Stanbic IBTC Holdings PLC
Annual Report
2016
Your progress is woven
into the fabric of Nigeria
Annual Overview 2
Report 12
2016 4 Our vision and values
6 Corporate profile 86
Front cover image of Gas Turbine installation 8 Our network 220
at the Azura-Edo Power plant, one of SIBTC’s 10 Recognition
many investments in Nigeria’s infrastructure.
Photograph courtesy of Azura Business review
14 Chairman’s statement
16 Chief executive’s statement
19 Economic review
23 Financial review
34 Executive committee
37 Personal and Business Banking
39 Case study: Black Horse Plastic Industries
40 Case study: Farm Support Services
43 Corporate and Investment Banking
45 Case study: Nigerian Breweries
46 Case study: GZ Industries
49 Wealth
53 Abridged sustainability report
57 Enterprise risk review
Annual report & financial statements
88 Board of directors
90 Directors’ report
96 Statement of directors’ responsibility
97 Corporate governance report
112 Report of the audit committee
116 Statement of financial position
118 Statement of profit or loss
124 Statement of cash flows
125 Notes to the annual financial statements
216 Annexure A
218 Annexure B
Other information
222 Management team
226 Branch network
230 Contact information
Overview In this section
4 Our vision and values
6 Corporate profile
8 Our network
10 Recognition
4 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 5
financial statements information
Vision and values
Overview
To be the leading end-to-end financial solutions provider in
Nigeria through innovative and customer-focused people.
Serving our customers Working in teams
We do everything in our power We, and all aspects of our
to ensure that we provide our work, are interdependent. We
clients with the products, services appreciate that, as teams, we can
and solutions to suit their needs, achieve much greater things than
provided that everything we as individuals. We value teams
do for them is based on sound within and across business units,
business principles. divisions and countries.
Growing our people Constantly raising the bar
We encourage and help our We have confidence in our ability
people to develop to their full to achieve ambitious goals and
potential and measure our leaders we celebrate success, but we must
on how well they grow and never allow ourselves to become
challenge the people they lead. complacent or arrogant.
Delivering to Being proactive
our shareholders
We strive to stay ahead by
We understand that we earn anticipating rather than reacting,
the right to exist by providing but our actions are always carefully
appropriate long-term returns to considered.
our shareholders. We try extremely
hard to meet our various targets Upholding the highest
and deliver on our commitments. levels of integrity
Respecting each other Our entire business model is based
on trust and integrity as perceived
We have the highest regard for the by our stakeholders, especially
dignity of all people. We respect our clients.
each other and what Stanbic IBTC
stands for. We recognise that there
are corresponding obligations
associated with our individual rights.
6 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 7
financial statements information
Corporate profile
Overview
Total income Total income Total income
Corporate and
Investment Banking (CIB)N49.5 billion N44.5 billion N32.1 billion
Personal andCorporate and investment bankingBanking and other financial servicesInvestment management in form of
Business Banking (PBB)services to government, parastatals,to individual customers and small toasset management, pension fund
larger corporates, financial medium sized enterprises. administration and trusteeship.
Wealthinstitutions and international
Stanbic IBTC was incorporated as Investment (“IBTC Chartered”) on 25 January 2006. On requires banks to divest from non-core banking counter-parties in Nigeria.
Banking and Trust Company Limited (“IBTC”), 24 September 2007, IBTC Chartered merged businesses or adopt a HoldCo structure.
a private limited liability company on 2 February with Stanbic Bank Nigeria Limited (“Stanbic
1989. IBTC was granted a merchant banking Bank”), a wholly owned subsidiary of Stanbic Under the new structure, the subsidiaries
license in February 1989 and commenced Africa Holdings Limited (“SAHL”), which in turn of Stanbic IBTC Holdings PLC are Stanbic
operations on 1 March 1989. IBTC’s merchant is a subsidiary of Standard Bank Group Limited IBTC Bank, Stanbic IBTC Pension Managers
banking license was converted to a universal of South Africa. As part of the transaction that Limited, Stanbic IBTC Asset Management
banking license in January 2002, pursuant to resulted in the combination of IBTC Chartered Limited, Stanbic IBTC Trustees Limited,
the universal banking guidelines of the Central and Stanbic Bank, SAHL acquired a majority Stanbic IBTC Capital Limited, Stanbic IBTC
Bank of Nigeria (“CBN”). In 2005, IBTC became shareholding (52.8%) in the enlarged bank, Stockbrokers Limited, Stanbic IBTC Insurance
a public company and its shares were listed on which was named Stanbic IBTC Bank PLC. Brokers Limited, Stanbic IBTC Ventures Limited
The Nigerian Stock Exchange. and Stanbic IBTC Investments Ltd. Stanbic
On 8 November 2012, Stanbic IBTC IBTC Nominees Nigeria Limited and Stanbic
In December 2005, IBTC merged with officially adopted a holding company structure IBTC Bureau de Change Limited are the only
Chartered Bank PLC and Regent Bank Plc and in compliance with the revised regulatory subsidiaries of Stanbic IBTC Bank.
changed its name to IBTC Chartered Bank Plc framework by the Central Bank of Nigeria which
Corporate structure
Stanbic IBTC Holdings PLC
Stanbic IBTC Stanbic IBTC Stanbic IBTC Stanbic IBTC Pension Stanbic IBTC Asset Gross revenue Total income
Bank PLC Capital Limited Stockbrokers Ltd Managers Ltd Management Ltd
Corporate and Corporate and
99.9% 99.9% 99.9% 88.2% 99.9% Investment Banking Investment Banking
42% 39%
Stanbic IBTC Nominees Stanbic IBTC Stanbic IBTC Stanbic IBTC Stanbic IBTC Personal and Personal and
Nigeria Limited Insurance Brokers Ltd Ventures Ltd Trustees Ltd Investments Ltd Business Banking Business Banking
99.9% 37% 35%
99.9% 99.9% 99.9% 99.9% Wealth Wealth
Stanbic IBTC Bureau 21% 26%
de Change Ltd
99.9% Gross loans Total deposits
and advances
Stanbic IBTC Holdings is a full service financial and other emerging markets. Standard Bank has development. Our success and growth over the Corporate and
institution which offers a wide range of been in operation for over 150 years and prides long term is built on making a difference in the Corporate and Investment Banking
products to a variety of segments. Stanbic IBTC itself on being a global bank with African roots. communities in which we operate. Investment Banking 37%
provides end-to-end financial solutions which The largest African bank by assets and earnings, 59% Personal and
include corporate and investment banking, it operates in 20 countries on the African Personal and Business Banking
personal and business banking, stockbroking continent, including South Africa, as well as in Business Banking 63%
and wealth management. other selected emerging markets. 41%
Standard Bank Group, to which Stanbic We uphold high standards of corporate
IBTC belongs, is rooted in Africa with strategic governance and are committed to advancing
representation in 20 key sub-Saharan countries the principles and practice of sustainable
8 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 9
financial statements information
Corporate profile
Overview
Country overview Group overview Nigeria overview
1 Angola Market Branches ATMs
2 Botswana capitalisation 27 Lagos Island 88 Lagos Island
3 Cote d’Ivoire R246 billion 33 Lagos Mainland 126 Lagos Mainland
4 DRC 31 North Central 88 North Central
5 Ethiopia (US$18 billion) 23 North West 65 North West
6 Ghana 32 South 85 South
7 Kenya Total assets 32 South West 109 South West
8 Lesotho R1.95 trillion
9 Malawi 36 13 5
10 Mauritius 15 (US$143 billion)
11 Mozambique
12 Namibia 18 7 Operating
13 Nigeria
14 South Africa 4 17 in 20 African countries
15 South Sudan 1 and 13 countries
16 Swaziland 9 outside Africa
17 Tanzania 19 20
18 Uganda 12 54,767
19 Zambia 11 employees
20 Zimbabwe
2 10 (2,926 in Nigeria)
14
16 1,211 branches
8
(178 in Nigeria)
8,822 ATMs
(561 in Nigeria)
10 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 11
financial statements information
Overview Recognition
1. Best Pension Fund Management Company 5. Pension Fund Administrator of the Year 8. Global Banking and Finance Awards 2016 11. Best Mutual Funds Provider Nigeria 2016 15. Best Foreign Investment Bank – Africa 20. Outstanding Financial Brand of the Year
Nigeria – 2016 – International Finance Nigeria, 2016 – The European, Global Pension Fund Administrator of the Year – Global Banking Finance Review Banking Awards – EMEA Finance (2016) 2016 – Marketing Edge
Magazine Banking and Finance – The European
12. Most Innovative Asset Management 16. Best Dealing Member Firm 2016 – The 21. Best Mobile Money Application – 2016
2. Excellence in Pension Asset 6. Post Master General Award 2016 9. Best Private Bank in Nigeria (Wealth Company Nigeria 2016 – Global Banking Nigerian Stock Exchange CEO’s award Brand Journalist Annual Marketing Awards
Administration, 2016 – Nigeria – NIPOST and Investment) – Professional Wealth Finance Review
Entrepreneurs Award Management (PWM) and the Banker 17. Card Payments Bank of the Year 22. Best Company in Poverty Reduction 2016
7. Recognition Award for long Standing Magazine (2016) 13. Best Stock broking/investment Bank – Nigeria Telecom Awards 2016 – The SERAS CSR Award
3. African Pension Awards for effective Relationship, Consistent Patronage of the Year – Business Day Banking
deployment of ICT for excellent customer and Meeting Financial Obligation to 10. Best Wealth Management Provider, Awards 2016 18. Best Company in Customer Care 2016 23. HR Best Practice Awards 2016
service delivery 2016 – PENCOM the Venture promptly Over the years Nigeria 2016 (Wealth and Investment) - – Marketing World Awards – Chartered Institute for Personnel
– NIPOST Bulk Post Venture (2016) World Finance 14. Best Debt House in Nigeria – Africa Management (CIPM)
4. Fund Manager Elite 2016 – Wealth and Banking Awards – EMEA Finance (2016) 19. Best Company in CSR – ADVAN
Finance International (Advertising Association of Nigeria) 2016
Awards for Marketing Excellence
BRuesivnieewss In this section
14 Chairman’s statement
16 Chief executive’s statement
19 Economic review
23 Financial review
34 Executive committee
37 Personal and Business Banking
39 Case study: Black Horse Plastic Industries
40 Case study: Farm Support Services
43 Corporate and Investment Banking
45 Case study: Nigerian Breweries
46 Case study: GZ Industries
49 Wealth
53 Abridged sustainability report
57 Enterprise risk review
14 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 15
financial statements information
Chairman’s Statement
Business
rReevviieeww Atedo N A Peterside con
Chairman
‘We continue to 2016 AT A GLANCE
Globally, 2016 was filled
with some defining moments demonstrate our Total assets
commitment to N1,053 billion
excellence in corporate Profit after tax
governance with N28.52 billion
‘Our insurance brokerage Dear Shareholders entrenched practices Final dividend per ordinary share
business kicked off in 2016
and has a potential to On behalf of the Board of Stanbic IBTC Holdings PLC, it is my pleasure brokerage business kicked off in 2016 and that ensure that 5 kobo
create more value for our to welcome you to this Annual General Meeting (AGM) of our company has a potential to create more value for our we run a profitable
stakeholders.’ i.e. the fifth since it became a holding company. stakeholders. Major aspects of the legal case/ business in an ethical Our corporate social responsibility initiatives
dispute that we had with the Financial Reporting and environmentally were sustained in 2016, with a focus on the
The year 2016 was a difficult one. Globally, it was filled with some Council of Nigeria were resolved, thereby allowing sustainable manner’. health and educational sector as well as economic
defining moments such as the United Kingdom referendum vote to us to release our outstanding audited financials. empowerment. Our flagship CSR programme
exit the Eurozone (Brexit), the US presidential elections and surprising Income statement “Together for a Limb” took place in Abuja and
victory of Donald Trump and incidences of terror in Europe and other In recognition of our efforts to create value eight internally displaced children were provided
places across the world. The further devaluation of the Chinese yuan, for our customers we received several accolades Stanbic IBTC Holdings PLC achieved total with prosthetics and an educational trust that
lower commodity prices and cut in interest rate by the European Central across the Group, including awards for the best income of N126.05 billion for the financial will see them completing their education.
Bank (“ECB”) during the year contributed to fragile investor sentiments. use of ICT for Excellent Customer Service delivery period ended 31st December 2016, which
It was a very volatile year for crude oil prices with Brent crude opening at the World Pension Summit (Africa Special) represented an increase of 25% over the As always, we continue to demonstrate
the year at $46 per barrel, dropping to a 12-year low of $27 in February 2016 Africa Pension Awards and The NSE CEO N100.65 billion achieved in 2015. This was our commitment to excellence in corporate
and subsequently recovering to $54 a barrel by December due to an award for 2016, making this the 8th consecutive largely due to an increase in interest income governance with entrenched practices that
agreement by the Organisation of Petroleum Exporting Countries time we will be receiving this award. and fees and commissions. ensure that we run a profitable business in an
(“OPEC”) to reduce collective production output by as much as 740,000 ethical and environmentally sustainable manner.
barrels per day, for the first time since 2008. In 2017 and beyond we will continue to The group’s net interest income increased
consolidate on the progress made so far and by 32% from N43.86 billion in 2015 to N57.86 I would like to use this opportunity to
Locally, the Nigerian economy failed to recover from the growth seek innovative ways to deliver best-in-class billion in 2016. Non-interest revenue increased express our gratitude to our shareholders,
decline already witnessed in 2015 and officially went into a recession, service to our customers and value to all by 20% from N56.79 billion in 2015 to N68.19 regulators, host communities, customers and
it’s first in the last two decades. Data released by the Nigerian Bureau stakeholders. billion in 2016. Overall, the group’s profit after staff for their support in the course of the year.
of Statistics (“NBS”) showed that real Gross Domestic Product (“GDP”) tax increased by 51% from N18.90 billion earned
for the fourth quarter contracted by 1.30%, after shrinking by 2.24%, Balance sheet in 2015 to N28.52 billion in 2016. As the leading end-to-end financial services
and 2.06% respectively in the two previous quarters. This was as a result solutions provider in the country, we will strive
of the further drop in reserves and foreign exchange illiquidity coupled The group’s total assets grew by N115.96 billion Your directors are therefore pleased to be to deliver best-in-class services to our customers
with a slow implementation of the 2016 budget. or 12% from N937.56 billion to N1,053.52 able to recommend a final dividend of 5 kobo in the coming year and do our best to deliver on
billion at the end of 2016. The bank’s deposits per ordinary share of 50 kobo, being the total our promises to stakeholders.
The Nigerian equities market was not isolated from the worsening from customers increased by N67 billion or 14% dividend for the year.
macroeconomic conditions and was amongst the worst performing markets from N493.51 billion to N561.0 billion at the Atedo N A Peterside con
in the world (in USD terms) in 2016, closing the year lower by 40.83%, end of 2016. General Chairman
largely on account of the loss of about a third of the official value of 1 February 2017
the naira against the US dollar. The bears dominated trade activities for The Bank’s loans to customers declined In accordance with Section 259 (1) of the
most of the year. Equity investors reacted negatively to disappointing slightly by N0.55 billion or 0.15% from N353.5 Companies and Allied Matters Act 2004, three
macroeconomic data releases (negative GDP growth, spiralling inflation billion to N352.97 billion at the end of 2016. directors – Mrs Sola David-Borha, Mr. Ballama
and rising unemployment). Consequently, The Nigerian Stock Exchange In line with the group’s robust risk management Manu and Mr. Basil Omiyi are retiring today as
(“The NSE”) All Share Index (“ASI”) recorded a loss of 6.17% in 2016. framework, there was a significant increase directors. Mrs Sola David-Borha, Mr. Ballama
in provisions for loans and advances while we Manu and Mr. Basil Omiyi, all being eligible, are
The banking industry landscape during the year was characterized remained cautious in the advancement of new offering themselves for re-election.
by frequent regulatory updates; with the most significant being policies loans due to the prevailing macroeconomic
relating to foreign exchange demand management and import substitution. environment. The total provisions made were
5.9% of the loans and advances book compared
Against this backdrop, our company was able to weather the difficult to 6.8% as at the end of 2015.
clime and made significant progress across our business lines. Our insurance
16 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 17
financial statements information
Business Chief Executive’s statement
rReevviieeww
Yinka Sanni
Chief Executive
Fundamentals of our ‘Our business grew despite the adverse
business remain strong macroeconomic environment, withstanding
the economic headwinds through a disciplined
approach that leveraged on innovation and
technology to create value for our customers
and stakeholders in a cost efficient manner.’
‘The fundamentals of our Dear Shareholders Total Assets grew by 12% to N1.05 trillion. 3. Best Foreign Investment Bank – Stanbic 2016 AT A GLANCE
business remain strong and Our group posted respective increases of 25% IBTC Capital (Africa Banking Awards –
as we purposefully execute our The year 2016 was a year that tested the resilience of our business and 51% over the prior year’s performance EMEA Finance) As an indication of our leadership in our focus
strategy we are optimistic that and the credibility of our brand. Our business grew despite facing in operating income and profit after tax and sectors, we were awarded with several accolades
we will continue to improve.’ severe economic headwinds locally, global uncertainty and a protracted achieved a ROE of 18.9% up from 12.9% in 4. Best Mobile Money Application – 2016 during the year including some listed below:
regulatory matter which was satisfactorily resolved. The nation entered the previous year. You will find included herein Brand Journalist Annual Marketing Awards
a recession for the first time in 2 decades. Data released by the Nigerian detailed financial reports. • Pension Fund Administrator
Bureau of Statistics (“NBS”) showed that real Gross Domestic Product The achievement of these milestones was due of the Year Nigeria, 2016
(“GDP”) contracted by 1.3% from the previous year in Q4 (2.2%, 2.1% The Stanbic IBTC brand remained strong and to the continuous hard work and dedication of The European, Global Banking and Finance
and 0.4% in Q3, Q2 and Q1 respectively). The oil sector’s GDP declined we were able to mitigate the heightening legal our staff as well as the loyalty of our esteemed
by 12.38% year-on-year in Q4, from a decline of 22.01% recorded in the and regulatory risk environment. In the course customers. • Best Private Bank in Nigeria
previous quarter, as crude production increased to 1.90 million barrels of the year we reached a settlement with the (Wealth and Investment)
per day from 1.63 million barrels per day achieved in the third quarter Financial Reporting Council of Nigeria (“FRC”) In 2017 we are focused on using innovation Professional Wealth Management
(2.16 million barrels per day in Q4 2015). The Stanbic IBTC Bank Nigeria and got final approval for the release of our and technology to provide exceptional services. (PWM) and the Banker Magazine
Purchasing Managers Index (PMI) reading depressed from 51.1 at the 2015 results. We maintained our dominance The fundamentals of our business remain strong
beginning of the year to 48.1 in December. Manufacturers continued to across our key businesses and made significant and as we purposefully execute our strategy we • Best Foreign Investment Bank
be faced with difficulties in accessing foreign exchange, high energy costs progress in our Personal and Business Banking are optimistic that we will continue to improve Stanbic IBTC Capital (Africa Banking
and a tightening monetary policy regime that has seen interest rates rise business. The addition of the insurance profitability, market share and customer service Awards) EMEA Finance
to uncomfortable levels. brokerage business in 2016 further increased delivery in a sustainable manner.
our capacity to deliver end-to-end financial • Best Mobile Money Application – 2016
The banking sector was not isolated from the activities in the macro solutions to our customers. We expect the Nigerian economy to move Brand Journalist Annual Marketing Awards
economy as the Central Bank of Nigeria (“CBN”) maintained a tight towards recovery in 2017, and we will remain
monetary policy during the year due to rising inflation in a bid to attract Our stockbroking subsidiary consolidated an active participant in the key sectors that will
foreign investment flows that would help improve liquidity in the FX its leadership position as the No.1 stockbroking drive its growth.
market. Pent up demand for forex to meet matured FX obligations of firm for the 8th year in a row; leading by both
companies operating in the agricultural, manufacturing, aviation and value and volume of transactions in 2016. Yinka Sanni
petroleum marketing sectors were given priority in the CBN’s special Chief Executive
Secondary Market Intervention Retail Sales of over $5 billion. The As an indication of our leadership in our 1 February 2017
nation’s external reserves declined by $3.22 billion to close the year focus sectors, we were awarded with several
at $25.84 billion from $29.06 billion at the beginning of the year. accolades during the year including;
The Nigerian Stock Exchange All Share Index recorded a loss of 1. Pension Fund Administrator of the Year
6.17% in 2016, with the Banking Sector index however posting a positive Nigeria, 2016 – The European, Global
growth of 2.17%. As investors remained cautious about taking long Banking and Finance
positions due to FX risk, concerns over inflation and uncertainty over
policy direction, average bond yields trended upwards by an average 2. Best Private Bank in Nigeria (Wealth
of 64 basis points to 15.74% p.a. and Investment) – Professional Wealth
Management (PWM) and the Banker
Our business grew despite the adverse macroeconomic environment, Magazine
withstanding the economic headwinds through a disciplined approach that
leveraged on innovation and technology to create value for our customers
and stakeholders in a cost efficient manner. The Group’s financial results
in the year were positively impacted by growth in transactional revenues
and reduction in cost of funds.
18 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 19
financial statements information
Business Economic review
rReevviieeww
Global economic environment forecast of Federal Open Market Committee policy, some rebound in the housing market
(FOMC) members. Last year, the Fed fell well and an ample supply of credit. As a result,
Major nations enter 2017 on a reasonably short of its forecast by delivering just one the weakness in the secondary sector was
positive note. Economic momentum seems hike. But 2017 is likely to see three rate hikes, more contained than expected. That said, it
to be improving and so too are inflationary albeit bunched into the last 6-7 months of the is expected that the first half of 2017 could
pressures. That said, neither seems likely year. US yields should also rise, with 10-year be turbulent for the Chinese economy. The
to increase substantially and there are still treasuries seen up into a 3.0%-3.5% range as immediate stress point will be the depreciation
significant headwinds to faster activity in inflationary pressures build, the Fed tightens of the CNY/USD and concomitant rise in capital
the shape of rising yields and geopolitical and the market frets over the fiscal implications outflows.
uncertainties. of Mr Trump’s presidency.
In emerging markets and developing
The tail end of 2016 saw some decent The euro zone economy looks set to put in economies, growth remained broadly flat
momentum in G10 economies growth, with another growth performance of around 1.5% in 2016 reaching around 4.2% from 4.0%
economic data releases tending to come year on year in 2017, from 1.6% year on year in 2015 and 4.6% in 2014, on the back
through well ahead of market expectations. in 2016. That is sufficient to continue the of still meagre economic performances in
The US in particular is showing better signs, downward momentum in unemployment but it Russia, Ukraine, Brazil and Mexico while the
with early indications that President-elect is not sufficient to turn the tide of nationalism performance in China was broadly in line with
Trump’s shocking victory in November’s and populism that threatens to engulf elections expectations. Sub-Sahara Africa’s growth
presidential election may have aroused a key in the Netherlands, France, Germany, and collapsed further in 2016 towards 1.4% year
ingredient of economic prosperity that has possibly Italy, next year. It seems unlikely that on year from 3.4% in 2015. This was due to
been lacking for some time. This might best Eurosceptic politicians will gain a sufficient the effects of a multi-year weakness in
be called ‘animal spirits’ and planned changes, foothold in these elections to force Brexit- commodity prices from oil to copper. The sub
such as corporate tax cuts, might just serve to style referenda. But politics is hard to call, as regions growth rate is forecast to improve
revive these spirits a bit more as we go through we saw last year, and just the mere possibility slightly towards 2.9% year on year in 2017
2017. Animal spirits is an economic term used of adverse outcomes could dampen business as commodity prices recover marginally.
to describe the instincts and emotions which and consumer sentiment and damage financial
influence human behavior with regards to markets. Add to this the slowdown in the UK, Political landscape
consumer and business confidence. Standard which will weigh on the euro zone, and we
Bank Research forecasts US growth to be 2.7% suspect that 2017’s growth is more likely to It is fair to say that the performance of the
year on year and this lies towards the top of be below 1.5% than above. authorities has been mixed with some successes
analysts’ expectations. The IMF expects US relating to the anti-corruption campaign as well
growth to reach 2.2% year on year in 2017 The UK’s economy is set to slow in 2017, as improving the security situation in the North
from 1.6% year on year in 2016. possibly quite a bit. For while growth could East. On the other hand, some may point to the
turn out to have been close to 2% in 2016, state of the economy, sharp increases in utility
While stronger US growth should help lift 2017 may be barely half that rate. That said, and energy, general goods and services prices
other countries and regions, it is clear that the market appears to be hopeful about how as well as a significantly weaker Naira as some
the fiscal expansion implied by President resilient the UK economy is. This may be false. areas of concern.
Trump’s budgetary plans is not being replicated It is notable, for instance, that the futures
around the world. On top of this, there are market is slowly pricing in the possibility of a The President will continue on his quest
still significant geopolitical headwinds. Some rate hike before the end of 2017. After the to eradicate corruption amongst the political
of these reflect the flip-side of President Brexit referendum in June 2016, the implied elite. Early evidence suggests that he is willing
Trump’s economic plans. One such example is probability of a rate hike by the end of 2017 to prosecute any corrupt and underperforming
the possibility of significant capital outflows was put at close to zero; now it is up to around government officials and politicians, although
from China as residents fear US trade pressure. 25%. The major headwinds lie in the consumer the critics say he is focusing predominantly on
Other geopolitical risks reflect the possibility sector and within business investment. A major the opposition. Furthermore, the authorities
of more surprises after the Brexit and Trump task facing the government is to achieve a appear to have succeeded in substantially
shocks of 2016. Elections in Germany, France, Brexit negotiation with the European Union reducing attacks by insurgents in north-east
the Netherlands, Italy, as well as the UK could (EU) in time (likely to be 15-18 months) once Nigeria.
easily serve to dampen any animal spirits that discussions begin.
are emerging in the euro zone. Going by evidence thus far, it is possible
The Chinese economy expanded by 6.7% to expect that it may take some time for the
As well as political headwinds, there could year on year in each quarter during 2016. The authorities to implement policies that will
be greater policy headwinds as well, particularly macroeconomic data was better than expected sustainably drive domestic production and set
if the Federal Reserve (Fed) delivers the three due in large part to an expansionary fiscal the economy on the path towards entrenched
rate hikes in 2017 that now forms the median economic development.
20 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 21
financial statements information
Economic review (continued)
Business
rReevviieeww
Economic growth Growth in construction and trade of around NGN2.5tr in 2016. Yet again, realisation that a free-floating exchange
activity continued to slow. In real terms, the we suspect the 80% y/y increase in non- rate, with an FX market that is encouraged to
The Nigerian economy contracted in 2016 construction sector slowed by 5.9% year on oil revenues is optimistic while oil revenue discover market clearing levels for the exchange
by about 1.5% year on year; and we believe year in 2016, from a growth of 4.4% a year projections assume that the recently agreed rate without hindrance, will be good for the
that GDP growth will remain depressed in ago and 11.3% year on year growth in the restructuring of JV cash call payments would economy. Hence, on 20 June the Central Bank
2017, only recovering to around 1.0% year corresponding period of 2014. This highlights boost production almost immediately. of Nigeria introduced regulations to govern
on year mainly due to favorable base effects the sharp fall in expenditure on gross fixed the foreign exchange market. In principle, the
and potential fiscal benefits from higher oil investments. Exchange rate and interest rate market is left to its own devices to find market
price and production levels. Favorable upside dynamics clearing levels.
risks to the outlook come from an ability of On the whole, there are indications that, if
government to deliver on its mandate to boost current realities remain unchanged, there is a After hiking the monetary policy rate by a In the aftermath of the introduction of
public infrastructure spend while also restoring possibility that economic growth recovers only cumulative 300 basis points (3%) in 2016, The the new FX regulations, there was improved
monetary and fiscal policy credibility. In any modestly in 2017, mainly due to positive base CBN will likely maintain its current tight stance but limited interbank trading as liquidity still
case, Foreign exchange (FX) shortages will effects from the low growth that was registered on monetary policy in coming months as it waits appeared thin. Heading into 2017, the policy
probably continue to be a significant factor in 2016, as well as mildly decelerating inflation for inflation to peak, possibly in Feb 17, before focus has to be directed at ensuring that
disrupting economic activity in the year ahead. in 2017. reducing the intensity of NGN sterilization via there is liquidity in the FX market, something
Open Market Operations (OMOs). that would, arguably, only happen if portfolio
That said, FX supply will likely improve Fiscal position investors can be enticed into participating in
marginally in 2017 especially if the current Thus far and certainly since mid-2016, the the market.
oil price trajectory persists and should the The authorities have yet again prepared a 2017 CBN maintained tight liquidity conditions in
arrangement in the Niger Delta result in budget that looks very much like the 2016 a bid to stifle import demand as well as offer The medium term outlook is for USD/NGN
a normalisation in oil production levels. iteration, which at the time, appeared to pose positive real rates of return to prospective to continue along its depreciating path despite
Furthermore, the government’s contribution a challenge, especially on the revenue side. foreign investors in NGN fixed income assets. the prospect of such depreciation resulting
towards oil production cash calls are now being The budgeted deficit however, is expected However, given the authorities current stance in a more healthy inflow of FX from abroad.
paid, thus opening the way for a sustained to remain within the fiscal responsibility rule, towards the FX market and being close to Anticipated strong FX inflows, via direct and
improvement in oil production. Having said below 3.0% of GDP. the top of the inflation upcycle, there is portfolio investments, would ordinarily be
that, considering the level of pent up demand, arguably limited rationale to continue keeping more supportive of USD/NGN. However, the
it is not clear that an increase in oil revenues Implementation of the 2016 budget proved rates elevated. Furthermore, we suspect existence of a persistent backlog, potentially
alone will be sufficient. Clearly an ability to to be a challenge, especially with regards the CBN may be tempted to move towards a strong growth in new import demand (linked
attract other sources of FX is required to revenue mobilization. On the expenditure side, more accommodative stance given the weak to the government’s infrastructure spending
boost domestic investment and consequently capital expenditure was probably designed to economic performance in 2016. The CBN will plans in 2017) and the risk that oil production
economic growth. be funded from borrowing. Thus, the fact that likely attempt to lower rates in a bid to boost challenges may linger for a while, will probably
there has been both a revenue shortfall as well credit extension to the private sector as well as ensure a depreciating bias.
The subsidence in economic growth in 2016 as funding shortfall significantly constrained lower government borrowing costs.
was due to a combination of a contraction in the capex budget. Total expenditure was
the oil sector, -14.5% year on year from -5.3% about 25% behind budget. The 2016 deficit Inflation dynamics would, arguably, provide
in the preceding year, as well as lower growth likely reached NGN2.0bn with most of it being a strong case for a change in the current
in the non-oil sector, -0.22% year over year funded domestically. monetary stance. Headline inflation was 18.6%
from 3.75% over the same period. A major y/y in December 2016, from 18.3% y/y in
reason why the non-oil sector seems to be The deficit in 2017 is expected to reach October, suggesting that underlying pressures
holding up relative to the contraction in the oil NGN2.4bn, 52% sourced from the domestic may be waning after it started in 2016 at 9.6%
sector is that the non-oil sector is dominated market and the rest externally. Like in 2016, y/y. Given the fact that the major drivers of
mainly by agriculture (about 24.5% of GDP). we suspect the challenge will lie with foreign inflation in 2016 may not materialize in 2017
This sector has benefitted from favourable financing. The second tranche (USD400mn) (or more aptly put, may not materialize by the
weather patterns as well as a more reliable input of the AfDB facility appears to be tied to the magnitude that it did in 2016), it is plausible to
pipeline. It grew by about 4.1% year on year in approval of the first tranche (USD1.0bn) of see headline inflation around 13.7% y/y by end
2016, compared to about 3.7% in 2015. a total USD2.5bn World Bank facility, which 2017 due to positive base effects.
is itself conditional on the adoption of a
Growth in manufacturing sector remained liberalized FX policy framework. Should the The policy that supported stability of the
in contraction territory, falling by 4.3% year on authorities struggle to raise the required funds USD/NGN is expected to continue in early
year, from the fall of 1.5% in 2015. However, externally, it may result in increased borrowing 2017 as the authorities may view an increase
considering that the sector grew at an average locally, thus putting pressure on rates. in oil price and production level as an incentive
of 14.7% year on year in 2014 it is clear that to keep the prices stable. In mid-2016, the
performance remains extremely fragile. In 2017, revenues are projected to reach authorities appeared to have come to the
NGN4.9tr from an estimated revenue take
22 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 23
financial statements information
Business Financial review
rReevviieeww
The group recorded very impressive results in Operating environment Business Banking (PBB) business unit which
2016 given the acute challenges experienced made an impressive growth in reducing loss
during the year. Beside the challenging The operating environment in 2016 was from prior year by 81%. The PBB business is
macro-economic conditions that impacted challenging. Inflationary rates spiked at 15.7% now close to break even and should continue
the operating environment, the group faced which was much higher than that of prior year to support strong future profit growth for the
the unusual situation of experiencing a delay at 9.0%. Accounting for this increase is a bank. The bank reported a PAT growth of over
in finalising its 2015 financial statements significant contribution from imported inflation 100% as compared with previous year.
for the better part of the year as a result of even as the naira depreciated by 59% on the
restrictions imposed on our reporting by the official market where it ended at N315.45/$ During the year the Wealth business
Financial Reporting Council of Nigeria (FRC). and depreciated by 83% on the parallel market continue to demonstrate resilience with a
This impacted our operations in several ways. where it ended at N485.45/$. As a result of the steady performance. Earnings growth in the
However, by remaining focused on delivering difficult business environment, unemployment year of 20% was relatively strong given that
superior solutions to our distinguished rate soared during the year to 13.9% from 9.9% contributions from both public and private
customers, the group achieved a very strong in prior year. customers were periodically late or lower
performance for the year. given the difficult operating environment.
The country’s crude oil production also Also the Wealth business experienced an
During the year, the macro-economic faced many hurdles. Insurgent attacks on increase in number of individuals making early
environment remained challenging as the pipeline reduced production levels to about withdrawals from their pensions as a result
economy faced its first recession since 1991. 1.5mn bpd from an average production level of loss of employment. As already discussed,
Key indices such as inflation, interest rates of 1.85m bpd in prior year. This represented the group increased its stake in Stanbic IBTC
and the exchange rates all deteriorated during the lowest production levels in about 3 years. Pension Managers Limited, as one of the
the year. The absence of US dollar liquidity Coupled with lower crude oil prices in 2016 minority interests was required to dispose of its
was particularly concerning for a number of which averaged $45.97 per barrel as against interests in the subsidiary upon the request of
businesses slowing growth and impacting $53.54 per barrel in previous year, this led to its regulator.
demand growth. Overall, GDP fell from 2.11% a reduction in government revenues and FX
in 2015 to -1.3% as at the close of the year. receipts. Government reserves fell from about The performance of other key subsidiaries
$29.06 bn in previous year to $25.8bn during such as Stanbic IBTC Capital Limited and the
The group’s performance in 2016 was the year. Stanbic IBTC Stockbrokers Limited were a lot
supported by an improvement in the funding more subdued during the year. Being more
mix leading to lower funding costs. Customer The currency was officially devalued in June integrated with The Stock Exchange and the
transactional activities through our channels 2016 from N198.89 per $ to N280.50 per $ and overall performance of the markets, these
remained strong in the year as the group subsequently allowed to float on the interbank subsidiaries witnessed a slump in activities
focused on improvement in the service market. Following the initial devaluation, the reflecting in lower overall results for the year.
experience provided to customers. As a result, naira has subsequently depreciated by 12% in
profit after tax grew strongly by 51% over the interbank market closing at N315.45/$ Looking ahead
prior year closing at N28.5bn. This is a strong in December. Confidence is yet to return into
recovery from the performance recorded in the interbank market as dollar flows in the Capital management during 2017 will be a key
2015. interbank market have reduced to a trickle of focus area. The depreciation of the naira in
previous levels. This has made foreign currency 2016 reduced capital adequacy levels within
Credit impairment charges remained from official sources scarce for a number of the industry. For the group, capital adequacy
a concern during the year. The impact of companies. There is therefore an increase in levels dipped after the initial devaluation but
the 59% depreciation of the naira and the dependence on the parallel market to meet this subsequently recovered during the year.
challenges experienced by businesses in the foreign currency requirements of many There are a number of new variables that
securing reliable flows of foreign currency for businesses and individuals. would continue to put pressure on our capital
trade and other requirements increased cost adequacy ratios during 2017.
of production leading to falling margins and On the global scene, growth at 2.4%
consequently had a negative impact on asset remains low when compared with historic trends Among these is the expected impact of IFRS
quality in the industry. Credit impairment in the last 5 years. While the US economy has 9. This standard has a far reaching implication
charges remained high over the year for both witnessed robust growth, uncertainties over on credit risk and requires the group to manage
corporate and personal customers. major economies in China and Europe have capital conservatively over 2017.
weighed on global growth. We do expect global
The group finally reached an agreement growth to continue to improve into 2017. This On the business front, it is our expectation
with Access Bank to acquire its 17.65% should support an improvement in commodity that the economy will rebound in 2017
interest in Stanbic IBTC Pension Managers prices and the Nigerian economy also. providing new opportunities for growth. We
Limited (“SIPML”). In effect the shareholding anticipate that offshore investors will once
of group in the SIPML is 88.24%. This is an Financial highlights for the year again return into the economy improving its
exciting development as it affords the group performance. This would positively impact our
access to a steady income stream from the The result of the bank during the year was a corporate business and other market facing
subsidiary. key highlight for the group’s results. Underlying subsidiaries. We also expect the PBB business to
this impressive growth was the Personal and maintain its current strong growth and results.
24 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 25
financial statements information
Business How we create value
rReevviieeww
Business activity Income statement Principal risk arising Impact of the economic environment on key financial ratios
impact from this activity
We lend money to our customers, The economic statistics, together with their expected influence on the group’s performance in 2016 and 2017, assuming no management action, have
invest in government securities and Interest income and been set out in the table below.
money market instruments credit impairment
The table below relates to the group’s operations in Nigeria.
We source for deposits from our Interest expense
Income after credit impairments customers and other banks Credit risk Interest rate risk Liquidity risk Key measurement metric Economic factors that impact metrics Economic Impact of Expected Expected impact
Net fees and factor economic factor economic factor of economic factor
We provide transactional banking commission Operational risk, including compliance, environmental and/or social risk Growth in loans and advances GDP growth
facilities to our customers and clients Business and reputational risk Net interest margin Interest rates in 2016 in 2016 in 2017 in 2017
Interest rates – – + +
We offer equity, foreign exchange and Trading revenue Credit risk Market risk Credit loss ratio Unemployment rates + – + –
commodity instrument to customers Crude oil prices + + + +
Other revenue Investment risk Growth in fee and Interest rates + + + +
We earn income from investment commission revenue GDP growth – + – +
properties and dividend income Income from pension Growth in trading revenue Inflation (CPI) + + + +
and non-pension asset Market trading volumes – – + +
We offer trustee, pension and non- management Growth in operating expenses Market price volatility + + + +
pension asset management services Effective tax rate Exchange rate – – – –
Growth in pension revenue Inflation (CPI) – – + +
Corporate tax rate + + + +
Equity market performance + + + +
Unemployment rates / / / /
– – – –
+ – + –
+ = Increase in economic factor/positive impact on the group’s performance 10
– = Decrease in economic factor/negative impact on the group’s performance
/ = Neutral
Growth in loans and advances Nbillion 7.3% 6.8% 6.2% %
500 8.0
Expenses Loans and advances remain the biggest portion of total assets in the 6.6% 303.3 413.4 7.0
group’s balance sheet. This asset class provides revenue to the group in 400 2013 2014 6.0
form of interest income, transaction fees charged as documentation and 279.5 5.0
We invest in developing and retaining Staff costs administration fees and opportunities for insurance related income. The 300 2012 4.0
our people to deliver on our strategy Other operating costs group is focused at growing this asset class within the accepted risk levels. 3.0
200 3.0% 2.0
We invest in our operations, which Gross domestic product (GDP) growth and interest rate have major 1.0
includes IT systems and business impact on loan growth in the Nigerian economy as this impacts customers’ 100 379.4 375.3 0
running costs ability to repay their loans. 266.1 2015 2016 (1.0)
(2.0)
The graph beside shows GDP growth as it impacted loan growth. 0 (1.5%)
2011
(100)
Dividend to our shareholders (200)
Tax to governments
= Net profit – = Retained equity which is reinvested Gross loans and advances GDP growth
to sustain and grow our business
26 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 27
financial statements information
Financial review (continued)
Business
rReevviieeww
10
The decline in economic performance resulted in the group lowering its Credit loss ratio and average crude oil prices Growth in operating expenses
risk appetite in some troubled sectors to ensure it reduces its exposure.
% 5.2 $/barrel Inflation is a major economic factor that drives cost growth in the group. witnessed high demand for foreign currency for importation of raw
The group will cautiously monitor the economy in 2017 and further 6.0 113.8 113.5 110.9 120 Inflation rate remained on the rise throughout 2016 reaching a high of material and finished goods, this resulted in higher cost of goods and
tighten its risk management process to improve the quality of loans. 100 18.55% in December 2016. This resulted in increased operating expenses. services. This also impacted on the group’s operating expenses which
100.4 80 grew by 11% in 2016 although lower than inflation of 18.55%.
Net interest margin 5.0 60 The naira value in the interbank declined by 59%, while it declined by
40 83% in the parallel market. Nigeria being an import dependent economy
20
Net interest margin is the profit earned from interest on loans and advances 4.0 3.8 10
and investments less interest paid on customer deposits and other funding
Operating expenses and average annual inflation rate
sources. The movement in benchmark lending rates such as the prime 3.0 2.5
2.0 1.3 52.9 Nmillion %
10 lending rate in Nigeria impacts significantly on the net interest margin. 80,000 18.0
The graph below shows the average prime lending rate and the group’s 45.97 70,000 16.0
net interest margin. 60,000 14.0
50,000 12.0
% % 1.0 0.9 0.8 40,000 15.7% 10.0
30,000 69,041 8.0
6.0 20.0 0 0 20,000 12.2% 2016 6.0
5.0 16.0% 2011 2012 2013 2014 2015 2016 10,000 48,789 4.0
16.8% 16.7% 16.6% 16.9% 16.87% 10.9% 2012 2.0
16.0 0 41,792 0
2011 8.5% 9.0%
Credit loss ratio Average crude oil prices 57,948 8.1% 62,066
57,901
4.0 2013 2015
12.0 2014
3.0 Growth in non-interest revenue
4.9 5.0 4.9 5.5 4.7 5.9 8.0
The two major components of non-interest revenue are net fee and
2.0 commission and trading revenue. The growth or decline in non-interest
revenue is largely induced by changes in these two variables.
1.0 4.0
Growth in net fees and commission revenue
0 0 Operating expenses Average inflation rate
2011 This depends on growth in transaction volumes and activity across the
2012 2013 2014 2015 2016 service delivery channels, which are a function of economic activity. The
Central Bank of Nigeria has however placed a ceiling on some fee lines
Net interest margin Prime lending rate which means that banks cannot charge above the amount stated by the Effective tax rate
central bank. Net fees and commission grew by 28% in 2016 on the back
The interest rate charged on loans and advances are mostly linked of growth in customers’ transactions as we continue to improve on our Nigeria’s corporate tax rate remained unchanged throughout 2016, results in higher investment income on assets under management which
to the prime lending rate which serves as the benchmark rate for loans. alternative banking channels. although the government had an increased focus on tax collection. This in turn increases the net asset value of the funds. The revenue from
is not expected to change in 2017. the pension and non-pension asset management business is usually
In Nigeria, the dip in rates in Q4 2015 continued in the first half of Growth in trading revenue a percentage of the net assets value of the funds.
2016 as CBN was not mopping up excess liquidity via OMO auctions. Growth in revenue from pension and non-pension assets
These rates however picked up in Q2 2016 when the CBN adopted the The trading revenue is basically income from trading in foreign currency, The level of unemployment also affects the revenue from pension
flexible exchange rate and increased the monetary policy rate to 14%. fixed income securities and equities. This revenue source is dependent The growth in revenue from managing pension and non-pension assets business. A decline in unemployment levels means that more people are
on trading volumes and volatility in the market which impacts on the is dependent on equity market performance, money market interest rates getting employed and pension contributions will increase resulting in
Credit loss ratio spread made by traders. The economy in 2016 witnessed low volumes and yields on government securities. Growth in equity market performance increased assets under management, while an increase in unemployment
on the back of FX scarcity and decline in foreign investor confidence in levels will have an adverse effect on the revenue of the pension business.
The credit loss ratio is the credit impairment charge expressed as a the Nigerian economy. Trading revenue was down 1% due to persistent
percentage of the average group loans and advances balance. Credit FX scarcity in 2016.
impairment is a percentage of loans and advances given to customers
that is charged to income statement as provision for bad loans. This is
the cost of risk incurred by the bank from the customers’ inability to
repay their loans.
The decline in economic growth occasioned by persistently low crude
oil prices and decline in revenue to the government at all levels impacted
business activities leading to increased unemployment rate and delay in
salary payment. This contributed to an increase in the bank’s credit loss
ratio to 5.2% in 2016 (2015: 3.8%).
28 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 29
financial statements information
Financial review (continued)
Business
rReevviieeww
Analysis of the Group’s financial performance Net interest income PBB business witnessed a significant growth of 77% in net fees and
commission income. The introduction of current account maintenance fees
Income statement analysis Net interest income increased year on year by 32%. Interest income by CBN impacted positively on fees, in addition there was an increase in
The statement of profit or loss reflects the revenue earned by the business and costs incurred in generating the revenue for the year end 2016. increased by 6% in the year, while interest expense reduced year on year foreign exchange transaction volumes on various card products offered by
by 24%. the business impacting on revenues from electronic channels. High ATM
The profit for the year grew significantly year on year by 51%. Below are explanations for significant movements recorded in the year. uptime and improved experience on the internet banking platform also
Interest income growth was muted by worsening asset quality in contributed positively to the growth in transactional activity improving fees.
Summarised income statement – Group Change % 2016 2015 the industry, while the reduction in interest expense was driven by an
Gross income 12 Nmillion Nmillion improvement in cost of funding which was occasioned by a reduction in CIB recorded a 3% growth in net fees and commissions revenue, lower
Net interest income 32 156,425 140,027 expensive term deposits being replaced with current and savings deposits. assets under custody, regulatory caps on some transactional banking
Interest income 6 57,859 43,860 income and a reduction in corporate finance and investment banking
Interest expense 24 87,467 82,686 In CIB, net interest income was up 25% on the back of a growth in activity. This was due to a difficult macro-economic environment which
Non-interest revenue 20 (29,608) (38,826) interest income driven by increased yield on financial instruments. Interest significantly impacted the performance of fee and commission income
Net fees and commission revenue 28 68,194 56,788 expense increased by 2% as the business unit focused on replacing line during the year.
Fees and commission revenue 28 52,154 40,704 matured fixed deposit and expensive interbank takings with current
Fees and commission expense 52,918 41,257 account deposits. Trading revenue declined marginally by 1% due to a reduction in
Trading revenue (38)
Other revenue (1) (764) (553) In PBB, net interest income grew by 39%. Accounting for this was a t1ra0ding volume, a marked reduction in interbank market activity following
23 15,326 15,503 significant dip in interest expenses resulting from the focused execution
Total income prolonged FX scarcity.
Credit impairment charges 25 714 581 1of0its customer acquisition strategy which yielded positive results as
Income after credit impairment charges (33)
Operating expenses 126,053 100,648 current and savings account balances grew significantly.
Staff costs 24 (19,803) (14,931)
Other operating expenses (11) 106,250 Nmillion 5.0 4.9 5.5 4.7 5.9 % Nmillion 50 57 55 56 54 %
Profit before taxation (22) (69,041) 85,717 70,000 3.9 4.5 5.1 3.6 7.0 80,000 100
Direct taxation (4) (30,173) (62,066) 60,000 3.9 6.0 70,000 33,856 48,219 57,987 56,788 68,194 90
Profit for the period (38,868) (24,825) 50,000 33,554 37,013 46,658 43,860 5.0 60,000 2012 2013 2014 2015 2016 80
Profit attributable to: 57 (37,241) 40,000 2012 2013 2014 2015 57,859 4.0 50,000 70
Non-controlling interests (83) 37,209 30,000 2016 3.0 40,000 60
Equity holders of the parent (8,689) 23,651 20,000 2.0 30,000 50
Profit for the period 51 28,520 (4,760) 10,000 1.0 20,000 40
18,891 0 10,000 30
14 3,878 0 20
59 24,642 3,393 0 10
51 28,520 15,498 0
18,891
Net interest income Net interest margin before impairment charges Non-interest revenue % of total income
Net interest margin after impairment charges
Non-interest revenue Corporate and
Investment Banking
Non-interest revenue comprises mainly fee and commission and trading 37%
revenue. Fee and commission revenue is dependent on transactional
banking volumes and asset under management, which are a function Personal and
of economic activity and of the competitive environment for banking Business Banking
services. 21%
Non-interest revenue increased by 20% on the back of a 28% growth Wealth
in net fees and commission and 23% increase in other revenue, while 42%
trading revenue declined marginally by 1%.
Growth in fee and commission was on the back of increased asset
management fees from the wealth business, growth in fees from
electronic banking channels, foreign services transactions and current
account maintenance fees.
30 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 31
financial statements information
Financial review (continued)
Business
rReevviieeww
Credit impairment charges Operating expenses Breakdown of operating expenses Change % 2016 2015
22 Nmillion Nmillion
Credit impairment charges increased by 33% to N19.8bn during the year The group’s disciplined approach to cost management produced positive Staff costs 4 30,173 24,825
owing to the current economic challenges, resulting in the credit loss results. Although, we continue to invest in staff and infrastructure to Other operating expenses: 14 38,868 37,241
ratio for the year worsening to 5.2% compared to prior year of 3.8%. The ensure top notch customer service and deliver on our strategic goals, cost Information technology 0
growth in provisions for performing loans is a reflection of the difficult growth was managed below inflation rate of 18.55%. Inflation remains a key Communication expenses 55 4,751 4,159
macro-economic environment and increased provisions arising from an external indicator that places pressure on growth in operating expenses. Premises and maintenance 21 921 919
increase in performing loans in the year. Depreciation expense
The group’s operating expenses grew by 11%. Staff cost was up 22%, Amortisation of intangible assets >100 4,023 2,593
CIB’s credit impairment grew by 26% to N10.3bn in 2016 from while other operating cost increased by 4%. Cost to income ratio improved Finacle core banking software (100) 4,204 3,479
N8.2bn in 2015 on account of higher provisioning (both performing to 54.8% from 61.7% in 2015. Deposit insurance premium
and non-performing loans) mainly relating to the oil and gas, power and AMCON expenses 3 33 -
infrastructure sectors. The continued low oil prices throughout 2016 Growth in staff cost is due to an increase in staff numbers, increase Other insurance premium (3) - (967)
coupled with the poor performance of the economy fuelled the asset in accrued performance reward and staff deferred bonus scheme due to Auditors renumeration >100 2,309
quality concerns. Credit loss ratio for CIB during the year increased from increase group’s profitability. Other operating expenses grew by 4% due Non audit service fee (see (ii) below) 18 2,382 4,664
3.8% to 4.7%. to increase in deposit insurance, marketing and advertising expenses and Professional fees (34) 4,504
information technology expenses. Administration and membership fees 38 199
PBB’s credit impairment charge increased to N9.5bn during the year Training expenses 54 647 263
from N6.8bn in 2015. The growth in credit provisions on personal lending CIB’s operating expenses increased by 3%, with cost to income ratio Security expenses (1) 310
was mainly due to delayed salary payment to public sector employees. improving to 45.4% from 49.2% reported in prior year. The cost to income Travel and entertainment (2) 47
Significant provisioning was also experienced in the business banking ratio improved on the back of a higher growth in revenues as compared to Stationery and printing (12) 31 1,602
portfolio on account of increase in general provision of some sectors with the cost growth reported. The increase in staff cost was a major driver of Marketing and advertising (5) 2,213 1,367
weakening performance. Credit loss ratio for PBB business stood at 6.0% cost growth in CIB business. Pension administration expense 15 2,103
as against a ratio of 4.1% in previous year. Pension sales agent commission >100 730
PBB business recorded a cost growth of 15% driven by 23% increase Penalties and fines (100) 726 1,216
10 in staff cost and 9% in other operating costs. The business recorded an Donations (30) 1,195 1,457
improvement in cost to income ratio to 82.4% from 106.8% in 2015. The Operational losses (48) 1,280
Nmillion 15,925 % cost growth is on account headcount growth, marketing cost, insurance Directors fees 37 919
18,000 5.2 6 and premises maintenance. Provision for legal costs, levies and fines 874 2,485
16,000 5 Impairment of other financial assets 7 2,853
14,000 12,009 4 Wealth’s operating cost increased by 16% driven by growth in other Indirect tax (VAT) (69) -
12,000 3 operating costs. Although the cost to income ratio improved to 30.9% M otor vehicle maintenance expense, conference 336 90
10,000 3.8 2 from 31.9% recorded prior year. Inflation adjustment to staff salaries expenses and other office administration expenses (5) - 100
1 accounted for staff cost growth, while other operating expenses in the 0 233
8,000 (0) wealth business unit was accounted for by office revamp, increased 70 181
6,000 marketing cost and general price increases in the economy. 38 122 312
4,000 248 6,485
2,000 6,391 334 964
2.5 1,978 437
0 914 998
(2,000) 3,502 2,922 3,878 437
1,379
1,922
504 745 0.8
0.9 (285)
2012 2013 2014 2015 2016
Credit impairment charge on non-performing loans
Credit impairment charge on performing loans
Credit loss ratio
32 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 33
financial statements information
Financial review (continued)
Business
rReevviieeww
Balance sheet analysis Loans and advances
The statement of financial position shows the position of the group’s assets, liabilities and equity at 31 December 2016. Total net loans and advances declined by 3% to N368.2bn (2015: N380.3bn), with customer loans and advances remaining flat at N353bn, while loans
The group’s balance sheet size increased by 12% to close at N1.053trn from N937.6bn at the end of 2015. Significant movements over the year are and advances to banks declined by 43% to N15.3bn (2015: N26.8bn).
discussed below. The challenging operating environment coupled with declined economy largely accounted for the slowdown in loans and advances growth to
customers.
Assets Change % 2016 2015
Cash and cash equivalents Nmillion Nmillion In CIB, customer loan balance grew by 3% and this can be attributed to increase in overdraft facilities reflecting the change in the business risk
Pledged assets 42 appetite to short term facilities due to current economic conditions. The business unit wrote off non-performing loans that were fully provided for in
Trading assets (67) 301,351 211,481 line with the waiver granted by the central bank for the treatment of such loans in 2016.
Derivative assets (56) 28,303 86,570 In PBB, customer loan balances fell by 7%. This was driven by maturities during the year, strategic decision to cut down lending on instalment sales
Financial investments >100 16,855 37,956 and finance leases on account of increased provisioning on this product line. Overdraft increased by 23% as the business focused on short term facilities.
Assets held for sale 14,317
Loans and advances 55 252,823 911 Breakdown of loans and advances to customers by business unit
Loans and advances to banks (57) 162,695
Loans and advances to customers 112 Overdrafts Personal & Corporate & Total
Other assets (3) 368,229 262 Term loans Business Banking Investment Banking Nmillion
Property and equipment (43) 380,295 Instalmental sales and finance leases 47,471
Intangible assets 15,264 Mortgage lending Nmillion Nmillion 301,648
Deferred tax assets - 352,965 26,782 Total loans and advances 17,273
Total assets 65 353,513 28,086 19,385
(9) 39,220 202,422 8,924
Equity and liabilities >100 22,962 23,741 99,226 375,316
Equity 25,311 1,150
Equity attributable to ordinary shareholders 4 713 16,123 -
Ordinary share capital 12 8,638 -
Ordinary share premium 1,053,523 8,342 8,924 222,956
Reserves 9 937,564
Non-controlling interest 11 140,798 152,360
137,102 128,967
Liabilities - 123,726 Deposit and current accounts
Trading liabilities - 5,000
Derivative liabilities 25 65,450 5,000 Customer deposits grew by 14% to close at N561.0 billion at the end of 2016 (2015: N493.5 billion). The growth in deposits was driven by a strategy
Deposit and current accounts (29) 66,652 65,450 targeted at acquiring customers with regular flow income and improving our service delivery channels. The group’s deposit mix improved as the ratio
Deposits from banks 53,276 of current and savings deposits to customer deposits increased to 57% from 44% in 2015.
Deposits from customers 13 3,696
Other borrowings (78) 5,241 In CIB, customer deposit declined by 14% due to the conscious effort to exit expensive term deposits acquired to cushion the impact of the implementation
Subordinated debt >100 911,725 of treasury single account by the federal government and harmonisation of CRR by the CBN.
Current tax liabilities 5,325 808,597
Deffered tax liabilities 4 11,788 24,101 In PBB, customer deposits grew by 40%, with current and savings accounts growing by 63%. The ratio of current and savings accounts as a proportion
Provisions (44) 383 of customer deposits improved significantly to 64% from 55% in 2015. There was a continued focus on growing retail deposits during the year with
Other liabilities 614,735 particular focus on customers with regular flow of income.
Total equity and liabilities 14 53,766 588,959
18 95,446 Deposit breakdown by business unit
18 560,969 493,513
96,037 81,107 Personal & Business Banking Change % 2016 2015
9 27,964 23,699 Current deposits 40 Nmillion Nmillion
(61) 9,508 Savings deposits 68 353,189 253,122
47 8,727 Call deposits 41 188,877 112,639
6 10,581 120 Term deposits 38,630 27,300
91 136,740 >100
12 10,027 Corporate & Investment Banking 6 9,687 4,082
1,053,523 71,474 Current deposits 115,996 109,100
937,564 Call deposits (14) 207,780 240,390
Term deposits 23 92,646 75,509
(4)
Total deposits and current accounts 32,616 34,110
(37) 82,517 130,772
14 560,969 493,512
34 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 35
financial statements information
Business Executive committee
review
Yinka Sanni Demola Sogunle Babatunde Macaulay Angela Omo-Dare Olufunke Amobi Kola Lawal
Head: Legal Services Head: Human Capital Head: CIB Credit
Chief Executive: Chief Executive: Executive Director:
Stanbic IBTC Holdings Stanbic IBTC Bank PBB Stanbic IBTC Bank
Wole Adeniyi Eric Fajemisin Victor Yeboah-Manu M’fon Akpan Nkiru Olumide-Ojo Taiwo Ala Irabor Malcolm
Chief Financial Officer Head: Group Risk Head: Internal Control
Executive Director: Business Support Chief Executive: Head: Marketing Head: Legal Services,
Stanbic IBTC Bank Stanbic IBTC Pension Managers and Communications Stanbic IBTC Bank
Chidi Okezie Gboyega Dada Rotimi Adojutelegan Oluwatosin Odutayo Sam Ocheho Benjamin Ahulu
Company Secretary Chief Information Officer Chief Compliance Officer Head, Internal Audit
Ag. Financial Controller, Head: Global Markets,
Stanbic IBTC Bank Stanbic IBTC Bank
36 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 37
financial statements information
Business Personal and Business Banking
rReevviieeww
Personal and Business Banking (“PBB”) is the Business Banking and linking up with affluent transactions and customer engagement are
retail part of the Stanbic IBTC group, which in the ecosystem. The strategy also focuses on executed via digital channels. This platform
offers banking and other financial services implementation of digitisation. Our relationship has improved service delivery to customers
to individual customers and businesses, by management focus is unchanged and we and positively impacted customer
providing bespoke products to meet the varied remain resolute in our commitment to meet experience.
needs of retail customers. We offer a range of the everyday banking needs of our customers.
solutions to our customers, from the most basic We continue to make significant investments
to the most sophisticated of financial services, In the year under review, we have made in digital channels to increase our digital
and ensure that our customers’ requirements progress in our customer experience journey engagements with customers and also deliver
are always met through the most with improving customer satisfaction and enhanced customer experience. Our overall
cost effective and convenient method. reduction in customer complaints. Some of distribution channel strategy strives to align
the initiatives includes the Customer Contact with customer preferences and facilitate
PBB is split into two segments, namely Centre (CCC) revamp project and monitoring efficient service delivery. In 2016, we
Business Banking and Personal Banking. The of Net Promoters Score (NPS). The extract launched the very first digital branch located
Business Banking segment comprises of SME below are from the 2016 KPMG Banking at Maryland Mall which marks the beginning
and commercial customers, while the Personal Industry Customer Satisfaction Survey of a new phase with regards to customer
Banking comprises of individual customers, (BICSS). However, the team ultimately aims to interface, channels and access to products
including workplace banking, private banking achieve the best rating in the industry in terms and services. The future of banking is digital
and High Net Worth individuals. of customer satisfaction. and the idea is for our customers to be able
to bank on the go, paperless environment and
The past year was very challenging for the • KPMG customer Satisfaction Index: self-service. This is the first amongst many
economy, as the macroeconomic headwinds Moved to 4th in 2016, up from 7th in 2015. of digital branches to be rolled out by the
facing the country continued to persist. business.
The impact of stressed macroeconomic • Product/Service Offering: Moved
conditions and harsh operating environment to 1st in 2016, up from 7th in 2015. The revamped SIBTC Mobile Banking App
for businesses led to increased delinquencies. was launched to customers in November 2016.
During the course of 2016, Nigeria was • Executional Excellence: Moved The App is currently available for download on
officially declared as a country in recession, as to 4th in 2016, up from 9th in 2015. Android and iOS devices, while Windows and
inflation, unemployment and Naira devaluation Blackberry versions of the Mobile App would
hit an all-time high. FX scarcity continued • Contact centre: Moved to 3rd in 2016, be available in January, 2017. Customers are
to persist, thereby impacting the ability to up from 8th in 2015. able to access their accounts within the Bank
execute large volume of trade transactions, from the Mobile App. Other features include
coupled with the drop in crude oil production • Internet Banking: Moved to 5th in 2016, remote on-boarding in which customers can
and price. up from 9th in 2015. register for the service without visiting a
branch is also working as expected.
Amidst the macroeconomic challenges, the • ATMs: Moved to 5th in 2016, up from
business has progressed in key areas, including 10th in 2015. Overall, we thank all our customers for
49% year-on-year growth in total income, 40% their business and support in 2016.
year on year growth in customer deposits with Two key initiatives were launched in 2016
62% growth in low cost deposits, which led to to drive better engagement with our clients.
lower that budgeted Net Interest Expense. The
growth in customer deposits has been driven by 1. Platinum Support Centre was launched to
a combination of both new to bank and existing provide a fast track service to our private
customers and across all segments. banking clients.
In a bid to maximize value from PBB, the 2. The SME Enterprise Direct Centre was
business strategy was refined to ensure focus fortified to improve the relationship
and alignment. The revised strategy focuses on management for SME customers, where
38 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 39
financial statements information
Personal and Business Banking (continued) Case study
Business
review
Financial performance Nmillion Change % 2016 2015 BLACK
Nmillion 39 29,964 21,600 HORSE
Performance highlights Nmillion 77 14,512 PLASTIC
Net interest income Nmillion 41 (9,504) 8,213 INDUSTRY
Non-interest revenue Nmillion 15 (36,656) (6,756)
Credit impairment charges Nmillion 81 (1,684) (31,839)
Operating expenses 81 (1,613) (8,782)
Loss before tax (8,632)
Loss after tax Nmillion (8) 227,148
Nmillion (7) 152,360 247,465
Total assets Nmillion 40 353,189 163,977
Gross loans and advances 253,122
Deposit liabilities % 82.4 Description of Business Relationship with Stanbic IBTC Bank fully flat-packed Self Assembly Furniture under
% 32.6 106.8 the brand name SAF. The high quality nature
Cost to income % 12.6 27.5 Black Horse Plastic Industry is a distinguished The company’s relationship continues to deepen of these products, combined with the ease of
Non-interest revenue to total income % 8.5 player in the Nigerian plastics manufacturing with the Bank having an Ecosystem size of 280 assembly, and most importantly, the effortless
Net interest margin 6.0 4.1 sector. 100% Nigerian owned, the company bankable clients which majorly include 200 staff low cost transportation allows Black Horse to
Credit loss ratio has been producing plastics injection moulded and 36 distributors. offer for the first time in Nigeria, fully indigenous,
Household items, Garden furniture, Kitchenware, affordable, comfortable, reliable (guaranteed
Industrial products and Packaging materials in Through deliberate focus on banking the 2 years), and eco-friendly furniture for houses,
Nigeria for over 35 years. Their products are of client’s value chain in 2016, a total of 142 clients offices and institutions. This range will be
international standards. currently maintain accounts with the bank. This developed and marketed over the coming years
cuts across the client’s distributors, suppliers, with the plan to have Black Horse (SAF) as the
Black Horse’s plastic furniture is number one employees, subsidiaries and shareholders. This go-to for all furniture requirements throughout
in the business and are nationally recognised for represents banked penetration levels of 50% of Nigeria as well as West Africa. Order requests
the variety and the incomparable quality of their the Ecosystem opportunity size in 2016. This also have been received from Ghana, Ivory-Coast,
products. Their chairs are widely used in homes, represents a 21% increase from 2015. Cameroun and Senegal.
schools, event functions, conference rooms,
churches, hotels, cafés, reception areas, training In the course of the year, the accounts of the Black Horse Plastics continues to employ
rooms and offices. Their design selection grows associates were opened. These include Wayne professionals to manage every stratum of their
by the day offering their customers a wide variety West Africa Ltd., Siperco Nigeria Ltd., and Heron operations. It currently has distributors in all the
of designs to suit their individual requirements. Travels Ltd., while HST was recently reactivated. states of Nigeria. More distributors are also being
Black Horse has a wide distribution network that short-listed to improve distribution network.
covers the whole of Nigeria and has started in We presently provide workplace banking
earnest to export to countries within the West services to the company staff and directors. Existing brands are well established in the
African sub-region. We are also working on onboarding more of its market and new product lines are being added.
suppliers, staff and partners.
Popular all over the country today, their In 2017, the company plans to grow
products have achieved a pervasive presence The Bank’s market share of the company their revenue and turnover by 30% and 50%
that proves the staying power of well-designed increased to 70% from 30% from the previous year. respectively. They will also be increasing
products, backed up by stringent production their stock points/warehouses closer to the
processes while using high quality equipment Business development and future distributors.
and raw materials. Furniture molds are mostly prospects
designed and manufactured in Europe (France Company Offices and outlets
/Italy) allowing Black Horse to manufacture The company’s vision is to become the No.1
products of International standards. plastic manufacturing company in Nigeria whilst The company’s head office/factory is located at
also extending market to other West African Km 12, Old Lagos Road, Ibadan.
Since its establishment in 1982, Black Horse countries. This it intends to achieve by expanding
Plastics has been continuously increasing and and increasing supply of the current range of The client is able to facilitate distribution of
diversifying its product ranges, which has always household products; development of new product its products, via appointed distributors and key
kept it at the forefront of innovative injection lines; increase of production capacity and human corporate sales outlets.
plastics manufacturing in Nigeria. capital development.
A major development this year is the
introduction of a completely new product range of
40 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 41
financial statements information
Business Case study
review
FARM SUPPORT
SERVICES LTD
Description of Business Ownership structure: The Company is Relationship with Stanbic IBTC Bank Significant Business development
owned by Olumide Origunloye and Opeyemi improvements and future prospects
Farm Support Services Limited is a Origunloye who is the Managing Director, The company commenced banking relationship in the gross margin are
distinguished player in the Nigerian agricultural while the Technical Director, Mr. Adekunle with Stanbic IBTC in 2010, and Farm Support expected as the business grows Farm Support Services Limited continues to
sector, focused on poultry products and Ogunwomoju is directly responsible for the was granted access to multiple loan facilities in with investment in improvements employ professionals to manage every stratum
services required for healthy living. The company’s operations. 2011 which was fully utilized. This was geared such as new raised-platform layer of her operations.
institution was incorporated in 1995, but towards the need to separate the Breeder houses, which affords better egg
commenced operations in mid-1996. The Accreditations & Certifications: Farm Farm from the Commercial Farm and increase production and livability of the birds. The company’s growth plans in the immediate
company’s vision is to be an international Support Services is accredited by various the total capacity of the farm, supporting the term are:
agriculture brand while building a sustainable regulatory bodies, including Standards Biosecurity requirements
relationship with stakeholders. Organization of Nigeria (SON), National Agency • Increase the Commercial Layer capacity to
for Food Drug Administration and Control The company was also availed a facility 425,000 annually from the present 225,000
The company is involved in a comprehensive (NAFDAC), Poultry Association of Nigeria in 2016 under the CBN (CACS) to support capacity.
poultry business consisting of a Breeder Farm and and Manufacturers Association of Nigeria. the new levels of project expansion on-going
Commercial Farm. The size of the Commercial on the Farms. • Increase the Commercial Growing capacity to
Farm is about 100 acres of land comprising four Partners, Affiliates, Suppliers, and 600,000 annually from the present 300,000.
major units of operation namely; Brooding/ Distributors: The single major partner to the The relationship continues to deepen with
Rearing Unit, Commercial Cage Growing Unit, company is Farm Support Poultry Breeders the Bank having an Ecosystem size of 550 • Provision of Grain Storage Silos for Maize,
Feed Mills/Raw Materials Storage Unit and Egg Ltd, providing the operational production bankable clients which majorly include 500 Soyabean meal and Wheat Offal to maximize
Holding Stores and Farm Offices. for the company. Others include: Agrited staff, 30 suppliers and 20 distributors. raw material stocking efficiency and
Limited, Animal Care Services Konsult, CHI management.
The size of the Breeder Farm is about 55 acres Limited, Fortune Oil Mill, Apple & Pears Limited, Through deliberate focus on banking
of land which comprises of three major units of Petersime, from whom the company purchases the client’s value chain in 2016, a total • A utomation of the Feed-Milling process with
operation namely; Cage Growing Unit, Layer and the Breeder birds, grains and poultry equipment. of 480 clients currently maintain accounts the installation of a 10-tonne an hour Mill.
Broiler Breeder Production Unit and the Hatchery with the bank. This cuts across the client’s This will bring about 200 new staff to the
Complex. Main Customers/Trade Debtors: The distributors, suppliers, employees, subsidiaries company’s operations.
company’s distributors buy crates of eggs, and shareholders. This represents banked
Capacity: The farm currently has about Day Old Chicks (DOCs), Point Of Lay (POLs), penetration level of 87% of the Ecosystem It is estimated that revenues would grow by 30%
160,000 commercial Layer birds producing and Livestock Feed. These buy an average of opportunity size in 2016. This also represents and an additional average of 15-20% on a year on
about 120,000 eggs daily. The Breeder farm 18,000 crates per time. a 30% increase from 2015. year basis until 2021. A significant improvement in
currently has 54,000 parent stock birds the gross margin is also expected as the business
producing about 27,397 Day-Old-Chicks daily. Business Objectives: The company aims to In the course of 2016, the business grows with massive savings expected to be derived
The farm produces about 300,000 Point of become the biggest and foremost player in acquired accounts of two major associates, from the introduction of the automatic feeding and
Layers (POL) annually of which about half are the poultry and fish production sector. Since namely Stanza Farms and Madej Farms. The egg collection systems in the newly raised-platform
stocked in the farm, while the rest are put up inception, the company has gained ground in relationship further deepened as credit facilities layer houses which affords better egg production
for sales. The company’s feed mill produces an the industry and is also increasing capacities were provided to these associates. and livability of the birds.
average of 40 metric tons of feed daily. with on-going expansion projects.
The bank also provides workplace banking Company Offices and outlets
and private banking services to the company staff
and directors. The bank is working on onboarding The company’s Office is located at Galilee Bus stop,
more of the suppliers, staff and partners. The Iwo-Ibadan road, Olodo, Ibadan and the farm is
Bank’s market share of the company increased located in Ile-Ogbo/Kuta town, Osun State, Nigeria.
to 80% in 2016 from 60% in the previous year.
The company is able to facilitate distribution of
its products, via appointed distributors, booking
offices and sales outlets.
42 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 43
financial statements information
Business Corporate and Investment Banking
rReevviieeww
The Corporate and Investment Banking (“CIB”) value of shares traded on the floor of The NSE opportunities for some clients and we
business draws on Standard Bank’s heritage based on 2016 trading results, a position it has endeavoured to meet their needs through
with presence in twenty African countries and held for about a decade. SISL is the stockbroker the timely delivery of bespoke products and
major financial centers around the world, to to the Federal Government of Nigeria and an services.
provide unrivalled services to our clients. By approved Market Maker of a basket of listed
using all the resources of capital, expertise equities on The NSE. The Client Coverage team continues to
and personnel available within the Group, operate in line with our Client Engagement
we strive to be the leading CIB business in Our investment banking services are Model to ensure our attention is focused on
Nigeria by connecting our clients to other delivered through Stanbic IBTC Capital carefully selected clients in our target sectors.
African countries as they expand, and to the Limited (“SICL”). SICL is the leading Specific attention has been paid towards
international capital markets. Within Nigeria, we investment banking franchise in Nigeria, and its supporting our clients through challenging
continue to meet our corporate clients’ needs principal activities include providing corporate macro-economic times by gaining a better
by connecting them to Stanbic IBTC’s spectrum finance and debt advisory services to corporates understanding of their businesses and changing
of products and services in the Personal and government entities. SICL is registered with needs in order to provide them with bespoke
and Business Banking (“PBB”) and Wealth the Securities & Exchange Commission as an solutions. Delivering the entire Stanbic IBTC
businesses. Synergies across these businesses Issuing House and Underwriter, and has handled franchise to our clients also remains a key
enable the delivery of end to end financial several landmark mergers and acquisitions and priority for the team.
service solutions to our corporate clients and capital raising transactions for leading local
their employees. corporates and multinationals. Despite the challenging business
environment in 2016, Global Markets and
CIB comprises four business units: Client Transactional Products and Services SISL retained their position as market leaders
Coverage, Global Markets, Investment (“TPS”) provides standardised and tailored as we continued to provide innovative solutions
Banking and Transactional Products and transactional products and services including to our clients. SICL also remains the leading
Services; trade finance, working capital and cash investment bank in Nigeria, as exemplified by
management solutions. The team offers a full the awards received, TPS focused on Trade
Our Client Coverage team is the main point range of solutions to deliver specific payments, finance and supporting clients with their
of contact with our clients and is responsible collections and liquidity management import requirements during the challenging
for corporate relationship management. The capabilities. TPS’ wealth of experience ensures business environment as well as a continued
team members are skilled at identifying client products are designed to meet our clients’ focus on collections and payment mandates.
needs and requirements, and at aligning specific business needs. Our online channel Additionally, SINL maintained its leading
these with the appropriate product houses capabilities continue to evolve to meet our position in the custody of non-pension assets.
for execution across Stanbic IBTC’s financial clients’ complex and changing requirements.
service offerings. We continued the expansion of our digital
Stanbic IBTC Nominees Limited (“SINL”) offering in 2016, with SISL’s launch of the
The Global Markets unit comprises sales provides custodial services to both local and Stanbic IBTC E-Trading platform. This direct
and trading teams with specialisations in fixed international clients and investors, namely trading platform allows clients interface and
income, foreign exchange, money market fund managers, asset managers, global trade directly on The Nigerian Stock Exchange,
and structuring of a wide range of financial custodians, international broker dealers, deepening our technological reach and allowing
hedging solutions. The unit is supported by our stockbrokers, retirement benefit schemes and clients trade from anywhere in the world during
highly respected Research team which has the other institutional investors wishing to invest trading hours. In the transactional banking
responsibility of providing analysis of macro- in the Nigerian market. SINL is currently the space, we continued the upgrade of our
economic conditions, markets and products largest custodian in the Nigerian market with Corporate Electronic Banking channel, Business
and the production of the Stanbic IBTC Bank approximately 80% market share of all foreign Online-NG, as part of our Cash, Trade and
Nigeria Purchasing Managers Index (“PMI”), institutional portfolios investing in the Nigerian Investor Services banking solutions. Delivering
approved by the National Bureau of Statistics market. efficient and reliable digital capabilities remains
(“NBS”) as its official PMI reading. a key priority and aligns with our strategic goal
Overview of 2016 to be our client’s core transactional bank.
Stanbic IBTC Stockbrokers Limited
(“SISL”), as part of our Global Markets The business environment in 2016 was Our customer centric culture continues to
business, provides world-class stockbroking challenging due a number of factors, including support the development of stronger client
services to local and foreign investors in The very high inflation, foreign exchange liquidity relationships. We continue to pitch innovative
Nigerian Capital Market (The NSE). With constraints, lower oil production and volatility ideas to add value and efficiencies to our
extensive reach both internationally and locally, in the financial and capital markets which clients businesses, with the aim of being our
SISL is currently the largest stockbroking house culminated in a recession. Nonetheless, the clients’ primary banker and partner in their
in Nigeria with a market share of 15.41% of the challenging environment also presented growth strategies.
44 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 45
financial statements information
Corporate and Investment Banking (continued) Case Study
Business
rReevviieeww
2016 Highlights • Stanbic IBTC Capital Limited: Best engagement with key operators, regulators NIGERIAN
Investment Bank of the Year (BusinessDay and representatives from government BREWERIES
• SISL maintained its dominance of the Banking Awards), Best Foreign Investment agencies. The forum provided Stanbic IBTC
secondary equity stock market with a Bank and Best Debt House in Nigeria the opportunity to showcase its mining Nigerian Breweries Plc (“Nigerian Breweries” or “the Company”), a
market share of 15.41%, of the value of (EMEA Finance African Banking Awards) sector expertise derived from Standard subsidiary of Heineken N.V., was incorporated in 1946. It is the largest
shares traded on the floor of The NSE. This Bank’s legacy as a mining bank and the brewer in Nigeria by volumes, market capitalization and revenue,
represents a 14% increase on prior year • S tanbic IBTC Stockbrokers Limited: Best services it can offer to companies in this effectively controlling c.70% of brewery market share. Following its
market share of 13.57% Stockbroker (BusinessDay Banking Awards), emerging sector. merger with Consolidated Breweries in 2014, its installed capacity and
Best Dealing Member Firm (The Nigeria production plants (breweries and malting plants) have also increased.
• SINL maintained its dominance as the Stock Exchange CEO’s Awards) • A s a thought leader in the Nigerian market, The Company’s product portfolio consists of market leading products
largest custodian in the Nigerian market SINL is driving different initiatives such across the alcoholic and non-alcoholic segments namely Heineken, Star,
with approximately 80% market share of all The CIB business continues to lead sustainable as the Electronic Certificate of Capital Gulder, Legend Extra Stout, Maltina, Amstel Malta and Fayrouz.
foreign institutional portfolios investing in market development and industry advocacy Importation and the use of extended SWIFT
the Nigerian market initiatives by committing staff and resources Message Type by the Central Securities Stanbic IBTC has built a strong and sustainable relationship with
to various regulatory and industry initiatives Depository amongst others. Nigerian Breweries over the years. We provided the Company with a
Award wins; including; Revolving Credit Facility (“RCF”) for 5 years from 2010. In 2015, our
• Stanbic IBTC Bank PLC: Best Loan Finance Debt Capital Markets team then established N100 billion Commercial
• CIB hosted an Iron and Steel breakfast Paper Programme for the Company, before Stanbic IBTC Bank PLC
Bank in Nigeria and Best Overall Bank in session, with the Honourable Minister subsequently provided the Company with a N15 billion RCF in 2016
Nigeria (Euromoney Real Estate Awards) of Solid Minerals as Keynote Speaker, as part of the Company’s medium term working capital requirements.
which created an avenue for meaningful By leveraging Stanbic IBTC’s extensive financial network, Nigerian
• Stanbic IBTC Nominees Limited: Best Breweries has been able to achieve its medium term financial service
Sub-Custodian in Nigeria (Global Finance requirements in addition to meeting other financial service needs.
Magazine) Stanbic IBTC has demonstrated its strengths and abilities by supporting
the Company’s financial needs as an end to end financial institution
Financial performance Nmillion Change % 2016 2015 by providing products and services across CIB, private and business
Nmillion 25 24,202 19,398 banking as well as wealth management services.
Performance highlights Nmillion 2 25,308 24,800
Net interest income Nmillion 26 (10,299) (8,175) Strategic Direction
Non-interest revenue Nmillion 3 (22,492) (21,735)
Credit impairment charges 17 16,719 14,288 CIB’s strategy is centred around the Client Engagement Model. This
Operating expenses client centric approach achieves deeper insight into client businesses,
Profit before tax Nmillion 18 779,058 659,093 thereby affording us the opportunity to provide bespoke solutions that
Nmillion 3 222,956 215,451 align with clients’ immediate needs as well as their long-term goals.
Total assets Nmillion 207,780 240,390 Paramount importance is placed on ensuring our business remains
Gross loans and advances (14) resilient, profitable and sustainable as part of a broader franchise: both
Deposit liabilities 45.4 49.2 Stanbic IBTC and Standard Bank. By working in partnership with all
% 51.1 56.1 parts of the franchise, we will continue to actively and comprehensively
Cost to income % 3.4 service our clients’ needs.
Non-interest revenue to total income % 4.7 2.9
Net interest margin % 3.8
Credit loss ratio
46 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 47
financial statements information
Business Case study
review
GZ GZ Industries Limited (“GZI” or “the Company”) is the pioneer
INDUSTRIES beverage can manufacturing company in Nigeria, serving the soft drinks
LIMITED and alcoholic beverage manufacturers in the region. GZI supplies the
full range of aluminium cans, with operational plants in Agbara, Ogun
State and a newly commissioned factory in Aba. Its expansion across
Africa with footprints in Kenya and South Africa makes her a strategic
client for Stanbic IBTC and the broader Standard Bank Group.
Stanbic IBTC recently acted as Mandated Lead Arranger and
Underwriter in a transaction for our client, GZI Industries Nigeria.
The acquisition finance and debt restructure facility had aggregate
commitments of N8.5billion and US$20million on the NGN and USD
tranches respectively.
The deal team comprised of the Diversified Lending & Leverage
Finance and Client Coverage teams in Nigeria with support from
their counterparts in the Rest of Africa. The team also leveraged the
expertise and experience of other functional teams within the Standard
Bank Group.
Stanbic IBTC has partnered GZI in realising its growth strategy since
2012, having started our relationship through the provision of corporate
finance advisory services. Subsequently we continue to provide
financial services to the Company across CIB and the broader Stanbic
IBTC and Standard Bank Group franchise.
With GZI’s second plant in Aba,
the 600 million initial capacity,
brought the total manufacturing
capacity to 1.8 billion cans.
The GZI Aba plant provides all
brewers of South Eastern Nigeria
with continuous supply of cans,
at their proximity, minimizing
their transport costs and with the
capacity to produce a full range
of products, according to
its customers’ demands.
48 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 49
financial statements information
Business Wealth
rReevviieeww
What we offer trusteeship and brokerage for all various classes of funds under management and used in
of insurance respectively. communicating performance to clients.
There are four subsidiaries of Stanbic IBTC
Holdings Plc (SIBTC) classified under the broad 2016 highlights • Achieved full integration of Bloomberg asset
heading- Wealth. Wealth’s focus is on pension and investment manager (AIM) application
administration and management, private non- • Wealth maintained its leading position as the for our fund management, risk management
pension asset management, trusteeship and largest institutional investment business and and research functions.
estate planning as well as insurance brokerage. number one wealth manager in Nigeria with
asset under management of N2.08 trillion • Regulatory collaboration via Fund Managers
The newest company within Wealth, the (US$ 6.6 billion). Association of Nigeria (FMAN) as we were at the
insurance brokerage business further enhances forefront of the campaign to reduce regulatory
our capability to meet the broader financial • Growth of 22% was recorded in year-on-year fees and transaction costs on Collective
needs of our customers and ensure the net profit. Investment Schemes (CIS). We also partnered
protection and preservation of our customers with the NSE and other Exchange Traded
and their assets. • Improved cost efficiency by attaining a cost Fund (ETF) issuers to organize a workshop
to income ratio of 31.0%, an improvement to educate brokers and investors on ETFs.
Overview over last year’s ratio of 31.9%.
• Adopted the Time Weighted Return (TWR)
The SIBTC subsidiaries which make up Wealth are; • Recorded a return on equity (ROE) of 42.7%. method of computing performance of our
privately managed funds in line with our
• S tanbic IBTC Pension Managers Limited • Stanbic IBTC Money Market fund defended plan for full adoption of Global Investment
(SIPML) for the administration and its position as the largest fund in Nigeria. Performance Standards.
management of pension assets,
• Increased traction for sale of Wills and better • We successfully organized three pre-
• Stanbic IBTC Asset Management Limited acceptance of product/service offering. retirement seminars in Lagos, Abuja and Port
(SIAML) for the management of non-pension Harcourt with approximately 1,300 pension
assets. Our Wealth & Investment team; • Despite the macroeconomic challenges clients cumulatively in attendance. It was an
experts who serve as advisors to high net- presented and the lack of depth in the opportunity to educate clients who are close
worth individuals sit in this subsidiary. financial markets compared to assets under to retirement on financial planning and also
management, the Retirement Savings Account educate them on ways to access their pension.
• Stanbic IBTC Trustees Limited (SITL) (RSA) fund remained competitive with a
for trusteeship and estate management double digit return Stanbic IBTC Insurance • SIPML and SITL successfully hosted media
functions and Brokers Limited (SIIBL) obtained its insurance parleys to showcase their businesses and
brokerage license from the National Insurance position them as thought leaders in their
• Stanbic IBTC Insurance Brokers Limited Commission (NAICOM) and effectively respective industries.
(SIIBL) for insurance brokerage and risk commenced operations in February.
management functions – (newly licensed) • Our CSI focus this year were on renovation
• Enhanced our alternative Investment of the female and pediatric wards at Ebutte-
As at 31 December 2016, Wealth had N2.08 offering by launching two new funds; Stanbic meta healthcare centre and three toilet
trillion (US$ 6.6 billion) as assets under IBTC Dollar Fund and SIAML Pension ETF blocks at Kaduna prison training school. In
management (AUM) and has remained the 40. These funds would be listed on The addition, we gifted eight children with the
leading wealth manager in Nigeria with the Nigerian Stock Exchange (NSE) following the Stanbic Education Trust (‘’SETs’’).
pension business, SIPML consolidating its approval of the allotment schedule by the
pre-eminent position as the largest Pension Securities and Exchange Commission (SEC). • We received some external recognition
Fund Administrator (PFA) in terms of Assets as well, the “excellent customer service
Under Management (AUM) and number of • Increased market share of Collective delivery through the use of ICT” was won by
Retirement Savings Account (RSA’s). The Investment Schemes (CIS). our pension business at the World Pension
asset management company, SIAML also Summit (Africa Special) and our Wealth &
maintained its position as the largest non- • We adopted a Pension Index as benchmark for Investment team emerged as the Private
pension assets manager measured by value of portfolios under management. This ensured Bank of the year at the Professional Wealth
AUM, number and size of mutual funds and portfolios were benchmarked with an index Management & the Banker Private Banking
number of customers while SITL and SIIBL that reflects the actual investment universe awards for the first time.
further broadened the product offering by
catering to the needs of different strata of our
clientele with respect to estate management,
50 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 51
financial statements information
Wealth (continued)
Business
rReevviieeww
2017 priorities Strategy These macroeconomic headwinds created a huge disincentive for of strategic cost efficiency and long term value-driven investment
investing in the equities market which recorded a negative performance decisions.
• W e aim to position the mutual funds for more inclusion at the retail The wealth business model is focused on managing our customers’ financial (The NSE ASI) of -6.17% in 2016. Despite the difficult economic
end Enhance our alternative investment products and capabilities. affairs, growing their wealth and protecting their assets. In doing these, we environment and the resultant volatilities in the capital market, Wealth’s Total income grew by 20% and net profit by an impressive 22% over
are committed to ensuring security, liquidity and reasonable returns over a performance exceeded budget expectations for the year on account the 2015 figures, while total assets under management increased by 18%
• C ollaborate with SEC, The NSE and other key stakeholders in improving medium to long term investment horizon and at every stage of our clients’ to close the year at N2.08 trillion (USD6.59 billion).
awareness and education regarding mutual funds. life cycle.
Performance highlights Nmillion Change % 2016 2015
• Continuous improvement on our mutual fund online access platform Across Wealth in 2016, we maintained our leadership position in the Net interest income Nmillion 29 3,693 2,862
in our pursuit of simpler, better and faster investment channels for our industry by further increasing our client base and assets under management Non-interest revenue Nmillion 19 28,374 23,775
customers as we continue to lead innovation in the industry. as well as introducing new product offerings in spite of the challenging Operating expenses Nmillion 16 (9,893) (8,492)
environment. For the pension business, we added about 79,198 clients and Profit before tax Nmillion 22 22,174 18,145
• Grow the insurance revenue stream by harnessing all the opportunities closed the year with 1,508,040 RSA clients. Assets under management grew Profit after tax 22 15,210 12,444
within the group and expand our product offerings to other non- by 18% to close at N2.08 trillion (US$6.59 billion). Nmillion
customers of the group. Total assets Nmillion 53 47,317 31,006
The recession hindered business expansion and also saw Assets under management Number 18 2,076,423 1,757,882
• Full integration of the Bloomberg AIM application to cover the portfolio businesses folding up. Hence, new hiring across all sectors slowed, Retirement savings accounts 1,508,040 1,428,842
management (including process flow), research data and analysis as well negatively impacting the momentum of new client acquisition drive. % 6
as risk management analytics of the business. Notwithstanding, we continued to stay close to the stakeholders by Cost to income ratio % 30.9 31.9
organizing awareness sessions such as the pre-retirement town hall Average fee per AuM 1.5 1.4
• Streamline all business processes through automation and meeting held in Lagos and Port Harcourt to educate them on their roles
documentation to enhance business turnaround time and deliver quality and rights as members of the contributory pension scheme. Looking forward The N7.2 trillion proposed 2017 budget by the Federal government
customer experience. seeks to reflate the economy after quarterly declines of 0.36%, 2.1%
The non-pension asset management business on the other hand A new order in the global political economy was established in 2016 with and 2.24% in GDP for Q1, Q2 and Q3 2016 respectively. With a budget
• Deliberate and intentional prospecting and marketing drive with closed its assets under management at N192.8 billion (US$612 million), the outcome of the Brexit vote in the UK and the Presidential elections deficit of N2.3 trillion to be financed by a combination of local and
increased marketing efforts. a 16% increase from the 2015 closing figure. SIAML continued to focus in the US. Furthermore, there was renewed cooperation between OPEC foreign debt, the ability to access cheap foreign debt in light of recent
on the exponential growth in net asset value of SIMM to ensure we and non-OPEC oil producers to stabilize crude oil prices for the first time rate hike by the US Fed is critical for execution of fiscal policy and short
Total income 2016 2015 maintain our pole position in AUM in the industry. in around 15 years by reducing production by 1.7 – 1.8 million barrels per term currency stability.
Cost to income ratio N32.07 billion N26.64 billion day from January 2017. The outcomes of these events therefore presented
Assets under management 30.9% 31.9% The trusteeship business continued to thrive in the year and significant uncertainty for the global economy and financial markets as well Consequently, we expect economic activities to remain soft in H1
Retirement savings accounts N2.08 trillion N1.76 trillion maintained its profitable position exceeding its set target by 22%. In as renewed optimism in a potential recovery in crude oil prices. 2017 as investors remain cautious of the macroeconomic risks, whilst
Profit before Tax 1,508,040 1,428,842 the course of the year, we continued to create Trust & Estate planning monitoring how the economy responds to government initiatives such as
N22.17 billion N18.15 billion awareness while remaining thought leader in sector and leverage Although economic momentum in Nigeria remains weak, we are negotiations with Niger-Delta militants, borrowing from foreign sources,
relationships with SEC. slightly more positive about the prospects of the economy in the first execution of multi-billion dollar oil deals with India and China as well as
Revenue by business unit quarter of 2017. We are likely to see better coordination and articulation fiscal stimulus linked to social programs and infrastructure. Furthermore,
Our insurance brokerage business consistently proffered creative of an economic recovery plan from government and greater urgency to the recent hike in rates by the US Fed makes frontier market securities,
SIPML 87% risk management solutions that enables customers create, protect and execute which should stimulate economic activity. including Nigeria, less attractive to portfolio investors as they switch in
SIAML 11% preserve wealth. We harnessed opportunities within the group and plan favour of US treasuries with improving yields. This would likely raise the
SITL 1% to remain visible to garner recognition within the industry. The business Our strategy for participating in equities would be to remain cautious cost of Nigeria’s foreign currency debt.
SIIB 1% also serves as health insurance consultants, life insurance & annuity as we continue to average down the carrying costs of selected holdings.
advisors and claims experts. Whilst we will be relatively aggressive for larger contributory funds, we We plan to obtain SEC allotment approval to list two newly launched
will take more conservative approach for the non-contributory funds. Our funds; Stanbic IBTC Dollar Fund and SIAML Pension ETF 40 on the NSE by
Financial performance investments in equities will also be focused on positioning the funds to claw Q1 2017. Active campaigning for flows into the dollar-denominated assets
back value eroded by inflation over the last 12 – 18 months, given the non- to assist our clients preserve their wealth and diversify their investments
The Stock Market failed to recover in 2016 from the bearish run that existent window to defend the Funds with foreign denominated assets. whilst remaining the preferred and number one asset manager with the
commenced in 2014 against general market expectation. This was most scalable operating model and best-in-class technology in Africa.
largely driven by negative investor sentiments on the back of poor We expect crude oil prices to hover between $50 and $60 per barrel
macroeconomic data and foreign exchange constraints in particular. in 2017 following the agreement reached by producers to cut output Improved visibility of our Wealth & Investment offering is also
These factors were also reflected in the weak corporate results released from January 2017. Whilst this is positive for Nigeria’s FX earnings, the expected to improve as we focus more on client centricity, client
by listed companies with signs of deterioration in capital structures, benefits would not accrue without a lasting solution to Niger-Delta acquisition to gain market share, strategic response to economic
declining revenues and rising costs. militancy. This portends further risk for naira stability and inflation as slowdown in order to proffer the right solutions for clients, thoughtful
the structure of the economy remains import-dependent despite recent client engagement to ensure they remain clients for life.
In the fixed income market, yields firmed up in H2 2016 as the CBN diversification efforts.
implemented tight monetary policies to curtail inflation and defend the
naira. Furthermore, investors took advantage by demanding higher rates
on fixed income securities to protect value against inflation. Consequently,
money market and treasury bills rates rose sharply and closed in excess
of 18%, broadly in line with inflationary trends while yields on bonds
exceeded 16% levels.
52 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 53
financial statements information
Wealth (continued) Abridged sustainability report
Business
rReevviieeww
We aim to create a distinct brand for SITL We will continue the drive for growth in Regulatory changes which have been CSI Sustainability Report 2016 and external stakeholders, manage social of customers. We are continuously engaging
as preferred Trustee and make company top of pension assets via an increased awareness in highly anticipated in prior years are expected and environmental challenges and invest for our employees to ensure their growth through
mind for the Nigerian public. Possibly, review benefits of additional voluntary contribution, in 2017, including the opening of the much As a business, Stanbic IBTC recognises that the future. We work hard to build trust in our leadership trainings and skills acquisition, a
pricing template to be more competitive conversion of un-funded accounts and special awaited transfer window in the pension our success is connected to the success of our operations and establish partnerships that will diversified and conducive work environment, and
and aligned with market realities. Key focus focus for new businesses from contributing industry, commencement of micro pension, stakeholders, specifically individuals, businesses be beneficial in the long term. well-structured compensation policy. Higher levels
will be cost optimization and automation of employers. We will also continue to follow up implementation of the guideline on withdrawal and the economy wherein we operate. This of employee engagement are linked to lower levels
systems which include for example the debt with employers for pension remittances as it from RSA towards equity contribution for a understanding has helped shaped our operation Corporate Social Investment: of absenteeism and employee turnover.
domain program and the Advanced Commercial is in the best interest of our clients and plan mortgage. We will continue with the CFI project and processes. We constantly develop solutions Business and Societal Needs
Banking System (ACBS) - this is a useful employer fora in 2017 to allow for more direct which allows for information gathering and that not only ensure our success but guarantee In 2016, employees formed an important
software in facility agency, used for calculating stakeholder engagement. direct interaction with the clients. Despite the the progress of society: individuals, businesses Our priority is to ensure financial, social and part of our CSI, helping to create awareness
amounts due and sums payable to transaction recession and the resultant challenges, we will and governments. environmental sustainability. Through our social and actively participating in chosen initiatives,
parties in syndicated loans. We also intend to We also plan to position the insurance remain steadfast to our core values and policies investments, we work to improve shared value individually and as a team.
actively prospect significant capital market brokerage business as the firm of choice and which will guide our decisions throughout the Over the past five years, we have witnessed for our stakeholders and Stanbic IBTC, sustain
transactions particularly in the bond market ensure a mutually beneficial partnership with course of the year. that digitalisation is defining the future; our Stanbic IBTC brand reputation, increase Creating thriving partnerships
which we expect will be revived in 2017. our key internal and external stakeholders. specifically we have experienced an increased our market share and improve employee
adoption by customers of electronic banking relations in a way that enhances our long term Sustainability is integrated into our business
via the internet, smartphones, mobile devices competitiveness. operations. Our work is governed by internal
and mobile apps, leading to the incorporation and external regulations as well as international
of more banking services on the electronic For maximum impact, we identified, using best practices. Corporate governance is a key
channels. The biggest impact of digitalisation, a research-based approach and by engaging part of our operation in approving, monitoring
however, is customers’ need for real time, with our stakeholders, including communities, and evaluating of projects. Our major CSI
bespoke and competitive financial solutions. governments and individuals, the critical needs objectives remain: support for strategic
Our competence and rich pedigree in financial of our business environment. These needs and credible projects, in line with business
innovation, drawn from our Standard Bank fall under Education, Health and Economic objectives; deploy scalable solutions that are
heritage, has enabled us provide solutions that Empowerment and form the tripod upon which beneficial to a higher number of people; work
have improved the quality of life of individuals our Corporate Social Investment activities with credible partners; and leverage existing
and enhance their financial security; facilitate rest. The convergence of social investment business opportunities.
business expansion, economic growth and goals and business helps engender long term
development in key sectors like agriculture, benefits and sustainability.
power, real estate, manufacturing and
healthcare, among others. Employee Engagement
Through our financial intermediation role As our objective is to have an increasingly
as well as our identity and business strategy, productive and highly motivated workforce,
we offer banking services to assist our internal one that constantly exceeds the expectations
S/No Category Major Social Partners Project
1 Education Lagos Progressive Schools
N/A Donation-Purchase of safety & health books
2 Economic Empowerment to our adopted school
3 Health Lagos Progressive School, Surulere
Ilasan Primary School Provision of Stanbic IBTC Education Trust Fund
for the Orisaguna girls – Children of the bread
Association of Orphans and Homeless Widows seller with remarkable change story
Slum2School
Children’s Day – Mentor a Class for a day
School materials provision
Provision of Stanbic IBTC Education Trust
Fund for 8 Indigent Children (Together4ALimb
project)
Provision of relief materials to Orphans and
Homeless widows
Provision of Mosquito Nets to Makoko
Community
54 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 55
financial statements information
Abridged sustainability report (continued)
Business
rReevviieeww
S/No Category Major Social Partners Project Awareness Creation Benefits of Environmental & Social Risk Management
4 Employee Community Involvement
Royal Diamond Orphanage and Bales of Mercy Provision of relief materials to children at the Our awareness creation drive increased across our stakeholder groups, in Appropriately and efficiently managed environmental and social risks
Orphanage orphanages the implementation of NSBP. Following the NSBP adoption, a total of 120 and opportunities will enhance our:
employees received introductory environmental and social risk training in
St. Stephens Home Provision of relief materials to Stephen 2015. And in 2016, that number rose across our business units. • Overall risk management which in turn reduces costs and liabilities;
Children’s Home
Old Peoples Home, Yaba Provision of relief materials to Old People’s Our Approach • Ability to access capital and attract foreign investors and partners;
Home, Yaba • Financial and non-financial performance;
Stanbic IBTC, in implementing Nigeria Sustainable Banking Principles in
Center for Destitute Empowerment International Provision of books and equipment to Centre for our business activities and operations, is under the following three pillars.
Destitute Empowerment International
Inner City Missions for Children Delivered participatory interventions to • Credit • Brands and reputations at the individual organisation as well
the Children by providing school and relief • Group Real Estate Services as sector level;
materials. • Procurement
• Operational efficiencies;
Love Home and Compassionate Home Orphanage Provision of Relief materials for the orphanages Credit: Integrate Environmental and Social Considerations into Credit
Decision Making process by ensuring on boarding of new business • Ability to attract and retain talents;
St. Mathias Boy’s Primary School, Obalende Repair of classrooms and conveniences for the opportunities are E&S compliant and follows approved credit process,
St. Mathias Boys’ Primary School, Obalende policy and guidelines for Corporate and Investment Banking (CIB) and • Relationships with our clients by becoming a trusted advisor; and
Business Banking (BB).
Modupe Cole Orphanage Provision of self-help and relief materials for • Growth prospects by reaching new markets and innovating new
the physically chalenged GRES: Monitor our ecological footprints with respect to the impact of our products and services.
business operations, In terms of Power maximization, waste management,
Lagos State Rehabilitation and Training Centre Provision of desks/chairs, blackboard, Carbon emissions, Energy and water efficiency and Building designs and
bookshelves and basic writing materials to the architecture that are green.
Lagos State Rehabilitation Training Centre
CSI Signature Activity Provision of prosthetic limbs for 8 indigent
children (Together4alimb)
Share of spend of Corporate Social Investments Environmental and Social Risk Management Procurement: Assess, develop and screen suppliers with a view to
against our group pillars: ensuring the sustainability of our vendors and their ability to meet
Stanbic IBTC acknowledges that the development of a corporate culture our procurement needs and also assist them in mitigating social and
Health, Education and Economic empowerment whereby environmental sustainability principles are adhered to both in its environmental costs.
operating environment and with counterparties is crucial to sustainable
Education development.
55%
Health Our impacts on society and the environment can be both indirect,
28% arising from the activities of our customers who we finance, and direct
Economic through our day-to-day operational activities and the products and
Empowerment services we provide. These are either internal, affecting employees or the
17% organization, or external, affecting communities, customers, partners, and
regulators, among others. Thus, we go beyond compliance in our approach
to environmental and social risk management. This approach has helped us
achieve best practice performance through sound governance structures
and policies, monitoring mechanisms, strategic partnership, energy
efficient and renewable energy programmes, supplier development and
screening, employee training and awareness, products and services that
help reduce carbon emission, green building design.
In line with regulatory stipulation, Stanbic IBTC complies with the
Nigeria Sustainable Banking Principles (“NSBP”) and through the Standard
Bank Group is a signatory to the Equator Principles, thereby adopting
international best practice in Environmental and Sustainability standards.
We adopt a precautionary approach to environmental management,
striving to anticipate and prevent environmental degradation in line with
the guidelines set out in the Equator Principles and the provisions of the
environmental laws of Nigeria.
56 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 57
financial statements information
Enterprise risk review
Business
review
Overview The overarching approach to managing of responsibilities between Business and Risk.
the enterprise-wide risk is based on the Risk officers report separately to the Head of
Group Risk Management (“Group Risk”) Three Lines of Defense principle which Group Risk who reports to the Chief Executive
objective continues to align with the group’s requires the first line (risk owners) to own of Stanbic IBTC Group and also through a matrix
strategic focus ”to be the leading end-to-end their risks and manage same closest to the reporting line to the Standard Bank Group
financial solutions provider in Nigeria through point of incidence; second line to review (SBG).
innovative and customer-focused people”. and challenge as well as provide oversight
The Group Risk function has the responsibility and advisory functions; and the third line to All principal risks are supported by the Risk
of creating a consistent, comprehensive conduct assurance that risk processes are fit department.
and strategic approach to the identification, for purpose and are implemented in accordance
measurement, management and reporting of to the standard operating procedures. Governance structure
enterprise-wide risks across the group. This is
executed through proactive risk management Risk management framework The risk governance structure provides a
practices which ensure that the business platform for the board, executive and senior
maintains the right balance in terms of the Approach and structure management through the various committees
risk-return trade off whilst limiting the negative The group’s approach to risk management is to evaluate and debate key existential and
variations that could impact the group’s risk based on governance processes that rely on emerging risks which the group is exposed to,
assets and appetite levels in a constantly both individual responsibility and collective and assess the effectiveness of risk responses
changing and dynamic operating environment. oversight that is supported by a tailored through the risk profiles of the underlying
Management Information System (MIS). This business units and functional areas (please refer
Whilst the Board sets the tone and risk approach balances corporate oversight at to the pictorial representation of the group risk
appetite for the organisation, the risks are senior management level with independent governance structure below).
managed in accordance to a set of governance risk management structures in the business.
standards, frameworks and policies which align Business unit heads, as part of the first line of The risk-focused board committees include
with the global best practices. defense, are specifically responsible for the the statutory audit committee, board credit
management of risk within their businesses committee, board IT committee, board legal
The group’s integrated risk management using appropriate risk management frameworks committee, and board risk management
architecture, as outlined in the Enterprise Risk that meet the required group minimum committee, while executive management
Management (ERM) framework, supports the standards. oversight at the subsidiary and group levels is
evaluation and prioritisation of the risk exposures achieved through management committees
and mitigation activities in line with the group’s An important element that underpins the that focus on specific risks. Each of the board
approved risk appetite, through prudent group’s approach to the management of all risk and management committees is governed
management of risk exposures in a way that is independence and appropriate segregation by mandates that set out the expected
balances the risk premium and return on equity. committee’s terms of reference.
Governance structure
Stanbic IBTC Board Shareholders
Management Committees Board Committees Audit
Executive Risk Management Remuneration IT Nomination Legal ADHOC
Committee (REMCO) - Property
- Stanlib Collabo
Operational
Risk & Risk Oversight New Products, IT Steering Equity Invest. Int. Financial
Compliance Business & Control
Services
Country Risk
Limit Review Board committees Statutory committees Management committees
*This is continuously evolving to meet changing needs and requirements.
58 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 59
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
Risk governance standards, Residual risk is then evaluated against the factor which also affects the credit quality of Funding liquidity risk refers to the risk that • Credit approval and delegated authority appropriate consideration of Basel 2 capital
policies and procedures risk appetite. the counterparty). the counterparties, who provide the group requirements (where applicable) and the
with funding, will withdraw or not roll-over that • Economic capital calculation, portfolio revenue and return implications of the credit
The group has developed a set of risk Risk categories Settlement risk funding. and management reporting proposal.
governance standards for each principal risk Settlement risk is the risk of loss to the group
including credit, market, operational, IT and The group’s enterprise risk management from a transaction settlement, where value is Market liquidity risk refers to the risk of a • Regulatory capital calculation Framework and governance
compliance risks. The standards define the framework is designed to govern, identify, exchanged, failing such that the counter value generalised disruption in asset markets that
acceptable conditions for the assumption measure, manage, control and report on the is not received in whole or part. makes normal liquid assets illiquid and the • RARORC (Risk-Adjusted Return on Credit risk remains a key component of financial
of the major risks and ensure alignment and principal risks to which the group is exposed. potential loss through the forced-sale of assets Regulatory Capital) calculation risks faced by any bank given the very nature
consistency in the manner in which these risks The principal financial risks are defined as Country and cross border risk resulting in proceeds being below their fair of its business. The importance of credit risk
are identified, measured, managed, controlled follows: Country and cross border risk is the risk of loss market value. • Pricing: PDs, EADs, and LGDs may be management cannot be over emphasised as
and reported, across the group. arising from political or economical conditions used to assess and compare relative pricing consequences can be severe when neglected.
Credit risk or events in a particular country which reduce Credit risk of assets/facilities, in conjunction with The bank has established governance principles
All standards are supported by policies the ability of counterparties in that particular strategic, relationship, market practice to ensure that credit risk is managed effectively
and procedural documents. They are applied Credit risk arises primarily in the group country to fulfill their obligations to the group. Principal credit standard and policies and competitive factors. within a comprehensive risk management and
consistently across the bank and are approved operations where an obligor/counterparty fails The group’s Governance Standard, as reviewed control framework.
by the Board. It is the responsibility of the to perform in accordance with agreed terms or Cross border risks is the risk of restriction on regularly, sets out the broad overall principles The starting point of all credit risk assessment
business unit executive management to ensure where the counterparty’s ability to meet such the transfer and convertibility of local currency to be applied in credit risk decisions and sets and evaluation lies in the counterparty risk In reaching credit decisions and taking credit
that the requirements of the risk governance contractual obligation is impaired. funds, into foreign currency funds thereby out the overall framework for the consistent grading, which is quantified and calculated in risk, both the credit and business functions
standards, policies and procedures are limiting payment by offshore counterparties to and unified governance, identification, compliance with the group’s credit rating policy must consistently and responsibly balance risk
implemented within the business units. Credit risk comprises counterparty risk, the group. measurement, management and reporting of and using such Basel-2 compliant models as and return, as return is not the sole prerogative
wrong-way risk, settlement risk, country risk credit risk in the group. are in current use and which are updated or of business neither is credit risk the sole
Risk appetite and concentration risk. Concentration risk enhanced from time to time. prerogative of credit. Credit (and the other risk
Concentration risk refers to any single exposure The Corporate and Investment Banking functions, as applicable) and business must work
Risk appetite is an expression of the amount, Counterparty risk or group of exposures large enough to cause (CIB) and the Personal and Business Banking Credit risk quantification for any exposure in partnership to understand the risk and apply
type and tenure of risk that the group is Counterparty risk is the risk of loss to the group credit losses which threaten the group’s (PBB) Global Credit Policies have been designed or portfolio is summarised by the calculation of appropriate risk pricing, with the overall aim of
prepared to accept in order to deliver its as a result of failure by a counterparty to meet capital adequacy or ability to maintain its core to expand the Group Credit Risk Governance the expected loss (EL), which is arrived at in the optimising the bank’s risk adjusted performance.
business objectives. It is the balance of risk and its financial and/or contractual obligations to operations. It is the risk that common factors Standard requirements by embodying the core following way:
return as the group implements business plans, the group. It has three components: within a risk type or across risk types cause principles for identifying, measuring, approving, The reporting lines, responsibilities and
whilst recognising a range of possible outcomes. credit losses or an event occurs within a risk and managing credit risk. These policies provide • Based on the risk grading foundation which authority for managing credit risk in the group
• primary credit risk which is the exposure type which results to credit losses. a comprehensive framework within which all yields the counterparty’s probability of are clear and independent. However, ultimate
The Board establishes the group’s at default (EAD) arising from lending and credit risk emanating from the operations default (PD), the nature and quantum of the responsibility for credit risk rests with the
parameters for risk appetite by: related banking product activities, including Market risk of the bank are legally executed, properly credit facilities are considered. board.
• providing strategic leadership and guidance; their underwriting; monitored and controlled in order to minimize
Market risk is defined as the risk of a change the risk of financial loss; and assure consistency • A forward-looking quantification of the Credit risk mitigation
• reviewing and approving annual budgets and • pre-settlement credit risk which is the in the actual or effective market value or of approach in the treatment of regulatory exposure at default (EAD) is determined in
forecasts for the group and each subsidiary; EAD arising from unsettled forward and earnings of a portfolio of financial instruments compliance requirements. accordance with group standard guidelines. Credit risk mitigation is defined as all methods
and derivative transactions, arising from caused by adverse moves in market variables of reducing credit expected loss whether by
the default of the counterparty to the such as equity, bond and commodity prices, In addition to the Credit Risk Governance • Risk mitigants such as security and asset means of reduction of EAD (e.g. netting), risk
• regularly reviewing and monitoring the transaction and measured as the cost of foreign exchange rates, interest rates, credit Standard, CIB and PBB Global Credit Policies, recovery propensities are then quantified to transfer (e.g. guarantees) or risk transformation.
group’s performance in relation to set risk replacing the transaction at current market spreads, recovery rates, correlations and implied a number of related credit policies and moderate exposure at default to yield the
appetite. rates; and volatilities in the market variables. Market risk documents have been developed, with contents loss given default (LGD). Guarantees, collateral and the transaction
covers both the impact of these risk factors on that are relevant to the full implementation and structures are used by the group to mitigate
The risk appetite is defined by several metrics • issuer risk which is the EAD arising from the market value of traded instruments as well understanding of the credit policies • Finally, the EL is a function of the PD, the credit risks both identified and inherent though
which are then converted into limits and traded credit and equity products, and as the impact on the group’s net interest LGD and the EAD. the amount and type of credit risk is determined
triggers across the relevant risk types, at both including their underwriting. margin as a consequence of interest rate Methodology for risk rating on a case by case basis. The group’s credit
entity and business line levels, through an risk on banking book assets and liabilities. Internal counterparty ratings and default These parameters are in turn used in policy and guidelines are used in a consistent
analysis of the risks that impact them. Wrong-way risk estimates that are updated and enhanced from quantifying the required regulatory capital manner while security is valued appropriately
Wrong-way risk is the risk that arises when Liquidity risk time-to-time play an essential role in the credit reserving, using the Regulatory Capital and reviewed regularly for enforceability and to
Stress testing default risk and credit exposure increase risk management and decision-making process, Calculator developed, maintained and updated meet changing business needs.
together. There are two types of wrong-way Liquidity risk is defined as the risk that the credit approvals, internal capital allocation, and in terms of Basel 2, and the economic capital
Stress testing serves as a diagnostic and forward risk as follows: specific wrong way risk (which group, although balance-sheet solvent, cannot corporate governance functions. Ratings are implications through the use of Credit Portfolio The credit policy establishes and defines the
looking tool to improve the group’s understanding arises through poorly structured transactions, maintain or generate sufficient cash resources used for the following purposes: Management’s (CPM’s) Economic Capital tools. principles of risk transfer, transformation and
of its credit; market, liquidity and operational risks for example, those collateralised by own or to meet its payment obligations in full as they Furthermore, bearing in mind the quantum reduction. The processes and procedures for
profile under event based scenarios. related party shares) and general wrong way fall due (as a result of funding liquidity risk), or • Credit assessment and evaluation of the facility and the risk/reward thereof, an accepting, verifying, maintaining, and releasing
risk (which arises where the credit quality of can only do so at materially disadvantageous collateral are well documented in order to
Management reviews the outcome of stress the counterparty may for non-specific reasons terms (as a result of market liquidity risk). • Credit monitoring ensure appropriate application of the collateral
tests and selects appropriate mitigating actions be held to be correlated with a macroeconomic management techniques.
to minimize and manage the impact of the risks
to the group.
60 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 61
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
Credit risk measurement asset portfolios and risk bands. The risk ratings The group uses the PD Master Scale rating
attributed to counterparties are based on a concept with a single scale to measure the
A key element in the measurement of credit combination of factors which cover business and credit riskiness of all counterparty types. The
risk is the assignment of credit ratings, which financial risks: grading system is a 25-point scale, with three
are used to determine expected defaults across additional default grades.
Group’s rating Grade description Standard & Poor’s Fitch
SB01 - SB12/SB13 Investment grades AAA to BBB- AAA to BBB-
SB14 - SB21 Sub Investment grades BB+ to CCC+ BB+ to CCC+
SB22 – SB25 Cautionary grade CCC to C CCC to C
IFRS 7 be recovered when considering future cash performing and for which there has been a
flows, including collateral. Ultimate loss is measurable decrease in estimated future cash
The tables that follow analyse the credit not expected but could occur if the adverse flows. Specifically impaired loans are further
quality of loans and advances measured in conditions persist. analysed into the following categories:
terms of IFRS.
Non-performing loans • substandard items that show underlying
Maximum exposure to credit risk well-defined weaknesses and are considered
Non-performing loans are those loans for which: to be specifically impaired;
Loans and advances are analysed and
categorised based on credit quality using • the group has identified objective evidence • doubtful items that are not yet considered
the following definitions. of default, such as a breach of a material final losses due to some pending factors
loan covenant or condition; or that may strengthen the quality of the
Performing loans items; and
Non-performing but not specifically impaired
Neither past due nor specifically impaired loans loans are not specifically impaired due to the • loss items that are considered to be
are loans that are current and fully compliant expected recoverability of the full carrying uncollectible in whole or in part. The group
with all contractual terms and conditions. value when considering future cash flows, provides fully for its anticipated loss, after
Early arrears but not specifically impaired loans including collateral. taking collateral into account.
include those loans where the counterparty Non-performing specifically impaired loans
has failed to make contractual payments and are those loans that are regarded as non-
payments are less than 90 days past due, but
it is expected that the full carrying value will
Performing loans Loans
Non-performing loans
Neither past Early arrears Non-performing Specifically
due nor but not but not impaired
specifically specifically specifically loans
impaired loans impaired loans impaired loans
Current Close Substandard Doubtful Loss
monitoring
Portfolio credit impairments Specific credit impairments
62 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 63
financial statements information
Enterprise risk review (continued)
Business
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Maximum exposure to credit risk by credit quality
Performing loans Not specifically impaired Non-performing loans
Specifically impaired loans
Neither past due nor
specifically impaired
Note Total Balance sheet Normal Close Early Securities Net after Balance sheet Gross specific Total non- Non-
loans and impairments monitoring monitoring arrears and expected securities impairments for impairment performing performing
December 2016 advances Nmillion Non-performing Sub-standard Doubtful Loss Total recoveries on and expected non-performing coverage
to customers for performing Nmillion Nmillion 22,372 Nmillion Nmillion Nmillion Nmillion Nmillion recoveries on % loans loans
Personal and Business Banking Nmillion loans 86,222 25,092 1,798 - 8,035 18,675 specifically specifically specifically 60 Nmillion %
Mortgage loans 3,417 - 189 4,803 5,837 impaired loans impaired impaired loans 64 18,675
Instalment sale and finance leases 152,360 Nmillion 5,396 1,472 - 1,111 27 42 258 46 12.3
Card debtors 6,141 5,277 380 - 68 68 518 1,697 Nmillion loans Nmillion 94 258 2.9
Other loans and advances 8,924 3,509 1,185 16,777 - 6,667 92 68 Nmillion 61 1,697
Corporate and Investment Banking 73,500 - 22,104 - - 228 7,426 11,249 - 10.3
Corporate loans 16,532 51 194,856 18,343 22,104 - - 4,616 5,209 16,492 11,249 - 228 12.7
Gross loans and advances 194,856 44,476 - 8,035 - - 94 164 60 16,492 13.2
Less: 1,793 275 281,078 5,995 - - - 164
Impairment for loans and advances 5,995 - 916 781 - -
125,111 48 31,087 4,803 5,837 18,675 781 - -
14 214 18,675 5.0
222,956 3,135 214
6,402 10,090
222,956 7,591 10,090
- -
375,316 7,591 -
- -
11,100 -
7,426 11,249
11,249
(22,351)
Net loans and advances 12 352,965
Add the following other banking
activities exposures:
Cash and cash equivalents 7 301,351
Derivatives 10.6 14,317
Financial investments (excluding equity) 11 251,233
Loans and advances to banks 12 15,264
Trading assets 9.1 16,855
Pledged assets 8 28,303
Other financial assets 31,897
Total on-balance sheet exposure 1,012,185
Unrecognised financial assets:
Letters of credit 30.1 15,620
Guarantees 30.1 38,523
Loan commitments 30,193
Total exposure to credit risk 1,096,521
Additional disclosures on loans and advances is set out in note 12.
64 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 65
financial statements information
Enterprise risk review (continued)
Business
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Maximum exposure to credit risk by credit quality
Performing loans Not specifically impaired Non-performing loans
Specifically impaired loans
Neither past due nor
specifically impaired
December 2015 Note Total Balance sheet Normal Close Early Non-performing Sub-standard Doubtful Loss Total Securities Net after Balance sheet Gross specific Total non- Non-
loans and impairments monitoring monitoring arrears Nmillion Nmillion Nmillion Nmillion Nmillion and expected securities impairments for impairment performing performing
Personal and Business Banking advances Nmillion - 3,277 16,599 recoveries on and expected non-performing coverage
Mortgage loans to customers for performing Nmillion Nmillion 32,348 - 173 7,099 6,223 recoveries on % loans loans
Instalment sale and finance leases Nmillion loans 95,644 19,386 2,123 154 283 610 specifically specifically specifically 67 Nmillion %
Card debtors - 1,014 impaired impaired impaired loans 70 16,599
Other loans and advances Nmillion 7,220 - 5,163 - 26 3,788 - 4,802 loans 10.1
Corporate and Investment Banking 45 - 122 - 148 Nmillion loans Nmillion 72 610 6.1
Corporate loans 5,506 6,764 - 2,064 5,940 Nmillion 93
Gross loans and advances 1,440 5 25,017 - - 3,035 3,016 11,039 64 4,802 21.6
Less: 163,977 2,387 81,478 82 - - 7,421 3,016 10,437 5,496 11,103 11,103 73 148 9.0
Impairment for loans and advances 192,418 12,617 82 7,421 9,239 10,437 73 8.5
9,953 112 192,418 12,514 3,277 14,520 27,036 181 429 429 69 11,039 4.8
288,062 12,514 32,430 10,437 4.8
22,235 496 31,900 1,354 3,448 3,448 10,437 7.1
27,036
1,638 18 11 137 137
130,151 1,761 3,950 7,089 7,089
215,451 4,837 2,849 7,588 7,588
215,451 4,837 2,849 7,588 7,588
379,428 7,224 8,345 18,691 18,691
(25,915)
Net loans and advances 12 353,513
Add the following other banking
activities exposures: 7 211,481
Cash and cash equivalents 10.6 911
Derivatives
Financial investments 11 162,695
Asset held for sale 11.4 262
Loans and advances to banks
Trading assets 12 26,782
Pledged assets 9.1 37,956
Other financial assets 8.1 86,570
Total on-balance sheet exposure
Unrecognised financial assets: 15,831
Letters of credit 896,001
Guarantees
Loan commitments 30.1 19,638
30.1 30,335
29,902
Total exposure to credit risk 975,876
Additional disclosures on loans and advances is set out in note 12.
66 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 67
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Ageing of loans and advances past due but not specifically impaired Collateral
Less than 31-60 61-89 90-180 More than Total collateral coverage
31 days days days days 180 days
Nmillion Nmillion Total Secured
Nmillion Nmillion Nmillion Nmillion
16,824 exposure Greater
1,579 3,923 1,624 -
December 2016 1,801 142 77 - Total Netting after 50%- than
Personal and Business Banking 200 -
1,054 562 - - 22,371 exposure Unsecured Secured agreements netting 1%-50% 100% 100%
Mortgage loans 13,244 131 49 - - 1,798
Instalment sales and finance lease - - - 3,417 Note Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
Card debtors - 2,596 936 - - 380
Other loans and advances 8,675 13,430 - - 16,776 December 2016 302,251 79,295 222,956 - - 46,763 88,940 87,254
Corporate and Investment Banking 16,824 8,675 13,430 - 22,105 Corporate 415,361 415,361
Corporate loans 12,598 15,054 - 22,105 Sovereign 134,739 134,739 117,675 --
Total - 44,477 Bank 170,029 52,354 8,924
2,378 Retail - - -- -
221 8,924 - 108,751
734 Retail mortgage 161,105 52,354 340,631 - - 41,972 41,710 33,994
13 Other retail 1,022,380 681,749
Total - - - - 8,924
1,410
82 - - 41,972 41,710 25,070
82
December 2015 - - 88,735 130,650 121,248
Personal and Business Banking 2,460
23,878 6,092 - - 32,348 Add: Financial assets not 66,299
Mortgage loans 1,788 114 - - 2,123 exposed to credit risk
Instalment sales and finance lease 3,038 - - 5,163 (22,351)
Card debtors - 1,391 - - 45 Less: Impairments for loans
Other loans and advances 32 - - 25,017 and advances (54,143)
Corporate and Investment Banking 19,052 - - 82 1,012,185
Corporate loans - 4,555 - - 82 Less: Unrecognised off
Total - - - - 32,430 balance sheet items
-
23,878 Total exposure
6,092
Reconciliation to statement of financial position:
Cash and cash equivalents 7 301,351
Derivatives 10.6 14,317
Renegotiated loans and advances recognition under Basel II but that management All exposures are presented before the effect Financial investments 11 251,233
takes into consideration in the management of of any impairment provisions. (excluding equity)
Renegotiated loans and advances are exposures the group’s exposures to credit risk. All on and
which have been refinanced, rescheduled, off-balance sheet exposures which are exposed In the retail portfolio, 69% (Dec 2015:66%) Loans and advances 12 368,229
rolled over or otherwise modified due to to credit risk, including non-performing assets, is collateralised. Of the group’s total exposure,
weaknesses in the counterparty’s financial have been included. 67% (Dec 2015: 64%) is unsecured and mainly Trading assets 9 16,855
position, and where it has been judged that reflects exposures to well-rated corporate
normal repayment will likely continue after the Collateral includes: counterparties, bank counterparties and Pledged assets 8 28,303
restructure. Renegotiated loans that would sovereign entities.
otherwise be past due or impaired amounted • financial securities that have a tradable Other financial assets 31,897
to N34.8 billion as at 31 December 2016 (Dec market, such as shares and other securities;
2015: N28.7 billion). Total 1,012,185
Collateral • physical items, such as property, plant
The table that follows shows the financial effect and equipment; and
that collateral has on the group’s maximum
exposure to credit risk. The table is presented • financial guarantees, suretyships and
according to Basel II asset categories and intangible assets.
includes collateral that may not be eligible for
68 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 69
financial statements information
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Collateral Concentration of risks of financial assets with credit risk exposure
Total collateral coverage a) Geographical sectors
The following table breaks down the group’s main credit exposure at their carrying amounts, as categorised by geographical region as of 31
Secured December 2016. For this table, the Group has allocated exposures to regions based on the region of domicile of our counter-parties.
exposure
Note Total Unsecured Secured Netting 1%-50% 50%- Greater Trading assets Derivative Pledged assets Financial Loans and Loans and Total
exposure Nmillion Nmillion agreements after Nmillion 100% than Nmillion Nmillion investments advances to advances to Nmillion
Nmillion netting Nmillion 1,198 assets 14,643
Nmillion Nmillion 100% 5,001 Nmillion Nmillion customers banks 309,536
Nmillion - - Nmillion Nmillion
- 13,445 6,575
December 2015 274,245 58,814 215,431 - - 188,781 368 26,282 31 December 2016 10,656 -- 10,131 293,196 - 22,837
Corporate 385,035 385,035 South South - 6,575 - 315,265
Sovereign 120,154 -- South West - 1,208 - - 22,837 -
Bank 91,857 91,857 9,953 South East - 15,171 - 1,741
Retail 184,211 64,057 - - -- - North West 16,855 -- 241,102 7,504 8,340
110,201 North Central 1,741 678,937
Retail mortgage 9,953 - 335,585 - - 44,518 21,702 53,934 North East -- - - -
Other retail 174,258 64,057 Outside Nigeria - 7,760
Total 935,348 599,763 - - 1,368 1,905 6,679 Carrying amount 12,529 28,303 251,233 352,965 15,264
- - 43,150 19,797 47,255 --
- - 233,299 22,070 80,216 580 -
14,317 28,303
Add: Financial assets not 36,541 31 December 2015 Trading assets Derivative Pledged assets Financial Loans and Loans and Total
exposed to credit risk South South Nmillion assets Nmillion investments advances to advances to Nmillion
(25,915) South West 1,363 - 18,791
Less: Impairments for loans South East 3 Nmillion - Nmillion customers banks 298,674
and advances (49,973) North West - - - - Nmillion Nmillion
896,001 North Central - - 17,428 8,374
Less: Unrecognised off North East 35,779 365 86,570 12,866 285,440 - 23,186
balance sheet items Outside Nigeria - 397 7,977 - 293,381
Carrying amount - - - - 23,186 -
Total exposure 811 - 17,810 - 1,672
37,956 528 86,570 149,694 3,000 24,611
Reconciliation to statement of financial position: 1,672 668,689
- - - -
Cash and cash equivalents 7 211,481 18 - 23,782
911 162,957 353,513 26,782
Derivatives 10.6 911
Financial investments 11 162,695
Asset held for sale 11.4 262
Loans and advances 12 380,295
Trading assets 9.1 37,956
Pledged assets 8.1 86,570
Other financial assets 15,831
Total 896,001
70 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 71
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Concentration of risks of financial assets with credit risk exposure (continued)
b. Industry sectors
Derivative Financial Loans and Loans and Derivative Pledged Financial Loans and Loans and
investments advances to advances to assets assets investments advances to advances to
Trading assets assets Pledged assets Total Trading assets Total
Nmillion Nmillion customers banks Nmillion Nmillion Nmillion Nmillion Nmillion customers banks Nmillion
31 December 2016 - Nmillion Nmillion Nmillion Nmillion 26,206 31 December 2015 - - - Nmillion Nmillion 22,280
Agriculture - - Agriculture - - - -
Business services - 1- 26,205 - 3,741 Business services - - - 22,280 - 5,017
Communication - - 21,485 Communication - - - - 34,741
Community, social & -- 3,741 - Community, social & 5,017 -
personal services - 470 2 personal services - 364 - 525 4
Construction and real estate - -- 21,015 - Construction and real estate - - - 34,216 -
Electricity 5,001 - 37,572 Electricity 814 - - 25,216
Financial intermediaries & -- 2 - - Financial intermediaries & 19 4 - 2,851
insurance 11,854 insurance 37,142 86,570
Government (including 26 - - 37,546 - 24,129 Government (including 528 - 24,852 - 42,765
Central Bank) - ----- Central Bank) - - - 2,851 -
Hotels, restaurants and 316,126 Hotels, restaurants and - 11,934 6,216 23,782 290,727
tourism - 582 - 9,248 1,538 7,760 tourism - -
Manufacturing - 21 Manufacturing - - - 128
Mining - 12,529 28,303 241,515 14,421 7,504 Mining - - - 150,498 12,989 3,000
Private households - 100,607 Private households - - - 76,371
Transport, storage and - - - 21 - 58,244 Transport, storage and - - 128 - 60,453
distribution - 48,215 distribution - - 58,881
Wholesale & retail trade 16,855 1,097 - - 99,510 - 11,331 Wholesale & retail trade 37,956 - 86,570 - 76,371 - 13,014
Carrying amount - - - 58,244 - Carrying amount 911 - 60,453 -
- - - 48,215 - 31,258 - 58,881 - 36,241
- - - 11,331 - 678,937 - 13,014 - 668,689
82 - - 31,176 - - 36,241 -
14,317 28,303 251,233 352,965 15,264 162,957 353,513 26,782
c. Analysis of financial assets disclosed above by portfolio distribution and risk rating
At 31 December 2016 AAA to A- BBB+ to BBB- Below BBB- Unrated Total
At 31 December 2015 Nmillion Nmillion Nmillion Nmillion Nmillion
7,666 18,923 604,205 49,845 680,639
4,141 40,720 554,457 69,371 668,689
72 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 73
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Concentration of risks of off-balance sheet engagements b. Industry sectors 31 December 2016 31 December 2015
a. Geographical sectors Bonds and Letters of credit* Total Agriculture Bonds and Letters of 2016 Total Bonds and Letters of 2015 Total
guarantees Nmillion Nmillion Business services guarantees credit Nmillion guarantees credit Nmillion
31 December 2016 - Communication 1 60
South South Nmillion 15,620 850 Community, social & personal services Nmillion Nmillion 690 Nmillion Nmillion 416
South West 850 - 50,797 Construction and real estate 273 269
South East - Electricity -1 - - 60 -
North West 35,177 - 18 Financial intermediaries & insurance 19,248 9,098
North Central 18 90 Hotels, Restaurants and Tourism 437 253 - 416 - -
North East 90 - 2,388 Manufacturing 185 5,128
Outside Nigeria - Mining 155 118 - 269 - 10
Total 2,388 15,620 - Private households 21,160 14,875
- Transport, storage and distribution -- 4,211 -- 10,661
31 December 2015 - 54,143 Wholesale & retail trade 486 -
South South - Carrying amount 19,248 - 22 9,098 - 12
South West 38,523 Total 7,867 9,444
South East Nmillion -- 54,143 49,973
North West
North Central 480 154 31 3,708 1,420
North East 48,601 10 -
Outside Nigeria --
Total 23 8,450 6,425
57 10,698 10,462 1,080 9,581
*Amount excludes letters of credit for which cash collateral has been received. 800
12 2,845 1,366 - -
12 -
- 486 - 7,292 2,152
49,973 30,335 19,638
Bonds and 22 -
guarantees
Letters of credit 4,478 3,389
Nmillion Nmillion
480 - 38,523 15,620
19,638
28,963 - Credit provisioning based on prudential guidelines
23 -
57 - In accordance with the Prudential Guidelines issued by the Central Bank of Nigeria, provision against credit risk is as follows;
800 - Non performing accounts Classification Minimum
- Substandard provision
12 19,638 Interest and/or principal
- outstanding for over: Doubtful 10%
90 days but less than 180 days Lost 50%
30,335 180 days but less than 360 days
Over 360 days 100%
When a loan is deemed uncollectible, it is written off against the related provision for impairments. Subsequent recoveries are credited to the provision
for loan losses in the profit and loss account. If the amount of the impairment subsequently decreases due to an event occurring after the write-down,
the release of the provision is credited as a reduction of the provision for impairment in the statement of profit or loss.
Performing accounts
A minimum of 2% general provision on performing loans is made in accordance with the Prudential Guidelines.
74 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 75
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Prudential guidelines disclosures Maintaining minimum levels of liquid specified level, which is reviewed periodically. proactively anticipate and plan for large cash
and marketable assets Similarly, in order to restrict the extent of outflows.
Had the Prudential Guidelines been employed in the preparation of these financial statements, the impairments for loans and advances to customers as foreign currency lending from the foreign
well as related disclosures, would have been made as follows: Minimum levels of prudential liquid assets currency deposit base, a foreign currency loan Interbank reliance
are held in accordance with all prudential to deposit limit, which is also referred to as own
Prudential disclosure of loan and advances to customers Group 31 Dec 2015 requirements as specified by the regulatory resource lending, is observed. As mitigants, the Interbank funding traditionally is seen as
Customer exposure for loans and advances 31 Dec 2016 Nmillion authorities. The group needs to hold additional group maintains high levels of unencumbered the most volatile and least stable source of
Mortgage loans unencumbered marketable assets, in excess marketable and liquid assets in excess of funding, easily influenced by market sentiment
Instalment sale and finance leases Nmillion 379,428 of any minimum prudential liquid asset regulatory benchmark. and prone to flight under stress situations.
Card debtors 9,953 requirement, to cater for volatile depositor Consequently, to ensure prudent liquidity
Overdrafts and other demand loans 375,316 withdrawals, draw-downs under committed Intra-day liquidity management management is enforced, the group restricts
Other term loans 8,924 23,376 facilities, collateral calls, etc. the local currency interbank funding as a
Provisions for loans and advances 17,272 1,638 The following criteria apply to readily The group manages its exposures in respect proportion of the local currency funding base
Specific provision 1,501 marketable securities: of payment and settlement systems. to a maximum of 15% of the total currency
General provision 33,945 Counterparties may view the failure to settle funding base.
Net loans and advances to customers 45,970 310,516 • prices must be quoted by a range of payments when expected as a sign of financial
301,649 (32,599) counterparties; weakness and in turn delay payments to the Liquidity stress testing and scenario
(25,569) (26,087) group. This can also disrupt the functioning testing
(14,467) (6,512) • the asset class must be regularly traded; of payment and settlement systems. At a
(11,102) 346,829 minimum, the following operational elements Anticipated on- and off-balance sheet cash
349,747 • the asset may be sold or repurchased in are included in the group’s intra-day liquidity flows are subjected to a variety of the group
a liquid market, for payment in cash; and management: specific and systemic stress scenarios in order
Liquidity risk exposures. The group has incorporated the Liquidity ratio 2016 2015 settlement must be according to a prescribed, to evaluate the impact of unlikely but plausible
following liquidity principles as part of a Minimum 56.24% 37.85% rather than a negotiated, timetable. • capacity to measure expected daily gross events on liquidity positions. Scenarios are
Framework and governance cohesive liquidity management process: Average 78.05% 49.04% liquidity inflows and outflows, including based on both historical events, such as past
The nature of banking and trading activities • structural liquidity mismatch management; Maximum 101.95% 57.13% Depositor concentration anticipated timing where possible; emerging markets crises, past local financial
results in a continuous exposure to liquidity • long-term funding ratio; markets crisis and hypothetical events, such
risk. Liquidity problems can have an adverse • maintaining minimum levels of liquid and Structural liquidity mismatch To ensure that the group does not place undue • capacity to monitor its intraday liquidity as an entity specific crisis. The results obtained
impact on a group’s earnings and capital and, management reliance on any single entity as a funding positions, including available credit and from stress testing provide meaningful input
in extreme circumstances, may even lead to the marketable assets; source, restrictions are imposed on the short collateral; when defining target liquidity risk positions.
collapse of a group which is otherwise solvent. • depositor restrictions; The mismatch approach measures the group’s dated (0 – 3 months term) deposits accepted
• local currency loan to deposit ratio; liquidity by assessing the mismatch between from any entity. These include: • sufficient intraday funding to meet its Maturity analysis of financial liabilities
The group’s liquidity risk management • foreign currency loan to deposit ratio; its inflow and outflow of funds within different objectives; by contractual maturity
framework is designed to measure and manage • interbank reliance limit; time bands on a maturity ladder. The structural • the sum of 0 – 3 month deposits and
the liquidity position at various levels of • intra-day liquidity management; liquidity mismatch is based on behaviourally- standby facilities provided by any single • ability to manage and mobilise collateral as The tables below analyses cash flows on a
consolidation such that payment obligations • collateral management; adjusted cash flows which factors a probability deposit counterparty must not, at any required; contractual, undiscounted basis based on
can be met at all times, under both normal and • daily cash flow management; of maturity into the various time bands. As time, exceed 10% of total funding related the earliest date on which the group can be
considerably stressed conditions. Under the • liquidity stress and scenario testing; and expected cash flows vary significantly from liabilities to the public; and • robust capacity to manage the timing of its required to pay (except for trading liabilities
delegated authority of the board of directors, • funding plans; the contractual position, behavioural profiling intraday outflows; and and trading derivatives) and may therefore not
the Asset and Liability Committee (ALCO) • liquidity contingency planning. is applied to assets, liabilities and off-balance • the aggregate of 0 – 3 month deposits and agree directly to the balances disclosed in the
sets liquidity risk policies in accordance with sheet items with an indeterminable maturity or standby facilities from the 10 largest single • readiness to deal with unexpected consolidated statement of financial position.
regulatory requirements and international best The cumulative impact of the above principle drawdown period. deposit counterparties must not, at any disruptions to its intraday liquidity flows.
practice and SBG stated risk appetite. is monitored, at least monthly by ALCO and the time, exceed 20% of total funding related Derivative liabilities are included in the
process is underpinned by a system of extensive A net mismatch figure is obtained by liabilities to the public. Daily cash flow management maturity analysis on a contractual, undiscounted
Tolerance limits, appetite thresholds and controls. The latter includes the application subtracting liabilities and net off-balance basis when contractual maturities are essential
monitoring items are prudently set and reflect of purpose-built technology, documented sheet positions from assets in each time band. Concentration risk limits are used to ensure The group generates a daily report to for an understanding of the derivatives’
the group’s conservative appetite for liquidity processes and procedures, independent The group’s liquidity position is assessed by that funding diversification is maintained across monitor significant cash flows. Maturities and future cash flows. Management considers
risk. ALCO is charged with ensuring compliance oversight and regular independent reviews and means of the net cumulative mismatch position products, sectors, and counterparties. Primary withdrawals are forecast at least 3-months in only contractual maturities to be essential
with liquidity risk standards and policies. The evaluations of the effectiveness of the system. while its liquidity mismatch performance is an sources of funding are in the form of deposits advance and management is alerted to large for understanding the future cash flows
Group must, at all times, comply with the more aggregation of the net liquidity position in each across a spectrum of retail and wholesale outflows. The report, which is made available of derivative liabilities that are designated
stringent of Standard Bank imposed tolerance The group ensures that the banking entity successive time band expressed as a percentage clients. As mitigants, the group maintains to the funding team, ALM and market risk also as hedging instruments in effective hedge
limits or regulatory limits. (Stanbic IBTC Bank PLC) is within the regulatory of total funding related liabilities to the public. marketable securities in excess of regulatory summarises material daily new deposit as well accounting relationships. All other derivative
liquidity ratio of 30% at all times. requirements in order to condone occasional as the interbank and top depositor reliance (by liabilities are treated as trading and are included
Liquidity and funding management breaches of concentration limits. value and product). at fair value in the redeemable on demand
A sound and robust liquidity process is required bucket since these positions are typically held
to measure, monitor and manage liquidity Loan to deposit limit The daily cash flow management report for short periods of time.
forms an integral part of the ongoing liquidity
A limit is put in place, restricting the local management process and is a crucial tool to
currency loan to deposit ratio to a maximum
76 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 77
financial statements information
Enterprise risk review (continued)
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The following tables also include contractual cash flows with respect to off-balance sheet items which have not yet been recorded on-balance sheet. Liquidity contingency plans wholesale clients, as well as long-term capital The in-country risk management is subject
Where cash flows are exchanged simultaneously, the net amounts have been reflected. and loan markets. The group remains committed to SBG oversight for compliance with group
The group recognises that it is not possible to increasing its core deposits and accessing standards and minimum requirements.
Maturity analysis of financial liabilities by contractual maturity to hold sufficiently large enough quantity of domestic and foreign capital markets when
readily available liquidity to cover the least likely appropriate to meet its anticipated funding The market risk management unit which
liquidity events. However, as such events can requirements. is independent of trading operations and
have devastating consequences, it is imperative accountable to ALCO, monitors market risk
Redeemable Maturing Maturing Maturing Maturing to bridge the gap between the liquidity the Depositor concentrations exposures due to trading and banking activities.
on demand within between between after group chooses to hold and the maximum This unit monitors exposures and respective
1-6 months 6-12 months Total liquidity the group might need. 2016 2015 excesses daily, report monthly to ALCO and
Nmillion 1 month Nmillion Nmillion 12 months Nmillion % % quarterly to the board risk management
Nmillion Nmillion The group’s liquidity contingency plan committee.
11,788 is designed to, as far as possible, protect 4 3
December 2016 - 1,177 8,466 2,110 35 5,325 stakeholder interests and maintain market Single depositor Market risk measurement
Financial liabilities - 99 4,489 82 655 637,892 confidence in order to ensure a positive Top 10 depositors 16 20
Derivative financial instruments 455,715 72,885 49,442 outcome in the event of a liquidity crisis. The The techniques used to measure and control
Trading liabilities - 97,185 1,337 12,102 5 114,555 plan incorporates an extensive early warning Market risk market risk include:
Deposits and current accounts 214 - 4,858 1,338 46,767 819,002 indicator methodology supported by a clear • daily net open position
Subordinated debt 455,929 92,035 30,870 76,034 and decisive crisis response strategy. Early The identification, management, control, • daily VaR;
Other borrowings 2,579 46,502 123,496 16,640 warning indicators span group specific crises, measurement and reporting of market risk is • back-testing;
Total 1,020 101,040 12,449 38,523 systemic crises, contingency planning, and categorised as follows: • PV01; and
Unrecognised financial instruments 1,178 11,107 546 - 30,193 liquidity risk management governance and • annual net interest income at risk.
Letters of credit 2,625 7,775 20,818 5,053 85,356 are monitored based on assigned frequencies Trading market risk
Guarantees - 367 31,331 2,856 and tolerance levels. The crisis response These risks arise in trading activities where Daily net open position
Loan commitments 2,198 1,099 7,909 383 strategy is formulated around the relevant the bank acts as a principal with clients in the
Total 18,463 22,463 24,203 crisis management structures and addresses market. The group policy is that all trading The board on the input of ALCO sets limits
21,455 602,505 internal and external communications, liquidity activities are contained within the bank’s on the level of exposure by currency and in
45,440 generation, operations, as well as heightened Corporate and Investment Banking (CIB) trading aggregate for overnight positions. The latter
December 2015 - 225 75 21 62 82,829 and supplementary information requirements. operations. is also aligned to the net open position limit as
Financial liabilities - 6,616 7,066 10,515 6 755,360 Banking book interest rate risk specified by the regulators, which is usually a
Derivative financial instruments 279,280 130,439 128,462 64,287 Foreign currency liquidity These risks arise from the structural interest proportion of the groups’ capital.
Trading liabilities - 1,208 1,209 37 19,638 management rate risk caused by the differing re-pricing
Deposits and current accounts 134 - 10,030 25,323 43,023 30,335 characteristics of banking assets and liabilities. Daily value-at-risk (VaR)
Subordinated debt 279,414 750 146,841 101,355 46,592 29,902 A number of indicators are observed to monitor Foreign currency risk
Other borrowings 138,030 89,720 79,875 changes in either market liquidity or exchange These risks arise as a result of changes in the fair VaR is a technique that estimates the potential
Total 2,527 16,443 - rates. Foreign currency loans and advances are value or future cash flows of financial exposures losses that may occur as a result of market
Unrecognised financial instruments 2,705 668 8,734 13,504 - restricted to the availability of foreign currency due to changes in foreign exchange rates. movements over a specified time period at a
Letters of credit 818 11,238 4,574 deposits. Equity investment risk predetermined probability.
Guarantees - 15,693 36,415 2,968 These risks arise from equity price changes in
Loan commitments 5,232 17,179 16,472 3 Funding strategy listed and unlisted investments, and managed VaR limits and exposure measurements are
Total 4,577 through the equity investment committee, in place for all market risks the trading desk
Funding markets are evaluated on an which is a sub-committee of the executive is exposed to. The bank generally uses the
ongoing basis to ensure appropriate group committee. historical VaR approach to derive quantitative
funding strategies are executed depending measures, specifically for market risk under
on the market, competitive and regulatory Framework and governance normal market conditions. Normal VaR is based
environment. The group employs a diversified on a holding period of one day and a confidence
funding strategy, sourcing liquidity in The board approves the market risk appetite and level of 95%. Daily losses exceeding the VaR
both domestic and offshore markets, and standards for all types of market risk. The board are likely to occur, on average, 13 times in every
incorporates a coordinated approach to grants general authority to take on market risk 250 days.
accessing capital and loan markets across the exposure to the asset and liability committee
group. (ALCO). ALCO sets market risk policies to ensure The use of historic VaR has limitations as it
that the measurement, reporting, monitoring is based on historical correlations and volatilities
Concentration risk limits are used within the and management of market risk associated in market prices and assumes that future prices
group to ensure that funding diversification is with operations of the bank follow a common will follow the observed historical distribution.
maintained across products, sectors, geographic governance framework. The bank’s ALCO Hence, there is a need to back-test the VaR
regions and counterparties. reports to EXCO and also to the board risk model regularly.
management committee.
Primary funding sources are in the form
of deposits across a spectrum of retail and
78 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 79
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
VaR back-testing Other market risk measures Interest rate risk in the banking book Approach to managing interest rate risk on positions in the
banking book
The group and the banking business back-test its foreign currency, interest Other market risk measures specific to individual business units include Interest rate risk in the banking book (IRRBB) can be defined as the
rate and credit trading exposure VaR model to verify the predictive ability permissible instruments, concentration of exposures, gap limits, maximum reduction in banking book net interest income due to changes in interest Banking-related market risk exposure principally involves the management
of the VaR calculations thereby ensuring the appropriateness of the model. tenor and stop loss triggers. In addition, only approved products that rates arising from the different re-pricing characteristics of banking book of the potential adverse effect of interest movements on banking book
Back-testing exercise is an ex-post comparison of the daily hypothetical can be independently priced and properly processed are permitted to be assets and liabilities. IRRBB is further divided into the following sub-risk earnings (net interest income and banking book mark-to-market profit or
profit and loss under the one-day buy and hold assumption to the prior traded. types: loss).
day VaR. Profit or loss for back-testing is based on the theoretical profits
or losses derived purely from market moves both interest rate and foreign Pricing models and risk metrics used in production systems, whether • Repricing risk referring to the timing differences in the maturity (fixed The group’s approach to managing IRRBB is governed by prudence
currency spot moves and it is calculated over 250 cumulative trading-days these systems are off-the-shelf or in-house developed, are independently rate) and repricing (floating rate) of assets and liabilities. and is in accordance with the applicable laws and regulations, best
at 95% confidence level. validated by the market risk unit before their use and periodically international practice and the competitive situation within which it
thereafter to confirm the continued applicability of the models. In • Yield curve risk arising when unanticipated shifts in the yield curve operates in financial markets. Interest rate risk is transferred to and
Stress tests addition, the market risk unit assesses the daily liquid closing price inputs have adverse effects on the group’s income. managed within the bank’s treasury operations under supervision of ALCO.
used to value instruments and performs a review of less liquid prices from
Stress testing provides an indication of the potential losses that could occur a reasonableness perspective at least fortnightly. Where differences are • Basis risk arising from the imperfect correlation in the adjustment of Measurement of IRRBB
in extreme market conditions. significant, mark-to-market adjustments are made. the rates earned and paid on different instruments with otherwise
similar repricing characteristics. The analytical technique used to quantify IRRBB is an earnings based
The stress tests carried out include individual market risk factor testing Annual net interest income at risk approach. A dynamic, forward-looking net interest income forecast is
and combinations of market factors on individual asset classes and across • Optionality risk arising from the options embedded in bank asset and used to quantify the bank’s anticipated interest rate exposure. Desired
different asset classes. Stress tests include a combination of historical and A dynamic forward-looking annual net interest income forecast is used liability portfolios, providing the holder with the right, but not the changes to a particular interest rate risk profile are achieved through the
hypothetical simulations. to quantify the banks’ anticipated interest rate exposure. This approach obligation, to buy, sell, or in some manner alter the cash flow of an restructuring of on-balance sheet repricing or maturity profiles. All assets
involves the forecasting of both changing balance sheet structures and instrument or financial contract. and liabilities are allocated to gap intervals based on either their repricing
PV01 interest rate scenarios, to determine the effect these changes may have or maturity characteristics. However, assets and liabilities for which no
on future earnings. The analysis is completed under both normal market • Endowment risk referring to the interest rate risk exposure arising identifiable contractual repricing or maturity dates exist are allocated to
PV01 is a risk measure used to assess the effect of a change of rate of one conditions as well as stressed market conditions. from the net differential between interest rate insensitive assets such gap intervals based on behavioural profiling.
basis point on the price of an asset. This limit is set for the fixed income, as non-earning assets and interest rate insensitive liabilities such as
money market trading, credit trading, derivatives and foreign exchange non-paying liabilities and equity. The impact on net interest income due to interest rate changes cover 12
trading portfolios. months of forecasting and allows for the dynamic interaction of payments,
new business and interest rates. The analyses are done under stressed
Analysis of Value-at-Risk (VaR) and actual income market conditions in which the banking book is subjected to an upward 400
basis points (2015: 350 basis points) and downward 200 basis points (2015:
The table below highlights the historical diversified normal VaR across the various trading desks. The minimum and maximum trading diversified normal VaR 400 basis points) parallel rate shocks for local currency and 100 basis
stood at USD115k and USD1.9m respectively with an annual average of USD0.6m which translates to a conservative VaR base limit utilisation of 20% on points (2015: 100 basis points) upward and downward parallel rate shocks
average. for foreign currency positions. The table below shows the sensitivity of the
bank’s net interest income in response to standardised parallel rate shocks.
Diversified Normal Var Exposures (USD’000)
Desk Maximum Minimum Average 30-Dec-16 31-Dec-15 Limit 31 December 2016 NGN USD Other Total
Bankwide 1,875 3,052 Increase in basis points 400 100 100 4,363
FX Trading 396 115 598 135 1,007 Sensitivity of annual net interest income 3827 601 (65) (3,037)
Money Markets Trading 1,853 808 Decrease in basis points 200 100 100
Fixed Income Trading 382 7 83 114 20 1,228 Sensitivity of annual net interest income NGNm (2556) (546) 65
Credit Trading 0 NGNm
Derivatives 0 28 521 28 980 931 31 December 2015 350 100
754 Increase in basis points NGNm 3119 460
7 95 14 45 121 Sensitivity of annual net interest income NGNm 400 100
Decrease in basis points (4392) (242)
0000 Sensitivity of annual net interest income
0000
Analysis of PV01 PVO1 (NGN’000) 31-Dec-16 31-Dec-15 Limit 100
(4) 3,575
The table below shows the PV01 of the money markets banking and the Money market trading book 218 911 2,998
individual trading books. The money markets trading book PV01 exposure Fixed income trading book 104 316 2,755 100
decreased to N218k from that of the previous year as a result of T-bills Credit trading book 4 (4,630)
sale of N71bn, the money markets banking book PV01 exposure stood at Derivatives trading book - - 10
N8.4m higher than that of the previous year as a result of T-bills purchase Total trading book - - 205
of N65bn, coupled with FGN and Corporate bonds while the fixed income Money market banking book 322 1,227 5,968
trading book PV01 exposure was N104k. Overall trading PV01 exposure 8,430 3,969 9,700
was N322k against a limit of N6m thus reflecting a very conservative
exposure utilisation.
80 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 81
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
Hedging of endowment risk Market risk on equity investment Concentrations of currency risk – on- and off-balance sheet financial instruments
IRRBB is predominantly the consequence of endowment exposures, being The equity committee (EC) has governance and oversight of all At 31 December 2015 Naira USD GBP Euro Others Total
the net exposure of non-rate sensitive liabilities and equity less non- investment decisions. The committee is tasked with the formulation Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
rate sensitive assets. The endowment risk is hedged using marketable of risk appetite and oversight of investment performance. In this Financial assets
liquid instruments in the same currency as the exposure as and when it regard, a loss trigger is in place for the non-strategic portion. Cash and cash equivalents 141,652 63,460 859 5,175 335 211,481
is considered opportune. Hedge decisions are made by ALCO following Trading assets 37,145 - 811 - - 37,956
careful consideration of the interest rate views to be hedged against, Exposure to currency risks Pledged assets 86,570 - - - 86,570
including magnitude, direction, timing and probability, and the exposure to Derivative assets 911 - - - - 911
be hedged. The group takes on exposure to the effects of fluctuations in the Financial investments - - - -
prevailing foreign currency exchange rates on its financial position and Asset held for sale 162,957 - - - - 162,957
cash flows. The board sets limits on the level of exposure by currency Loans and advances to banks - - - -
and in aggregate for both overnight and intra day positions, which are Loans and advances to customers 20,868 - 4 2,914
monitored daily. The table below summarises the group’s exposure to Other financial assets 3,000 134,811 62 - 26,782
foreign currency exchange risk as at 31 December 2016. 218,636 (47) (1,295) 353,513
(38,090) 57,193 1,685 3,884 (1,930)
Concentrations of currency risk – on- and off-balance sheet financial instruments 612,781 276,332 1,319 15,831
- 896,001
-
At 31 December 2016 Naira USD GBP Euro Others Total Financial liabilities -
Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Trading liabilities 834
Financial assets Derivative liabilities -
Cash and cash equivalents 140,417 149,899 3,172 7,144 719 301,351 Deposits and current accounts from banks 13,911 10,190 - - - 24,101
Trading assets 16,855 - - - - 16,855 Deposits and current accounts from customers 383 - - 3,052 - 383
Pledged assets 28,303 - - - - 28,303 Other borrowings - 3,886 -
Derivative assets 14,282 - - - 14,317 Subordinated debt 23,000 72,446 1,327 63 95,446
Financial investments 35 - - - 252,823 Other financial liabilitiies (restated) 381,542 109,747 - (2) - 493,513
Asset held for sale 252,822 1 - - - 112 66,435 - -
Loans and advances to banks 112 - - - - 15,264 14,672 348 1,826 229 81,107
Loans and advances to customers 1 352,965 15,698 8,001 1,675 292 23,699
Other financial assets 12,917 2,347 72 631 36,189 27,418 67,236
195,786 156,475 58 2 (1) 31,897 485,395 294,237 1,027 785,485
3,302 719 1,013,887
31,155 683 7,777 Net on-balance sheet financial position 127,386 (17,905) 10 1,024 110,516
692,649 309,440
- 49,973
- Off balance sheet 2,074 44,993 56
74
Financial liabilities 5,325 - - 1,363 - 5,325 Exchange rates applied 2016 2015
Trading liabilities 11,754 34 - - - 11,788 305 199.3
Derivative liabilities 53,692 - - - 53,766 Year-end spot rate* 377.33 294.93
Deposits and current accounts from banks 399,968 - 2,308 3,251 349 560,969 US Dollar 321.62 216.86
Deposits and current accounts from customers 37,253 156,981 - 4,688 - 96,037 GBP
Other borrowings 15,713 58,784 - - 27,964 Euro
Subordinated debt 56,745 881 3,089 172 136,409
Other financial liabilitiies 580,450 12,251 3,189 521 892,258
75,360 2,220
303,410 198 121,629
742 55,143 * Some foreign currency borrowings were valued at a rate different from interbank rate due to strict foreign exchange regime. See note 22 (viii).
Net on-balance sheet financial position 112,199 6,030 113
Off balance sheet 25,009 26,944 228
82 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 83
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
Sensitivity analysis Capital management Capital adequacy
Regulatory capital adequacy is measured based on Pillar 1 of the Basel
A reasonably possible strengthening (weakening) of the US dollar, GBP or Euro against Naira at 31 December would have affected the measurement of Capital adequacy II capital framework. Capital adequacy ratio is calculated by dividing
financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that The group manages its capital base to achieve a prudent balance the capital held by total risk-weighted assets. Risk weighted assets
all other variables, in particular interest rates, remain constant. between maintaining capital ratios to support business growth and comprise computed risk weights from credit, operational and market risks
depositor confidence, and providing competitive returns to shareholders. associated with the business of the bank. Notional risk weighted asset for
Profit or loss Equity, net of tax The capital management process ensures that each group entity market risk is calculated using the standardised approach while operational
maintains sufficient capital levels for legal and regulatory compliance risk is determined using the basic indicator approach. Management
Effect in N million Strengthening Weakening Strengthening Weakening purposes. The group ensures that its actions do not compromise sound monitors the capital adequacy ratio on a proactive basis.
At 31 December 2016 governance and appropriate business practices and it eliminates any
USD (20% movement) 1,206 (1,206) 844 (844) negative effect on payment capacity, liquidity and profitability. Throughout the year under review, Stanbic IBTC Bank operated above
GBP (10% movement) 11 (11) 8 (8) its targeted capitalization range and well over the minimum regulatory
EUR (5% movement) The Central Bank of Nigeria (CBN) adopted the Basel II capital capital adequacy ratio of 10% as mandated by CBN.
154 (154) 108 (108) framework with effect from 1 October 2014 and revised the framework in
At 31 December 2015 June 2015. Stanbic IBTC Bank has been compliant with the requirements
USD (5% movement) of Basel II capital framework since it was adopted.
GBP (2% movement)
EUR (1% movement) (3,581) 3,581 (2,507) 2,507 Regulatory capital
1 (1) 1 (1) The group’s regulatory capital is divided into two tiers:
- - - -
Basel II framework • Pillar II - Supervisory Review. This is structured along two separate • Tier 1 capital which comprises share capital, share premium, retained
but complementary stages; the Internal Capital Adequacy Assessment earnings and reserves created by appropriations of retained earnings.
The Basel II framework stipulates a minimum level of capital that banks Process (ICAAP) and the Supervisory Review and Evaluation process The closing balance on deferred tax asset and intangible asset is
must maintain to ensure that they can meet their obligations, cover (SREP). The bank conducts a self-assessment of its internal capital deducted in arriving at Tier 1 capital;
unexpected losses; and can, very importantly, promote public confidence. requirements via the ICAAP whilst the Central Bank of Nigeria (CBN)
It also specifies comprehensive disclosure requirements for banks operating conducts its assessment of the bank via the SREP. • Tier 2 capital which includes subordinated debts and other
under the framework. comprehensive income. Subordinated debt at the end of the year
• Pillar III – Market Discipline allows market participants access totalled N28bn and is broken down as follows:
The Basel II framework is based on three pillars: information on risk exposure and risk management policies and
procedures through disclosures. The bank through this Pillar III • Naira denominated subordinated debt totalling N15.6bn issued on
• Pillar I - Minimum Capital Requirements. This details various Disclosures report provides an overview of its risk management 30 September 2014 at an interest rate of 13.25% per annum;
approaches to measure and quantify capital required for the three practices in line with the CBN Guidance Notes on Pillar III Disclosures.
major risk components that a bank faces: credit risk, market risk • N 100 million Naira denominated subordinated debt issued on 30
and operational risk. SIBTC has adopted the Standardized Approach The Pillar III Disclosures Report will be published on bi-annual September 2014. Interest is payable semi-annually at 6-month
for Credit and Market Risk and the Basic Indicator Approach for basis and will be made available through the bank’s website at Nigerian Treasury Bills yield plus 1.20%. It has a tenor of 10
Operational Risk. www.stanbicibtcbank.com. years and is callable after 5 years from the issue date. The debt is
unsecured;
• USD denominated term subordinated non-collaterised facility
of USD40 million obtained from Standard Bank of South Africa
effective 31 May 2013. The facility expires on 31 May 2025 and
is repayable at maturity. Interest on the facility is payable semi-
annually at LIBOR (London Interbank Offered Rate) plus 3.60%.
Total eligible Tier 2 Capital as at 31 December 2016 was N29bn (2015:
N24bn).
Investment in unconsolidated subsidiaries and associations are
deducted from Tier 1 and 2 capital to arrive at total regulatory capital.
84 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 85
financial statements information
Enterprise risk review (continued)
Business
rReevviieeww
Capital management – BASEL II regulatory capital B II B II Capital management – BASEL II regulatory capital B II B II
Stanbic IBTC Group 31 Dec 2016 31 Dec 2015 Stanbic IBTC Bank PLC 31 Dec 2016 31 Dec 2015
Tier 1 Nmillion Nmillion Tier 1 Nmillion Nmillion
Paid-up Share capital 138,831 121,057 Paid-up share capital 108,228 87,355
Share premium Share premium 1,875
General reserve (Retained Profit) 5,000 5,000 General reserve (Retained profit) 1,875 42,469
SMEEIS reserve 65,450 65,450 SMEEIS reserve 42,469 22,033
Statutory reserve 50,157 38,215 Statutory reserve 40,664 1,039
Other reserves Other reserves 19,907
Non controlling interests 1,039 1,039 Non controlling interests 1,039
Less: regulatory deduction 32,576 25,179 Less: regulatory deduction 22,153 32
Goodwill (19,087) (19,067) Deferred Tax Assets -
Deferred tax assets 5,241 Other intangible assets 28
Other intangible assets 3,696 8,342 Investment in the capital of financial subsidiaries - 7,371
Current year losses 9,351 Excess exposure(s) over single obligor without CBN approval 7,321
Under impairment - Exposures to own financial holding company 9,084
Reciprocal cross-holdings in ordinary shares of financial institutions - 8,342 Unsecured lending to subsidiaries within the same group 8,321 -
Investment in the capital of banking and financial institutions 8,638 Eligible Tier I capital 50
Excess exposure(s) over single obligor without CBN approval - 713
Exposures to own financial holding company 713 - Tier II 50 -
Unsecured lending to subsidiaries within the same group - - Hybrid (debt/equity) capital instruments -
Eligible Tier I capital - - Subordinated term debt - -
- - Other comprehensive income (OCI) - 79,984
Tier II - - Less: regulatory deduction -
Hybrid (debt/equity) capital instruments - - Reciprocal cross-holdings in ordinary shares of financial institutions 99,144 24,282
Subordinated term debt - - Investment in the capital of banking and financial institutions -
Other comprehensive income (OCI) - 112,715 Investment in the capital of financial subsidiaries 28,149
Less: regulatory deduction Exposures to own financial holding company - 23,699
Reciprocal cross-holdings in ordinary shares of financial institutions 129,480 24,925 Unsecured lending to subsidiaries within the same group 583
Investment in the capital of banking and financial institutions - 27,964 50
Investment in the capital of financial subsidiaries 28,906 Eligible Tier II capital 185 -
Exposures to own financial holding company - 23,699 50 -
Unsecured lending to subsidiaries within the same group 1,226 Risk weighted assets: - 50
Eligible Tier II capital 27,964 - Credit risk - -
Total regulatory capital 942 - Operational risk 50 -
- - Market risk -
Risk weighted assets: - - Total risk weight - 24,232
Credit risk - - 104,216
Operational risk - - Total capital adequacy ratio 28,099
Market risk - Tier I capital adequacy ratio 127,243 438,694
Total risk weight - 24,925 128,524
137,640 458,266
Total capital adequacy ratio 28,906 146,986 2,004
Tier I capital adequacy ratio 158,386 483,455 569,223
160,884 1,917
486,430 607,169 18.3%
207,092 2,004 14.1%
646,343 21.0%
1,917 16.3%
695,439 21.3%
17.4%
22.8%
18.6%
ARnFenSipuntoaaarlnttecamianlednts In this section
88 Board of directors
90 Directors’ report
96 Statement of directors’ responsibility
97 Corporate governance report
112 Report of the audit committee
116 Statement of financial position
118 Statement of profit or loss
124 Statement of cash flows
125 Notes to the annual financial statements
216 Annexure A
218 Annexure B
88 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 89
financial statements information
Annual report Board of directors
& financial
statements
Atedo N.A. Peterside con Yinka Sanni Dominic Bruynseels Ratan Mahtani Ngozi Edozien
Chairman Chief Executive Non-executive Non-executive Non-executive
B.Sc, Msc Bsc, MBA, AMP (Harvard Business School) BA Hons, MBA, Associate of Institute of Bankers, Appointed: 2012 BA, MBA
Appointed: 2012 Appointed: 2017 UK, Diploma in Financial Studies Appointed: 2015
Appointed: 2012 Directorships: Aegean Investments Limited, Churchgate Nigeria
Directorships: Standard Bank Group, Standard Bank of South Directorships: The Nigeria Economic Summit Group; Stanbic Limited, First Century International Limited, First Continental Directorships: Barloworld, Vlisco Group, PZ Cussons PLC,
Africa, Cadbury Nigeria PLC, Nigerian Breweries PLC, Presco IBTC Bank PLC; Stanbic IBTC Pension Managers Limited; Stanbic Directorships: Standard Bank de Angola, S.A, Stanbic Bank Properties Ltd, T F Kuboye and Co, International Seafoods African Leadership Network Advisory Board, Guinness Nigeria Plc
PLC, Unilever Nigeria PLC, Flour Mills of Nigeria PLC IBTC Asset Management Limited; Stanbic IBTC Insurance Brokers Ghana Limited, Standard Bank RDC SARL, Stanbic IBTC Pension Limited Committee member: Board IT Committee, Board Risk
Limited Managers Limited Committee member: Audit Committee Management Committee, Ad-hoc Head Office Property Sub-
Committee member: Board Risk Management Committee; Committee member: Board Remunerations Committee, Board Committee.
Board Legal Committee; Board IT Committee; Board Nominations Risk Management Committee, Board Nominations Committee,
Committee; Ad Hoc Head office Property Committee Board Legal Committee, Board IT Committee
Salamatu. H. Suleiman Lilian. I. Esiri Basil Omiyi Ballama Manu Simpiwe Tshabalala
Non-executive Non-executive Non-executive Non-executive Non-executive
LLB, BL, LLM LLB, BL, LLM B.Sc, PGD B.Sc, Msc BA; LLB; LLM
Appointed: 2016 Appointed: 2012 Appointed: 2015 Appointed: 2015 Appointed: August 2013
Directorships: Forte Oil Limited; Flour Mills of Nigeria PLC; Directorships: Stanbic IBTC Asset Management Limited, Directorships: David Michaels Nigeria Limited, SEPLAT Directorships: Sicom Capital Services Limited, Alpine Directorships: Stanbic IBTC Bank PLC; Standard Bank of South
Primechoice Investments Limited; S & M Investments Limited Podini International Limited, Veritas Geophysical Nigeria Limited, Petroleum Development Company, Taf Nigerian Homes Limited, Investments Limited, Modibo Adamu University of Technology, Africa; Standard Bank Group; Banking Association of South
Committee member: Board Remunerations Committee; Ashbert Leisures Limited, Ashbert Beverages Limited, Ashbert RivTaf Nigeria Limited Shell Nigeria Closed Pension Fund Administrator Limited Africa.
Board Legal Committee Oil and Gas Limited Committee member: Board Remunerations Committee, Board Committee member: Board Risk Management Committee, Committee: Board Remunerations Committee; Board
Committee member: Board Risk Management Committee, Nominations Committee, Ad-hoc Head Office Property, Sub- Board IT Committee Nominations Committee
Audit Committee, Board Legal Committee Committee.
90 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 91
financial statements information
Annual report Directors’ report
& financial
statements For the year ended 31 December 2016
The directors present their annual report on the affairs of Stanbic IBTC Management Limited, Stanbic IBTC Capital Limited, Stanbic IBTC d. Directors shareholding
Holdings PLC (“the company”) and its subsidiaries (“the group”), together Investments Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC
with the consolidated financial statements and auditor’s report for the Ventures Limited, Stanbic IBTC Insurance Brokers Limited and Stanbic The direct interest of directors in the issued share capital of the company as recorded in the register of directors shareholding and/or as notified by the
year ended 31 December 2016. IBTC Trustees Limited. directors for the purposes of section 275 and 276 of CAMA and the listing requirements of The Nigerian Stock Exchange are as follows:
a. Legal form The company prepares consolidated financial statements, which Direct shareholding
includes separate financial statements of the company. Stanbic IBTC
The company was incorporated in Nigeria under the Companies & Allied Investments Limited had not yet commenced operations as at 31 Number of Ordinary Shares Number of Ordinary Shares
Matters Act (CAMA) as a public limited liability company on 14 March December 2016. of Stanbic IBTC Holdings PLC of Stanbic IBTC Holdings PLC
2012. The company’s shares were listed on 23 November 2012 on the
floor of The Nigerian Stock Exchange. c. Operating results and dividends held as at December 2016 held as at Dec 2015
b. Principal activity and business review The group’s gross earnings increased by 11.7%, while profit before tax Atedo N. A. Peterside CON * --
increased by 57.3% for the year ended 31 December 2016. The board Sola David-Borha
The principal activity of the company is to carry on business as a financial recommended the approval of a final dividend of 5 kobo per share (31 Dominic Bruynseels 527,839 527,839
holding company, to invest and hold controlling shares, in as well as Dec 2015: 5 kobo per share) for the year ended 31 December 2016. Salamatu Suleiman
manage equity in its subsidiary companies. Ifeoma Esiri** --
Highlights of the group’s operating results for the year under review Ratan Mahtani ***
The company has nine direct subsidiaries, namely: Stanbic IBTC are as follows: Ngozi Edozien --
Bank PLC, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Asset Basil Omiyi
Ballama Manu 42,776,676 42,776,676
Simpiwe Tshabalala
28,465,803 28,465,803
18,563 18,563
--
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015 151,667 151,667
Group Group Company Company
Nmillion Nmillion --
Nmillion Nmillion 2,528 10,987
Gross earnings 156,425 140,027 1,501 9,899 * Mr Atedo Peterside has indirect shareholding amounting to 120,000,000 ordinary shares (Dec 2015: 120,000,000) respectively through Stanbic IBTC Trustees
Profit before tax (892) (28) Limited/ The First ANAP Domestic Trust.
Income tax 37,209 23,651 609 9,871
Profit after tax (8,689) (4,760) - - ** Mrs Ifeoma Esiri has indirect shareholding amounting to 2,666,670 ordinary shares through Ashbert Limited.
Non controlling interest 28,520 18,891
Profit attributable to equity holders of the parent (3,878) (3,393) 609 9,871 *** M r Ratan Mahtani has indirect shareholdings amounting to 1,064,555,439 ordinary shares (Dec 2015: 1,061,732,972) respectively through First Century International
Limited, Churchgate Nigeria Limited, International Seafoods Limited, Foco International Limited and RB Properties Limited.
24,642 15,498
Appropriations: 7,397 2,368 -- In terms of Section 259 (1) of the Company and Allied Matters Act 2004, the company shall hold its fifth Annual General Meeting in 2017, and Mrs. Sola David-Borha;
Transfer to statutory reserve* 17,245 13,130 609 9,871 Mr. Ballama Manu and Mr. Basil Omiyi will be retiring as directors and except for Mrs. Sola David-Borha who will not be seeking re-election, the other two Directors being
Transfer to retained earnings reserve 24,642 15,498 609 9,871 eligible, shall offer themselves for re-election. In compliance with Section 252 and 256 of the Companies and Allied Matters Act 2004, NOTICE will be given at the Annual
500 500 General Meeting to be held in 2017, of the fact that Mr. Basil Omiyi has attained the age of 70.
Dividend proposed/paid (final) 500 500
Dividend paid (interim) - 9,000 - 9,000 e. Directors interest in contracts of three years at a cost of N146 million. This property is owned by First
Continental Properties Limited, and Mr. Ratan Mahtani is a Director on the
* This represents appropriation from profit to other statutory reserves (see 19.3 (b)(i)) Stanbic IBTC Bank PLC one of the Company’s subsidiaries, rented an Board of this company.
apartment for one of its employees in Victoria Island from ANAP Holdings
Limited at a gross rent of N15m per annum during the course of this f. Property and equipment
financial year. Mr. Atedo Peterside is the majority shareholder of ANAP
Holdings Limited as disclosed previously to the board of the Company. Information relating to changes in property and equipment is given in note
17 to the financial statements. In the directors’ opinion the disclosures
In addition to the above, the Bank also renewed the lease for one of regarding the group’s properties are in line with the related statement of
its branches located on the Ground Floor at Churchgate Towers, PC 30, accounting policy of the group.
Churchgate Street, Victoria Island, Lagos. The lease renewal is for a period
92 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 93
financial statements information
Annual report Directors’ report (continued)
& financial
statements
g. Shareholding analysis j. Dividend history and unclaimed dividend as at 31 December 2016
The shareholding pattern of the company as at 31 December 2016 is as stated below:
Share range No. of shareholders Percentage of No. of holding Percentage holdings Year end Dividend type Total dividend amount Dividend per share Net dividend amount Percentage
1-1,000 38,924 shareholders 21,001,987 0.21 2005 declared* unclaimed as at 31 Dec. 2016 unclaimed
1,001-5,000 36,878 40.59 76,437,831 0.76 2006 Final N 20 kobo %
5,001-10,000 9,664 38.46 60,205,991 0.60 2007 Final 20 kobo N 0.18
10,001-50,000 8,059 10.08 1.52 2007 Interim 2,170,298,271 30 kobo 3,813,332 2.26
50,001-100,000 1,212 8.40 152,421,528 0.77 2008 Final 2,170,297,800 25 kobo 49,113,763 0.10
100,001-500,000 867 1.26 77,116,682 1.61 2009 Final 3,375,000,000 40 kobo 3,385,581 0.12
500,001-1,000,000 119 0.90 0.75 2010 Final 4,218,750,000 30 kobo 5,022,292 3.55
1,000,001-5,000,000 87 0.12 161,026,442 1.85 2011 Final 6,750,000,000 39 kobo 239,894,898 4.94
5,000,001-10,000,000 13 0.09 75,255,511 0.92 2012 Interim 5,062,500,000 10 kobo 250,319,391 6.06
10,000,001-50,000,000 37 0.01 7.81 2013 Final 3,240,215,108 10 kobo 196,507,298 1.77
50,000,001-100,000,000 15 0.04 185,236,634 9.84 2013 Interim 1,687,500,000 70 kobo 29,880,948 2.53
100,000,001-10,000,000,000 10 0.02 92,316,127 2014 Final 10 kobo 22,793,715 2.80
Grand Total 95,885 0.01 73.33 2014 Interim 900,570,889 110 kobo 176,814,043 3.11
100 781,479,396 100 2015 Final 6,304,041,033 15 kobo 28,014,571 2.68
Foreign shareholders 157 984,009,727 Total Interim 90 kobo 265,454,901 2.82
- 7,333,492,144 901,992,337 38,153,871 2.80
10,000,000,000 *Amount is less of withholding tax. 9,920,077,516 230,808,346
1,352,701,559 1,539,976,951
8,235,882,607
5,447,043,112 54.47%
h. Substantial interest in shares k. Dividend history and unclaimed dividend as at 31 December 2016 (continued)
According to the register of members as at 31 December 2016, no shareholder held more than 5% of the issued share capital of the company except The total unclaimed dividend fund as at 31 December 2016 amounted to N1,540 million (2015: N1,574 million). A sum of N723 million of the fund
the following: balance is held in an investment account (money market mutual fund) managed by Stanbic IBTC Asset Management Limited (2015: N523 million), while
the balance is held in demand deposits maintained with Stanbic IBTC Bank PLC. Total income earned on the investment account and recognised by the
2016 2015 company for the year ended 31 December 2016 was N61 million (2015: N77 million).
Shareholder No of shares held Percentage shareholding No of shares held Percentage shareholding
Stanbic Africa Holdings Limited (SAHL)
First Century International Limited 5,318,957,354 53.2% 5,318,957,354 53.2%
747,089,076 7.47% 747,089,076 7.47%
i. Share capital history Authorised (No of shares) Issued and fully paid up
‘000 N’000
Year
2012 Increase Cumulative Increase Cumulative
2015
5,000,000 5,000,000 5,000,000 5,000,000
1,500,000 6,500,000 - 5,000,000
94 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 95
financial statements information
Annual report Directors’ report (continued)
& financial
statements
l. Donations and Charitable Gifts m. Events after the reporting date Fire prevention and firefighting equipment are installed in strategic
locations within the company’s premises.
The group and company made contributions to charitable and non-political organisations amounting to N121.75 million and N83.97 million respectively Subsequent to 31 December 2016, the National Pension Commission
(Dec 2015: Group – N232.5 million; Company – N169.5 million) during the year. approved the transfer of 176,470,588 ordinary shares held by Access Bank The company has both Group Personal Accident and Workmen’s
PLC in SIPML to Stanbic IBTC Holdings PLC subject to filing of necessary Compensation Insurance cover for the benefit of its employees. It also
Together4alimb Project Group N‘000 Company N‘000 returns with Corporate Affairs Commission. This transfer therefore operates a contributory pension plan in line with the Pension Reform
Refurbishment of Accountant General of Federation's office 55,668 55,668 increased the shareholding of Stanbic IBTC Holdings in SIPML to 88.24%. Act 2014.
Education trust payments 20,000 -
Renovation of Female and Pediatric wards of Lagos State Healthcare Centre 12,500 12,500 Mrs. Sola David-Borha tendered her resignation as the Chief Executive o. Employee involvement and training
Hospital Equipment for Lagos State Healthcare Centre 5,550 - of the company to take up a new appointment as the Chief Executive
Fittings and purchase of Prothesis-Irede Foundation 5,496 - Africa Regions for Standard Bank Group. Her resignation became The company ensures, through various fora, that employees are kept
Renovation of toilet at Nigeria Prison Training School Kaduna 3,833 3,833 effective on 19 January 2017. In view of this development, the Board has informed on matters concerning them. Formal and informal channels
CSI donation to Modupe Cole Memorial Children Care center 3,239 - appointed Mr. Yinka Sanni as the new Chief Executive of the company. are employed for communication with employees with an appropriate
CSI payment for the donation of 15KVA Generator to Wesley Schools 2,074 2,074 two-way feedback mechanism. In accordance with the company’s policy
CSI donation to University French Teachers Association of Nigeria 1,710 2,927 n. Human resources of continuous staff development, training facilities are provided in the
CSI press campaign in the newspaper 1,700 1,700 group’s well equipped Training School (the Blue Academy). Employees of
CSI donation of Laptops to Abdulraheem college of Advanced studies 1,217 - Employment of disabled persons the Company attend training programmes organized by the Standard Bank
CSI project at Ilasan Primary school 1,140 - The company continues to maintain a policy of giving fair consideration to Group (SBG) in South Africa and elsewhere and participate in programmes
Table reservation for the Social Enterprise Report Nigeria-CSR Awards 2016 1,062 1,062 applications for employment made by disabled persons with due regard to at the Standard Bank Global Leadership centre in South Africa. The
Donation for the purchase of safety & health book for ''Adopt-A-School initiative 1,000 1,000 their abilities and aptitude. The company’s policy prohibits discrimination company also provides its employees with on the job training in the
CSI donation towards Save the Children Project 965 965 of disabled persons or persons with HIV in the recruitment, training and company and at various Standard Bank locations.
SISL co-sponsorship for Charterred Institute of Stockrockers conference 500 - career development of its employees. In the event of members of staff
Sponsorship of NSE Building African Financial Market Conference 500 - becoming disabled, efforts will be made to ensure that, as far as possible, p. Auditors
CSI project - visits to old people's home at Yaba 500 - their employment with company continues and appropriate training is
CSI project at Inner City Mission for Children 400 400 arranged to ensure that they fit into the company’s working environment. Messrs. KPMG Professional Services, having satisfied the relevant
Purchase of nursery and junior school room furniture 300 300 corporate governance rules on their tenure in office have indicated their
CSI project at the Center for Destitute Empowerment International 295 295 Health safety and welfare at work willingness to continue in office as auditors to the Company. In accordance
Donation towards Loyola Jesuit College fun day 253 253 The company enforces strict health and safety rules and practices at the with Section 357 (2) of the Companies and Allied Matters Act of Nigeria
CSI donation towards save The Children-Stop Diarrhea 250 250 work environment which are reviewed and tested regularly. The company’s therefore, the auditors will be re-appointed at the next annual general
Branding of computer laboratory at GSS Apo Abuja 250 - staff are covered under a comprehensive health insurance scheme pursuant meeting of the Company without any resolution being passed.
CSI project at Stephen Children Home 244 244 to which the medical expenses of staff and their immediate family are
CSI project -Vigilant Heart Orphanage 200 200 covered up to a defined limit. By order of the Board
CSI contribution towards Abakaliki Bankers' committee dinner 183 183
CSI sponsorship of camp activities- Benue state 100 - Chidi Okezie
Donation towards campaign for ''War against fraud in Nigeria'' 100 - Company Secretary
CSI visit to 2 orphanages 100 - FRC/2013/NBA/00000001082
Sponsorship for Youth Summer Education Programme 100 100 01 February 2017
CSI sponsorship of social activities YOBE State Batch "A" NYSC 100 -
CSI donation - Montessori International School 95 -
Scholarship donation MISS OMAMULI SONIA 50 -
Sponsor for Igbo cultural association at MAUTECH 35 -
Creation of Table Holes & Klebs for Govt Secondary School Apo, Abuja 20 -
Total 20 20
121,749 83,974
96 Stanbic IBTC Annual group financial statements for the year ended 31 December 2016 Overview Business review Annual report & Other 97
financial statements information
Annual report Statement of directors’ responsibilities Corporate governance report
& financial in relation to the financial statements
statements For the year ended 31 December 2016
For the year ended 31 December 2016
The directors accept responsibility for the preparation of the annual Matters Act of Nigeria and for such internal control as the directors Introduction the group, the company’s board also acts as the companies that are holding companies
financial statements that give a true and fair view in accordance with determine is necessary to enable the preparation of financial statements group board, with oversight of the full activities or subsidiaries of public companies and
International Financial Reporting Standards (IFRS) and in the manner that are free from material misstatement whether due to fraud or error. The company is a member of the Standard Bank of the group. regulated private companies. All the
required by the Companies and Allied Matters Act of Nigeria and the Group, which holds a 53.2% equity holding provisions of the NCCG were also stated
Financial Reporting Council of Nigeria Act, 2011. The directors have made an assessment of the Company’s ability to (through Stanbic Africa Holdings Limited) in A number of committees have been to be compulsory and superceded all
continue as a going concern and have no reason to believe the Company the company. established by the company’s board that assists corporate governance codes in force in the
The directors further accept responsibility for maintaining will not remain a going concern in the year ahead the board in fulfilling its stated objectives. country. However on 10 January 2017, the
adequate accounting records as required by the Companies and Allied Standard Bank Group (“SBG”) is committed The committees’ roles and responsibilities are implementation of the NCCG was suspended
to implementing initiatives that improve set out in their mandates, which are reviewed by the Federal Government in order to allow
Signed on behalf of the directors by: corporate governance for the benefit of all periodically to ensure they remain relevant. The for additional stakeholder engagement.
stakeholders. SBG’s board of directors remains mandates set out their roles, responsibilities, Proactively however, we had conducted
Atedo N.A. Peterside CON Yinka Sanni steadfast in implementing governance practices scope of authority, composition and procedures a gap analysis with a view to identifying
Chairman Chief Executive that comply with international best practice, for reporting to the board. specific areas that the company and its
FRC/2013/CIBN/00000001069 FRC/2013/CISN/00000001072 where substance prevails over form. subsidiaries are required to implement in
01 February 2017 01 February 2017 Codes and regulations order to fully comply with the NCCG. This
Subsidiary entities within SBG are guided by review process is still ongoing.
these principles in establishing their respective The company operates in highly regulated
governance frameworks, which are aligned markets and compliance with applicable • T he Company settled all the issues relating
to SBG’s standards in addition to meeting the legislation, regulations, standards and codes, to the regulatory decision issued by FRC
relevant jurisdictional requirements in their including transparency and accountability, in October 2015 and parties have reached
areas of operation. remain an essential characteristic of its culture. an amicable out of court settlement in that
The board monitors compliance with these by regard.
Stanbic IBTC Holdings PLC (“the company”), means of management reports, which include
and its subsidiaries (“the group”), as a member information on the outcome of any significant • T he Board conducted an annual review of its
of SBG, operate under a governance framework interaction with key stakeholders such as Mandates and the Mandates of the Board
which enables the board to balance its role of regulators. and Executive Committees and approved
providing oversight and strategic counsel with the revised Mandates.
its responsibility to ensure conformance with The group complies with all applicable
regulatory requirements, group standards and legislation, regulations, standards and codes. • There was a continued focus on directors
acceptable risk tolerance parameters. training via attendance at various courses
Shareholders’ responsibilities such as Board Effectiveness, the role and
The direct subsidiaries of the company are: responsiblity of a holding company board
Stanbic IBTC Bank PLC, Stanbic IBTC Asset The shareholders’ role is to approve as well as IFRS 9. In addition, and as with
Management Limited, Stanbic IBTC Pension appointments to the board of directors and the prior years, the Board held its annual Board
Managers Limited, Stanbic IBTC Insurance external auditors as well as to grant approval for Strategy Session, in order to review the
Brokers Limited, Stanbic IBTC Trustees Limited, certain corporate actions that are by legislation overall Group Strategy.
Stanbic IBTC Stockbrokers Limited, Stanbic IBTC or the company’s articles of association
Ventures Limited, Stanbic IBTC Investments specifically reserved for shareholders. Their role • In March 2016, the FRC published new
Limited and Stanbic IBTC Capital Limited and is extended to holding the board accountable Rules on its website, which rules were made
these subisidiaries have their own distinct and responsible for efficient and effective pursuant to Section 8(2), 30 and 53(2) of the
boards and take account of the particular corporate governance. Financial Reporting Council Act No. 6 2011
statutory and regulatory requirements of the (FRC Act). Part of these new rules require
businesses they operate. These subsidiaries Developments during 2016 that any person attesting, as Chairman of
operate under a governance framework that Audit Committee, to annual report, financial
enables their boards to balance their roles in During 2016, the following developments in statements, accounts, financial report,
providing oversight and strategic counsel with the company’s corporate governance practices returns and other documents of a financial
their responsibility for ensuring compliance occurred: nature, shall be a professional member of
with the regulatory requirements that apply in an accounting body established by Act of
their areas of operation and the standards and • T he Financial Reporting Council (FRC) National Assembly in Nigeria.
acceptable risk tolerance parameters adopted of Nigeria released the National Code of
by the company. In this regard they have aligned Corporate Governance (NCCG) 2016 for the
their respective governance frameworks to that Private Sector with a commencement date
of the company. As Stanbic IBTC Holdings PLC of 17 October 2016. The NCCG was made
is the holding company for the subsidiaries in applicable to all public companies, private
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2016 Annual Report
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