Stanbic IBTC Holdings PLC 2017 Annual Report

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Stanbic IBTC Holdings PLC

ANNUAL REPORT 2017

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Stanbic IBTC Holdings PLC Overview

Annual Report 2017 6 Our vision and values
8 Corporate profile
10 Our network
12 Recognitions

Business review

16 Chairman’s statement
19 Chief Executive’s statement
23 Economic review
27 Financial review
38 Executive committee
41 Personal and Business Banking
42 Case study: Ulysses Nigeria Ltd.
44 Case study: Natural Prime Resources Nigeria Ltd
47 Corporate and Investment Banking
49 Case study: Kellogg Tolaram Nigeria Ltd
50 Case study: Anheuser-Busch InBev
53 Wealth
59 Abridged sustainability report
65 Enterprise risk review

Annual report &
financial statements

98 Board of directors
100 Directors’ report
106 Statement of directors’ responsibility
107 Corporate governance report
122 Report of the audit committee
124 Independent auditors report
128 Consolidated and separate statement

of financial position
130 Consolidated and separate statement

of profit and loss
136 Consolidated and separate statement

of cash flows
137 Notes to the consolidated and separate

financial statement
244 Annexure A
246 Annexure B

Other information

250 Management team
254 Branch network
258 Contact information

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Having advisors with

to make your Overview
Nigeria possible
6 Our vision and values
Our collective vision allows our group to 8 Corporate profile
make the connections between investors, 10 Our network
businesses and inspired ideas. Creating 12 Recognitions
new opportunities, and navigating the
financial challenges of a changing economy
imaginatively so that we never leave people
unsupported or new avenues unexplored.

This is what drives us at Stanbic IBTC

6 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 7

Vision and values

To be the leading end-to-end financial solutions provider Working in teams
in Nigeria through innovative and customer-focused people.
We, and all aspects of our work, are interdependent.
We appreciate that as teams we can achieve much greater
things than as individuals. We value teams within and
across business units, divisions and countries.

Serving our customers Growing our people Constantly raising the bar

We do everything in our power to We encourage and help our people to develop to their We have confidence in our ability to achieve
ensure that we provide our clients with full potential and measure our leaders on how well they ambitious goals and we celebrate success,
the products, services and solutions grow and challenge the people they lead. but we are careful never to allow ourselves
to suit their needs, provided that to become complacent or arrogant.
everything we do for them is based Respecting each other
on sound business principles. Being proactive
We have the highest regard for the dignity of all people.
Delivering to our shareholders We respect each other and what Stanbic IBTC stands for. We strive to stay ahead by anticipating rather than
We recognise that there are corresponding obligations reacting, but our actions are always carefully considered.
We understand that we earn the right to exist by associated with our individual rights.
providing appropriate long-term returns to our Upholding the highest
shareholders. We try extremely hard to meet levels of integrity
our various targets and deliver on
our commitments. Our entire business model is based on
trust and integrity as perceived by our
stakeholders, especially our clients.

8 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 9

Corporate profile

Stanbic IBTC Holdings PLC (“Stanbic IBTC”) was incorporated as resulted in the combination of IBTC Chartered and Stanbic Bank, Corporate and Personal and Wealth
Investment Banking and Trust Company Limited (“IBTC”), a private SAHL acquired a majority shareholding (50.1%) in the enlarged
limited liability company, on 2 February 1989. IBTC was granted bank, which was named Stanbic IBTC Bank PLC. Investment Banking (“CIB”) Business Banking (“PBB”) Total income
a merchant banking licence in February 1989 and commenced
operations on 1 March 1989. IBTC’s merchant banking licence was On 1 November 2012, Stanbic IBTC officially adopted a Holding Total income Total income N39.5 billion
converted to a universal banking licence in January 2002, pursuant Company (“Holdco”) structure in compliance with the revised
to the universal banking guidelines of the Central Bank of Nigeria regulatory framework by the Central Bank of Nigeria which requires N89.0 billion N44.3 billion
(“CBN”). In 2005, IBTC became a public company and its shares banks to divest from non-core banking businesses or adopt a
were listed on The Nigerian Stock Exchange (“The NSE” or HoldCo structure. Corporate and investment banking Banking and other financial services Investment management in form
“The Exchange”) services to government, parastatals, to individual customers and small to of asset management, pension
Under the new structure, the subsidiaries of Stanbic IBTC Holdings larger corporates, financial institutions medium sized enterprises. fund administration, trusteeship
In December 2005, IBTC merged with Chartered Bank PLC and PLC are Stanbic IBTC Bank, Stanbic IBTC Pension Managers and international counter-parties and insurance brokerage.
Regent Bank PLC and changed its name to IBTC Chartered Bank Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC in Nigeria.
PLC (“IBTC Chartered”) on 25 January 2006. On 24 September Trustees Limited, Stanbic IBTC Capital Limited, Stanbic IBTC
2007, IBTC Chartered merged with Stanbic Bank Nigeria Limited Stockbrokers Limited, Stanbic IBTC Insurance Brokers Limited,
(“Stanbic Bank”), a wholly owned subsidiary of Stanbic Africa Stanbic IBTC Ventures Limited, and Stanbic IBTC Investments
Holdings Limited (“SAHL”), which in turn is a subsidiary of Standard Limited. Stanbic IBTC Nominees Limited and Stanbic IBTC Bureau
Bank Group Limited of South Africa. As part of the transaction that de Change Limited are the only subsidiaries of Stanbic IBTC Bank.

Corporate Structure Gross revenue Total income

Stanbic IBTC Holdings PLC Corporate and Corporate and
Investment Banking Investment Banking
99.9% 99.9% 99.9% 88.2% 99.9% 54% 51%

Stanbic IBTC Stanbic IBTC Stanbic IBTC Stanbic IBTC Stanbic Personal and Personal and
Bank PLC Capital Ltd Stockbrokers Pension IBTC Asset Business Banking Business Banking
(“SICL”) Ltd (“SISL”) Managers Ltd Management 27% 26%
(“SIPML”) Ltd (“SIAML”)
75.0% Wealth Wealth
19% 23%
Stanbic IBTC
99.9% 99.9% Insurance 99.9% 99.9% 99.9%
Brokers Ltd
Stanbic IBTC Stanbic IBTC (“SIIBL”) Stanbic IBTC Stanbic IBTC Stanbic IBTC
Nominees Ltd Bureau de Ventures Ltd Trustees Ltd Investments
(“SINL”) Change Ltd (“SIVL”) (“SITL”) Ltd (“SIIL”)

Stanbic IBTC is a full service financial institution which offers a wide range of products to a variety of segments. Gross loans and advances Total deposits
Stanbic IBTC provides end-to-end financial solutions which include corporate and investment banking, personal
and business banking, stockbroking and wealth management. Corporate and Corporate and
Investment Banking Investment Banking
Standard Bank Group, to which Stanbic IBTC belongs, is Africa’s largest bank by assets and earnings with 63% 42%
strategic representation in 20 key sub-Saharan countries and other emerging markets. Standard Bank has been in
operation for over 150 years and prides itself on being a global financial institution with African roots. Personal and Personal and
Business Banking Business Banking
37% 58%

10 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 11

Standard Bank Group network

Country overview Nigeria overview Standard Bank
Group Overview
1 Angola Branches ATMs BNAs
2 Botswana Lagos Island: 27 Lagos Island: 85 Lagos Island: 4 Market
3 Cote d’Ivoire Lagos Mainland: 33 Lagos Mainland: 116 Lagos Mainland: 10 capitalisation
4 DRC North Central: 31 North Central: 86 South South: 1 R317 billion
5 Ethiopia North West: 23 North West: 63 South West: 4
6 Ghana South East: 16 South East: 35 (US$28 billion)
7 Kenya South South: 16 South South: 47 Total: 19
8 Lesotho South West: 31 South West: 103 Total assets
9 Malawi Total: 177 Total: 535 R2 trillion
10 Mauritius
11 Mozambique 36 13 5 (US$165 billion)
12 Namibia 15
13 Nigeria Operating
14 South Africa 18 7
15 South Sudan in 20 African countries
16 Swaziland 4 17 and 8 countries
17 Tanzania 1 outside Africa
18 Uganda 9
19 Zambia 19 20 54,558
20 Zimbabwe 12 employees
11
(3,031 in Nigeria)
2 10
14 1,212 branches
16
8 (177 in Nigeria)

9,036 ATMs

(535 in Nigeria)

12 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 13

Recognitions

SIAML SIPML PBB CIB Human Capital Awards 19. Best Human Resources Optimisation
Award for Employee Engagement and
1. Business Day Award for Best 3. Business Day Award for Most 6. The Asian Bankers Award for Best 9. Best Sub Custodian in Nigeria 2017 15. Exceptional Investment in Employee Internal Communications
Managed Money Market Fund 2017 Innovative PFA 2017 Branch Innovation for our Digital – Global Finance (SINL) Medical and Welfare (Redbridge
branch (2017) Health Care – HealthMeetings.org) 20. 2017 Chartered Institute of
2. Business Day Award for Best 4. African Child Prize Award for Integrity 10. Best FMDQ Registration Member Personnel Management (“CIPM”)
Managed Fixed Income Fund 2017 in Corporate Business 2017 7. The Asian Bankers Award for Best (Quotations) – FMDQ (SICL) 16. Human Resources People Magazine Best HR Practice Award
SME Bank in Nigeria (2017) Award for Outstanding Employee
5. Nigerian Customer Service Awards 11. Best Stockbroking/Investment Bank Engagement Strategy
for Excellent Service Delivery in PFA 8. Human Development Initiatives Award of the Year 2017 – BusinessDay
Category 2017 for support towards tertiary education Banking Awards (SISL) 17. Human Resources People Magazine
of orphans and children of widows Award for Outstanding Talent
and widowers (2017) 12. Best FX Provider in Nigeria 2017 Management Strategy
– Global Finance (Global Market)
18. Human Resources Best Practice
13. 2017 Financial Mail Top Analyst Award for the Financial Industry
Award: Best Equities Research, Sub in Nigeria
Saharan Africa

14. 2017 Sprite Award: Best Fixed
Income Research, Africa

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The experience to

in new technologies, Business review
ventures and futures
16 Chairman’s statement
We have seen our country evolve dramatically
over the last 29 years, so managing change 19 Chief Executive’s statement
is not only something we handle with great
perspective, we plan for it. 23 Economic review

Looking to the future and capitalising on 27 Financial review
what Nigeria has to offer is key to how we
progress. Our investments in communications 38 Executive Committee
infrastructure, alternative energy resources and
transport links are all testaments to how we 41 Personal and Business Banking
can see Nigeria needing more in years to come
and making sure we are ahead of the curve. 42 Case study: Ulysses Nigeria Ltd.

This is what drives us at Stanbic IBTC 44 Case study: Natural Prime

Resources Nigeria Ltd

47 Corporate and Investment Banking

49 Case study: Kellogg Tolaram

Nigeria Ltd

50 Case study: Anheuser-Busch InBev

53 Wealth

59 Abridged sustainability report

65 Enterprise risk review

16 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 17

Chairman’s statement

2017 in numbers

Basil Omiyi (con) Locally, the World Bank had projected The country’s external reserve high of N44.30 while closing the year 34.3%
Chairman the country’s economy to grow by 1.0 grew significantly to $38.77 billion, as the most priced banking stock at 31.6%
per cent in 2017 following the carryover representing a 50 per cent increase N41.50. The institution also made
2017: A year of a sub-zero (about -1.7 per cent) real from the $25.84 billion recorded at quantum leaps in almost all of its Deposits from Group total
of synchronised Gross Domestic Product (“GDP”) growth the beginning of the year. key performance metrics culminating customers assets
global recovery rate from the 2016 recession. The in an ROE of over 28%. increased by increased by
most important policy challenge for the The foreign exchange stability impacted N192.7billion N333 billion
Federal Government was, therefore, to positively on the performance of the In recognition of our contribution to
Fellow shareholders, distinguished arguably the biggest political crisis in 40 take the country out of recession within bourse as The Exchange closed the year providing excellent solutions for clients 44.5%
ladies and gentlemen, on behalf of the years, posing a major challenge for the the year; and all this was at a time the on a positive note with year-to-date return we won several awards during the year
Board of Stanbic IBTC Holdings PLC, European Union. Due to irreconcilable naira traded at N490 against the US of 42.3%, emerging as one of the top five across the group. The awards won include Group’s net
I am pleased to welcome you all to this differences among the four political dollar at the Bureau de Change (“BDC”) best performing stock markets for 2017 but not limited to the following: The NSE interest income
Annual General Meeting (“AGM”) of our parties involved, Chancellor Angela while exchanging for N497 at the parallel among major global stock exchanges. CEO award for 2017, (for the sixth year increase
company being the sixth since it became Merkel was unable to form a new three- (black) market, appreciating from about Positive market sentiments this year have consecutively), Business Day Award for
a holding company. way government in Germany, thereby N516 per dollar in Q4 2016. External been largely buoyed by foreign portfolio Best Managed Fixed Income Fund 2017, 69.6%
increasing the chances of a new general reserve had plummeted to $25.8 billion inflows into the equities markets since Nigerian Customer Service Awards for
Year 2017 turned out to be a year of election. In Italy, the campaign for next in December 2016 while inflation rate in the introduction of the IEFX window Excellent Service Delivery in PFA Category Group’s profit
synchronised global recovery despite year’s general elections revealed January 2017 reached 18.72 per cent. (especially targeted at blue chip stocks), 2017, The Asian Bankers Award for Best after tax
political volatilities in some parts of the a fragmented picture and a growing impressive corporate earnings releases and Branch Innovation for our Digital branch, increase
world. While growth stagnated in the support for anti-establishment parties. Nigeria extended its slow climb out of the positive macro-economic data. On a Business Day Banking Awards for the Best
UK at 1.8% given the stall in EU Brexit its first recession in 25 years, as data full year basis, all of the sectoral indices Stockbroking/Investment Bank of the Year
negotiations, China managed to maintain The global oil price was also not left out from the National Bureau of Statistics closed the year on a positive note. 2017 and Best FX Provider in Nigeria 2017
its rate of expansion, dispelling fears as it recovered sharply in 2017, with (“NBS”) revealed that the economy grew – by Global Finance.
over a potential sharp slowdown as it Brent crude moving from $56.82 at the by 1.92% year-on-year in the fourth Foreign Portfolio Investment (“FPI”)
matures after decades of rapid growth. beginning of the year to close at $66.87 at quarter, being its third consecutive quarter increased significantly in 2017. The large We remain optimistic that in 2018 and
The Eurozone also staged a recovery year end, primarily driven by an agreement of growth in 2017 (Q3’17: +1.4% year-on- chunk of FPI was invested in equities and beyond, we are well positioned to sustain
after years of uncertainty. Japan, as well among OPEC and a number of non- year) after five consecutive quarters of Treasury Bills, which had attractive yield. In the progress made so far as we continue
as other major emerging economies such member countries such as Russia to extend negative growth. the banking industry, banks demonstrated to create value for our customers with
as Russia, continued to post solid growth production cuts to the end of 2018 and resilience amid macro-economic challenges our innovative solutions while taking
numbers. However, there was a surge also as a result of increasing demand from Also, inflation fell to 15.37 per cent in which weighed on credit expansion, asset advantage of any potential upsides in the
of political noise during the last quarter. factories around the world, particularly in December 2017, from 18.72 per cent quality and capital adequacy. economy and in turn provide sustainable
In Spain, the Catalonia region’s drive for China, amid a boom in economic activity. as of January 2017. returns to our shareholders.
independence plunged the country into Stanbic IBTC Bank PLC and Stanbic IBTC
The economic recovery was underpinned Holdings PLC retained their AAA national Balance Sheet
by a rebound in oil production due to the ratings by Fitch Ratings, reaffirming the
relative peace in the Niger Delta region, institutions’ strong fundamentals and The Group’s total assets increased by
rising oil prices and foreign exchange stability. 31.6% (N333 billion) from N1,053.5 billion
stability as a result of the introduction as at 31 December 2016 to N1,386.4
of the Investors’ and Exporters’ Foreign In light of the above, our company made billion as at 31 December 2017 due to
Exchange (“IEFX”) Window by the giant strides, recording several feats on positive growth in business activities and
Central Bank and the subsequent near all fronts. The company grew its Asset change in FX rate for foreign currency
liberalisation of the foreign exchange under Custody (“AuC”) to a record high of translation. Major growth lines in total
market, which brought the value of the N5.6trn thus maintaining its leadership in assets are trading securities due to
naira in the parallel market from N525/$ the non-pension custodial business. The positions currently held (N151.5 billion),
to N362/$ in December 2017. company’s share price grew from N15.00 investment in financial securities (N316.6
at the beginning of the year to a record billion) and net loans to customers also

18 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 19

Chairman’s statement (continued) Chief Executive’s statement

witnessed marginal growth of 5.4% N13.8 billion. Total expenses increased to Finally, I would like to thank our clients, Yinka Sanni amount. The resultant improvement in
(N19.1 billion) to close at N372.1 billion. N86.0 billion in 2017 from N69.0 billion shareholders, regulators and staff for Chief Executive USD liquidity had a positive effect on the
in 2016. Despite the 24.6% growth in their unwavering support in the course naira which further strengthened against
In line with the comprehensive risk cost, cost to income ratio for 2017 stood of the year. A record breaking, the USD in the parallel market to close
management framework of the Group, at 49.8% compared to 54.8% in 2016. pace-setting year the quarter at N362.00 to USD$1. This
there was a significant increase in the Overall, group profit after tax increased Basil Omiyi (con) in our market represents a significant appreciation from
provisions held for loans and advances in by 69.6% from N28.52 billion in 2016 to Chairman the all-time high of N490.00 to USD$1
2017. Provisions grew by N9.4 billion or N48.38 billion in 2017. 1 February 2018 which the year opened at. Given the lower
42.1% from N22.4 billion in 2016 to FX intervention sales by the CBN, coupled
N31.8 billion in 2017, representing 7.9% General The Year 2017 was impressive in the quarter coupled with higher crude oil with higher crude oil receipts, the nation’s
of gross loan book (2016: 6.0%). history of our company as our business receipts. Nigeria’s annual inflation rate external foreign reserves closed the year
Our Corporate Social Investment (“CSI”) made giant strides on several fronts continued to decline, easing to 15.37% at $38.77 billion, which is the highest
Funding the growth in total asset is an pillars are centred on education, economic amidst the recessionary trends and in December 2017 (lowest rate of price figure recorded since November 2014.
increase in total liabilities of N288.5 billion empowerment and healthcare. These other economic headwinds which increases since April 2016 (13.7%)). As such, the Monetary Policy Committee
(31.6%) between period end 2016 and pillars enhance our brand reputation, marked activities within the year. (‘’MPC’’) of the CBN, which met once
2017. Deposits from customers increased increase employee proposition and present The banking sector also contributed to (in November) during the last quarter of
by N192.7 billion, representing a 34.3% us as socially responsible and ultimately Globally, it was a year of strong growth the activities of the macro economy as the year, agreed to retain the benchmark
growth year-on-year. This growth is in grow our market share. that was supported by low-interest rate the Central Bank of Nigeria’s (“CBN”) Monetary Policy Rate (“MPR”) at 14% per
alignment with the bank’s focus on raising stimulus from central banks and a gradual FX intervention exercise continued annum, as well as other monetary policy
cheap customer liabilities. Through our signature CSI programme easing of the crisis that have rocked both to promote economic activities. The parameters (corridor around the MPR, CRR
“Together4ALimb”, seven (7) children developed and emerging economies in CBN continued to meet demand for and Liquidity Ratio) at the same levels they
Shareholders’ funds grew by N45.0 billion received artificial limbs and Educational recent times. invisibles; providing FX to Small and were since July 2016, in line with market
following the impressive result for the Trust in 2017 while twenty (20) children Medium Enterprises (“SMEs”) for eligible expectations.
financial year 2017. have benefited from the programme since Locally, Nigeria exited the recession as imports, and continued with the special
inception. We have also had over 2,000 the economy expanded by 0.83% year- FX interventions for retail and wholesale The Stanbic IBTC Bank Nigeria Purchasing
Income Statement staff participate in the annual walks. In on-year in 2017, according to the National demand. Foreign Exchange liquidity was Managers’ Index (“PMI”) jumped in
2018, our signature activities would be; Bureau of Statistics (“NBS”). Drivers of also significantly supported by activities of December, ending the year at a three-year
Stanbic IBTC Holdings PLC achieved total Together4ALimb, Adopted School Project, the economic growth were: the significant investors on the new IEFX window bringing high. The indicator lies comfortably above
income of N172.8 billion for the financial Malaria Day, Employee CSI and Global increase in the value of capital imported total trades from inception via this medium the 50-point threshold that separates
period ended 31 December 2017, which is Fund Partnership. into the country, which more than doubled to $26.2 billion, with Stanbic IBTC Bank expansion from contraction in business
37.1% above prior period result of N126.1 in the third quarter to $4.15 billion, from accounting for approximately 46% of this conditions, pointing to robust growth in
billion. This growth can be largely adduced As a group, we remain committed to the $1.8 billion inflow recorded in the second the private sector.
to increase in revenue from government attainment and maintenance of the highest
securities due to high yields and improved standards of corporate governance. We aim These positive economic indices led to the
trading revenue following liberalisation to continue to adopt global best practices success of the country’s fourth Eurobond
of the FX market and the opening of the that are applicable and relevant to our issuance during the last quarter. Stanbic
IEFX window. own business environment. At the same IBTC Capital Limited, our Investment
time, we will continue to make significant Banking subsidiary, acted as the sole
The group’s net interest income witnessed investments in our people through training Financial Adviser to the Debt Management
a growth of N25.7 billion (44.5%) from across board, as we recognise that growing Office (“DMO”) in the fund raising
N57.9 billion in 2016 to N83.6 billion in our people holds the key to our longer activity, which raised a total of USD3.0
2017. Non-interest revenue increased by term competitiveness. billion within the last quarter of 2017.
N21 billion or 31% from N68.2 billion in
2016 to N89.2 billion in 2017 driven by
significant growth in trading revenue of

20 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 21

Chief Executive’s statement (continued)

On The NSE, the equities market closed Our pension business achieved record Our asset management subsidiary, 2017 Accolades We are grateful that as an indicator of our leadership in our focus sectors and in
the year with a gain of 42.30% (2016: assets under management of N2.3 trillion, Stanbic IBTC Asset Management Limited, recognition of our efforts to making our company a great place to work, 2017 saw
-6.17%), its strongest performance since making Stanbic IBTC Pension Managers successfully listed a total of 9 Collective Stanbic IBTC again receiving a number of accolades and awards, including:
2013. The NSE sector indices showed Limited the largest institutional investment Investment Schemes (“CIS”). These
that all sectors closed the year in positive business in Nigeria. include the Stanbic IBTC Dollar Fund as • The Asian Bankers award • 2017 Financial Mail Top Analyst • Human Development Initiatives
territory with the banking sector being well as SIAML Pension ETF 40, which for Best Branch Innovation for our Award: Best Equities Research, Sub award for support towards tertiary
the top-performing sector. Stanbic IBTC Stockbrokers Limited, our mirrors the performance of an index of top Digital branch Saharan Africa education of orphans and children of
stockbroking subsidiary with its high 40 listed companies that are permissible widows and widowers
In the local fixed income market, yields performance culture, consolidated for investment by Pension Fund • The Asian Bankers award • 2017 Sprite Award: Best Fixed Income
remained elevated for the most part of its leadership position as the leading Administrators (“PFA”) on The NSE. for Best SME Bank in Nigeria. Research, Africa • Exceptional Investment in Employee
2017 amidst sticky inflation and a resulting stockbroking firm in terms of transaction Medical & Welfare (Redbridge Health
tight monetary policy environment. values in 2017. This confirms the goodwill We moved up the league table in terms • Best Sub Custodian in Nigeria 2017 • Business Day Award Care - HealthMeetings.org)
and execution capability of the firm, of client service as evidenced by our 3rd - Global Finance for Best Managed Money Market Fund
Our business recorded significant strides leveraging on the expertise of the Stanbic position ranking on the KPMG Customer 2017 • HR People Magazine Award
despite the recessionary trends and other IBTC Group, to provide robust services Service Survey (from 4th in 2016) in retail • Best FMDQ Registration Member for Outstanding Employee Engagement
economic headwinds, leveraging on our in the capital market. The firm was again banking and to 4th ( from 10th in 2016) (Quotations) – FMDQ • Business Day Award Strategy
competencies to provide best-in-class awarded the 2017 NSE CEO award for in Corporate Banking. On employee for Best Managed Fixed Income Fund
services to our customers and stakeholders capital market operators as the best engagement, amongst several other • Best Stockbroking/Investment Bank of 2017 • HR People Magazine Award
while deploying efficient cost management dealing member, being the sixth time awards, our Human Capital division was the year 2017 – Business Day Banking for Outstanding Talent Management
initiatives. In summary, a significant growth in a row. SISL has been Nigeria’s number awarded the CIPM’s Best HR Practice Awards • Business Day Award Strategy
in profitability was recorded largely driven one stockbroking house, posting the Awards, Best HR Practice Awards for the for Most Innovative PFA 2017
by very strong performances from our highest turnover for the last nine (9) years second year running, even as our devoted • Best Dealing Member Firm • HR Best Practice Award for the
Corporate and Investment Banking and consecutively. The business has retained staff continue to seek and conduct the - The NSE CEO Awards • Nigerian Customer Service Awards Financial Industry in Nigeria
Wealth Management businesses. the number one spot in fifteen (15) of the right business the right way; in a socially, for Excellent Service Delivery in PFA
last twenty (20) years. economically and environmentally • African Child Prize Award for Integrity Category 2017 • Best HR Optimisation Award for
Total Asset grew by 32%. Our group sustainable manner. in Corporate Business 2017 Employee Engagement and Internal
posted increases of 37.1% and 69.6% Our custody business retained its market • 2017 CIPM Best HR Practice Awards Communication
over the prior year’s performance in leadership and reinforced its role as • Best FX Provider in Nigeria 2017
operating income and profit after tax, the leading non-pension custodial – Global Finance
respectively, and achieved an ROE of service provider in Nigeria. This feat was
28.9% compared to 18.9% in the previous underscored by a significant growth in The achievement of these milestones was remains positive as we leverage on our Yinka Sanni
year. You will find included herein detailed assets under custody by Stanbic IBTC due to the hard work and dedication of our competencies to execute flawlessly as a Chief Executive
financial reports. Nominees Limited (“SINL”) to N5.6 trillion. staff as well as the loyalty of our esteemed Universal Financial Services Organisation 1 February 2018
In addition, SINL continued to set the pace customers. providing innovative and best-in-class end-
Our Share price reached an all-time high of within the custody industry; successfully to-end financial solutions to our customers
N44.30 on 19 October 2017 and closed executing the first commercial securities Despite the economic, regulatory and in a sustainable manner while creating
at N41.50/share for the year ended 31 lending transaction in Nigeria on 14 political headwinds, as we enter a pre- value for our shareholders.
December 2017. December 2017. election year that would herald the 2019
general elections, our outlook for the year

22 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 23

Economic review

Global economic environment us hopeful that the market can take a in 2017. On the other hand, the UK is
modest FED surprise on board without too expected to struggle and grow by only
Will 2018 turn out to be another good much problem. The key here, of course, 0.9% year-on-year compared to the 1.3%
year, with global equities performing is the word ‘modest’. So if, for instance, it grew by in 2017. Interestingly, Japan
strongly, volatility staying low, the dollar the Federal Open Market Committee and China are also expected to continue
subdued and bond yields generally calm? (“FOMC”) median call for 75 bps of rate normalising, growing by 1.0% and 6.3%
This was the story of 2017. For 2018 to hikes in 2018 turns into 100 bps we think year-on-year from the 1.3% and 6.5%
be a repeat, certain threats or risks need the market will cope. If it is 150 bps or which they grew by in 2017, respectively.
to remain dormant. What are these risks? more it might be a very different story.
With commodity prices on the rise
Probably the main threat is an implosion Surging US rates might not be a huge (especially crude oil prices), the risks that
of riskier assets created not by any risk this year to global markets. But a face emerging markets in 2018 may prove
specific shock but instead as a simple surging dollar could prove to be just as to be of a different kind. Towards the tail
function of stretched valuations. Many disruptive. US tax cuts do create some end of 2017, the US President boasted
traders and investors will argue that you risk of strong dollar demand from US of a “bigger” button than North Korean
need a specific event to materialise to firms as they repatriate overseas profits leader Kim Jong Un. He was referring to
trigger financial market disarray. This to benefit from the lowering of the US the alleged nuclear button that sits on
could come in the arenas of monetary tax rate. With USD2.5-USD3tr thought Kim’s desk but we wonder whether the
policy, or geopolitics for example. But to be sitting abroad in the form of President’s real power lies in blowing up
a ‘trigger’ is not necessarily needed, foreign profit, repatriation flows could the dollar rather than his nuclear capability.
in our view. With risk assets as strong be substantial. However, the evidence
as they are and with volatility as low as tends to suggest that the offshore profits In our view, the threat to the dollar lies in
it is, asset price implosion could occur are mainly held in dollar instruments. the confrontational “America First” policy
naturally as investors rush to the exits Unwinding of these could impact the price that does not just take in North Korea but
to protect profits. But how likely is this of those instruments but probably not also the administration’s attitude towards
in 2018? This is clearly a hard question the value of the dollar too much. Hence, other issues, such as global security (given
to answer but the probability of such a this issue is unlikely to flare up in 2018. the attacks on NATO members), global
scenario is well below 50%, in our view. trade, or global climate change with the
Among other risks to consider from a withdrawal from the Paris Accord. The
This then requires a careful analysis of global perspective in 2018, we would US risks losing global influence and with
possible specific threats or risks that include the end of the North America this loss could come losses for the dollar.
could cause an asset price implosion in Free Trade Agreement (NAFTA), failure
2018. Monetary policy is certainly one of Brexit talks, a debt-related implosion In just over six months, Brent crude oil
such area but something, in our view, in China, the rise of Eurosceptic parties prices have increased by 50% to around
that is constrained to the United States in Italian elections, North Korean military USD69 per barrel. At some stage, US oil
of America (“US”). It is hard to see other conflict, an indictment of some sort to the producers, lured by high prices, should
central banks like the European Central current US administration and more. But start to boost production, reversing the
Bank (“ECB”) and Bank of Japan (“BoJ”) are these risks sufficiently high to mean falling trend in the number of operating
falling behind the curve in 2018 and that markets should stay clear of risk assets rigs that we have seen since July 2017,
sparking global panic by catching up with in 2018? The answer is probably ‘no’. thus countering the OPEC cuts. Yet, robust
policy tightening that is way ahead of global demand and geopolitical tensions
current expectations. The US is another With respect to actual economic are likely to keep crude oil prices elevated
matter for the Federal Reserve Bank performance, G10 economies seem for a longer period. This should bode well
(“FED”) could easily fall behind the robust – with the exception of the United for Nigeria as long as the country limits
curve; after all, this is what has tended Kingdom (“UK”) – but lower economic below the line subsidies to petrol imports,
to happen in the more recent tightening risk contrasts with some increases in which has allowed it keep retail petrol
cycles. However, markets should probably political risk (Catalonian independence) prices unchanged. Other commodities,
remain optimistic here as well. The FED’s and geopolitical risk (North Korea). Growth especially metals, are set for further gains
rate hike in March was an example of looks robust even if inflation in many in 2018 given the upward revisions to
a hike that was not well discounted by countries remains short of central bank global economic growth and expectations
the market beforehand, meaning that targets. The US is expected to deliver of a weaker dollar (generally there is a
FED members essentially had to tell the even stronger growth numbers in 2018, negative correlation between the dollar
market to catch up. The fact that this perhaps growing by 2.7% year-on-year and spot commodity price indices).
event failed to derail asset prices leaves from an estimate of 2.3% year-on-year

24 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 25
Economic review (continued)

Political landscape Economic growth was higher than the contraction of 1.6% access credit, which counteracted the some planned revenue boosting reforms, tenured Eurobonds in November 2017,
year-on-year in 2016. Although one might benefits of having access to more FX. including implementing the Voluntary which resulted in authorities receiving
Aside from the president’s health, perhaps The Nigerian economy contracted and point out that the oil sector makes up Assets and Income Declaration Scheme USD3.0 billion from the proceeds.
the most widely debated political issue in began its journey towards recovery in only around 10% of total GDP in Nigeria, Also of concern was the performance (“VAIDS”) as well as increasing VAT on
2017 was the proposed “restructuring” 2017, helped mainly by a rebound in it indirectly accounts for another 65% of of the information and communications ‘luxury’ goods, it is still hard to believe Exchange rate and interest
of Nigeria. Over the years, Nigeria has oil prices and oil production as well as the economy, according to the NBS. The sector. The sector slipped into a that these would suffice to produce rate dynamics
been criticised for functioning within a adjustments made to the foreign exchange oil sector grew by 8.4% year-on-year in recession for the first time in decades the 40% y/y jump between what we
federal political arrangement, comprising market which finally allowed robust levels the fourth quarter of 2017 from 25.9% in as lower disposable incomes resulted anticipate will be the actual non-oil The central bank maintained an effectively
the central “federal” government and of portfolio flows back into the country. the preceding quarter, and a contraction in a lagged negative impact on the revenue collected in 2017 and the target tight monetary policy stance for much
regional “state and local” governments. As such, the economy is expected to of 17.7% in the fourth quarter of 2016. sector’s share of the consumer’s for 2018. NGN2.4 trillion is budgeted of 2017 without adjusting the formal
The inference is that the current continue growing at a modest pace. However, in the fourth quarter, the non-oil wallet. The sector contracted by an for oil revenues, while NGN4.2 trillion is policy rate. We expect much of the
system misaligns incentives of regional However, given the trajectory of oil prices sector showed some signs of recovery average 1.0% year-on-year in 2017, expected to come from the non-oil sector. same through the course of this year,
governments, as they receive resources and our expectation, taking account of after being depressed for most of the year. compared to a growth of 1.9% year- albeit with an easing bias towards the
from the center without necessarily a potential decline in coming months, on-year in the same period of 2016. As such, meeting the NGN8.6 trillion end of the year. Indeed, the CBN has
putting those resources to the best use. they will remain above the 2017 oil price Specifically, the agriculture sector, which expenditure target is at risk given arguably already influenced yields lower
Unsurprisingly, the distribution of oil average, we expect the economy to grow has been a subject of much attention over Fiscal position revenue concerns. Assuming we are by momentarily halting Open Market
revenues by the federal government to by around 2.5% year-on-year in 2018. the last two years, appeared to have lost correct and the authorities miss their Operations (“OMO”) aimed at sterilising
state and local governments, and the some momentum, having grown by an Yet again, the authorities have prepared revenue targets, it is likely that the Naira in December 2017. The temporary
use (or lack thereof) of those funds Favourable upside risks to the outlook average 3.5% year-on-year in 2017 from a 2018 budget that looks very much like fiscal deficit could widen more than the halt in OMO issuances meant that the
by those regional governments for come from a higher than anticipated 4.1% year-on-year in 2016. This perhaps those presented in 2017 and 2016, which planned 1.6% of GDP. Should there be a yield curve declined by up to 500
the good of the masses, are the basic oil price environment, a smoother than suggests that gains from the increased both looked ambitious on the revenue need to limit expenditure, infrastructure bps in some cases, and while the CBN
tenets of the restructure debate. expected election campaign cycle, focus on the sector will probably take side. The budgeted deficit, however, spending plans may need to be deferred. has resumed those OMOs once more,
unchanged positive sentiment from some time given the slow implementation is expected to remain within the fiscal Proposed capital expenditure makes up they are now at much lower levels.
The central theme here appears to be foreign investors and potentially more of structural reforms which are required responsibility rule, below 3.0% of GDP. around 28% of the total expenditure
the devolution of powers with the view favourable monetary policy stance to de-risk the sector while improving the envelope, while debt servicing takes up The combination of a less hawkish central
to give more economic responsibility to taken by the Central Bank of Nigeria. ease of doing business in that sector. The proposed 2018 budget deficit another 23%. It is worthy to note that bank, lower domestic borrowing by the
the state, with respect to both revenues remains broadly unchanged at around no provision has been made for petrol fiscal authorities and potentially lower
and expenditures, while the federal The implementation of the Economic Growth in manufacturing sector continued NGN2.1 trillion (1.6% of GDP) with subsidies in the 2018 budget proposal. headline inflation in 2018 should all
government oversees foreign policy and Recovery and Growth Plan (“ERGP”) to disappoint despite the improvement around NGN306 billion being privatisation mean a downward bias to interest rates,
defence-related matters. Should the remains slow. The authorities expect that in availability of FX for the most parts proceeds. Interestingly, authorities will We anticipate that material changes will especially in the later parts of 2018.
discourse culminate in actual changes to implementation of the plan should result of 2017. The sector returned to positive attempt to split the funding balance be incorporated in the final iteration
the federal system of government, the in economic growth reaching 7.0% y/y growth of 0.1% year-on-year in the fourth of NGN1.7 trillion equally between of the 2018 budget. Specifically, we This slightly lower interest rate
immediate losers will likely be those states in 2020, after their forecast for a rather quarter of 2017 from a contraction of domestic and foreign sources. The broadly suspect lawmakers will attempt to increase environment should then result in
that rely solely on the federal government’s optimistic 2.2% y/y in 2017. In order 2.9% in preceding quarter and 2.5% in unchanged net domestic funding proposal the oil price benchmark, especially if improved private sector credit extension
monthly allocations to survive. However, to ensure structural reform which will the same quarter of 2016 while averaging means that the yield curve should remain international crude oil prices remain and subsequently a rebound in import
it can be argued that such a change lead to long run economic development, a contraction of 0.2% in 2017. On the supported through most of 2018. stuck in a USD65-70 per barrel handle. demand growth which should place some
may be beneficial in the longer term. authorities must implement many parts of whole, the sector improved in 2017 This could result in some implementation pressure on the currency, particularly
the ERGP. The plan outlines three broad compared to 2016 when it contracted Given that the 2018 budget proposal risks should oil prices decline later in within the investors-and-exporters-
With the 2019 general elections now objectives (restoring growth, investing by an average of 4.3% year-on-year. is anchored on an exchange rate of 2018. Furthermore, given that the foreign-exchange-window. Furthermore,
barely 12 months away, political attention in people and building a competitive N305.00 it is unlikely that the CBN will budget proposal has been presented the potential for some capital outflows
will likely now focus on campaigns, economy) and five principles (tackling Both the construction and trade sectors choose to engineer a convergence of the slightly ahead of schedule, it may be as some foreign investors exit ahead of
especially as the Independent National constraints to growth, leveraging the continued to show moderate signs of different segments within the FX market. approved earlier than usual, perhaps the 2019 elections could exacerbate the
Electoral Commission (“INEC”) recently private sector, allowing markets to improvement, with the trade sector still Oil production is projected to remain around the end of the first quarter. pressure on the exchange rate. However,
published election timelines. The main function, promoting national cohesion remaining in negative growth territory. broadly unchanged at 2.3m bpd, while FX reserves are in a much better shape
question remains: has the current and inclusion, as well as upholding the In 2017, the construction sector grew real GDP growth is forecast at 3.5% y/y. Finally, yield curve dynamics will than they were 12 months ago. At USD40
administration done enough to convince countries core values). Furthermore, by 1.0% year-on-year compared to a Furthermore, the oil price benchmark continue being dictated by the central billion, and potentially rising towards
Nigerians of another term in office? Will there are five execution priorities (macro- contraction of 5.9% year-on-year during is proposed to remain broadly flat at bank’s liquidity management stance, USD45 billion by the second quarter,
the administration be willing to take tough economic stability, achieving food security, the same period in 2016. Surprisingly, USD47 per barrel. However, it would not especially as supply of Naira-denominated the CBN should be able to limit any
decisions which arguably are beneficial energy sufficiency, improving transport the trade sector actually performed be surprising if the National Assembly government paper is unlikely to rise. disorderly depreciation of the currency.
to the country in the medium term such infrastructure and Small and Medium worse in 2017 than it did in 2016. The were to increase the benchmark rate That being said, external borrowing will
as allowing a more market reflective Scale Enterprises (“SME”) development). sector delivered an average contraction given current global oil price realities. rise, starting with a possible USD2.5
pricing template for petrol and electricity of 1.0% year-on-year in 2017 compared billion – USD4.0 billion Eurobond issuance
supply? And also just as important, is National Bureau of Statistics (“NBS”) data to a contraction of 0.2% in 2016. With a revenue target of NGN6.6 during the course of the next 4 months.
the main opposition organised enough indicates that GDP growth in 2017 rose This underperformance suggests that trillion, we remain concerned about the This will follow the issuance of two long
to mount a credible challenge? by 0.8% year-on-year mainly as a result of businesses still found it difficult to government’s ambitious revenue targets.
a rebound in the oil sector. The increase While the authorities have outlined

26 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 27

Financial review

The group’s strong results for 2017 increased activities in various markets. billion (>100%) to close the year at N43.2
align with the improvement in the The stock market returned 42.3% on billion. The strong growth was underlined
economic performance of Nigeria in the back of renewed investor confidence by a sustained effort to create sustainable
2017 which also reflects an improvement in 2017. High interest rate and yield in client focused franchise which saw an
in global economic growth in 2017. government securities also attracted improvement in business transactions.
foreign investor flows. Inflationary rate This was also supported by strong yields
The country officially pulled out of moderated and closed the year at 15.37% on government securities and increased
recession in 2017 after five consecutive from 18.55% at the end of 2016. foreign currency flows in the market.
quarters of negative economic growth.
GDP year-on-year growth rate for the The rebound in oil price, relative peace The wealth business continued to show
year was 0.8% from a contraction of in the delta and consistent oil production business resilience and positive growth
1.6% in 2016. Underpinning the economic helped in the revenue generation of the trajectory in its operation. The business
growth for 2017 are improvements in country as external reserves reached grew Asset under Management (“AuM”)
crude oil prices which increased from USD$38.77 billion in December 2017. The from N2.1 trillion in 2016 to N2.7 trillion
$56.82 at the beginning of 2017 to naira remained stable at N306.00 in the in 2017 with N260 billion of the growth
$66.87 by year-end. Also contributing official market but appreciated against the coming from increased contributions. The
to the growth in revenue receipts from dollar in the parallel market. At the Bureau Pension business recorded an increase in
crude oil was a period of relative peace de Change, the exchange rate closed the number of Retirement Savings Account
in the Niger-Delta region leading to at N362.00/$1 in December 2017 as (“RSA”) by over 87,000 accounts despite
minimal disruptions to oil production. against N485.45/$1 in December 2016. the increased competitive environment.
The liberalisation of the FX market through Wealth business contribution to the
the introduction of the Investors’ and Average Interbank rates remained overall profitability improved to N19.2
Exporters’ Foreign Exchange (“IEFX”) neutral year-on-year to close at 8.56% in billion from N15.2 billion in 2016.
window by the Central Bank of Nigeria December 2017 from 8.50% in December
led to an increase in foreign investors’ 2016, although we witnessed significant 2017 also proved successful for the
activities in the market which support spikes in the course of the year. The other business units. In particular the
foreign currency flows into the economy. decline towards the end of the year was as stockbrokerage business improved its
a result of increased liquidity in the system market share to 16% and recorded
The impressive performance reported for in absence of CBN OMO interventions. a significant improvement in profit after
2017 benefited from strong margins in tax. Supporting this enhanced results were
our earning assets and an improvement Financial highlights for the year the increased activity on the stock market
in our overall trading activity. As a and our ability to leverage on our brand to
result, profit after tax for the year stood With the exception of Stanbic IBTC increase client presence. This effort ended
at N48.4 billion, a 70% improvement Ventures Limited (SIVL), all other up being recognised by Business Day
over prior year of N28.5 billion. subsidiaries of the group generated good which saw them bag the award as the Best
results in the year. The banking subsidiary Stockbroker/Investment Banking Firm
Despite the growth in the economy and remained the most profitable subsidiary for the second consecutive year in 2017.
the gross earning of the institution, the within the group closely followed by the
performance of the group is not insulated Pension business. The banking subsidiary, We also witnessed improvements in
against the economic realities of credit which has Personal & Business Banking our Custody and Capital businesses.
impairment and inflation both of which and Corporate & Transactional Banking Custody assets grew by 93% to N5.6
tapered the overall result of the group. (“CTB”) as its business segments, trillion. We continue to own the largest
Credit impairment increased by 29% witnessed varied outcomes in the year. custody business in the market. Our
to close at N25.6 billion from N19.8 PBB made a loss after tax of N14.4 billion capital business also recorded an
billion last year while operating expenses in the year largely due to the strategic improvement in profitability from a loss
had a growth of 25% due to inflation but prudent decision to write-off some of N935million to a profit of N1.7 billion.
adjusted staff cost and growth in other persistently delinquent facilities in the year With the improvement in markets, we
business related operational costs. leading to the growth in credit impairment. witnessed a number of clients accessing
The business however showed strong the market to either raise equity or debt.
Operating environment and sustainable business fundamentals This led to an increase in transactional
leading to growth in both net interest income for the organisation.
The operating environment opened 2017 income and non-interest revenue. CTB
on a difficult note but the introduction on the other hand recorded a laudable
of the IEFX window led to improved FX performance with a PAT growth of N27.3
liquidity in the country thereby causing

28 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 29
Financial review (continued)

How we create value Looking ahead

Business activity Income statement Principal risk arising We expect the improvement in the operating environment Business performance would be driven by our continuous
impact from this activity to continue in 2018. GDP is forecasted to grow by 2.5% focus on client centricity, capital management and interest
We lend money to our while inflation is expected to fall to about 14%. Being a margin management. With the IFRS 9 accounting standard now
customers, invest in Interest income pre-election year, we do expect the government to be effective, we will continue to focus on capital management and
government securities and and credit impairment conservative with its economic policies. However, we expect its consequential impact on credit risks and product pricing.
money market instruments charges that government capital investments would increase, thereby
Credit risk driving the overall economic growth in the country.
We source for deposits Interest expense Interest rate risk
from our customers and Impact of the economic environment on key financial ratios
other banks Net fees and Liquidity risk
commission Operational risk, including compliance, environmental and/or social risk The economic statistics, together with their expected influence on the group’s performance in 2017 and 2018, assuming no
We provide transactional revenue Business and reputational risk management action, have been set out in the table below.
banking facilities to our
customers and clients The table below relates to the group’s operations in Nigeria.

Income after credit impairments We offer equity, foreign Trading revenue Credit risk Key measurement metric Economic factors that impact metrics Economic Impact of Expected Expected impact
exchange and commodity Market risk factor economic factor economic factor of economic factor
instrument to customers Investment risk Growth in loans and advances GDP growth
Net interest margin Interest rates in 2017 in 2017 in 2018 in 2018
We earn income from Other revenue Credit loss ratio Interest rates / / + +
investment properties Income from pension Unemployment rates + – – +
and dividend income and non-pension asset Growth in fee and Crude oil prices + + – –
management commission revenue Interest rates + – - +
We offer trustee, pension Growth in trading revenue GDP growth + + + +
and non-pension asset Staff costs Growth in operating expenses Inflation (CPI) + – – +
management services Effective tax rate Market trading volumes / + + +
Other operating costs Growth in pension revenue Market price volatility – + – +
– Exchange rate + + + +
Inflation (CPI) + + + +
We invest in developing Corporate tax rate + – / /
and retaining our people Equity market performance – / – /
to deliver on our strategy Unemployment rates / / / /
Interest rates + + / /
We invest in our operations, + – – +
which include IT systems + + – –
and business running costs
Expenses + = Increase in economic factor/positive impact on the group’s performance
– = Decrease in economic factor/negative impact on the group’s performance
/ = Neutral

= = Retained equity which is reinvested
to sustain and grow our business
Dividend to our shareholders
Net profit –

Tax to governments

30 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 31
Financial review (continued)

Growth in loans and advances Net interest margin Credit loss ratio Growth in non-interest revenue

Loans and advances remain the biggest portion of total assets in Net interest margin is the profit earned from interest on loans and The credit loss ratio is the credit impairment charge expressed as The two major components of non-interest revenue are net fee
the group’s balance sheet. This asset class provides revenue to advances and investments less interest paid on customer deposits a percentage of the average group loans and advances balance. and commission and trading revenue. The growth or decline in
the group in form of interest income, transaction fees charged and other funding sources. The movement in benchmark lending Credit impairment is the amount of loans and advances given to non-interest revenue is largely induced by changes in these two
as documentation and administration fees and opportunities for rates such as the prime lending rate in Nigeria impacts significantly customers that is charged to income statement as provision for variables.
insurance related income. The group is focused on growing this on the net interest margin. bad loans. This is the cost of risk incurred by the bank from the
asset class within the accepted risk levels. customers’ inability to repay their loans. Growth in net fees and commission revenue
The graph below shows the average prime lending rate and the
Gross Domestic Product (“GDP”) growth and interest rate have group’s net interest margin. The growth in credit impairment is occasioned by the strategic This depends on growth in transaction volumes and activity across
major impact on loan growth in the Nigerian economy as they decision to write-off some facilities and also the need to increase the service delivery channels, which are a function of economic
impact customers’ ability to repay their loans. %% the provision held for some facilities that moved to non-performing activity. The Central Bank of Nigeria has however placed a ceiling
loan. This contributed to an increase in the bank’s credit loss ratio on some fee lines which means that banks cannot charge above the
The graph below shows GDP growth as it impacted loan growth 8.0 17.8 to 6.6% in 2017 (2016: 5.2%). amount stated by the central bank. Net fees and commission grew
17.6% by 13% in 2017 on the back of growth in customers’ transactions
as we continue to improve on our alternative banking channels.
7.0 17.6
Growth in trading revenue
Nbillion % 6.0 17.4 Credit loss ratio and average crude oil prices
450.0 7.0 17.2 The trading revenue is basically income from trading in foreign
350.0 6.0 5.0 17.0 % $million currency, fixed income securities and equities. This revenue source
250.0 5.0 16.8 7.0 120.00 is dependent on trading volumes and volatility in the market which
150.0 5.4 4.0 4.0 16.9% 16.6 100.00 impact on the spread made by traders. With the liberalisation of
50.0 303.3 3.0 16.4 108.70 80.00 the FX market through the introduction of IEFX window, there was
0 2013 5.9 2.0 16.7% 16.9% 6.0 99.50 60.00 a resurgence in market activities and trade flows. Trading revenue
-50.0 413.4 1.0 3.0 40.00 soared leading to a growth of 90% in 2017.
-150.0 2014 0 20.00
2.7 -1.0 16.6% 5.0 0 Growth in operating expenses
379.4 -2.0 2.0
Inflation is a major economic factor that drives cost growth in the
2015 1.0 5.5% 4.7% 5.9% 6.9% 16.2 4.0 group. Headline inflation (year-on-year) receded marginally for the
4.9% eleventh consecutive month to 15.4 percent in December 2017
54.75 and this contributed significantly to current cost growth. Growth
375.3 403.9 0.0 16.0 3.0 in headcount, revised salary structure, growth in balance sheet
0.8 2013 size with the attendant growth in regulatory charges and increase
-1.5 2014 2015 2016 2017 53.60 in vendor payment due to currency depreciation all fuelled the
2016 2017 45.10 growth in operating expenses.
Net interest margin Average prime lending rate
2.0

The interest rate charged on loans and advances are mostly linked 1.0 0.8% 3.8% 5.2% 6.6%
to the prime lending rate which serves as the benchmark rate for 2014 2015 2016 2017
loans. 0.9%
0.0
Interest rate regime in 2017 had varied cycles. Government
securities yields were high for the better part of the year but 2013
started tapering in Q4. Market remained quite liquid in the first
Gross loans and advances GDP growth half of the year partly due to the fact that offshore investors
were unable to exit the country due to unavailability of FX.
Credit loss ratio (%) Average crude oil price ($)

The growth in economic indices coupled with increased support to Operating expenses and average annual inflation rate
clients in our preferred sectors resulted in the growth in risk asset.
The change in FX translation rate following the multiple FX rate Nmillion %
available in the country also contributed to the growth. 100,000 18.0
16.0
The group will continue to monitor the economy in 2018 to harness 90,000 14.0
emerging opportunities and also tighten its risk management 80,000 12.0
process to improve the quality of loans. 70,000 10.0
60,000 8.0
50,000 8.5% 8.1% 9.0% 15.7% 16.5% 6.0
40,000 4.0
30,000 57,948 57,901 62,066 69,041 86,026 2.0
20,000 2013 2014 2015 2016 2017 0
10,000 Average inlation rate

0

Operating expenses (N’m)

32 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 33
Financial review (continued)

Effective tax rate under management which in turn increases the net asset value of Net interest income Non-interest revenue
the funds. The revenue from the pension and non-pension asset
Nigeria’s corporate tax rate remained unchanged throughout 2017, management business is usually a percentage of the net assets Net interest income increased year-on-year by 44%. Interest Non-interest revenue comprises mainly fee and commission
although the government had an increased focus on tax collection. value of the funds. income and interest expense increased year-on-year by 41% and trading revenue. Fee and commission revenue is dependent
This is not expected to change in 2018 given the revenue drive of and 33%, respectively. on transactional banking volumes and asset under management,
both state and federal governments. The level of unemployment also affects the revenue from pension which are a function of economic activity and of the competitive
business. A decline in unemployment rate means that more people Interest income growth was mainly driven by growth in the volume environment for banking services.
Growth in revenue from pension and non-pension assets are getting employed and pension contributions will increase and yield of government securities coupled with marginal growth
thereby resulting in increased assets under management, while in risk asset. The increase in interest expense can be attributed to Non-interest revenue increased by 31% on the back of a 13%
The growth in revenue from managing pension and non-pension an increase in unemployment rate will have an adverse effect growth in customer deposit mostly from fixed deposit which grew growth in net fees and commission, 90% increase in trading
assets is dependent on equity market performance, money market on the revenue of the pension business. by 60%. revenue and 32% increase in other revenue.
interest rates and yields on government securities. Growth in equity
market performance results in higher investment income on assets In CIB, net interest income was up 98% on the back of a growth in Growth in fee and commission was on the back of increased
interest income driven by increased yield on financial instruments. asset management fees from the wealth business, growth in
Analysis of the Group’s financial performance Interest expense increased by 30% as the business grew customer stockbroking and non-pension custody fees, foreign services
deposits. transactions and corporate finance fees.
Income statement analysis
The statement of profit or loss reflects the revenue earned by the business and costs incurred in generating the revenue for the year In PBB, net interest income grew by 4%. The business witnessed PBB business witnessed a decline of 12% in net fee and
end 2017. an increase in interest income of 10% due to a dip in loans and commission income. The reduction in the volume of foreign
advances to customers on account of loan write-offs and NPL of transaction on card products due to the restriction of foreign
The profit for the year grew significantly year-on-year by 70%. Below are explanations for significant movements recorded in the year. 11.4%. Interest expense also increased by a margin of 27% due transaction to only the bank’s USD debit card on account of
to increased focus on liability generation, which is evident by FX shortage contributed significantly to the decline in PBB’s
the growth in customer’s deposits. The impact of the above was fee income. The impact of this was however cushioned by
cushioned by growth in funding benefits of 72%. increased customer transactional activities which generated
increased electronic channel fees and current account
Summarised income statement – Group Change % 2017 2016 Nmillion % maintenance fees.
Gross earnings 36 Nmillion Nmillion 100,000 8.0
Net interest income 44 212,434 156,425 CIB recorded a 20% growth in net fees and commissions
Interest income 41 83,587 57,859 6.9% revenue. This impressive growth can be attributed to growth in
Interest expense 33 122,911 87,467 non-pension custody fees on account of growth in asset under
Non-interest revenue 31 (39,324) (29,608) 80,000 5.9% 6.0 custody from N2.9 trillion at the beginning of the year to close
Net fees and commission revenue 13 89,182 68,194 60,000 at N5.6 trillion, increase in trade and transactional fees, rebound
Fees and commission revenue 12 59,089 52,154 40,000 4.9% 5.5% 4.8% in stock market leading to increased trades thus increase in
Fees and commission expense 59,430 52,918 4.5% 5.1% stockbroking fees and growth in corporate finance related deals
Trading revenue (55) 4.7% and fee income.
Other revenue 90 (341) (764) 3.6% 4.0
32 29,148 15,326 Trading revenue growth of 90% is premised on liberalisation
3.9% of the FX market through the introduction of the IEFX window,
945 714 growth in trade business due to the availability of FX and futures
20,000 2.0 and forward related transactions.

37,013 46,658 43,860 57,859 83,587

0 0.0
2013
2014 2015 2016 2017

Total income 37 172,769 126,053 Net interest income Net interest margin before impairment charges
Credit impairment charges
Income after credit impairment charges 29 (25,577) (19,803)
Operating expenses
Staff costs 39 147,192 106,250 Net interest margin after impairment charges
Other operating expenses
Profit before taxation 25 (86,026) (69,041)
Direct taxation
Profit for the period 20 (36,282) (30,173)
Profit attributable to:
Non-controlling interests 28 (49,744) (38,868)
Equity holders of the parent
Profit for the period 64 61,166 37,209

47 (12,785) (8,689)

70 48,381 28,520

(44) 2,186 3,878

87 46,195 24,642

70 48,381 28,520

34 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 35
Financial review (continued)

Wealth business continues to be the trail blazer with a growth current state of these facilities. CIB’s credit loss ratio for the year Growth in IT cost and provisions for litigation and tax liabilities Wealth’s operating expenses recorded a growth of 24% driven
of N6.7 billion (24%) above previous year. The growth can be stood at 4.4% as against 4.7% in 2016. are part of the growth items in other operating expenses. by growth in staff cost of 32% and other operating costs of 18%.
attributed to the increase in asset under management of 31% as Cost to income ratio remained flat at 31%, same as prior year.
well as higher average return on investment. PBB’s credit impairment charge increased to N15 billion during PBB business had a cost growth of 21% driven by 11% increase in Inflation adjustment to staff salaries accounted for growth in staff
the year from N9.5 billion in 2016. The growth in credit provisions staff cost and 30% in other operating costs. The cost growth is on cost. The major contributor to growth in other operating expense
Nmillion % on personal lending was mainly due to strategic decision to take a account of headcount growth, increase in salaries, maintenance is the provision made for the newly introduced Pension Fund
100,000 100 one-time write-off of some restructured facilities that are further and upgrade of existing infrastructures and marketing cost. Protection Levy.
90 showing distress signs. This led to the reduction in customer loan
90,000 80 book of PBB and will improve the quality of loans in the books. Breakdown of operating expenses
80,000 70 Credit loss ratio for PBB business stood at 9.9% as against a ratio
70,000 60 of 6.0% in previous year. Staff costs
60,000 50 Other operating expenses:
50,000 57% 55% 56% 54% 52% 40 Nmillion % Information technology Change % 2017 2016
40,000 30 30,000 8.5 Communication expenses 20 Nmillion Nmillion
30,000 48,219 57,987 56,788 68,194 89,182 20 25,000 Premises and maintenance 28 36,282 30,173
20,000 2013 2014 2015 2016 2017 10 20,000 25,831 Depreciation expense 26 49,744 38,868
10,000 0 15,000 Amortisation of intangible assets 31
10,000 3.8% 5.2% 6.6% 6.5 Deposit insurance premium 12 5,984 4,751
0 12,009 15,925 4.5 AMCON expenses (2) 1,205 921
5,000 (254) 2.5 Other insurance premium 39 4,517
Non-interest revenue Percentage of NIR to total income 0 2017 0.5 Auditors renumeration 4 4,129 4,023
-1.5 Non-audit service fee 12 4,204
-5,000 0.9% 3,502 2,922 3,878 Professional fees 33 46
Administration and membership fees 10 2,482 33
1,922745 0.8% Training expenses 5,034 2,382
Security expenses (39) 4,504
(285) Travel and entertainment 13 858
Stationery and printing 76 340 647
Corporate & Investment 2013 2014 2015 2016 Marketing and advertising 57 310
Banking 46% Pension administration expense 24 19
Credit impairment charge on non-performing loans Penalties and fines 39 850 31
Personal & Business Credit impairment charge on performing loans Donations 35 3,711 755
Banking 15% Credit loss ratio Operational losses 5 1,139 2,103
Directors fees 1,484 726
Wealth 39% Provision for legal costs, levies and fines (36) 1,773 1,195
Impairment of other financial assets (46) 1,182 1,280
Credit impairment charges Operating expenses Bank Charges >100 2,982 874
Motor vehicle maintenance expense (90) 215 2,853
Credit impairment charges increased by 29% to N25.6 billion Although the group continued its tight hold on cost, total Indirect tax (VAT) 336
during the year owing to the strategic decision to write-off certain operating expenses still grew by 25% year-on-year as the group Others 20 38
loans from the books of the bank, resulting in the credit loss ratio had to invest in both human and material resources to drive the Total operating expenses 79 437 70
for the year worsening to 6.6% compared to prior year of 5.2%. growth in total revenue that has epitomised this financial year. >100 122
The growth in provisions is mainly from the non-performing loan >100 25 248
book where the write-offs were recorded and additional provisions The group uses the inflation and cost to income as the benchmark 401 334
made for new and existing non-performing loans. to measure its performance on cost management. While the 3 3,538 1,978
group’s cost growth trended ahead of average inflation rate of 89 3,068 914
CIB’s credit impairment grew marginally by 3% to N10.6 billion in 16.5%, it managed to improve cost to income ratio to 49.8% 764 280
2017 from N10.3 billion in 2016. The impairment charge for the from 54.8% in 2016. 9 1,496 1,458
year is coming mainly from provisions made on three clients two 25 828 437
of which are in the oil and gas sector and the third a telecom Growth in staff cost (20%) accounted for over 35% of the 1,199 1,099
company. A combination of low crude oil price, restiveness in the increase in total operating expenses. The growth can be adduced 86,026 69,041
Niger-Delta region and management issues are responsible for the to an increase in staff numbers and inflation adjusted salary
increase. Other operating expenses grew by 28% due to increase
in deposit insurance and AMCON sinking fund contribution
expenses, information technology expenses and provisions raised.

CIB’s operating expenses increased by 31%, while cost to income
ratio improved to 33.2% from the 45.4% reported in prior year.
The cost to income ratio improved on the back of a higher growth
in revenues (80%) as compared to the cost growth reported.

36 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 37
Financial review (continued)

Balance sheet analysis Cash and cash equivalents In PBB, customer loan balances declined by 1%. This was largely
driven by the strategic decision to write-off some restructured
The statement of financial position shows the position of the group’s assets, liabilities and equity at 31 December 2017. The growth in this balance sheet line of 33% (N100 billion) facilities that were showing further stress signs. The business also
can be adduced to the increase in cash balances held in offshore continued the strategy to cut down lending on some product lines
The group’s balance sheet size increased by 32% to close at N1.39 trillion from N1.05 trillion at the end of 2016. Significant movements correspondent banks (Nostro balances) and growth in cash reserve such as on instalment sales and finance leases. The Central Bank’s
over the year are discussed below. requirement (“CRR”) balance above the regulatory limit of approval was sought for the full write-off of these facilities by way
22.5% owing to the non-refund of excess CRR by the Central of an extension of the approval granted last year for loan write-off.
Assets Change % 2017 2016 Bank.
Cash and cash equivalents Nmillion Nmillion Deposit and current accounts
Pledged assets 33 Trading assets
Trading assets 53 401,348 301,351 Deposit and current accounts grew by 33% from a prior year close
Derivative assets >100 43,240 28,303 Trading asset growth was on account of position held in treasury of N614.7 billion to N815.4 billion in 2017. The major contributor
Financial investments (23) 151,479 16,855 bills part of which constituted hedging strategy for local currency to this growth is increase in customer deposits of over N192
Assets held for sale 25 11,052 14,317 (“LCY”) interest rate risk on FX swaps. billion.
Loans and advances 316,641 252,823
Loans and advances to banks 2 114 Financial investments Customer deposits grew by 34% to close at N753.6 billion at
Loans and advances to customers 4 381,711 112 the end of 2017 (2016: N561 billion). The growth in customer
Other assets (37) 9,623 368,229 Financial investments provided a veritable alternative investment deposits was driven by a strategy targeted at acquiring customers
Property and equipment 5 outlet to risk assets in the course of the year due to the attractive with regular income flow, banking the customers’ ecosystem and
Intangible assets 26 372,088 15,264 yields. The growth of 25.2% witnessed in financial investment is improving our service delivery across all channels. The group’s
Deferred tax assets (5) 49,442 352,965 to take advantage of the attractive yields on this asset class in the deposit mix of current-and-savings deposits to total deposits
Total assets (15) 21,883 absence of significant growth in customer loans and advances deteriorated to 49% from 57% in 2016 due to the need to raise
3 605 39,220 tenured funds to match some assets on the book.
32 8,901 22,962 Loans and advances
In CIB, customer deposit increased by 53% due to the deliberate
1,386,416 713 Total net loans and advances increased by 4% to N381.7 billion effort to grow term deposits to fund some risk assets and also to
8,638 (2016: N368.2 billion), with customer loans and advances support the balance sheet owing to the discretionary deductions
1,053,523 accounting for the entire growth with a balance of N372.1 billion made by the Central Bank for investments in special treasury bills.
compared to prior year of N353 billion. Loans and advances to
Equity and liabilities 32 185,218 140,798 banks declined by 37% to N9.6 billion (2016: N15.3 billion). In PBB, customer deposits grew by 24%, with current-and-
Equity savings-accounts (“CASA”) growing by 29%, reaffirming the
Equity attributable to ordinary shareholders 33 182,060 137,102 The bank maintained a cautious approach to loan book growth as continued strategy to grow CASA volumes. The ratio of CASA as
Ordinary share capital the economy gradually recovers from recession and with focus on a proportion of customer deposits improved to 67% from 64% in
Ordinary share premium 0 5,025 5,000 identified growth segments of the economy. 2016. The business continued its focus on growing retail deposits
Reserves during the year with particular focus on banking the customers’
Non-controlling interest 2 66,945 65,450 In CIB, customer loan balance grew by 10% and this can be ecosystem.
attributed to increases in both overdraft facilities and term loans.
65 110,090 66,652 The bulk of the growth witnessed in term loan is coming from the
foreign currency book on account of new facilities booked and
(15) 3,158 3,696 change in exchange rate for foreign currency translation.

Liabilities 32 1,201,198 912,725
Trading liabilities >100 62,449 5,325
Derivative liabilities (78) 2,592 11,788
Deposit and current accounts 815,363
Deposits from banks 33 61,721 614,735
Deposits from customers 15 53,766
Other borrowings 34 753,642
Subordinated debt (22) 74,892 560,969
Current tax liabilities 4 29,046 96,037
Deferred tax liabilities 29 12,240 27,964
Provisions >100 120 9,508
Other liabilities 23 12,979 47
Total equity and liabilities 40 191,517 10,581
32 136,740
1,386,416
1,053,523

38 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 39

Executive committee

Yinka Sanni Demola Sogunle Wole Adeniyi Babatunde Macaulay M’fon Akpan Rotimi Adojutelegan Gboyega Dada
Chief Executive, Chief Executive, Executive Director, Business Executive Director, Head, Risk, Chief Compliance Officer, Chief Information Officer
Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC support, Stanbic IBTC Bank PLC Personal & Business Banking, Stanbic IBTC Bank PLC Stanbic IBTC Bank PLC
Stanbic IBTC Bank PLC

Andrew Mashanda Eric Fajemisin Victor Yeboah-Manu Olufunke Amobi Malcom Irabor Kola Lawal Nkiru Olumide-Ojo
Executive Director, Corporate Chief Executive, Stanbic IBTC Chief Financial Officer Head, Human Capital Head, Legal Services, Head, Corporate & Investment Head, Marketing &
& Transactional Banking, Pension Managers Limited Stanbic IBTC Bank PLC Banking Credit Communications
Stanbic IBTC Bank PLC

Angela Omo-Dare Benjamin Ahulu Dele Kuti Sam Ocheho Chidi Okezie Oluwatosin Odutayo Taiwo Ala
Country Head, Legal Services, Head, Internal Audit, Global Sector Head – Head, Global Markets, Company Secretary Ag. Head of Finance, Head, Internal Control
Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC Oil & Gas Client Coverage Stanbic IBTC Bank PLC Stanbic IBTC Bank PLC

40 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 41

Personal and Business Banking

Personal and Business Banking (“PBB”) is (“CASA”), which grew by N66.1 billion in digital channels to increase our digital
the retail arm of the Stanbic IBTC Holdings in the year. The business experienced engagements with customers and also
PLC, which offers banking and other an increase in total customer base to deliver enhanced customer experience.
financial services to individual customers 1,747,784 as at December 2017, compared
and businesses, by providing bespoke to 1,421,115 as at December 2016. Our overall distribution channel strategy
products to meet the varied needs of The business also continues to acquire strives to align with customer preferences
retail customers. Our bouquet of offerings customers in the focus segment. A total and facilitate efficient service delivery.
ranges from the most basic to the most of 260,701 new customers were acquired
sophisticated of financial services, and we in 2017 across all segments within PBB. PBB has also made progress in the
ensure that our customers’ requirements The 2017 full year sales figure represents customer experience journey and improving
are always met through the most cost an improvement of 6% and 81% compared customer satisfaction. The progress is
effective and convenient method. to 2016 & 2015, respectively. These new manifest in the 2017 KPMG Banking
customers added N32.7 billion in CASA Industry Customer Satisfaction Survey
PBB is split into two segments, namely deposits and resulted in an improvement (“BICSS”). Retail banking moved from 4th
Business Banking and Personal Banking. in cost of funds to 2.9% from 4.0% in in 2016 to 3rd position in 2017 and SME
The Business Banking segment comprises prior year. Banking moved from 13th in 2015 to 8th
small and medium enterprises (“SMEs”) position in 2017.
and commercial banking customers (mid- We have seen consistent growth across
corporates), while the Personal Banking all our digital banking platforms. The Our Africa-China Banking Center has
comprises individual customers, including growth recorded in 2017 represents 165% been set-up and is geared for launch.
workplace banking, private banking and increase year-on-year across all digital The center is aimed at providing bespoke
High Net Worth individuals. banking channels. Total downloads on the solutions and addressing the needs of
Stanbic IBTC Mobile Banking App as at business communities in both Nigeria and
Despite the challenging macro-economic December 2017 represents 545% year- China. This would drive better engagement
environment in 2017, the key drivers of the to-date growth on downloads compared with our clients and improve trade relations
business continued to progress positively. to December 2016 across Android, Apple, between both countries.
Total customer deposits increased by Windows and Blackberry devices. We
N83.4 billion (24%) in the year driven continue to make significant investments We thank all our customers for their
majorly by current-and-savings-account support in 2017 and look forward to

42 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 43

Case study

Ulysses Nigeria
Limited

The Business Relationship with Stanbic IBTC Business development
and future prospects
Ulysses Nigeria Limited was incorporated in October 1987. The company is a Ulysses Nigeria Limited commenced
distinguished player in the manufacture of household and cosmetic products. banking relationship with Stanbic IBTC Ulysses Nigeria Limited aims
The establishment of the company was hinged on the increased demand in March 2016. In March 2017, the Bank to commence the expansion
for indigenous household and personal care products which would match approved a Letter of Credit Confirmation of its factory located around
international standard. Line which has been active till date. the Otta axis in Ogun State.
The proposed factory would be
The company’s mission is to provide high quality products which would The company has operated its account and well-equipped and would be able
positively impact people every day. The company operates with a sense of facilities in a proper manner. All obligations to meet capacity and production in
responsibility towards its valued customers, distributors, regulatory bodies and are always met on or before due date the coming years. With the
more importantly towards its environment. The company’s vision statement is to without request for extensions. expansion of the factory, it is
design, manufacture and deliver top of the range products that meet the unique expected that production will
need and expectation of each customer through innovation, commitment and The company’s relationship with Stanbic increase further, meeting the
value addition. IBTC has experienced significant growth demand of the company’s clients
over the past few years. The Bank’s market within and outside Nigeria.
Ulysses Nigeria Limited’s major brands include Sunshine bleach, Sunshine Ultra- share of the company has increased to
Marine Blue, Sunshine Air Freshener and Blue diamond bleach. The company also 60% from 20% in the previous year. The company currently has
produces a vast brand of body lotions such as Soft and Sensual, Silver Line and distributors across the nation
Glorious Flowers. These products are available across the country. The company has a staff strength of 308 with a clientele base within
and all its staff have salary accounts with the ECOWAS community.
Stanbic IBTC Bank PLC.
In 2018, the company has
Company Offices and Outlets projected to grow its
revenue by 40%.
The company’s head office/factory is
located at 227, Apapa Road, Iganmu
Industrial Estate.

44 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 45
Case study

Natural Prime
Resources Nigeria Ltd.

The Business Relationship with Stanbic IBTC Business development
and future prospects
Natural Prime Resources Nigeria Limited Natural Prime Resources Nigeria Limited
(“NPRNL”) was incorporated on 19 August commenced banking relationship In 2018, NPRNL’s plan is to grow
2010 and commenced full operations with Stanbic IBTC in January 2016. its export business to other
in January 2014. The company is one In February 2017, the Bank approved African countries. The company
of the viable manufacturers in the soap a Letter of Credit Confirmation Line began exportation about 2 years
and detergent industry in the country. and eventually increased the limit by ago and the volume increased in
over 100% as at September 2017. 2017. The company plans to
The company’s mission is to meet the expand this part of the
needs of washing powder users with high The company has operated its account business so that it contributes
quality detergents at affordable prices, and facilities in a proper manner. All significantly to the overall
hence rooting to become the number one obligations are always met on or before revenue of the company.
detergent manufacturer in Nigeria. The due date without request for extensions.
company’s flagship brand, “So Klin” has The So Klin brand is well
become one of the leading brands in the Our wallet share of the business has established in the Nigerian
market. The brand is one of the pioneering grown from zero to about 15% in 2017. market. The AC Nielsen Report
brands of sachets in the industry. for Q3 2017 places So Klin as
The company has a staff strength of number one in the detergent
The company’s strong brand name, 853 of which 32% have opened salary market with 24% market share.
large market share, broad product range accounts with Stanbic IBTC. We intend The brand’s leadership position
and extensive distribution network to pre-enlist the staff for workplace is due to the quality of its
as well as its experience and track banking products such as unsecured products as well as marketing
record in the marketing of fast moving personal loans, credit cards and and distribution strategies.
consumer products, are sources of Vehicle and Asset Finance facilities.
strength and growth to the company. In 2018, the company plans
The client’s sole distributor has an to increase turnover by 15% by
Natural Prime Resources also produces account with Stanbic IBTC and has been deepening market share locally
the “Boom” brand of detergent which is profiled on our digital channels platforms. and also increasing volume of
fast gaining market share. The company We have also opened accounts for exports.
usually sells its finished products locally, 15 of the company’s sub-distributors
however in the last few years, the company and also created a loyalty scheme for
has been able to tap into opportunities them. In 2018, we project to on-board
for exports to other African countries. at least 50% of these distributors.

The company’s sole distributor in Prior to 2017, the relationship with
Nigeria is Euro Mega Atlantic Limited NPRNL was fairly inactive but we
(“Euro Mega”). Euro Mega channels the have since grown our wallet share of
products through its network of over 500 the business and the plan is to grow
sub-distributors located nationwide. to a significant level in 2018.

Natural Prime Resources’ 2016 Business Location
Financial Year End (“FYE”) turnover
was N26.56 billion which grew to N40 The company’s factory is located
billion as of 2017 FYE. The company is at Block V, Plot 9,10 Industrial 1,
aiming for a 15% increase in 2018. Opic Estate Igbesa Agbara, Ogun
State while its administrative office
is at 3 Magbon Close, Ikoyi.

46 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 47

Corporate and Investment Banking

Introduction The team, structured by sector, provides • Euromoney Real Estate Survey Award
a single point of contact for our clients in Nigeria as well as overall best real
The Corporate and Investment Banking within the group. Drawing on our sector estate loan financing, real estate
(“CIB”) business continues to make expertise and experience, the team equity financing, real estate debt
great strides in Nigeria’s challenging and members work closely with clients and capital markets, and real estate mergers
complex economic, capital markets and product specialists across the group to and acquisitions advisory firm.
regulatory environment in pursuit of its create customised solutions for our clients.
goal of being the clear leader in corporate Notable transactions for the year
and investment banking in Nigeria. Stanbic IBTC Capital Limited (“SICL”) • Sole issuing house: Unilever Nigeria
The business leverages Standard Bank’s
heritage with presence in twenty African Stanbic IBTC Capital is the leading Plc’s N58.9 billion rights issue.
countries and major financial centers investment banking firm in Nigeria.
around the world, in delivering the The firm provides corporate finance • Sole issuing house: Guinness Nigeria
end-to-end financial service solutions and debt advisory services to a diversified Plc’s N39.7 billion rights issue.
to our clients. client base that includes corporate and
government entities within and outside • Lead issuing house and bookrunner:
CIB comprises four business units: Client Nigeria. It helps clients raise capital to Dufil Prima Foods Plc’s N10.0 billion
Coverage, Global Markets, Investment strengthen and grow their businesses debut bond issuance
Banking and Transactional Products and and also provides financial and strategic
Services with greater focus on delivering advisory services. SICL is registered with • Financial Advisor and overall transaction
a superior client experience through our the Securities & Exchange Commission as coordinator: Merger of AB InBev’s
Universal Financial Services Organisation an Issuing House and Underwriter. Nigerian brewery subsidiaries –
for a deeper products penetration across International Breweries Plc, Intafact
CIB, PBB and Wealth into our clients’ The corporate finance solutions SICL Beverages Limited, and Pabod
ecosystem. provides include: private and public Breweries Limited.
equity capital raises (initial public offers,
The challenging macroeconomic and rights issues), mergers and acquisitions, • Sole mandated arranger: N6.0 billion
business environment, which negatively corporate restructuring, bonds, commercial Medium Term Facility for Kellogg
impacted deal making in 2016 continued papers, and ratings advisory. Tolaram Nigeria Limited to finance
in the first quarter of the year. Severe FX the construction of Nigeria’s first
liquidity challenges, rising interest rates The debt advisory solutions include cereal manufacturing plant.
and high inflation triggered the suspension debt arranging, optimal capital structure
of expansion and capital raising plans advisory across energy and infrastructure, • Mandated lead arranger: Dual currency
of our clients. The rest of the year was real estate and diversified industrials financing of Novare Gateway Mall,
characterised by recovery and favourable sectors. Abuja (US$8.4 million & N3.3 billion).
market conditions. Increased economic
activity was supported by improved oil SICL 2017 highlights
production and prices, stability in the In 2017, SICL continued to remain a leading
FX market, better access to liquidity and investment banking firm in Nigeria. Our
declining inflation. These factors positively position as the leading investment bank in
impacted our investment banking business Nigeria was confirmed by continued flow of
and translated into strong financial business, market-wide acknowledgement
performance in 2017. and the industry awards received.

Departmental highlights SICL 2017 Awards
• Best Foreign Investment Bank and
Client Coverage
The client engagement model is central to Best Debt House (EMEA Finance
everything we do in CIB. Client Coverage African Banking Awards)
team focuses on understanding the needs
and strategic goals of our clients in order • Issuing House of the Year
to deliver the end-to-end financial service (Pearl Awards)
solutions across products and markets.
• Best FMDQ Registration Member,
Quotations (FMDQ Debt Capital
Market Awards)

48 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 49

Corporate and Investment Banking (continued) Case study

Global Markets Notable transactions for the year lines within the TPS business namely Cash Kellogg Tolaram
During the course of the year, SISL played Management, Trade Finance and Custodial Nigeria Limited
The Global Markets business comprises a critical role in the successful execution of Services recorded positive trends driven
sales and trading teams with specialisations leading equity capital markets deals. Most largely by new client acquisition, client- Financing the Construction of a
in fixed income, foreign exchange, money notable of these are: centric product offerings and channel N6billion Cereal Manufacturing Plant
markets and structuring of a wide range of commercialisation.
financial hedging solutions. The business • Stockbroker to Guinness Nigeria In April 2017, Stanbic IBTC Capital Limited consumers. The factory, which has a
had an outstanding year in 2017 with its Plc’s N39.7 billion (US$110 million) Stanbic IBTC Nominees Limited and Stanbic IBTC Bank Plc provided production capacity of about 10,000
world-class trading, sales and research Rights Issue. (“SINL”) Kellogg Tolaram Nigeria Limited (“KTNL”) metric tonnes of cereal per annum, was
teams remaining leaders in their respective with a N6 billion medium term facility commissioned in December 2017 and
fields. • Stockbroker to Unilever Nigeria Stanbic IBTC Nominees Limited provides to finance the construction of a new has commenced operations from January
Plc’s N58.9 billion (US$163 million) custodial services to both local and cereal manufacturing plant at the Lagos 2018. The investment will go a long way in
2017 Awards Rights issue. international clients and investors, namely Free Trade Zone located in Lekki. preserving precious foreign exchange while
• N umber 1 Trading house for full year fund managers, asset managers, global generating employment and development
• Stockbroker to UAC Nigeria’s N15.4 custodians, international broker dealers, KTNL is the result of a joint venture opportunities for the local workforce.
2017 in value traded overall in the over- billion (US$42 million) Rights Issue. stockbrokers, retirement benefit schemes between Kellogg Company USA
the-counter (“OTC”) market as reported and other institutional investors wishing (“Kellogg”) and Tolaram Group, Singapore The transaction enhances Kellogg
by the FMDQ OTC Securities Exchange. • Stockbroker to Union Bank’s N50 billion to invest in the Nigerian market. SINL (“Tolaram”) which was set up to locally Tolaram’s status as a key player in the
(US$138 million) Rights issue. is currently the largest custodian in the manufacture cereals and snacks in Nigeria Nigerian cereal industry and also provides
• Number 1 Trading house for FX, FX Nigerian market with approximately 80% and will serve as the sourcing hub for the company with the opportunity to
Derivatives and Unsecured Placements • Stockbroker to International market share of all foreign institutional West African markets. Kellogg is the ultimately become a dominant local
as reported by the FMDQ OTC Breweries Plc in its merger with portfolios investing in the Nigerian market. world’s leading manufacturer and marketer cereal manufacturer in West Africa,
Securities Exchange. Intafact Beverages Limited and of ready-to-eat cereal and convenience whilst increasing its current market share.
Pabod Breweries Limited (AB InBev’s SINL continued to hold its leading position foods, while Tolaram is one of the largest
• Our Research Team won the Top subsidiaries in Nigeria). in the custody of non-pension assets and, food companies in Nigeria with a solid The transaction demonstrates the support
Analyst Ranking 2017 (Financial Mail), in testament to this, executed the first track record of building strong consumer that the Stanbic IBTC Group provides
Best Research House for Sub Saharan Transactional Products and Services Securities lending transaction in Nigeria. brands like Indomie instant noodles. towards driving growth and investment in
Africa (Financial Mail) as well as Spire (“TPS”) Nigeria. It also coincidentally aligns with
Awards Best Research House 2017. The establishment of the new cereal the Federal Government’s drive to support
Transactional Products and Services manufacturing factory is an important local industries in a bid to strengthen the
Stanbic IBTC Stockbrokers Limited provides standardised and tailored milestone for the company as it local currency. With over 2,000 direct
(“SISL”) transactional products and services, creates a platform for the popular and indirect jobs created, a source of
including trade finance, working capital Kellogg’s breakfast cereal brands to be livelihood is created for many Nigerians.
Stanbic IBTC Stockbrokers Limited, a and cash management solutions. The team manufactured locally with world class
market leading firm, provides stockbroking offers a full range of solutions to deliver quality and enjoyed by the Nigerian
services to local and foreign investors in specific payments, collections and liquidity
the Nigerian Capital Market. management capabilities. TPS’ wealth of
experience ensures products are designed
SISL is Nigeria’s largest stockbroking firm to meet our clients’ specific business
in terms of transaction value - a position needs. Our online channel capabilities
that has been held since 2006 (2017 continue to evolve to meet our clients’
current market share of 18%). complex and changing requirements.

2017 Awards Despite the very challenging business
• Received the 2017 NSE (The Nigerian environment, the Transactional Products
and Services business remained
Stock Exchange) CEO award for the focused on its key business drivers and
sixth consecutive year as the best competitive advantage to deliver a strong
dealing member firm. performance in 2017. Revenues grew by
61.8%, deposits by 6.6% and channel
• Awarded Business Day Banking utilisation by 53.2%. All three product
Award 2017 for Best Stockbroker/
Investment Banking Firm for the
second consecutive year.

50 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 51

Case study

Anheuser-Busch InBev

Consolidation of Brewery Operations in
Nigeria via Merger and US$50 million Debt
Financing for Capital Expansion

1. Overall transaction adviser and significant challenges for FMCG companies
financial adviser to Intafact Beverages in Nigeria. Consumer purchasing power
Limited and Pabod Breweries Limited; declined on account of high inflation and
unemployment. Input and production
2. Stockbrokers to International costs increased because of challenges
Breweries Plc; and and increased cost of sourcing FX to
buy raw materials.
3. Sole lender to International Breweries
Plc and Intafact Beverages Limited Stanbic IBTC Capital Limited advised
two of AB InBev’s subsidiaries (Intafact
Anheuser-Busch InBev SA/NV (AB InBev) Beverages Limited and Pabod Breweries
is the largest brewer and multinational Limited) on their merger with International
beverage group in the world. Following Breweries Plc. Stanbic IBTC Stockbrokers
AB InBev’s acquisition of SABMiller Plc in Limited were stockbrokers to International
2016, International Breweries Plc, Intafact Breweries Plc.
Beverages Limited and Pabod Breweries
Limited (the merging companies) became As overall transaction adviser to the
indirect subsidiaries of AB InBev. The core merger, Stanbic IBTC Capital Limited
business of the merging companies is the supported AB InBev and the merging
production and distribution of alcoholic entities on key deal parameters and
and non-alcoholic beverages in Nigeria. considerations, including transaction
The intention of the merger was to jointly structuring, regulatory approvals,
create a market leadership position and to shareholder engagement, valuation
maximise value for stakeholders. and share exchange ratio, and project
management.
International Breweries, the only listed
company among the three merging In a separate transaction, Stanbic IBTC
companies, is on The Nigerian Stock Capital Limited and Standard Bank of
Exchange and has become the top six South Africa supported AB InBev’s
listed company by market capitalisation, long term investment plans for Nigeria
up from number 15. The value of the by structuring and arranging US$50
consideration to shareholders of Intafact million debt financing to fund AB InBev’s
Beverages and Pabod Breweries, in the capital expansion and working capital
form of International Breweries shares, requirements. AB InBev’s announced
was US$ 950 million / N291 billion. plans for Nigeria include the construction
of a US$250 million brewery in Sagamu,
This merger has reshaped the competitive positioned to be the second largest
landscape for the Nigerian beverage brewery in Africa.
sector. It has created the second largest
beer brewer in Nigeria with a combined This merger and debt financing
installed capacity of 5.65 million transactions represent Stanbic IBTC’s
hectolitres. The merger is expected to unique service offering as a full service
lead to administrative efficiencies, cost corporate and investment bank and
reduction and operational synergies our commitment to assist international
which will be beneficial to shareholders of institutions in achieving their strategic
the enlarged entity. It also positions the objectives and growing their investments
enlarged company for success in a difficult in Nigeria.
competitive market. Tough macroeconomic
conditions in 2016 and 2017 created

52 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 53

Wealth

What we offer also maintained its position as the largest bid to promote transparency,
non-pension assets manager measured by professionalism and investor
Stanbic IBTC Holding’s Wealth group value of AUM, number and size of mutual confidence.
comprises four legal entities viz. Stanbic funds and number of customers while
IBTC Pension Managers Limited (“SIPML”), SITL and SIIBL further broadened the • SITL renamed her flagship estate
Stanbic IBTC Asset Management Limited product offering by catering to the needs planning product, Simple Will to
(“SIAML”), Stanbic IBTC Trustees Limited of different strata of our clientele with ‘’Legacee’’ after requisite approval
(“SITL”) and Stanbic IBTC Insurance respect to estate management, trusteeship of the patent name registry. This was
Brokers Limited (“SIIBL”). and brokerage for various classes of done for improved acceptability and a
insurance respectively. public launch was also held.
The Wealth franchise being capital light
is focused on annuity type income, 2017 highlights • SITL was appointed joint trustee to the
pension administration and management, only Sovereign bond issued in the year.
private non-pension asset management, • Wealth maintained its leading position
trusteeship and estate planning as well as the largest institutional investment • SIIBL won significant key mandates
as insurance brokerage. The businesses business and number one wealth during the year including its
within Wealth underlines SIBTC’s capability manager in Nigeria with assets under appointment for insurance brokerage
to meet the broader financial needs of management of N2.71 trillion (US$ services to the largest shopping Mall
our customers and ensure we provide 8.62 billion). in Nigeria & also large mandates in the
protection and preservation of their assets. oil & gas sector.
It completes the loop in our promise of • Growth of 26% was recorded in
being a universal financial services year-on-year net profit. • SIIBL registered a sender ID,
organisation as we seek to provide solutions ‘’SIBTCInsure’’ with the National
at every stage of an individual’s life. • Cost efficiency remained stable at Communication Commission (“NCC”) to
a cost to income ratio of 31.0%. enable us to proactively send automatic
Overview insurance renewal notices to clients. In
• Recorded a return on equity (“ROE”) addition, a contact centre was set up in
Outlined below are the Stanbic IBTC of 61.8%. order to improve customer service and
subsidiaries which make up Wealth; drive our customer centricity strategy.
• Stanbic IBTC Money Market fund
• Stanbic IBTC Pension Managers Limited defended its position as the largest • Three additional self-service kiosks
(SIPML) deals with the administration mutual fund in Nigeria thereby were deployed to serve our pension
and management of pension assets, maintaining its leadership position. clients. These were built to enhance
SIAML now has a market share of customer experience and ensure easier
• Stanbic IBTC Asset Management over 40% of the collective investment accessibility to information by pension
Limited (SIAML) deals with the schemes (“CIS”) industry. clients. Our customers can also enjoy
management of non-pension assets. self-service for frequently requested
Our Wealth & Investment team, experts • SIAML listed a total of nine mutual enquiries.
who serve as advisors to high net-worth funds on The NSE in 2017 to further
individuals, sits within this subsidiary. improve the visibility of our products. • As part of our customer centricity,
digitisation and cost saving efforts,
• Stanbic IBTC Trustees Limited (SITL) • The minimum investment amount we launched an online portal for our
deals with trusteeship and estate for our mutual funds were reduced pension clients to submit benefits
management functions and to N5,000 and $1,000 for our naira applications. Voluntary Contributions
denominated mutual funds and Stanbic (“VC”) application was used as a pilot
• Stanbic IBTC Insurance Brokers Limited IBTC dollar fund, respectively, to test and the feature is now accessible
for insurance brokerage and risk accommodate more retail investors. to all clients.
management functions
• Our online platform and mobile app • In our bid to drive awareness and
As at 31 December 2017, Wealth had were upgraded for simpler and more improved education on the contributory
N2.71 trillion (US$ 8.62 billion) in assets efficient transaction processing for pension scheme, SIPML held employer
under management (“AUM”) and has mutual fund clients. For instance, forums across six regions (Lagos,
remained the leading wealth manager in clients can now open instant mutual Abuja, Port-Harcourt, Enugu, Ibadan
Nigeria with the pension business - SIPML fund accounts online and through our and Benin). These events were well
consolidating its pre-eminent position as mobile app. attended by up to 3,500 employer
the largest Pension Fund Administrator representatives cumulatively.
(“PFA”) in terms of AUM and number of • SIAML also sponsored a workshop for
Retirement Savings Accounts (“RSAs”). the adoption of the Global Investment
The asset management company, SIAML Performance Standards in Nigeria in a

54 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 55
Wealth (continued)

• Our external recognition reflected through the number of • Grow the insurance revenue stream by harnessing all the Strategy Financial performance
awards won by the Pension business, which includes the opportunities within the group through improved collaboration
Business Day Award 2017 for the Most Innovative PFA, African and extend our product offerings to other non-customers of The wealth business model focuses on providing financial The equities market posted an impressive return of 42.3% as
Child Prize Award 2017 – Integrity in corporate business, the the group through expansion of sales structure to cover new advisory, financial planning, investment portfolio management, of YE 2017, its best performance in four years. This strong
Nigerian Customer Experience Awards - Excellent Service locations and empower staff to provide quotes to clients within estate planning and a number of other financial services to our performance was driven by a significant increase in foreign
Delivery in PFA Category, Best Pension Fund of the Year by the reasonable timelines. customers. In doing this, we are committed to ensuring security, portfolio flows on the back of improved liquidity in the foreign
National Association of Insurance & Pension Correspondents liquidity as well as competitive long term returns at every stage exchange market and expectation for improved corporate
(“NAIPCO”) and the Lead Best Pension Manager of the year. • We will continue our digitisation journey by implementing new of the clients’ life cycle. performance alongside improving macroeconomic fundamentals
channels to drive our retail insurance acquisition strategy and as Nigeria exited recession in Q3.
• Our Asset Management business also won the Business Day some corporate products, and also aim to improve ways of In 2017, we maintained our leadership position in the various
Awards for Best managed funds for money market and best working to support digital ambition. segments of the wealth business by improving on our product In the fixed income market, the tight monetary policy by the
managed funds for fixed income as well as the Euro money offerings, client base and assets under management. In the Central Bank of Nigeria (“CBN”) kept interest rates high thus
Awards in excellence - Africa’s best bank and the Private • Streamline all business processes through automation and Pension business, our client base grew by 87,303 and we closed creating solid carry trade opportunities for international investors
Banker awards 2017 (for our Wealth & Investment business) documentation to enhance business turnaround time and the year with a total of 1,595,343 RSA clients. Pension assets and real return opportunity for domestic investors with treasury
for the second year running. deliver quality customer experience. under management also increased by 22.79% to close the year bills and government bonds rising as high as 22% and 16.9%,
at N2.31 trillion (US$7.57 billion). In the asset management respectively. Cost of debt servicing remained a major concern for
2018 Priorities • In our bid to deliver improved customer experience through segment, we increased our client base by 26.9% to close the year the country’s economic managers and they sought to address this
innovation, to drive client retention and improved efficiency in at 92,391. by issuing Eurobonds to redeem maturing treasury bills in the last
• C ontinued collaboration with SEC, The NSE, FMDQ our pension operations, we intend to update the online portal quarter of 2017. This resulted in a compression of the yield curve
and other key stakeholders in improving awareness to accommodate receipt of the 25% benefit applications from The slowdown in economic activities stalled business expansions by c. 210bps as average treasury bills and government bonds
and education regarding mutual funds. pension contributors. and triggered job cuts across various sectors of the economy. yields declined by 350bps and 71bps respectively.
Therefore, new hiring across all sectors slowed down, negatively
• We plan to step up on the use of technology to enhance • SIPML is poised to implement the multi-fund structure impacting the momentum of new client acquisition by the pension Consequently, the year ended with profit taking on both equities
transaction processing and efficiency of subscriptions and which allows pension contributors to decide their investment business. Despite the foregoing, we continued to maintain and fixed income as investors sought to close their books with
redemption of our mutual funds. We would also enhance exposure based on their risk appetite. This is regulatory driven close relationships with our stakeholders by organising regular strong realised gains. Total income grew by 23% and net profit by
the use of digital and user-friendly customer interfaces to and it is expected to commence in Q1 2018. awareness sessions through their employers and town hall forums an impressive 26% over the 2016 figures, while total assets under
provide more bespoke advisory services to both high net with employer representatives to educate them on their roles and management increased by 31% to close the year at N2.71 trillion
worth and retail clients. • Following the joint circular issued by the National Pension rights as members of the contributory pension scheme. (USD8.62 billion).
Commission and the National Insurance Commission on the
• We intend to finalise our digital investment platform to modalities for the transfer of the annuity assets, SIIBL will Our asset management business continued to focus on ensuring Performance highlights Growth 2017 2016
capture the retail market, effectively seek to increase double its efforts on securing new annuity mandates to we maintained our leadership position in the industry by growing % Nmillion Nmillion
our focus on investors’ education through traditional boost income. the net asset value of funds under management. The elevated Net interest income 18
and digital media channels. interest rate for most of the year as well as the fund manager’s Non-interest revenue 4,375 3,693
Total income 2017 2016 expertise helped our money market fund emerge as the best in Total income 24
• W e will also increase the visibility of our mutual funds Cost to income ratio N39.46 billion N32.07 billion the industry. Staff cost 23 35,087 28,374
and related solutions through deliberate and intentional Assets under management 31.0% 30.9% Other operating cost (32) 39,462 32,067
prospecting and increase marketing efforts to reposition Retirement savings accounts N2.71 trillion N2.08 trillion SITL was appointed as joint trustees with five others on a Tax provision (18) (5,514) (4,177)
the funds against more specific client needs and objectives. Profit before Tax 1,595,343 1,508,040 sizeable bond issuance. It also rebranded and repositioned Profit after tax (16) (6,722) (5,716)
N27.23 billion N22.17 billion the Wills product, now ‘Legacee’, to position it for more ready 26 (8,068) (6,964)
• We aim to offer new products and solutions in both traditional acceptance amongst its target market. In the course of the year, 19,158 15,210
and alternative assets to meet the changing and diverse needs we continued to create trust and estate planning awareness while
of existing and potential clients. Adopting more innovative Revenue by business unit providing advocacy and thought leadership to the Securities and
methods in the delivery of our Wealth & Investment solutions SIPML 87.11% Exchange Commission.
to enhance our clients’ experience. SIAML 10.86%
SITL 0.98% For the insurance brokerage business, we continued to proffer
• Equip and resource the alternative investment desk to focus SIIBL 1.05% risk management solutions to our clients. Our collaborative efforts
on positioning SIAML in the alternative investment space and with the group helped improve our client base and recognition
enhance our alternative investment products and capabilities. in the industry. We plan to continue to provide a hedge against
In the same vein, we aim to position our mutual funds for unforeseen risks as well as consolidate our position within the
more inclusion at the retail end of the market. industry in our areas of expertise.

• Continuous improvement of our mutual fund online access
platform in our pursuit of simpler, better and faster investment
channels for our customers as we continue to lead innovation
in the industry.

56 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 57
Wealth (continued)

Looking forward for corporate issuances at attractive outlook, organisational re-design, strategy
levels when compared with government adjustment and competency review to
The global economy is expected to securities. ensure fit for purpose structure and
experience sustained growth in 2018 while optimal results.
central banks of developed economies In equities, we will seek for opportunities
are expected to be less accommodative. to increase equity allocation in funds Improved visibility of our Wealth &
Africa’s key trading partners such as China with regular inflow patterns and a long Investment offering with deliberate
and India are expected to grow at 6.50% term outlook thus taking full advantage collaboration with the group is also
and 7.40% in 2018 with positive tailwinds of rising economic growth, opportunity expected to improve as we focus more
expected for Sub-Saharan Africa as to outperform inflation and accumulate on client centricity so our clients can
stronger external demand should support wealth for beneficiaries of such funds. extract the best value from our universal
commodity prices whilst cyclical recoveries Thus, we will focus on companies best offering. We will offer strategic, tailor-
in oil and agriculture would bolster growth positioned to deliver earnings growth made responses to each client’s need
across a number of countries. Similarly, and strong market performance in the as we proffer the right solutions and
the rebound in growth in Nigeria is current phase of the economic cycle. thoughtful client engagement to ensure
expected to pick up pace in 2018 as oil Fixed income continues to provide income they remain clients for life.
production recovers, oil prices remain and liquidity opportunity for funds. Given
stable (forecasted to average $59pb in our positioning in duration coming into the We aim to continue SIIBL’s digitisation
2018) and government revenues continue year, we would remain focused on taking journey with an online sales platform
to improve. The key risks to this outlook advantage of opportunities to boost total (subject to regulatory considerations) to
are: inclusion of Nigeria in OPEC’s output return as they become available. drive retail sales. We also plan to expand
cut and resurgence of militant activities in the sales structure to include a sales
the delta. Political risk will also remain in We will continue to engage actively agency to enable wider coverage so that
the short term, being a pre-election year, with SEC & FMAN to improve our sales staff will be stationed closer
a period when horse-trading from interest transparency, reporting standards and to source of business and positioned to
groups usually takes place. However, in the investor confidence in the capital work closely with various business units
medium to long term, sustained efforts to market. We would also aim to expand across Stanbic IBTC subsidiaries. We will
diversify government FX revenues away the investment universe in order to meet continue in our drive to position the
from oil will be key to achieving sustained our clients’ objectives. insurance brokerage business as the firm
capital investment and development. of choice and ensure a mutually beneficial
We aim for increased investments in partnership with our key internal and
The 2018 proposed budget of N8.6 trillion digital solutions to deliver exceptional external stakeholders.
seeks to consolidate on the gains of 2017, client experience while leveraging on
which focused on recovery and growth. Standard Bank group’s knowledge We will stay ready for regulatory changes
While remaining in line with the Medium sharing platforms and networks for our which have been highly anticipated in prior
Term Expenditure Framework (MTEF 2018 alternative investment team. years such as the opening of the much
– 2020), the revenue targets of the budget awaited transfer window in the pension
seem ambitious partly due to assumptions We keep driving for growth in pension industry, commencement of the micro
used. In addition to seeming unrealistic assets via an increased awareness of pension scheme and implementation of the
assumptions made on the exchange rate the benefits of contributions into the guideline on withdrawal from RSA towards
and revenue generation, real GDP growth scheme through education for employer equity contribution for a mortgage. Despite
is forecasted at 3.5%, significantly higher compliance, conversion of un-funded the sustained recession for the most part
than market expectations of over 2%. accounts and special focus for new of 2017 and the resultant challenges, we
With a budget deficit target of N2.0 businesses from contributing employers. will remain steadfast to our core values
trillion, the government would have to We will also continue to follow up with and policies which will guide our decisions
strike the right balance between funding employers for pension remittances as it throughout the course of the year.
the budget deficit and its goal of lowering is in the best interest of our clients and
debt servicing costs. plan more employer town hall sessions in We will continue to focus on positioning the
2018 to allow for more direct stakeholder group as an end-to-end financial services
Monetary policy is expected to ease engagement. organisation by collaborating purposefully
slightly as the CBN strives to maintain with other Stanbic IBTC subsidiaries thus
the handle on inflationary pressures and The trustees’ business will consolidate on delivering the entire group to both existing
Foreign Exchange stability in a pre- its mandate acquisition drive for lucrative and new clients. We will leverage on the
election year. We therefore expect rates transactions with worthwhile revenues group’s position across the value chain of
to stay around the mid-teens during the in its attempt to significantly move the financial services to deepen existing client
year. Furthermore, we expect the easing dial and earn appreciable income to relationships as we unearth opportunities
in monetary policy to also create opening ensure it meets and exceeds its financial that will drive real progress for our clients.
targets. It will be aided by its revamped

58 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 59

Sustainability Report 2017

Introduction from the Chief Executive our success but guarantee the success of consonance with our brand and vision
government, businesses and individuals. “To be the leading end-to-end financial
In 2017, the Nigerian financial services solutions provider in Nigeria through
industry took further steps towards We pride ourselves on our rich pedigree innovative and customer-focused people.”
digitalisation. Data provided by the in financial innovation, drawn from our The group offers expert services in three
Central Bank of Nigeria (“CBN”) showed Standard Bank heritage, which has enabled business areas - Corporate and Investment
a significant uptake in electronic banking. us provide solutions that have enhanced Banking; Personal and Business Banking
Competition for e-banking market share the quality of life of individuals and and Wealth Management.
from Financial Technology (“FinTech”) boost their financial security; facilitate
companies rose with provision of business expansion, economic growth We do everything in our power to ensure
e-solutions as new players entered the and development in key sectors like oil that we provide our clients with the
market. However, banks continue to adopt and gas, manufacturing, agriculture, products, services and solutions to suit
newer and better solutions to simplify their power, healthcare, and real estate, among their needs, provided that everything we
operations and remain nimble. others. Our business strategy is to offer do for them is based on sound business
banking services to assist our internal and principles. We uphold high standards of
It was a significant year for the Stanbic external stakeholders manage social and corporate governance and are committed
IBTC Group. Following the resolution of environmental challenges and invest for to advancing the principles and practice
the long-drawn issue with the Financial the future. We work hard to build trust in of sustainable development. Our success
Reporting Council of Nigeria late in 2016, our operations and establish partnerships and growth over the long term is built on
we were able to release our outstanding that will be beneficial in the long term. making a difference in the communities in
financial reports as well as hold our 4th which we operate.
(2015) and 5th (2016) AGMs. There This Sustainability Report details
was also a change at the board and our corporate social investments, Stanbic IBTC Holdings has nine
management levels. The founder and environmental and social risk management subsidiaries:
chairman, Atedo Peterside, resigned to and performance as well as our shared
take up a new role in the mother brand, values in 2017. Our priority, going • Stanbic IBTC Bank (including Stanbic
Standard Bank Group of South Africa, forward, will be to ensure financial, social IBTC Bureau de Change Ltd and Stanbic
while the Chief Executive of the holding and environmental sustainability in our IBTC Nominees Limited)
company, Sola David-Borha, was elevated operations. We not only want to achieve
to a bigger role as Chief Executive (Rest financial outcomes, but we also want to • Stanbic IBTC Pension Managers Limited
of Africa) at the Standard Bank Group. fulfill our purpose of driving the growth
We continued to be at the forefront of of our economy. • Stanbic IBTC Asset Management
innovation and experienced some positive Limited
transformational changes and developed Stanbic IBTC Corporate Profile
further competencies in other segments • Stanbic IBTC Stockbrokers Limited
of the financial services industry, like in Stanbic IBTC Holdings is a full service
retail and personal banking, outside our financial institution which offers a wide • Stanbic IBTC Trustees Limited
well-honed competencies in investment range of products to a variety of segments.
banking and wealth management. We were Stanbic IBTC provides end-to-end • Stanbic IBTC Ventures Limited
equally able to provide significant support financial solutions which include corporate
to government’s fund raising efforts to and investment banking, personal and • Stanbic IBTC Capital Limited
finance the 2017 national budget deficit. business banking, stockbroking and wealth
We were instrumental to government’s management. • Stanbic IBTC Investments Limited
successful Eurobond Programmes,
Diaspora Bond issue, and FGN Savings Standard Bank Group, to which Stanbic • Stanbic IBTC Insurance Brokers Limited
Bond programme and their listing on IBTC belongs, is the largest African bank
both The Nigerian Stock Exchange and by assets with a unique footprint across 20 Our Approach to Sustainability
the FMDQ OTC Securities Exchange for African countries, including South Africa,
secondary trading. and 12 countries outside Africa, including Our approach to sustainability begins
key financial centres in Europe, United with our objective to operate an ethical,
We realised that our success as a business States and Asia. Standard Bank has been professional, accountable and profitable
is dependent on the success of the in operation for over 154 years and prides business. This is couched in our three-
individuals and businesses we serve and itself on being a global bank with African pronged sustainability framework
on the economy where we operate from. roots. document. We designed the SEE (Social,
Therefore, we are mindful to develop Economic and Environmental) framework
relevant solutions that not only ensure Stanbic IBTC Holdings aims to position to ensure we support the wellbeing of
itself as the leading end-to-end financial communities by delivering value through
services solutions provider in Nigeria in the products and services that we provide.

We have a commitment to contribute
to sustainable development. This
commitment is embedded in our core

60 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 61

Sustainability Report 2017 (continued)

values of integrity, professionalism and The Chief Executive of the Group has the Beneficiaries of our sustainable lending Awareness Creation advancement of women in business and in Being an ardent supporter of persons
respect for both internal and external overall responsibility for sustainability include Dangote Refinery, Indorama Eleme Our awareness creation drive increased paid employment. living with prostheses, our organisation
stakeholders as outlined in the SEE accountability, supported by an executive Petrochemical, Kellogs Tolerams, Lekki across our stakeholder groups, in the has constructed wheelchair access ramps
framework. committee. However, care is taken to Concession Company, and Presco, among implementation of NSBP. Following the • The Stanbic IBTC Blue Women Network in 33 branches and our major head office
ensure decisions are cascaded from the others. NSBP adoption, a total of 120 employees is a platform for female employees of campuses across the group to facilitate
In implementing the Nigerian Sustainable top management level to the individual received introductory environmental and Stanbic IBTC across all cadres, which access of physically challenged persons
Banking Principles in our business activities employee. Environmental and Social Risk social risk training in 2015 and several provides opportunities for networking, into our office locations.
and operations, Stanbic IBTC is under the Management others in 2016. This number rose across development and growth. By default,
following three pillars. Corporate Social Investment: Business Stanbic IBTC acknowledges that the our business units in 2017. all women who join our organisation We will continue to explore ways to
and Societal Needs development of a corporate culture become crucial members of the alleviate the difficulties encountered
• Credit Our priority is to ensure financial, social whereby environmental sustainability Benefits of Environmental network. by the physically challenged for a more
• Group Real Estate Services (“GRES”) and environmental sustainability. Through principles are adhered to both in and Social Risk Management inclusive banking experience for all our
• Procurement our social investments, we hope to boost its operating environment and with Appropriately and efficiently managed We also ensure that staff policies targeted customers.
the Stanbic IBTC brand reputation, counterparties is crucial to sustainable environmental and social risks and at our female employees address their
Credit: Integrate Environmental and Social increase our market share and improve development. opportunities will enhance our: needs. Education
Considerations into Credit Decision Making employee relations in a way to enhance
process by ensuring on boarding of new our long term competitiveness. Our impacts on society and the • Overall risk management which in turn Health Education, through knowledge and skills
business opportunities are E&S compliant environment can be both indirect, reduces costs and liabilities; acquisition, is an essential ingredient for a
and follows approved credit process, For maximum impact, we identified, arising from the activities of our customers Our employees remain at the heart productive workforce. As a result, we are
policy and guidelines for Corporate and using a research-based approach and who we finance, and direct through our • Ability to access capital and attract of our business; and we believe that continuously engaging our employees to
Investment Banking (‘CIB”) and Business by engaging with our stakeholders, day-to-day operational activities and foreign investors and partners; their wellbeing is important to enable ensure their growth through leadership
Banking (“BB”). including communities, governments the products and services we provide. us deliver our promises to our clients trainings and skills acquisition, to
and individuals, the critical needs of our These are either internal, affecting • Financial and non-financial and stakeholders as an organisation. complement a diversified and conducive
GRES: Monitor our ecological business environment. These needs fall employees or the organisation, or external, performance; Therefore, we take matters concerning work environment, and well-structured
footprints with respect to the impact of under Education, Health and Economic affecting communities, customers, their wellbeing to heart and have invested compensation policy.
our business operations, in terms of Power Empowerment and form the tripod upon partners and regulators, among others. • Brands and reputations at the individual in a number of wellness programmes to
maximisation, waste management, carbon which our Corporate Social Investment Thus, we go beyond compliance in our organisation as well as sector level; encourage healthy lifestyles for them. We continue to invest in the educational
emissions, energy and water efficiency and activities rest. The convergence of approach to environmental and social risk The wellness initiatives include: advancements of our communities through
building designs and architecture that are social investment goals and business management. This approach has helped • Operational efficiencies; our CSI Initiatives such as the Mentor-a-
green. helps engender long term benefits and us achieve best practice performance • Weekly on-site aerobics in our four Class project, where staff members take
sustainability. through sound governance structures • Ability to attract and retain talents; head office campuses across the group; a day off to engage school children in our
Procurement: Assess, develop and and policies, monitoring mechanisms, adopted school, Lagos Progressive School,
screen suppliers with a view to ensuring Sustainable Lending strategic partnership, energy efficient • Relationships with our clients by • Physical activities encouraged in all Surulere, on financial literacy, leadership
the sustainability of our vendors and their In providing credit facilities to and renewable energy programmes, becoming a trusted advisor; and our offices, including our branches and analytical skills, among others. Under
ability to meet our procurement needs and conglomerates, multinationals, small and supplier development and screening, nationwide; these are group walks and our staff volunteerism initiative, a block of
also assist them in mitigating social and medium scale enterprises, we continue to employee training and awareness, • Growth prospects by reaching new daily exercise-at-the-desk routine for six classrooms was donated to the National
environmental costs. review the environmental and social (E&S) products and services that help reduce markets and innovating new products all employees. Orthopaedic Special School, Igbobi, Lagos
risk considerations embedded in our credit carbon emission and green building design. and services. by the Operation Shared Services Team.
Corporate Governance approval process. This entails the screening To also encourage physical exercise, we The children we fitted with artificial
of credit transactions for E&S risks, as well In line with regulatory stipulation, Stanbic Empowering our People have instituted a no-lift-day once a week limbs were also awarded Stanbic IBTC
Creating thriving partnerships as monitoring their activities to ensure our IBTC complies with the Nigeria Sustainable We expect an increasingly productive across the organisation, when staff are Educational Trusts to give them a better
Stanbic IBTC has a strong governance clients carry out their operations in line Banking Principles (“NSBP”) and through and highly motivated workforce, one that encouraged to opt for the staircases rather chance at success in life.
structure, with distinct roles and with acceptable environmental and social the Standard Bank Group is a signatory constantly exceeds the expectations of than use the lift.
responsibilities between the board and standards. to the Equator Principles, thereby customers. We are continuously engaging
management. These roles are governed by adopting international best practice our employees to ensure their growth For our external stakeholders, one of
clearly marked policies and controls. Our From January 2017, we have assessed in Environmental and Sustainability through leadership trainings and skills the key pillars of our CSI initiative is in
work is governed by internal and external about 330 Business Banking credit standards. We adopt a precautionary acquisition, a diversified and conducive the health sector. We have consistently
regulations as well as international best transactions for E&S risks. In our approach to environmental management, work environment, and well-structured partnered with an NGO Slum2School to
practices. Corporate governance is a key Corporate and Investment Banking striving to anticipate and prevent compensation policy. Higher levels create awareness on the scourge of malaria
part of our entire operation in evaluating, business, 36 approved credit transactions environmental degradation in line with of employee engagement are linked as well as distribute mosquito treated nets
approving, and monitoring of projects. were assessed for E&S risks. We also the guidelines set out in the Equator to lower levels of absenteeism and to indigent school children and pregnant
Our major CSI objectives remain: support take pride in providing credit facilities Principles and the provisions of the employee turnover. In 2017, employees women in underserved and malaria prone
for strategic and credible projects, in line to Business Banking clients for Environmental Laws of Nigeria. formed an important part of our CSI, communities. Through our signature CSI
with business objectives; deploy scalable environmentally beneficial purposes. helping to create awareness and actively initiative, Together4 A Limb, we provide
solutions that are beneficial to a higher As of June 2017, we had approved credit participating in chosen initiatives, prostheses for children with limb losses
number of people; work with credible facilities of about $2.2million for this area. individually and as a team. as well as replacing these limbs annually
partners; and leverage existing business until they are 18 years. So far, we have
opportunities. Our organisation is very sensitive to gender 20 beneficiaries.
parity and inclusion. As a result, we have
initiatives targeted at the wellbeing and

62 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 63

Sustainability Report 2017 (continued)

Economic Empowerment • Switch-off initiative which aims to save 3. Green Branches Employee Volunteerism This initiative has been hugely successful Stanbic IBTC Bank PLC and its holding
energy consumed by elevators and over the past year. Through staff CSI company, Stanbic IBTC Holdings PLC,
At Stanbic IBTC, we apply sustainable central air conditioners in our head In addition to our printing reduction and At Stanbic IBTC, our vision recognises that volunteerism or contribution alone, both recorded AAA(nga) national
principles that drive the growth and office campuses. We also turn-off paper recycling initiatives, we are also our people are our most important asset, we invested over a N100 million towards long-term ratings by Fitch Ratings,
development of the industries we finance power at 6pm in our branches. This piloting ‘Green Branches’ within our which makes it imperative to inspire and various charitable causes under the health, which provide a relative measure of
and communities in which we operate in. It initiative also encourages work-life organisation where additional sustainability engage employees in ongoing CSI efforts education and economic empowerment creditworthiness for rated institutions.
gives us satisfaction to deliver value to the balance among our employees, who initiatives and processes will be driven. Our to make a meaningful impact. We see portfolios in 2017. Under our staff According to Fitch Ratings, “AAA is
communities we serve by contributing to remain the drivers of our business. aim is to run operations in these branches our employees as our partners in all our volunteerism initiative, a block of the highest credit quality. They are
their social, economic and environmental that ensure minimal paper use, increased sustainability initiatives. By doing this, not six modern classrooms was built and assigned only in cases of exceptionally
(“SEE”) wellbeing through the services • Installation of energy saving LED bulbs energy and water efficiency. only do we succeed in getting their active donated to the National Orthopaedic strong capacity for payment of financial
we provide. Our aim is to improve life for across our bank branches and head involvement, but also benefit from the fact Special School, Igbobi, Lagos. commitments. This capacity is highly
everyone in Nigeria and beyond. We not office campuses for reduced energy 4. Tree planting in Zaria branch that employees gain a lot of valuable skills unlikely to be adversely affected by
only want to achieve financial outcomes, consumption. and experiences which make them a better Sponsorships foreseeable events.” Fitch said triple
but we also want to fulfil our purpose of In line with efforts targeted at preventing asset to our organisation. A “denotes the lowest expectation of
driving the country’s growth. • I nstallation of motion sensors in desert encroachment, especially in the Development is key to our deciding default risk” while the F1+ “indicates
buildings for the control of power. northern part of Nigeria, a substantial part The sustainability of an idea needs on what sponsorships we undertake. the strongest intrinsic capacity for timely
We made donations to orphanages, we of our Zaria Branch is being landscaped to everyone in every title to be aligned to We continue to identify credible and payment of financial commitments.”
have also made donations to widows Use of alternative sources of power for provide greenery and shade for our staff our mission of moving forward. We believe impactful initiatives that are compliant Such regular ratings provide an idea of
through the Human Development ATMs and branches – Our Festac and Katin and customers who use the location. our people and culture will determine our with our sustainability policy to the credit worthiness of the institutions
Initiatives. We have initiatives targeted at Kwari branches are partly powered by solar success in executing our strategy, which support through sponsorships. And so rated.
the wellbeing and advancement of women energy; while ten (10) offsite ATMs are 5. Waste segregation includes our CSI. Our business philosophy our sponsorships cut across the broad
in business and paid employment in a way also powered by alternative sources. is anchored on and vested in building spectrum of sectors which we serve, to The Stanbic IBTC Blue Academy was
to ensure gender parity and inclusion. To address issues of environmental relationships and trust with our clients/ reflect our end-to-end financial services accredited by the banking industry
As of June 2017, we had successfully 2. Paper reduction and recycling degradation resulting from indiscriminate customers, employees, shareholders, credentials. umbrella body, the Chartered Institute of
empowered businesses owned by women Across the group, we strive to bring and inappropriate disposal of waste, the regulators, communities and other key Bankers of Nigeria, and certification issued
through lending amounting to about unnecessary printing to a minimum and group continues to invest in solid waste stakeholders. Our values underpin our Through our Fine-Arts-and-The-Acts, to validate its training standard.
16% of the total loan portfolio for reduce paper usage in our business segregation and recycling initiatives legitimacy and are intended to reinforce Stanbic IBTC is recognised as an active
Stanbic IBTC Bank. operations. As at August 2017, we had involving the sensitisation of staff and the trust our stakeholders have in our sponsor and supporter of the creative Awards
successfully reduced our year-to-date customers on the need to separate organisation. As such, we endeavor to industry. The overriding objective of
Sustainability Practices paper usage (for printing and photocopy) solid waste for further recycling. The carry along and get the buy in of all our our arts sponsorship programme is to The stockbroking arm of the Group, Stanbic
across the bank by about 30 percent deployment of waste bins designed for internal and external stakeholders. nurture and promote the development IBTC Stockbrokers Limited, received The
Stanbic IBTC is a member of the compared to the same period in 2016. segregation of solid waste are ongoing in of the creative industry, encouraging Nigerian Stock Exchange CEO award as
Nigerian Conservation Fund which our head office campuses. We have a culture of staff involvement engagement and social interaction. the best dealing member firm in 2017,
supports sustainability related causes. Measures taken include: and participation in our social investment We also sponsored the ArtX Lagos for a high-performance culture, the sixth
Our membership further attests to 6. Water utilisation initiatives which means that our staff are and the Eat Drink Lagos. consecutive time it would win the award.
our commitment to maintain a robust • Installation of Follow-Me Printing on not only part of the activation but the
operation focused on environmental Printers We have implemented eco-friendly water entire process of identifying key areas Standards and Codes
education, biodiversity conservation, utilisation measures to reduce wastage by: where we choose to support, collaborate
policy advocacy, public sensitisation • Setting printers to Double Sided or invest. We try as much as possible to Stanbic IBTC’s business sustainability and
on environmental issues, mitigating printing by default • Installing toilet systems with dual flush encourage our staff to either as teams or international best practices continue to
environmental pollution and poverty knobs units voluntarily contribute and participate attract commendations, recognitions and
reduction. • Recycling of paper for printing through departmental CSI activities. revalidation through various awards and
• Installing of taps with motion sensors certifications.
Our key sustainability practices include: • The use of shared folders to document in restrooms and kitchens
storage as against printing
1. Energy efficiency in operations As a responsible corporate citizen, we
Replenishing our sources of energy • Eliminated the use of paper in 12 will continue to carry out our business
remains an important aspect for the branch processes operations in ways that minimise
growth of our economy. As a result of this, any negative social, economic and
we have embarked on energy efficiency We are also supportive of paper recycling environmental impact. We will continue
initiatives across Stanbic IBTC Group. and have recently worked with partners to review our operational processes and
These include: to recycle over nine (9) tons of archived engage our key stakeholders to achieve
paper in exchange for tissue papers that as much involvement in our sustainability
• Operation Switch Off and UnPlug will be used in our offices. initiatives as possible, for the benefit of
(“SOUP”) initiative which encourages the communities we operate in.
staff members to switch off and unplug These initiatives serve as one of the
electronic devices at close of business. ways we contribute to the reduction in
tree-felling for paper production. A more
balanced ecosystem is achievable if such
practice is encouraged by organisations.

64 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 65

Enterprise risk review

Overview measures, including strengthening the Risk management framework
risk and control environment, monitoring
Risk Management’s objective continues risk appetite and governance standards Approach and structure
to align with the group’s strategic focus across the institution and elevating The group’s approach to risk management
“to be the leading end-to-end financial risk awareness by deploying requisite is based on governance processes that
solutions provider in Nigeria through compliance training programme for all rely on both individual responsibility and
innovative and customer-focused people”. Stanbic IBTC employees with a standard collective oversight that is supported
Effective risk management is fundamental process of monitoring and escalating by a tailored Management Information
and essential to the achievement of the deficiencies in meeting the required System (“MIS”). This approach balances
group’s strategic objectives. It is also one standards. This is also in line with the corporate oversight at senior management
of the pillars of the institution’s strategic established code of conduct and ethics level with independent risk management
value drivers, which entails supporting that all members of staff must adhere and structures in the business where the
our clients by doing the right business attest to on an annual basis. business unit heads, as part of the first line
the right way and maintaining the highest of defense, are specifically responsible
possible standards of responsible business The Board sets the tone and risk appetite for the management of risk within
practice using the right frameworks that for the organisation, including the their businesses using appropriate risk
align with regulatory expectations and tolerance levels for key risks. These risks management frameworks that meet
standard business practices as well as are however managed in accordance with a the required group minimum standards.
procedures. set of governance standards, frameworks
and policies which align with the global An important element that underpins the
The Group Risk function continues its best practices. group’s approach to the management of
oversight and advisory responsibilities by all risk is independence and appropriate
deploying a consistent, comprehensive and The overarching approach to managing segregation of responsibilities between
strategic approach to the identification, enterprise-wide risk is based on the Business and Risk. Risk officers report
measurement, management and reporting “Three Lines of Defense” principle which separately to the Head of Risk who
of enterprise-wide risks across the group. requires the first line (Business risk reports to the Chief Executive of Stanbic
This is executed through proactive risk owners) to appropriately demonstrate IBTC Bank and also through a matrix
management practices which ensure ownership and accountability for risks reporting line to the Standard Bank
that the business maintains the right and manage same closest to the point Group (“SBG”).
balance in terms of the risk-return trade of incidence; second line (including Risk,
off whilst limiting the negative variations Compliance, and Internal Control) to All principal risks are supported by
that could impact the group’s capital, review and challenge as well as provide the Risk Management department.
earnings, risk assets and appetite levels oversight and advisory functions; and
in a constantly changing and dynamic the third line (Internal Audit) to conduct
operating environment. Furthermore, assurance that control processes are fit for
Group Risk continues to shape, drive and purpose, are implemented in accordance
monitor the activities relating to risk and with standard operating procedures, and
conduct in the institution through various operating effectively or as intended.

66 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 67

Enterprise risk review (continued)

Governance structure Residual risk is then evaluated against shares) and general wrong way risk (which Liquidity risk
the risk appetite. arises where the credit quality of the
The risk governance structure provides a platform for the board, executive and senior management through the various committees to counterparty may for non-specific reasons Liquidity risk is defined as the risk that
evaluate and debate material existential and emerging risks which the group is exposed to, and assess the effectiveness of risk responses Risk categories be correlated with a macroeconomic factor the group, although balance-sheet solvent,
through the risk profiles of the underlying business units and functional areas (please refer to the pictorial representation of the group which also affects the credit quality of the cannot maintain or generate sufficient
risk governance structure below). The group’s enterprise risk management counterparty). cash resources to meet its payment
framework is designed to govern, identify, obligations in full as they fall due or can
The risk-focused board committees include the statutory audit committee, board credit committee, board IT committee, board legal measure, manage, control and report on Settlement risk only do so at materially disadvantageous
committee, and board risk management committee, while executive management oversight at the subsidiary and group levels is achieved the principal risks to which the group is Settlement risk is the risk of loss to the terms.
through management committees that focus on specific risks. Each of the board and management committees is governed by mandates exposed. The principal financial risks are group from a transaction settlement,
that set out the expected committee’s terms of reference. defined as follows: where value is exchanged and the There are two major sources of liquidity
counter value is not received in whole risk, which are funding liquidity risk and
Governance structurea Credit risk or part. market liquidity risk. Funding liquidity risk
refers to the risk that the counterparties
Stanbic IBTC Board Shareholders Credit risk arises primarily in the group Country and cross border risk who provide the group with funding will
operations where an obligor/counterparty Country and cross border risk is the risk withdraw or not roll-over that funding.
Management Board Committees Statutory Audit fails to perform in accordance with agreed of loss arising from political or economical Market liquidity risk, on the other
Committees Committee terms or where the counterparty’s ability conditions or events in a particular country hand, refers to the risk of a generalised
to meet such contractual obligations is which reduce the ability of counterparties disruption in asset markets that makes
Executive Risk Remuneration Nominations Legal Information ADHOC impaired. in that particular country to fulfill their normal liquid assets illiquid and the
Committee Management (REMCO) Technology obligations to the group. potential loss through the forced-sale of
Credit risk comprises counterparty risk, assets resulting in proceeds being below
Internal Risk wrong-way risk, settlement risk, country Cross border risk is the risk of restriction their fair market value.
Financial Oversight risk and concentration risk. on the transfer and convertibility of local
Control Committee currency funds, into foreign currency funds Credit risk
Counterparty risk thereby limiting payment by offshore
Equity and Operational Information IT Steering New & Amended Counterparty risk is the risk of loss counterparties to the group. Principal credit standard and policies
Investment Risk & Strategy & Committee Products, to the group as a result of failure by The group’s Governance Standard, as
Governance Business & a counterparty to meet its financial Concentration risk reviewed regularly, sets out the broad
Risk Compliance Committee Services and/or contractual obligations to the Concentration risk refers to any single overall principles to be applied in credit
Committee Committee group. It has three components: exposure or group of exposures large risk decisions and sets out the overall
enough to cause credit losses which framework for the consistent and unified
Board Committees Statutory Committees Management Committees • primary credit risk, which is the threaten the group’s capital adequacy governance, identification, measurement,
exposure at default (“EAD”) arising or ability to maintain its core operations. management and reporting of credit risk
aThis is continuously evolving to meet changing needs and requirements. from lending and related banking It is the risk that common factors within in the group.
product activities, including their a risk type or across risk types cause
Risk governance standards, standards, policies and procedures are • r eviewing and monitoring underwriting; credit losses or an event occurs within a The Corporate and Investment Banking
policies and procedures implemented within and across the the group’s performance in relation risk type which results to credit losses. (“CIB”) and the Personal and Business
business units. to set risk appetite. • pre-settlement credit risk, which is the Banking (“PBB”) Global Credit Policies
The group has developed a set of risk EAD arising from unsettled forward and Market risk have been designed to expand the
governance standards for each principal Risk appetite Risk appetite is defined by core metrics derivative transactions, arising from Group Credit Risk Governance Standard
risk, including credit, market, liquidity, which are carefully calibrated and the default of the counterparty to the Market risk is defined as the risk of a requirements by embodying the core
operational, IT, legal, environmental Risk appetite is an expression of the converted into limits, thresholds and transaction and measured as the cost change in the actual or effective market principles for identifying, measuring,
& social risk and compliance risks. amount, type and tenure of risk that triggers across the relevant risk types, of replacing the transaction at current value or earnings of a portfolio of financial approving, and managing credit risk.
The standards define the acceptable the group is prepared to accept in order at both entity and business line levels, market rates; instruments caused by adverse movements These policies provide a comprehensive
conditions for the assumption of the to deliver its business objectives. It is through an analysis of the risks that in market variables such as equity, bond framework within which all credit risk
major risks and ensure alignment and the balance of risk and return as the impact those metrics. • issuer risk, which is the EAD arising and commodity prices, foreign exchange emanating from the operations of the
consistency in the manner in which these group implements business plans, whilst from traded credit and equity products, rates, interest rates, credit spreads, bank are legally executed, properly
risks are identified, measured, managed, recognising a range of possible outcomes. Stress testing and including their underwriting. recovery rates, correlations and implied monitored and controlled in order to
controlled and reported across the group. volatilities in the market variables. Market minimise the risk of financial loss; and
The Board establishes the group’s Stress testing serves as a diagnostic Wrong-way risk risk covers both the impact of these risk assure consistency of approach in the
All standards are supported by either parameters for risk appetite by: and forward looking tool to improve the Wrong-way risk is the risk that arises factors on the market value of traded treatment of regulatory compliance
policies and/or procedural documents. group’s understanding of its credit; market, when default risk and credit exposure instruments as well as the impact on requirements.
They are applied consistently across the • providing strategic leadership and liquidity and operational risks profile under increase together. There are two types the group’s net interest margin as a
group and are approved by the Board. It guidance; event based scenarios. of wrong-way risk: specific wrong consequence of interest rate risk on In addition to the Credit Risk Governance
is the responsibility of the business unit way risk (which arises through poorly banking book assets and liabilities.
executive management to ensure that • r eviewing and approving annual Management reviews the outcome of stress structured transactions, for example, those
the requirements of the risk governance budgets and forecasts for the group tests and selects appropriate mitigating collateralised by own or related party
and each subsidiary; actions to minimise and manage the impact
of the risks to the group.

68 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 69

Enterprise risk review (continued)

Standard and CIB and PBB Global Credit • A forward-looking quantification of The reporting lines, responsibilities and Group’s rating Grade description Standard & Poor’s Fitch
Policies, a number of related credit policies the exposure at default is determined authority for managing credit risk in the Investment grades AAA to BBB- AAA to BBB-
and documents have been developed, in accordance with group standard group are clear and independent. However, SB01 – SB12/SB13 Sub Investment grades BB+ to CCC+ BB+ to CCC+
with contents that are relevant to the full guidelines. ultimate responsibility for credit risk rests Cautionary grade CCC to C CCC to C
implementation and understanding of the with the board. SB14 – SB21
credit policies. • Risk mitigants such as security and are less than 90 days past due, but it is Non-performing specifically impaired loans
asset recovery propensities are then Credit risk mitigation SB22 – SB25 expected that the full carrying value will are those loans that are regarded as non-
Methodology for risk rating quantified to moderate exposure at be recovered when considering future performing and for which there has been
Internal counterparty ratings and default default to yield the loss given default. Credit risk mitigation is defined as all IFRS 7 cash flows, including collateral. Ultimate a measurable decrease in estimated future
estimates that are updated and enhanced methods of reducing credit expected loss is not expected but could occur if cash flows. Specifically impaired loans
from time-to-time play an essential • Finally, the EL is a function of the PD, loss whether by means of reduction of The tables that follow analyse the credit the adverse conditions persist. are further analysed into the following
role in the credit risk management and the LGD and the EAD. EAD (e.g. netting), risk transfer (e.g. quality of loans and advances measured categories:
decision-making process, credit approvals, guarantees) or risk transformation. in terms of IFRS. Non-performing loans
internal capital allocation, and corporate These parameters are in turn used • substandard items that show underlying
governance functions. Ratings are used in quantifying the required regulatory Guarantees, collateral and the transaction Maximum exposure to credit risk Non-performing loans are those loans well-defined weaknesses and are
for the following purposes: capital reserving, using the Regulatory structures are used by the group to for which: considered to be specifically impaired;
Capital Calculator developed, maintained mitigate credit risks both identified and Loans and advances are analysed and
• Credit assessment and evaluation and updated in terms of Basel 2, and the inherent though the amount and type categorised based on credit quality • the group has identified objective • d oubtful items that are not yet
economic capital implications through of credit risk is determined on a case by using the following definitions. evidence of default, such as a breach of considered final losses due to some
• Credit monitoring the use of Credit Portfolio Management’s case basis. The group’s credit policy and a material loan covenant or condition; or pending factors that may strengthen
(“CPM’s”) Economic Capital tools. guidelines are used in a consistent manner Performing loans the quality of the items; and
• Credit approval and delegated authority Furthermore, bearing in mind the quantum while security is valued appropriately Non-performing but not specifically
of the facility and the risk/reward thereof, and reviewed regularly for enforceability Neither past due nor specifically impaired impaired loans are not specifically impaired • l ost items that are considered to be
• Economic capital calculation, portfolio an appropriate consideration of Basel 2 and to meet changing business needs. loans are loans that are current and fully due to the expected recoverability of the uncollectible in whole or in part. The
and management reporting capital requirements (where applicable) compliant with all contractual terms and full carrying value when considering future group provides fully for its anticipated
and the revenue and return implications of The credit policy establishes and conditions. cash flows, including collateral. loss, after taking collateral into account.
• R egulatory capital calculation the credit proposal is also important in the defines the principles of risk transfer,
risk consideration and rating methodology. transformation and reduction. The Early arrears but not specifically impaired
• RARORC (Risk-Adjusted Return processes and procedures for accepting, loans include those loans where
on Regulatory Capital) calculation Framework and governance verifying, maintaining, and releasing the counterparty has failed to make
collateral are well documented in order contractual payments and payments
• Pricing: Probability of Default (“PD”), Credit risk remains a key component of to ensure appropriate application of the
Exposure at Default (“EAD”) and Loss financial risks faced by any bank given the collateral management techniques. Loans
given Default (“LGD”) may be used very nature of its business. The importance
to assess and compare relative pricing of credit risk management cannot be Credit risk measurement Performing loans Non-performing
of assets/facilities, in conjunction with over emphasised as consequences can loans
strategic, relationship, market practice be severe when neglected. The group A key element in the measurement of
and competitive factors. has established governance principles credit risk is the assignment of credit Neither past Early arrears Non-performing Specifically
to ensure that credit risk is managed ratings, which are used to determine due nor but not but not impaired loans
The primary method for credit risk effectively within a comprehensive risk expected defaults across asset portfolios
assessment and evaluation lies in management and control framework. and risk bands. The risk ratings specifically specifically specifically
the counterparty risk grading. This is attributed to counterparties are based impaired loans impaired loans impaired loans
quantified and calculated in compliance In reaching credit decisions and taking on a combination of factors which
with the group’s credit rating policy credit risk, both the credit and business cover business and financial risks: Current Close Substandard Doubtful Loss
leveraging Basel II compliant models functions must consistently and monitoring
(currently in use) which are updated or responsibly balance risk and return, The group uses the PD Master Scale rating
enhanced on a periodic basis as required. as return is not the sole prerogative of concept with a single scale to measure the
business neither is credit risk the sole credit riskiness of all counterparty types.
Credit risk quantification for any exposure prerogative of credit. Credit (and the other The grading system is a 25-point scale,
or portfolio is summarised by the risk functions, as applicable) and business with three additional default grades.
calculation of the expected loss (“EL”), must work in partnership to understand
which is arrived at in the following way: the risk and apply appropriate risk pricing, Portfolio credit impairments Specific credit impairments
with the overall aim of optimising the
• Based on the risk grading foundation, bank’s risk adjusted performance.
which yields the counterparty’s
probability of default (“PD”), the nature
and quantum of the credit facilities
are considered;

70 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 71

Enterprise risk review (continued)

Maximum exposure to credit risk by credit quality

Performing loans Not specifically Non-performing loans
impaired Specifically impaired loans
Neither past due nor specifically
impaired

Non-performing loans

December 2017 Note Total Balance sheet Normal Close Early arrears Sub-standard Doubtful Lost Total Securities Net after Balance sheet Gross specific Total non- Non-
Personal and Business Banking loans and impairments for monitoring monitoring Nmillion Nmillion Nmillion Nmillion Nmillion and expected securities impairments for impairment performing performing
Mortgage loans advances performing loans recoveries on and expected non-performing coverage
Instalment sale and finance leases to customers Nmillion Nmillion 13,526 4,426 6,301 6,228 recoveries on % loans loans
Card debtors Nmillion Nmillion 889 1,113 156 179 specifically specifically specifically Nmillion %
Other loans and advances 149,324 106,656 12,186 772 516 impaired loans impaired impaired loans 64
Corporate and Investment Banking 2,775 4,365 724 210 65 3,663 216 45 16,955 11.4
Corporate loans 7,426 76 4,555 28 68 Nmillion loans Nmillion 60 1,448 19.5
Gross loans and advances to customers 12,167 923 2,596 11,655 3,220 5,317 Nmillion 92 4,244 34.9
Less: 1,451 162 6 12,079 13,027 2,414 - 67 21.5
Impairment for loans and advances 128,280 20 96,813 12,079 13,027 1,730 - 16,955 6,142 10,813 10,813 68 312 8.5
254,528 219,326 8,860 25,605 17,453 1,730 68 10,951 5.8
254,528 2,517 219,326 8,366 8,031 6,228 1,448 793 655 655 66 14,757 5.8
403,852 8,072 325,982 8,366 14,757
8,072 20,552 4,244 1,694 2,550 2,550 31,712 7.9
(31,764) 10,847
312 24 288 288

10,951 3,631 7,320 7,320

14,757 4,654 10,103 10,103

14,757 4,654 10,103 10,103

31,712 10,796 20,916 20,916

Net loans and advances 12 372,088
Add the following other banking
activities exposures: 7 401,348
Cash and cash equivalents 10.6 11,052
Derivatives
Financial investments (excluding equity) 11 314,367
Loans and advances to banks 12 9,623
Trading assets 9.1 151,479
Pledged assets 8 43,240
Other financial assets
Total on-balance sheet exposure 41,427
Unrecognised financial assets: 1,344,624
Letters of credit
Guarantees 30.1 118,054
Loan commitments 30.1 35,323

56,108

Total exposure to credit risk 1,554,109

Additional disclosures on loans and advances is set out in note 12.

72 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 73

Enterprise risk review (continued)

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

Non-performing loans

Total Balance sheet Normal Close Early arrears Non-performing Sub-standard Doubtful Lost Total Securities Net after Balance sheet Gross specific Total non- Non-
loans and impairments for monitoring monitoring Nmillion Nmillion Nmillion Nmillion and expected securities impairments for impairment performing performing
December 2016 Note advances performing loans Nmillion Nmillion 8,035 18,675 recoveries on and expected non-performing coverage
Personal and Business Banking to customers Nmillion Nmillion 189 4,803 5,837 recoveries on % loans loans
Mortgage loans Nmillion Nmillion 86,222 25,092 22,372 - 1,111 27 42 258 specifically specifically specifically 60 Nmillion %
Instalment sale and finance leases 3,509 68 68 518 1,697 impaired loans impaired impaired loans 64 18,675
Card debtors 152,360 51 5,396 1,472 1,798 - 6,667 92 68 46 12.3
Other loans and advances 275 6,141 5,277 - 228 Nmillion loans Nmillion 94 258 2.9
Corporate and Investment Banking 8,924 48 1,185 3,417 - - 4,616 5,209 16,492 Nmillion 61 1,697
Corporate loans 3,135 73,500 - 8,035 - - 7,426 11,249 11,249 - 10.3
Gross loans and advances 16,532 7,591 194,856 18,343 380 - - - - - 228 12.7
Less: 7,591 194,856 - 94 164 164 60 16,492 13.2
Impairment for loans and advances 1,793 11,100 281,078 5,995 16,777 - 4,803 5,837 18,675 781
5,995 916 214 781 - -
125,111 31,087 22,104 - 10,090 - -
14 214 18,675 5.0
222,956 22,104 - -
6,402 10,090
222,956 44,476 - 11,249
- -
375,316
- -

7,426 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.

74 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 75

Enterprise risk review (continued)

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
10,172 exposure Greater
501 1,923 1,432 -
December 2017 490 272 117 - Total Netting after 50%- than
Personal and Business Banking 144 272 11 -
48 17 - - 13,526 exposure Unsecured Secured agreements netting 1%-50% 100% 100%
Mortgage loans 9,038 - - 889
Instalment sales and finance lease 3,261 1,331 1,287 - - 772 Note Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
Card debtors 3,261 582 8,236 - - 210
Other loans and advances 13,432 582 8,236 - - 11,655 December 2017 396,023 273,744 122,279 - - 41,061 81,218 -
Corporate and Investment Banking 9,668 - 12,079 Corporate 677,220 677,220 -
Corporate loans 2,506 - 12,079 Sovereign 223,600 223,600 - - - -- -
Total 1,624 - 25,605 Bank 196,068
77 Retail 94,153 101,915 - - -- -
7,426 - 7,426
562 Retail mortgage - - 26,014 68,220 7,681
49 188,642 94,153 94,489
Other retail - - - - 7,426
936 1,492,911 1,268,717 224,194
13,430 Total - - 26,014 68,220 255
13,430
December 2016 15,054 - - 67,075 149,438 7,681
Personal and Business Banking
16,824 3,923 - - 22,372 Add: Financial assets not 36,853
Mortgage loans 1,579 142 - - 1,798 exposed to credit risk (31,763)
Instalment sales and finance lease 1,801 - - 3,417 (153,377)
Card debtors 200 1,054 - - 380 Less: Impairments for loans 1,344,624
Other loans and advances 131 - - 16,777 and advances
Corporate and Investment Banking 13,244 - - 22,105
Corporate loans - 2,596 - - 22,105 Less: Unrecognised off
Total - 8,675 - - 44,477 balance sheet items
8,675
16,824 12,598 Total exposure

Reconciliation to statement of financial position:

Cash and cash equivalents 7 401,348

Renegotiated loans and advances Collateral Collateral includes: Derivatives 10.6 11,052
The table that follows shows the financial
Renegotiated loans and advances are effect that collateral has on the group’s • financial securities that have a tradable Financial investments 11 314,367
exposures which have been refinanced, maximum exposure to credit risk. The market, such as shares and other (excluding equity)
rescheduled, rolled over or otherwise table is presented according to Basel II securities;
modified due to weaknesses in the asset categories and includes collateral Loans and advances 12 381,711
counterparty’s financial position, and that may not be eligible for recognition • physical items, such as property, plant
where it has been judged that normal under Basel II but that management takes and equipment; and Trading assets 9 151,479
repayment will likely continue after the into consideration in the management of
restructure. Renegotiated loans that the group’s exposures to credit risk. All • financial guarantees, suretyships and Pledged assets 8 43,240
would otherwise be past due or impaired on- and off-balance sheet exposures which intangible assets.
amounted to N13.5 billion as at 31 Dec are exposed to credit risk, including non- Other financial assets 41,427
2017 (Dec 2016: N34.8 billion). performing assets, have been included. All exposures are presented before the
effect of any impairment provisions. Total 1,344,624

In the retail portfolio, 52% (Dec 2016:
69%) is collateralised. Of the group’s
total exposure, 85% (Dec 2016: 67%) is
unsecured and mainly reflects exposures to
well-rated corporate counterparties, bank
counterparties and sovereign entities.

76 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 77

Enterprise risk review (continued)

Collateral Concentration of risks of financial assets with credit risk exposure

Total collateral coverage a) G eographical sectors
The following table breaks down the group’s main credit exposure at their carrying amounts, as categorised by geographical
Secured region as of 31 December 2017. For this table, the group has allocated exposures to regions based on the region of domicile
of our counterparties.
exposure Greater

Total Netting after 50%- than

exposure Unsecured Secured agreements netting 1%-50% 100% 100% Financial
investments
Note Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Loans and Loans and
(excluding advances to advances to
December 2016 302,251 79,295 222,956 - - 46,763 88,940 87,254 31 December 2017 Trading assets Derivative Pledged assets equity) Total
Corporate 415,361 415,361 South South Nmillion assets Nmillion customers banks Nmillion
Sovereign 134,739 134,739 117,675 -- South West - Nmillion Nmillion Nmillion 14,896
Bank 170,029 52,354 8,924 South East 8,284 Nmillion - 14,896 341,783
Retail North West - 319,839 -
8,924 - 108,751 - - -- - North Central - -- 12,860 7,273 - 7,273
Retail mortgage 340,631 North East 143,195 - 16,623 - 16,623
161,105 52,354 - - 41,972 41,710 33,994 Outside Nigeria - 800 - - 12,466 - 508,929
Other retail Carrying amount - 991 -
1,022,380 681,749 - - - - 8,924 151,479 -- 301,507 - - 991
Total 31 December 2016 372,088 9,623 11,354
South South Trading assets -- - 9,623 901,849
South West Nmillion - Loans and
- - 41,972 41,710 25,070 South East 1,198 8,521 43,240 314,367 advances to Loans and Total
North West 5,001 advances to Nmillion
- - 88,735 130,650 121,248 North Central - -- Financial customers 14,643
North East - investments Nmillion banks 309,536
Outside Nigeria 10,656 1,731 - 13,445 Nmillion
Carrying amount - (excluding 293,196 6,575
Add: Financial assets not - 11,052 43,240 equity) 6,575 - 22,837
exposed to credit risk 16,855 22,837 - 315,265
66,299 Derivative Pledged assets Nmillion 15,171 -
Less: Impairments for loans (22,351) assets Nmillion - 1,741 - 1,741
and advances (54,143) - 7,504 8,340
1,012,185 Nmillion 10,131 352,965 - 678,937
Less: Unrecognised off - 7,760
balance sheet items -- - 15,264

Total exposure 1,208 - 241,102

-- -
-
Reconciliation to statement of financial position: -- 251,233

Cash and cash equivalents 7 301,351 12,529 28,303

Derivatives 10.6 14,317 --

Financial investments 580 -
(excluding equity)
11 251,233 14,317 28,303

Loans and advances 12 368,229

Trading assets 9.1 16,855

Pledged assets 8.1 28,303

Other financial assets 31,897

Total 1,012,185

78 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 79

Enterprise risk review (continued)

Concentration of risks of financial assets with credit risk exposure (continued)
b. Industry sectors

Derivative Financial Loans and Loans and Derivative Financial Loans and Loans and
investments advances to advances to investments advances to advances to
Trading assets assets Pledged assets Total Trading assets assets Pledged assets Total
Nmillion (excluding customers banks Nmillion Nmillion (excluding customers banks Nmillion
31 December 2017 - Nmillion Nmillion equity) Nmillion Nmillion 23,829 31 December 2016 - Nmillion Nmillion equity) Nmillion Nmillion 26,206
- -
Agriculture - 621 - Nmillion 23,208 - 3,989 Agriculture - 1- Nmillion 26,205 - 3,741
Business services - 14,227 Business services - 21,485
Communication 22 - - 3,967 - Communication -- - 3,741 -
Community, social & - - Community, social & - 2
personal services - 1- - 13,673 - personal services - -- - 21,015 -
Construction and real estate 8,284 41,529 Construction and real estate 5,001 37,572
Electricity -- 553 - - - Electricity -- 470 2 - -
Financial intermediaries & 143,195 Financial intermediaries & 11,854
insurance - 31,585 insurance - 24,129
Government (including - Government (including -
Central Bank) 3 - - 41,526 - 518,295 Central Bank) 26 - - 37,546 - 316,126
Hotels, restaurants and - - - Hotels, restaurants and - -----
tourism - 1,752 --- 9,623 22 tourism - 21
Manufacturing - Manufacturing - 582 - 9,248 1,538 7,760
Mining - - 11,326 600 124,565 Mining - 100,607
Private households 61,286 Private households 58,244
Transport, storage and - 8,521 43,240 301,409 21,930 - 45,365 Transport, storage and - 12,529 28,303 241,515 14,421 7,504 48,215
distribution 151,479 6,038 distribution 16,855 11,331
Wholesale & retail trade - - - 22 - Wholesale & retail trade - - - 21 -
Carrying amount 31,119 Carrying amount 31,258
26 - - 124,539 - 901,849 1,097 - - 99,510 - 678,937
1 - - 61,285 - - - - 58,244 -
1 - - 45,364 - - - - 48,215 -
- - - 6,038 - - - - 11,331 -

104 - 1,079 29,936 - 82 - - 31,176 -
11,052 43,240 314,367 372,088 9,623 14,317 28,303 251,233 352,965 15,264

c. Analysis of financial assets disclosed above by portfolio distribution and risk rating

At 31 December 2017 AAA to A- BBB+ to BBB- Below BBB- Unrated Total
At 31 December 2016 Nmillion Nmillion Nmillion Nmillion Nmillion

5 687,201 213,889 754 901,849

7,666 18,923 604,205 49,845 680,639

80 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 81

Enterprise risk review (continued)

Concentration of risks of off-balance sheet engagements b. Industry sectors 31 December 2017 31 December 2016
a. Geographical sectors
Bonds and Letters of credit* Total Agriculture Bonds and Letters of 2017 Total Bonds and Letters of 2016 Total
31 December 2017 guarantees Nmillion Nmillion Business services guarantees credit Nmillion guarantees credit Nmillion
South South - Communication 247 1
South West Nmillion 118,054 379 Construction and real estate Nmillion Nmillion 10,659 Nmillion Nmillion 690
South East 379 - 152,098 Financial intermediaries & insurance - 273
North West - Hotels, Restaurants and Tourism 247 - 49 -1 19,248
North Central 34,044 - 30 Manufacturing 17,912 185
North East 30 120 Mining/oil and gas 4,033 6,626 45,159 437 253 -
Outside Nigeria 120 - 750 Private households 31,000 21,160
Total - Transport, storage and distribution -- 29,244 155 118 4,211
750 118,054 - Wholesale & retail trade - 486
31 December 2016 - Carrying amount 49 - 1,896 19,248 - 22
South South - 153,377 17,211 7,867
South West - 17,912 - 153,377 154 31 54,143
South East 35,323 Total
North West Nmillion - 45,159 --
North Central
North East 850 3,981 27,019 10,698 10,462
Outside Nigeria 50,797
Total 2,393 26,851 2,845 1,366
18
*Amount excludes letters of credit for which cash collateral has been received. 90 -- 486 -
2,388
168 1,728 22 -
-
- 6,540 10,671 4,478 3,389
54,143
Bonds and 35,323 118,054 38,523 15,620
guarantees
Letters of credit* Credit provisioning based on prudential guidelines
Nmillion Nmillion
850 - In accordance with the Prudential Guidelines issued by the Central Bank of Nigeria, provision against credit risk is as follows;
15,620
35,177 - Non performing accounts
18 -
90 - Interest and/or principal Classification Minimum
outstanding for over: Substandard provision
2,388 - 90 days but less than 180 days
- 180 days but less than 360 days Doubtful 10%
- 15,620 Lost 50%
- Over 360 days
38,523 100%

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.

82 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 83

Enterprise risk review (continued)

Prudential guidelines disclosures Liquidity risk • collateral management; Maintaining minimum levels of liquid
and marketable assets
Had the Prudential Guidelines been employed in the preparation of these financial statements, the impairments for loans and advances to Framework and governance • daily cash flow management;
customers as well as related disclosures, would have been made as follows: The nature of banking and trading activities Minimum levels of prudential liquid assets
results in a continuous exposure to liquidity are held in accordance with all prudential
Group risk. Liquidity problems can have an • liquidity stress and scenario testing; requirements as specified by the regulatory
31 Dec 2017 adverse impact on a group’s earnings and authorities. The group needs to hold
31 Dec 2016 capital and, in extreme circumstances, may • funding plans; additional unencumbered marketable assets,
Nmillion Nmillion even lead to the collapse of a group which in excess of any minimum prudential liquid
is otherwise solvent. • liquidity contingency planning. asset requirement, to cater for volatile
403,852 375,316 depositor withdrawals, draw-downs under
Prudential disclosure of loan and advances to customers 7,426 8,924 The group’s liquidity risk management The cumulative impact of these principles committed facilities, collateral calls, etc.
Customer exposure for loans and advances 12,167 17,272 framework is designed to measure and is monitored, at least monthly by ALCO
Mortgage loans 1,451 1,501 manage the liquidity position at various through a process which is underpinned The following criteria apply to readily
Instalment sale and finance leases levels of consolidation such that payment by a system of extensive controls. The marketable securities:
Card debtors 128,281 45,970 obligations can be met at all times, under latter includes the application of purpose-
Overdrafts and other demand loans 254,527 301,649 both normal and considerably stressed built technology, documented processes • prices must be quoted by a range
Other term loans (22,333) (25,569) conditions. Under the delegated authority and procedures, independent oversight of counterparties;
Credit impairments for loans and advances (14,995) (14,467) of the board of directors, the Asset and and regular independent reviews and
Specific provision (11,102) Liability Committee (“ALCO”) sets liquidity evaluations of the effectiveness of • the asset class must be regularly traded;
General provision (7,338) 349,747 risk policies in accordance with regulatory the system.
Net loans and advances to customers 381,519 requirements, international best practice • the asset may be sold or repurchased
Prudential disclosure of loan classification 355,466 and SBG stated risk appetite. The group ensures that the banking entity in a liquid market, for payment in cash;
Performing loans 373,334 24,022 (Stanbic IBTC Bank PLC) is within the and settlement must be according to
Non-performing loans 35,322 5,685 Tolerance limits, appetite thresholds and regulatory liquidity ratio of 30% at all times. a prescribed, rather than a negotiated,
17,732 5,828 monitoring items are prudently set and timetable.
- substandard 8,736 12,509 reflect the group’s conservative appetite Liquidity ratio 2017 2016
- doubtful 8,854 for liquidity risk. ALCO is charged with Minimum 83.91% 56.24% Depositor concentration
- lost 379,488 ensuring ongoing compliance with liquidity Average 106.72% 78.05%
Total performing and non performing loans 408,656 (4,172) risk standards and policies. The Group Maximum 119.64% 101.95% To ensure that the group does not place
Adjustment for Interest in suspense and below-market interest staff loans (4,804) must, at all times, comply with the more undue reliance on any single entity as a
Customer exposure for loans and advances 408,656 379,488 stringent Standard Bank imposed tolerance Structural liquidity mismatch funding source, restrictions are imposed
Non-performing loan ratio (regulatory) 8.64% 6.33% limits or regulatory limits. management on the short dated (0 – 3 months term)
deposits accepted from any entity.
Liquidity and funding management The mismatch principle measures the These include:
A sound and robust liquidity process group’s liquidity by assessing the mismatch
is required to measure, monitor and between its inflow and outflow of funds • the sum of 0 – 3 month deposits and
manage liquidity exposures. The group within different time bands on a maturity standby facilities provided by any single
has incorporated the following liquidity ladder. The structural liquidity mismatch is deposit counterparty must not, at any
principles as part of a cohesive liquidity based on behaviourally-adjusted cash flows time, exceed 10% of total funding
management process: which factors a probability of maturity related liabilities to the public; and
into the various time bands. As expected,
• structural liquidity mismatch cash flows vary significantly from the • the aggregate of 0 – 3 month deposits
management; contractual position, behavioural profiling and standby facilities from the 10
is applied to assets, liabilities and off- largest single deposit counterparties
• long-term funding ratio; balance sheet items with an indeterminable must not, at any time, exceed 20%
maturity or drawdown period. of total funding related liabilities
• maintaining minimum levels of liquid to the public.
and marketable assets; A net mismatch figure is obtained by
subtracting liabilities and netting off- Concentration risk limits are used to
• depositor restrictions; balance sheet positions from assets in each ensure that funding diversification is
time band. The group’s liquidity position is maintained across products, sectors,
• local currency loan to deposit ratio; assessed by means of the net cumulative and counterparties. Primary sources
mismatch position while its liquidity of funding are in the form of deposits
• foreign currency loan to deposit ratio; mismatch performance is an aggregation of across a spectrum of retail and
the net liquidity position in each successive wholesale clients. As mitigants, the
• interbank reliance limit; time band expressed as a percentage of group maintains marketable securities
total funding related to deposits. in excess of regulatory requirements in
• intra-day liquidity management; order to create a buffer for occasional
breaches of concentration limits.

84 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 85

Enterprise risk review (continued)

Loan to deposit limit Daily cash flow management Maturity analysis of financial liabilities The following tables also include contractual cash flows with respect to off-balance sheet items which have not yet been recorded
by contractual maturity on-balance sheet. Where cash flows are exchanged simultaneously, the net amounts have been reflected.
A limit is put in place, restricting the The group generates a daily report
local currency loan to deposit ratio to to monitor significant cash flows. The tables on the next page analyses cash Maturity analysis of financial liabilities by contractual maturity
a maximum specified level, which is Maturities and withdrawals are forecast flows on a contractual, undiscounted basis
reviewed periodically. Similarly, in order at least three months in advance and based on the earliest date on which the Redeemable Maturing Maturing Maturing Maturing after Total
to restrict the extent of foreign currency management is alerted to large outflows. group can be required to pay (except for on demand within 1 month between between 12 months Nmillion
lending from the foreign currency The report, which is made available to the trading liabilities and trading derivatives) 1-6 months 6-12 months Nmillion
deposit base, a foreign currency loan to funding team, ALM and market risk, also and may therefore not agree directly with Nmillion Nmillion Nmillion Nmillion
deposit limit, which is also referred to as summarises material daily new deposits as the balances disclosed in the consolidated
own resource lending, is observed. As well as the interbank and top depositor statement of financial position. December 2017 134 449 1,678 331 - 2,592
mitigants, the group maintains high levels reliance (by value and product). Financial liabilities - 28,385 27,170 6,239 658 62,452
of unencumbered marketable and liquid Derivative liabilities are included in Derivative financial instruments 138,719 107,192 18,332 841,798
assets in excess of regulatory benchmark. The daily cash flow management report the maturity analysis on a contractual, Trading liabilities 577,551 4 45,687
forms an integral part of the ongoing undiscounted basis when contractual Deposits and current accounts - - - - 45,687 82,431
Intra-day liquidity management liquidity management process and is a maturities are essential for an Subordinated debt - 5,661 7,885 58,269 1,034,959
crucial tool to proactively anticipate and understanding of the derivatives’ future Other borrowings 10,615 167,553 141,701 32,787 104,618
The group manages its exposures in plan for large cash outflows. cash flows. All other derivative liabilities Total 588,300
respect of payment and settlement are treated as trading instruments and are Unrecognised financial instruments 30,128 87,096 8,128 - 125,352
systems. Counterparties may view the Interbank reliance included at fair value in the redeemable on Letters of credit - 332 20,365 7,650 6,977 35,324
failure to settle payments when expected demand bucket since these positions are Guarantees - 22,355 13,918 1,496 56,108
as a sign of financial weakness and in turn Interbank funding traditionally is seen as typically held for short periods of time. Loan commitments - 18,339 129,816 29,696 8,473
delay payments to the group. This can the most volatile and least stable source Total - 48,799 216,784
also disrupt the functioning of payment of funding, easily influenced by market
and settlement systems. At a minimum, sentiment and prone to flight under December 2016 - 1,177 8,466 2,110 35 11,788
the following operational elements are stress situations. Consequently, to ensure Financial liabilities - 99 4,489 82 655 5,325
included in the group’s intra-day liquidity prudent liquidity management is enforced, Derivative financial instruments 455,715 72,885 637,892
management: the group restricts the local currency Trading liabilities - 97,185 1,337 12,102 5 49,442
interbank funding as a proportion of the Deposits and current accounts 214 - 4,858 1,338 46,767 114,555
• capacity to measure expected daily local currency funding base to a maximum Subordinated debt 455,929 92,035 30,870 76,034 819,002
gross liquidity inflows and outflows, of 15% of the total currency funding base. Other borrowings 2,579 46,502 123,496
including anticipated timing where Total 1,020 101,040 12,449 16,640
possible; Liquidity stress testing Unrecognised financial instruments 1,178 11,107 546 - 38,523
and scenario testing Letters of credit 2,625 7,775 20,818 5,053 30,193
• capacity to monitor its intra-day Guarantees - 367 31,331 2,856 85,356
liquidity positions, including available Anticipated on-balance sheet and off- Loan commitments 2,198 1,099 7,909
credit and collateral; balance sheet cash flows are subjected Total 18,463 22,463
to a variety of the group specific and 21,455
• sufficient intra-day funding to meet systemic stress scenarios in order to
its objectives; evaluate the impact of unlikely but
plausible events on liquidity positions.
• ability to manage and mobilise collateral Scenarios are based on both historical
as required; events, such as past emerging markets
crises, past local financial markets crisis
• robust capacity to manage the timing and hypothetical events, such as an
of its intra-day outflows; and entity specific crisis. The results obtained
from stress testing provide meaningful
• readiness to deal with unexpected input when defining target liquidity risk
disruptions to its intra-day liquidity positions.
flows.

86 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 87

Liquidity contingency plans Foreign currency liquidity Banking book interest rate risk Market risk measurement historical distribution. Hence, there is a Other market risk measures
management These risks arise from the structural need to back-test the VaR model regularly.
The group recognises that it is not possible interest rate risk caused by the differing The techniques used to measure Other market risk measures specific
to hold sufficiently large enough quantity A number of indicators are observed to re-pricing characteristics of banking assets and control market risk include: VaR back-testing to individual business units include
of readily available liquidity to cover the monitor changes in either market liquidity and liabilities. permissible instruments, concentration
least likely liquidity events. However, or exchange rates. Foreign currency • daily net open position The group and the banking business of exposures, gap limits, maximum
as such events can have devastating loans and advances are restricted to the Foreign currency risk back-test its foreign currency, interest tenure and stop loss triggers. In addition,
consequences, it is imperative to bridge availability of foreign currency deposits. These risks arise as a result of changes • daily VaR; rate and credit trading exposure VaR only approved products that can be
the gap between the liquidity the group in the fair value or future cash flows of model to verify the predictive ability of independently priced and properly
chooses to hold and the maximum liquidity Funding strategy financial exposures due to changes in • back-testing; the VaR calculations thereby ensuring the processed are permitted to be traded.
the group might need. foreign exchange rates. appropriateness of the model. Back-testing
Funding markets are evaluated on an • PV01; exercise is an ex-post comparison of the Pricing models and risk metrics used
The group’s liquidity contingency plan ongoing basis to ensure appropriate group Equity investment risk daily hypothetical profit and loss under in production systems, whether these
is designed to, as far as possible, protect funding strategies are executed depending These risks arise from equity price changes • annual net interest income at risk; the one-day buy and hold assumption to systems are off-the-shelf or in-house
stakeholder interests and maintain market on the market, competitive and regulatory in listed and unlisted investments, and the prior day VaR. Profit or loss for back- developed, are independently validated
confidence in order to ensure a positive environment. The group employs a managed through the equity investment Daily net open position testing is based on the theoretical profits by the market risk unit before their use
outcome in the event of a liquidity crisis. diversified funding strategy, sourcing committee, which is a sub-committee of or losses derived purely from market and periodically thereafter to confirm the
The plan incorporates an extensive early liquidity in both domestic and offshore the executive committee. The board, on the input of ALCO, sets moves both interest rate and foreign continued applicability of the models. In
warning indicator methodology supported markets, and incorporates a coordinated limits on the level of exposure by currency currency spot moves and it is calculated addition, the market risk unit assesses the
by a clear and decisive crisis response approach to accessing capital and loan Framework and governance and in aggregate for overnight positions. over 250 cumulative trading-days at 95% daily liquid closing price inputs used to
strategy. Early warning indicators span markets across the group. The latter is also aligned to the net confidence level. value instruments and performs a review
group specific crises, systemic crises, The board approves the market risk open position limit as specified by the of less liquid prices from a reasonableness
contingency planning, and liquidity Concentration risk limits are used appetite and standards for all types of regulators, which is usually a proportion Stress tests perspective at least fortnightly. Where
risk management governance and are within the group to ensure that funding market risk. The board grants general of the groups’ capital. differences are significant, mark-to-market
monitored based on assigned frequencies diversification is maintained across authority to take on market risk exposure Stress testing provides an indication of adjustments are made.
and tolerance levels. The crisis response products, sectors, geographic regions to the asset and liability committee Daily value-at-risk (VaR) the potential losses that could occur in
strategy is formulated around the and counterparties. (“ALCO”). ALCO sets market risk policies to extreme market conditions. Annual net interest income at risk
relevant crisis management structures ensure that the measurement, reporting, VaR is a technique that estimates the
and addresses internal and external Primary funding sources are in the form monitoring and management of market potential losses that may occur as a result The stress tests carried out include A dynamic forward-looking annual net
communications, liquidity generation, of deposits across a spectrum of retail risk associated with operations of the bank of market movements over a specified time individual market risk factor testing interest income forecast is used to
operations, as well as heightened and and wholesale clients, as well as long- follow a common governance framework. period at a predetermined probability. and combinations of market factors quantify the banks’ anticipated interest
supplementary information requirements. term capital and loan markets. The group The bank’s ALCO reports to EXCO and also on individual asset classes and across rate exposure. This approach involves the
remains committed to increasing its core to the board risk management committee. VaR limits and exposure measurements different asset classes. Stress tests forecasting of both changing balance sheet
To ensure adherence to international deposits and accessing domestic and are in place for all market risks the trading include a combination of historical structures and interest rate scenarios, to
best practices for prudent liquidity foreign capital markets when appropriate to The in-country risk management is subject desk is exposed to. The bank generally and hypothetical simulations. determine the effect these changes may
risk management and in line with the meet its anticipated funding requirements. to SBG oversight for compliance with group uses the historical VaR approach to have on future earnings. The analysis is
Central Bank of Nigeria’s guideline for standards and minimum requirements. derive quantitative measures, specifically PV01 completed under both normal market
the development of liquidity contingency Depositor concentrations for market risk under normal market conditions as well as stressed market
funding plans by way of a binding standby The market risk management unit, which conditions. Normal VaR is based on a PV01 is a risk measure used to assess conditions.
funding agreement contracts between 2017 2016 is independent of trading operations and holding period of one day and a confidence the effect of a change of rate of one basis
banks, Stanbic IBTC Bank PLC (a subsidiary Single depositor % % accountable to ALCO, monitors market level of 95%. Daily losses exceeding the point on the price of an asset. This limit
of the group) has entered into the following Top 10 depositors risk exposures due to trading and banking VaR are likely to occur, on average, 13 is set for the fixed income, money market
funding agreements: 7 4 activities. This unit monitors exposures and times in every 250 days. trading, credit trading, derivatives and
respective excesses daily, report monthly foreign exchange trading portfolios.
(i) A local currency contingency standby 27 16 to ALCO and quarterly to the board risk The use of historic VaR has limitations as
funding agreement with Zenith Bank PLC management committee. it is based on historical correlations and
up to a limit of N10 billion effective 09 Market risk volatilities in market prices and assumes
February 2017. See note 12.1 on page 179. that future prices will follow the observed
The identification, management, control,
(ii) A foreign currency revolving facility measurement and reporting of market risk
from Standard Bank of South Africa is categorised as follows:
(Isle of Man Branch) of US$50 million.
The facility is effective from 18 July 2017 Trading market risk
and renewable annually. See note 36.5 These risks arise in trading activities where
the bank acts as a principal with clients
The group did not draw on any of the in the market. The group’s policy is that all
commitments during the period. trading activities are contained within the
bank’s Corporate and Investment Banking
trading operations.

88 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 89

Enterprise risk review (continued)

Analysis of Value-at-Risk (VaR) and actual income Interest rate risk in the banking book The group’s approach to managing IRRBB is governed by prudence
and is in accordance with the applicable laws and regulations, best
The table below highlights the historical diversified normal VaR across the various trading desks. The minimum and maximum trading Interest rate risk in the banking book (“IRRBB”) can be defined international practice and the competitive situation within which
diversified normal VaR stood at NGN10 million and NGN396 million, respectively, with an annual average of NGN188 million which as the reduction in banking book net interest income due to it operates in financial markets. Interest rate risk is transferred
translates to a conservative VaR base limit utilisation of 16.2% on average. changes in interest rates arising from the different re-pricing to and managed within the bank’s treasury operations under
characteristics of banking book assets and liabilities. IRRBB is supervision of ALCO.
Diversified Normal Var Exposures (N’million) further divided into the following sub-risk types:
Measurement of IRRBB
Desk Maximum Minimum Average 30-Dec-17 31-Dec-16 Limit • Repricing risk referring to the timing differences in the
Bankwide 396 1,057 maturity (fixed rate) and repricing (floating rate) of assets The analytical technique used to quantify IRRBB is an earnings
FX Trading 243 10 188 135 41 and liabilities. based approach. A dynamic, forward-looking net interest income
Money Markets Trading 257 246 forecast is used to quantify the bank’s anticipated interest
Fixed Income Trading 47 5 91 75 35 379 • Yield curve risk arising when unanticipated shifts in the rate exposure. Desired changes to a particular interest rate risk
Credit Trading - 303 yield curve have adverse effects on the group’s income. profile are achieved through the restructuring of on-balance
Derivatives - 6 142 124 9 118 sheet repricing or maturity profiles. All assets and liabilities
• Basis risk arising from the imperfect correlation in the are allocated to gap intervals based on either their repricing or
1 13 10 4 40 adjustment of the rates earned and paid on different maturity characteristics. However, assets and liabilities for which
instruments with otherwise similar repricing characteristics. no identifiable contractual repricing or maturity dates exist are
---- allocated to gap intervals based on behavioural profiling.
• Optionality risk arising from the options embedded in bank
---- asset and liability portfolios, providing the holder with the The impact on net interest income due to interest rate changes
right, but not the obligation, to buy, sell, or in some manner cover 12 months of forecasting and allows for the dynamic
Analysis of PV01 PVO1 (NGN’000) 31-Dec-17 31-Dec-16 Limit alter the cash flow of an instrument or financial contract. interaction of payments, new business and interest rates. The
1,213 218 2,998 analyses are done under stressed market conditions in which the
The table to the right shows the PV01 of the money markets Money market trading book 939 104 2,755 • Endowment risk referring to the interest rate risk exposure banking book is subjected to an upward 300 basis points (2016:
banking and the individual trading books as at year end. The Fixed income trading book - - 1,032 arising from the net differential between interest rate 400 basis points) and downward 350 basis points (2016: 200
money markets trading book PV01 exposure increased to N1.2 Credit trading book - - insensitive assets such as non-earning assets and interest rate basis points) parallel rate shocks for local currency and 100 basis
million from that of the previous year as a result of T-bills Derivatives trading book 2,151 322 405 insensitive liabilities such as non-paying liabilities and equity. points (2016: 100 basis points) upward and downward parallel
purchase of N101 billion, the money markets banking book PV01 Total trading book 9,300 rate shocks for foreign currency positions. The table below shows
exposure stood at N10.1 million; higher than that of the previous Money market banking book 10,057 8,430 11,800 Approach to managing interest rate risk on positions the sensitivity of the bank’s net interest income in response to
year as a result of T-bills purchase of N27.4 billion, while the fixed in the banking book standardised parallel rate shocks.
income trading book PV01 exposure was N939,000. Overall
trading PV01 exposure was N2.2 million against a limit of N9.3 Banking-related market risk exposure principally involves
million thus reflecting a very conservative exposure utilisation. the management of the potential adverse effect of interest
movements on banking book earnings (net interest income
and banking book mark-to-market profit or loss).

31 December 2017 NGNm NGN USD Other Total
Increase in basis points NGNm 300 100 100 5 016
Sensitivity of annual net interest income 4,808 264 (56) (7,420)
Decrease in basis points 350 100 100
Sensitivity of annual net interest income (6,644) (832) 56

31 December 2016 NGNm 400 100 100
Increase in basis points NGNm 3,827 601 (65) 4,363
Sensitivity of annual net interest income 100 100
Decrease in basis points 200 (546)
Sensitivity of annual net interest income (2,556) 65 (3,037)

90 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 91

Enterprise risk review (continued)

Hedging of endowment risk The committee is tasked with the formulation of risk appetite and Concentrations of currency risk – on- and off-balance sheet financial instruments
oversight of investment performance. In this regard, a loss trigger
IRRBB is predominantly the consequence of endowment exposures, is in place for the non-strategic portion. At 31 December 2016 Naira USD GBP Euro Others Total
being the net exposure of non-rate sensitive liabilities and equity Financial assets Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
less non-rate sensitive assets. The endowment risk is hedged using Exposure to currency risks Cash and balances with central bank
marketable liquid instruments in the same currency as the exposure Trading assets 140,417 149,899 3,172 7,144 719 301,351
as and when it is considered opportune. Hedge decisions are made The group takes on exposure to the effects of fluctuations in Pledged assets 16,855 - - - - 16,855
by ALCO following careful consideration of the interest rate views the prevailing foreign currency exchange rates on its financial Derivative assets 28,303 - - - - 28,303
to be hedged against, including magnitude, direction, timing and position and cash flows. The board sets limits on the level of Financial investments 14,282 - - - 14,317
probability, and the exposure to be hedged. exposure by currency and in aggregate for both overnight and Asset held for sale 35 - - - 252,823
intra day positions, which are monitored daily. The table below Loans and advances to banks 252,822 1 - - - 112
Market risk on equity investment summarises the group’s exposure to foreign currency exchange Loans and advances to customers 112 - - - - 15,264
risk as at 31 December 2017. Other financial assets 1 352,965
The group’s equity and investment risk committee (“GEIRC”) has 12,917 2,347 72 631
governance and oversight of all investment decisions. 195,786 156,475 58 2 (1) 31,897
3,302 719 1,013,887
Concentrations of currency risk – on- and off-balance sheet financial instruments 31,155 683 7,777
692,649 309,440
-
At 31 December 2017 Naira USD GBP Euro Others Total Financial liabilities -
Financial assets Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Trading liabilities 74
Cash and balances with central bank Derivative liabilities 1,363
Pledged asset 196,431 187,599 4,424 11,741 1,153 401,348 Deposits and current accounts from banks 5,325 - - - - 5,325
Derivative assets 43,240 - - - - 43,240 Deposits and current accounts from customers 11,754 34 - - - 11,788
Trading securities 11,044 8 - - - 11,052 Other borrowings 53,692 - 3,251 - 53,766
Financial investments 143,195 - - - 151,479 Subordinated debt 399,968 - 2,308 4,688 349 560,969
Asset held for sale 316,266 8,284 - - - 316,641 Other financial liabilitiies (restated) 37,253 156,981 - - 96,037
Loans and advances to customers 375 - - - 114 15,713 58,784 - 3,089 - 27,964
Loans and advances to banks 114 - 56,745 881 172 136,409
Other assets 194,715 198 8,173 12 372,088 580,450 12,251 3,189 2,220 521 892,258
168,990 28 - - 9,623 75,360
8,086 1,509 10 - 303,410 198 121,629
47,523 1,895 14 49,442
960,614 4,660 19,928 1,165 1,355,027 Net on-balance sheet financial position 112,199 6,030 113 742 55,143
368,660
-
- Off balance sheet 25,009 26,944 228
4,860
Financial liabilities 2,584 8 - 9,489 - 2,592 Exchange rates applied 2017 2016
Derivative liabilities 62,449 - - - - 62,449 331.16 305
Trading liabilities 23,556 33,223 2 5,408 80 61,721 Year-end spot rate* 447.70 377.33
Deposits and current accounts from banks 438,537 301,476 4,029 - 111 753,642 US Dollar 397.26 321.62
Deposits and current accounts from customers 15,784 13,262 - 19,757 - 29,046 GBP
Subordinated debt 133,900 50,698 549 743 191,298 Euro
Other liabilities 15,581 59,311 - 171 - 74,892
Other borrowings 692,391 457,978 4,580 934 1,175,640
29,542
231 179,387 * Some foreign currency borrowings were valued at a rate different from interbank rate due to volatile exchange regime. See note 22 (viii).

Net on-balance sheet financial position 268,223 (89,318) 80 - 153,378

Off balance sheet 13,904 108,762 1,170

92 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 93

Enterprise risk review (continued)

Sensitivity analysis Capital management Capital adequacy
Regulatory capital adequacy is measured based on Pillar 1 of the
A reasonably possible strengthening or weakening of the US dollar, GBP or Euro against the Naira at 31 December would have affected Capital adequacy Basel II capital framework. Capital adequacy ratio is calculated
the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown The group manages its capital base to achieve a prudent balance by dividing the capital held by total risk-weighted assets. Risk
below. This analysis assumes that all other variables, in particular interest rates, remain constant. between maintaining capital ratios to support business growth weighted assets comprise computed risk weights from credit,
and depositor confidence, and providing competitive returns to operational and market risks associated with the business of the
Profit or loss Equity, net of tax shareholders. The capital management process ensures that each bank. Notional risk weighted assets for market risk is calculated
group entity maintains sufficient capital levels for support of our using the standardised approach while operational risk is
Effect in Nmillion Strengthening Weakening Strengthening Weakening clients, our business strategy, and regulatory compliance purposes determined using the basic indicator approach. Management
At 31 December 2017 including stress testing. The group ensures that its actions do not monitors the capital adequacy ratio on a proactive basis.
USD (20% movement) (17,864) 17,864 (12,505) 12,505 compromise sound governance and appropriate business practices
GBP (10% movement) 8 (8) 6 (6) and it eliminates any negative effect on payment capacity, Throughout the period under review, Stanbic IBTC Group operated
EUR (5% movement) 9 (9) 6 (6) liquidity and profitability. A sound capital management is the above its targeted capitalisation range and well over the minimum
center of the overall performance landscape, to ensure delivery regulatory capital adequacy ratio of 10% (for banks) as mandated
At 31 December 2016 1,206 (1,206) 844 (844) on its objective of maximising the shareholder’s value. by CBN.
USD (5% movement) 11 (11) 8 (8)
GBP (2% movement) The Central Bank of Nigeria adopted the Basel II capital framework The main movements in regulatory capital in 2017 include the
EUR (1% movement) 154 (154) 108 (108) with effect from 1 October 2014 and revised the framework increase in capital adequacy ratio to 23.5% due to a N46 billion
in June 2015. Stanbic IBTC Group has been compliant with the increase in total regulatory capital. The increase in total regulatory
Basel II framework Review and Evaluation process (“SREP”). The bank conducts requirements of Basel II capital framework since it was adopted. capital was as a result of the following factors:
a self-assessment of its internal capital requirements via the
The Basel II framework stipulates a minimum level of capital ICAAP whilst the Central Bank of Nigeria (“CBN”) conducts Regulatory capital • Tier 1 capital increased by N40 billion largely as a result of
that banks must maintain to ensure that they can meet their its assessment of the bank via the SREP. The group’s regulatory capital is divided into two tiers: an increase in retained earnings of N35 billion
obligations, cover unexpected losses; and can, very importantly,
promote public confidence. It also specifies comprehensive • Pillar III – Market Discipline allows market participants access • Tier 1 capital which comprises share capital, share premium, • Tier 2 capital increased by N5 billion
disclosure requirements for banks operating under the framework. information on risk exposure and risk management policies and retained earnings and reserves created by appropriations of
procedures through disclosures. The bank through this Pillar III retained earnings. The closing balance on deferred tax assets • Risk Weighted Assets (“RWA”) increased by N172 billion as a
The Basel II framework is based on three pillars: Disclosures report provides an overview of its risk management is deducted in arriving at Tier 1 capital; result of increases in credit and operational RWA
practices in line with the CBN Guidance Notes on Pillar III
• Pillar I - Minimum Capital Requirements. This details various Disclosures. • Tier 2 capital which includes subordinated debts and other
approaches to measure and quantify capital required for the comprehensive income. Subordinated debt at the end of the
three major risk components that a bank faces: credit risk, The Pillar III Disclosures Report will be published on a bi-annual period totalled N28 billion and is broken down as follows:
market risk and operational risk. Stanbic IBTC has adopted the basis and will be made available through the company’s website
Standardised Approach for Credit and Market Risk and the at www.stanbicibtcbank.com. • Naira denominated subordinated debt totalling N15.6
Basic Indicator Approach for Operational Risk. billion issued on 30 September 2014 at an interest rate of
13.25% per annum;
• P illar II - Supervisory Review. This is structured along two
separate but complementary stages: the Internal Capital • N 100 million Naira denominated subordinated debt issued
Adequacy Assessment Process (“ICAAP”), and the Supervisory on 30 September 2014. Interest is payable semi-annually
at 6-month Nigerian Treasury Bills yield plus 1.20%. It has a
tenure of 10 periods and is callable after 5 periods from
the issue date. The debt is unsecured;

• U SD 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 Inter
Bank Offered Rate) plus 3.60%.

Total eligible Tier 2 Capital as at 31 December 2017 was N34
billion (2016: N29 billion).

Investment in unconsolidated subsidiaries and associations are
deducted from Tier 1 and 2 capital to arrive at total regulatory
capital.

94 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 95

Enterprise risk review (continued)

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 2017 31 Dec 2016 Stanbic IBTC Bank PLC 31 Dec 2017 31 Dec 2016
Tier 1 Tier 1
Paid-up Share capital Nmillion Nmillion Paid-up share capital Nmillion Nmillion
Share premium 179,270 138,831 Share premium 133,317 108,228
General reserve (retained profit) General reserve (retained profit)
SMEEIS reserve 5,025 5,000 SMEEIS reserve 1,875 1,875
AGSMEIS reserve 66,945 65,450 AGSMEIS reserve 42,469 42,469
Statutory reserve 85,227 50,157 Statutory reserve 65,767 40,664
Other reserves Other reserves
Non controlling interests 1,039 1,039 Non controlling interests 1,039 1,039
Less: regulatory deduction 749 - Less: regulatory deduction 749 -
Goodwill Deferred Tax Assets
Deferred tax assets 16,863 32,576 Other intangible assets 21,405 22,153
Other intangible assets 264 (19,087) Investment in the capital of financial subsidiaries 13 28
Current year losses Excess exposure(s) over single obligor without CBN approval - -
Under impairment 3,159 3,696 Exposures to own financial holding company
Reciprocal cross-holdings in ordinary shares of financial institutions 9,506 9,351 Unsecured lending to subsidiaries within the same group 8,976 9,084
Investment in the capital of banking and financial institutions Eligible Tier I capital 8,321 8,321
Excess exposure(s) over single obligor without CBN approval - -
Exposures to own financial holding company 8,901 8,638 Tier II 605 713
Unsecured lending to subsidiaries within the same group Hybrid (debt/equity) capital instruments 50 50
Eligible Tier I capital 605 713 Subordinated term debt
- Other comprehensive income (OCI) - -
Tier II - - Less: regulatory deduction - -
Hybrid (debt/equity) capital instruments - - Reciprocal cross-holdings in ordinary shares of financial institutions 124,341 -
Subordinated term debt - - Investment in the capital of banking and financial institutions 99,144
Other comprehensive income (OCI) - - Investment in the capital of financial subsidiaries 32,787
Less: regulatory deduction - - Exposures to own financial holding company - 28,149
Reciprocal cross-holdings in ordinary shares of financial institutions - - Unsecured lending to subsidiaries within the same group -
Investment in the capital of banking and financial institutions 169,763 29,046
Investment in the capital of financial subsidiaries 129,480 Eligible Tier II capital 3,741 27,964
Exposures to own financial holding company 34,239 50 185
Unsecured lending to subsidiaries within the same group - 28,906 Risk weighted assets: - 50
Eligible Tier II capital - Credit risk - -
Total regulatory capital 29,046 Operational risk 50 -
5,193 27,964 Market risk - 50
Risk weighted assets: - 942 Total risk weight - -
Credit risk - - -
Operational risk - - Total capital adequacy ratio 32,737
Market risk - - Tier I capital adequacy ratio 157,078 28,099
Total risk weight - - 127,243
- - 574,948
Total capital adequacy ratio - 179,605 458,266
Tier I capital adequacy ratio 34,239 146,986
204,002 28,906 13,270
158,386 767,823 1,917
604,262 607,169
249,669 486,430 20.5%
207,092 16.2% 21.0%
13,270 16.3%
867,200 1,917
695,439
23.5%
19.6% 22.8%
18.6%

97

Foundations
designed for

in our people, Annual report &
skills and financial statements
strengths
98 Board of directors
We know the soundest investment is one 100 Directors’ report
that is based in people, for people. Which 106 Statement of directors’ responsibility
is why we invest in everyone in different 107 Corporate governance report
ways, because we believe that knowledge 122 Report of the audit committee
and its empowerment is pivotal to our 124 Independent auditors report
success. 128 Consolidated and separate

Be it through our Assets management statement of financial position
experts, our Youth Leadership Series, 130 Consolidated and separate
the schools we have donated to for the
betterment of young Nigerians or even statement of profit and loss
podcasts for our customers on how they 136 Consolidated and separate
can save, invest or simply learn more
about how banking works, we want statement of cash flows
everyone to grow with us. 137 Notes to the consolidated and

This is what drives us at Stanbic IBTC separate financial statement
244 Annexure A
246 Annexure B

98 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information 99

Board of Directors

Basil Omiyi (con) Yinka Sanni Dominic Bruynseels Prof. Fabian Ajogwu (san) Ngozi Edozien Salamatu. H. Suleiman
Chairman Chief Executive, BSc, MBA, Non-executive Independent non-executive Independent non-executive Independent Non-executive
BSc, PGD AMP (Harvard Business School) BA Hons, MBA, Associate of Institute of LL.B, B.L, LL.M, MBA, Ph.D. BA, MBA LLB, BL, LLM
Appointed: 2015 Appointed: 2017 Bankers, UK, Diploma in Financial Studies Appointed: 2017 Appointed: 2015 Appointed: 2016
Appointed: 2012
Directorships: David Michaels Nigeria Limited, SEPLAT Directorships: The Nigeria Economic Summit Group; Directorships: Urshday Limited, Nep Mall Limited, Directorships: Barloworld, Vlisco Group, PZ Cussons PLC, Directorships: Forte Oil Limited; Flour Mills of Nigeria
Petroleum Development Company, Taf Nigerian Homes Stanbic IBTC Bank PLC; Stanbic IBTC Pension Managers Directorships: Standard Bank de Angola, S.A, Stanbic Elysium Dem Nigeria Limited, Gray-Bar Alliance Limited, African Leadership Network Advisory Board, Guinness PLC; Primechoice Investments Limited; S & M Investments
Limited, RivTaf Nigeria Limited Limited; Stanbic IBTC Asset Management Limited; Stanbic Bank Ghana Limited, Standard Bank RDC SARL, Stanbic Kenna Partners Nigeria Plc Limited
IBTC Insurance Brokers Limited, Stanbic IBTC Trustees IBTC Pension Managers Limited Committee member: Board Remunerations Committee, Committee member: Board IT Committee, Board Risk Committee member: Board Remunerations Committee;
Limited; Stanbic IBTC Capital Limited; Stanbic IBTC Committee member: Board Remunerations Committee, Board Legal Committee, Board Risk Management Management Committee, Ad-hoc Head Office Property Board Legal Committee
Ventures Limited; Stanbic IBTC Investments Limited; Board Risk Management Committee, Board Nominations Committee Sub-Committee.
Stanbic IBTC Stockbrokers Limited Committee, Board Legal Committee, Board IT Committee
Committee member: Board Risk Management
Committee; Board Legal Committee; Board IT Committee;
Board Nominations Committee

Lilian Ifeoma Esiri Ballama Manu Simpiwe Tshabalala Ratan Mahtani
Non-executive Non-executive Non-executive Non-executive
LLB, BL, LLM BSc, MSc BA; LLB; LLM Appointed: 2012
Appointed: 2012 Appointed: 2015 Appointed: August 2013
Directorships: Aegean Investments Limited, Churchgate
Directorships: Stanbic IBTC Asset Management Limited, Directorships: Sicom Capital Services Limited, Alpine Directorships: Stanbic IBTC Bank PLC; Standard Bank of Nigeria Limited, First Century International Limited,
Podini International Limited, Veritas Geophysical Nigeria Investments Limited, Modibo Adamu University South Africa; Standard Bank Group; Banking Association First Continental Properties Ltd, T F Kuboye and Co,
Limited, Ashbert Leisures Limited, Ashbert Beverages of Technology, Shell Nigeria Closed Pension Fund of South Africa. International Seafoods Limited
Limited, Ashbert Oil and Gas Limited Administrator Limited Committee: Board Remunerations Committee; Committee member: Audit Committee
Committee member: Board Risk Management Committee member: Board Risk Management Board Nominations Committee
Committee, Audit Committee, Board Legal Committee Committee, Board IT Committee