December 2023 6,741 Reconciliation of Level 3 items At 1 January 2024 6,741 Addition 93 Transfer out due to availability of data - Gain recognised through other comprehensive income of equity investments 2,026 At 31 December 2024 8,860 There was a transfer between fair value hierarchy during the year from level 2 to level 3. In prior year, the Bank's investment in AFC was valued as a level 2 hierarchy because of the availability of observable market data arising from issue of AFC shares during that year. However, as there were no additional issue during 2024 financial year, hence the absence of observable market data, the Bank valued its investment in AFC as a level 3 hierarchy. 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 2024 and 31 December 2023 in measuring financial instruments categorized as level 3 in the fair value hierarchy. Type of financial instrument Fair values at 31 December 2024 Valuation technique Significant unobservable input Unquoted equity investment N8.86 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. 133 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (ii) The effect of unobservable inputs on fair value measurements Although the Group believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurement in Level 3, changing one or more of the assumptions would have the following effects. At 31 December 2024 In millions of Naira The lowest and highest values if the cost of equity and terminal growth rate decrease or increase by 1% and 0.25% respectively Lowest value Highest value Actual value FMDQ 5,062 4,931 4,996 NIBSS 2,706 2,593 2,649 UPSL 646 633 639 AFREXIM 511 531 521 The table below shows the effect of changes in cost of equity and terminal growth rate on other comprehensive income In millions of Naira 31 December 2024 31 December 2023 Effect of 1% decrease in cost of equity and 0.25% increase in terminal growth rate 120 595 Effect of 1% increase in cost of equity and 0.25% decrease in terminal growth rate (117) (246) 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. 134 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) (vii) Derivatives The Group uses widely recognised valuation models for determining the fair value of common and simple financial instruments, such as interest rate and currency swaps that use only observable market data and require little management judgement and estimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives, and simple OTC derivatives such as interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and 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) Profit from Operations: The Group has consistently reported good profit, which can easily be retained to support the capital base. (b) Issue of Shares: The Group has successfully assessed the capital market to raise equity and debt. With such experiences, the Group is confident that it can access the capital market when the need arises. (c) Bank Loans (long term/short term): In 2014 financial year, Zenith Bank commenced capital computations in accordance with Basel II standard under the guidelines issued by the Central Bank of Nigeria. The guidelines require capital adequacy computations based on the Standardized 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. 135 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 3. Risk management (continued) The table below shows the computation of the Group's capital adequacy ratio for the year ended 31 December 2024 as well 31 December 2023. 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. Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Tier 1 capital Basel II Basel II Basel II Basel II Share capital 20,535 15,698 20,535 15,698 Share premium 594,113 255,047 594,113 255,047 Statutory reserves 549,528 409,104 508,366 367,942 SMEIES reserve 3,729 3,729 3,729 3,729 Retained earnings 2,015,513 1,179,390 1,538,189 893,938 Non-controlling interest 2,365 1,628 - - Total qualifying Tier 1 capital 3,185,783 1,864,596 2,664,932 1,536,354 Deferred tax assets (21,542) (17,251) (1,756) - Intangible assets (88,196) (47,018) (80,203) (44,185) Investment in capital of financial subsidiaries - - (17,313) (17,313) Unsecured lending to subsidiaries within the same group - - (77,450) - Adjusted Total qualifying Tier 1 capital 3,076,045 1,800,327 2,488,210 1,474,856 Tier 2 capital Other comprehensive income (OCI) 739,308 364,801 326,994 175,983 Total qualifying Tier 2 capital 739,308 364,801 326,994 175,983 Investment in capital and financial subsidiaries - - (17,313) (17,313) Net Tier 2 Capital 739,308 364,801 309,681 158,670 Total regulatory capital 3,815,353 2,165,128 2,797,891 1,633,526 Risk-weighted assets Credit risk 11,351,782 7,882,270 8,270,027 6,672,311 Market risk 206,990 214,752 104,027 153,007 Operational risk 3,342,575 1,894,809 2,837,480 1,667,274 Total risk-weighted assets 14,901,347 9,991,831 11,211,534 8,492,592 Risk-weighted Capital Adequacy Ratio (CAR) % 26 % 22 % 25 % 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) To provide clear and consistent direction in all operations of the Group. (b) To provide a standardised framework and appropriate guidelines for creating and managing all operational risk exposures; and (c) To enable the Group identify and analyse events (both internal and external) that impact on its business. The Operational Risk unit constantly conducts reviews to identify and assess the operational risk inherent in all material products, activities, processes, and systems. It also ensures that all business units within the 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. 136 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 137 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) Board and senior management oversee the proper set-up and effective functioning of the reputational risk management framework. (b) 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 (c) 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. Identification: Recognizing potential reputational risk as a primary and consequential risk. ii. Assessment: Conducting qualitative assessment of reputational risk based on the potential events that have been identified as reputational risk. iii. Monitoring: Undertaking frequent monitoring of the reputational risk drivers. iv. Mitigation and Control: Establishing preventive measures and controls for management of reputational risk and tracking mitigation actions. v. Independent review: Subjecting the reputational risk measures and mitigation techniques to regular independent review by internal auditors and/or external auditors; and vi. Reporting: Generating regular, action-oriented reports for management review. 3.11 Taxation risk Taxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss as a result of non-compliance with tax laws. The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Group to comply with taxation laws and, where required, seeking the advice of tax specialists. 3.12 Regulatory risk The Group manages the regulatory risk to which it is potentially exposed by monitoring new regulatory rules and applicable laws and identifying significant regulatory risks. The Group strives to maintain appropriate procedures, processes and policies that enable it to comply with applicable regulations. The Group maintains zero tolerance posture for any regulatory breach in all its areas of operations. 138 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 4 Critical accounting estimate and judgements The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 4.1 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 2024 In millions of Naira 10% increase No change 10% decrease Gross loans balance 9,722,660 9,722,660 9,722,660 Loss allowance 990,706 1,013,886 1,033,074 4.3 Determining fair value of equity instruments All financial instruments are initially recognised at fair value. 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. The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). The majority of valuation techniques employ only observable market data. However, equity instruments are classified on the basis of valuation techniques that features one or more significant market inputs that are unobservable ('Level 3" assets and liabilities), and for them, the measurement of fair value is more judgemental. The degree of judgement depends on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific financial instrument. Details on the Group's Level 3 financial instruments and the sensitivity of their valuation to the effect of applying reasonably possible alternative assumptions in determining their fair value are set out in Note 3.5c. 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. 139 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 31 December 2024 are stated in the current purchasing power using the Consumer Price Index as at 31 December 2024 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 2024. 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 N30 billion decrease in the Group profit before tax for the year ended 31 December 2024. Included in this is a net monetary loss of N33.78 billion. Other effects on the Group consolidated financial statements as at 31 December 2024 are: - Total assets increased by N72.08 billion driven by non-monetary assets; - Opening retained profit increased by N108.64 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 2024 for the effect of inflation; - Net Revenue increased by NGN 11.8 billion; The CPI for Ghana was 248.30 (2023: 200.5) with an increase in the year of 47.8 (2023: 37.7). 140 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 141 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total (Outside Nigeria) Total reportable segments Eliminations Consolidation In millions of Naira 31 December 2024 Interest and similar income 2,288,747 233,477 232,766 466,243 2,754,990 (33,613) 2,721,377 Total Income on fee and commission 306,796 43,089 14,637 57,726 364,522 (8,178) 356,344 Other operating income (146,392) (47,259) (13,113) (60,372) (206,764) - (206,764) Trading gains 1,053,127 46,104 771 46,875 1,100,002 - 1,100,002 Total revenue 3,502,278 275,411 235,061 510,472 4,012,750 (41,791) 3,970,959 Revenue: Derived from external customers 3,460,488 275,411 235,060 510,471 3,970,959 - 3,970,959 Derived from other business segments 41,790 - - - 41,791 (41,791) - Total revenue 3,502,278 275,411 235,060 510,471 4,012,750 (41,791) 3,970,959 Interest expense (839,113) (78,393) (108,490) (186,883) (1,025,996) 33,522 (992,474) Impairment loss on financial assets (668,922) (2,607) 12,723 10,116 (658,806) - (658,806) Depreciation charge (33,540) (8,856) (1,832) (10,688) (44,228) - (44,228) Amortisation charge (5,923) (1,622) (773) (2,395) (8,318) - (8,318) Fees and commission expense (143,026) (6,450) - (6,450) (149,476) - (149,476) Admin and operating expenses (665,619) (77,154) (57,941) (135,095) (800,714) 9,908 (790,806) Profit / (loss) before tax 1,146,135 100,329 78,748 179,077 1,325,212 1,639 1,326,851 Tax expense (200,635) (71,967) (21,355) (93,322) (293,957) - (293,956) Profit / (loss) after tax 945,500 28,362 57,393 85,755 1,031,255 1,639 1,032,895 142 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 5. Segment Analysis (continued) Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total (Outside Nigeria) Total reportable segments Eliminations Consolidation In millions of Naira 31 December 2024 Expenditure on non-current assets 137,762 10,996 11,466 22,462 160,224 - 160,224 Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total (Outside Nigeria) Total reportable segments Eliminations Consolidation In millions of Naira 31 December 2024 Total assets 24,075,319 2,338,659 4,102,198 6,440,857 30,516,176 (558,651) 29,957,525 Other measures of assets Loans and advances to customers 8,708,989 401,913 861,626 1,263,539 9,972,528 (7,164) 9,965,364 Treasury bills 2,437,464 241,465 - 241,465 2,678,929 - 2,678,929 Investment securities 2,276,099 535,510 2,286,432 2,821,942 5,098,041 - 5,098,044 Total liabilities 20,945,853 1,991,457 3,512,820 5,504,277 26,450,130 (521,878) 25,928,252 Other measures of liabilities Customer deposits 17,163,424 1,831,958 3,479,128 5,311,086 22,474,510 (515,141) 21,959,369 Borrowings 1,951,616 100,732 - 100,732 2,052,348 (7,163) 2,045,185 143 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 5. Segment Analysis (continued) Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total outside Nigeria Total outside Nigeria Eliminations Consolidation In millions of Naira 31 December 2023 Interest and similar income 928,913 - 130,331 99,866 230,197 1,159,110 (14,436) 1,144,674 Total Income on fee and commission 152,508 - 23,568 5,902 29,470 181,978 (4,463) 177,515 Other operating income 264,192 - (6,339) (854) (7,193) 256,999 (14,411) 242,588 Trading gains 538,286 - 27,007 1,680 28,687 566,973 - 566,973 Total revenue 1,883,899 - 174,567 106,594 281,161 2,165,060 (33,310) 2,131,750 Revenue: Derived from external customers 1,850,589 - 174,567 106,594 281,161 2,131,750 - 2,131,750 Derived from other business segments 33,310 - - - - 33,310 (33,310) - Total revenue 1,883,899 - 174,567 106,594 281,161 2,165,060 (33,310) 2,131,750 Interest expense (355,230) - (32,828) (34,941) (67,769) (422,999) 14,507 (408,492) Impairment loss on financial assets (398,476) - (10,341) (520) (10,861) (409,337) (279) (409,616) Depreciation charge (26,231) - (2,901) (725) (3,626) (29,857) - (29,857) Amortisation charge (2,510) - (588) (371) (959) (3,469) - (3,469) Fees and commission expense (70,092) - (2,575) - (2,575) (72,667) 4,459 (68,208) Admin and operating expenses (353,478) - (42,949) (20,936) (63,885) (417,363) 1,217 (416,146) Profit before tax 677,882 - 82,385 49,101 131,486 809,368 (13,406) 795,962 Tax expense (75,021) - (31,205) (12,116) (43,321) (118,342) (711) (119,053) Profit after tax 602,861 - (51,180) 36,985 (14,195) 691,026 (14,117) 676,909 144 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 5. Segment Analysis (continued) Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total reportable segments Eliminations Consolidation In millions of Naira 31 December 2023 Expenditure on non-current assets 65,409 - 10,773 262 - 76,444 - - 76,444 Nigeria Corporate retail and pensions custodian services Outside Nigeria Africa---------------- Europe Total outside Nigeria Total outside Nigeria Eliminations Consolidation In millions of Naira 31 December 2023 Total assets 16,843,187 - 1,279,688 2,531,841 3,811,529 20,654,716 - (286,261) 20,368,455 Other measures of assets Loans and advances to customers 5,928,907 - 197,615 482,875 680,490 6,609,397 - (6,609,397) - Treasury bills 2,529,966 - 206,307 - 206,307 2,736,273 - (2,736,273) - Investment securities 1,234,116 - 334,831 1,721,948 2,056,779 3,290,895 - (3,290,895) - Total liabilities 15,009,095 - 1,075,664 2,212,021 3,287,685 18,296,780 - (251,705) 18,045,075 Other measures of liabilities Customer deposits 12,154,824 - 1,028,018 2,203,674 3,231,692 15,386,516 - (15,386,516) - Borrowings 1,450,182 - 13,631 - 13,631 1,463,813 - (1,463,813) - * 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. 145 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 6. Interest and similar income Loans and advances to customers 1,517,917 671,920 1,394,672 635,806 Placement with banks and discount houses 165,319 81,822 130,068 39,796 Treasury bills 579,918 178,967 488,716 145,646 Promissoy notes 5,734 3,205 5,734 3,204 Commercial papers 12,023 21,406 11,853 21,090 Government and other bonds 440,466 187,354 253,720 80,690 2,721,377 1,144,674 2,284,763 926,232 Interest and similar income represents interest income on financial assets measured at amortised cost and fair value through other comprehensive income. The interest is calculated using the effective interest method. Interest income accrued on impaired financial assets amount to N18,246 million and N18,246 million (31 December 2023: N29,093 million and N5,484 million) for Group and Bank respectively. 7. Interest and similar expense Current accounts 237,412 96,807 218,708 85,898 Savings accounts 156,427 85,593 155,235 84,995 Time deposits 228,169 124,348 114,720 79,858 Borrowed funds 367,404 99,166 349,287 103,443 Leases 3,062 2,578 1,161 1,034 992,474 408,492 839,111 355,228 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) 594,176 400,650 594,395 394,440 Investment securities (see note 3.2.18) (9,430) 7,903 (445) 2,867 Treasury Bills (see note 3.2.18) (33) (337) (33) 32 Other financial assets (see note 3.2.18) 20,259 2,173 20,268 2,193 Due from other banks (see note 3.2.18) 11,653 860 11,634 860 Asset pledged as collateral (see note 3.2.18) (18) 10 (18) 10 - - - - Total ECL on financial instruments 616,607 411,259 625,801 400,402 Impairment (credit)/charge on non-financial instruments: Off balance sheet (see note 3.2.18) 40,396 1,633 41,310 1,286 Other non-financial assets (see note 25) 1,802 (3,276) 1,802 (3,276) 658,805 409,616 668,913 398,412 146 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 9. Net income on fee and commission Credit related fees 17,478 3,980 6,383 3,045 Commission on turnover 3,500 2,054 - - Account maintenance fee 72,925 47,201 69,315 44,969 Income from financial guarantee contracts issued 31,301 16,247 13,712 8,157 Fees on electronic products 80,051 51,818 71,267 46,294 Foreign currency transaction fees and commission 13,480 4,190 13,378 3,072 Asset based management fees 15,649 10,956 - - Auction fees income 3,002 695 3,002 695 Corporate finance fees 438 128 438 128 Foreign withdrawal charges 78,525 19,718 78,525 19,718 Commission on letters of credit 27,918 12,068 26,760 7,596 Commission on agency and collection services 12,077 8,460 10,094 7,498 Total fee and commission income 356,344 177,515 292,874 141,172 Fees and commission expense (149,477) (68,208) (143,013) (70,092) 206,867 109,307 149,861 71,080 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 N254,731 million and N208,588 million for Group and Bank (31 December 2023: N110,083 million and N84,361 million) respectively while an amount of N101,613 million and N84,287 million (31 December 2023: N71,025 million and N56,811 million) was recognised over the service period. 10. Trading gains Gain on other trading books 1,116,343 463,371 1,078,708 438,360 (Loss)/Gain on treasury bills FVTPL (29,841) 98,912 (31,749) 98,135 Gain/(loss) on bonds at FVTPL 9,528 1,100 2,196 (1,799) Interest income on trading bonds 3,972 3,590 3,972 3,590 1,100,002 566,973 1,053,127 538,286 Included in gain on other trading books is N2.2 billion gains on derivatives for Group and Bank respectively (31 December 2023: Group N4.05 billion and Bank N4.05 billion). Also included in Gains/loss on other trading books is N15.4 billion related to foreign currency trading gains for both bank and Group (2023: N6 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) 265,522 458,478 265,522 458,478 - Losses on the hedged items attributable to the hedged risk (275,920) (468,482) (275,920) (468,482) -Fair value hedge ineffectiveness (10,398) (10,004) (10,398) (10,004) The effective portion of the fair value gains on the derivatives designated in the fair value hedge of the foreign currency risk has been transferred to other income to net off the recognised losses on the hedged item attributable to the hedged risk. 147 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 11. Other operating income/(loss) Dividend Income from equity instruments (See note a below) 8,645 5,661 14,645 19,777 Gain on disposal of property and equipment (see note 44(vi) (995) 189 (1,013) 186 Income on cash handling 84 27 - - Loan and other recoveries (see note c below) 39,822 24,079 22,938 15,290 Foreign currency revaluation (loss)/gain(see note b below) (178,019) 223,334 (183,235) 228,810 Net monetary loss arising from hyperinflationary economy (see note d below) (33,783) (13,225) - - Derecognition loss on investment securities (see note e below) (42,518) 2,523 - - (206,764) 242,588 (146,665) 264,063 a) Dividend income from equity investments represent dividend received from subsidiaries of N6 billion and N8.6 billion 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. b) Foreign currency revaluation (loss)/ gain represents net (loss)/ 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). c) Included in this balance is Loan recoveries. This represents amount recovered for previously written-off facilities. The amount is recognised on a cash basis only. d) Net monetary loss arising from hyperinflationary economy relates to the remeasurement of monetary items in Ghana following its designation as a hyperinflationary economy. e) During the year, the Government of Ghana restructured its existing Eurobonds, presenting investors with two new bond options with varying terms. Zenith Bank selected the Disco bond option, which indicated substantially different terms compared to the original bonds. Consequently, this triggered the derecognition of the existing bonds and recognition of the new bonds, culminating in a loss on derecognition. 148 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 12. Operating expenses Directors' emoluments (see note 36 (b)) 10,854 5,440 10,131 4,759 Auditors' remuneration 3,191 1,337 800 700 Deposit insurance premium 55,655 28,048 52,405 26,234 Professional fees 13,261 9,387 17,200 8,173 Training and development 4,719 3,857 3,997 3,299 Information Technology 67,301 33,596 59,872 28,678 Lease expense 695 3,495 16 2,496 Advertisement 31,451 11,450 30,887 11,205 Outsourcing services 30,730 24,876 30,649 24,845 Bank charges 16,809 5,807 12,696 4,055 Fuel and maintenance 100,900 41,171 90,834 36,009 Insurance 4,621 3,220 3,059 2,485 Licenses, registrations and subscriptions 41,194 10,139 33,656 6,594 Travel and hotel expenses 12,627 5,155 8,998 4,289 Printing and stationery 10,550 5,049 6,417 2,925 Security and cash handling 12,085 7,246 11,005 5,321 Fines & Penalties (see note 41) 15,428 21 15,428 21 Donations 4,925 5,765 4,750 5,673 AMCON levy 92,201 57,383 92,201 57,383 Telephone,postages and communication charges 11,784 9,262 10,969 8,843 Corporate promotions 22,704 15,890 22,263 15,723 General running expenses 22,951 4,137 13,838 1,976 586,636 291,731 532,071 261,686 Lease expense for the year ended 31 December 2024 amounting to N695 million and N16million, (31 December 2023: N3,495 million and N2,496 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 N136 million. These non-audit services were for the following: review of the bank's Risk assesment N65.4m, Corporate Governance N48m, Training N10m, Zenith bank capital raise Scrutineer service N5m (Wura Olowofoyeku: FRC/2017/PRO/ICAN/004/00000016809) and Sustainability assessment N7.5m (Edafe Erhie: FRC/2013/PRO/ICAN/004/00000001143). 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. 149 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 13. Taxation (a) Major components of the tax expense Income tax expense Corporate tax 201,617 35,465 153,740 16,824 Information technology tax 11,354 6,775 11,244 6,677 Tertiary Education tax 17,960 3,127 17,740 2,876 Police trust fund levy 56 33 56 33 National agency for science and engineering infrastructure levy (NASENI) 2,811 1,670 2,810 1,670 National Fiscal Stabilization Levy & Financial Sector Recovery 11,220 8,177 - - Effect of hyperinflation 2,609 1,622 - - Prior period underprovision 33,452 712 9,224 712 Windfall Tax Levy 63,306 - 63,306 - Current income tax 344,385 57,581 258,120 28,792 Deferred tax expense Origination of temporary differences (50,429) 61,472 (60,989) 43,322 Income tax expense 293,956 119,053 197,131 72,114 Total tax expense 293,956 119,053 197,131 72,114 (b) Reconciliation of the tax expense Profit before income tax 1,326,851 795,962 1,133,289 667,715 Tax calculated at the weighted average Group rate of 30% (2023: 30%) 398,055 238,789 339,987 200,315 Tax effect of adjustments on taxable income Effect of difference of rate across different tax jurisdictions (9,338) (6,450) - - Non-deductable expenses 163,706 32,003 185,830 56,730 Tax exempt income (354,454) (228,282) (348,416) (228,282) Balancing charge 31,602 13,052 241 112 Origination of Temporary differences (50,429) 61,472 (60,989) 43,322 Information technology levy 11,354 6,776 11,244 6,676 Capital allowance utilised (25,368) (12,050) (23,904) (12,050) Tertiary education tax 17,960 3,126 17,740 2,876 Windfall tax 63,307 - 63,307 - Prior period underprovision 33,452 737 9,224 712 National Fiscal Stabilization Levy & Financial Sector Recovery Levy 11,220 8,177 - - Police trust fund levy 78 33 56 33 NASENI 2,811 1,670 2,811 1,670 Total tax expense 293,956 119,053 197,131 72,114 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 (c) The movement in the current income tax payable balance is as follows: At start of the year 33,877 64,856 28,080 61,655 Tax paid (55,669) (65,187) (28,723) (62,367) Current income tax charge (see note 13a) 286,826 34,208 258,122 28,792 WHT Utilized (8,866) - (8,866) - At end of the year 256,168 33,877 248,613 28,080 (d) The movement in the current income tax receivable balance is as follows: At start of the year (18,975) - - - Tax paid (45,466) (42,348) - - Current income tax charge (see note 13a) 57,572 23,373 - - At end of the year (6,869) (18,975) - - 150 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 14. Earnings per share (EPS) Basic earnings per share Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. Profit attributable to shareholders of the Bank (N'million) 1,032,711 676,569 936,158 595,601 Number of issued shares at the end of the year (millions) 41,070 31,396 41,070 31,396 Weighted average number of ordinary shares in issue (millions) 31,423 31,396 31,423 31,396 Basic and diluted earnings per share (Naira) 32.87 21.55 29.79 18.97 Basic and diluted earnings per share are the same, as the Bank has no potentially dilutive ordinary shares. 151 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 15. Cash and balances with central banks Cash 166,374 146,264 95,825 105,262 Operating accounts and deposits with central banks 365,714 123,703 220,377 21,187 Mandatory reserve deposits with central bank (cash reserve) 5,329,200 3,902,718 4,906,659 3,758,248 Special cash reserve requirement 26,928 80,689 26,928 80,689 5,888,216 4,253,374 5,249,789 3,965,386 Current 532,088 269,967 316,202 126,449 Non-current 5,356,128 3,983,407 4,933,587 3,838,937 5,888,216 4,253,374 5,249,789 3,965,386 16. Treasury bills Treasury bills (FVTPL) 1,656,226 749,606 1,656,226 749,606 Treasury bills (Amortized cost) 1,022,741 1,986,738 781,276 1,780,431 ECL Allowance on treasury bills (Amortized cost) (see note 3.2.18) (38) (71) (38) (71) 2,678,929 2,736,273 2,437,464 2,529,966 Classified as: Current 2,678,929 2,736,273 2,437,464 2,529,966 2,678,929 2,736,273 2,437,464 2,529,966 The following treasury bills have maturities less than three months and are classified as cash and cash equivalents for purposes of the statements of cash flows (Note 40) 218,724 209,246 11,403 209,246 218,724 209,246 11,403 209,246 17. Assets pledged as collateral Bonds pledged as collateral 136,492 217,446 89,073 163,869 Treasury bills/Bonds under repurchase agreement 130,385 91,221 - 91,221 ECL Allowance on assets pledged and under repo (11) (29) (11) (29) 266,866 308,638 89,062 255,061 Included in assets pledged as collateral for Group/Bank are bonds at amortised cost of N N184.6billion (Bank N89.06 billion) (31 December 2023: treasury bills N91.22 billion and bonds N217.45 billion, Bank N163.87 billion). All other assets pledged as collateral for Group/Bank are treasury bills at fair value. The assets pledged as collateral were given to the counter parties without transferring the ownership to them. These are held by the counterparty for the term of the transaction being collateralized. These assets were pledged as collateral to Nigeria Interbank Settlement System (NIBBS) N4 billion (31 December 2023: N4 billion), being collateralized, Financial Market dealers Quotation (FMDQ) N5.58 billion (31 December 2023: 11.19 billion), E-Transact N15.05 billion (31 December 2023: N50 million), V-pay: N50 million (31 December 2023: N50 million), Interswitch: N2.4 billion (31 December 2023: N2.4 billion), System specs / Remitta N2.5 billion (31 December 2023: N2.5 billion), CBN Settlement clearing N16 billion (31 December 2023: N15 billion), CBN Real Sector Support Fund: N23 billion (31 December 2023: N23 billion), Federal Inland Revenue Service: N9 billion (31 December 2023: N9 billion), Bank of Industries (BOING) N34.05 billion (31 December 2023: N34 billion), Africa Finance Corporation N15.8 billion (31 December 2023: Nil) and EIB N31.7 billion (31 December 2023: Nil). 152 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 18. Due From Other Banks Current balances with banks within Nigeria 616 - - - Current balances with banks outside Nigeria 1,643,344 837,559 1,951,531 922,922 Placement with banks 3,304,335 997,690 2,503,474 769,735 ECL allowance (12,588) (935) (12,569) (935) 4,935,707 1,834,314 4,442,436 1,691,722 Classified as: Current 4,179,144 1,834,314 3,685,873 1,691,722 Non-current 756,563 - 756,563 - 4,935,707 1,834,314 4,442,436 1,691,722 Included in balances with banks outside Nigeria are the amount of N134.5 billion and N537.61 billion for the Group and Bank respectively (31 December 2023: N254.47 billion and N363.72 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: 894,246 272,851 1,294,171 363,715 19. Derivative assets Instrument types(fair value) Forward and Swap Contracts 280,127 489,167 270,714 462,376 Futures contracts 499 45,572 499 45,566 280,626 534,739 271,213 507,942 Instrument types (Notional amount): Forward and Swap contracts 1,449,884 1,190,997 1,090,047 889,583 Futures contracts 775 310,807 775 190,834 Total 1,450,659 1,501,804 1,090,822 1,080,417 a) Hedging derivative assets 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 2024, the mark-to-market value of these hedged asset is N251 billion (31 December 2023: 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. 153 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 20. Loans and advances Overdraft 2,003,445 1,098,703 1,822,924 1,032,834 Term Loans 8,912,221 5,291,536 7,821,586 4,714,937 On Lending Facilities 78,150 665,208 78,150 665,208 Gross loans and advances to customers 10,993,816 7,055,447 9,722,660 6,412,979 Less: ECL Allowance (see note 3.2.18) (1,028,452) (498,977) (1,013,885) (484,183) 9,965,364 6,556,470 8,708,775 5,928,796 Net Loans classified as: Current 4,768,544 2,855,923 4,588,021 2,790,053 Non-current 5,196,820 3,700,547 4,120,754 3,138,743 9,965,364 6,556,470 8,708,775 5,928,796 Movement in ECL Allowance as at 31 December 2024 is presented in Note 3.2.18. 21. Investment Securities Debt securities At amortised cost 2,758,208 1,563,994 1,851,210 975,608 At FVTOCI 1,949,011 1,528,786 - - ECL allowance (18,210) (42,312) (5,005) (5,451) Net debt securities measured at amortised cost and FVTOCI 4,689,009 3,050,468 1,846,205 970,157 Debt securities (measured at fair value through profit or loss) 41,891 24,293 35,238 19,433 Net debt securities 4,730,900 3,074,761 1,881,443 989,590 Equity securities At fair value through other comprehensive income 367,144 216,134 367,144 216,134 5,098,044 3,290,895 2,248,587 1,205,724 Modification of financial assets 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: Carrying amount before modification 135,351 250,775 - - Net derecognition loss (42,518) (2,523) - - Movement in gross carrying amount and impairment allowance on investment securities are presented in Note 3.2.18 Classified as: Current 76,437 314,392 65,153 309,532 Non-current 5,021,607 2,976,503 2,183,434 896,192 5,098,044 3,290,895 2,248,587 1,205,724 Sovereign (Federal) 2,416,954 1,061,763 1,723,895 580,306 Sub-sovereign (State) 39,756 34,765 38,568 34,765 Corporate bonds 277,831 196,509 66,192 89,580 Promissory note 22,555 43,539 22,555 43,539 Commercial papers 1,112 227,418 - 227,418 2,758,208 1,563,994 1,851,210 975,608 154 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 Jurisdiction of Incorporation Principal place of business 31 December 2024 Ownership interest % 31 December 2024 Zenith Bank (Ghana) Limited Ghana Ghana 99.42% 7,066 Zenith Bank (UK) Limited United Kingdom United Kingdom 100.00% 21,482 Zenith Bank (Sierra Leone) Limited Sierra Leone Sierra Leone 99.99% 2,059 Zenith Bank (Gambia) Limited Gambia Gambia 99.96% 1,038 Zenith Pensions Custodian Limited Nigeria Nigeria 99.00% 1,980 Zenith Nominees Limited Nigeria Nigeria 99.00% 1,000 34,625 Name of company Jurisdiction of Incorporation Principal place of business 31 December 2023 Ownership interest % 31 December 2023 Zenith Bank (Ghana) Limited Ghana Ghana 99.42% 7,066 Zenith Bank (UK) Limited United Kingdom United Kingdom 100.00% 21,482 Zenith Bank (Sierra Leone) Limited Sierra Leone Sierra Leone 99.99% 2,059 Zenith Bank (Gambia) Limited Gambia Gambia 99.96% 1,038 Zenith Pensions Custodian Limited Nigeria Nigeria 99.00% 1,980 Zenith Nominees Limited Nigeria Nigeria 99.00% 1,000 34,625 155 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 (b) Condensed results of consolidated entities 31 December 2024 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 Condensed statement of profit or loss Operating income 3,970,959 (47,782) 3,484,099 247,040 240,409 30,198 11,113 16,932 1,230 Expenses (1,985,303) 41,783 (1,681,897) (150,293) (169,036) (12,906) (7,645) (5,203) (108) (Impairment charge)/writeback for financial and non-financial assets (658,805) - (668,913) (14,545) 12,724 (313) (28) (15) 6 Profit before tax 1,326,851 (5,999) 1,133,289 82,202 84,097 16,979 3,440 11,714 1,128 Taxation (293,956) - (197,131) (67,009) (21,355) (4,278) (679) (3,296) (208) Profit for the year 1,032,895 (5,999) 936,158 15,193 62,742 12,701 2,761 8,418 920 Condensed statement of financial position Assets Cash and cash equivalents 5,888,216 - 5,249,789 607,374 49 20,264 10,736 - - Treasury bills 2,678,929 - 2,437,464 207,321 - - 34,144 - - Assets pledged as collateral 266,866 - 89,062 - 177,804 - - - - Due From Other Banks 4,935,707 (515,142) 4,442,436 219,869 743,832 29,959 9,596 3,449 1,708 Derivative asset held for risk management 280,626 - 271,213 7,062 2,351 - - - - Loans and advances 9,965,364 (7,162) 8,708,775 360,977 861,626 26,602 14,333 213 - Investment securities 5,098,044 - 2,248,587 445,499 2,286,432 75,153 14,858 25,364 2,151 Investment in subsidiaries - (34,625) 34,625 - - - - - - Current tax receivable 6,869 - - 6,869 - - - - - Deferred tax asset 21,542 - 1,756 18,175 1,205 321 85 - - Other assets 326,725 (1,728) 184,136 127,008 11,383 1,567 1,498 2,698 163 Property and equipment 400,441 - 290,273 90,838 13,728 1,141 3,375 1,081 5 Intangible assets 88,196 - 80,203 3,420 3,789 539 76 162 7 29,957,525 (558,657) 24,038,319 2,094,412 4,102,199 155,546 88,701 32,967 4,034 156 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 31 December 2024 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 Liabilities & Equity Customer deposits 21,959,369 (515,143) 17,163,424 1,665,245 3,479,129 110,092 56,622 - - Derivative liabilities 9,258 - 4,465 - 4,793 - - - - Current income tax 256,168 - 248,613 - 1,670 1,935 428 3,301 221 Deferred income tax liabilities 5,502 38 - 5,383 - - - 81 38 Other liabilities 1,402,045 (1,740) 1,323,440 41,640 27,228 5,610 3,778 1,510 579 On-lending facilities 250,725 - 250,725 - - - - - - Borrowings 2,045,185 (7,163) 1,951,616 100,732 - - - - - Equity and reserves 4,029,273 (34,626) 3,096,036 281,416 589,379 37,927 27,870 28,074 3,197 29,957,525 (558,634) 24,038,319 2,094,416 4,102,199 155,564 88,698 32,966 4,035 Condensed statement of cash flow Net cash (used in)/from operating activities 716,029 375,282 3,720 8,982 321,204 15,733 (15,691) 6,274 525 Net cash (used in)/from financing activities 100,810 (49,086) 60,521 96,416 (1,041) - - (6,000) - Net cash (used in)/from investing activities (109) (1,011,078) 375,766 584,006 851 8,847 37,789 2,638 1,072 Increase / (decrease) in cash and cash equivalents 816,730 (684,882) 440,007 689,404 321,014 24,580 22,098 2,912 1,597 157 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 31 December 2023 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 Condensed statement of profit or loss Operating income 2,131,750 (33,310) 1,869,753 160,233 106,594 8,799 5,535 13,587 559 Expenses (926,172) 20,183 (803,626) (75,059) (56,973) (3,921) (2,861) (3,779) (136) Impairment charge for financial and non-financial assets (409,616) (279) (398,412) (9,968) (520) (200) (173) 29 (93) Profit/(loss) before tax 795,962 (13,406) 667,715 75,206 49,101 4,678 2,501 9,837 330 Taxation (119,053) (711) (72,114) (29,318) (12,116) (1,171) (716) (2,823) (84) Profit for the year 676,909 (14,117) 595,601 45,888 36,985 3,507 1,785 7,014 246 Condensed statement of financial position Assets Cash and balances with central banks 4,253,374 - 3,965,386 275,667 32 5,709 6,580 - - Treasury bills 2,736,273 - 2,529,966 174,294 - - 32,013 - - Assets pledged as collateral 308,638 - 255,061 - 53,577 - - - - Due From Other Banks 1,834,314 (218,774) 1,691,722 78,567 262,727 12,415 6,979 557 121 Derivative asset held for risk management 534,739 (35) 507,942 24,538 2,294 - - - - Loans and advances 6,556,470 (52,927) 5,928,796 179,719 482,875 9,084 8,812 111 - Investment securities 3,290,895 - 1,205,724 293,276 1,721,948 34,381 7,174 26,003 2,389 Investment in subsidiaries - (34,625) 34,625 - - - - - - Current tax receivable 18,975 - - 18,433 542 - - - - Deferred tax asset 17,251 (3,110) - 17,338 2,816 173 29 - 5 Other assets 474,976 (1,371) 417,419 52,350 2,799 677 892 2,146 64 Property and equipment 295,532 - 230,267 60,057 1,496 804 2,367 540 1 Intangible assets 47,018 - 44,185 1,369 735 409 86 216 18 20,368,455 (310,842) 16,811,093 1,175,608 2,531,841 63,652 64,932 29,573 2,598 158 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 31 December 2023 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 Liabilities & Equity Customer deposits 15,167,740 (218,776) 12,154,824 937,694 2,203,674 44,608 45,716 - - Derivative liabilities 70,486 24,468 45,514 - 504 - - - - Current income tax 33,877 - 28,080 - - 2,096 820 2,798 83 Deferred income tax liabilities 59,310 (3,110) 59,233 3,110 - - - 77 - Other liabilities 1,039,712 (1,365) 1,003,947 24,849 7,843 1,567 1,567 1,057 238 On-lending facilities 263,065 - 263,065 - - - - - - Borrowings 1,410,885 (52,928) 1,450,182 13,631 - - - - - Equity and reserves 2,323,380 (34,628) 1,806,248 171,821 319,821 15,382 16,820 25,640 2,276 20,368,455 (286,339) 16,811,093 1,151,105 2,531,842 63,653 64,923 29,572 2,597 Condensed statement of cash flow Net cash (used in)/from operating activities 2,450,430 1,158,673 1,494,453 183,276 (389,240) (2,365) (5,552) 11,078 107 Net cash (used in)/from financing activities (680,707) (44,581) (631,155) 18,557 (17,528) - - (6,000) - Net cash (used in)/from investing activities (2,092,246) (1,074,823) (1,016,323) (75,017) 70,223 990 2,167 539 15 Increase / (decrease) in cash and cash equivalents (322,523) 39,269 (153,025) 126,816 (336,545) (1,375) (3,385) 5,617 122 159 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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 2024 (31 December 2023: Nil). 31 December 202431 December 2023 Carrying amount of Investment in associates 92 92 Less: Impairment (92) (92) - - 160 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 24. Deferred tax balances Deferred tax assets (i) Deferred tax asset Unutilised capital allowances 219 (5) - - ECL allowance on not-credit impaired financial instruments 197,122 50,412 180,570 50,331 Other liabilities 2,000 - 2,000 - Other assets 1,230 18,381 - - Lease liability 1,464 3,402 - 3,402 Foreign exchange difference 42 - - - Fair value reserve 1,132 1,904 - - Total deferred tax asset 203,209 74,094 182,570 53,733 Set-off of deferred tax asset pursuant to set-off provisions (see (ii) below) (181,667) (56,843) (180,814) (53,733) Net deferred tax asset 21,542 17,251 1,756 - (ii) Deferred tax liability Property and equipment 31,004 26,850 25,540 23,663 Unutilized capital allowances 853 - - - Right of use asset - 3,402 - 3,402 Foreign exchange differences 155,312 85,901 155,274 85,901 Total deferred tax liability 187,169 116,153 180,814 112,966 Set-off of deferred tax liabilities pursuant to set-off provisions (see (i) above) (181,667) (56,843) (180,814) (53,733) Net deferred tax liability 5,502 59,310 - 59,233 Group 31 December 2024 Movements in temporary differences during the period 1 January 2024 Recognised in profit or loss Impact of hyperinflation and other FX Recognised in OCI 31 December 2024 Asset Other assets 18,381 (24,093) 6,941 - 1,229 Unutilized capital allowances (5) 223 - - 219 ECL Allowance on not-credit impaired financial instruments 50,412 146,711 - - 197,122 Other liabilities - 2,000 - - 2,000 Fair value reserve 1,904 2,070 - (2,841) 1,133 Lease liability 3,402 (1,938) - - 1,464 Foreign exchange differences - 42 - - 42 74,094 125,015 6,941 (2,841) 203,209 161 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 24. Deferred tax balances (continued) 31 December 2024 Movements in temporary differences during the year 1 January 2024 Recognised in profit or loss Impact of hyperinflation and other FX Recognised in OCI 31 December 2024 Liabilities Property and equipment 26,850 4,154 - - 31,004 Right of use asset 3,402 (3,402) - - - Unutilized capital allowances - 853 - - 853 Foreign exchange differences 85,901 72,981 (3,570) - 155,312 116,153 74,586 (3,570) - 187,169 Bank 31 December 2024 Movements in temporary differences during the year 1 January 2024 Recognised in profit or loss 31 December 2024 Asset ECL Allowance on not-credit impaired financial instruments 50,331 130,239 180,570 Other liabilities - 2,000 2,000 Lease liability 3,402 (3,402) - 53,733 128,837 182,570 31 December 2024 Movements in temporary differences during the year 1 January 2024 Recognised in profit or loss 31 December 2024 Liability Property and equipment 23,663 1,877 25,540 Right of use asset 3,402 (3,402) - Foreign exchange differences 85,901 69,373 155,274 112,966 67,848 180,814 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. The Group has recognised all of its deferred tax asset as at 31 December 2024. 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 71,842 18,862 59,476 12,985 Other non-financial assets* 19,553 10,602 12,259 9,979 Gross other non-financial assetss 91,395 29,464 71,735 22,964 Less impairment (see note (i) below) (1,887) (85) (1,887) (85) Net other non-financial assets 89,508 29,379 69,848 22,879 Other financial assets E-card and settlement receivables 100,285 348,566 96,366 345,486 Intercompany receivables - - 767 651 Deposits for investment in AGSMEIS 65,476 65,476 65,476 65,476 Other receivables** 122,899 62,698 2,288 13,268 Deposits for shares - - 720 720 Gross other financial assets 288,660 476,740 165,617 425,601 Less: ECL allowance(see note 25(ii)) (51,443) (31,143) (51,329) (31,061) Net other financial assets 237,217 445,597 114,288 394,540 Total other assets (Net) 326,725 474,976 184,136 417,419 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. 162 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 25. Other assets (continued) *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 261,249 409,500 117,940 351,223 Non-current 65,476 65,476 66,196 66,196 326,725 474,976 184,136 417,419 See note 3.2.18 for movement in impairment allowance for other financial assets as at 31 December . (i) Movement in impairment allowance for non-financial assets At start of the year 85 3,361 85 3,361 Charge for the year (see note 8) 1,802 (3,276) 1,802 (3,276) At end of the year 1,887 85 1,887 85 163 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 26. Property and equipment (a) Property and equipment movement Group 31 December 2024 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets - Buildings Work in progress Total Cost At 1 January 2024 41,996 99,691 30,699 123,123 63,457 25,704 44,973 51,109 50,260 531,012 Additions 1,106 2,824 1,117 17,512 15,890 5,324 19,058 14,089 39,162 116,082 Reclassifications from WIP 61 2,886 1,739 3,059 1,022 - 843 - (9,610) - Modifications - - - - - - - 497 - 497 Impact of Hyperinflation - 20,017 801 2,069 2,476 - 2,168 11,974 3,465 42,970 Disposals/Write off - (66) (228) (2,482) (809) - (3,300) - (1,714) (8,599) Exchange difference - 886 1,863 1,515 423 - 496 3,393 112 8,688 At 31 December 2024 43,163 126,238 35,991 144,796 82,459 31,028 64,238 81,062 81,675 690,650 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets Buildings Work in progress Total Accumulated Depreciation At 1 January 2024 - 16,463 26,199 100,206 46,816 1,457 28,779 15,560 - 235,480 Charge for the year - 2,694 2,682 11,271 12,222 1,135 9,065 5,159 - 44,228 Reclassifications/transfer from WIP - 112 (100) (72) (30) - (568) - - (658) Disposals - (53) (265) (2,269) (798) - (2,266) - - (5,651) Impact of Hyperinflation - 2,656 1,025 2,298 1,139 - 1,832 1,746 - 10,696 Exchange difference - 146 1,487 1,408 370 - 241 2,462 - 6,114 At 31 December 2024 - 22,018 31,028 112,842 59,719 2,592 37,083 24,927 - 290,209 Net book amount At 31 December 2024 43,163 104,220 4,963 31,954 22,740 28,436 27,155 56,135 81,675 400,441 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 2023: Nil). There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2023: 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. 164 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 165 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 26. Property and equipment (continued) Group 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 Cost At 1 January 2023 38,847 66,062 26,453 110,885 47,878 25,704 34,395 28,729 43,419 422,372 Additions 2,709 3,693 1,067 7,286 12,511 - 8,328 2,128 14,687 52,409 Reclassifications from WIP 440 3,812 149 2,258 1,650 - 269 - (9,224) (646) Modifications - - - - - - - 755 - 755 Impact of Hyperinflation - 25,355 1,698 3,400 1,338 - 3,623 16,889 2,149 54,452 Disposals - (67) (169) (1,771) (258) - (2,030) (111) (904) (5,310) Exchange difference - 836 1,501 1,065 338 - 388 2,719 133 6,980 At 31 December 2023 41,996 99,691 30,699 123,123 63,457 25,704 44,973 51,109 50,260 531,012 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets Buildings Work in progress Total Accumulated Depreciation At 1 January 2023 - 11,338 21,915 88,352 38,916 357 22,719 7,932 - 191,529 Charge for the year - 1,570 2,141 9,979 6,760 1,100 5,377 2,930 - 29,857 Reclassifications/Transfers from WIP - 47 (76) 45 (16) - - - - - Disposals - (64) (169) (1,727) (257) - (1,789) (45) - (4,051) Impact of Hyperinflation - 3,407 1,218 2,763 1,125 - 2,193 2,920 - 13,626 Exchange difference - 165 1,170 794 288 - 279 1,823 - 4,519 At 31 December 2023 - 16,463 26,199 100,206 46,816 1,457 28,779 15,560 - 235,480 Net book amount At 31 December 2023 41,996 83,228 4,500 22,917 16,641 24,247 16,194 35,549 50,260 295,532 166 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 26. Property and equipment (continued) Bank 31 December 2024 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets - Buildings Work in progress Total Cost At 1 January 2024 41,996 65,979 25,208 115,381 57,379 25,704 37,684 23,188 42,674 435,193 Additions 1,107 2,771 754 15,086 13,923 5,324 15,414 1,075 38,349 93,803 Reclassifications /transfer from WIP - 3,083 297 2,105 389 - 243 - (6,117) - Disposals - (66) (227) (2,413) (426) - (2,779) - (376) (6,287) Foreign exchange movements - - - - - - - 497 - 497 At 31 December 2024 43,103 71,767 26,032 130,159 71,265 31,028 50,562 24,760 74,530 523,206 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets - Buildings Work in progress Total Accumulated Depreciation At 1 January 2024 - 11,667 21,974 94,365 43,557 1,457 24,435 7,472 - 204,927 Charge for the year - 1,350 1,693 10,106 9,888 1,135 6,787 2,239 - 33,198 Reclassifications/transfer from WIP - 112 (100) 3 (17) - 2 - - - Disposals - (53) (265) (2,238) (426) - (2,210) - - (5,192) At 31 December 2024 - 13,076 23,302 102,236 53,002 2,592 29,014 9,711 - 232,933 Net book amount At 31 December 2024 43,103 58,691 2,730 27,923 18,263 28,436 21,548 15,049 74,530 290,273 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 2023: Nil). There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2023: 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. 167 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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. 168 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 26. Property and equipment (continued) Bank 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 Cost At 1 January 2023 38,847 58,555 24,261 108,297 46,334 25,704 32,073 20,829 42,408 397,308 Additions 2,709 3,679 969 6,556 9,763 - 7,304 1,685 9,600 42,265 Reclassifications from WIP 440 3,812 147 2,258 1,522 - 251 - (8,429) - Disposals - (67) (169) (1,730) (240) - (1,944) (81) (904) (5,135) Modifications - - - - - - - 755 - 755 At 31 December 2023 41,996 65,979 25,208 115,381 57,379 25,704 37,684 23,188 42,675 435,193 Land Buildings Leasehold improvements Furniture, fittings and equipment Computer equipment Aircraft Motor vehicles Right-of-use assets - Buildings Work in progress Total Accumulated Depreciation At 1 January 2023 - 10,479 20,428 86,525 37,768 357 21,583 5,595 - 182,734 Charge for the year - 1,205 1,791 9,496 6,045 1,100 4,576 1,877 - 26,090 Reclassifications/transfer from WIP - 47 (76) 45 (16) - - - - - Disposals - (64) (169) (1,701) (240) - (1,724) - - (3,898) At 31 December 2023 - 11,667 21,974 94,365 43,557 1,457 24,435 7,472 - 204,926 Net book amount At 31 December 2023 41,996 54,312 3,234 21,016 13,822 24,247 13,249 15,716 42,675 230,267 169 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 26. Property and equipment (continued) (b) Right of use amounts and lease liability amounts recognised in the statement of financial position 31 December 2024 31 December 2023 31 December 2024 31 December 2023 In millions of Naira Right-of-use assets Buildings (see note 26) 56,135 35,549 15,049 15,716 56,135 35,549 15,049 15,716 Additions to the right-of-use asset for during the year ended 31 December 2024 was N790 million and N1,075 million (31 December 2023: N1,207 million and N1,685 million respectively). (c) Amounts recognised in the income statement 31 December 2024 31 December 2023 31 December 2024 30 December 2023 In millions of Naira Depreciation charge of right-of-use asset Buildings (see note 26) 5,159 2,930 2,239 1,877 5,159 2,930 2,239 1,877 Interest expense (included in finance cost) 3,599 2,578 1,161 1,034 Lease expense 695 3,495 16 2,496 The total cash outflow of leases as at 31 December 2024 was N1,674 million and N1,572 million respectively (31 December 2023: 1,601 million and N1,191 million respectively). 170 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 27. Intangible assets Computer Software Cost At start of the year 78,046 49,274 67,789 45,115 Additions 49,371 24,035 43,444 22,674 Disposal (5,218) - (5,218) - Impact of hyperinflation (178) 2,449 - - Exchange difference 2,991 2,288 - - At the end of the year 125,012 78,046 106,015 67,789 Accumulated amortization At start of the year 31,028 24,024 23,604 21,157 Charge for the year 8,318 3,469 5,860 2,447 Disposal (3,652) - (3,652) - Impact of hyperinflation (1,071) 1,839 - - Exchange difference 2,193 1,696 - - At the end of the year 36,816 31,028 25,812 23,604 Carrying amount at the end of the year 88,196 47,018 80,203 44,185 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. 171 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 28. Customers' deposits Demand 9,268,444 6,875,307 6,669,514 5,290,857 Savings 7,585,026 5,047,056 7,377,305 4,955,730 Term 5,105,899 3,245,377 3,116,605 1,908,237 21,959,369 15,167,740 17,163,424 12,154,824 Classified as: Current 21,959,369 15,167,740 17,163,424 12,154,824 21,959,369 15,167,740 17,163,424 12,154,824 29. Other liabilities Other financial liabilities Customer deposits for letters of credit 538,817 354,178 537,607 354,150 Managers' Cheques 25,738 22,052 25,312 21,330 Collections accounts 443,193 353,851 443,193 353,797 Unclaimed dividend 30,600 30,116 30,600 30,116 Lease liability (see note (c) below) 37,066 20,900 11,405 10,308 Electronic card and settlement payables 160,138 198,756 160,074 197,002 Customers' foreign transactions payables 18,780 4,089 18,780 4,089 Account payables 15,130 7,412 - - Total other financial liabilities 1,269,462 991,354 1,226,971 970,792 Non-financial liabilities Tax collections 17,378 10,143 16,614 9,573 Deferred income on financial guarantee contracts 7,172 2,864 3,859 1,796 Other payables 53,926 25,284 28,109 15,209 Off Balance Sheet exposures impairment allowance 54,107 10,067 47,887 6,577 Total other non-financial liabilities 132,583 48,358 96,469 33,155 Total other liabilities 1,402,045 1,039,712 1,323,440 1,003,947 Classified as: Current 1,368,564 1,029,704 1,311,159 993,939 Non-current 33,482 10,008 12,281 10,008 1,402,046 1,039,712 1,323,440 1,003,947 (a) ECL allowance for off balance sheet exposure In millions of Naira Bonds and guarantee contracts 19,479 1,597 17,239 109 Undrawn portion of loan commitments 34,087 3,105 30,169 2,858 Letters of credit 541 5,365 479 3,610 54,107 10,067 47,887 6,577 172 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 29. Other liabilities (continued) (c) Lease liability This relates to lease rental for properties used by the Group. The net carrying amount of leased assets, included within property and equipment is N56.13 billion and N15.04 billion as at 31 December 2024. (31 December 2023: N35.55 billion and N15.72 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 5,209 3,697 890 524 Over one year but less than five years 25,408 11,063 4,065 3,679 More than five years 14,609 15,220 14,609 15,220 At end of the year 45,226 29,980 19,564 19,423 The table below shows the movement in lease liability during the year: . As at 1 January 20,900 14,990 10,308 8,916 Additions 13,958 1,269 1,011 874 Lease Termination - (80) - (80) Principal repayment (4,899) (1,543) (1,088) (979) Modification 497 755 497 755 Interest expense 3,599 2,578 1,161 1,034 Interest paid (485) (224) (484) (212) Foreign exchange difference 3,496 3,155 - - At end of the year 37,066 20,900 11,405 10,308 31 December 2024 31 December 2023 31 December 2024 31 December 2023 In millions of Naira Lease liabilities Current 4,785 3,515 466 300 Non-current 32,281 17,385 10,939 10,008 37,066 20,900 11,405 10,308 30. On lending facilities (a) This comprises: Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme Loan (i) 2,062 12,653 2,062 12,653 Bank of Industry (BOI) Intervention Loan (ii) 17,816 25,024 17,816 25,024 Nigerian Export-Import Bank (NEXIM) rediscounting & refinancing facility (iii) 16,860 - 16,860 - Central Bank of Nigeria (CBN) / Bank of Industry(BOI) - Power & Aviation intervention Funds (iv) - 1,585 - 1,585 CBN MSMEDF Deposit (v) 297 544 297 544 FGN SSB Intervention Fund (vi) 124,915 122,418 124,915 122,418 Excess Crude Loan Facilty Deposit (vii) 69,412 68,031 69,412 68,031 Real Sector Support Facility (viii) 16,480 13,417 16,480 13,417 Non-Oil Export Stimulation Facility (ix) 2,883 5,258 2,883 5,258 National Food Security Programme (x) - 11,657 - 11,657 Accelerated Agricultural Development Scheme (xi) - 2,478 - 2,478 250,725 263,065 250,725 263,065 173 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 30. On lending facilities (continued) Classified as: Current 29,659 64,212 29,659 64,212 Non-current 221,066 198,853 221,066 198,853 250,725 263,065 250,725 263,065 Movement At beginning of the year 263,065 311,192 263,065 311,192 Principal addition during the year 16,860 - 16,860 - Principal repayment during the year (31,812) (48,080) (31,812) (48,080) Interest expense during the year 3,969 5,731 3,969 5,731 Interest paid during the year (1,357) (5,778) (1,357) (5,778) At end of the year 250,725 263,065 250,725 263,065 174 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 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) These facilities are loans totaling N16.86 billion to eligible clients to support the working capital for export manufacturing related activities. This is a rediscounting and refinancing facilitiy at a discount rate of 9% payable to Nexim and a maximum of 3% interest/discount rate allowable to Zenith Bank. (iv) 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. (v) 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. (vi) 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. (vii) 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. (viii) 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. (ix) 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. (x) The National Food Security Program (NFSP) was launched in 2001. The main objective of this program was to improve food security by promoting sustainable agricultural practices, providing credit facilities to farmers, and distributing agricultural input. The fund is disbursed to the bank at 5% interest rate. (xi) 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. 175 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 31. Borrowings Long term borowings comprise: Due to AFREXIM (i) 346,214 283,954 346,214 283,954 Due to IFC (ii) 394,311 243,705 394,311 243,705 Due to ABSA bank (iii) - 249,786 - 249,786 Due to Mashreq (iv) 187,698 98,508 187,698 98,508 Interbank takings (v) - 13,000 - 13,000 Due to banks for clean letters of credit (vi) 101,960 52,847 8,391 62,468 Due to BUNGESA (vii) - 50,065 - 50,065 Due to CAIXA (viii) 84,266 186,372 84,266 186,372 Due to ADM (ix) 38,316 18,369 38,316 18,369 Due to AREDIN (x) - 17,784 - 17,784 Due to CBN (xi) 824,246 - 824,246 - Due to Africa Trade (xii) - 48,921 - 48,921 Due to CARGILL (xiii) 68,174 - 68,174 - Due to AXENDO (ix) - 46,122 - 46,122 Due to Standard Chartered Bank UK - - - - Due to CBN - - - - Due to WILBENTRAD - 23,338 - 23,338 Due to CITILON - 28,898 - 28,898 Due to SUMITOMOBN - 49,216 - 49,216 Due to ZENUK - - - 29,676 2,045,185 1,410,885 1,951,616 1,450,182 The Group has not had any defaults of principal, interest,or other breaches with respect to the debt securities during the year (31 December 2023: nil). The assets exchanged under repurchase agreements with counterparties are disclosed in note 17. Classified as: Current 1,762,442 1,001,635 1,668,873 1,040,932 Non-current 282,743 409,250 282,743 409,250 2,045,185 1,410,885 1,951,616 1,450,182 Movement in borrowings At the beginning of the year 1,410,885 963,450 1,450,182 999,580 Addition during the year 2,860,580 1,148,702 2,771,322 1,197,352 Interest expense 363,439 93,435 345,318 97,712 Interest paid (192,475) (97,895) (160,647) (97,569) Repayments (principal) (2,735,376) (1,569,493) (2,735,376) (1,569,493) Foreign exchange difference 338,132 872,686 280,817 822,600 At the end of the year 2,045,185 1,410,885 1,951,616 1,450,182 176 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 31. Borrowings (continued) Details of Borrowings i. Due to AFREXIM (African Export-Import Bank) The outstanding balance of N346.214 billion (US $223.51 million) due to AFREXIM represents the amount payable by the Bank from 3year term loan received in 2023, with a one-year moratorium. The $300m facility received in January 2023 is priced at 3months Term SOFR+5% and will mature in December 2027. Interest on the facility is payable quarterly. ii. Due to IFC (International Finance Corporation) The amount of N394.311 billion (US $254.5 million) represents the amount payable by the bank on a 3-year term loan granted by IFC in two tranches of $150m & $100m in July 2022 and September 2022 respectively. Interest is payable semi-annually at 6 months Term SOFR+2.87% and the facility will mature in June 2025. iii Due to ABSA (Amalgamated Banks of South Africa) No outstanding balance due to ABSA at the year end iv Due to MASHREQ The outstanding balance of N187.69 billion (US $121.17 million) due to MASHREQ represents the amount payable by the Bank from 1 year term loan receied in 2024. The $120m facility recieved in February 2024 is priced at 3months SOFR+3% and will mature in January 2025. Interest on the facility is payable quarterly. v Interbank takings No outstanding balance as at the year end.. vi Due to banks for clean letters of credit The amount represents a clean line from various international banks for letter of credit. vii Due to BUNGE S.A No outstanding balance due to Bunge S.A as at the year end. viii Due to CAIXA The outstanding balance of N 84.266 billion (US $ 24.74million) due to CAIXA represents the amount payable by the Bank. ix Due to ADM The outstanding balance of N 38.316billion (US $23.63 million) due to ADM represents the amount payable by the Bank. x Due to AREDIN There is no outstanding balance due to Aredin as at the year end. xi Due to CBN The outstanding balance of N824.246 billion due to CBN represents the amount payable by the BanK as at the year end. xii Due to Africa trade finance There is no outstanding balance due to Africa Trade Finance as at the year end. xiii Due to CARGILL The outstanding balance of N 68.174 billion (US $ 44.01 million) due to Cargill represents the amount payable by the Bank. ix Due to Axendo There is no outstanding balance due to Axendo as at the year end 177 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 31. Borrowings (continued) 32. Derivative liabilities Instrument types (Fair value): Forward and swap contracts 8,759 504 3,966 - Futures contracts 499 69,982 499 45,514 9,258 70,486 4,465 45,514 Instrument types (Notional Amount) Forward and swap contracts 148,011 518 143,218 14 Futures contracts 775 96,131 775 96,131 148,786 96,649 143,993 96,145 Classified as: Current 9,258 70,486 4,465 45,514 33. Share capital Issued and fully paid 41,069,830,000 ordinary shares of 50k each (December 2023: 31,396,493,787) 20,535 15,698 20,535 15,698 The bank issued additional 9,673,336,214 shares through a combination of right issue and public offer, with a nominal value was N0.5k. Issued Ordinary 20,535 15,698 20,535 15,698 178 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 34. Share premium, retained earnings and other reserves (a) There was movement in the Share premium account during the current year ,as a result of the issuance of 9,673,336,214 shares through a combination of right issue and public offer. The shares were issued at a premium. Share premium 594,113 255,047 594,113 255,047 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 N140.42 billion (2023: N89.34 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 2024, the Bank has made a cumulative credit risk reserve of N104.11 billion, while the cumulative amount made by the Group is N104.18 billion (31 December 2023: Group N93.98 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. (j) Issue share cost: This relates to cost incured by the Bank's subsidiary for additional share capital issued during the year. These costs were associated with regulatory processes required to increase the subsidiary's share capital base which were accounted for as a direct deduction from equity. Movement in Non-controlling interest 31 December 2024 31 December 2023 At start of the year 1,628 813 Impact of adopting IAS 29 on 1 January 556 472 Profit for the period/year 184 340 Foreign currency translation differences (3) 3 At end of the period/year 2,365 1,628 179 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 35. Pension contribution In accordance with the provisions of the Pensions Reform Act 2014, the Bank and its subsidiaries commenced a contributory pension scheme in January 2005. For entities operating in Nigeria, the contribution by employees and the employing entities are 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 N11.15billion and N3.22 billion respectively (31 December 2023: N6.01 billion and N2.79 billion). 180 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 36. Personnel expenses Compensation for the staff are as follows: Salaries and wages 137,689 92,637 87,526 71,627 Other staff costs* 55,331 25,766 37,895 13,670 Pension contribution 11,150 6,012 3,223 2,786 204,170 124,415 128,644 88,083 *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: Number Number Number Number Executive directors 6 6 6 6 Management 571 572 514 519 Non-management 8,694 7,587 7,184 6,154 9,271 8,165 7,704 6,679 The table below shows the number of employees, whose earnings during the year, fell within the ranges shown below: Number Number Number Number N300,001 - N2,000,000 109 183 - - N2,000,001 - N2,800,000 31 91 - - N2,800,001 - N4,000,000 3,127 1,795 2,972 1,719 N4,000,001 - N6,000,000 150 172 - 31 N6,000,001 - N8,000,000 1,338 1,462 1,280 1,406 N8,000,001 - N9,000,000 456 42 400 - N9,000,001 - and above 4,060 4,420 3,052 3,523 9,271 8,165 7,704 6,679 (b) Directors' emoluments Directors' renumeration excluding certain benefits are as follows: Executive compensation 3,238 2,575 3,238 2,575 Fees and sitting allowances 1,243 1,039 519 358 Retirement Benefit costs 6,373 1,826 6,373 1,826 10,854 5,440 10,130 4,759 Fees and other emoluments disclosed above include amounts paid to: The Chairman 64 46 The highest paid director 874 2,168 The number of directors who received fees and other emoluments (excluding pension contributions and reimbursable expenses) in the following ranges was: Number Number Number Number N5,500,001 and above 15 14 15 14 37. Group subsidiaries and related party transactions Parent: The Group is controlled by Zenith Bank Plc (incorporated in Nigeria) which is the parent company and whose shares are widely held. 181 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 37. Group subsidiaries and related party transactions (continued) Subsidiaries: The amount of N8,889billion 31 December 2023: N7,649 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 N254 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 2024 are shown below. Entity Effective Holding % Nominal share capital held Zenith Bank (Ghana) Limited 99.42 7,066 Zenith Bank (UK) Limited 100.00 21,482 Zenith Bank (Sierra Leone) Limited 99.99 2,059 Zenith Bank (The Gambia ) Limited 99.96 1,038 Zenith Pension Custodians Limited 99.00 1,980 Zenith Nominees Limited 99.00 1,000 31 December 2024 Transactions and balances with subsidiaries In millions of naira Receivable from Payable to Income received from Expense paid to Zenith Bank (UK) Limited 757,549 284,087 22,077 16,618 Zenith Bank (Ghana) Limited 3 - - - Zenith Bank (Sierra Leone) Limited 84 - - - Zenith Bank (Gambia) Limited 1,405 - - - Zenith Pensions Custodian Limited - 482 6,000 - Zenith Nominees Limited - 1,681 - - 31 December 2023 31 December 2023 Transactions and balances with subsidiaries In millions of naira Receivable from Payable to Income received from Expense paid to Zenith Bank (UK) Limited 198,112 29,676 16,411 4,866 Zenith Bank (Ghana) Limited 16 3,225 - - Zenith Bank (Sierra Leone) Limited 565 - - - Zenith Bank (Gambia) Limited 71 4,503 - - Zenith Pensions Custodian Limited - - 6,000 - 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 N6,441 bn and N5,505 bn respectively (31 December 2023: N3,751 billion and N3,266 billion respectively). Non-controlling interest in subsidiaries The Group does not have any subsidiary that has material non-controlling interest. 182 Zenith Bank Plc Annual Report - 31 December 2024 37. 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 close 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. Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Key management compensation Salaries and other short-term benefits 3,238 2,575 3,238 2,575 Retirement benefit cost 6,373 1,826 6,373 1,826 Allowances 1,243 1,039 519 358 At the end of the year 10,854 5,440 10,130 4,759 Loans and advances to key management personnel At start of the year 2,850 3,245 1,297 1,692 Granted during the year 32 272 32 272 Repayment during the year (2,304) (667) (751) (667) At end of the year 578 2,850 578 1,297 Interest earned 23 50 23 50 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 2024 Name of company Relationship/Name Loans Deposits Interest received Interest paid Directors 2,184 3,762 30 28 Quantum Fund Management Common significant shareholder/JimOvia 37 3 - - Zenith General Insurance Company Limited Common directorship/JimOvia - 762 - - Sirius Lumina Limited Common significant shareholder/JimOvia 1 1 - - Cyberspace Network Common significant shareholder/JimOvia - 2,609 - - Quantum Zenith Trustees & Inv. Ltd Common significant shareholder - 28 - - - - - - 2,222 7,165 30 28 31 December 2023 Name of company Relationship/Name Loans Deposits Interest received Interest paid Directors 679 3,134 50 31 Quantum Fund Management Common significant shareholder/JimOvia 48 3 - - Zenith General Insurance Company Limited Common directorship/JimOvia - 957 - - Cyberspace Network Common significant shareholder/JimOvia - 466 - - Zenith Trustees Ltd Common significant shareholder/JimOvia - 11 - - Oviation Limited Common directorship/Jim Ovia - - - - Sirius Lumina Ltd Director/Prof. Sam Enwemeka - 1 - - At end of the year 727 4,572 50 31 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 2023: Nil). During the year, Zenith Bank Plc paid N1.38 billion as insurance premium to Zenith General Insurance Limited (31 December 2023: N1.65 billion) and N1.23 billion to prudential Zenith (31 December 2023: N886 million). These expenses were reported as operating expenses. The Bank paid N15.83 billion (31 December 2023:N3.99 billion) to Cyberspace Network for various Information technology services rendered during the year. 183 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 38. 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 N1.30 trillion (31 December 2023: N1 trillion). 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 N1,244 million (31 December 2023: N489 million) in respect of authorized and contracted capital projects. Group Break down of capital commitments Property and equipment: 31 December 2024 31 December 2023 Motor vehicles, Furniture and equipment - 55 Property 673 434 Intangible assets: Information technology 571 - 1,244 489 c) Confirmed credits and other obligations on behalf of customers In the normal course of business the group is a party to financial instruments with off-balance sheet risk. These instruments are issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance sheet financial instruments are: Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 Performance bonds and guarantees 1,672,254 740,714 1,644,573 770,347 Usance (see note ii below) 2,567,161 433,926 2,801,850 433,926 Letters of credit (see note ii below) 357,738 555,368 33,994 424,903 4,597,153 1,730,008 4,480,417 1,629,176 Pension Funds (See Note iii below) 8,758,164 7,648,625 8,758,164 7,648,625 i. The transaction related performance bonds and guarantees are, generally, short-term commitments to third parties which are not directly dependent on the customer's creditworthiness. As at 31 December 2024, performance bonds and guarantees worth N11.8 billion (31 December 2023: N12.19 billion) are secured by cash while others are otherwise secured. ii. Usance and letters of credit are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity dates, but are cancellable by the Group (as lender) subject to notice requirements. These Letters of credit are provided at market-related interest rates. Usance and letters of credit are secured by different types of collaterals similar to those accepted for actual credit facilities. iii. The amount of N8,889 billion (31 December 2023: N7,649 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 N254 billion (31 December 2023: N130.2 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 N260.88 billion (31 December 2023: N211.71 billion). 184 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 38. Contingent liabilities and commitments (continued) 39. Dividend paid Nominal value of shares 20,535 15,698 20,535 15,698 Number of share in issue and ranking for dividend 31,396 31,396 31,396 31,396 Proposed dividend per share (Naira) 1.00 0.50 1.00 0.50 Interim dividend per share paid (Naira) 1.00 0.50 1.00 0.50 Final dividend per share proposed - 3.50 - 3.50 Final Dividend paid during the year 109,888 91,050 109,888 91,050 Interim Dividend paid during the year 31,396 15,698 31,396 15,698 Total dividend paid during the year 141,284 106,748 141,284 106,748 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 final dividend of N4.00 per share which in addition to the N1.00 per share as interim dividend amounts to N5.00 per share (2023: Interim dividend of N0.50 per share, final dividend of N3.50 and a total dividend per share of N4.00) from the retained earnings accounts as at 31 December 2024. This will be presented for ratification by the 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 2024 and 31 December 2023 respectively. Dividends are paid to shareholders' net of withholding tax at the rate of 10% in compliance with extant tax laws. 40. Cash and cash equivalents Cash and balances with central banks (less mandatory reserve deposits) (see note 15) 532,088 269,967 316,202 126,449 Treasury bills (3 months tenor) (see note 16) 218,724 209,246 11,403 209,246 Due from other banks(see note 18) 4,041,461 1,825,298 3,148,265 1,682,707 4,792,273 2,304,511 3,475,870 2,018,402 41. Compliance with Banking Regulations During the year, the bank paid the following penalties to Central Bank of Nigeria. S/N Description Amount paid in Naira 1 Late resolution of customer's complaint 2,000,000 2 Non-compliance with CBN directive on reconciliation of customer charges 14,000,000 3 Penalty on Anti-money laundering findings 61,000,000 4 Non-compliance with CBN directives 20,000,000 5 Penalty as a result of infraction related to risk assessment examination 4,000,000 6 Penalty for cyber security breaches 4,000,000 7 Checks on customers onboarding documentation 322,000,000 8 Penalty for extant regulation violation 250,000,000 9 Penalty as a result of anti-money laundery reviews 103,250,000 10 Infractions from the foreign exchange examination 14,647,419,153 Total 15,427,669,153 185 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 42. 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 2024, 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 Bank 31 December 2024 31 December 2023 Loans and advances: -Lost 151,916 61,483 -Doubtful 151,498 90,107 Sub-standard 706 5,002 -Watchlist 487,010 276,808 -Performing 138,499 102,402 -Other known losses 10,952 6,805 (a) 940,581 542,607 Impairment assessment under IFRS Loans and advances 12 months ECL credit 138,188 34,739 Life time ECL not impaired 634,733 170,708 Life time ECL credit impaired 240,964 278,736 (b) 1,013,885 484,183 Due from Banks - 12 months ECL (c) 12,569 935 Treasury bills - 12 months ECL (d) 38 71 Asset pledged as collateral- 12 months ECL (e) 11 29 Investment securities- 12 months ECL (f) 5,005 5,451 Other financial assets- ECL allowance (g) 51,329 31,061 Other non-financial assets (h) 1,887 85 Off Balance Sheet Exposures- 12 months ECL (i) 47,887 6,577 (m)=(b)+(c)+(d)+(e)+(f)+(g)+(h)+(i) 1,132,611 528,392 Transfer to credit risk reserve (n)=(a)-(m) - 14,215 As at 31 December 2024, the Bank holds a total of N104,111 million in its credit risk reserves. 186 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 43. Statement of cash flow workings 31 31 December 2024 (i) Investment securities (see note 17 & 21) Group Bank 31 December 2024 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 At 1 January 2024 1,739,098 1,769,213 1,133,997 235,567 Change in ECL allowance 9,448 - 463 - Additions to Investment securities 1,640,256 371,331 1,087,128 - Disposal of Investment securities (414,354) - (376,950) - Unrealised gain from changes in fair value recognised in profit or loss - (864) - (864) Fair value gain/loss OCI - 157,057 - 151,011 Interest income 453,687 107,424 271,307 - Interest received (390,262) (53,069) (180,678) - Derecognition loss (31,010) (11,508) - - Balance as at 31 December 2024 (3,006,863) (2,358,046) (1,935,267) (402,382) Recognised in cash flow statement - (18,462) - (16,668) Group Bank 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 At 01 January 2023 907,188 940,273 637,367 104,443 Change in ECL allowance (7,736) - (2,877) - Additions to Investment securities 820,166 1,558,191 539,842 - Disposal to Investment Securities (122,846) (857,915) (82,885) - Unrealised gain from changes in fair value recognised in profit or loss - 2,206 - 2,206 Fair value gain/loss OCI - 132,532 - 122,252 Interest income 165,255 46,709 104,984 - Interest received (22,929) (62,328) (62,434) - Balance as at 31 December 2023 (1,739,098) (1,769,213) (1,133,997) (233,567) Recognised in cash flow statement - (9,545) - (6,666) Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 (iia) Treasury bills (Amortised cost) (see note 16 & 17) 31 December 2024 Treasury bills (including pledged instrumets) at armotised cost as 1 January (1,868,642) (989,891) (1,662,335) (950,021) Change in ECL allowance (33) (337) (33) 32 Interest income (239,830) (166,813) (144,080) (133,492) Additions (798,943) (4,547,984) (705,643) (2,824,475) Redemptions 2,092,066 3,836,384 1,730,853 2,245,622 Balance as at 31 December 2024 (815,382) (1,868,641) (781,238) (1,662,334) - - - - 187 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Interim Consolidated and Separate Financial Statements for the six month period ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 43. Statement of cash flow workings (continued) (iib) Treasury bills (FVTPL) (see note 16) 31 December 2024 Treasury bills fair value through profit or loss (including pledged instruments) as at 1 January 749,606 1,159,965 749,606 1,159,965 Unrealised fair value gain (8,719) 29,132 (8,719) 29,132 Interest income 344,636 12,154 344,636 12,154 Balance as at end of year (1,644,823) (749,606) (1,644,823) (749,606) Recognised in Cashflow (559,300) 451,645 (559,300) 451,645 (iii) Loans and advances (see note 20) 31 December 2024 Loans and advances at 1 January 6,556,470 4,013,705 5,928,796 3,735,676 Changes in ECL allowance (594,176) (400,650) (594,395) (394,440) Interest Income 1,517,917 671,919 1,394,672 635,806 Interest received (1,362,644) (722,437) (1,246,158) (671,888) Impact of hyperinflation (5,791) (8,029) - - Balance as at end of year (9,965,364) (6,556,470) (8,708,775) (5,928,796) Recognised in Cash flow (3,853,588) (3,001,962) (3,225,860) (2,623,642) (iv) Customer deposits 31 December 2024 As at 1 January (15,167,740) (8,975,653) (12,154,824) (7,434,806) Interest expense (622,008) (306,748) (488,663) (250,751) Interest paid 639,393 310,064 481,431 243,790 Balance as at end of year 21,959,369 15,167,740 17,163,424 12,154,824 Recognised in Cash flow 6,809,014 6,195,403 5,001,368 4,713,057 (v) Other liabilities (see note 29) 31 December 2024 As at 1 January (1,039,712) (568,559) (1,003,947) (546,347) Changes in ECL allowance (40,396) (1,633) (41,310) (1,286) Lease modification (497) (755) (497) (755) Lease liability additions (13,958) (1,269) (1,011) (874) Interest expense on lease liability (3,599) (2,578) (1,161) (1,034) Lease interest paid 485 224 484 212 Principal repayment on lease liability 4,899 1,543 1,088 979 Unclaimed dividend received (484) (352) (484) (352) Impact of hyperinflation 5,120 4,547 - - Lease terminations - 80 - 80 Balance as at end of year 1,402,046 1,039,712 1,323,440 1,003,947 Net cash movement in operating activties 313,904 470,960 276,602 454,570 (vi) (Loss)/Gain on disposal of property and equipment and Intangible assets 31 December 2024 Cost (see note 26 & 27) (13,818) (5,244) (11,505) (5,055) Accumulated depreciation (see note 26 & 27) 9,304 4,051 8,845 3,900 Net book value (4,514) (1,193) (2,660) (1,155) Sales proceed 3,520 1,382 1,647 1,341 Profit on Disposal (see note 10) (994) 189 (1,013) 186 188 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 43. Statement of cash flow workings (continued) (vii) Due from Banks (greater than 90 days) 31 December 2024 As at 1 January 9,015 46,407 9,015 115,315 Changes in ECL allowance (11,653) (860) (11,634) (860) Interest income 165,306 81,822 130,068 39,796 Interest received (108,660) (81,207) (73,422) (39,181) Balance as at end of year (894,246) (9,015) (1,294,171) (9,015) Recognised in cash flow statement (840,238) 37,147 (1,240,144) 106,055 (viii) Other assets 31 December 2024 As at 1 January 474,976 213,523 417,419 193,792 Changes in ECL allowance (22,061) 1,103 (22,070) 1,083 Reclassification (658) 646 - - Impact of hyperinflation 16,067 837 - - Balance as at end of year (326,725) (474,976) (184,136) (417,419) Net cash movement in operating activities 141,599 (258,867) 211,213 (222,544) (ix) Net movement in Derivatives Derivative assets 31 December 2024 As at 1 January (534,739) (49,874) (507,942) (48,851) Unrealised fair value gain (280,626) (534,739) (271,213) (507,942) Balance as at end of year 280,626 534,739 271,213 507,942 (534,739) (49,874) (507,942) (48,851) Derivative liabilities 31 December 2024 As at 1 January 70,486 (6,325) 45,514 (6,040) Unrealised fair value changes 9,258 (70,486) 4,465 (45,514) Balance as at end of year (9,258) 70,486 (4,465) 45,514 Recognised in cash flow 70,486 (6,325) 45,514 (6,040) Net movement in derivatives (464,253) (43,549) (462,428) (42,811) (x) Restricted balances (Cash Reserve) 31 December 2024 Opening Balance 3,983,407 1,749,608 3,838,937 1,694,906 Mandatory Reserve deposit with Central Bank 5,329,200 3,902,718 4,906,659 3,758,248 Special Cash Reserve 26,928 80,689 26,928 80,689 Recognised in cashflow (1,372,721) (2,233,797) (1,094,650) (2,144,031) (xia) Interest paid on operating activities 31 December 2024 Customer deposit (see note 43(iv)) (639,393) (310,064) (481,431) (243,790) (639,393) (310,064) (481,431) (243,790) (xib) Interest paid on financing activities Onlending facilities (see note 30b) (1,357) (5,778) (1,357) (5,778) Lease liabilities (see 43(v)) (485) (224) (484) (212) Borrowings (see note 31) (192,475) (97,895) (160,647) (97,569) (194,317) (103,897) (162,488) (103,559) 189 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 43. Statement of cash flow workings (continued) (xii) Unrealised fair value change 31 December 2024 Investment securities (see note 43(i)) 864 (2,206) 864 (2,206) Treasury bills (see note 43(ii)) 8,719 (29,132) 8,719 (29,132) Derivatives (see note 43(ix)) (271,368) (464,253) (266,748) (462,428) (261,785) (495,591) (257,165) (493,766) (xiiia) Interest received from operating activities 31 December 2024 Due from other banks (see note 41(vii)) 108,660 81,207 73,422 39,181 Loans and advances (see note 41(iii)) 1,362,644 722,437 1,246,158 671,888 1,471,304 803,644 1,319,580 711,069 (xiiib) Interest received from investment securities 31 December 2024 Investment securities (see note 41(i)) 443,331 85,081 180,678 62,434 443,331 85,081 180,678 62,434 (xiva) Acquisition of Right of use asset 31 December 2024 Addition to right of use (see note 26) (14,089) (2,128) (1,075) (1,685) Lease liability addition (see note 43(v)) 13,958 1,269 1,011 874 (131) (859) (64) (811) (xivb) Additions to property,plant and equipment other than right of use 31 December 2024 Addition to property, plant and equipment (see note 26) (116,082) (52,409) (93,803) (42,265) Addition to right of use asset (see note 26) 14,089 2,128 1,075 1,685 (101,993) (50,281) (92,728) (40,580) (xv)Addition to investment securities 31 December 2024 Investment securities at amortized cost (1,640,256) (820,166) (1,087,128) (539,842) Investment securities at FVOCI (371,331) (1,558,191) - - (2,011,587) (2,378,357) (1,087,128) (539,842) (xvi)Lease Modification 31 December 2024 Right of use 497 755 497 755 Lease Liability (497) (755) (497) (755) - - - - 190 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Notes to the Consolidated and Separate Financial Statements for the Year Ended 31 December 2024 Group Bank In millions of Naira 31 December 2024 31 December 2023 31 December 2024 31 December 2023 (xvii)Unclaimed dividend received 31 December 2024 As at 1 January (30,116) (29,764) (30,116) (29,764) Balance as at 31 Dec 2024 30,600 30,116 30,600 30,116 484 352 484 352 (xviii)Lease derecognition 31 December 2024 Right of use- cost - 66 - 81 lease liability - (80) - (79) - (14) - 2 (xix)Dividend received 31 December 2024 Dividend Income 8,645 5,661 14,645 19,777 8,645 5,661 14,645 19,777 (xx) Foreign exchange revaluation loss 31 December 2024 Cash and bank balances (31,234) (28,194) (31,234) (28,002) Due to other banks (1,406,517) (486,389) (986,222) (486,246) Borrowings 338,132 872,686 280,817 822,600 (1,099,619) 358,103 (736,639) 308,352 44. Comparatives Certain disclosures and some prior year figures have been re-presented to conform with current year presentation. 45. Events after the reporting period On January 23, 2025, the Bank received approval for the allotment of its newly issued shares. The total number of additional shares raised by the bank through the capital raise exercise is 9,673,336,214. This brings the total number of issued shares of the bank from a previous 31,396,493,787 units to a current 41,069,830,001 units. See below analysis of the newly allotted shares: Share range No. of Shareholders (Right) No of shares (Right) No. of Applicants No. of Shares (Public offer) Total no of shareholders Total no of issued shares 1 - 50,000 38,169 410,937,059 116,643 815,302,250 154,812 1,226,239,309 50,001 - 100,000 637 85,569,449 5,700 465,710,250 6,337 551,279,699 100,001 - 500,000 660 410,622,233 3,834 877,405,500 4,494 1,288,027,733 500,001 - 1,000,000 121 97,269,348 756 649,132,500 877 746,401,848 1,000,001 - 5,000,000 115 353,919,902 411 915,262,500 526 1,269,182,402 5,000,001 - 10,000,000 19 177,806,321 30 214,104,000 49 391,910,321 10,000,001 - 50,000,000 23 633,280,993 21 391,340,750 44 1,024,621,743 50,000,001 and above 14 3,063,343,659 2 112,329,500 16 3,175,673,159 39,758 5,232,748,964 127,397 4,440,587,250 167,155 9,673,336,214 191 Zenith Bank Plc Annual Report - 31 December 2024 OTHER NATIONAL DISCLOSURES ZENITH BANK PLC Value Added Statement In millions of Naira 31 December 2024 31 December 2024 31 December 2023 31 December 2023 % % Group Value Added Gross income 3,970,959 2,131,750 Interest and fee expense -Local (732,819) (302,912) -Foreign (409,134) (173,788) 2,829,006 1,655,050 Impairment loss on financial and non-financial instruments (658,805) (409,616) 2,170,201 1,245,434 Bought - in materials and services -Local (525,039) (262,775) -Foreign (61,595) (28,956) Value added 1,583,567 100 953,703 100 Distribution Employees Salaries and benefits 204,170 13 124,415 16 Government Income tax 293,956 19 119,053 15 Retained in the Group Replacement of property and equipment / intangible assets 52,546 3 33,326 3 Profit for the year (including statutory reserves, small scale industry, and non- controling interest) 1,032,895 65 676,909 71 Total Value Added 1,583,567 100 953,703 100 Value added represents the additional wealth which the group has been able to create by its own and employees efforts. 193 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Value Added Statement In millions of Naira 31 December 2024 31 December 2024 31 December 2023 31 December 2023 % % Bank Gross Income 3,484,099 1,869,753 Interest and fee expense -Local (732,817) (321,877) -Foreign (249,307) (103,443) 2,501,975 1,444,433 Impairment loss on financial and non-financial instruments (668,914) (398,412) 1,833,061 1,046,021 Bought-in material and services -Local (532,071) (261,686) -Foreign - - Value added 1,300,990 100 784,335 100 Distribution Employees Salaries and benefits 128,643 10 88,083 11 Government Income tax 197,131 15 72,114 9 Retained in the Bank Replacement of property and equipment/intagible assets 39,058 3 28,537 4 Profit for the year (including staturory reserves and small scale industry) 936,158 72 595,601 76 Total Value Added 1,300,990 100 784,335 100 Value added represents the additional wealth which the Bank has been able to create by its own and employees efforts. 194 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Five-Year Financial Summary In millions of Naira 31 December 202431 December 202331 December 202231 December 202131 December 2020 Group Statement of Financial Position Assets Cash and balances with central banks 5,888,216 4,253,374 2,201,744 1,488,363 1,591,768 Treasury bills 2,678,929 2,736,273 2,246,538 1,764,946 1,577,875 Assets pledged as collateral 266,866 308,638 254,663 392,594 298,530 Due From Other Banks 4,935,707 1,834,314 1,302,811 691,244 810,494 Derivative assets 280,626 534,739 49,874 56,187 44,496 Loans and advances 9,965,364 6,556,470 4,013,705 3,355,728 2,779,027 Investment securities 5,098,044 3,290,895 1,728,334 1,303,725 996,916 Current tax receivable 6,869 18,975 - - - Deferred tax 21,542 17,251 18,343 1,837 5,786 Other assets 326,725 474,976 213,523 168,210 169,967 Property and equipment 400,441 295,532 230,843 200,008 190,170 Intangible assets 88,196 47,018 25,251 25,001 16,243 Total assets 29,957,525 20,368,455 12,285,629 9,447,843 8,481,272 Liabilities Customer deposits 21,959,369 15,167,740 8,975,653 6,472,054 5,339,911 Derivative liabilities 9,258 70,486 6,325 14,674 11,076 Current tax payable 256,168 33,877 64,856 16,909 11,690 Deferred tax liabilities 5,502 59,310 16,654 11,603 - Other liabilities 1,402,045 1,039,712 568,559 487,432 703,292 On-lending facilities 250,725 263,065 311,192 369,241 384,573 Borrowings 2,045,185 1,410,885 963,450 750,469 870,080 Debt Securities issued - - - 45,799 43,177 Total liabilities 25,928,252 18,045,075 10,906,689 8,168,181 7,363,799 Net assets 4,029,273 2,323,380 1,378,940 1,279,662 1,117,473 Equity Share capital 20,535 15,698 15,698 15,698 15,698 Share premium 594,113 255,047 255,047 255,047 255,047 Retained earnings 2,015,513 1,179,390 625,005 607,203 521,293 Other Reserves 1,396,747 871,617 482,377 400,570 324,461 Attributable to equity holders of the parent 4,026,908 2,321,752 1,378,127 1,278,518 1,116,499 Non-controlling interest 2,365 1,628 813 1,144 974 Total shareholders' equity 4,029,273 2,323,380 1,378,940 1,279,662 1,117,473 Financed by: 195 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Five Year Financial Summary In millions of Naira 31 December 202431 December 202331 December 202231 December 202131 December 2020 Statements of Profit or Loss and Other Comprehensive Income Gross earnings 3,970,959 2,131,750 945,554 765,558 696,450 Share of profit/(loss) of associate - - - - - Interest expense (992,474) (408,492) (173,539) (106,794) (121,131) Operating and direct expenses (992,829) (517,680) (364,113) (318,458) (279,924) Impairment charge for financial and non-financial assets (658,805) (409,616) (123,252) (59,932) (39,534) Profit before taxation 1,326,851 795,962 284,650 280,374 255,861 Taxation (293,956) (119,053) (60,739) (35,816) (25,296) Profit after tax 1,032,895 676,909 223,911 244,558 230,565 Foreign currency translation differences 220,288 162,942 (28,768) 8,485 - Impact of applying IAS 29 on 1 January 2023 109,202 81,408 - - - Fair value movement on equity instruments 151,011 122,252 8,109 5,599 16,295 Fair value movements on debt securities at FVOCI 6,046 10,280 (6,602) (2,227) 1,981 Income tax effect relating to fair value movement on debt securities at FVOCI (2,841) (2,603) - - (355) Total Comprehensive income 1,516,601 1,051,188 196,650 256,415 248,486 Earnings per share Basic and diluted (kobo) 3,287 2,155 714 778 734 196 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Five Year Financial Summary In millions of Naira 31 December 202431 December 202331 December 202231 December 202131 December 2020 Bank Statement of Financial Position Assets Cash and balances with central banks 5,249,789 3,965,386 2,102,394 1,397,666 1,503,245 Treasury bills 2,437,464 2,529,966 2,206,668 1,577,647 1,393,421 Assets pledged as collateral 89,062 255,061 254,565 357,000 298,530 Due From Other Banks 4,442,436 1,691,722 1,132,796 518,053 532,377 Derivatives 271,213 507,942 48,851 57,476 41,729 Loans and advances 8,708,775 5,928,796 3,735,676 3,099,452 2,639,797 Investment securities 2,248,587 1,205,724 622,781 477,004 333,126 Investment in subsidiaries 34,625 34,625 34,625 34,625 34,625 Investment in associates - - - - - Deferred tax 1,756 - - - 4,733 Other assets 184,136 417,419 193,792 152,326 159,625 Property and equipment 290,273 230,267 214,572 177,501 169,080 Intangible assets 80,203 44,185 23,958 23,542 14,699 Total assets 24,038,319 16,811,093 10,570,678 7,872,292 7,124,987 Liabilities Customer deposits 17,163,424 12,154,824 7,434,806 5,169,199 4,298,258 Derivative liabilities 4,465 45,514 6,040 15,170 11,076 Current tax payable 248,613 28,080 61,655 14,241 9,117 Deferred income tax liabilities - 59,233 15,911 11,596 - Other liabilities 1,323,440 1,003,947 546,347 427,876 599,464 On Lending Facilities 250,725 263,065 311,192 369,241 384,573 Borrowings 1,951,616 1,450,182 999,580 769,395 874,090 Debt Securities issued - - - 45,799 43,177 Total liabilities 20,942,283 15,004,845 9,375,531 6,822,517 6,219,755 Net assets 3,096,036 1,806,248 1,195,147 1,049,775 905,232 Equity Share capital 20,535 15,698 15,698 15,698 15,698 Share premium 594,113 255,047 255,047 255,047 255,047 Retained earnings 1,538,189 893,938 494,429 466,250 382,292 Reserves 943,199 641,565 429,973 312,781 252,195 Attributable to equity holders of the parent 3,096,036 1,806,248 1,195,147 1,049,776 905,232 Total shareholder's equity 3,096,036 1,806,248 1,195,147 1,049,776 905,232 197 Zenith Bank Plc Annual Report - 31 December 2024 ZENITH BANK PLC Five Year Financial Summary In millions of Naira 31 December 202431 December 202331 December 202231 December 202131 December 2020 Statements of Profit or Loss and Other Comprehensive Income Gross earnings 3,484,099 1,869,753 833,087 677,283 595,921 Interest expense (839,111) (355,228) (153,019) (82,718) (102,111) Other operating expenses (842,786) (448,398) (324,122) (281,223) (246,566) Impairments (668,913) (398,412) (61,896) (56,175) (37,237) Profit before tax 1,133,289 667,715 294,050 257,167 210,007 Taxation (197,131) (72,114) (59,457) (24,034) (12,155) Profit after taxation 936,158 595,601 234,593 233,133 197,852 Other comprehensive income Fair value movements on equity instruments 151,011 122,252 8,109 5,599 16,295 151,011 122,252 8,109 5,599 16,295 Total Comprehensive income 1,087,169 717,853 242,702 238,732 214,147 Earning per share Basic and diluted (kobo) 2,979 1,897 747 743 630 198 Zenith Bank Plc Annual Report - 31 December 2024

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