FIDELITY BANK PLC - FMDQ OTC Securities Exchange

Transcription

This document is important and should be read carefully. If you are in any doubt as to its contents or the action to be taken, please
consult your Banker, Stockbroker, Accountant, Solicitor or any other professional adviser for guidance immediately. For
information concerning certain risk factors which should be considered by prospective Investors, see “risk factors” commencing
on page 21 of this Prospectus.
FIDELITY BANK PLC
Rc 103022
OFFER FOR SUBSCRIPTION OF N30,000,000,000.00
16.48% FIXED RATE SUBORDINATED UNSECURED BONDS DUE 2022
Issue Price: N1,000 per unit
Payable in full on Application
Application list Opens: May 13, 2015
Application list Closes: May 13, 2015
This offering of 7 year 16.48% Fixed Rate Subordinated Unsecured Bonds (“the Issue”) by Fidelity Bank Plc (“the Bank” or “the
Issuer”) was made through 100% firm underwriting process wherein 100% of the Issue was offered to the Underwriters listed on Page
10 of this Prospectus. The bonds have been assigned a ‘BBB’ rating by the Global Credit Rating Company Limited (“GCR”). A rating is
not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the
assigning rating agency.
This Prospectus and the securities that it offers have been approved and registered by the Securities & Exchange Commission. It is a civil
wrong and criminal offence under the Investment & Securities Act No 29 of 2007 (“The Act”) to issue a Prospectus which contains false
or misleading information. The clearance and registration of this prospectus and the securities which it offers does not relieve the parties
from any liability arising under the act for false and misleading statements contained herein or for any omission of a material fact.
This Prospectus has been prepared in compliance with Part IX of the Act, the Rules and Regulations of the Commission and the listing
requirements of The Nigerian Stock Exchange (“the Exchange”) and contains particulars which are compliant with the requirements of
the Commission for the purpose of giving information with regard to the N
= 30,000,000,000 Fidelity Bank Bond Issue. The registration of
this Prospectus does not in any way whatsoever suggest that the Commission endorses or recommends the securities or assumes
responsibility for the correctness of any statement made or opinion or report expressed therein.
This Prospectus contains particulars in compliance with the requirements of the Commission for the purpose of giving information with
regard to the Securities being issued hereunder (“Bonds”). Application has been made to the Council of the Exchange for the admission
of the Bonds to the Daily Official List of the Exchange. The Bond qualifies as securities in which Pension Fund Assets can be invested
under the Pensions Reforms Act 2014 and securities in which Trustees may invest under the Trustees Investments Act, Cap T22, LFN,
2004. The Bonds are exempt from taxation in Nigeria in accordance with the Companies Income Tax (Exemption of Bonds and Short
Term Government Securities) Order 2011, the Value Added Tax (Exemption of Proceeds of the Disposal of Government and Corporate
Securities) Order 2011 and the Personal Income Tax (Amendment) Act 2011. As such, all payments made to Bondholders shall be free
and clear of Withholding, State and Federal Income and Capital Gains Taxes with no deductions whatsoever being made at source.
The Directors of the Bank (“Directors”) accept full responsibility for the accuracy of the information contained in this Prospectus. The
Directors declare that having taken reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the
best of their knowledge and belief, in accordance with the facts and does not omit anything likely to affect the import of such
information. Furthermore, the material facts contained herein are true and accurate in all material respects and the Directors confirm
that, having made all reasonable enquiries, to the best of their knowledge and belief, there are no material facts, the omission of which
would make any statement contained herein misleading or untrue.
LEAD ISSUING HOUSE/UNDERWRITER
PLANET CAPITAL LIMITED RC 986761
JOINT ISSUING HOUSES/UNDERWRITERS
Cowry Asset Management Limited Rc 617327
Dunn Loren Merrifield Advisory
Partners Limited Rc 688014
FSDH Merchant Bank Limited Rc 434206
Pan African Capital Plc Rc 254413
Stanbic IBTC Capital Limited Rc 1031358
United Capital Plc Rc 444999
Fidelity Securities Limited Rc139396
ICMG Securities Limited Rc 174789
Union Capital Markets Limited Rc 370890
This Prospectus is dated May 08, 2015
Fidelity Bank Plc N30 Billion 7-years Fixed Rate Subordinated Unsecured Bonds - Prospectus
FORWARD LOOKING STATEMENTS
Certain statements included in this Prospectus may constitute forward-looking statements that involve a
number of risks and uncertainties because they relate to events and depend on circumstances that may or
may not occur in the future. Such forward-looking statements can be identified by the use of forwardlooking terminology such as “believes”, “expects”, “may”, “are expected to”, “intends”, “will”, “will
continue”, “should”, “would be”, “seeks”, “approximately” or “anticipates” or similar expressions or the
negative thereof or other variations thereof or comparable terminology. These forward-looking
statements include all matters that are not historical facts and include statements regarding the Issuer’s
intentions, beliefs or current expectations concerning, amongst other things, the Issuer’s operating results,
financial condition, liquidity, prospects, growth, strategies and the banking industry in which it operates.
Prospective investors should be aware that forward-looking statements are not guarantees of future
performance and that the Issuer’s actual results of operations, financial condition and liquidity, and the
development of the industry in which it operates may differ materially from those made in or suggested
by the forward-looking statements contained in this Prospectus. In addition, even if the Issuer’s results of
operations, financial condition and liquidity and the development of the industry in which it operates are
consistent with the forward-looking statements contained in this Prospectus, those results or
developments may not be indicative of results or developments in subsequent periods.
Factors that could cause actual results to differ materially from the Issuer’s expectations are contained in
cautionary statements in this Prospectus and include, among other things, the following:

Overall political, economic and business conditions in Nigeria;

Changes in government regulations, especially those pertaining to the banking industry;

Changes in tax requirements, including tax rate changes, new tax laws and revised tax law
interpretations;

Economic and political conditions in international markets, including governmental changes;

The demand for the Issuer’s products and services;

Competitive factors in the industries in which the Issuer and its customers compete;

Interest rate fluctuations and other capital market conditions;

Exchange rate fluctuations; and

The timing, impact and other uncertainties of future actions.
The sections of this Prospectus entitled “Risk and Mitigating Factors”, “Description of Fidelity
Bank Plc” and “Statutory and General Information” contains a more detailed discussion of the factors
that could affect the Issuer’s future performance and the industry in which it operates. In light of these
risks, uncertainties and assumptions, the forward-looking events described in this Prospectus may not
occur.
The Issuer does not undertake any obligation to update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise. All subsequent written and oral forwardlooking statements attributable to the Issuer or to persons acting on its behalf are expressly qualified in
their entirety by the cautionary statements referred to above and contained elsewhere in this Prospectus.
2
CONTENTS
CONTENTS ........................................................................................................................... 3
ABRIDGED TIMETABLE......................................................................................................... 4
DECLARATION BY THE ISSUER ............................................................................................. 5
DOCUMENTS TO BE INCORPORATED BY REFERENCE ........................................................... 6
KEY TERMS AND ABBREVIATIONS ........................................................................................ 7
SUMMARY OF THE ISSUE ....................................................................................................... 9
THE ISSUE ........................................................................................................................... 14
TERMS AND CONDITIONS OF THE BONDS ........................................................................... 15
RISK AND MITIGATING FACTORS ........................................................................................ 21
TAXATION ........................................................................................................................... 25
NIGERIA - AN OVERVIEW .................................................................................................... 26
DESCRIPTION OF FIDELITY BANK PLC ............................................................................... 31
USE OF PROCEEDS ............................................................................................................... 49
EXTRACT FROM THE RATING REPORT ................................................................................. 50
FINANCIAL FORECAST ......................................................................................................... 51
MANAGEMENT ACCOUNTS – AS AT 31 DECEMBER 2014 ....................................................... 58
REPORTING ACCOUNTANT’S REPORT ................................................................................. 61
STATUTORY AND GENERAL INFORMATION ...................................................................... 139
PARTIES TO THE ISSUE ..................................................................................................... 144
PROCEDURE FOR APPLICATION AND ALLOTMENT ........................................................... 147
APPLICATION FORM .......................................................................................................... 148
3
ABRIDGED TIMETABLE
DATE
ACTIVITY
RESPONSIBILITY
15 December 2014
File Application for the approval of the Issue with the SEC and
NSE
Issuing
Houses/Stockbrokers
16 March2015
Receive SEC’s approval and clearance to hold Completion
Board Meeting
Issuing Houses
08 May 2015
Hold Completion Board Meeting
All Parties
11 May 2015
File Executed Offer Documents with SEC
Issuing Houses
13 May 2015
Application List Opens
Issuing Houses
13 May 2015
Application List Closes
Issuing Houses
13 May 2015
Forward Net Issue proceeds to the Bank
Issuing Houses
18 May 2015
File Allotment Proposal and draft newspaper announcement
with SEC
Issuing Houses
27 May 2015
Receive SEC clearance of Allotment Proposal
Issuing Houses
28 May 2015
Publish Allotment Announcement in at least two (2) national
bodies
Issuing Houses
01 June 2015
Distribute Certificates/Credit Central Securities Clearing System
(“CSCS”) Accounts
Registrar
01 June 2015
Forward Declaration of Compliance to The Exchange
Stockbrokers
04 June 2015
Listing of the Bonds
Stockbrokers
08 June 2015
Submission of Summary Report to the SEC
Issuing Houses
4
DECLARATION BY THE ISSUER
5
DOCUMENTS TO BE INCORPORATED BY REFERENCE
The following documents have been filed with the Commission and shall be deemed incorporated in, and
form part of this Prospectus:
i.
The Rating Report by Global Credit Rating Company Limited dated December, 2014;
ii.
The Reporting Accountant’s Report dated November 24, 2014;
iii.
The audited financial statements of Fidelity Bank Plc for the years ended 30 June 2009, and 31
December 2010-2013;
iv.
The letter of “No Objection” dated January 29, 2015 issued by the Central Bank of Nigeria;
v.
The Fidelity Bank Plc’s shareholders’ resolution dated December 21, 2009; and
vi.
The resolution of the Board of Directors of Fidelity Bank Plc dated October 23, 2014.
This Prospectus, if applicable, is accessible, and copies are available free of charge at the offices of the
Issuing Houses from 8:00a.m till 5:30p.m on Business Days during the Offer Period.
Telephone enquiries should be directed to the Issuing Houses on:
Planet Capital Limited
JOINT ISSUING HOUSES/
UNDERWRITERS
CONTACT PERSON(S)
TELEPHONE NUMBER(S)
Sammy Chidoka
08023124910
George Imade
08025545914
Foluso Adigun
08020997885
CONTACT PERSON(S)
TELEPHONE NUMBER(S)
Dunn Loren Merrifield Advisory Partners Chinua Azubike
Limited
Bola Bhadmus
Fidelity Securities Limited
FSDH Merchant Bank Limited
ICMG Securities Limited
Pan African Capital Plc
Stanbic IBTC Capital Limited
United Capital Plc
Union Capital Markets Limited
JOINT ISSUING HOUSE
Cowry Asset Management Limited
08037178936
07032259444
Chris Okenwa
08033254487
Azuike Obinna
08072068181
Kunle Osunkunle
08033255801
Ik Izedonmwen
08053391211
Frans Ojielu
08022231754
Eric Okoruwa
08077994794
Steve Amihere
08085495929
Kobby Bentsi-Enchill
07039166303
Gbeminiyi Ade-Odiachi
08141327854
Wale Shonibare
07034145045
Kayode Fadahunsi
07052420532
Egie Akpata
07039258550
Tunde Sarumi
CONTACT PERSON(S)
07087137134
TELEPHONE NUMBER(S)
Nkoli Edoka
08023147859
Victor Bisong
08062862692
6
KEY TERMS AND ABBREVIATIONS
Unless the context otherwise requires, the following expressions shall have the meanings respectively assigned to them:
“Allotment Announcement”
The publication to be made after the SEC approval of
allotment, in a minimum of two national newspapers by
the Issuing Houses/Book Runners on behalf of the
Issuer, which shall disclose the Coupon Rate, the size of
the Issue and other salient information;
“Allotment Date”
Date the basis of allotment of
approved/cleared by the SEC;
“Allottee”
.
the Bond is
A successful Participant from whom receipt of
subscription monies is confirmed by the Receiving Bank
and to whom the Bonds shall be allotted by the Issuer;
“Bond” or “Securities”
A registered certificate of debt issued by the Issuer which
the Issuer obligates itself to pay to a Holder an aggregate
principal amount and Coupons on a specified date after
the Issue Date;
“Business Day”
Any day except Saturday, Sunday and public holidays, on
which banks are open for business in Nigeria;
“Certificates”
means in relation to the Bonds, a certificate in or
substantially in the form specified in the Schedule to the
Trust Deed or in such other form as may be agreed from
time to time by the Trustee;
“CBN”
Central Bank of Nigeria;
“Completion Board Meeting”
The meeting at which the Issue Documents in
connection with the Issue shall be executed by the
parties to the Issue;
“Conditions”
means in relation to the Bonds, the terms and conditions
to be endorsed on, or incorporated by reference in, the
Bond Certificate in respect of such Bonds, in the form
set out in the Schedule to the Trust Deed or in such
other form, having regard to the terms of this
Prospectus, as may be agreed between the Bank, the
Trustee(s) and the Issuing Houses;
“Coupon Payment Date”
The date on which coupons are to be paid to
Bondholders as specified in this Prospectus;
“Coupon”
Refers to both the specified rate of interest on a Bond,
and also to the rate stated on an actual Bond Certificate
evidencing the interest payable at a specified date;
“CSCS”
Central Securities Clearing System Limited;
“Day Count Fraction”
means in respect of the calculation of an amount for any
period of time (the “Calculation Period”) such day count
fraction as may be specified in the Conditions, if
“Actual/365” is specified, the actual number of days in
the Calculation Period divided by 365;
“Face Value”
The par value of a Bond;
“Fidelity Bank” or “the Bank” or
“the Issuer”
Fidelity Bank Plc, a public limited liability company;
incorporated under the laws of the Federal Republic of
Nigeria;
“Fixed Rate”
The rate of interest payable on the Bonds;
“GDP”
Gross Domestic Product;
7
“Holder”/ “Bondholder”
means any person for the time being entered in the
Register or the Central Securities Clearing System (CSCS)
as a holder of a unit or units of the Bonds and includes
persons so registered as joint holders;
“Interest Commencement Date”
The Issue Date from which interest on the Bonds begins
to accrue;
“Interest Payment Date”
Any date set out in the Prospectus on which the Coupon
becomes payable;
“ISA” or the “Act”
Investment and Securities Act, No. 29 2007
“Issue Date”
The date on which the Bond may be issued to
prospective investors for subscription
“Issue Price”
The price of issue of the Bonds as set out in the
Prospectus;
“Issuing Houses”
The Lead Issuing House and the Joint Issuing Houses;
“Joint-Issuing Houses”
Dunn Loren Merrifield Advisory Partners Limited
United Capital Plc
“Lead Issuing House”
Planet Capital Limited;
“LFN”
Laws of the Federation of Nigeria, 2004;
“Listing Rules”
The Listing Rules of the Nigerian Stock Exchange;
“NSE” or “the Exchange”
The Nigerian Stock Exchange;
“Register”
The register kept at the specified office of First
Registrars Limited into which shall be entered the names
and addresses of each Bondholder and the particulars,
transfers and redemption of the Bonds held by each
Bondholder;
“Rules & Regulations”
The Rules and Regulations of the Securities & Exchange
Commission issued pursuant to the Investments and
Securities Act No. 29 2007;
“Registrar”
First Registrars Limited;
“SEC” or “the Commission”
Securities & Exchange Commission;
“Special Resolution”
A resolution passed at a meeting of the Bondholders at
which Bondholders holding in the aggregate not less
than three-fourths (75%) of the Bonds are present, in
person or by proxy;
“Terms and Conditions”
The terms and conditions of the Bonds as set out in this
Prospectus;
“Trust Deed”
A trust deed made between the Issuer and the Trustees;
8
SUMMARY OF THE ISSUE
The following information should be read in conjunction with the full text of this Prospectus, from which it is derived. The information
provided below is a brief summary of the key features of the issue, a description of the Issuer and, to the extent applicable, the summary of
the terms and conditions of the Bonds. This summary should be read as an introduction to this Prospectus. It does not purport to be
incorporated by reference in this prospectus.
Issuer:
Description of the Bonds:
Fidelity Bank Plc, registered in Nigeria and quoted on the NSE
The Bond is a 7- year fixed rate subordinated unsecured debt instrument due
2022 to be issued at par. It will form part of the Issuer’s regulatory Tier II
Capital, subject to Central Bank of Nigeria (“CBN”) approval. The Bond shall
be denominated in Naira and shall be constituted under a Trust Deed.
Aggregate Issue Size:
N30,000,000,000 (Thirty Billion Naira only)
Par Value:
N1,000 per unit
Issue Price:
100% of Par
Tenor:
7 years
Maturity:
May 13, 2022, being the 7th anniversary of the Allotment date
Method of Issue:
Offer for Subscription
Currency:
The Bonds shall be denominated in Nigerian Naira (N)
Coupon Rate:
16.48%
Coupon Frequency:
Semi-annual, and payable in arrears on May and November of each year up to
and including the Maturity
Interest Commencement Date:
Coupon shall accrue from the payment date, being May 13, 2015
Initial Coupon payment:
Six (6) months from the Allotment Date
Issue Opens:
May 13, 2015
Issue Closes:
May 13, 2015
Day Count Fraction:
Actual/Actual
Minimum Units of Sale:
Minimum of 20,000 units and multiple of 5,000 units thereafter
Source of Repayment:
The Bond shall be redeemed from the operating earnings of the Bank
Grossing Up:
All amounts payable under the Bonds will be paid in full without set-off or
counterclaim or other restrictions and free and clear of and without any
deductions or withholding for or on account of any taxes or any charges or
otherwise.
PENCOM Compliance:
The Bond qualifies as securities in which Pension Fund Assets can be invested
under the Pensions Reforms Act 2014 and also qualifies as securities in which
Trustees may invest under the Trustees Investments Act, Cap T22, LFN,
2004.
Listing:
An application has been filed with the Council of The Nigerian Stock
Exchange for admission of the Bonds to the Daily Official List of the
Exchange.
9
After the deduction of the costs and expenses of the Issue, which are
estimated at N614,535,000 representing 2.0485% and the underwriting fees of
N630,000,000 representing 2.10% of the gross issue proceeds, the net
proceeds amounting to N 28,755,465,000 will be utilised as follows:
Purpose
Use of Proceeds:
Amount
(N)
% of proceeds
Estimated
Completion
Period
Small Medium
Enterprise
Lending
(“SME”)
23,004,372,000
80%
12 Months
Retail Lending
4,313,319,750
15%
9 Months
Retail
Infrastructure
1,437,773,250
5%
6 Months
28,755,465,000
100%
Total
The estimated cost of issue is as follows:
Estimated Cost of Issue:
Item
Amount (N)
Percentage
(%)
Cost of Issue excluding
Underwriting
Underwriting Cost
614,535,000.00
2.0485%
630,000,000.00
2.10%
1,244,535,000.00
4.15%
Total
The Bond shall be 100% firmly underwritten by a syndicate of Underwriters at
the instance of the Issuer as stated below:
Party
Underwriting:
Amount
Underwritten (N)
Percentage
(%)
6,800,000,000
22.67%
FSDH Merchant
Limited
5,000,000,000
16.67%
3,600,000,000
12.00%
Stanbic
Limited
3,500,000,000
11.67%
2,600,000,000
8.67%
2,600,000,000
8.67%
2,900,000,000
9.67%
2,000,000,000
6.67%
Dunn Loren Merrifield
Advisory Partners Limited
1,000,000,000
3.33%
30,000,000,000
100%
IBTC
Bank
Capital
United Capital Plc
Union Capital
Limited
TOTAL
Markets
Indebtedness:
As at December 4, 2014, the Bank has issued a Eurobond and has borrowings,
in the ordinary course of business, amounting to N90,726,400,000. Save as
disclosed, the Bank has no outstanding loans, charges or similar indebtedness.
Form of
Bonds/Transferability:
The Bonds will be issued in registered form and be freely transferable in
accordance with the provision of the Trust Deed. The Bonds may be initially
represented by a certificate(s). Where the Bonds are represented by certificate,
the certificate(s) will be authenticated by the Registrar and may be
dematerialised and held in electronic book entry at the CSCS depository.
10
Early Redemption:
The Issuer shall be entitled on any date after 5 years after the Issue Date, such
date being a Coupon Payment Date in respect of the Bonds, to redeem the
whole or any part of the Bonds outstanding upon giving to the Trustees not
more than 60 days nor less than 30 days’ notice (expiring on a day fixed for the
payment of Coupon thereon) of its intention to do so and at the expiration of
such notice, the Issuer shall be bound to redeem the Bonds in respect of
which notice has been given and to pay any Coupon that shall have accrued
thereon PROVIDED THAT any Bonds redeemed pursuant to this Condition
shall be redeemed as between the bondholders on a pro rata basis
Notwithstanding the clause above, for as long as any of the Bonds certified by
the CBN as forming part of the Issuer’s regulatory capital remains outstanding,
the Issuer shall not exercise any right to redeem the Bonds prior to its stated
maturity unless:
(i) The Early Redemption will not result in the Issuer’s capital adequacy
ratio (“CAR”) falling below the regulatory minimum ratio prescribed by
the CBN and
(ii) The Issuer has obtained the consent of the CBN for such Early
Redemption
Issuer Rating:
The Issuer has an A- rating by Global Credit Rating Company Limited
Issue Rating:
The Bond has been assigned a rating of BBB by Global Credit Rating
Company Limited
Taxation:
All payments made to Bondholders shall be free and clear of Federal Income
and Capital Gains Taxes with no deduction made whatsoever at source. This
is by virtue of the provisions of Value Added Tax (Exemption of Proceeds of
the Disposal of Government and Corporate Securities) Order, 2011, the
Companies Income Tax (Exemption of Bonds and Short Term Government
Securities) Order, 2011 and the Personal Income Tax (Amendment) Act 2011.
Business Day Convention:
Where the day on which a payment is due to be made is not a Business Day,
that payment shall be effected on or by the next succeeding Business Day
unless that succeeding business day falls in a different month in which case,
payment shall be made on or by the immediately preceding Business Day
Day Count Convention:
Actual/Actual (actual number of days in a Month and actual number of days
in a Year)
Status:
The Bonds are direct, unsecured and subordinated obligations of the Issuer
and rank pari passu without any preference among themselves and at least pari
passu with the claims of all holders of subordinated Indebtedness as provided
in the Trust Deed. In the event of the winding-up of the Issuer, the claims of
the Trustees and the holders of subordinated Bonds against the Issuer for
payment of principal and interest in respect of the subordinated Bonds will be
subordinated to the Senior Indebtedness of the Issuer.
Undertaking:
Claims and Litigation:
The Bonds are backed by an Undertaking issued by Fidelity Bank Plc in favour
of the Trustees on behalf of Bondholders supporting all the obligations of the
Issuer.
The Bank is, in its ordinary course of business, presently involved in FortyThree (43) cases. Of the said 43 (forty-three) cases, the Bank is; (i) Claimant in
six (6) cases instituted by it; (ii) Defendant in thirty-seven (37) cases instituted
against it by various individuals and organizations; and (iii) Counter-claimant in
four (4) cases out of the cases instituted against it. The total claims against the
Bank in the thirty seven (37) cases instituted against it is N3,682,313,632.02
(Three Billion, Six Hundred and Eighty Two Million, Three Hundred and
Thirteen Thousand, Six Hundred and Thirty Two Naira, Two kobo Only) and
$317,000, (Three Hundred and Seventeen Thousand United States Dollars).
In the context of the contemplated transaction, the Solicitors to the
Transaction have set a materiality threshold of Twenty Million Naira
(N20,000,000) (the “Materiality Threshold”). Of the thirty-seven (37) cases
against the Bank, only eight (8) cases are in respect of claims above the
Materiality Threshold.
11
The total monetary claims in the said eight (8) litigation cases instituted against
the Bank is N3,413,582,799 (Three Billion, Four Hundred and Thirteen
Million, Five Hundred and Eighty-Two Thousand, Seven Hundred and
Ninety-Nine Naira Only) and $317,000 (Three Hundred and Seventeen
Thousand United States Dollars) excluding interest and costs, which may be
awarded by the courts hearing those matters after conclusion of same.
The Solicitors to the Transaction believe that the contingent liability to which
the Bank may likely be exposed in respect of the above-referenced 8 cases is
the sum of N151,000,000 (One Hundred and Fifty-One Million Naira).
The Solicitors to the Transaction are of the opinion that the claims against the
Bank should not have any material adverse effect on the Transaction.
The Directors of the Bank are also of the opinion that none of the
aforementioned cases is likely to have any material adverse effect on the Bank
or on the Transaction, and are not aware of any other pending and/or
threatened claim or litigation.
- Prospectus
- Trust Deed
- Underwriting Agreement
- Vending Agreement
- The Rating Report
- Reporting Accountants’ Report
Transaction Documents:
- Solicitors Opinion on Claims and Litigations
- Consent of all parties and Directors/Company Secretary of Fidelity Bank
Plc
- the Shareholders’ resolution dated December 21, 2009
- the resolution of the Board of Directors dated October 23, 2014
- Letter of ‘No Objection’ by the Central Bank of Nigeria
- Letter of Approval from the SEC
Events of Default:
An event of default shall occur if an order is made or a resolution is passed for
the Winding-Up of the Issuer or if default is made in the payment of principal
or interest due for a period of 5 business days, or if the Issuer does not
perform any or more of its obligations under the Trust Deed for a period of
30 days subject to the provisions of the Trust Deed. Please, refer to the section
on “Events of Default” on page 50 of the Trust Deed.
Governing Law:
The Laws of the Federal Republic of Nigeria
12
DESCRIPTION OF THE ISSUE
FIDELITY BANK PLC
Fidelity Bank Plc was incorporated in Nigeria as a Private Limited Liability Company on November 19,
1987 as Fidelity Union Merchant Bank Limited. It obtained a merchant banking license on December 31,
1987 and commenced banking operations on June 3, 1988. By 1990, it had distinguished itself as one of
the fastest growing merchant bank in the country.
To leverage the emerging opportunities in the commercial and consumer end of financial services in
Nigeria, the Bank converted to commercial banking on July 16, 1999. It registered as a public limited
liability company on August 10, 1999, and changed its name to Fidelity Bank Plc. It became a universal
bank on February 6, 2001, with a license to offer the entire spectrum of commercial, consumer, corporate
and investment banking services. The Bank’s shares were quoted on the floor of The Nigerian Stock
Exchange on May 17, 2005.
THE BOND
The Bank seeks to raise a 7 year Fixed Rate Subordinated Unsecured Bond from the Nigerian Capital
Market through Firm Underwriting.
The Bond qualifies as securities in which Pension Fund Assets can be invested under the Pensions
Reforms Act 2014 and as securities in which Trustees may invest under the Trustees Investments Act,
Cap T22, LFN, 2004. The Bonds are exempt from taxation in Nigeria in accordance with the Companies
Income Tax (Exemption of Bonds and Short Term Government Securities) Order 2011, the Value Added
Tax (Exemption of Proceeds of the Disposal of Government and Corporate Securities) Order 2011 and
the Personal Income Tax (Amendment) Act 2011. As such, all payments made to Bondholders shall be
free and clear of Withholding, State and Federal Income and Capital Gains Taxes with no deductions
whatsoever being made at source.
UNDERTAKING
The Bonds are backed by an Undertaking issued by Fidelity Bank Plc in favour of the Trustee on behalf
of Bondholders supporting all the obligations of the Issuer.
STRUCTURE OF THE ISSUE
1. Fidelity Bank Plc issues bonds in consideration for gross proceeds.
2. Investors subscribe to Fidelity Bank Plc bond issue.
3. Fidelity Bank pays interest and principal, semi-annually to bondholders in accordance with the terms
of the Prospectus
a) GCR provides bond issue rating to Fidelity Bank Plc’s proposed bond issue.
b) GCR provides Issuer rating.
c) Trustee administers payment obligations according to the terms of the Trust Deed.
13
THE ISSUE
This Prospectus is issued by the Joint Issuing Houses on behalf of Fidelity Bank Plc in respect of its N30
Billion 16.48% Fixed Rate Subordinated Unsecured Bonds.
A decision to invest in the Bonds should be based on consideration by the prospective investor, of this
Prospectus in addition to any document incorporated by reference therein as a whole.
PLANET CAPITAL LIMITED
RC 986761
Partners Limited Rc 688014
On behalf of
FIDELITY BANK PLC Rc 103022
Offer for Subscription
And is authorised to receive application for
N30,000,000,000
16.48% FIXED RATE SUBORDINATED UNSECURED BONDS Due 2022
Issued At Par
Application List Opens: May 13, 2015
Application List Closes: May 13 2015
14
TERMS AND CONDITIONS OF THE BONDS
OVERVIEW OF PROVISIONS RELATING TO THE BONDS
The following are the terms and conditions on which the Bonds are issued pursuant to the Trust Deed. Certain provisions of
these terms and conditions (“the conditions”) are summaries of, and are subject to, the detailed provisions of the Trust Deed.
The following provisions apply to the Bonds. Terms defined in the Trust Deed have the same meaning in the paragraphs
below.
1.
Form, Denomination and Title
1.1.
Form and Denomination: The Bonds are in registered form and shall be registered with a
separate securities identification code with CSCS. Each Bondholder’s holding of the Bonds will be
credited into his Securities Account. The Bonds shall be issued in denominations of N1,000.00
(One Thousand Naira) with a minimum initial subscription of N20,000,000 (Twenty Million Naira)
and in integral multiples of N5,000,000.00 (Five Million Naira) thereafter.
1.2.
Title: Title to the Bonds will be evidenced by registration for the time being in the Bonds Register.
Title to the Bonds will pass by transfer and registration in the Bonds Register. The holder of any
Bond will (except as otherwise required by law or as ordered by a court of competent jurisdiction)
be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any
notice of ownership, trust or any other interest in it, any writing thereon by any Person or any
notice of any previous theft or loss thereof; and no Person will be liable for so treating the holder.
All payments made to the holder shall be valid and, to the extent of sums so paid, effective to
satisfy and discharge the liability for the moneys payable on the Bonds. “Person” means any
individual, company, corporation, firm, partnership, joint venture, association, unincorporated
organisation, trust or other judicial entity, including, without limitation, any state or agency of a
state or other entity, whether or not having separate legal personality, “Bondholder” or “holder”
means the Person in whose name a Bond is for the time being registered in the Register (as defined
below) (or, in the case of joint holders, the first named thereof) and “holders” shall be construed
accordingly.
2.
Transfer
2.1.
Transfer of the Bonds will be effected through book entries in securities accounts held by the
transferor and transferee in the CSCS in accordance with the procedures of the CSCS or such
alternative clearing system approved by the Issuer and the Trustee, and registration of the name of
the transferee in the Bonds Register in respect of the Bonds then held by him. The transferor shall
be deemed the holder of the Bonds until the transferee’s name is entered in the Bond Register in
respect thereof.
3.
3.1.
Redemption, Purchase and Cancellation
Redemption at Maturity: Unless previously redeemed, purchased and cancelled, the principal on
the Bonds will be fully redeemed in one bullet payment at the Maturity Date, or such earlier date as
the Trustee in accordance with the Trust Deed shall declare the Bonds to have become
immediately repayable together with such interest and premium (if any) on such Bonds as may be
payable under the Conditions.
3.2.
Early Redemption:
3.2.1.
The Issuer shall be entitled on any date after 5 years after the Issue Date, such date being a
Coupon Payment Date in respect of the Bond, to redeem the whole or any part of the
Principal Amount Outstanding of the Bond upon giving to the Trustees not more than 60
days nor less than 30 days’ notice (expiring on a day fixed for the payment of Coupon
thereon) of its intention to do so and at the expiration of such notice, the Issuers shall be
bound to redeem the Bond in respect of which notice has been given and to pay any
Coupon that shall have accrued thereon PROVIDED THAT any Bond redeemed
pursuant to this Condition shall be redeemed as between the Bond-holders on a pro rata
basis.
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3.2.2.
Notwithstanding the foregoing, for as long as any of the Bonds certified by the CBN as
forming part of the Issuer’s regulatory capital remains outstanding, the Issuer shall not
exercise any right to redeem the Bonds prior to the Maturity Date unless:
(i).
The Early Redemption will not result in the Issuer’s capital adequacy ratio falling
below the regulatory minimum ratio prescribed by the CBN; and
(ii).
The Issuer has obtained the consent of the CBN for such Early Redemption.
3.3.
Purchase: The Issuer may at any time and from time to time purchase at any price Bonds through
the market or by tender (available to all Bondholders alike).
3.4.
Cancellation: All the Bonds which are redeemed in accordance with the provisions of the Trust
Deed will be cancelled and may not be reissued or resold. For so long as the Bond is admitted to
listing and/or trading on a recognised Stock Exchange and the rules of such exchange so require,
the Registrar shall promptly inform the recognised Stock Exchange of the cancellation of any
Bonds.
4.
Negative Pledge
So long as any Bonds remain outstanding the Issuer will not, without the consent of the Trustees,
secure any other Indebtedness represented by bonds, notes or any other publicly issued debt
securities which are, or are capable of being, traded or listed on any stock exchange or over-thecounter or similar securities market without securing the Bonds equally and rateably with such
Indebtedness.
5.
5.1.
Coupon and Calculation
Accrual of Coupon: The Bonds will bear interest from and including the Issue Date at the
Coupon Rate payable in arrears on its Principal Amount Outstanding. The Coupon shall be fixed
for 7 years and shall be payable on each Coupon Payment Date. Each Bond will cease to bear
interest from and including the due date for final redemption unless, upon due presentation,
payment of principal is improperly withheld or refused, in which event interest will continue to
accrue (as well after as before judgment) at the Coupon Rate in the manner provided in the
Conditions.
5.2.
Calculation of Coupon Amount: The amount of interest payable in respect of any Bond for any
period shall be calculated by multiplying the product of the Coupon Rate and the Principal Amount
Outstanding of such Bond by the number of days in a month and/or actual number of days (as
applicable) and rounding the resulting figure to the nearest sub unit of the Naira.
6.
6.1.
Payments
All payments in respect of, under and in connection with the Bonds to the relevant Bondholders
shall be made in the Nigerian Naira.
6.2.
Any principal, interest or other moneys payable on or in respect of any Bonds may be paid by the
Trustees through the Registrar by electronic payment transfer except where the bondholders bank
account is unavailable, in which case payment shall be made by cheque or warrant sent through
recorded delivery post to the registered address of the holder or Person entitled thereto, or in the
case of joint holders to the registered address of the joint holder who is first named on the Register
in respect of such Bonds, or to such Person and to such address as the holder or holders may in
writing direct.
6.3.
Every such cheque or warrant shall be made payable to the order of the Person to whom it is sent
or to such other Person or Persons as the holder, or in the case of joint holders, all such joint
holders may in writing direct and payment of the cheque or warrant shall be a satisfaction of the
moneys represented thereby. Every such cheque or warrant shall be sent by registered post to the
person entitled to the money.
6.4.
Upon application or notification by the Bondholder to the Registrar or the Trustees, such payment
may be made by transfer to an account (denominated in Naira) maintained by the payee with any
Nigerian bank as notified to the Registrar.
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6.5.
Whenever any part of the Bond is redeemed a proportionate part of each holding of the Bond shall
be repaid to the Bondholders.
6.6.
Payments will be made to the Person shown in the Bonds Register at the close of business on the
Record Date.
6.7.
Where the day on which a payment is due to be made is not a Business Day, that payment shall be
effected on or by the next succeeding Business Day unless that succeeding business day falls in a
different month in which case payment shall be made on or by the immediately preceding Business
Day.
6.8.
The Registrar shall give to the Bondholders not less than thirty (30) day’s notice in writing of the
time and mode for repayment of the Bonds to be redeemed and each such notice shall state the
amount of the Bond for redemption.
6.9.
On a Redemption Date, the Registrar shall instruct the CSCS (or such other clearing system as
applicable), to debit the Securities Account of the Bondholders whose Bonds are liable to be
redeemed with the amount of Bonds which have matured or are liable to be redeemed and which
were entered on their account, and to credit such Bonds into the Issuer’s Securities Account, in
order that the same may be cancelled. Upon such credit of the Bonds to the Issuer’s Securities
Account, the Trustee shall, acting through the Registrars pay to the Bondholders the amount
payable to them in respect of such redemption together with any interest accrued and yet unpaid
thereon.
6.10. The Bonds shall be deemed redeemed and the obligations of the Issuer discharged on payment to
the Trustee, on behalf of the Bondholders, of the Principal Amount Outstanding on the Bonds to
the Bondholders whose names appear on the Bond Register on the Record Date. Payment by the
Issuer to the Trustee shall be a legal discharge of the liability of the Issuer towards the Bondholders
from all obligations in connection with the Bonds.
6.11. If, on a Redemption Date, any Bonds which are liable to be redeemed are not delivered to the
Issuer’s Securities Account, the moneys payable to such Bondholder shall be paid to the Trustees
and the Trustees shall hold such moneys in trust for such Bondholder and interest on such Bonds
shall cease to accrue as from the date fixed for redemption thereof and the Issuer shall thereby be
discharged from all obligations in connection with such Bonds. If the Trustees shall place the
moneys so paid to them on deposit at a commercial bank or invest them in the purchase of
securities for the time being authorised by law for the investment of trust funds the Trustees shall
not be responsible for the safe custody of such moneys or for interest thereon except such interest
(if any) as the said money may earn whilst on deposit or invested as aforesaid less any expenses
incurred by the Trustees.
7.
Taxation
All payments of principal, interest and any other sum due in respect of the Bonds shall be made
free and clear of, and without withholding or deduction for, any Taxes, duties, assessments or
governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by or
within the Federal Republic of Nigeria by virtue of the provisions of the Companies Income Tax
(Exemption of Bonds and Short Term Government Securities) 2011 and the Value Added Tax
(Exemption of Proceeds of the Disposal of Government and Corporate Securities) Order 2011.
8.
8.1.
Notices
Any notice or other document may be given to or served on any Bondholder either personally or
by sending it by post in a prepaid envelope or delivering it addressed to him at his registered
address or (if he desires that notices shall be sent to some other persons or address) to the person
at the address supplied by the Bondholder.
8.2.
In the case of joint registered holders of any Bonds a notice given to the Bondholders whose name
stands first in the Register in respect of such Bonds shall be sufficient notice to all the joint holders.
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8.3.
Any notice or other document duly served on or delivered to any Bondholder shall
(notwithstanding that such Bondholder is then dead or bankrupt or that any other event has
occurred and whether or not the Issuer has notice of the death or the bankruptcy or other event)
be deemed to have been duly served or delivered in respect of any Bond registered in the name of
such Bondholder as sole or joint holder unless before the day of posting (or if it is not sent by post
before the day of service or delivery) of the notice or document his name has been removed from
the Register as the holder of the Bond and such service or delivery shall for all purposes be deemed
a sufficient service or delivery of such notice or document on all persons interested (whether jointly
with or claiming through or under him) in the Bond.
8.4.
Any notice, or other communication may be given to the Trustees hereunder by sending the same
through the post in a prepaid letter addressed to:
The Managing Director, FBN Trustees Limited
16 -18 Keffi Street, S.W. Ikoyi, Lagos
The Managing Director, Stanbic IBTC Trustees Limited
The Wealth House, Plot 1678 Olakunle Bakare Close, Victoria Island, Lagos
The Managing Director, UBA Trustees Limited
UBA House (12th Floor), 57 Marina, Lagos
8.5.
Any notice, or other communication may be given to the Issuer by sending the same through the
post in a prepaid letter addressed to:
The Managing Director, Fidelity Bank Plc
2, Kofo Abayomi Street, Victoria Island, Lagos
9.
Events of Default in respect of the Bonds
On the occurrence or continuance of an Events of Default, the Trustees may at their discretion and
shall, upon the request in writing of the registered holders of at least one-fifth of the nominal
amount of the Bonds for the time being outstanding or upon being so directed by a Special
Resolution by notice in writing to the Issuer declare the Bonds to have become immediately
repayable. See “Terms and Conditions of the Bonds— Condition 24 (Events of Default)”.
10. Default of Payment
10.1. In any case where payment of the whole or any part of the principal amount due in respect of any
Bond is improperly withheld or refused on the Redemption Date, interest shall accrue on the whole
or such part of such principal amount, from the date of such withholding or refusal until the date
either on which such principal or interest amount due is paid to the relevant Bondholders or, if
earlier, the fifth day after which notice is given to the relevant Bondholders in accordance with the
Conditions that the full amount payable in respect of the said principal amount is available for
collection by the relevant Bondholders.
11.
Enforcement
Only the Trustee may enforce the provisions of the Trust Deed. No Bondholder shall be entitled to
proceed directly against the Issuer to enforce the performance of any of the provisions of this Trust
Deed unless where Bondholders holding 75% of the principal amount of the bonds outstanding
have requested the Trustee in writing to exercise the powers granted and, the Trustee having
become bound as aforesaid to take proceedings fails or refuses to proceed within 90 days and such
failure is continuing
12.
Meetings of Bondholders
12.1. Convening Meeting of Bondholders: The Trust Deed contains provisions for convening
meetings of Bondholders to consider matters affecting their interests, including the modification by
Special Resolution of the Conditions or the provisions of the Trust Deed. Such a meeting may be
convened by the Trustee on its own motion or on the requisition of the Issuer; and shall be
convened by the Trustee at anytime upon request in writing of holders of at least ten (10)percent of
the aggregate principal amount of the outstanding Bonds.
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12.2. Quorum: The quorum at any meeting of the Bondholders convened for passing a Special
Resolution will be two or more Persons holding or representing by proxy not less than threefourths of the nominal amount of the Bonds for the time being outstanding; or, at any adjourned
such meeting, two or more Persons being or representing Bondholders, whatever the amount of
the Bonds held by them shall be a quorum for all purposes including the passing of Special
Resolutions and to decide upon all matters which could properly have been disposed of at the
meeting from which the adjournment took place. A Special Resolution passed at any meeting of
the Bondholders will be binding on all Bondholders, whether or not they were present at such
meeting.
12.3. Resolution in Writing: A resolution in writing duly signed by all the holders of the Bonds for the
time being outstanding, shall be as effective for all purposes as a Resolution duly passed at a
meeting of the Bondholders. Provided that the resolution was received by all the Holders entitled
to receive notice of a meeting of Holders. Such Resolution in writing may be contained in one
document or in several documents in like form each signed by or on behalf of one or more of the
Bondholders.
13.
Modifications and Waiver: The Trustee may agree: (i) upon the giving of prior written
notification by the Issuer to the Rating Agency which has assigned a credit rating to the Bonds; and
(ii) without the consent of the Bondholders, to:
13.1.1. any modification of any of the provisions of the Trust Deed or the Conditions that is of a
formal, minor or technical nature or is made to correct a manifest error; and
13.1.2. any other modification (except as mentioned in the Trust Deed) and any waiver or
authorisation of any breach or proposed breach of any of the Conditions or any of the
provisions of the Trust Deed which, in the opinion of the Trustee, is not materially
prejudicial to the interests of the Bondholders.
Any such modification shall be binding on the Bondholders and shall be notified by the Issuer to
the Bondholders as soon as practicable, but subject to the Commission’s prior approval, and the
Stock Exchange as soon as practicable thereafter.
14.
Rights Against Predecessors-in-Title
Except as required by law the Issuer will recognise the registered holder of any Bonds as the
absolute owner thereof and shall not be bound to take notice or see to the execution of any trust
whether express, implied or constructive to which any Bonds maybe subject, and the receipt by
such registered holder, or in the case of joint registered holders the receipt by any of them, of the
interest from time to time accruing due for any other moneys available in respect thereof shall be a
good discharge to the Issuer notwithstanding any notice it may have whether express or otherwise
of the right, title, interest or claim of any other Person to or in such Bonds interest or moneys.
Notice of any trust express or constructive shall not be entered on the Register in respect of any
Bonds.
15.
Freedom from Equities
The Bondholder will be recognized by the Issuer as entitled to the Bonds free from any equities,
set-off or cross-claim on the part of the Issuer against the original or any intermediate holder of the
Bonds.
16.
Declaration of Trust
16.1
The Trustee: The Trustee hereby declares itself trustee for the Bondholders with effect from the
date of this Trust Deed to hold the benefit of the covenants and other obligations on the part of
the Issuer herein contained on trust for the Bondholders subject to the terms of this Trust Deed.
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16.2
Duration of Trust: For the avoidance of doubt, the parties to this Trust Deed agree that the
common law rule against perpetuities will apply to the trusts constituted under this Trust Deed and
that the Deed shall not endure beyond 21 years from the date of its creation. The trusts created by
this Trust Deed shall remain in full force and effect until the earliest of:
16.2.1 the date on which the Trustee unconditionally confirms in writing to the Issuer that there
is no longer any outstanding Indebtedness which is secured by this Trust Deed; or the date
on which the Trustee receives unconditional confirmation in writing from the Registrar
that the Bondholders have been paid all outstanding obligations; or
16.2.2 the unconditional release of the Issuer by the Trustee from all of its obligations under this
Trust Deed, such release to be given promptly upon request by the Issuer and the Trustee
is satisfied that there is no longer any outstanding Indebtedness secured by this Trust
Deed.
16.3 Utilisation of Proceeds: The Issuer shall use the net proceeds from the issue of the Bonds (after
deduction of the costs and expenses incurred in connection with the issuance of the Bonds) in
accordance with the provisions of the Prospectus.
17.
Indemnity: The Issuer shall indemnify the Trustee (i) in respect of all losses, liabilities, Taxes, fees,
costs and expenses incurred by it or by any Appointee or other person appointed by it to whom
any trust, power, authority or discretion may be delegated by it in the execution or purported
execution of the trusts, powers, authorities or discretions vested in it by this Trust Deed and (ii)
against all liabilities, actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to this Trust Deed except as a result of the Trustee's
negligence and wilful default and provided further that the indemnity contained in clause 15.1 (f) of
the Trust Deed shall remain in full force and effect notwithstanding any discharge of this Trust
Deed.
18.
Further Issues
The Issuer may from time to time, without the consent of the Bondholders and in accordance with
the Trust Deed, create and issue further notes having the same terms and conditions as the Bonds
in all respects (or in all respects except for the first payment of interest) so as to be consolidated
and form a single series with the Bonds. The Issuer may from time to time, with the consent of the
Trustee, create and issue other series of bonds having the benefit of the Trust Deed.
19.
Establishment and Funding of Payment Account
19.1.
Establishment of Payment Account: The Issuer shall open the Payment Account on or before the
Issue Date in the name and under the control of the Trustee.
19.2.
Funding of Payment Account: The Issuer hereby covenants, at least five (5) Business Days before
each Payment Date, to pay into the Payment Account from the income from its operations, all
monies due under the Bonds at the relevant time to the relevant Bondholders.
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RISK AND MITIGATING FACTORS
An investment in Bonds, as with any other investment, involves a certain degree of risk. Accordingly, prospective investors
should carefully consider the following risk factors together with all of the other information included in this Prospectus, prior
to purchasing the Bonds.
The risks below are not the only risks facing investment in the Bond. Additional risks and uncertainties not currently known
to the Issuer or that it currently considers immaterial may also materially and adversely affect the Bank. Any of the following
risks could result in a material adverse effect on the Bank’s financial condition, results of operations and ability to service
debt, including the Bonds. Investors should reach their own views or obtain such professional advice as they deem appropriate,
before making an investment decision in respect of the Bonds.
1. COUNTRY RISK
i.
Political Risk
Nigeria has experienced periods of political instability since its independence in 1960. After 16 years of
military rule, a democratic government was reinstated in 1999. Since then, significant progress has been
made to strengthen the political environment, the economy, and also to tackle corruption. Nevertheless,
Nigeria’s track record under democracy is short and challenges remain. The transition of power from
President Obasanjo, who had served since 1999, to late President Umar Musa Yar’Adua and now to
President Goodluck Ebele Jonathan marked the first time in Nigeria’s history that power has been handed
democratically from one elected government to another. The principal geographical place of operation of
the Bank where it derives most of its income is Nigeria. Should Nigeria cease to be a country, the
repayment source of the Bonds could be severely compromised.
Mitigating Factor: Nigeria has experienced over a decade of un-interrupted democratic rule for the first
time since independence in 1960. The transition to a new government, following the death of President
Umar Musa Yar’Adua further demonstrated that the Nigerian political atmosphere is maturing. The
Nigerian political and judicial institutions continue to be strengthened in recognition that democratic
governance positively impacts development, and there is a greater will to ensure the participation of the
electorate in decision making through the conduct of free and fair elections. There is the expectation that
this trend will continue although there can be no assurances that the political environment will remain
stable. The Government has also promised to stem the growing insecurity in the country and ensure the
protection of lives and property. Therefore, the likelihood of Nigeria ceasing to exist as a Nation is
extremely limited.
ii.
Economic Risk
The Nigerian economy was impacted by the global economic recession that created a significant
downturn in the capital markets as well as a liquidity squeeze. The Nigerian economy is largely dependent
on oil production and is directly affected by fluctuations in the global prices of crude oil. According to the
World Bank, oil accounts for circa 17.0% of Nigeria’s Gross Domestic Product (“GDP”), over 95.5% of
its export earnings and approximately 81.0% of its budgetary earnings. The economy has in recent
months witnessed reduced earnings due to theft of crude from the Niger Delta region of the Country and
the drop in crude oil prices. The drop in price is caused by the activities of shale oil producers and the
Organisation of Petroleum Exporting Countries (OPEC)’s stance on retaining volume output. The drop
in foreign exchange earnings also caused some depreciation in the Nigerian Naira.
Mitigating Factor: The global financial crisis has largely ended. Economies are beginning to emerge
from recession and are witnessing improved performance. In Nigeria, the theft of the nation’s crude oil is
being addressed with the increased presence of security personnel in the Niger Delta region. The Jonathan
administration remains committed to the wide-ranging reforms aimed at diversifying the economy and
increasing macro-economic stability.
At the last Monetary Policy Committee Meeting of November 25, the Central Bank of Nigeria (CBN)
devalued the naira and raised interest rates by 100 basis points to 13 percent from 12 percent. The CBN
sought to stem losses to its foreign reserves from defending the currency hit by weaker oil prices.
The bank moved the target band of the currency to 160-176 naira to the U.S. dollar, compared with 150160 naira previously.
21
iii.
Risk of civil unrest, sectarian violence and armed conflict.
Nigeria is increasingly experiencing pockets of violence. There were series of bomb blasts, kidnapping of
school children and killing of innocent civilians. There have also been targeted killings of government
officials and attacks on state infrastructure by members of a terrorist sect, Boko Haram in some states of
the North. In addition, there continues to be sporadic cases of kidnap of expatriates, government officials
and wealthy individuals by armed groups in the Niger Delta and Eastern parts of the nation. Unless
resolved by the Government, these conflicts have the potential to destabilise the country.
Mitigating Factor: The Federal Government has continued to strengthen the capacity of law
enforcement agencies. 20% of 2014 fiscal budget was allocated to security in a bid to provide the law
enforcement agencies with the resources to fight all manners of insurgencies and armed conflicts across
the country. Furthermore the Federal Government on the 14th of May 2013 declared a State of
Emergency (“SoE”) in Yobe, Borno and Adamawa States in a bid to tackle the activities of the Boko
Haram sect in those states. Since the declaration of the SoE in those states, there has been a noticeable
reduction in the activities of the sect. In addition, the Government has very recently invited the
international community, specifically the United States of America, Great Britain and Israel to assist in the
rescue of the kidnapped school girls in the Chibok area of Borno State and has indicated a strong
commitment to arrest and prosecute the perpetrators of such acts.
2. BOND SPECIFIC RISKS
i.
The Bonds may not be suitable for all investors
Each potential investor in the Bonds must determine the suitability of the investment in light of its own
circumstances. In particular, each potential investor should:
-
have sufficient knowledge and experience to make a meaningful evaluation of the bonds, the
merits and risks of investing in the Bonds and the information contained or incorporated by
reference in this Prospectus;
-
have knowledge, and access to appropriate analytical tools to evaluate, in the context of its
particular financial situation an investment in the Bonds and the impact the Bonds will have on
its overall investment portfolio;
-
have sufficient financial resources and liquidity to bear all the risks of an investment in the Bonds,
including Bonds with principal and interest payable in one or more currencies, or where the
currency for principal or interest payments is different from the investor’s home currency;
-
understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevant
indices and financial markets; and
-
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.
Mitigating Factor: The bond is targeted at, and firmly underwritten by a club of Underwriters
each of which possesses the requirements listed above.
ii.
The market price of the Bonds may be volatile
The market price of the Bonds in the secondary market could be subject to significant fluctuations in
response to actual or anticipated variations in key economic indices (e.g. inflation, benchmark rate etc),
changes in the regulatory environment and the actual or expected sale of a large number of Bonds. Each
investor needs to assess the market at the right time to trade its Bonds.
Mitigating Factor: The bond will be listed on the Nigerian Stock Exchange. This market is transparent,
has information symmetry and allows for price discovery. In addition, there are mechanisms in place to
prevent free falling of security prices. Therefore, it is expected that there will be less volatility for this
bond.
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iii.
Changes in interest rates may affect the price of the Bonds
Where securities such as Bonds are offered with a fixed rate of interest, such securities are subject to price
risk; as such prices may vary inversely with changes in prevailing interest rates. That is, where interest rates
rise, prices of fixed rate securities fall and when interest rates drop, the prices increase. Accordingly, the
extent of the fall or rise in the prices is a function of the existing coupon, days to maturity and the
increase or decrease in the level of the prevailing interest rates. Increased interest rates which frequently
accompany inflation and/or a growing economy are also likely to have a negative effect on the price of
the Bonds.
Mitigating Factor: The benchmark interest rate remained unchanged at 12% since October 2011 till
January 2015 when it was raised by 100 basis points to 13%. It is not expected that the Monetary Policy
Committee of the Central Bank will further increase the Monetary Policy Rate (“MPR”) in the short to
medium term.
3. ENVIRONMENTAL RISKS
Natural disasters could occur and negatively impact the expected revenue streams or negatively affect
some of the investments made or projects under construction. This will decrease the projected cash flows
which the Bank expects to generate.
Mitigating Factor: Fidelity Bank Plc operates in compliance with all applicable environmental standards.
All offices of the Bank have adequate safety devices to combat fire and other environmental threats that
could arise in the normal course of business.
4. LEGAL AND REGULATORY ENVIRONMENT
The Statutory and Regulatory environment may change and the policies that have created an enabling
environment for the issuance of the Bonds may be amended. The Nigerian Banking industry is highly
regulated and in particular, there may be material changes in the Bank and other Financial Institution
(“BOFI”) Act or CBN policies that could impact the Bank’s business.
Mitigating Factor: The Federal Government and the respective regulators are committed to creating and
sustaining an investment friendly environment governed by stable policies. In recent history, the Nigerian
capital market has not witnessed any significant regulatory pronouncement or policies that have impacted
negatively on issued securities. In addition, the Bank continues to maintain a pro-active stance in
anticipating changes in the regulatory environment.
5. CREDIT RISK
The credit risk of any bond is that the Issuer will default in its obligations and consequently, neither the
semi-annual payment of Interest and Principal will occur where the Bond is an amortising Bond or Semiannual payment of Interest and full redemption of Principal at the end of the final maturity of the Bond
for a bullet Bond.
Mitigating Factor: A reputable international Credit Rating Agency has rated the bond as an Investment
Grade security, and in addition, one reputable Trustee will govern the operations of the securities. The
Bank has also included additional protection to the effect that any default in payment will incur 2%
interest in addition to the fixed interest rate.
6. OPERATIONAL RISK
i.
The primary business of the Bank is lending which carries a risk of default by borrowers
Mitigating Factor: The Bank is in compliance with the single obligor limit requirement imposed by the
CBN, and constantly monitors the risks associated with lending. The Bank also ensures the integrity of its
risk assets through a combination of conservatism, adequate provisioning and emphasis on recoveries.
The Bank has also put in place, reliable risk management systems.
ii.
Resignation of key managerial personnel and executive officers may have an impact on
operations
Mitigating Factor: The Board and the Human Resources department take steps to ensure management
continuity. The Bank has been able to identify, attract and retain talent internally and externally to ensure
smooth business operations.
23
iii.
Size/Competition – Fidelity Bank Plc is not a Tier I Bank and public perception of size
impacts in a highly competitive environment
Mitigating Factor: The Bank needs to grow in order to compete at the same level as the top tier banks.
It has identified funds needed and the effective and strategic deployment of these funds to accelerate the
Bank’s growth.
24
TAXATION
Please note that this information about the tax exempt status of bonds and income accruing there from is meant to serve only
as a guide and should not be considered as or deemed to be tax advice which can be acted upon by an investor.
The following, which applies only to persons who are the beneficial owners of the Bonds, is a summary of the Issuer's
understanding of current law and practice in Nigeria as at the date of this Prospectus relating to certain aspects of the
taxation of the Bonds in Nigeria. Prospective Bondholders who are in any doubt about their tax position or who may be
subject to tax in a jurisdiction other than Nigeria are advised to seek specific tax advice regarding investment in the Bonds
from their professional tax adviser.
Federal Government Waiver of Taxes on all Categories of Bonds
By the Company Income Tax Exemption Order 2011 (Exemption of Bonds and Short Term
Government Securities, the Federal Government of Nigeria approved tax waivers for all categories of
Bonds..
The range of taxes covered by the approval, are those prescribed under the Value Added Tax Act, the
Capital Gains Tax Act, the Companies Income Tax Act, the Personal Income tax Act, and Withholding
Tax. These tax exemptions are for an initial period of ten years. With these approvals, all bonds issued by
corporate bodies are tax exempt.
Corporate Bonds
The Bonds qualify as a Corporate bond under Section 20(1) (g) of the Personal Income Tax Act, 1993 as
well as Section (19) (2) of the Companies Income Tax Act, 1993.
Exemption from Stamp Duties
Pursuant to Section 266 of ISA 2007, all documents or instruments made or used in connection with the
Bonds in such form prescribed by the Commission shall be exempted from stamp duty payable to
the Federal or a State Government.
25
NIGERIA - AN OVERVIEW
The information in this section has been extracted from publicly available documents and publications which have previously
been released by various public and private organizations including the Central Bank of Nigeria (“CBN”), the Economic
Intelligence Unit, the World Bank, the International Monetary Fund, the Nigerian Bureau of Statistics; as well as other
financial and economic publications. Neither the Issuer nor its advisers are able to ascertain the omission of any facts, and
whether such omission would render any extracted information inaccurate or misleading.
OVERVIEW
GENERAL
The Federal Republic of Nigeria (“Nigeria”) occupies 923,768 square kilometres of West Africa,
bordering the Republic of Benin to the west, Chad and Cameroon to the east, Niger to the north and the
Gulf of Guinea to the south. Nigeria has a population of approximately 170 million. Nigeria consists of
36 states and the Federal Capital Territory (“FCT”) of Abuja, which is located in central Nigeria. Lagos is
the most populous city in Nigeria with a population of approximately 17 million.
Nigeria achieved full independence from the United Kingdom on October 1, 1960 and became a federal
republic in 1963. In 1999, following many years of military rule, a new constitution was adopted, and a
peaceful transition to civilian government was completed under the leadership of President Olusegun
Obasanjo, the first democratically elected civilian since the end of the last democratic rule from 1979 to
1983. He was elected under the platform of the Peoples Democratic Party (“PDP”) which has been in
power ever since. Since 1999, the Federal Government of Nigeria (“FGN”) has attempted to reconstruct
Nigeria’s political institutions, improve its international image, reform the economy, manage its oil wealth
in a more sustainable way and diversify the economy beyond the oil industry.
Presidential elections were held in 2007 and resulted in the election of late President Umaru Musa
Yar’Adua. Following the death of President Umaru Musa Yar’Adua, Goodluck Ebele Jonathan was sworn
in as President, in accordance with the Constitution, on May 6, 2010. General elections in Nigeria were
held in April 2011. It was generally reported that the elections were free, fair, peaceful and credible.
Despite this, prior to the formal announcement of the results, post-election violence and riots erupted in
certain cities of some of the northern states of Nigeria (Kaduna, Gombe, Bauchi, Kano, Adamawa, and
some parts of the Federal Capital Territory).
Regardless, the Independent National Electoral Commission (“INEC”) and international observers
upheld the elections as being well conducted and INEC formally announced the incumbent President
Goodluck Ebele Jonathan as the winner, with 58.89% of the total votes cast. President Goodluck secured
more than 25% of the votes cast in over two thirds of the states in Nigeria and avoided the need for a
run-off.
The current Constitution, which was adopted in May 1999 has undergone several amendments. It
provides for a President, a National Assembly and a Judiciary. The National Assembly, with two
chambers, comprises a Senate and a House of Representatives. The Senate, the upper chamber, is made
up of members elected for a four-year term. Each Nigerian state elects three senators while the FCT elects
one senator (109 seats in total). The House of Representatives, the lower chamber, for which elections
were held on April 9, 2011, has 360 members who are elected in single member constituencies for fouryear terms.
OVERVIEW OF THE NIGERIAN ECONOMY
The recent rebasing of Nigeria’s Gross Domestic Product has placed the economy as the largest in Africa,
displacing South Africa. Notwithstanding the negative effects of the global financial crisis of 2008 and
local security challenges, Nigeria’s economy has continued to experience sustained GDP growth over the
last decade.
GDP
Rebased figures from the National Bureau of Statistics estimated real GDP growth rate of 7.31% for 2013
which is 0.56% higher than the 6.75% for 2012 and significantly higher than the 4.65% recorded in 2011.
The services sector displaced the Agricultural sector to become the major driver of the GDP growth rate,
contributing 51.89%, while Industry and Agriculture contributed 25.64% and 21.97% respectively.
According to the National Bureau of Statistics (“NBS”), the nominal GDP for 2013 was estimated at
N80,222.12 trillion, compared with N71,186.53 in 2012 and N63,258.57trillion in 2011.
26
The FGN plans to reinforce economic growth in future periods by encouraging non-oil private sector
growth, which it intends to facilitate through the implementation of its Vision 20:2020 mission.
Real GDP growth rate (% yoy)
8.00%
6.00%
4.00%
2.00%
0.00%
2011
2012
2013
Source: National Bureau of Statistics, Planet Capital Research
OIL PRICES AND PRODUCTION
The Nigerian economy is highly impacted by oil and gas production, which accounted for 14.40% of
GDP in 2013 and approximately 80% of total gross federally collectible revenue. According to data from
the CBN, Crude oil prices declined from an average of U.S$113.47 per barrel in 2012 to U.S$110.63 in
2013. The highest price traded in 2013 was U.S$118.81 per barrel in February. In 2014, there has been a
steady decline in oil prices with the current price of circa $61 as at February 16, 2015. Nigerian oil
production averaged 2.32million barrels per day (mbpd) in 2012 and rose to an average of 2.39million
barrels per day for 2013 while the average daily crude oil production in the second Quarter of 2014 was
recorded at 2.21 mbpd. The marginal increase was as a result of the Government’s commitment to
controlling vandalism and crude oil theft which had hitherto caused supply disruptions.
Prior to 2012, oil production averaged 2.38million barrels per day in 2011 and was capped in 2010 to an
average of 2.47 million barrels per day. In 2008 and 2009 production averaged 2.1 million barrels per day,
compared to 2.5 million barrels per day in 2005.
The oil and gas sector is a major driver of Foreign Direct Investment (“FDI”) into Nigeria but this has
slowed down in recent years owing to the uncertainties in the sector particularly in relation to the passage
of the Petroleum Industry Bill (PIB). Non-oil investments are increasing as global investors strive to take
strategic positions in various sectors of the economy such as finance, agriculture, hospitality, construction,
food, consumer goods, telecommunications and recently power. The growing population, emerging
middle class, improved governance & reforms and improving investment environment are points of
attraction for these investors. Foreign Direct Investment for 2013 was estimated at US$9 billion.
EXTERNAL SECTOR
Nigeria’s external sector, like most economies was under pressure during the global financial crisis and
this was reflected in the decline in external reserves, capital withdrawals by portfolio investors and a lower
trade balance. The external reserves position increased from U.S.$28.3 billion in 2005 to U.S.$53billion in
2008, before dropping to U.S.$32.3billion as of 31 December 2010. By the end of 2011, foreign exchange
reserves amounted to US.$32.64billion and firmed up to US$44billion to close 2012.
The nation’s reserve came under renewed pressure in 2013 due to the prevalence of crude oil theft and
vandalism to close the year at $43.61billion. Despite the marginal decline of 0.89% between 2012 and
2013, the balance is able to finance about 10 months of imports. From a historical viewpoint, Nigeria’s
foreign reserve has struggled, particularly during the periods of economic slowdown when oil prices
crashed and the exchange rate dipped significantly.
27
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: National Bureau of Statistics/Planet Capital Research
The external reserve assumed a downward trend again in the third Quarter of 2014 primarily due to
declining oil prices at the international market and oil theft. Reserves were US$39.57 billion in September,
2014 and US$36.68 billion as at December 1, 2014
MONETARY POLICY RATE (“MPR”)
Before the Monetary Policy Committee meeting of November 24th -25th 2014, the CBN had maintained
the MPR at 12% since October 2010.
Against the backdrop of moderate but uneven growth in the global economy and a build up of
vulnerabilities in the domestic economy, the CBN raised the MPR by 100 basis points from 12% to 13%.
Similarly, the CRR on private sector deposits was increased by 500 basis points, from 15% to 20%, while
the CRR on public sector deposits was retained at 75%. .
Benchmark Rates of Key Emerging & Developing Countries
20.00%
15.00%
10.00%
5.00%
0.00%
Ghana Nigeria
Kenya
Egypt
Russia
India
Brazil
China
South
Africa
Japan
Source: Trading Economics, Planet Capital Research
INFLATION
The annual inflation rate was 6.6% as at 31st December 2007 and rose to 15.1% as at 31st December 2008.
Inflationary pressure moderated slightly in 2009 and was 17% as at 31stDecember 2009, reflecting an
increase in demand pressure due to fuel shortages linked to the speculation that petroleum product prices
would be deregulated. The year-on-year headline inflation, which was 11.8% in December 2010
moderated to 10.39% by December 2011 and further declined to 8.0% in December 2013, down from
8.7% in July 2013. Single digit inflation has been sustained since the beginning of the year 2014 owing
primarily to the continuing monetary policy tightening of the CBN and stood at 8.10% as at December 4,
2014. It is anticipated that inflation will remain at the single digit level for the rest of this year.
28
Inflation in 2014
8.60%
8.40%
8.20%
8.00%
7.80%
7.60%
7.40%
7.20%
Source: National Bureau of Statistics, Planet Capital Research
REFORMS
Nigeria is in the process of adopting and implementing a number of reforms aimed at making her one of
the 20 largest economies in the world by 2020. The reforms are aimed at a number of areas, primarily
diversifying the economy away from dependence on oil by addressing infrastructure and related issues to
create a more favourable environment for continued growth of the non-oil and gas sectors of the
economy. The FGN has adopted the First National Implementation Plan (“First NIP”) as its mediumterm plan to implement the first stage of Vision 20:2020.
The First NIP has six main areas of focus:
-
Physical Infrastructure - focusing on power, transport and housing;
Productive Sector - focusing on the key sources of economic growth such as agriculture, oil and gas
and manufacturing;
Human Capital and Social Development - focusing on the social sectors of the economy, namely;
education, health, labour, employment and productivity;
Building a knowledge-based economy - focusing on building a knowledgeable workforce and
ensuring widespread access to Information, Internet and Communication Technology;
Governance and General Administration - focusing on election reform and combating corruption;
and
Regional, Geopolitical Zone Development - focusing on fostering accelerated, sustainable social and
economic development, in a competitive and friendly manner.
OIL AND GAS SECTOR
The Government is currently reforming the petroleum industry and a general overhaul of the oil and gas
sector is expected. The Petroleum Industry Bill (“PIB”), a major legislative proposal that will represent the
most comprehensive overhaul of the structure of the oil and gas industry in Nigeria since commercial oil
production began in the 1960s, is currently being considered by the National Assembly. Other significant
reforms, includes the Nigerian Content Act 2010.
POWER SECTOR
In August 2010, the Government launched the “Roadmap for Power Sector Reform” which seeks, among other
objectives, to remove obstacles to private sector investment in the power sector, permit the privatisation
of the generation and distribution companies as well as facilitate the construction of new transmission
networks and reform the fuel-to-power sector. The Government estimates that in order to meet the
target of 40,000 Mega-watts by 2020, a total investment of U.S.$10 billion per annum will be needed
throughout the whole power sector over the next 10 years, most of which it aims to achieve by
incentivising the private sector to make such investments. The Government has successfully privatised the
Distribution and Generation Companies and Core Investors have taken over the assets.
29
BANKING
The global financial crisis and the resulting decline in the Nigerian equities market in 2009 resulted in
significant provisions by a number of Nigerian banks. Following a special examination and investigation
of the 24 banks that comprised the Nigerian banking system, the CBN found significant irregularities and
capital adequacy deficiencies at some of the banks. This resulted in a number of proposed reforms
including the creation of the Asset and Management Corporation of Nigeria (“AMCON”), a governmentbacked corporation set up with the primary objective of purchasing a significant portion of the nonperforming assets in the Nigerian banking sector and providing assistance in the recapitalisation of
undercapitalised banks to help restore the health of the banking sector. AMCON has issued FGNguaranteed bonds in the amount of approximately N4.5 trillion to acquire non-performing assets in the
banking sector.
30
DESCRIPTION OF FIDELITY BANK PLC
HISTORY AND NATURE OF BUSINESS
Fidelity Bank Plc was incorporated in Nigeria as a Private Limited Liability Company on November 19,
1987 as Fidelity Union Merchant Bank Limited. The bank obtained a merchant banking license on
December 31, 1987 and commenced banking operations on June 3, 1988. By 1990, Fidelity Bank had
distinguished itself as the fastest growing merchant bank in the country. However, to leverage on the
emerging opportunities in the commercial and consumer end of financial services in Nigeria, on July 16,
1999, the bank converted to commercial banking, and registered as a public limited liability company on
August 10, 1999, changing its name to Fidelity Bank Plc. Fidelity bank became a universal bank on
February 6, 2001, with a license to offer the entire spectrum of commercial, consumer, corporate and
investment banking services. The Bank’s shares were quoted on the floor of The Nigerian Stock
Exchange on May 17, 2005.
Fidelity Bank has presence in the major cities and commercial centres of Nigeria. Over the years, the bank
has been reputed for integrity and professionalism, and also respected for the quality and stability of its
management.
The Management is focused on building and maintaining a well-respected brand that caters for the needs
of its growing corporate, commercial and consumer banking clientele. For this purpose, the bank is
leveraging its pedigree in investment banking (Fidelity was a merchant bank for 11years) and its structures
and service offerings for a retail populace.
Fidelity Bank also enjoys the respect and partnership of a network of off-shore institutions with which it
has correspondent banking, confirmation lines, credit and other relationships. These include, ANZ
London, Afrexim Bank, Cairo, Egypt, ABSA South Africa, Commerce Bank, Frankfurt, Citibank, N.A.
London and New York, FBN Bank, UK Limited, SCB, London, HSBC, US Exim Bank, USAID, etc.
The Bank currently has over 400,000 shareholders with the majority being Nigerian citizens and
corporations. As at December 2014, the Bank had one of the highest Capital Adequacy Ratios (CAR)
amongst Nigerian banks at c.27%, well above the CBN requirement of 15%. Over 85% of the branch
network is located in key business centres and the most economically viable regions of Nigeria. Fidelity
Bank Plc is a leading partner to the Nigerian power, oil and gas and telecom industries.
BUSINESS OFFICES
Lagos
75
South-West
11
South-South
40
South-East
42
North-West
15
North-East
7
North-Central
11
FCT-Abuja
16
INFORMATION HIGHLIGHTS
Total Assets
1,058 million
Total Equity
166.4 Million
Business Offices
217
No of Accounts
2.6 Million
Total Head Count
3,840
Consumer Sales Agents
848
Issuer Ratings
B/B [Standard & Poor (S&P/Fitch]
Ernst & Young / Pannel Kerr Forster Chartered
Accountants
Joint Auditors
31
RECENT AWARDS AND RECOGNITION
PRODUCT AND SERVICE OFFERINGS
Fidelity Bank’s main business activities include the following:

Corporate Banking business: This services Fidelity Bank's institutional clients, including large
corporations, established middle-market companies and rapidly growing businesses. Fidelity Bank's
Corporate Banking clients usually have turnover in excess of N10 billion. The Corporate Banking
business is organized under industry sector sub-groups and focuses primarily on companies with
significant market shares in the larger sectors of the economy, such as power and infrastructure,
upstream and downstream oil and gas, telecommunications, real estate and construction, food and
beverages.

Commercial and Retail Banking business: This covers public and private, local and foreign
entities and SMEs that operate on a smaller scale than large corporate clients, as well as individuals.

Treasury business: This covers the buying and selling of securities for Fidelity Bank’s investment
portfolio, and provides securities brokerage services to customers.
S/N SERVICES
1
Manage Small and Medium scale Enterprises
2
Fidelity Corporate Banking
3
Fidelity E-Channel
4
Fidelity Private Banking
5
Fidelity Diaspora Banking
6
Fidelity Internet Services
7
Fidelity Agric-Nigeria Project
8
Fidelity Trade Services & Product
9
Fidelity ATM
10
Fidelity Instant Recharge
11
Fidelity Treasury Management
12
Fidelity Money Transfer
32
ORGANOGRAM AND GOVERNANCE STRUCTURE
CORPORATE GOVERNANCE STRUCTURE
Fidelity Bank’s governance philosophy is hinged on its internal governance framework, which is executed
through the following primary organs:

The Board of Directors;

Board Committees;

Shareholders Audit Committee; and

Management Committees.
THE BOARD OF DIRECTORS (STRUCTURE AND RESPONSIBILITIES)
Fidelity Bank currently operates a unitary board system in which the Board has both Supervisory and
Management functions. These functions are split between the Executive Board and the Supervisory Board
or full Board.
The Executive Board is the key management organ of the Bank and is primarily responsible for achieving
the banks corporate operating and strategic performance expectations and increasing shareholder value.
The Executive Board reports regularly to the Supervisory Board on all issues that relate to the growth and
development of the Bank. Responsibility for the day-to-day management of the Bank resides in the
Managing Director/Chief Executive Officer (MD/CEO), who carries out his functions in accordance
with guidelines approved by the Board of Directors. The MD/CEO is ably assisted by the Executive
Directors.
33
The Supervisory Board plays a major supportive and complimentary role in ensuring that the Bank is well
managed. The Supervisory Board includes an Independent Director. The Board of Directors is
accountable to all stakeholders and continues to play a pivotal role in the Bank’s governance.
It is the responsibility of the Board of Directors to endorse the Bank’s organizational strategy, develop
directional policy, appoint, supervise and remunerate senior executives and ensure accountability of the
Bank to its owners, stakeholders and the regulatory authorities. The Board is responsible for providing
stable and effective leadership for the Bank, and to also facilitate achievement of its corporate operating
objectives.
All Directors are persons of high integrity, who are competent, knowledgeable and proficient in their
professional career, vocation and business of banking. The professional background of Board members
reflects these ideals. The Directors bring to the Board, their diverse experience in several fields ranging
from business, corporate finance, accounting, management, banking operations, taxation, project finance,
leasing and treasury management.
Chairman and Chief Executive
The positions, functions and responsibilities of the Chairman and Managing Director are separate. Whilst
the Chairman is responsible for leadership and overall Board effectiveness, the MD/CEO is responsible
for the day-to-day management of the enterprise and its overall performance.
The Board’s functions are further dispensed through the Board Committees as indicated below, which
work closely with the Executive Board to achieve their objectives.
Board Committees
The Board carries out its responsibilities through its four standing committees: the Board Credit
Committee, the Board Finance & General Purpose Committee, the Board Corporate Governance
Committee and the Board Audit & Risk Committee. These standing committees work closely with the
Executive Board to achieve Fidelity Bank’s strategic objectives. Each committee's roles, functions,
responsibilities and scope of authority are defined within its charter. These committees make
recommendations to the Board on various matters as appropriate, and present periodic reports to the
Board.
In addition to the Board committees, the Bank also has a Shareholders Audit Committee, which is
established in compliance with Section 359 (3) of the Company & Allied Matters Act 2004 (“CAMA”).
The Shareholders Audit Committee reviews and approves Fidelity Bank’s financial statements before
publication.
Board Credit Committee
This committee is responsible for credit related issues. The Committee reviews credits granted by the
Bank and approves specific loans above the Management Credit & Investment Committee’s authority
limit as may be defined from time to time by the Board. The committee carries out the responsibilities
listed below:
-
Reviews and recommends credit policy changes to the full Board;
-
Ensures compliance with regulatory requirements on credits;
-
Tracks the quality of Fidelity Bank’s loan portfolio through quarterly review of risk assets;
-
Considers recommendations from the Management Credit & Investment Committee, Asset &
Liability Committee, and Operational Risk Review Committee on matters relating to credit
management;
-
Considers and recommends for full Board approval, any director, shareholder and insider related
credits; and
-
Considers exceptions to rules or policies, providing counsel on unusual credit transactions.
This committee comprises of five Non-Executive Directors including an Independent Director and all the
Executive Directors.
The Committee meets monthly or as the need arises.
34
Board Audit & Risk Committee
This committee is responsible for enterprise risk management. It ensures compliance with the Bank’s
enterprise risk policies including credit risk, market risk and operational risk policies, and also ensures
compliance with regulatory risk requirements. The committee’s responsibilities include:
-
Overseeing the Bank's risk management activities including enterprise risk management;
-
Overseeing the integrity of the financial reporting process;
-
Ensuring risk management processes and culture is embedded throughout the Bank;
-
Approving the Risk Management Policy including risk appetite and strategy;
-
Oversight of Management’s design and implementation of Fidelity Bank’s internal control system;
-
Ensuring the efficiency and effectiveness of the Bank’s internal control framework, periodically
review and assess the adequacy of internal control systems;
-
Reviewing the adequacy and effectiveness of the framework for managing compliance risks within
Bank; and
-
Assessing the scope and depth of compliance review activities and the resulting impact the findings
have on Fidelity Bank's risk profile.
The committee reviews the activities of the Chief Compliance Officer and ensures that Management
implements an annual risk management plan to identify, manage and report risks that may prevent Fidelity
Bank from achieving its strategic objectives. The committee has oversight responsibilities for Fidelity
Bank’s information security programs and ensures that senior management and key stakeholders within
the information security possess requisite expertise and knowledge to secure Fidelity Bank’s information
assets.
The committee comprises four Non-Executive Directors including an Independent Director. The
committee meets quarterly or as the need arises. Occasionally, a joint meeting is held between the Board
Risk Committee and Board Audit & Credit Committee.
Board Finance & General Purpose Committee
This committee is responsible for ensuring that an appropriate internal control framework is established
and maintained over procurements, significant contracts award and strategic planning. The committee’s
responsibilities include the following:
-
Ensuring that cost management strategies are developed and implemented to monitor and control
costs;
-
Reviewing major expense lines and significant transactions that are not part of the Bank’s normal
business;
-
Developing, monitoring and implementation of the Bank’s strategy and other financial matters
including the review and approval of the Bank’s financial projections, capital and operating budgets
and recommendation of the dividend policy.
The committee comprises four Non-Executive Directors including an Independent Director and four
Executive Directors and the Managing Director/Chief Executive Officer.
35
Shareholders Audit Committee
The Shareholders Audit Committee is established in compliance with Section 359 (3) of the CAMA. The
committee reviews and approves the Bank’s financial statements and the Audit Scope and Plan for each
year. The committee also reviews the management letter prepared annually by the external auditors.
The committee’s responsibilities include the following:
-
Monitoring the activities and performance of external auditors;
-
Reviewing with external auditors any difficulties encountered in the normal course of audit;
-
Reviewing the results of the interim and annual audits and discussing such results with management;
-
Presenting the report of the committee to the Shareholders at the Annual General Meeting
(“AGM”); and
-
Reviewing and approves the Bank’s financial statements before publication.
This committee has six members and membership is split evenly between three members of the Board
Audit & Risk Committee and three members nominated annually by Shareholders at the Annual General
Meeting.
Board Corporate Governance Committee
This committee is responsible for overseeing and advising the Board on its oversight responsibilities in
relation to corporate governance matters generally. The committee is responsible for:
-
Determining Board and Board Committee’s composition;
-
Designing and executing the process for appointment of new Board members in accordance with the
Directors Selection Criteria Policy;
-
Developing an appropriate corporate governance framework for the Bank;
-
Providing oversight for Directors orientation and training;
-
Remuneration of Directors including executive remuneration, recruitment, compensation and
promotion of senior management;
-
Compliance with the CBN and SEC corporate governance codes and evaluating the performance of
Directors in accordance with the Board evaluation process; and
-
Reviewing and making recommendations to the Board on Fidelity Bank’s key human capital policies
and agreeing Key Performance Indicators (“KPIs”) for the Executive Directors as well as succession
planning.
The committee comprises four Non-Executive Directors including an Independent Director, and meets
quarterly or as the need arises, with the Managing Director in attendance at meetings.
MANAGEMENT COMMITTEES
In addition to the Board, Board Committees and the Shareholders’ Audit Committee, the Bank’s
corporate governance objectives are also met through the following Management Committees:
Executive Committee
This Committee is comprised of the Managing Director/ Chief Executive Officer and the Executive
Directors of Fidelity Bank. The Committee meets fortnightly or as required to consider the following key
objectives:
-
Determine the strategic planning objectives of the Bank;
-
Review the business plan and ensure that same is in keeping with objectives;
-
Review the Human Resource and Audit Policy of the Bank; and
-
Review all decisions that affect the management of the Bank and its staff.
36
Asset & Liability Committee:
Membership of the Asset & Liability Committee is derived mainly from the asset and liability generation
divisions of the Bank. The Committee meets fortnightly or as required and has the following key
objectives:
-
Review the economic outlook and its impact on the Bank’s strategy;
-
Ensure adequate liquidity;
-
Ensure that Management interest rate risks are within acceptable parameters;
-
Maintain and enhance the capital position of the Bank; and
-
Maximize the risk adjusted returns to stakeholders over the long term.
Management Credit & Investment Committee:
The Management Credit & Investment Committee is charged with the following key responsibilities
amongst others:
-
Review of the Bank’s Credit Policy Manual;
-
Establishing Minimum Lending Rate (“MLR”);
-
Establishing the Prime Lending Rate (“PLR”);
-
Approving Target Market Definitions (“TMD”);
-
Approving Risk Asset Acceptance Criteria (‘RAAC”);
-
Approving New Credit Products & Initiatives;
-
Approving Individual Lending Limits subject to confirmation from Sector Head, Risk Management;
-
Pre-approval of Platform Credits (Product papers);
-
Approving Risk Rating;
-
Approving Inter-Bank and Discount House Placement Limits;
-
Approving Exposures up to maximum of N100 Million; and
-
Approving Credit Portfolio Structures and Market Development.
Credit Review Committee:
The Credit Review Committee is charged with the following:
-
Review of the Bank’s credit risk portfolio;
-
Review of collateral documentation to ensure compliance with approvals;
-
Review of non-performing loan stock;
-
Approval of recovery strategies for bad loans;
-
Approval of portfolio classification/reclassification and level of provisioning; and
-
Approval of interest waivers and loan write offs.
Management Performance Review Committee:
This Committee meets monthly and is concerned primarily with reviewing Fidelity Bank’s performance
on set targets:
-
Review of the Bank’s performance monthly;
-
Monitor budget achievement;
-
Assess efficiency of resource deployment in the Bank;
-
Review product performance; and
-
Reappraise cost management initiatives.
37
Operational Risk and Services Review Committee
This Committee is charged with the following responsibilities:
(a) Ensuring full implementation of the Operational Risk Management framework approved by the Board
Risk Committee and the Board of Directors within all Business and Support Units.
(b) Monitoring the implementation of policies, processes and procedures for managing operational risk in
all of the Bank’s material products, activities, processes and systems.
(c) Ensuring that clear roles and responsibilities for the management of operational risk are defined
throughout all levels of the Bank, including all Business and Support Units.
(d) Providing support to the Executive Director, Risk Management to ensure that a culture of compliance
is entrenched throughout the Bank.
Loan Recovery Committee
The Loan Recovery Committee is charged with the following key objectives:
(a) Review performance of Loan Recovery Agents, Receiver/Managers and Legal Firms assigned recovery
briefs with the objective of delisting nonperformers
(b) Consider and recommend collateral realization on defaulting accounts
(c) Consider and determine waivers, concessions and propose amounts to be accepted in full and final
settlement from defaulting borrowers
(d) Approve interest suspension for non-performing accounts on a case-by-case basis
Governance Procedures
Except for the Board Credit Committee that meets monthly, the Board and all other Board Committee
meetings are held once a quarter and on needs basis. The Chairman is not a member of any Board
Committee. Each Board Committee Chairman presents a formal report on their Committees’
deliberations at Board meetings.
With the exception of the Executive Committee, Assets & Liability Committee and Management
Performance Review Committee, which the Managing Director & Chief Executive Officer chairs, all
other Management Committee meetings are presided over by Executive Directors.
Management Committee Meetings are held fortnightly or monthly per the terms of reference of each
Committee or as the need arises.
In addition to the above, the Bank is conscious of regulatory reporting requirements and routinely
discloses any material information to all stakeholders. To this end, the Bank has established structures for
information dissemination via direct communication to interested parties using electronic and print media
as well as Fidelity Bank’s website.
The Bank diligently submits its financial reports quarterly, half yearly and annually to the Nigerian Stock
Exchange for publication following the approval of the CBN.
RISK MANAGEMENT
Risk Management Framework
The Bank’s risk management framework and governance structure are intended to provide
comprehensive controls and on-going management of the major risks inherent in its business activities.
The Bank seeks to minimise the effect of these risks while, at the same time, maximising profitability by
effectively monitoring and managing the mismatch between maturities of its assets and liabilities, the size
and degree of its interest and foreign exchange rate exposure and its credit quality.
The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank; to
set appropriate risk limits and controls, and to monitor risks and adherence to limits. The risk
management policies are subject to review at least once a year. More frequent reviews may be conducted
when changes in laws, market conditions or the Bank’s activities are material enough to impact on the
continued adoption of existing policies. The Bank, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment, in which all employees
understand their roles and obligations.
38
We completed the implementation of an enterprise-wide risk management framework project in 2011,
with Deloitte of South Africa as consultants to the project. The enterprise wide risk management system
is governed by the following key principles:
Comprehensive and well defined policies and procedures designed to identify, assess, measure, monitor
and report significant risk exposures in the Bank. These policies are clearly communicated throughout
Fidelity Bank and are reviewed annually.
Clearly Defined Governance Structure
-
Clear segregation of duties between the risk management function and other business groups
-
Management of all classes of banking risk broadly categorized into credit, market, liquidity and
operational risk independently but in a coordinated manner at all relevant levels within Fidelity Bank
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk
management framework through its committees: the Board Audit & Risk Committee, the Board Credit
Committee, Board Corporate Governance Committee, and the Board Finance & General Purpose
Committees. These committees are responsible for developing and monitoring risk policies in their
specified areas and report regularly to the Board of Directors on their activities.
The Board Committees are assisted by various committees composed of members of management in
identifying and assessing risks arising from the Bank's day-to-day activities. These committees include:
-
Executive Management Committee (“EXCO”)
-
Management Credit and Investment Committee (“MCIC”)
-
Credit Review Committee (“CRC”)
-
Loan Recovery Committee (“LRC”)
-
Asset and Liability Committee “(ALCO”)
-
Operational Risk and Services Review Committee (“ORRC”)
-
Management Performance Reporting Committee (“MPRC”)
These committees meet on a regular basis. Ad hoc meetings are also called as dictated by circumstances.
Risk Management/Defence Model
The Bank employs a three-tier risk management defence model, which aims to enhance risk management
and control by clarifying risk management roles and responsibilities of the different functions within the
Bank.
-
First tier – Senior Management, which includes the Executive Management Committee, the credit
committees, namely the Management Credit and Investment Committee, Credit Review Committee
and Loan Recovery Committee, as well as the Operational Risk Review Committee .
-
Second tier – Independent risk management function, headed by the Board Audit & Risk Committee
(“BARC”) and Board Credit Committee (“BCC”), and includes the credit risk management function,
operational risk management functions and asset and liability management functions within the
Bank.
-
Third tier – Internal and external audit, providing assurance on the effectiveness of governance, risk
management and internal controls, as well as a compliance function that monitors various specific
risks.
Our Corporate Audit Division assists the Board Audit & Risk Committee by providing independent
appraisal of our risk framework for internal risk assurance. The Division assesses compliance with
established controls and enterprise-wide risk management methodologies. Significant risk related
infractions and recommendations for improvement in processes are escalated to relevant management
and board committees.
39
ENTERPRISE RISK PHILOSOPHY
Risk Culture
The Bank’s risk culture proactively anticipates and stems losses that may arise from its banking risk
underwriting. This culture evolved out of the understanding that the Bank is in a growth phase. This
phase requires a strong risk management culture that supports growth objectives. By design therefore,
The Bank operates a managed risk culture, which places emphasis on a mixture of growth and risk control
to achieve corporate goals without compromising asset and service quality.
Risk Appetite
Risk appetite determines the quantum of risk that the Bank would assume in pursuit of its business
objectives at any point in time. The Bank’s risk appetite is defined quantitatively at two levels: at the
enterprise level and at the Business / Support Unit level.
To give effect to the above, the Board of Directors of the Bank set target Key Performance Indicators at
both enterprise and a business / support unit levels based on recommendations from the Executive
Management Committee . At the Business and Support Unit level, the enterprise KPI’s are cascaded to
the extent that the contribution of each Business/Support Unit to risk losses serve as input for assessing
the performance of the Business/Support Unit. The Bank sets tolerance limits for identified Key Risk
Indicators (“KRIs”) which serve as proxy for the risk appetite for each risk area and Business / Support
Unit. Tolerance levels for KRI’s are jointly defined and agreed upon by the Business and Support Units
and are subject to annual reviews.
The following key principles govern the Bank’s approach to enterprise-wide risk management:
-
The Bank’s risk management policies and procedures are designed to identify, assess, measure,
mitigate, monitor, manage and report significant risk exposures.
These policies are subject to annual reviews.
FINANCIAL STRENGTH
Current Capital Structure
Fidelity current capital structure and capital adequacy ratio are as follows:
N'billion
180
120
% Ratio
163.5
161.5
40%
30%
29%
60
26%
20%
15%
10%
10%
0
0%
Dec 2012
Total Equity
Dec 2013
Fidelity CAR
Regulatory Minimum
As at December 31 2012, the Bank had zero medium or long term debt on its Balance Sheet. However in
May 2013, the Bank executed a very successful US$300m Eurobond offering of 5 Year Tenor, which
increased its medium to long term funding capacity. The Bank has a diverse base of more than 400,000
shareholders with no one holding a controlling interest of up to 5%.
40
Capital Structure and Funding Capacity
The Bank’s diversified funding profile in terms of investor types, regions, products and instruments is an
important element of its liquidity risk management framework. Core funding resources are retail,
commercial and corporate customer deposits, medium term debt and long-term tier 1 capital funds.
Sources of funding include:
-
Shareholder’s Funds
The Bank has shown a tremendous growth trend since 2005, Its shareholders funds have grown from
N9.8 billion in 2005 to N163.5 billion in May, 2013.
Long-term tier 1 capital funds have stayed well above regulatory minimum.
-
Debts & Deposits
Medium term debt is needed to minimize tenor and currency mismatch on the balance sheet. The Bank
raised US$300m in 5 Year Eurobond/Notes in 2013.
Deposits are a major source of funding; Fidelity’s robust branch network and superior customer
experience has boosted the deposit base which stood at N806bn as at Dec. 31 2013.
-
Cash
Cash and regulatory balances remain at healthy levels.
LIQUIDITY AND CAPITAL MANAGEMENT
Liquidity management safeguards the ability of the bank to meet all payment obligations when they
become due. The liquidity risk management framework is an important factor in maintaining adequate
liquidity and a healthy funding profile all year round. The corporate treasury is responsible for liquidity
management under the guidance of the Assets and Liability Management Committee . The liquidity risk
management framework is designed to identify, measure and manage the liquidity risk position at all
times. Underlying Assets and Liabilities Management policies and procedures are reviewed and approved
regularly by ALCO.
The liquidity risk management approach starts at the intra-day level by managing the daily payments,
forecasting cash flows, Settlement Clearing and Central Bank Account relationships. It then covers tactical
liquidity risk management dealing with the access to unsecured funding sources and the liquidity
characteristics of the asset inventory. Finally, the strategic perspective comprises the determination of
maturity profile and gaps that may exist between all assets and liabilities on our balance sheet.
Annually, a Capital Plan is derived from the business plan of strategic business units (“SBUs”) for both
assets and liabilities which clearly articulates growth projections, funding requirements and source of
funding.
There is a reporting system that tracks cash flows on a daily basis. This system allows management to
assess the short-term liquidity position in each location by currency and products.
Diversification of the funding profile in terms of investor types, regions, products and instruments is an
important element of the liquidity risk management framework. Core funding resources are retail,
commercial and corporate customer deposits and long-term Tier 1 Capital funds.
Cash and regulatory balances and ratios remain at healthy levels. As at December 31 2013, the Bank’s
Liquidity Ratio was 45.73% well above the regulatory minimum of 30%. The strong liquidity position of
the Bank is depicted below:
Breakdown of Liquid Assets (N’ million)
Cash & Short-term Funds
Inter-bank Placements
Treasury Bills
Government Bonds
Total Liquid Assets
As At
Dec. 31 2013 (Audited)
275,709
13,000
239,885
69,857
598,451
As At
Dec. 31 2012 (Audited)
199,735
15,557
200,021
92,497
507,810
41
SOURCES OF FUNDING
Raised N22bn through
Rights Issue, IPO and
Private Placement
Fidelity completed
acquisition of FSB
International Bank Plc
and Manny Bank Plc
Fidelity raised equity to
US$1bn through GDR
and Public Offer
Fidelity issued
US$300m in 5 Year
Notes through
Eurobond Offering
2005
2005
2007
2013
Equity:
In order to meet the N25bn minimum capitalization requirement of the Central Bank of Nigeria in 2005,
the Bank proceeded to the capital market with a Private Placement in 2004 and a Rights Issue and Initial
Public Offer in 2005, which achieved over N22 billion in Shareholders’ Fund. This afforded the Bank the
leverage to acquire Manny Bank and FSB International Bank.
In 2007, the bank executed a highly successful multi-currency equity offering which had a 223%
subscription level. As at December 31 2013, through fresh capital raising and continued retention of
profit, the Bank has increased equity to N163.5bn.
Debt:
In May 2013, the Bank accessed the international debt market through the execution of a very successful
debut Eurobond offering which raised US$300m in 5 Year Tenor Notes. The Eurobond offering, was
pitched to international investors in Europe and the United States.
Over the years, by working with domestic financial advisers with deep market knowledge, and
international book runners and advisers with large international investor client bases, the Bank has built a
reservoir of investors, locally and internationally, which it can tap into at relatively short period.
42
PROFILE OF BOARD OF DIRECTORS
Chief Christopher I. Ezeh, MFR - Chairman
A fellow of the Institute of Chartered Accountants of Nigeria (“ICAN”), Institute of Directors (“IOD”),
Institute of Cost and Management Accountants (“ICMA”) and member of the British Institute of
Management, Chief Ezeh, who also holds a Doctor of Business Administration (“DBA”) Honoris Causa,
from Enugu State University of Technology (1995), started his working life with Chrysler (UK) Limited in
1968. He joined Shell BP, Zambia (1971), before leaving for John Holt (Nig.) Limited (now John Holt
Plc) in 1976, becoming Group Managing Director (in 1986) and later, Chairman, a position he has held
from 2001 to date.
Nnamdi J. Okonkwo – Managing Director / Chief Executive Officer
Mr. Nnamdi Okonkwo holds a Bachelor of Science degree in Agriculture from the University of Benin
(1989) and a Masters in Business Administration in Banking & Finance (2000) from Enugu State
University. He is also a graduate of the Advanced Management Programme (“AMP”) from INSEAD,
France (2008).
Mr. Okonkwo has worked at Merchant Bank of Africa Ltd (1990 -1993), GTBank Plc (1993 -1998), FSB
International Bank Plc (1998 -2000), Citizens Int'l Bank Ltd (2000 -2001), Broad Bank of Nigeria Ltd
(2001 -2004) and STB Plc (2004 -2005). He was a Regional Director (FCT) with UBA Plc from August to
December 2005. He was also at various times, the Managing Director & Chief Executive Officer of UBA,
Ghana (2006-2009) and the Regional Chief Executive Officer of all UBA subsidiaries in Ghana, Liberia
and Sierra Leone (2008-2009). He was the head of the Corporate Banking Directorate in United Bank for
Africa (“UBA”) Plc (2009-2012). He joined Fidelity Bank in April 2012 as Executive Director, South
Directorate. He was appointed MD/CEO of Fidelity Bank in January 2014.
Mbagwu Ikemefuna– Executive Director
Mr. Ik Mbagwu holds a Combined Honours degree in Geography & Economics from Middlesex
University, London in 1982 as well as a Master's degree in Development Economics from Reading
University, Berkshire (UK) in 1983. He has attended management courses in notable institutions in
Nigeria and overseas. Starting his career as a tax senior in Arthur Andersen & Co (1984), Ik moved on to
Nigerian – American Merchant Bank Limited in 1989 (Bank of Boston) before joining the then Fidelity
Union Merchant Bank Limited in 1993, rising to the rank of General Manager (“GM”). In 2001, he
moved on to Citizens International Bank Limited as an Executive Director. He rejoined Fidelity Bank as
an Executive Director in 2006. He is currently the Executive Director in charge of Lagos & South West.
Olaolu Onome– Executive Director
Mrs. Onome Olaolu holds a B.Sc. in Accounting from the University of Benin (1982) and M.Sc., Banking
& Finance, from the University of Lagos (1996). She is a Fellow of the Institute of Chartered Accountants
of Nigeria (“ICAN”) and also of the Chartered Institute of Bankers of Nigeria (“CIBN”). She is currently
a Council Member of ICAN, Honorary Treasurer of ICAN, and the Chairperson of the Society for
Women Accountants of Nigeria (“SWAN”). Mrs. Olaolu has attended Harvard, Kellogg, European
Institute of Business Administration (“INSEAD”) and Wharton Business Schools in USA and is an
Alumnus of the International Banking Summer School and Lagos Business School (“LBS”).
She worked at Texaco Nigeria Plc from 1985-1990 from where she moved to the then Nigerian
Intercontinental Merchant Bank Limited (1990). In 1994, she moved to Metropolitan Merchant Limited
before joining Fidelity Bank in 1997 as a Senior Manager, rising to the position of General Manager, Risk
Management Sector in 2006. In July 2009, she was appointed to the Board as Executive Director, Risk.
43
John Obi – Executive Director
Mr. John Obi is a graduate of Accountancy from the Institute of Management and Technology, Enugu
(1981) and also holds a Masters in Business Administration from the Lagos State University (2004). He is
a Fellow of the Institute of Chartered Accountants of Nigeria (“ICAN”) and a member of the Chartered
Institute of Bankers of Nigeria (“CIBN”).
Mr. Obi, who was also the General Manager, Corporate Bank in the Bank, was the pioneer Managing
Director of Fidelity Pension Managers Limited (“FPM”), a former subsidiary of Fidelity Bank. He had
previously worked with Union Bank Plc (1983 – 1992). He joined Manny Bank Plc (Now Fidelity Bank
Plc) in the year 2000. He has over 28 years industry experience and has served in various capacities in
Corporate Banking, Investment Banking and the Public Sector. He joined the Board in April 2012 as
Executive Director, Corporate.
Chijioke Ugochukwu – Executive Director
Mrs. Chijioke Ugochukwu was General Manager, Legal Services and Company Secretary of the Bank until
April 2012, when she joined the Board as Executive Director, Shared Services.
She holds a Bachelor of Laws (LLB Hons.) degree from Obafemi Awolowo University, Ile-Ife (1988), and
is a Barrister at Law (BL) called to the Nigerian Bar in 1989. She also holds a Masters in Business
Administration from IESE, Barcelona, Spain (1997). She is a member of the Institute of Chartered
Secretaries and Administrators of Nigeria and has more than 23 years industry experience. At various
times, Mrs. Ugochukwu had been in Operations, Treasury Management and Corporate Services functions.
She is a regular speaker on Personal Financial Planning and Wealth Preservation.
Mohammed Balarabe – Executive Director
Mr. Mohammed Balarabe holds a Bachelor's degree in Accountancy and Finance from Nottingham Trent
University, Nottingham, England (1987), as well as a Master of Science degree in Finance from the
University of Lagos (1995). He has been a dealing member of the Nigerian Stock Exchange since 1992.
He has worked with Continental Merchant Bank Plc (1988-1990) and New Africa Merchant Bank Ltd
(1990-1994). Mr. Balarabe was General Manager & Chief Executive Officer of Newdevco Finance
Services Company Limited (1994-1995). He worked with UBA Plc from 1995 – 2009, notably as General
Manager from 2008 to 2009. He was Executive Director at the former Oceanic Bank Plc (2009-2012). He
has over 24 years banking experience across various business portfolios including Retail, Corporate and
Commercial banking. He joined Fidelity Bank in April 2012 as Executive Director, North.
Aku Odinkemelu – Executive Director
Mrs. Aku Odinkemelu holds a Bachelor of Laws (LL.B Hons.) from University of Nigeria, Nsukka (1986)
and Barrister at Law (BL) degree from the Nigerian Law School, Lagos (1987). She is a graduate of the
Advanced Management Programme (AMP) from Harvard Business School (2008).
Mrs. Odinkemelu worked in Continental Merchant Bank Plc (1987-1993), Guaranty Trust Bank Plc
(1994-1998), former Equitorial Trust Bank Limited (1998-1999), Access Bank Plc (2000-2004), Guaranty
Trust Bank Plc (2004-2009),and Guaranty Trust Assurance Plc (2009-2011). She also served as a NonExecutive Director in Guaranty Trust Bank Plc, Sierra Leone (2011-2014). She comes with over 25 years
experience in various areas of banking. She was appointed to the Board in August 2014 as Executive
Director, South.
Bashari Mohammed Gumel
Alhaji Bashari M. Gumel is an alumnus of the Ahmadu Bello University, Zaria (1971). Alhaji Gumel who
holds a Post Graduate Diploma in Public & Social Administration from South Devon Technical College,
Torquay, England (1973), is a seasoned administrator who began his early career as a civil servant in 1968
and rose to the position of a Permanent Secretary in1980 when he retired to venture into private business.
He sits on the Board of several companies and is currently the Chairman of Jafa Foam Products Limited.
44
Robert Nnana-Kalu
Mr. Robert Nnana-Kalu holds an M.A. degree in International Relations (1985) as well as a Bachelor of
Laws from University of Kent, at Canterbury, Kent, England (1987). He also obtained a Master of Laws
from Kings College, University of London, England (1990). He practiced law in the firm of Chief K. K.
Ogba Chambers, Owerri (1991-1993), before joining Star Paper Mills Limited, Aba in 1993, as Manager,
Legal Services & Corporate Affairs. He rose to the position of Executive Director in the company in
1995, a position he holds till date. From 2001 to 2005, Mr. Nnana-Kalu was Chairman of the Imo/Abia
Chapter of the Manufacturers Association of Nigeria (“MAN”) and also a National Council Member of
the Association. He has travelled extensively in Nigeria and overseas. He joined the Board of Fidelity
Bank in July, 2012.
Olowoniyi Kayode
Mr. Gabriel Olowoniyi holds a National Diploma in Secretarial Administration from the Federal
Polytechnic, Ado-Ekiti (1984) and is a Chartered Secretary and Administrator of longstanding from the
Institute of Chartered Secretaries and Administrators, London (1993). Mr Olowoniyi worked at A.B.M &
Company, Lagos (1984-1986); Upjohn Nigeria Property Limited, Ogun (1986-1988); Nigerian-German
Chemicals Plc, Lagos (1988-1997); Smart Mark Limited, Lagos (1998-2005); and Tropics Finance &
Investment Company Limited (2005 - Date). He is currently a Director of Amazing Inspiration Media
Limited.
Ichie Nnaeto Orazulike
Ichie Nnaeto Orazulike holds a B.Sc. in Accountancy from the University of Nigeria, Enugu Campus
(1989). He began private business in 1993 when he started Genesis Foods Limited, a frontline industrial
catering services company. His vast chain of other successful businesses includes Orazulike Trading
Company Limited, Stanchions Nigeria Limited and Genesis Deluxe Cinemas Limited. Nnaeto has trained
at some of the best business schools, both locally and overseas including Harvard Business School.
Mallam Umar Yahaya
Mallam Umar Yahaya holds a Bachelor's and a Master's degree in Business Administration from Ahmadu
Bello University, Zaria in 1977 and 1981 respectively. He has an Advanced Diploma in Management from
Harvard Business School, Boston, Massachusetts (2001), and an Executive Management Diploma in
Strategy & Organisation from Stanford Graduate School of Business, USA (2003).
Mallam Yahaya worked previously at Kaduna Investment Company Limited (1981-82), New Nigeria
Development Company Limited (1982-1987), and Nigerian Merchant Bank (1987-1992). He was
Managing Director/Chief Executive Officer of New Africa Merchant Bank (NAMB) Limited from 1992
to 1997, and an Executive Director of First Bank of Nigeria Plc (1997 - 2004). He is currently the
Managing Director / Chief Executive Officer of Associated Haulages Nigeria Limited, a position he has
held from January 2005 till Date.
45
PROFILE OF SENIOR MANAGEMENT
Idris Yakubu, Head North Central Regional Bank
Idris Yakubu holds a B.Sc in Accounting from University of Jos (1989) and Masters in Business Finance
from University of Lagos, Akoka (2003). He is an Honorary Member, Chartered Institute of Bankers
(HCIB – 2009). He has attended the Advanced Management Program (“AMP”) in Lagos Business
School; Leadership program in Harvard Business School in Boston, U.S.A and another program in
Kellogg School of Management, Evanston, U.S.A. and Said Business School, England. He started his
career with Continental Merchant Bank (1990-1994) and moved to Crystal Bank of Africa Ltd (19941996). He later joined FSB International Bank Plc in 1996 and actively served during the Merger and
Acquisition that gave birth to Fidelity Bank Plc. Idris has served in various capacities in Fidelity Bank, and
currently, he is a General Manager, serving as the Regional Bank Head, North Central.
Chukwuemeka Obioha Obiagwu, Head, Victoria Island Regional Bank
Chukwuemeka Obiagwu holds a Higher National Diploma (“HND”) in Accountancy from Federal
Polytechnic, Idah (1985). He is an Associate Member, Chartered Institute of Insurance (ACII - 1992), a
Fellow, Institute of Chartered Accountants of Nigeria (FCA - 1997) and of Chartered Institute of
Taxation (FCIT - 1997), and Honorary Member of the Chartered Institute of Bankers (HCIB – 2009). .He
has attended trainings organized by Euromoney, Uk, Harvard Business School, Wharton School and
Kellogg School of Management, U.S.A. He started his career as an Accountant with National Directorate
of Employment (1987-1988) and later moved to the Nigerian Reinsurance Corporation (1988-1991), from
where he moved to Merchant Bank of Africa (1991-1994)before joining Fidelity Bank in 1994. He served
as the Managing Director of Fidelity Union Securities Limited (“FUSL”), Investment Banking Division of
the Bank for almost 3 years. Chukwumeka is currently a General Manager serving as the Head, Victoria
Island Regional Bank.
Charles Oguguo Okoro, Head, Rivers-Bayelsa Regional Bank
Charles Okoro holds a B.Sc in Economics from the University of Benin (1988) and MBA Finance from
the University of Lagos (1999). He is a Fellow, Institute of Chartered Accountants of Nigeria (FCA 2009) and an Honorary Member of the Chartered Institute of Bankers (HCIB - 2010).He has attended
trainings organized by Euromoney UK, INSEAD and London Business School. He started his career
with Chartered Bank (1990-1993), from where he moved to Spring Bank (1993-2007) as the Head,
Indigenous Conglomerates/Manufacturing Unit. Charles joined Fidelity Bank Plc in 2007 as a Deputy
General Manager and presently, he is a General Manager and Head, Rivers-Bayelsa Regional Bank.
Oluwatobi Lawal, Head, Yaba Surulere Regional Bank
Oluwatobi Lawal holds a B.Sc in Economics from the University of Maiduguri (1989) and MBA Finance
from Lagos State University (1994). He is an Honorary Member, Chartered Institute of Bankers (HCIB –
2009). He has attended trainings in Euromoney UK, Kellogg School of Management and Harvard
Business School, U.S.A. Oluwatobi started his career with Savannah Bank Nigeria Ltd (1989-1992),
where he moved to Eko International Bank Plc (1992-1997). He later joined the International Trust Bank
team (1997-2000), from where he moved to Gateway Bank Plc (2000-2002). He left the Banking Industry
and joined JP Morgan Ltd in Dublin (2002-2003), where he worked for a year as a Financial Analyst. He
worked with Magnum Trust Bank Plc from 2003 to 2007 and Sterling Bank from 2007 to 2008. He joined
the Public Sector team of Fidelity Bank Plc in 2008. He is presently a General Manager and Head, YabaSurulere Regional Bank.
Gbolahan Joshua, Head, Strategy, Innovation and Business
Gbolahan Joshua holds B.Sc in Accounting from Olabisi Onabanjo University, Ogun State(1998). He is
an Associate Member of Institute of Chartered Accountants of Nigeria (ACA - 2000). He started his
career with Afenwa Osiberu & Co. Chartered Accountants (2000). He moved into the banking sector and
worked at various capacities in different banks. He was in Citizens International Bank (2000-2002), from
where he moved to Broad Bank Nigeria (2002-2006), and then to First City Monument Bank Plc (20062008). He worked in United Bank for Africa Plc (2008-2014) as Finance/Asset & Liability Management.
Gbolahan joined the Fidelity Banking team in 2014 as a General Manager heading Strategy, Innovation
and Business Transformation Division (“SIBT”).
46
FUTURE PROSPECTS
SHORT TERM STRATEGY: 2014
I.
Strengthen distribution capabilities;
II.

Low-Cost (Mini) Branch expansion

Co-location and e-offices

Deployment of ATM network

Strategic Alliances
Increase operating
improvements;
efficiency through proprietary technology driven business
process
III.
Strengthen the bank’s role in SME & retail segments in mobilising cheap deposits and originating
loans; and
IV.
Deepen participation in energy, oil & gas, telecom and other fast-growing sectors by leveraging
enhanced balance sheet and expanded distribution network.
MID-TERM STRATEGY: 2015-2017
I.
Extend the leverage on the value chain of corporate segment to extract maximum value from
commercial and retail businesses towards a 50:50 loan split between corporate and commercial
loans;
II.
Diversify earnings base by leveraging technology and digitization to develop new products in retail
and e-banking; and
III.
Deploy Customer Relationship Management System and Business Analytics tools to gain deeper
customer insights and increased penetration ratio for branded SME, Retail and electronic products.
LONG TERM STRATEGY: FROM 2018
I.
Continuously expand distribution capabilities in targeted markets to maintain a leading position;
II.
Provide unrivalled customer service based on deep segment experience and solid technological
distribution base;
III.
Build a strong consumer finance offering distributed through a wider traditional electronic platform;
and
IV.
Consolidate leadership in the SME, Retail and E-Banking Segments.
S/N
1.
2.
INDEX
Net Interest
Margin
Tax Rate
GROWTH EXPECTATIONS
TARGET 2013-2015
RATIONALE
Based on low cost deposits and earning assets
6%
growth expectations
Effective tax rate
between 15% and
20%
Based on the impact of amended tax laws on
Government Securities and Agriculture Financing
3.
Loan Growth
15%-20% average
growth per annum
Principally from existing new and upcoming
growth sectors in the corporate banking business
segment e.g. Power, Agriculture, Oil & Gas,
Production expansion, etc and the corresponding
value chain
4.
Deposit
Growth
20% average growth
New branches, flattened sales organizational
structure that has improved speed to market and
deepened customer interaction
5.
Other NonInterest Income
15%-20% average
growth per annum
Based on expected growth in customer base,
earning assets, deposits and service delivery
channels
6.
Cost-Income
60%-65% band
Expected to be contained within the band as
47
GROWTH EXPECTATIONS
growth in income lines are expected to outstrip
increases in operating costs
Ratio
7.
Proposed
Dividends
30%-50% (of Profit
after Tax (PAT))
band
Based on PAT growth trajectory and subject to
shareholders and regulatory ratification
8.
Non
Performing
Loan (“NPL”)
Ratio
Target maximum of
4%
On back of improving market conditions, asset
quality, loan growth and strengthened lending
conditions
9.
Return on
Equity
(“ROE”)
2014 target of 10%
and 17%-20% in
medium term
Aligns with the Bank’s profit performance
outlook and capital policy, and guided by liquidity
expectations and capital adequacy
SME GROWTH STRATEGY
-
Adopting transaction origination and monitoring strategy that leverages on retail infrastructure by
having well trained regional SME relationship managers at the regional offices;
-
Develop in-house competencies for advising SMEs on various business models and leveraging on
this to grow these businesses and the volumes;
-
Engage in strategic partnership with other reputable facilitators of SMEs to position the Bank as a
Bank of choice for SMEs. This will impact positively on the volume of transaction origination;
-
Focusing on clusters and partnerships to drive businesses at the micro segments of the pyramids; and
-
Focusing on Enterprises that focus on outsourced services from blue chip companies.
Key targets
1. Manufacturing Enterprises in High growth sectors with export potentials e.g. shoes, leather etc
2. Education
3. Leisure/Tourism/Hotels
4. Health & Beauty care/Hospitals
5. Animal Husbandry and Agric Products Processing
6. Mining
7. Entertainment/Film Industry
8. Restaurants and Fast Food sector
CONSUMER BANKING GROWTH STRATEGY
-
Focus on high utility low price-low cost products and services for the increasing youth population
and emerging middle class;
-
Generate low priced liabilities and create profitable risk assets from the target customer base;
-
Market mapping and neighbourhood marketing for penetration of the large underserved and
unbanked customer groups;
-
Leverage on emerging consumer credit bureaus and bank-wide risk management framework to
provide loan products to the grossly underserved consumer banking segment; and
-
Strategic alliances with churches, schools, microfinance banks, supermarkets etc., to increase retail
customer base.
48
USE OF PROCEEDS
After the deduction of the costs and expenses of the Issue, which are estimated at N614,535,000
representing 2.05% and the underwriting fees of N630,000,000 representing 2.10% of the gross issue
proceeds, the net proceeds amounting to N28,755,465,000 will be utilised as follows:
(i)
Increase the Bank’s Tier II Capital which in turn would improve the Bank’s capital adequacy, in line
with the guidelines of Basel II. To achieve this objective, the Conditions of issue must satisfy the
requirements of the CBN such as Tenor and subordination provisions; and
(ii)
Fund the Bank’s long-term investments and financing activities such as:
PURPOSE
AMOUNT (N)
% OF PROCEEDS
ESTIMATED
COMPLETION PERIOD
SME Lending
23,004,372,000
80%
12 months
Retail Lending
4,313,319,750
15%
9 months
Retail Infrastructure
1,437,773,250
5%
6 months
28,755,465,000
100%
Total
SME Lending:
The Bank will provide loans to the Small and Medium scale Enterprises (SMEs) in the following
segments:
 Manufacturing
 Educational Institutions
 Agriculture
 Health
 General Commerce
Retail Lending
The Bank will provide loans to retails and individual customers for the following categories:
 Auto loans
 Home loans
 Cash advance loans
 General loans
Retail Infrastructure:
Retail Infrastructure to be purchased is for retail lending infrastructure technology. The retail lending
infrastructure technology are processing platforms that will be used for the following:
 Loan application
 Loan scoring
 Loan approval
 Loan monitoring
 Loan collections
 Consumer analytics
49
EXTRACT FROM THE RATING REPORT
50
FINANCIAL FORECAST
LETTER FROM THE REPORTING ACCOUNTANT ON FINANCIAL FORECASTS
51
FIDELITY BANK PLC
SEVEN YEARS FINANCIAL FORCAST
STATEMENT OF COMPREHENSIVE INCOME POSITION
FOR THE YEARS ENDED 31 DECEMBER
The directors are of the opinion that subject to unforeseen circumstances, and based on the foregoing assumptions, the
profit before taxation for the years ended 31st December, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 will be in the order of
N23.5b, N26.1b, N29.7b, N33.0b, N36.6b, N41.3b and N47.2b respectively as detailed below:2015
2016
2017
2018
2019
2020
2021
N'm
N'm
N'm
N'm
N'm
N'm
N'm
Gross Earnings
146,167
158,812
172,089
184,658
196,863
209,532
223,960
Interest and similar income
Interest and similar expense
Interest Expense on fresh bond issue
118,253
(72,922)
(4,900)
129,370
(81,084)
(4,900)
141,124
(88,702)
(4,900)
152,411
(95,406)
(4,900)
163,275
(101,288)
(4,900)
174,541
(106,108)
(4,900)
188,158
(111,168)
(4,900)
Net interest income
40,431
43,386
47,522
52,105
57,086
63,533
72,090
Impairment charge
Net interest income after impairment
charge
(2,138)
(2,319)
(2,503)
(2,690)
(2,884)
(3,086)
(3,313)
38,293
41,067
45,019
49,415
54,202
60,447
68,777
Net fee and commission income
19,396
20,754
22,103
23,208
24,368
25,587
26,303
592
802
928
1,074
1,183
1,111
1,353
8,518
(43,272)
8,688
(45,195)
8,862
(47,206)
9,039
(49,732)
9,220
(52,405)
9,404
(55,232)
9,499
(58,744)
Profit before taxation
23,528
26,116
29,706
33,003
36,569
41,317
47,188
Income tax
(4,000)
(4,440)
(5,050)
(5,611)
(6,217)
(7,024)
(8,022)
Profit after taxation
19,528
21,676
24,656
27,393
30,352
34,293
39,166
Net gains from financial instruments classified
as held for trading
Other operating income
Other operating expenses
52
FIDELITY BANK PLC
SEVEN YEARS FINANCIAL FORCAST
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER
2015
2016
2017
2018
2019
2020
2021
N'm
N'm
N'm
N'm
N'm
N'm
N'm
311,347
348,709
365,876
395,146
420,831
434,745
422,808
67,059
75,107
82,617
76,480
47,513
21,381
22,450
Loans and advances to customers
570,139
618,318
667,567
717,381
769,100
823,044
883,500
Discount Instruments
292,983
322,281
354,509
389,960
428,956
467,562
490,940
Property and equipment
37,885
38,642
39,415
40,203
41,008
41,828
42,664
Other assets
28,113
25,966
33,543
26,617
29,755
25,863
33,754
1,307,526
1,429,023
1,543,528
1,645,788
1,737,163
1,814,423
1,896,116
957,991
1,072,950
1,180,245
1,274,665
1,357,518
1,425,394
1,496,664
Other liabilities
52,064
54,268
56,545
58,907
61,358
63,884
66,475
Debt issued and other borrowed funds
77,852
77,852
77,852
77,852
77,852
77,852
77,852
Bond Borrowing
35,000
35,000
35,000
35,000
35,000
35,000
35,000
Retirement benefit obligations
11,681
11,681
11,681
11,681
11,681
11,681
11,681
1,134,964
1,252,545
1,362,593
1,459,904
1,545,792
1,616,855
1,691,471
172,937
177,272
182,203
187,682
193,752
200,611
208,444
1,307,526
1,429,023
1,543,528
1,645,788
1,737,163
1,814,423
1,896,116
ASSETS
Cash and balances with central bank
Loans and advances to banks
TOTAL ASSETS
LIABILITIES
Deposits from customers
TOTAL LIABILITIES
Capital and Reserves
Total Liabilities and Equity
53
FIDELITY BANK PLC
MEMORANDUM ON THE FORECAST
FOR THE YEARS ENDING 31 DECEMBER,
2015, 2016, 2017, 2018, 2019, 2020 AND 2021
1 INTRODUCTION
i)
ii)
2
This memorandum has been prepared to summarise and outline the information available
to the Directors and their basic assumptions at the time of their forecast of the pre–tax
profit for the years ending 31December, 2015, 2016, 2017, 2018, 2019, 2020 and 2021.
The directors’ forecast which is made for the purpose of a proposed 14%subordinated
fixed rate bonds 2021 is as follows:
“The Directors are of the opinion that subject to unforeseen circumstances, the profit
before taxation for the years ending 31 December, 2015, 2016, 2017, 2018, 2019, 2020
and 2021 after allowing for contingencies will be approximately N23.5billion,
N26.1billion, N29.7billion, N33.0billion, N36.6billion, N41.3billion and N47.2billion
respectively.”
BASES AND ASSUMPTIONS
The forecast has been arrived at on the following bases and assumptions which are expected to
remain in operation throughout the forecast period:
BASES
(a)
Previous years’ actual performances of Fidelity Bank Plc and the bank’s actual
results for nine months ended 30 September, 2014 have been used as bases for
measuring the reasonableness of the forecasts for the years ending31 December
2015, 2016, 2017, 2018, 2019, 2020 and 2021financial years.
(b)
The estimates for the years ending 31 December 2015, 2016, 2017, 2018, 2019,
2020 and 2021 have been prepared on a basis consistent with the bank’s
accounting policies.
54
FIDELITY BANK PLC
2015, 2016, 2017, 2018, 2019, 2020 AND 2021
BASES AND ASSUMPTIONS (CONT’D)
ASSUMPTIONS
The following assumptions have been made, and are expected to remain in operation throughout
the forecast period:
GENERAL ASSUMPTIONS FOR THE PROJECTIONS
1. The political economic and social environment would be relatively stable. No major social,
economic, political, or civil disruption is expected in the country.
2. Cash inflows and outflows on this financial projection shall be purely from normal
operations of the bank.
3. There will be no significant changes in the federal government’s monetary and fiscal policies
that will adversely affect the operation of the bank.
4. There will be no material successful claims for damages against the Bank.
KEY ASSUMPTIONS FOR THE PROJECTIONS
1. Loans are expected to grow in the following pattern:
a. Existing Retail/SME loan - To grow at an average rate of 14% in year 1 and 15%
for the rest of the forecast period
b. 95% of the bond proceeds will also be invested in the Retail/SME loans.
c. Other loans - Include borrowing to non-retails/SME customers. This category of
loans will grow at a reducing rate between 8% in year 1 and 3% in year 7.
2. Long term foreign currency borrowing will remain constant throughout the period.
55
FIDELITY BANK PLC
2013, 2014, 2015, 2016, 2017, 2018 AND 2019
3. The bank will provide for retirement benefit obligations at N2b per annum up to
December 2015.
4. Weighted average interest yield on retail loan is expected to be constant at 21%
throughout the period while the weighted average interest yield on other loans (Including
foreign currency loans) is expected to be 13%.
5. Weighted average interest yield on discount instruments is 9%.
6. Total interest expense consist of - Weighted average cost of deposits of 7%; the 6%
interest currently paid on borrowed funds and the estimated cost of the bond issuance
(14%).
7. Provision for specific and collective impairment is 7.5% on all non-performing loans.
8. Non-performing loans are projected to be 5% of all running loans for the period under
projection.
9. Commissions and Fees consist of amount charged on remittances, risk assets creation etc.
We estimate a growth of between 7% and 2.8% in the forecast period.
10. Other operating income consists mainly of gains from foreign exchange transactions. We
estimate that this will only increase by 2% through the period.
11. The effective Income tax rate is assumed to be 17% of profit before tax.
12. Balances with CBN consist of Cash; Current account balance with CBN and the cash
reserve.
13. Discount instruments (Bonds, T-bills etc) are to grow at a reducing rate between 10% in
year 1 and 5% in year 7 while investment in fixed assets is expected to grow by 2% per
annum.
56
FIDELITY BANK PLC
2013, 2014, 2015, 2016, 2017, 2018 AND 2019
14. The coupon rate on the N35billion is estimated to be 14% per annum.
15. The bond of N35billion is callable at the end of the 5th year only at the instance of the
issuer.
16. That the N35billion bond will be available for disbursement for retail and SME loans at
the beginning of year 1.
17. The total national demand for the bank’s products will be sustained, and its share of the
market will not show a significant reduction.
57
MANAGEMENT ACCOUNTS – AS AT 31 DECEMBER 2014
FIDELITY BANK PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
2014
N'million
2013
N'million
Gross Earnings
133,739
126,918
104,181
(55,488)
86,257
(55,445)
Net interest income
48,693
30,812
Impairment charge
(2,662)
(7,630)
Net interest income after impairment charge
46,031
23,182
Net gains from financial instruments classified as held for trading
Net losses on investment securities
16,817
(1,460)
-
18,698
7,789
-
Operating profit
14,201
(59,086)
16,503
14,174
(54,815)
9,028
-
-
16,503
9,028
-
(1,307)
16,503
7,721
57 k
27 k
Gain from sale of subsidiaries
Profit before income tax
Income tax expense
PROFIT FOR THE YEAR
Earnings per share
Basic and diluted (in kobo)
FIDELITY BANK PLC
STATEMENT OF COMPREHENSIVE INCOMEContinued
2014
N'million
2013
N'million
16,503
7,721
(1,237)
2,263
-
(812)
-
(1,087)
Other comprehensive income for the year, net of tax
(1,237)
364
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
15,266
8,085
PROFIT FOR THE YEAR
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Net gains/(losses) on Available-for-sale financial assets
-Unrealised net gains/(losses) arising during the year
-Net reclassification adjustments for realised net gains/ (losses)
Items that may not be reclassified subsequently to profit or loss:
Actuarial gains/(losses)
59
FIDELITY BANK PLC
AS AT 31 DECEMBER 2014
2014
N'million
2013
N'million
254,593
64,509
207,834
80,875
Investments:
543,085
426,076
Held for trading (fair value through profit or loss)
Available for sale
Held to maturity
Intangible assets
Other assets
82,811
95,331
65,992
37,741
31,473
254,909
21,041
45,105
37,470
7,908
1,175,534
1,081,217
Current income tax liability
812,980
-183
806,320
1,307
Deferred income tax liabilities
Other liabilities
1,410
61,814
117,087
7,761
1,955
30,286
70,328
7,566
1,000,869
917,762
EQUITY
Share capital
14,481
14,481
Share premium
Retained earnings
101,272
17,365
101,272
7,395
Other reserves:
Statutory reserve
21,336
18,861
Small scale investment reserve
Contingency reserve
764
1,723
764
1,723
Non-distributable regulatory reserve
Revaluation reserve
18,884
-1,162
18,884
75
174,664
163,455
1,175,534
1,081,217
ASSETS
TOTAL ASSETS
LIABILITIES
TOTAL LIABILITIES
Total equity
60
REPORTING ACCOUNTANT’S REPORT
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER
IFRS
IFRS
Note
2013
2012
N'million
N'million
IFRS
2011
N'million
NGAAP
2010
N'million
NGAAP
2009
N'million
6
7
86,257
(55,445)
78,996
(42,186)
49,527
(19,008)
40,102
(13,721)
25,513
(12,403)
Net interest income
Impairment charge
8
30,812
(7,630)
36,810
(4,610)
30,519
(16,236)
26,381
(3,885)
13,110
(3,525)
23,182
32,200
14,283
22,496
9,585
9
18,698
21,421
9,783
7,899
3,724
10
7,789
3,034
5,988
-
-
11
12
13
14,174
(54,815)
(1,041)
15,686
(50,708)
66
7,744
(36,390)
658
6,507
(29,235)
354
4,038
(15,821)
Operating profit
Profit / (loss) from sale Subsidiary
9,028
-
20,592
757
1,474
-
8,325
-
1,880
-
9,028
21,349
1,474
8,325
1,880
(1,307)
(3,425)
2,437
(2,497)
(466)
7,721
17,924
3,911
5,828
1,414
7,721
-
17,924
-
3,911
-
5,828
-
1,414
-
7,721
17,924
3,911
5,828
1,414
27
62
14
20
5
Net interest income after impairment
charge
Net gains / (losses) from financial
instruments
Net gains/(losses) on investment
securities
Income tax expense
14
Profit for the year
Profit attributable to:
Equity holders of the bank
Non-controlling interest
Earnings per share - Basic (kobo)
15
62
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
Note
PROFIT FOR THE YEAR
IFRS
IFRS
IFRS
NGAAP
NGAAP
2013
2012
2011
2010
2009
N' million
N' million
N' million
N' million
N' million
7,721
17,924
3,911
5,828
1,414
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
- Unrealised net gains/(losses) arising
during the period
- Net reclassification adjustments for
realised net gains/(losses)
2,263
(67)
(1,071)
-
-
(812)
-
(66)
-
-
(1,087)
1,824
401
-
-
Other comprehensive income for the year,
net of tax
364
1,757
(736)
-
-
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR
8,085
19,681
3,175
5,828
1,414
Items that may not be reclassified
subsequently to profit or loss:
Actuarial gains/(losses)
27
63
AS AT 31 DECEMBER
IFRS
2013
N' million
207,834
80,875
426,076
IFRS
2012
N' million
117,291
98,000
345,500
IFRS
2011
N' million
82,271
98,411
280,421
IFRS
2010
N' million
25,505
148,401
207,491
NGAAP
2009
N' million
23,720
164,092
28,574
176,398
254,909
21,040
45,105
37,470
7,908
1,081,217
201,806
21,835
76,258
35,358
470
17,842
914,360
20,620
131,849
75,622
343
32,811
349
11,841
3,193
737,731
7,660
38,007
27,761
2,173
343
31,601
253
8,358
497,553
816
61
8,654
24,335
295
7,108
434,053
24
14
22
25
26
27
806,320
1,307
1,955
30,286
70,328
7,566
917,762
716,749
2,275
1,955
26,354
5,572
752,905
564,390
2,613
617
16,535
7,605
591,760
329,200
1,515
5,835
7,714
6,437
350,702
288,808
1,491
13,116
1,299
304,714
28
29
29
14,481
101,272
7,395
14,481
101,272
6,193
14,481
101,272
(4,829)
14,481
101,272
(3,761)
14,481
101,272
2,248
29
29
29
29
29
18,861
764
1,723
18,884
75
163,455
17,703
764
1,723
19,608
(289)
161,455
12,243
764
1,867
20,395
(222)
145,971
10,455
764
1,867
20,858
915
146,851
8,707
764
1,867
129,339
1,081,217
914,360
737,731
497,553
434,053
ASSETS
Note
Cash and balances with central banks
Treasury bills
Investments:
16
Held for trading(Fair value through
profit and loss)
Available for sale
Held to maturity
Interest in subsidiary
Insurance receivables
Investment securities
Investment property
Intangible assets
Other assets
Assets classified as held for sale
TOTAL ASSETS
LIABILITIES
Current income tax liability
Deferred income tax liability
Other liabilities
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Retained earnings
Other reserves
Statutory reserve
SSI Reserve
Contingency reserve
Non-distributable reserve
Revaluation reserve
TOTAL EQUITY
TOTAL EQUITY & LIABILITIES
18.1
18.2
19.1
19.2
19.3
20
21
23
64
STATEMENT OF CHANGES IN EQUITY
Share
capital
Share
premium
Retained
earnings
Statutory
reserve
SSI
reserve
Continge
ncy
reserve
NDR
Revaluati
on
reserve
Total
equity
14,481
101,272
(3,761)
10,455
764
1,867
20,858
915
146,851
Profit for the year
-
-
3,911
-
-
-
-
-
3,911
Actuarial gain
Net gain /(loss) on
available for sale financial
asets
Total
comprehensive
income
-
-
401
-
-
-
-
-
401
-
-
-
-
-
-
-
-
-
-
-
4,312
-
-
-
-
-
4,312
Dividends
Transfer from
earnings
-
-
(4,055)
-
-
-
-
-
(4,055)
-
-
(1,325)
1,788
-
-
(463)
-
-
14,481
101,272
(4,829)
12,243
764
1,867
20,395
915
147,108
Profit for the year
Net gain /(loss) on
asets
-
-
17,924
-
-
-
-
-
17,924
-
-
-
-
-
-
-
(67)
(67)
Actuarial gain
Total
comprehensive
income
-
-
1,824
-
-
-
-
-
1,824
-
-
19,748
-
-
-
(67)
19,681
Dividends
Transfer
from
earnings
-
-
(4,055)
-
-
-
-
-
(4,055)
-
-
788
-
-
-
(788)
-
-
Transfer between reserves
-
-
(5,460)
5,460
-
-
-
-
-
Arising during the year
-
-
-
-
-
(144)
-
-
(144)
At 31 December 2012
14,481
101,272
6,192
17,703
764
1,723
19,608
848
162,591
Profit for the year
Other
comprehensive
income
Net gain /(loss) on
asets
-
-
7,721
-
-
-
-
-
7,721
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,263
2,263
Actuarial losses
Net
reclassification
adjustments for realised
net gains/(losses)
Total
comprehensive
income
-
-
-
-
-
-
-
(1,087)
(1,087)
-
-
-
-
-
-
-
(812)
(812)
-
-
7,721
-
-
-
-
364
8,085
Dividend
-
-
(6,084)
-
-
-
-
-
(6,084)
14,481
101,272
(435)
7,394
1,158
18,861
764
1,723
(723)
18,885
1,212
164,592
At 31 December 2010
retained
At 31 December 2011
retain
Transfer between reserves
At 31 December 2013
65
STATEMENT OF CASHFLOWS
IFRS
2013
N'million
IFRS
2012
N'million
IFRS
2011
N'million
NGAAP
2010
N'million
NGAAP
2009
N'million
9,028
21,349
1,474
8,325
1,880
(91,509)
93,503
6,301
(2,275)
(151,391)
161,145
16,492
(1,993)
(2,424)
(231,068)
241,058
12,172
(,054)
(1,683)
(34,104)
35,615
15,920
(883)
50,973
(68,747)
6,659
(1,798)
Net cash flows from operating activities
15,048
43,178
15,899
24,873
(11,033)
Investing activities
Proceeds from sale of Subsidiaries
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Redemption/Disposal of fixed assets
Dividend received
Proceeds from sale of investment
Purchase of long term investments
(5,454)
141
-
749
(5,121)
48
(189)
-
(4,935)
118
(251)
-
(3,578)
59
1,871
636
158
(2,433)
(2,499)
11
30
(15)
Net cash flows from/(used in) investing activities
(5,313)
(4,513)
(5,069)
(3,287)
(2,473)
Financing activities
Dividends Paid
(6,084)
69,768
(4,055)
-
(4,055)
-
(724)
-
(1,448)
Net cash flows from/(used in) Financing activities
63,684
(4,055)
(4,055)
(724)
(1,448)
Increase in cash and cash equivalents
73,419
34,610
6,776
20,862
(14,954)
Cash and cash equivalents at start of year
215,292
180,682
173,906
184,691
231,340
Cash and cash equivalents at end of year
Operational cash flow from interest and dividend
Interest received
Interest paid
Dividend received
288,711
215,292
180,682
205,553
216,386
86,257
55,445
725
78,996
42,186
933
49,527
19,008
930
40,102
13,721
636
25,513
12,403
-
Operating Activities
Profit before taxation
Adjustment for:
Change in operating assets
Change in operating liabilities
Other non-cash items included in profit after tax
Net gain/(loss) from investing activities
Income tax paid
66
NOTES TO THE FINANCIALSTATEMENT FOR THE YEARS ENDED 31 DECEMBER, 2009-2013
1.
GENERAL INFORMATION
These financial statements are the financial statements of Fidelity Bank Plc (the “Bank”), a company incorporated in
Nigeria on 19 November 1987.
The registered office address of the Bank is at Fidelity Place, 2 Kofo Abayomi Street, Victoria-Island, Lagos, Nigeria.
The principal activity of the Bank is the provision of banking services to corporate and individual customers.
The financial statements for the year ended 31 December 2013 were approved for issue by the Board of Directors
on 25th March, 2014.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented unless otherwise stated.
2.1 Introduction to summary of significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
2.1.1 Basis of Preparation
Statement of Compliance
The Bank’s financial statements for the year 2013 have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Additional
information required by national regulations is included where appropriate.
The financial statements comprise the statement of comprehensive income, the statement of financial position, the
statement of changes in equity, the cash flow statement and the notes.
The financial statements have been prepared in accordance with the going concern principle under the historical cost
convention, except for financial assets and financial liabilities measured at fair value.
The financial statements are presented in Naira, which is the Bank’s presentation currency. The figures shown in the
financial statements are stated in Naira millions.
2.1.2 Significant accounting judgments, estimates and assumptions
The preparation of the Bank’s financial statements requires management to make judgments, estimates and
assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the accompanying
disclosure, as well as the disclosure of contingent liability about these assumption and estimates could result in
outcome that require a material adjustment to the carrying amount of assets and liabilities affected in future periods.
Management discusses with the Audit Committee the development, selection and disclosure of the Bank’s critical
accounting policies and estimates, and the application of these policies and estimates.
Estimates and Assumptions
The key assumption concerning the future and other key sources of estimation uncertainly at the reporting date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial period, are described below. The Bank based its assumption and estimates on parameters available
when the financial statements were prepared. Existing circumstances and assumption about future developments,
however, may change due to market changes or circumstances beyond the control of the Bank. Such changes are
reflected in the assumptions when they occur.
67
Going Concern
The Bank’s management has made an assessment of its ability to continue as a going concern and is satisfied that it
has the resources to continue in the business for the foreseeable future. Furthermore, management is not aware of
any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern.
Therefore, the financial statements continue to be prepared on the going concern basis.
Allowances for credit losses
Assets accounted for at amortized cost are evaluated for impairment on a basis described in accounting policy Note
2.7 The specific counterparty component of the total allowances for impairment applies to claims evaluated
individually for impairment and is based upon management’s best estimate of the present value of the cash flows
that are expected to be received. In estimating these cash flows, management makes judgment about counterparty’s
financial situation and the net realizable value of any underlying collateral. Each impaired asset is assessed on its
merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by
the Credit Committee. Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans
with similar economic characteristics when there is objective evidence to suggest that they contain impaired loans,
but the individual impaired items cannot yet be identified. In assessing the need for collective loan loss allowances,
management considers factors such as credit quality, portfolio size, concentrations, and economic factors. In order
to estimate the required allowance, assumptions are made to define the way inherent losses are modeled and to
determine the required input parameters, based on historical experience and current economic conditions. The
accuracy of the allowances depends on how well these estimate of future cash flows for specific counterparty
allowances and the model assumptions and parameters used in determining collective allowances are made.
Fair value of financial instruments
The determination of fair value for financial assets and liabilities for which there is no observable market price
requires the use of techniques as described in accounting policy Note 2.4 (E) For financial instruments that trade
infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment
depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting
the specific instrument.
Deferred tax assets
Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that the future taxable
profit will be available against which the losses can be utilised. Judgment is required to determine the amount of
deferred tax that can be recognised, based upon the likely timing and level of future taxable profits, together with
future tax-planning strategies. Tax losses can be used indefinitely.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset
amounts are as follows:
Retirement benefit obligation
The cost of the defined benefit plan is determined using an actuarial valuation. The actuarial valuation involves
making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates
and future pension increases. Due to the long–term nature of these plans, such estimates are subject to significant
uncertainty. See Note 27 for the assumptions used.
JUDGEMENTS
In the process of applying the Bank’s accounting policies, management has made the following judgments, which
have significant effect on the amount recognised in the financial statements:
Depreciation and carrying value of property, plant and equipment
The estimation of the useful lives of assets is based on management’s judgment. Any material adjustment to the
estimated useful lives of items of property and equipment will have an impact on the carrying value of these items.
68
Determination of impairment of property, plant and equipment, and intangible assets
Management is required to make judgment concerning the cause, timing and amount of impairment. In the
identification of impairment indicators, management considers the impact of changes in current competitive
conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other
circumstances that could indicate that impairment exists. The Bank applies the impairment assessment to, its
separate cash generating units. This requires management to make significant judgment and estimates concerning the
existence of impairment indicators, separate cash generating units, remaining useful lives of assets, projected cash
flows and net realisable values. Management’s judgment is also required when assessing whether a previously
recognised impairment loss should be reversed
Determination of collateral Value
Management monitors market value of collateral in a regular basis. Management uses its experienced judgment on
independent opinion to adjust the fair value to reflect the current circumstances. The amount and collateral required
depend on the assessment of credit risk of the counterpart.
The Directors believes that the underlying assumptions are appropriate and that the Bank’s financial statements
therefore present the financial position and results fairly. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the
notes.
2.2 A STANDARDS, AMENDMENTS AND INTERPRETATIONS EFFECTIVE FOR THE
FINANCIAL YEAR BEGINNING 1 JANUARY 2013
The accounting policies adopted in the preparation of the 2013 financial statements are consistent with those
followed in the preparation of the Bank’s 2012 financial statements, except for the adoption of new standards or
interpretations effective as of 1 January 2013. The nature and the impact of each new standard/amendment are
described below:
• IAS 1 - Presentation of Items of Other Comprehensive Income – Amendments to IAS 1
The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (“OCI”). Items
that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net gain on hedge of net
investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net
loss or gain on available-for-sale financial assets) now have to be presented separately from items that will never be
reclassified (e.g., actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The
amendment affected presentation only and had no impact on the Bank’s financial position or performance.
• IAS 1- Clarification of the requirement for comparative information (Amendment)
The amendment to IAS 1 clarifies the difference between voluntary additional comparative information and the
minimum required comparative information. An entity must include comparative information in the related notes to
the financial statements when it voluntarily provides comparative information beyond the minimum required
comparative period. The additional voluntarily comparative information does not need to be presented in a complete
set of financial statements. An opening statement of financial position (known as the ‘third balance sheet’) must be
presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or
reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of
financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does
not have to be accompanied by comparative information in the related notes. Under IAS 34, the minimum items
required for interim financial statements do not include a third balance sheet. The amendment had no impact on the
Bank’s financial position or performance as there was no retrospective application of accounting policy, nor
retrospective restatement or reclassification.
•IAS 32 - Tax effects of distributions to holders of equity instruments (Amendment)
69
The amendment to IAS 32 Financial Instruments: Presentation clarifies that income taxes arising from distributions
to equity holders are accounted for in accordance with IAS 12 Income Taxes. The amendment removes existing
income tax requirements from IAS 32 and requires entities to apply the requirements in IAS 12 to any income tax
arising from distributions to equity holders. The amendment did not have an impact on the financial statements of
the Bank, as there is no tax consequences attached to cash or non-cash distribution.
IAS 34 - Interim financial reporting and segment information for total assets and liabilities (Amendment)
The amendment clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities
for each reportable segment to enhance consistency with the requirements in IFRS 8 Operating Segments. Total
assets and liabilities for a reportable segment need to be disclosed only when the amounts are regularly provided to
the chief operating decision maker and there has been a material change in the total amount disclosed in the entity’s
previous annual financial statements for that reportable segment. The Bank provides this disclosure as total segment
assets were reported to the chief operating decision maker (“CODM”). As a result of this amendment, the Bank now
also includes disclosure of total segment liabilities as these are reported to the CODM.
IAS 16 - Property, Plant and Equipment (Amendments) – Classification of servicing equipment
The amendment clarifies that major spare parts and servicing equipment that meet the definition of property plant
and equipment are not inventory.
IAS 19 - Employee Benefits (Revised 2011) (IAS 19R)
IAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and
losses that are now recognised in OCI and permanently excluded from profit and loss; expected returns on plan
assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net
defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit
obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the
amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include
new disclosures, such as, quantitative sensitivity disclosures. In case, the transition to IAS 19R had an impact on the
net defined benefit plan obligations due to the difference in accounting for interest on plan assets and unvested past
service costs. This has no impact on the Bank.
IFRS 7 - Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments to
IFRS 7)
The amendment requires an entity to disclose information about rights to set-off financial instruments and related
arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in
evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for
all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to
recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement,
irrespective of whether the financial instruments are set off in accordance with IAS
32. As the Bank is not setting off financial instruments in accordance with IAS 32 and does not have relevant
offsetting arrangements, the amendment does not have an impact on the Bank.
IFRS 10 - Consolidated Financial Statements and IAS 27 Separate Financial Statements
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10
replaces the parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with
consolidated financial statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the
definition of control such that an investor controls an investee when it is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the investee
70
To meet the definition of control in IFRS 10, all three criteria must be met, including:
(a) an investor has power over an investee;
(b) The investor has exposure, or rights, to variable returns from its involvement with the investee;
(c) The investor has the ability to use its power over the investee to affect the amount of the investor’s returns.
IFRS 10 had no impact on the Bank’s financial statements.
IFRS 11- Joint Arrangements and IAS 28 - Investments in Associates and Joint Ventures
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary
Contributions by Ventures. IFRS 11 removes the option to account for jointly controlled entities (“JCEs”) using
proportionate consolidation. Instead, JCEs that meet the definition of a joint venture under IFRS 11 must be
accounted for using the equity method. This has no effect on the financial statements.
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements,
associates and structured entities. None of these disclosure requirements are applicable to the Bank.
IFRS 13 - Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not
change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under
IFRS. IFRS 13 defines fair value as an exit price. As a result of the guidance in IFRS 13, the Bank re-assessed its
policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value
measurement of liabilities. IFRS 13 also requires additional disclosures. Application of IFRS 13 has not materially
impacted the fair value measurements of the Bank. Additional disclosures where required, are provided in the
individual notes relating to the assets and liabilities whose fair values were determined. Fair value hierarchy is
provided in Note 3.5.
IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine
This Interpretation applies to waste removal costs that are incurred in surface mining activity during the production
phase of the mine (‘production stripping costs’). This Interpretation addresses the following issues-recognition of
production stripping costs as an asset; initial measurement of the stripping activity asset; and subsequent
measurement of the stripping activity asset. This standard is applicable for annual periods beginning on or after 1
January 2013. This is not applicable to the Bank. In addition to the above-mentioned amendments and new
standards, IFRS 1 First-time Adoption of International Financial Reporting Standards was amended with effect for
reporting periods starting on or after 1 January 2013. The Bank is not a first-time adopter of IFRS; therefore, this
amendment is not relevant to the Bank. The Bank has not adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
B. STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR
THE 31 DECEMBER 2013 YEAR END
Standards and improvement that are issued but not yet effective up to the date of review of the Banks financial
statements are disclosed below. The Bank intends to adopt the standards and improvements, if applicable, below
when it becomes effective: (i) IFRS 9 - Financial Instrument: Classification and Measurement IFRS 9 as issued
reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to the classification and
measurement of financial assets and liabilities as defined in IAS 39. The standard should have been effective for
annual periods beginning on or after 1 January 2015, but the IASB at its July 2013 meeting tentatively decided to
defer the mandatory effective date of IFRS 9 until the issue date of the completed version of IFRS 9 is known. The
impact of this IFRS will be in the area of classification and measurement of financial assets, reporting for entities
that have designated liabilities using For Voucher Only (“FVO”). The other phases including impairment and hedge
accounting are also expected to have significant accounting implications.
71
2.3 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of the Bank are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”).
The financial statements are presented in Naira millions, which is the Bank’s presentation currency.
(b) Transactions and balances
Foreign currency transactions (i.e. transactions denominated, or that require settlement, in a currency other than the
functional currency) are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured.
Monetary items denominated in foreign currency are translated with the closing rate as at the reporting date.
Nonmonetary items measured at historical cost denominated in a foreign currency are translated with the exchange
rate as at the date of initial recognition; non-monetary items in a foreign currency that are measured at fair value are
translated using the exchange rates at the date when the fair value was determined.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the profit or loss.
In the case of changes in the fair value of monetary assets denominated in foreign currency classified as available for
sale, a distinction is made between translation differences resulting from changes in amortised cost of the security
and other changes in the carrying amount of the security. Translation differences related to changes in the amortised
cost are recognised in profit or loss, and other changes in the carrying amount, except impairment, are recognised in
other comprehensive income.
Translation differences on non-monetary financial instruments, such as equities held at fair value through profit or
loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary financial
instruments, such as equities classified as available-for-sale financial assets, are included in other comprehensive
income.
2.4 Financial assets and liabilities
In accordance with IAS 39, all financial assets and liabilities - which include derivative financial instruments - have to
be recognised in the statement of financial position and measured in accordance with their assigned category.
A) Initial recognition and measurement
Financial instruments at fair value through profit or loss are initially recognised at fair value while transaction costs,
which are directly attributable to the acquisition or issue of the financial instruments, are recognised immediately
through profit or loss. Financial instruments that are not carried at fair value through profit or loss are initially
measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial
instruments.
Financial instruments are recognised or derecognised on the date that the financial instrument is delivered to or by
the Bank (settlement date accounting).
The Bank does not currently apply hedge accounting.
B) Subsequent measurement
Subsequent to initial measurement, financial instruments are measured either at fair value or amortised cost
depending on their classification.
C) Classification and related measurement
Management determines the classification of its financial instruments at initial recognition. Reclassification of
financial assets is permitted in certain instances as discussed below.
72
i) Financial assets
The Bank classifies its financial assets in terms of the following IAS 39 categories: financial assets at fair value
through profit or loss; loans and receivables; held-to-maturity financial assets; and available-for-sale financial assets.
a) Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets classified as held for trading, and financial assets
designated by the Bank as fair value through profit or loss upon initial recognition (the so-called “fair value option”).
At the reporting dates covered by these financial statements, financial assets at fair value through profit or loss
comprise financial assets classified as held for trading only. Management did not apply the fair value option to any
financial assets existing at these dates.
A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or
repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also
categorised as held for trading unless they are designated and effective as hedging instruments.
Financial instruments included in this category are subsequently measured at fair value with gains and losses arising
from changes in fair value recognised in ‘Net gains / (losses) from financial instruments at fair value’ in the
Statement of comprehensive income. Interest income and dividend income on financial assets held for trading are
included in ‘Interest income’ and ‘Other operating income’ respectively.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market, other than:
• Those that the Bank intends to sell immediately or in the short term, which are classified as held for trading, and
those that the entity upon initial recognition designates as fair value through profit or loss;
• Those that the Bank upon initial recognition designates as available-for-sale; or
• Those for which the holder may not recover substantially all of its initial investment, other than because of credit
deterioration. Loans and receivables are subsequently measured at amortised cost using the effective interest rate
method.
Interest income is included in ‘Interest income’ in the Statement of comprehensive income. Refer to accounting
policy 2.7 for the impairment of financial assets.
c) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Bank’s management has the positive intention and ability to hold to maturity, other than:
• Those that the Bank upon initial recognition designates as fair value through profit or loss;
• Those that the Bank upon initial recognition designates as available-for-sale; or
• Those that meet the definition of loans and receivables.
These financial assets are subsequently measured at amortised cost using the effective interest rate method.
Interest income is included in ‘Interest income’ in the Statement of comprehensive income. Refer to accounting
policy 2.8 for the impairment of financial assets.
d) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified as
loans and receivables, held-to-maturity financial assets or financial assets at fair value through profit or loss.
No financial assets designated as available-for-sale exist at any of the reporting dates covered by these financial
statements.
Available-for-sale financial assets are subsequently measured at fair value with fair value gains and losses recognised
in other comprehensive income. Interest calculated using the effective interest method is recognised in ‘Interest
income’, with dividend income included in ‘Other operating income’. When available-for-sale financial assets are
sold or impaired, the cumulative gain or loss recognised in a separate reserve in equity is reclassified to profit or loss.
73
ii) Financial liabilities
Financial liabilities are classified as at fair value through profit or loss (including financial liabilities held for trading
and those designated at fair value through profit or loss) and financial liabilities at amortised cost. The Bank only has
financial liabilities at amortised cost.
a) Financial liabilities at amortised cost
Financial liabilities that are not classified as at fair value through profit or loss are measured at amortised cost using
the effective interest method. Interest expense is included in ‘Interest expense’ in the Statement of comprehensive
income.
D) Reclassification of financial assets
The Bank may choose to reclassify a non-derivative financial asset held for trading out of the held for trading
category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other
than loans and receivables are permitted to be reclassified out of the held for trading category only in rare
circumstances arising from a single event that is unusual and highly unlikely to recur in the near-term. In addition,
the Bank may choose to reclassify financial assets that would meet the definition of loans and receivables out of the
held for trading or available-for-sale categories if the Bank has the intention and ability to hold these financial assets
for the foreseeable future or until maturity at the date of Reclassifications are made at fair value as of the
reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value
gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial
assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date.
Further increases in estimates of cash flows adjust effective interest rates prospectively.
On reclassification of a financial asset out of the fair value through profit or loss category, all embedded derivatives
are re-assessed and, if necessary, separately accounted for.
‘E) Determination of fair value
At initial recognition, the best evidence of the fair value of a financial instrument is the transaction price (i.e. the fair
value of the consideration paid or received), unless the fair value of that instrument is evidenced by comparison with
other observable current market transactions in the same instrument, without modification or repackaging, or based
on valuation techniques such as discounted cash flow models and option pricing models whose variables include
only data from observable markets.
Subsequent to initial recognition, for financial instruments traded in active markets, the determination of fair values
of financial assets and financial liabilities is based on quoted market prices or dealer price quotations.
This includes listed equity securities and quoted debt instruments on major exchanges and broker quotes.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry Bank, pricing service or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm’s length basis. If the above criteria are not met, the
market is regarded as being inactive. Indications that a market is inactive are when there is a wide bid offer spread or
significant increase in the bid-offer spread or there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair
values are estimated from observable data in respect of similar financial instruments, using models to estimate the
present value of expected future cash flows or other valuation techniques, using inputs (for example, LIBOR yield
curve, foreign exchange rates, volatilities and counterparty spreads) existing at the reporting dates.
The Bank uses widely recognised valuation models for determining fair values of non-standardized financial
instruments of lower complexity, such as options or interest rate and currency swaps. For these financial
instruments, inputs into models are generally market-observable.
74
For more complex instruments, the Bank uses internally developed models, which are usually based on valuation
methods and techniques generally recognised as standard within the industry. Valuation models are used primarily to
value derivatives transacted in the over-the-counter market, unlisted debt securities (including those with embedded
derivatives) and other debt instruments for which markets were or have become illiquid. Some of the inputs to these
models may not be market observable and are therefore estimated based on assumptions.
The output of a model is always an estimate or approximation of a value that cannot be determined with certainty,
and valuation techniques employed may not fully reflect all factors relevant to the positions the Bank holds
Valuations may therefore be adjusted, where appropriate, to allow for additional factors including model risks,
liquidity risk and counterparty credit risk. Based on the established fair value model governance policies, and related
controls and procedures applied, management believes that these valuation adjustments are necessary and
appropriate to fairly state the values of financial instruments carried at fair value in the statement of financial
position. Price data and parameters used in the measurement procedures applied are generally reviewed carefully and
adjusted, if necessary.
F) Derecognition
Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased
to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are
also transferred (that is, if substantially all the risks and rewards have not been transferred, the Bank tests control to
ensure that continuing involvement on the basis of any retained powers of control does not prevent derecognition).
Financial liabilities are derecognised when they have been redeemed or otherwise extinguished.
Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending
and borrowing transactions is not derecognised because the Bank retains substantially all the risks and rewards on
the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met.
Financial assets that are transferred to a third party but do not qualify for derecognition are presented in the
Statement of financial position as ‘Assets pledged as collateral’, if the transferee has the right to sell or replete them.
2.5 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously.
2.6 Revenue recognition
Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognised within ‘Interest income’ and
‘Interest expense’ in the Statement of comprehensive income using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability
and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial
liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms
of the financial instrument (for example, prepayment options) but does not consider future credit losses. The
calculation includes all fees and points paid or received between parties to the contract that are an integral part of the
effective interest rate, transaction costs and all other premiums or discounts. Where the estimated cash flows on
financial assets are subsequently revised, other than impairment losses, the carrying
75
amount of the financial assets is adjusted to reflect actual and revised estimated cash flows. Once a financial asset or
a group of similar financial assets has been written down as a result of an impairment loss, interest income is
recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss.
Fees and commission income
Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan
commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and
recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees are recognised as
revenue when the syndication has been completed and the Bank has retained no part of the loan package for itself or
has retained a part at the same effective interest rate as the other participants. Commission and fees arising from
negotiating, or participating in the negotiation of, a transaction for a third party, are recognised on completion of the
underlying transaction.
Income from bonds or guarantees and letters of credit
Income from bonds or guarantees and letters of credit are recognised on a straight line basis over the life of the
bond or guarantee.
Dividend income
Dividends are recognised in the Statement of comprehensive income in ‘Other income’ when the entity’s right to
receive payment is established.
2.7 Impairment of financial assets
(i) Assets carried at amortised cost
The Bank assesses at the end of each reporting period whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated
future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:
Delinquency in contractual payments of principal or interest;· Cash flow difficulties experienced by the borrower
(for example, equity ratio, net income percentage of sales);· Breach of loan covenants or conditions;· Initiation of
bankruptcy proceedings;· Deterioration of the borrower’s competitive position;· Deterioration in the value of
collateral;· Downgrading below investment grade level;· Significant financial difficulty of the issuer or obligor;· A
breach of contract, such as a default or delinquency in interest or principal payments. The lender, for economic or
legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender
would not otherwise consider;· It becomes probable that the borrower will enter bankruptcy or other financial
reorganisation;· The disappearance of an active market for that financial asset because of financial difficulties; and·
Observable data indicating that there is an measurable decrease in the estimated future cash flows from a portfolio
of financial assets since the initial recognition of those assets although the decrease cannot yet be identified with the
individual financial assets in the portfolio, including: adverse changes in the payment status of borrowers in the
portfolio; and national or local economic conditions that correlate with defaults on the assets in the portfolio.
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If the
Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an
impairment loss is or continues to be recognised are not included in a collective assessment of impairment.
76
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance
account and the amount of the loss is recognised in profit or loss. If a financial instrument has a variable interest
rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the
contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the
cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not
foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are banked on the basis of similar credit
risk characteristics (i.e. on the basis of the Bank’s grading process that considers asset type, industry, geographical
location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the
estimation of future cash flows for Banks of such assets by being indicative of the debtors’ ability to pay all amounts
due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the
basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk
characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable
data to reflect the effects of current conditions that did not affect the period on which the historical loss experience
is based and to remove the effects of conditions in the historical period that do not currently exist. Estimates of
changes in future cash flows for Banks of assets are reflected and directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment
status, or other factors indicative of changes in the probability of losses in the Bank and their magnitude). The
methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce
any differences between loss estimates and actual loss experience. When a loan is uncollectible, it is written off
against the related provision for loan impairment. Such loans are written off after all the necessary procedures have
been completed and the amount of the loss has been determined. Impairment charges on financial assets are
included in profit or loss within ‘Impairment charges. .
(ii) Available-for-sale financial assets
Available-for-sale financial assets are impaired if there is objective evidence of impairment, resulting from one or
more loss events that occurred after initial recognition but before the reporting date, that have an impact on the
future cash flows of the asset. In addition, an available-for-sale equity instrument is generally considered impaired if
a significant or prolonged decline in the fair value of the instrument below its cost has occurred. Where an availablefor-sale asset, which has been re-measured to fair value directly through equity, is impaired, the impairment loss is
recognised in profit or loss. If any loss on the financial asset was previously recognised directly in equity as a
reduction in fair value, the cumulative net loss that had been recognised in equity is transferred to profit or loss and
is recognised as part of the impairment loss. The amount of the loss recognised in profit or loss is the difference
between the acquisition cost and the current fair value, less any previously recognised impairment loss. If, in a
subsequent period, the amount relating to an impairment loss decreases and the decrease can be linked objectively to
an event occurring after the impairment loss was recognised in the income statement, where the instrument is a debt
instrument, the impairment loss is reversed through profit or loss. An impairment loss in respect of an equity
instrument classified as available-for-sale is not reversed through profit or loss but accounted for directly in equity.
2.8 Impairment of non-financial assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. Additionally, intangible assets that have an indefinite useful life and are not subject to
amortisation are tested annually for impairment. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use.
77
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows (cash-generating units). The impairment test may also be performed on a single asset when
the fair value less cost to sell or the value in use can be determined reliably. Non-financial assets other than goodwill
that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Impairment
losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised. An impairment loss in respect of goodwill is not reversed.
2.9 Share-based payments
The Bank operates a share scheme which enables employees of the Bank to acquire shares in the Bank. The shares
are bought on loan account and the fair value is calculated as the difference between the price paid and the fair value
of the shares. The share vests immediately and the post vesting conditions are included in the valuation.
2.10 Statement of cash flows
The Statement of cash flows shows the changes in cash and cash equivalents arising during the year from operating
activities, investing activities and financing activities. Cash and cash equivalents include highly liquid investments.
The cash flows from operating activities are determined by using the indirect method. Net income is therefore
adjusted by non-cash items, such as measurement gains or losses, changes in provisions, as well as changes from
receivables and liabilities. In addition, all income and expenses from cash transactions that are attributable to
investing or financing activities are eliminated.
The cash flows from investing and financing activities are determined by using the direct method. The Bank’s
assignment of the cash flows to operating, investing and financing category depends on the Bank’s business model
(management approach). Interest and dividends received and interest paid are classified as operating cash flows,
while dividends paid are included in financing activities.
2.11 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition,
including cash in hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents include cash and non-restricted balances
with central bank.
2.12 Leases
Leases are divided into finance leases and operating leases.
(a) The company is the lessee
(i) Operating lease
Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor,
are classified as operating leases. Payments, including prepayments, made under operating leases (net of any
incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of
the lease. When an operating lease is terminated before the lease period has expired, any payment required to be
made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
(ii) Finance lease
Leases of assets where the Bank has substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments. Each lease payment is allocated between the liability
and finance charges so as to achieve a constant rate on the finance balance outstanding.
78
The corresponding rental obligations, net of finance charges, are included in ‘Deposits from banks’ or ‘Deposits
from customers’ depending on the counter party.
The interest element of the finance cost is charged to the income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The investment properties
acquired under finance leases are measured subsequently at their fair value.
(b) The company is the lessor
(i) Operating lease
When assets are subject to an operating lease, the assets continue to be recognised as property and equipment based
on the nature of the asset. Lease income is recognised on a straight line basis over the lease term. Lease incentives
are recognised as a reduction of rental income on a straight-line basis over the lease term.
(ii) Finance lease
When assets are held subject to a finance lease, the related asset is derecognised and the present value of the lease
payments (discounted at the interest rate implicit in the lease) is recognised as a receivable. The difference between
the gross receivable and the present value of the receivable is recognised as unearned finance income.
Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a
constant periodic rate of return.
2.13 Property, plant and equipment
Land and buildings comprise mainly branches and offices. All property and equipment used by the Bank is stated at
historical cost less accumulated depreciation and accumulated impairment losses, if any Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent expenditures are included in the asset’s carrying amount or are recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank
and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All
other repair and maintenance costs are charged to ‘Other operating expenses’ during the financial period in which
they are incurred.
Land included in leasehold land and buildings is not depreciated. Depreciation of other assets is calculated using the
straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:Leasehold buildings: Depreciated over the lease period- Leasehold improvements: The lower of useful life and lease
period- Motor vehicles: 4 years- Furniture and fittings: 4 years- Computer equipment: 5 years Office equipment: 5
years
The assets’ residual values and useful lives are reviewed annually, and adjusted if appropriate.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are
included in ‘Other operating expenses’ in profit or loss.
Construction cost and improvements in respect of offices is carried at cost as capital work in progress. On
completion of construction or improvements, the related amounts are transferred to the appropriate category of
property and equipment. Payments in advance for items of property and equipment are included as Prepayments in
“Other Assets” and upon delivery are reclassified as additions in the appropriate category of property and
equipment.
2.14 Intangible assets
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software
products controlled by the Bank, are recognised as intangible assets when the following criteria are met:
 It is technically feasible to complete the software product so that it will be available for use;
 Management intends to complete the software product and use or sell it;
79




There is an ability to use or sell the software product;
It can be demonstrated how the software product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the
software product are available; and
The expenditure attributable to the software product during its development can be reliably measured.
Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates.
Direct computer software development costs recognised as intangible assets are amortised on the straight-line basis
over 3 years and are carried at cost less any accumulated amortisation and any accumulated impairment losses.
2.15 Income taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in arriving at profit or loss,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(a) Current income tax
The current income tax charge is calculated on the basis of the applicable tax laws enacted or substantively enacted
at the reporting date in the respective jurisdiction.
(b) Deferred income tax
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates,
except where the timing of the reversal of the temporary difference is controlled by the Bank and it is probable that
the difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable’s entities where there is an
intention to settle the balance on a net basis.
2.16 Employee benefits
Defined contribution scheme
For defined contribution plans, the Bank pays contributions to publicly or privately administered pension insurance
plans on a contractual basis. The Bank contributes 10% of basic salary, rent and transport allowances, with the
employee contributing a further 8%. The Bank has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Defined benefit scheme
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors, such as age, years of service and compensation. The liability
recognised in the statement of financial position in respect of defined benefit pension plans is the present
80
value of the defined benefit obligation at the date of the statement of financial position less the fair value of plan
assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated future cash
outflows using Federal Government Bonds of Nigeria as High Quality Corporate bonds are not available.
Actuarial gains and losses are recognised in full in other comprehensive income when they occur.
Gratuity scheme
The Bank had a non contributory defined gratuity scheme whereby on separation, staff who have spent a minimum
number of periods are paid a sum based on their qualifying emoluments and the number of periods spent in service
of the Bank upon retirement.
2.17 Provisions
Provisions for restructuring costs and legal claims are recognised when: the Bank has a present legal or constructive
obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated. The Bank recognizes no provisions for future operating
losses.
2.18 Financial guarantee contracts
A financial guarantee contract is a contract that requires the Bank (“Issuer”) to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance
with the original or modified terms of a debt instrument. Such financial guarantees are given to banks, financial
institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee liabilities are initially recognised at fair value, which is generally equal to the premium received,
and then amortised over the life of the financial guarantee. Subsequent to initial recognition, the financial guarantee
liability is measured at the higher of the present value of any expected payment, when payment under the guarantee
has become probable, and the unamortised premium.
2.19 Share capital
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are
shown in equity as a deduction, net of tax, from the proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s
shareholders.
Dividends for the year that are declared after the date of the Statement of financial position are dealt with in the
subsequent events note.
Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in
accordance with the requirements of the Company and Allied Matters Act.
(c) Treasury shares
Where the Bank purchase the Bank’s equity share capital, the consideration paid is deducted from total
Shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued
any consideration received is included in shareholders’ equity.
2.20 Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed
with comparative information. Where IAS 8 applies, comparative figures have been adjusted to conform to changes
in presentation in the current year.
81
2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses
the performance of the operating segments of an entity. The Bank has determined the [Executive Committee] as its
chief operating decision maker.
All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and
costs being eliminated in head office. Income and expenses directly associated with each segment are included in
determining business segment performance. Refer to note 5 for the segment report.
82
3.
Financial risk management
3.1
Introduction and overview
IFRS 7 par 31: An entity shall disclose information that enables users of its financial statements to evaluate the nature
and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period.
Enterprise Risk Management
Fidelity Bank runs an Enterprise-wide Risk Management system which is governed by the following key principles:
i)
Comprehensive and well defined policies and procedures designed to identify, assess, measure, monitor and report
significant risk exposures of the entity. These policies are clearly communicated throughout the bank and are reviewed
annually.
ii)
iii)
Clearly defined governance structure.
Clear segregation of duties within the Risk Management Sector and also between them and the business groups.
iv)
Management of all classes of banking risk broadly categorized into credit, market, liquidity and operational risk
independently but in a co-coordinated manner at all relevant levels within our organization.
Risk Management Governance Structure
Enterprise-wide risk management roles and responsibilities are assigned to stakeholders in the Bank at three levels as
follows:
Level 1 - Board/Executive Management oversight is performed by the Board of Directors, Board Audit & Risk
Committee (“BA&RC”), Board Credit Committee (“BCC”), Board Finance & General Purpose Committee, Board
Governance Committee, and Executive Management Committee (“EXCO”).
Level 2 - Senior Management function is performed by the Management Credit and Investment Committee
(“MCIC”), Credit Review Committee (“CRC’), Loan Recovery Committee (“LRC”), Asset and Liability Management
Committee (“ALCO”), Operational Risk & Service Measurements Committee (ORSMC), Management Performance
Reporting Committee (“MPR”), The Chief Risk Officer (“CRO”) and Heads of Enterprise Risk Strategy, Loan
Processing, Credit Administration, Remedial Assets Management, Market Risk Management & ALM and Operational
Risk Management.
Level 3 - This is performed by all enterprise-wide Business and Support Units. Business and Support Units are
required to comply with all risk policies and procedures and to manage risk exposures that arise from daily operations.
Our Corporate Audit Division assists the Board Finance & General Purpose Committee by providing independent
appraisal of the Bank’s risk framework for internal risk assurance. The Division assesses compliance with established
controls and enterprise-wide risk management methodologies. Significant risk related infractions and recommendations
for improvement in processes are escalated to relevant Management and Board committees.
83
The Risk Management Organogram of the Bank is as follows:
84
Enterprise Risk Philosophy
Fidelity Enterprise Risk Mission
The Bank's Enterprise Risk Mission is to proactively anticipate and stem enterprise-wide losses that may occur in
the execution of its mission of making financial services easy and accessible.
Risk Culture
The Bank's risk culture proactively anticipates and curtails losses that may arise from its banking risk underwriting.
This culture evolved out of the understanding that the Bank is in a growth phase which requires strong risk
management. By design therefore, the Bank operates a MANAGED risk culture, which places emphasis on a
mixture of GROWTH and RISK CONTROL to achieve corporate goals without compromising asset or service
quality.
Risk Appetite
Our risk appetite describes the quantum of risk that we would assume in pursuit of our business objectives at any
point in time. For Fidelity Bank, it is the core instrument used in aligning our overall corporate strategy, our capital
allocation and risks.
We define our risk Appetite quantitatively at two levels: Enterprise level and Business/Support Unit level To give
effect to the above, the Board of Directors of the Bank sets target Key Performance Indicators at both enterprise
and business/support unit levels based on recommendations from the Executive Management Committee.
At the Business and Support unit level, the enterprise KPIs are cascaded to the extent that the contribution of
each Business/Support Unit to risk losses serves as input for assessing the performance of the Business/Support
Unit.
85
3.2
3.2.1
Credit risk
Management of credit risk
The Bank defines credit risk as the risk of transactions that give rise to actual, contingent or potential claims against any
counter-party, borrower or obligor. Credit risk arises anytime the Bank’s funds are extended, committed, invested or
otherwise exposed through actual or implied contractual agreements. This is the largest single risk we carry as a Bank.
We measure and manage credit risk following the principles below:
• Consistent standards as documented in our credit policies and procedures manual are applied to all credit applications and
credit approval decisions.
• Credit facilities are approved for counter-parties only if underlying requests meet our standard risk acceptance criteria.
• Every extension of credit or material change to a credit facility (such as its tenor, collateral structure or major covenants)
to any counter-party requires approval at the appropriate authority level. The approval limits are as follows:
Approving Authority
Executive Directors
Managing Director/CEO
Management Credit & Investment Committee
Board Credit
Committee
Full Board
Approval Limit
N50million and below
Above N50million but below N100 million
Above N100million but below N500 million
Above N500million but below N1billion
N1billion and above
• We assign credit approval authorities to individuals according to their qualifications, experience, training and quality of
previous credit decisions. These are also reviewed periodically.
• We measure and consolidate all our credit exposures to each obligor on a global basis. Our definition of an “obligor”
include a group of individual borrowers that are linked to one another by any of a number of criteria we have established,
including capital ownership, voting rights, demonstrable control, other indication of group affiliation; or are jointly and
severally liable for all or significant portions of the credit we have extended.
• Our respective business units are required to implement credit policies and procedures while processing credit approvals
including those granted by Management and Board Committees.
• Each business unit is responsible for the quality, performance and collection of its credit portfolio including those
approved by the Management and Board Committees.
• Our Credit Inspection and Credit Administration departments regularly undertake independent audit and credit quality
reviews of credit portfolios held by business units.
3.2.2
Credit risk ratings
A primary element of our credit approval process is a detailed risk assessment of every credit associated with counterparty. Our risk assessment procedures consider both the credit worthiness of the counter-party and the risks related to
the specific type of credit facility or exposure. This risk assessment not only affects the structuring of the transaction and
the outcome of the credit decision, but also influences the level of decision-making authority required to extend or
materially change the credit and the monitoring procedures we apply to the on-going exposure.
We have our own in-house assessment methodologies and rating scale for evaluating the creditworthiness of our
counter-parties. Our programmed 9-grade rating model was developed in collaboration with Agusto & Company, a
foremost rating agency in Nigeria, enables us to compare our internal ratings with common market practice and ensures
comparability between different portfolios of our institution. We generally rate all our credit exposures individually. The
rating scale and its mapping to the Standard and Poors agency rating scale is as follows:
86
Internal Rating
Categories
AAA
AA
A
BBB to BB
B to CCC
3.2.3
Interpretation
Impeccable financial condition and overwhelming capacity to meet
obligations in a timely manner
Very good financial condition and very low likelihood of default
Good financial condition and low likelihood of default
Satisfactory financial condition and adequate capacity to meet
obligations
Weak financial condition and capacity to repay is in doubt and may
be contingent upon refinancing
Mapping to External
Rating (S&P)
AAA
AA
A
BBB to BB
B to D
Credit Limits
Portfolio concentration limits are set by the Bank to specify maximum credit exposures we are willing to assume over
given periods. The limits reflect the Bank’s credit risk appetite. The parameters on which portfolio limits are based
include limits per obligor, products, sector, industry, rating grade, geographical location, type of collateral, facility
structure and conditions of the exposure.
87
3.2.4
Monitoring Default Risk
We monitor all of our credit exposures on a continuing basis using the risk management tools described above. We also
have procedures in place to identify at an early stage credit exposures for which there may be an increased risk of loss.
Counter-parties that on the basis of the application of our risk management tools, demonstrate the likelihood of
problems, are identified well in advance so that we can effectively manage the credit exposure and maximize the
recovery. The objective of this early warning system is to address potential problems while adequate alternatives for
action are still available. This early risk detection is a tenet of our credit culture and is intended to ensure that greater
attention is paid to such exposures. In instances where we have identified counter-parties where problems might arise,
the respective exposure is placed on a watch-list.
3.2.5
Maximum exposure to credit risk before collateral held or other credit enhancements
The Bank's maximum exposure to credit risk at 31 December 2013 and 31 December 2012 is represented by the net
carrying amounts of the financial assets set out below:
Financial
Assets
Cash and balances with central
bank
Investments:
Held for trading (Fair value through
profit or loss)
Available for
sale
Held to
maturity
Other assets
Performance bonds and
guarantees
Letters of credit
On-lending facilities
Financial
Assets
bank
Investments:
Held for trading (Fair value through
profit or loss)
Available for
sale
Held to
maturity
Other assets
guarantees
Letters of credit
Maximum
exposure
Fair value of
Collateral
held
Surplus
collateral
Net
exposure
2013
N'million
2013
N'million
2013
N'million
2013
N'million
207,834
80,875
426,076
2,650,548
-2,224,472
207,834
80,875
-
254,881
-
-
254,881
12,685
-
-
12,685
45,105
1,445
-
-
45,105
1,445
143,269
35,978
41
1,028,901
2,650,548
-2,224,472
143,269
35,978
41
602,825
Maximum
exposure
Fair value of
collateral
held
Surplus
collateral
Net
exposure
2012
N'million
2012
N'million
2012
N'million
2012
N'million
117,290
98,000
345,500
2,389,834
-2,044,334
117,290
98,000
-
201,778
-
-
201,778
21,834
-
-
21,834
76,258
2,794
-
-
76,258
2,794
103,152
-
-
103,152
29,044
27
863,456
2,389,834
-2,044,334
29,044
27
517,956
88
3.2.6
Credit concentrations
The Bank monitors concentrations of credit risk by sector and by geographical location. An analysis of concentrations of credit risk at 31 December 2013, 2012,
2011, 2010 and 2009 respectively, is set out below:
IFRS
IFRS
IFRS
IFRS
31 Dec 2013
To
To banks customers
31 Dec 2012
To
To banks customers
31 Dec 2011
To
To banks customers
31 Dec 2010
To
To banks customers
To banks
To
customers
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
80,875
426,076
98,000
345,500
98,951
279,211
148,923
206,320
-
210,911
Agriculture
9,039
-
13,050
-
5,169
-
1,294
-
51
Oil and gas
74,324
-
47,100
-
23,962
-
17,990
-
22,360
0
-
80
-
7,227
-
4,831
-
12,711
33,054
-
32,680
-
70,389
-
37,618
-
43,090
Manufacturing
Mining and
Quarrying
29,339
-
42,330
-
44,124
-
32,660
-
23,992
-
-
-
-
3,754
-
75
-
331
Mortgage
Real estate and
construction
860
-
1,250
-
5,112
-
4,055
-
3,591
7,790
-
7,750
-
9,815
-
8,242
-
10,120
17,617
-
21,162
-
19,969
-
17,390
-
4,101
373
98,000
1,310
98,951
7,028
148,923
2,417
-
6,861
Government
31,809
-
46,650
-
9,618
-
6,042
-
7,420
Power
Other public
utilities
48,145
-
6,050
-
6,570
-
9,075
-
3,542
299
-
200
-
4,606
-
28
-
560
Transportation
20,517
-
19,040
-
15,980
-
9,229
-
10,701
Communication
84,834
-
66,540
-
39,685
-
44,798
-
61,120
3,817
-
3,610
-
4,409
-
691
-
360
64,258
-
36,698
-
1,794
-
9,885
-
-
80,875
426,076
98,000
345,500
98,951
279,211
148,923
206,320
-
210,911
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
9,520
-
12,580
-
-
-
630
-
890
North Central
26,408
-
24,030
-
8,100
-
6,380
-
5,300
North West
10,399
-
30,000
-
1,200
-
810
-
1,170
South East
9,868
-
12,290
-
3,200
-
4,870
-
2,790
South South
16,321
-
12,760
-
8,550
-
6,570
-
5,861
80,875
353,560
98,000
253,840
98,951
258,161
148,923
187,060
-
194,900
80,875
426,076
98,000
345,500
98,951
279,211
148,923
206,320
-
210,911
Loans and
advances:
Carrying
amount
Concentration
by sector
Capital markets
Consumer
credit
Construction
Finance and
insurance
80,875
Education
Other
Concentration
by location
NGAAP
31 Dec 2009
Nigeria:
North East
South West
89
3.2.7
Credit quality
IFRS
IFRS
IFRS
IFRS
NGAAP
31 Dec 2013
31 Dec 2012
31 Dec 2011
31 Dec 2010
31 Dec 2009
Loans and
Loans and
Loans and
Loans and
Loans and
Loans and
Loans and
Loans and
Loans and
Loans and
advances
to
advances
to
advances
to
advances
to
advances
to
advances
to
advances
to
advances
to
advances
to
advances
to
banks
customers
banks
Customers
banks
customers
banks
customers
banks
customers
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
N'million
80,875
426,170
98,000
345,056
98,951
271,550
148,923
173,077
-
-
-
-
-
-
-
-
-
-
-
-
-
2,693
-
2,464
-
1,453
-
10,698
-
-
-
13,787
-
11,365
-
20,020
-
49,292
-
-
80,875
442,649
98,000
358,884
98,951
293,023
148,923
233,067
-
-
Collective
Impairment
-
-6,503
-
-5,779
-
-3,517
-
-5,480
-
-
Specific
impairment
-
(10,070)
-
(7,605)
-
(10,295)
-
(21,267)
-
-
80,875
426,076
98,000
345,500
98,951
279,211
148,923
206,320
-
-
Neither past due
nor impaired
Past due but not
impaired
Past due and
collectively
impaired
Individually
impaired
Gross
Impairment
allowance
Net
(a)
(b)
Historical Default Rates in percentages
31 Dec. 2013
31 Dec. 2012
1. AAA to AA
0.0001
0.0001
2. A+ to A0.0015
0.0689
3. BBB+ to BB0.0182
0.7559
4. Below BB0.0153
2.8863
5. Unrated
0.0022
0.1374
Financial assets neither past due nor
impaired
The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by
reference to the internal rating system adopted by the Bank.
To customers
Finance
Overdrafts
Term loans
lease
Other
Total
31 December 2013 (IFRS)
N'million
N'million
N'million
N'million
N'million
Grades:
1. AAA to AA
244
23,746
14,967
38,958
2. A+ to A4,986
24,983
9,449
9,858
49,276
3. BBB+ to BB28,832
126,898
14,798
170,528
4. Below BB6,127
53,612
1,903
61,642
5. Unrated
16,124
77,938
11,611
105,672
56,312
307,177
52,728
9,858
426,076
Grades:
1. AAA to AA
2. A+ to A3. BBB+ to BB4. Below BB5. Unrated
N'million
N'million
N'million
N'million
N'million
1,288
7,533
41,766
1,179
5,465
57,231
13,471
40,070
112,056
2,539
39,201
207,336
17,435
14,800
20,007
234
20,779
73,254
1,050
6,248
7,298
32,193
63,453
173,828
3,952
71,693
345,119
31 December 2011(IFRS)
Grades:
1. AAA to AA
N'million
N'million
N'million
N'million
N'million
216
7,365
50,093
2,284
14,231
74,189
N'million
25,945
35,061
89,258
4,507
17,407
172,178
N'million
1,000
9,458
10,182
301
1,482
22,423
N'million
2,278
1,693
3,971
N'million
27,161
54,162
149,533
7,092
34,813
272,761
N'million
133
1,669
22,504
5,249
15,855
45,410
14,129
3,695
31,838
10,489
25,415
85,566
1,020
20,024
8,693
1,011
8,548
39,296
2,560
1,416
3,976
15,282
27,948
63,035
16,749
51,234
174,248
Grades:
1. AAA to AA
91
The credit quality of cash and cash equivalents, short-term investments and investments in government securities that were neither
past due nor impaired can be assessed by reference to the bank's internal rating agency at 31 December 2013, 2012, 2011 and 1 Jan
2011:
Investments in Government Securities
Federal
Cash & cash
Treasury
Govt
State
AMCON
Others
equivalents
bills
bonds
bonds
bonds
31 December 2013
N'million
N'million
N'million
N'million
N'million
N'million
AAA to AA
288,239
239,885
35,169
15,361
19,328
2,930
A+ to A-
-
-
-
-
-
-
BBB+ to BB-
-
-
-
-
-
-
Below BB-
-
-
-
-
-
-
Unrated
-
-
-
-
-
-
288,239
239,885
35,169
15,361
19,328
2,930
117,291
197,238
32,565
17,191
42,556
-
31 December 2012
AAA to AA
A+ to A-
-
-
-
-
-
-
BBB+ to BB-
-
-
-
-
-
-
Below BB-
-
-
-
-
-
-
Unrated
-
-
-
-
-
291
17,191
42,556
291
8,668
37,730
-
117,291
197,238
82,271
141,877
32,565
31 December 2011
AAA to AA
32,244
A+ to A-
-
-
-
-
-
-
BBB+ to BB-
-
-
-
-
-
-
Below BB-
-
-
-
-
-
-
Unrated
-
-
-
-
-
287
8,668
37,730
287
3,680
682
283
82,271
141,877
25,505
31,267
32,244
31 December 2010
AAA to AA
30,264
A+ to A-
-
-
-
-
-
-
BBB+ to BB-
-
-
-
-
-
-
Below BB-
-
-
-
-
-
-
Unrated
-
-
-
-
-
283
682
566
25,505
31,267
30,264
3,680
92
The credit risk associated with other financial assets that were neither past due nor impaired are considered to below as at
31 December 2013, 31 December 2012, 31 December 2011 and 1 Jan 2011:
(c)
Financial assets past due and collectively impaired
To customers
31 December 2013
AAA to AA
A+ to ABBB+ to BBBelow BBUnrated
31 December 2012
AAA to AA
31 December 2011
AAA to AA
31 December 2010
AAA to AA
(d)
Term
loans
N'million
Overdrafts
N'million
183
1,225
147
790
2,345
Finance
lease
N'million
Other
N'million
-
Total
N'million
183
1,391
147
971
2,693
165
171
337
-
140
1,001
119
468
1,728
711
7
718
18
18
-
140
1,711
119
494
2,464
690
330
423
1,443
-
10
10
-
690
330
433
1,453
137
177
83
10,005
10,402
205
205
91
91
-
137
177
83
10,301
10,698
1
10
11
Financial assets individually impaired
To customers
Term
loans
Overdrafts
Finance
lease
Other
Total
31 December 2013
Gross amount
1. AAA to AA
Specific impairment
Net amount
282
6,605
4,300
11,188
(8,670)
2,517
211
2,327
2,539
(1,339)
1,200
-
-
60
60
(60)
-
-
493
6,666
6,627
13,787
(10,070)
3,717
93
31 December 2012
Gross amount
1. AAA to AA
2. A+ to A3. BBB+ to
BB4. Below BB5. Unrated
Specific impairment
Net amount
31 December 2011
Gross amount
1. AAA to AA
Specific impairment
Net amount
31 December 2010
Gross amount
1. AAA to AA
Specific impairment
Net amount
3.2.8
N'million
107
N'million
-
N'million
-
N'million
-
N'million
107
1,005
10,252
11,365
(7,605)
3,760
-
-
-
1,005
10,252
11,365
(7,605)
3,760
N'million
-
N'million
9,926
N'million
-
N'million
-
N'million
9,926
-
2,205
7,212
677
20,020
(10,295)
9,725
-
-
2,205
7,212
677
20,020
(10,295)
9,725
N'million
5,276
N'million
1,780
N'million
-
N'million
-
N'million
7,056
1,128
4,020
19,939
30,363
17,149
18,929
-
-
1,128
4,020
37,088
49,292
(16,639)
13,724
(7,145)
11,784
-
-
(23,784)
25,508
Description of collateral held
Potential credit losses from any given exposure are mitigated using a range of tools including collateral securities,
insurance bonds and policies as well as different forms of guarantees. We assess the degree of reliance that can be
placed on these credit risk mitigants carefully in the light of issues such as legal enforceability, market valuation,
correlation with exposure and the counterparty risk of the guarantor.
Key Collateral Management Policies
Our risk mitigation policies determine the eligibility of collateral types. Eligible collateral types for credit risk mitigation
include: cash; residential, commercial and industrial property in acceptable locations; fixed assets such as motor
vehicles, plant and machinery; marketable securities; bank guarantees; confirmed domiciliation of payments; credit and
insurance bonds, warehouse warrants, lien on shipping documents; back-to-back letters of credit; etc. The Bank also
enters into collateralised reverse repurchase agreements where appropriate. For certain types of lending, typically
mortgages and asset financing, the right to take charge over physical assets is a significant consideration in determining
appropriate pricing and recoverability in the event of default.
94
We report collateral values in accordance with the Bank’s risk mitigation policy, which prescribes the frequency of
valuation for different collateral types, based on the level of price volatility of each type of collateral and the nature of the
underlying product or risk exposure. Depending on the nature of the collateral, frequent or periodic evaluations are
carried out to determine the adequacy of collateral margins. Services of independent professional appraisers are used
where the Bank lacks adequate internal valuation capability or where dictated by industry practice or legal requirements.
Where appropriate, collateral values are adjusted to reflect current market conditions, the probability of recovery and the
period of time to realise the collateral in the event of repossession.
The Bank will only grant unsecured loans where clean lending is a market feature and insistence on security would
compromise Bank’s market share. In such an instance, the Bank ensures that the borrower has proven record of sound
financial condition and ability to repay the loan from internal sources in the ordinary course of business. In addition, we
ensure that total outstanding borrowings of the obligor do not exceed 70% of estimated asset value.
We believe that the requirement for collateral is not a substitute for the ability to pay, which is a primary consideration in
our lending decisions. Although the Bank will usually collaterise its credit exposure to a customer, such an obligor is
expected to repay the loan in the ordinary course of business without forcing the Bank to look to the collateral for
ultimate repayment. Therefore, if while reviewing a loan request, there is the possibility that the collateral will need to be
relied upon to repay the loan, the Bank will not grant the facility.
Where guarantees are used for credit risk mitigation, the creditworthiness of the guarantor is assessed and established
using the credit approval process in addition to that of the obligor or main counterparty.
Management of secured credits requires periodic inspections of the collateral to ensure its existence and adequacy for the
bank’s exposure. These inspections include examination of security agreements to determine enforceability of liens,
verification of adequate insurance protection, proper legal registration and adequacy of overall safeguards.
When obligations are secured by marketable securities, predetermined maintenance margins are established and the
securities are liquidated if the value falls to this limit except if additional and satisfactory security is provided. In all cases,
only valuations done at the instance of the Bank can be considered acceptable for the purposes of credit risk mitigation.
The Bank ensures that all properties and chattels pledged as collateral are properly and adequately insured with the Bank’s
interest duly noted as first loss beneficiary. Only insurance policies obtained from an insurance firm in the Bank’s preapproved list of Insurance Companies are acceptable as eligible collateral.
95
The following table indicates the Bank’s credit exposures by class and value collaterals:
31 December 2013
Secured against real estate
Secured by shares of
quoted companies
Secured others
Unsecured
Gross loans and
advances to customers
31 December 2012
Exposure
Collateral
Value
N'million
31 December 2011
Exposure
Collateral
Value
N'million
N'million
46,648
167,636
643
31 December 2010
Exposure
Collateral
Value
Exposure
Collateral
Value
N'million
N'million
N'million
N'million
N'million
41,689
225,733
21,179
496,674
19,672
318,922
1,469
550
1,341
1,318
2,643
2,319
5,712
380,941
2,481,443
306,909
2,162,760
265,724
2,742,144
211,386
991,130
14,415
-
9,736
-
5,502
254
2,207
-
442,647
2,650,548
358,884
2,389,834
293,723
3,241,715
235,584
1,315,764
The following table indicates the nature and carrying amount of collateral possessed through foreclosure:
31 December 2013
31 December 2012
Exposure
Carrying
Amount of
Collateral
Exposure
Carrying
Amount of
Collateral
N'million
N'million
N'million
N'million
176
183
25
27
Total
176
183
25
27
96
3.3
Liquidity risk
Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when they
fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay
depositors and fulfil commitments to lend.
3.3.1
Management of liquidity risk
Our principal liquidity objective is to ensure that the bank holds sufficient liquid resources to enable it meet all probable cashflow
obligations, without incurring undue transaction costs under normal conditions. Liquidity management safeguards the ability of
the bank to meet all payment obligations as they fall due. Our liquidity risk management framework has been an important factor
in maintaining adequate liquidity and a healthy funding profile during the year and is structured to identify, measure and manage
our liquidity risk at all times. The Board approved liquidity policy guides the management of liquidity risk strategically through the
Board Risk Committee (BRC) as well as Asset and Liability Committee (ALCO) and daily by the ALM group. The liquidity
management framework is designed to identify measure and manage our liquidity risk position at all times. Underlying Assets and
Liabilities Management policies and procedures are reviewed and approved regularly by the Assets and Liability Management
Committee (ALCO).
The Bank has established liquidity and concentration limits and ratios, tolerance levels as well as triggers, through which it
identifies liquidity risk. It also uses gap analysis to identify short, medium and long term mismatches, deploying gapping strategies
to appropriately manage them. Periodic monitoring is carried out to trigger immediate reaction to deviations from set limits.
Short-Term Liquidity
Our reporting system tracks cash flows on a daily basis. This system allows management to assess our short-term liquidity
position in each location by currency and products. The system captures all of our cash flows from transactions on our balance
sheet, as well as liquidity risks resulting from off-balance sheet transactions. We take account of products that have no specific
contractual maturities by extrapolating from their historical behaviour of cash flows.
Asset Liquidity
The asset liquidity component tracks the volume and booking location of our inventory of unencumbered liquid assets, which we
can use to raise liquidity in times of need. The liquidity of these assets is an important element in protecting us against short-term
liquidity squeezes. We keep a portfolio of highly liquid securities in major currencies around the world to supply collateral for
cash needs associated with clearing activities.
Funding Diversification
Diversification of our funding profile in terms of investor types, regions, products and instruments is also an important element
of the Bank’s liquidity risk management practices. In addition, the bank invests in liquid assets to facilitate quick conversion to
cash, should the need arise.
Stress Testing
As a result of volatilities which take place in our operating environment, the Bank conducts stress tests to evaluate the size of
potential losses related to rate movements under extreme market conditions. These are conducted on elements of its trading
portfolio in response to the economic and market outlook. Consideration is given to historical events, prospective events and
regulatory guidelines. The Bank, after ALCO’s authorization, responds to the result of this activity, by modifying the portfolio
and taking other specific steps to reduce the expected impact in the event that these risks materialize.
97
3.3.2
Maturity analysis
The table below analyses financial assets and liabilities of the Bank into relevant maturity rankings based on the remaining period
at balance sheet date to the contractual maturity date. The table includes both principal and interest cash flows.
Up to
1-3
3-12
1-5
31 December 2013
(IFRS)
Financial liabilities
Customer deposits
Other liabilities
guarantees
Letters of credit
Total financial liabilities
1 month
Months
months
years
Over 5 years
Total
N'million
N'million
N'million
N'million
N'million
N'million
458,518
248,013
99,740
49
-
806,320
-
-
-
88,618
-
88,618
16,909
18,037
60,893
16,244
31,187
143,269
10,586
13,266
12,126
-
-
35,978
-
-
-
-
-
-
486,012
279,316
172,759
104,911
31,187
1,074,184
Up to
1-3
3-12
1-5
1 month
Months
months
years
Over 5 years
Total
420,047
219,694
76,930
78
-
716,749
2,176
4,597
19,581
-
-
26,354
422,223
224,291
96,511
78
-
743,103
Up to
1-3
3-12
1-5
1 month
Months
months
years
Over 5 years
Total
319,530
187,573
57,223
64
-
564,390
2,024
6,149
8,362
189
-
16,724
321,554
193,722
65,585
253
-
581,114
Up to
1-3
3-12
1-5
1 month
Months
months
years
Over 5 years
Total
171,200
126,086
31,300
4
-
328,590
1,326
2,610
3,778
2,528
-
10,242
172,526
128,696
35,078
2,532
-
338,832
31 December 2012
(IFRS)
Customer deposits
Other liabilities
31 December 2011
(IFRS)
Customer deposits
Other liabilities
31 December 2010
(IFRS)
Customer deposits
Other liabilities
98
3.4
Market risk
The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will
be adversely affected by changes in market prices such as interest rates, foreign exchange rates, equity prices and commodity prices.
3.4.1
Management of market risk
Essentially, the banking business in which we are engaged is subject to the risk that financial market prices and rates will move and
result in profits or losses for us. Market risk arises from the probability of adverse movements in financial market prices and rates.
Our definition of financial market prices in this regard refer to interest rates, equity prices, foreign exchange rates, commodity
prices, the correlations among them and their levels of volatility. Interest rate and equity price risks consist of two components
each: general risk, which describes value changes due to general market movements, and specific risk which has issuer-related
causes.
We assume market risk in both our trading and non-trading activities. We underwrite market risks by making markets and taking
proprietary positions in the inter-bank, bonds, foreign exchange and other security markets. The bank separates its market risk
exposures between the trading and the banking books. Overall authority and management of market risk in the Bank is invested on
the Assets and Liability Management Committee (ALCO).
The Board approves the Bank’s Market Risk Management policy and performs its oversight management role through the Board
Risk Committee (BRC).The Bank’s trading strategy evolves from its business strategy, and is in line with its risk appetite. Our
Market Risk and ALM group manages the Bank’s market risk in line with established risk limits, which are measured, monitored
and reported on, periodically. Established risk limits, which are monitored on a daily basis by our Market Risk group, include
intraday, daily devaluation for currency positions, net open position, dealers’, deposit placement, stop loss, duration and
management action trigger limits. Daily positions of our trading books are marked-to-market to enable the Bank obtain an accurate
view of its trading portfolio exposures. Financial market prices used in the mark-to-market exercise are independently verified by
the Market Risk Group with regular reports prepared at different levels to reflect volatility of the Bank’s earnings.
3.4.2
Measurement of market risk
The Bank's major measurement technique used to measure and control market risk is outlined below.
Value at risk (“VAR”)
VaR measures the worst expected loss in the fair value of a financial instrument over a defined period of time (horizon) under
normal market conditions at a stated confidence level.
Delta Normal approach to VaR is adopted to measure the potential loss in financial instrument over a one business day horizon at
99% confidence level (1% probability) and a defeasance (holding) period of 10 business days. The 1% probability measure implies
that the VaR amount may be exceeded three times in a year for 250 business days.
The risk factors used to calculate the VaR numbers are foreign exchange rate and interest rate and both impacted the positions held
being very volatile during the year.
99
The VaR approach adopted were under assumptions of normally distributed returns and effect of correlations in calculating the
potential losses.
However, the VaR figures may not accurately capture potential losses, to the extent that there are deviations from normal
distribution and abnormally large number of extreme events. The table below shows the VaR of the trading position of the bank.
12 months to 31 December 2013
Foreign exchange risk
Interest rate risk
Equity risk
Total VAR
3.4.3
12 months to 31 December 2012
Average
High
Low
Average
High
Low
N'million
N'million
N'million
N'million
N'million
N'million
14,734
60,388
982
-
-
-
4,988
189,446
865
-
-
-
-
-
-
-
-
-
19,722
249,834
1,847
-
-
-
Foreign exchange risk
The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position
and cash flows. The board sets limits on the level of exposure by currency and its aggregate for both overnight and intra-day
positions, which are monitored daily.
The table below summarises the Bank's exposure to foreign currency exchange risk at 31 December 2013, 2012, 2011 and 2010.
31 December 2013
Euro
Other
Naira
Total
N'million
N'million
N'million
2,395
-
193,670
207,834
273
1,249
-
13,002
80,875
114,378
339
453
-
310,906
426,076
12,909
-
-
-
242,000
254,909
-
-
-
-
21,041
21,041
- Held to maturity
-
-
-
-
45,105
45,105
Other financial assets
-
-
-
-
1,444
1,444
204,472
1,547
4,097
-
827,168
1,037,284
129,506
2,070
1,547
6
673,191
806,320
9,566
79,894
682,757
886,214
Financial assets
Cash and balances with
Central Bank
Loans and advances to
banks
customers
- Financial assets held for
trading
- Available for sale
USD
GBP
N'million
N'million
N'million
10,834
935
66,351
Customer deposits
Other financial liabilities
70,328
199,834
2,070
1,547
6
100
Sensitivity Analysis of Foreign Currency
Balance Sheet
Currency
USD
N'million
4,638
160.60
162.21
GBP
N'million
(523)
266.51
269.18
Euro
N'million
2,550
220.86
223.07
Other
N'million
(6)
1.95
1.97
Total
N'million
46
(5)
25
(0)
67
31 December 2012
USD
GBP
N'million
N'million
5,408
532
81,431
1,498
4,607
-
Euro
N'million
1,845
3,965
-
Other
N'million
-
Naira
N'million
109,505
11,106
340,893
-
199,366
21,835
76,258
2,646
761,609
Total
N'million
117,290
98,000
345,500
201,806
21,835
76,258
2,646
863,335
Net on Balance Sheet Position
Closing Exchange Rate (Naira/ Currency)
1% Currency Depreciation
(+)/Appreciation (-)
Net Effect on Profit &Capital
Financial assets
Cash and balances with Central Bank
- Financial assets held for trading
- Held to maturity
Customer deposits
2,440
93,886
2,030
5,810
91,631
91,631
1,540
1,540
1,466
1,466
-
622,112
26,354
648,466
716,749
26,354
743,103
USD
N'million
2,255
160.6
162.2
GBP
N'million
490
266.5
269.2
Euro
N'million
4,344
220.9
223.1
Other
N'million
-
Total
N'million
23
GBP
N'million
5
Euro
N'million
43
Other
N'million
Naira
N'million
71
Total
N'million
706
428
-
4,462
1,050
-
14
-
64,390
31,240
250,875
1,134
5,512
14
23,227
128,224
75,622
2,418
575,996
82,271
98,952
279,211
23,227
128,224
75,622
2,418
689,925
Sensitivity Analysis of Foreign Currency
Balance Sheet
Currency
Net on Balance Sheet Position
Closing Exchange Rate (Naira/ Currency)
1% Currency Depreciation
(+)/Appreciation (-)
Net Effect on Profit &Capital +/31 December 2011
Financial assets
- Held to maturity
Other assets
USD
N'million
12,713
66,220
28,336
107,269
101
Customer deposits
Other liabilities
31 December 2010
Financial assets
- Held to maturity
Other assets
Customer deposits
Other liabilities
USD
N'million
GBP
N'million
Euro
N'million
Other
N'million
Naira
N'million
Total
N'million
48,827
1,151
1,182
2
48,827
1,151
1,182
2
512,504
16,724
529,228
563,666
16,724
580,390
USD
N'million
GBP
N'million
Euro
N'million
Other
N'million
Naira
N'million
Total
N'million
5,448
-
152
-
624
-
1
-
19,280
148,923
206,320
5,448
152
624
1
12,217
38,092
27,761
838
453,431
25,505
148,923
206,320
12,217
38,092
27,761
838
459,656
32,975
32,975
673
673
482
482
25
25
294,435
10,241
304,676
328,590
10,241
338,831
The Bank's exposure to foreign exchange risk is largely concentrated in US dollars. Movement in the exchange rate between the
US dollar and the Nigerian naira affects reported earnings through revaluation gain or loss and the statement of financial
position through an increase or decrease in the revalued amounts of financial assets and liabilities denominated in US dollars.
3.4.4
Interest rate risk
The table below summarises the Bank's interest rate gap position on non-trading portfolios:
Carrying
Variable
31 December 2013
Financial assets
Central Bank of Nigeria
banks
customers
- Held to maturity
Customer deposits
Fixed
amount
N'million
interest
N'million
interest
N'million
Non
interestbearing
N'million
207,834
-
207,834
-
80,875
-
80,875
-
426,076
-
426,076
-
254,909
21,041
45,105
1,444
1,037,284
-
254,909
12,686
45,105
1,027,485
8,383
1,444
9,827
806,320
70,328
22,484
1,340,185
47,844
19,654
9,566
876,648
22,484
1,388,029
29,220
102
31 December 2012
Financial assets
Central Bank of Nigeria
banks
customers
- Financial assets held for
trading
- Held to maturity
Customer deposits
Carrying
Amount
Variable
Interest
Fixed
Interest
N'million
N'million
N'million
N'million
117,290
-
117,290
-
98,000
-
98,000
-
345,500
4,607
340,893
-
201,806
-
201,806
-
21,835
76,258
2,646
863,335
4,607
21,835
76,258
856,082
2,646
2,646
716,749
26,354
743,103
-
716,749
26,354
743,103
-
-
-
Not
Interest
Bearing
-
-
Interest rate sensitivity
Total interest repricing gap
The repricing gap details each time the interest rates are expected to change.
- For a fixed rate instrument it’s on maturity
- For variable rates linked to prime, it’s the date prime is next expected to change unless the instrument is expected to mature
sooner
- For non-interest bearing items it is not included in the table.
31 December 2013
Financial assets
banks
customers
- Held to maturity
Total assets
Customer deposits
Total liabilities
Total Interest
Sensitivity gap
N'million
-
6-12
Months
N'million
-
N'million
-
More than 5
years
N'million
-
Total rate
sensitive
N'million
80,875
29,204
31,481
41,416
50,189
273,786
426,076
149
2,176
1,551
21,599
3,905
9,293
17,014
10,486
21,068
45,105
112,404
33,032
63,015
63,387
301,286
573,123
706,530
86,635
13,105
-
-
-
-
806,320
1
806,321
301,286
(233,198)
Less than 3
Months
3–6
Months
N'million
80,875
1-5 years
706,530
86,635
13,105
50
1
51
(594,126)
(53,603)
49,910
63,336
103
INTEREST RATE SENSITIVITY ANALYSIS 31 DEC 2013
Increase/Decr
ease in bp
+200bp
+200bp
+200bp
+200bp
+200bp
Net gap
N'million
(479,114)
(53,603)
49,910
63,336
301,286
Cumulative
gap
N'million
(479,114)
(532,717)
(482,807)
(419,471)
(118,185)
Sensitivity
on Profit
N'million
-2,396
-536
998
1,267
6,026
Less than 3
months
N'million
98,000
46,385
3-6 months
N'million
62,087
6-12 months
N'million
26,605
1-5 years
N'million
210,423
More than 5
years
N'million
-
Total rate
sensitive
N'million
98,000
345,500
6,607
-
9,305
1,881
12,530
58,466
9,304
21,835
76,258
150,992
62,087
37,791
281,419
9,304
541,593
639,741
72,491
4,439
78
-
639,741
72,491
4,439
78
-
716,749
716,749
(488,749)
(10,404)
33,352
281,341
9,304
(175,156)
INTEREST RATE SENSITIVITY ANALYSIS 31 DEC 2012
Increase/
Decrease in bp
Net gap
N'million
Less than 3 Months
+200bp
(488,749)
3-6 Months
+200bp
(10,404)
6-12 Months
+200bp
33,352
1-5 years
+200bp
281,341
More than 5 Years
+200bp
9,304
Cumulative
gap
N'million
(488,749)
(499,153)
(465,801)
(184,460)
(175,156)
Sensitivity
on Profit
N'million
-2,444
-104
667
5,627
186
Annualised
profit
Less than 3 Months
3-6 Months
6-12 Months
1-5 years
More than 5 Years
31 December 2012
Financial assets
- Loan and receivable
- Held to maturity
Total assets
Customer deposits
Total liabilities
Total Interest Sensitivity gap
3.4.5
Annualised
profit
3 months
6 months
1 year
3 months
6 months
1 year
Equity and commodity price risk
The Bank is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (“NSE”) and other nonquoted investments. Equity securities quoted on the NSE are exposed to movements based on the general movement of the all
share index and movement in prices of specific securities held by the Bank.
As at 31 December 2013, the market value of quoted securities held by the Bank is N 28 million (31 December 2013: N28 million)
of which all is in the trading portfolio. If the all share index of the NSE moves by 100 basis points from the (38,747) position at 31
December 2013, the effect on the fair value of these quoted securities would have been N0.072 million and the effect on profit or
loss would have been N0.072 million.
The Bank holds a number of investments in unquoted securities with a market value of N8.112 billion (31 December 2012:
N7.358 billion). The significant investments are MTN Nigeria (“MTN”) and Africa Finance Corporation (“AFC”) which were
valued at N6.177billion (cost N5.096 billion) for MTN and N900 million (cost N638 million) for AFC as at 31 December 2013.
AFC is a private sector led investment bank and development finance institution (“DFI” )which has the Central Bank as a single
major shareholder (42.5%) with other African financial institutions and investors holding the remaining shares. The AFC operates
a US dollar denominated balance sheet and provides finance in this currency. As at 31 December 2012 the corporation had a
balance sheet size of $1.6 billion. MTN Nigeria is a private limited liability company whose principal activity is the provision of
mobile telecommunications service using the Global System for Mobile Communications (“GSM”) platform.
The information on AFC financial statement for 2013 was not available as at the time of this report.
The Bank does not deal in commodities and is therefore not exposed to any commodity price risk.
104
3.5
(a)
Fair value of financial assets and liabilities
Financial instruments not measured at fair value
Financial assets
Cash and balances with Central banks
Cash
Balances with central banks other than mandatory
reserve deposits
Mandatory reserve deposits with central banks
- Current balances with local banks
- Current balances with foreign banks
- Placements with other banks and discount
houses
- Overdrafts
- Term loans
- Advances under finance lease
- Others
Listed debt securities
- Federal Government bonds (HTM)
- Crusader Insurance Convertible Debenture
(L&R)
Unlisted debt securities
- Lagos State Government bonds (HTM)
- Ekiti State Government bonds (HTM)
- AMCON (HTM)
31 December 2013
Carrying value
Fair value
N'million
N'million
31 December 2012
Carrying value
Fair value
N'million
N'million
207,834
31,879
27,222
207,834
31,879
27,222
117,291
35,000
13,587
117,291
35,000
13,587
148,723
148,723
68,707
68,707
80,876
67,876
13,000
80,876
67,876
13,000
98,000
779
81,665
15,556
98,000
779
81,665
15,556
426,076
56,982
316,858
52,236
-
392,089
56,982
282,006
53,101
-
345,500
58,127
209,634
70,506
7,233
336,953
58,127
205,696
65,897
7,233
1,444
1,444
2,646
2,646
17,874
-
14,217
-
25,277
291
28,433
251
3,666
4,029
19,329
3,429
3,855
19,104
3,643
4,782
42,556
4,422
5,044
42,550
806,320
315,209
83,325
269,150
132,759
806,320
315,209
83,325
269,150
132,759
716,749
363,339
67,129
187,252
94,096
716,749
363,339
67,129
187,252
94,096
5,877
47,844
22,484
5,877
45,024
22,484
4,934
-
4,934
-
Demand
Saving
Term
Domiciliary
Other liabilities
Other liabilities
Eurobond issued
Long term borrowings
105
(b)
Financial instruments measured at fair value
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or
unobservable. Observable input reflects market data obtained from independent sources; unobservable inputs reflect the Bank's
market assumptions. These two types of inputs have created the following fair value hierarchy:
● Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
● Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
● Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market
prices in its valuations where possible.
31 December 2013
Financial assets
Loans and Advances
Financial assets carried at amortised cost
- Term loans
Investments
Financial assets held for trading
- Listed Debt Securities
- Listed Equity Securities
Available for sale
- Unlisted Equity Securities
Held to maturity
Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
-
282,006
53,101
-
282,006
53,101
254,881
28
-
21,041
-
8,355
254,881
28
21,041
8,355
26,388
281,297
356,148
8,355
26,388
645,800
Borrowings
Financial liabilities carried at amortised cost
N'million
N'million
N'million
N'million
45,024
-
-
45,024
45,024
-
-
45,024
31 December 2012
Financial assets
Loans and Advances
Financial assets carried at amortised cost
- Term loans
Investments
Financial assets held for trading
- Listed Equity Securities
Available for sale
Held to maturity
Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
-
205,696
65,897
-
205,696
65,897
201,778
28
6,116
-
8,656
-
7,060
201,778
28
14,772
7,060
52,016
259,938
280,249
7,060
495,231
Borrowings
Financial liabilities carried at amortised cost
N'million
N'million
N'million
N'million
-
-
-
-
106
Reconciliation of Level 3 items
Unlisted
equity
securities
N'million
At 1 January 2013
Total gains / (losses)
Purchases
Sales
Issues
Settlements
At 31 December 2013
7,060
778
818
(301)
8,355
Total gains or losses for the period included in profit or loss for assets/ liabilities held as at 31 December 2013.
Unlisted
equity
securities
N'million
At 1 January 2012
Total gains / (losses)
Purchases
Sales
Issues
Settlements
At 31 December 2012
7,259
24
(223)
7,060
Total gains or losses for the period included in profit or loss for assets/ liabilities held as at 31 December 2012.
Sensitivity analysis of Level 3 items
The following table shows the sensitivity of level 3 measurements to reasonably possible alternative assumptions:
31 December 2013
31 December 2012
Carrying value
Effect of
Carrying value
Effect of
reasonably
reasonably
possible
possible
alternative
alternative
assumptions
assumptions
Financial asset
N'million
N'million
N'million
N'million
8,355
836
7,060
706
In order to determine reasonably possible alternative assumptions the Bank adjusted key unobservable models
inputs as follows:
For equities, the Bank adjusted the net asset by increasing and decreasing the net asset by 10%, which is considered by the
Bank to be within a range of reasonably possible increase in net assets of companies within similar industry from year to
year.
107
(c)
Fair valuation methods and assumptions
(i) Cash and balances with central banks
Cash and balances with central bank represent cash held with central banks of the various jurisdictions in which the Bank
operates. The fair value of these balances is their carrying amounts.
(ii) Due from other banks
Due from other banks represents balances with local and correspondence banks, inter-bank placements and items in the
course of collection. The fair value of the current account balances, floating placements and overnight deposits are their
carrying amounts.
(iii) Treasury bills and bonds
Treasury bills (“T-bills”) represent short term instruments issued by the Central banks of the jurisdiction where the Bank
operates. The fair value of treasury bills and bonds at fair value are determined with reference to quoted prices (unadjusted)
in active markets for identical assets. Valued using market prices of individual securities at the reporting date. For certain
securities market prices cannot be readily obtained especially for illiquid State Government or Corporate Bonds. The
positions were marked-to-model at 31 December 2013 based on yields for identical assets.
(iv) Equity securities
The fair value of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for
identical instruments. The fair value of unquoted equity securities are determined based on the level of information available.
The investment in MTN Nigeria was valued by reference to recent market transaction price (unadjusted). The investment in
AFC and similar smaller holdings in various unquoted entities is determined on the basis of the fair value of the entity's net
assets.
(v) Loans and advances to customers
Loans and advances are carried at amortised cost net of provision for impairment. The estimated fair value of loans and
advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
(vi) Other assets
Other assets represent monetary assets which usually have a short recycle period and as such the fair values of these balances
approximate their carrying amount.
(vii) Deposits from banks and due to customers
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount
repayable on demand. The estimated fair values of fixed interest-bearing deposits and borrowings are determined using a
discounted cash flow model based on a current yield curve appropriate for the remaining term to maturity.
3.6
OPERATIONAL RISK MANAGEMENT
Operational risk is the potential for loss arising from inadequate or failed internal processes, people and systems or from
external events. This definition includes legal and regulatory risk, but excludes strategic and reputational risk.
The scope of operational risk management in the Bank covers risk exposures that may lead to unavailability of service,
information deficiency, financial loss, increased costs, loss of professional reputation, failure to keep or increase market
share, risks which result in the imposition of sanctions on the Bank by regulators or legal proceedings against the Bank by
third parties.
Organizational Set-up
Operational Risk Management is an independent risk management function within Fidelity Bank. The Operational Risk &
Service Measurements Committee is the main decision-making committee for all operational risk management matters and
approves our Bank’s standards for identification, measurement, assessment, reporting and monitoring of operational risk.
Operational Risk Management is responsible for defining the operational risk framework and related policies while the
responsibility for implementing the framework as well as the day-to-day operational risk management lies with our business
and support units. Based on this business partnership model we ensure close monitoring and high awareness of operational
risk.
108
Operational Risk Framework
As is common with all businesses, operational risk is inherent in all operations and activities of the Bank. We therefore carefully
manage operational risk based on a consistent framework that enables us to determine our operational risk profile in comparison
to our risk appetite and to define risk mitigating measures and priorities. We apply a number of techniques to efficiently manage
operational risk in our business, for example: as part of our strategy for making enterprise risk management our discriminating
competence, the Bank has redefined business requirements across all networks and branches using the following tools:
Process/Risk Mapping
With the objective to engender standardization and facilitate risk communication among our team members, key processes of
the Bank have been mapped to procedural levels with inherent risk and controls identified and overlaid. Process maps and
documentation developed from this implementation assist the Bank in identifying process bottlenecks, pinpointing
redundancies, locating waste and processes for optimisation.
Loss Data Collection
The Bank implements an event driven Loss Data Collection (“LDC”) system designed to facilitate collection of internal loss data
triggered at the occurrence of a loss event anywhere within the divisions of the Bank. The LDC system captures data elements,
which discriminate between boundary events related to credit, market and operational risk. The system facilitates collection of
loss data arising from actual losses, potential losses and near misses. Work-flow capabilities built within our predefined Event
Escalation Matrix enable risk incidents to be reported to designated Event Identifiers, Event Managers, Event Approvers and
Action Owners that manage each risk incident from point of occurrence to closure.
Risk and Control Self Assessments (“RCSA”)
We implement a quantitative methodology for our Risk and Control Self Assessments, which supports collection of quantitative
frequency and severity estimates. Facilitated top-down RCSA workshops are used by the bank to identify key risks and related
controls at business unit levels. During these workshops business experts and senior management identify and discuss key risks,
controls and required remedial actions for each respective business unit and the results captured within the operational risk
database for action tracking.
Key Risk Indicators(“KRIs”)
We measure quantifiable risk statistics or metrics that provide warning signals of risk hotspots in our entity. We have established
key risk indicators with tolerance limits for core operational groups of the Bank. Our KRI database integrate with the Loss Data
Collection and Risk & Control Self Assessment models and systems to provide red flags that typically inform initiatives for risk
response actions in the Bank.
Business
Continuity
Management
(“BCM”)
Our BCM plans assist us in building resilience for effective response to catastrophic and business disruption events. In broad
categories, the plans cover disaster recovery, business recovery, business resumption, contingency planning and crisis
management events. Our event specific BCM plans which are tested semi-annually deal with threats of fire, flood, robberies, loss
of utilities, information security breaches, civil disturbances, disruption from outsourced service partners amongst others.
4.
Capital management
The Bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of balance sheets, are:
a. To comply with the capital requirements set by the regulators of the banking markets where the entities within the Bank
operate;
b. To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
c. To maintain a strong capital base to support the development of its business.
Capital adequacy and the use of regulatory capital are monitored daily by the Bank’s management, employing techniques based
on the guidelines developed by the Central Bank of Nigeria, for supervisory purposes. The required information is filed with the
CBN on a monthly basis. Auditors to the Bank are also required to render an annual certificate to the Nigerian Deposit
Insurance Corporation (“NDIC”) that includes the computed capital adequacy ratio of the Bank.
The CBN requires each bank to: (a) hold the minimum level of the regulatory capital of N25 billion and (b) maintain a ratio of
total regulatory capital to the risk-weighted asset at or above the minimum of 10%.
The Bank’s regulatory capital as managed by its Financial Control and Treasury Units is made up of tier one capital as follows:
Tier 1 capital: share capital, retained earnings , reserves created by appropriations of retained earnings and capital reserve arising
on consolidation. Investments in unconsolidated subsidiaries and associates are deducted from Tier 1 capital to arrive at the
regulatory capital.
The risk-weighted assets are measured by means of a hierarchy of five risk weights classified according to the nature of – and
reflecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account any
eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments to reflect
the more contingent nature of the potential losses.
109
The table below summarises the composition of regulatory capital and the ratios of the Bank for the years ended 31
December. During those two years, the individual entities within the Bank and the Bank as an entity as well complied with
all of the externally imposed capital requirements to which they are subject.
2013
N'million
2012
N'million
2011
N'million
2010
N'million
14,481
101,272
7,395
18,861
764
1,723
18,884
14,481
101,272
6,193
17,703
764
1,723
19,608
14,481
101,272
-4,829
12,244
764
1,867
20,395
14,481
101,272
-3,761
10,456
764
1,867
20,858
163,380
161,744
146,194
145,937
Tier 2 capital
Non-controlling interest
Revaluation reserve - investment securities
Total qualifying Tier 2 capital
Total regulatory capital
75
75
163,455
-289
(289)
161,455
-222
(222)
145,972
915
915
146,852
Risk-weighted assets:
632,278
561,325
430,361
303,773
1,081,217
179,288
914,360
132,223
727,896
118,335
487,555
80,590
632,278
561,325
430,361
303,773
26%
29%
34%
48%
Tier 1 capital
Share capital
Share premium
Retained earnings
Statutory reserve
SSI reserve
Contingency reserve
Non-distributable reserve
Less: Intangible assets
Total qualifying Tier 1 capital
On-balance sheet
Off-balance sheet
Total risk-weighted assets
Risk weighted Capital Adequacy Ratio
110
5
SEGMENT ANALYSIS
Following the management approach of IFRS 8, operating segments are reported in accordance with the internal
reports provided to the Bank's Managing Director (the chief operating decision maker). In 2013, Management
prepared its financial records in accordance with International Financial Reporting Standards (“IFRS”) issued by the
International Accounting Standards Board (“IASB”). This standard is what the Bank's Managing Director reviews in
assessing performance, allocating resources and making investment decisions. The following summary describes each
of the Bank's reportable segments.
Retail banking
The Retail banking segment offers a comprehensive range of retail, personal and commercial services to individuals,
small and medium business customers including a variety of E-Business products to serve the retail banking segment.
Corporate banking
The Corporate banking segment offers a comprehensive range of commercial and corporate banking services to the
corporate business customers including other medium and large business customers. This segment covers the Power
and Infrastructure, Oil and Gas Upstream and downstream, Real Estate, Agro-Allied and other industries.
Investment banking
The Bank’s Investment Banking segment is involved in the funding and management of the bank’s securities, trading
and investment decisions on asset management with a view of maximising the banks shareholders returns.
Public sector
The Public sector offers a wide variety of services to governments of various levels including parastatals, ministries,
departments and other agencies.
Transactions between the business segments are on normal commercial terms and conditions.
Segment result of operations - IFRS 8.23
The segment information provided to the Managing Director for the reportable segments for the year ended 31
December 2013 is as follows:
111
At 31 December 2013
Derived from external
customers
Revenues from other
segments
Total
Operating profit
Profit/(loss)
Income tax expense
Profit for the year
At 31 December 2013
Total segment assets
Total segment liabilities
Other segment information
Depreciation/Amortization
At 31 December 2012
Internal revenues
Revenues from other
segments
Total
Operating profit
Income tax expense
Profit for the year
Total segment assets
Total segment liabilities
Other segment information
Depreciation/Amortization
Retail
banking
N 'millions
Corporate
banking
N 'millions
Investment
banking
N 'millions
Public sector
Eliminations
N 'millions
N 'millions
Consolidated
(IFRS)
N 'millions
44,147
40,088
42,278
405
-
126,918
-
-
-
-
-
44,147
40,088
42,278
405
-
126,918
5,099
-714
4,385
1,497
-226
1,271
2,362
-356
2,006
70
-11
59
-
9,028
-1,307
7,721
303,466
257,746
453,281
657,530
321,055
146
3,374
2,866
-
1,081,271
917,762
-2,996
-539
-6
-140
-
-3,681
28,758
-
38,858
-
51,309
-
214
-
-
119,139
-
28,758
38,858
51,309
214
-
119,140
2,231
-371
1,860
89,110
579,060
5,791
-963
4,828
230,998
74,964
12,056
-2,005
10,807
593,237
54,382
514
-86
429
1,015
44,498
20,592
-3,425
17,924
914,360
752,905
3,323
162
29
42
3,556
112
6
Treasury bills and other investment
securities:
-Held For Trade
-Available For Sale
-Held To Maturity
Advances under finance lease
Placements and short term funds
IFRS
2013
N'million
41,366
IFRS
2012
N'million
38,698
IFRS
2011
N'million
30,448
NGAAP
2010
N'million
28,002
NGAAP
2009
N'million
20,649
24,276
3,409
6,942
9,651
613
21,928
921
4,414
11,372
1,664
8,886
3,100
7,093
6,261
2,589
3,250
2,322
1,370
1,172
86,257
78,996
49,527
40,102
25,513
Interest income earned in Nigeria
Interest income of N1,378,000 (2012:N1,814,000) on loans and advances to customers includes interest income on impaired
financial assets, recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss
7
Term deposits
Debt issued and other borrowed
funds
Current accounts
Savings deposits
Inter-bank takings
8
Impairment charge
Impairment on credit loss
Write off of AMCON BOND on
clawback loan
IFRS
2013
N'million
48,450
IFRS
2012
N'million
39,670
IFRS
2011
N'million
16,427
NGAAP
2010
N'million
11,705
NGAAP
2009
N'million
4,546
3,184
2,063
1,154
594
55,445
1,235
748
533
42,186
1,093
731
757
19,008
959
536
521
13,721
7,151
434
272
12,403
IFRS
2013
N'million
IFRS
2012
N'million
IFRS
2011
N'million
NGAAP
2010
N'million
NGAAP
2009
N'million
(3,190)
(4,610)
(16,236)
(3,885)
(3,525)
(4,440)
(7,630)
(4,610)
(16,236)
(3,885)
(3,525)
113
9
IFRS
2013
N'million
1,359
148
4,578
IFRS
2012
N'million
1,717
78
4,357
IFRS
2011
N'million
147
2,763
NGAAP
2010
N'million
447
124
2,513
NGAAP
2009
N'million
266
34
1,285
433
312
70
13
3
498
441
495
339
197
5,063
6,628
4,133
10,407
3,224
3,127
2,289
2,631
2,204
Fee and commission income
Fee and commission expense
18,707
(9)
21,443
(22)
9,826
(43)
8,356
(457)
3,989
(265)
18,698
21,421
9,783
7,899
3,724
Net gains from financial instruments classified as held for trading
through profit and loss
IFRS
IFRS
2013
2012
Net gains arising from:
N'million
N'million
Bonds
924
299
Treasury bills
6,865
2,735
IFRS
2011
N'million
1,370
4,618
NGAAP
2010
N'million
-
NGAAP
2009
N'million
-
Credit related fees
Remittance fees
Commissions on turnover
Commissions on off-balance sheet
transactions
Letters of credit commissions and fees
Commission on travellers cheque and
foreign bills
Other fees and commissions
10
11
Net (loss)/gain on investment
securities
Equities investment in subsidiaries that
were disposed
Treasury bills
12
Net foreign exchange gains
Dividend income
Profit on disposal of
property
Other income
7,789
3,034
5,988
-
-
IFRS
IFRS
IFRS
NGAAP
NGAAP
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
-
(1,041)
(1,041)
(1,140)
1,206
66
658
658
354
354
IFRS
2013
N'million
13,362
725
IFRS
2012
N'million
14,230
933
IFRS
2011
N'million
6,814
930
NGAAP
2010
N'million
5,243
-
NGAAP
2009
N'million
3,227
-
87
14,174
13
510
15,686
7,744
1,264
6,507
811
4,038
investment
114
13
Personnel expenses
Other expenses
Banking sector resolution cost
Deposit insurance premium
Depreciation
Contractor compensation
Repairs and maintenance
Computer expenses
Marketing, communication &
entertainment
Security expenses
Impairment charge on other assets
Amortisation
Cash movement expenses
Directors' emoluments
Electricity
Auditors' remuneration
Infrastructure
Loss/(profit) on sale of property, plant
and equipment
2013
N'million
25,629
8,076
4,572
3,332
3,211
2,427
2,051
1,354
2012
N'million
22,649
6,474
2,230
3,316
3,408
2,741
1,750
1,274
2011
N'million
17,010
6,217
1,440
1,727
3,014
1,579
683
1,065
2010
N'million
14,498
4,219
1,821
2,781
1,277
485
988
2009
N'million
8,489
3,705
939
1,295
618
596
1,067
977
510
470
403
328
283
125
-
2,174
829
2,778
148
331
282
201
113
10
1,244
843
155
317
197
751
75
-
1,013
804
118
351
194
568
65
-
59
97
57
-
54,815
50,708
73
36,390
53
29,235
(34)
15,821
2013
N'million
24,231
2012
N'million
21,780
2011
N'million
14,346
2010
N'million
11,697
2009
N'million
7,213
431
967
25,629
435
434
22,649
661
2,003
17,010
768
2,033
14,498
259
1,017
8,489
2013
N'million
1,217
90
-
2012
N'million
1,825
19
209
22
2011
N'million
2,418
282
81
-
2010
N'million
754
70
83
-
2009
N'million
692
91
19
-
1,307
12
2,087
2,781
907
802
1,307
1,338
1,338
3,425
(5,218)
(5,218)
(2,437)
1,590
1,590
2,497
(336)
(336)
466
Personnel expenses
Salaries and wages
Pension costs:
- Staff Gratuity Plan
- Staff Retirement benefit plan
14
Taxation
Education tax
Technology levy
Capital Gain Tax
Current taxes referring to previous
periods
Total current tax
Deferred taxation
Origination and reversal of temporary
differences
Total deferred taxation
Income tax expense
115
Reconciliation of effective tax rate
Income tax using the domestic corporation tax
rate of 30%
Non-deductible expenses
Education tax levy
Tax exempt income
Technology levy
Capital Gain Tax
Tax loss effect
Over provided in prior years
Total income tax expense in income statement
The movement in the current income tax
liability is as follows:
At 1 Jan
Tax paid
Tax effect of translation
Prior period over provision
Income tax charge
At 31 December
Current tax liability reclassified to non-current
assets held for sale
15
IFRS
2013
N'million
9,023
IFRS
2012
N'million
21,394
IFRS
2011
N'million
1,474
NGAAP
2010
N'million
8,325
NGAAP
2009
N'million
1,880
2,707
13,641
-42,750
90
25,004
(1,307)
6,340
4,480
19
(9,172)
209
22
1,539
(12)
3,425
685
282
(3,485)
81
(2,437)
-
-
2,275
-2,275
1,307
1,307
-
2,613
(2,425)
12
2,075
2,275
-
1,515
(1,683)
2,781
2,613
-
1,491
(883)
907
1,515
-
2,488
(1,798)
802
1,491
-
1,307
2,275
2,613
1,515
1,491
Earnings per share
Basic and Diluted
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Bank by the weighted average
number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Bank and
held as treasury shares.
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
Profit/(loss) attributable to equity holders of
the Bank
7,721
17,924
3,911
5,828
1,414
Weighted average number of ordinary shares in
issue
28,963
28,963
28,963
28,963
28,963
Basic& Diluted earnings per share (expressed in
kobo per share)
27
62
14
20
5
116
16
bank
IFRS
2013
N'million
IFRS
2012
N'million
IFRS
2011
N'million
IFRS
2010
N'million
NGAAP
2009
N'million
Cash
Balances with central bank other than
mandatory reserve deposits
31,889
35,007
39,640
21,128
18,634
26,586
13,577
8,342
1,528
2,661
Included in cash and cash equivalents
Mandatory reserve deposits with central
bank
58,475
48,584
47,982
22,656
21,295
149,359
68,707
34,289
2,849
2,425
Carrying amount
207,834
117,291
82,271
25,505
23,720
Mandatory reserve deposits are not available for use in the Bank's day-to-day operations. Mandatory reserve deposits are
non interest-bearing and are calculated as a fixed percentage of the Bank's deposit liabilities.
17
Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition,
including cash in hand, deposits held at call with other banks and other short-term highly liquid investments with
original maturities less than three months.
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
207,834
80,875
288,709
117,290
98,000
215,290
82,271
98,411
180,682
25,505
148,401
173,906
23,720
28,574
52,294
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
-
779
699
7,649
4,251
Current account with foreign banks
Placements with other banks and discount
houses
67,875
81,665
67,712
52,752
24,323
13,000
15,556
30,000
88,000
-
Carrying amount
80,875
98,000
98,411
148,401
28,574
Total cash and cash equivalents
18
18.1
Loans and advances
Current account with local banks
Current
Non-current
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
80,875
98,000
98,411
148,401
28,574
-
-
-
-
-
80,875
98,000
98,411
148,401
28,574
117
18.2
31 December 2013 (N'million)
Overdrafts
Term loans
Other loans
Overdrafts
Term loans
Other loans
Interest receivables
Overdrafts
Term loans
Other loans
1 January 2011 (N'million)
Overdrafts
Term loans
Other loans
Balance at 1 January
(N'million)
Specific impairment
Collective impairment
Gross
amount
Specific
impairment
Collective
impairment
Total
impairment
Carrying
amount
66,512
323,036
53,101
-
(8,670)
(1,340)
(60)
-
(860)
(4,838)
(805)
-
(9,530)
(6,178)
(865)
-
56,982
316,858
52,236
-
442,649
-10,070
-6,503
-16,573
426,076
66,517
213,960
71,172
1,050
6,185
358,884
(6,757)
(376)
(472)
(7,605)
(1,633)
(3,949)
(194)
(2)
(5,778)
(8,391)
(4,325)
(666)
(2)
(13,383)
58,127
209,634
70,506
1,049
6,185
345,500
76,618
186,313
26,120
2,278
2,905
294,234
(8,467)
(1,828)
(10,295)
(3,518)
(3,518)
(8,467)
(5,346)
(13,813)
68,151
180,967
26,120
2,278
2,905
280,421
81,175
108,719
39,719
3,361
1,264
234,238
(15,109)
(6,158)
(21,267)
(15,109)
(11,638)
(26,747)
66,066
97,081
39,719
3,361
1,264
207,491
Overdrafts
Term loans
(5,480)
(5,480)
Finance
leases
Others
Total
7,605
959
8,564
3,472
3,472
1,227
1,227
121
121
7,605
5,779
13,384
2,102
(99)
1,340
1,366
60
(422)
(121)
3,502
725
(1,037)
966
2,706
(362)
(121)
(1,037)
3,190
8,670
860
1,340
4,838
60
805
-
10,070
6,503
9,530
6,178
865
-
16,573
2013
Additional provision
Specific impairment
Eliminated on loans sold to AMCON
Amounts recovered during the year
Total charge to income statement
Unwind of discount allowance
Specific impairment
Balance at 31 December 2013
(N'million)
118
Balance at 1 January 2012 (N'million)
Specific impairment
Specific impairment
Unwind of discount allowance
Specific impairment
Balance at 31 December 2012 (N'million)
Balance at 1 January 2011 (N'million)
Specific impairment
18.3
18.4
Overdrafts
Term loans
Finance lease
Other
Total
15,109
15,109
(4,814)
3,518
(1,296)
-
-
10,295
3,518
13,813
6,767
1,633
8,400
21,876
1,633
23,509
Overdrafts
3,752
433
(3,024)
(5,617)
(4,456)
(8,641)
(14,743)
3,951
(10,792)
Term loans
472
194
666
472
194
666
Finance lease
Other
10,991
2,260
(3,024)
(5,617)
4,610
(8,641)
7,605
5,778
13,383
Total
15,109
15,109
6,158
5,480
11,638
-
-
21,267
5,480
26,747
67,875
(1,962)
(41,881)
(7,796)
16,236
(29,170)
(4,814)
3,518
(1,296)
-
-
67,875
(1,962)
(41,881)
(7,796)
16,236
(29,170)
10,295
3,518
13,813
2012
N'million
4,053
80,301
2,040
86,394
(15,519)
2011
N'million
375
26,269
26,644
(524)
2010
N'million
362
40,230
40,592
(873)
2009
N'million
2,034
13,067
15,101
-
70,875
26,120
39,719
15,101
3,834
66,099
942
70,874
375
25,745
26,120
362
39,357
39,719
2,034
13,067
15,101
2012
N'million
41,689
550
236,034
70,875
9,736
358,884
2011
N'million
21,179
1,318
263,405
40
36
285,978
2010
N'million
19,672
2,319
214,651
2,207
238,849
2009
N'million
-
Specific impairment
Eliminated against retained earnings
Specific impairment
15,109
Balance at 31 December 2011 (N'million)
15,109
Advances under finance lease may be analysed as follows:
2013
Gross investment
N'million
- No later than 1 year
3,088
- Later than 1 year and no later than 5 years
61,090
- Later than 5 years
1,550
65,728
Unearned future finance income on finance
-12,627
leases
Net investment
53,101
The net investment may be analysed as
follows:
- No later than 1 year
2,496
- Later than 1 year and no later than 5 years
49,353
- Later than 5 years
1,252
53,101
Nature of security in respect of loans and advances:
2013
N'million
46,648
Secured by shares of quoted companies
643
Secured others
359,754
21,187
Unsecured
14,415
Gross loans and advances to customers
442,647
119
19
Investments
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
Treasury bills - At fair value through profit and loss
239,885
198,123
20,361
4,392
-
Federal Government bonds - At fair value through
profit and loss
Listed equity investments - At fair value through
profit and loss
14,997
3,655
226
3,235
-
28
28
33
33
-
254,909
201,806
20,620
7,660
-
Federal Government bonds - Available-for-sale (At
fair value)
Treasury bills - Available-for-sale (At fair value)
2,230
3,928
2,788
3,630
-
-
1,897
121,515
26,875
-
State bonds - Available-for-sale (At fair value)
7,525
8,657
-
-
-
Crusader Insurance Convertible Debenture Loans and receivable (At amortised cost)
Unlisted equity investments - Available-for-sale
(At fair value)-gross
Less - impairment
2,930
292
287
283
-
8,355
9,787
10,319
9,166
-
-
(2,726)
(3,060)
(1,947)
21,040
21,835
131,849
38,007
-
17,942
25,277
29,224
23,399
-
3,806
3,643
3,668
3,680
-
4,029
4,782
5,000
-
-
19,328
42,556
37,730
682
-
45,105
76,258
75,622
27,761
-
321,054
299,900
228,091
73,428
-
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
15.5
11.6
14.7
4.4
-
9.3
-
-
-
-
Debt and equity securities
19.1
19.2
19.3
Fair value through profit and loss
Available for sale
Held to maturity
Federal Government bonds - Held-to-maturity
(At amortised cost)
Lagos State Government bonds - Held-tomaturity (At amortised cost)
Ekiti State Government bonds - Held-to-maturity
(At amortised cost)
AMCON - Held-to-maturity (At amortised cost)
Total investments
19.4
Pledged assets
Treasury bills
Federal Government bonds
120
20
Property, plant and
equipment
Cost
At 1 January 2013
Additions
Reclassifications
Disposals
At 31 December
2013
Office
Equipment
N'million
Furniture,
fittings
&
equipment
N'million
Computer
equipment
N'million
Motor
vehicles
N'million
Work in
progress
N'million
Total
N'million
3,108
758
68
(9)
5,948
414
205
(50)
1,607
107
15
(3)
6,589
1,456
213
(7)
4,717
785
9
(430)
11,837
1,738
(3,082)
-
51,055
5,456
(534)
19,986
3,923
6,517
1,726
8,251
5,081
10,493
55,977
Land &
buildings
N'million
Leasehold
improveme
nts
N'million
17,249
198
2,572
(33)
Accumulated
depreciation
At 1 January 2013
Charge for the year
Disposals
At 31 December
2013
(708)
(323)
1
(2,100)
(565)
9
(4,122)
(794)
50
(1,210)
(193)
3
(4,489)
(616)
5
(3,069)
(720)
335
-
(15,698)
(3,211)
403
(1,031)
(2,657)
(4,866)
(1,400)
(5,100)
(3,455)
-
(18,507)
Net book amount at 31
December 2013
18,956
1,266
1,650
326
3,151
1,626
10,493
37,470
16,153
352
745
(1)
1,441
668
999
-
5,357
613
68
(90)
1,525
67
26
(11)
6,037
403
159
(10)
4,120
968
7
(378)
11,108
2,102
(1,343)
(30)
45,741
5,173
661
(520)
17,249
3,108
5,948
1,607
6,589
4,717
11,837
51,055
(412)
(297)
1
(1,589)
(511)
-
(3,387)
(822)
87
(1,013)
(208)
11
(3,919)
(886)
306
10
(2,656)
(728)
315
-
(12,976)
(3,452)
306
424
(708)
(2,100)
(4,122)
(1,210)
(4,489)
(3,069)
-
(15,698)
16,541
1,008
1,826
397
2,100
1,648
11,837
35,358
Cost
At 1 January 2012
Additions
Reclassifications
Disposals
At 31 December
2012
Accumulated
depreciation
At 1 January 2012
Charge for the year
Reclassifications
Disposals
At 31 December
2012
Net book amount at 31
December 2012
121
Land &
buildings
Leasehold
improveme
nts
Office
equipment
Computer
equipment
Motor
vehicles
Work in
Progress
Total
N'million
Furniture,
fittings
&
equipment
N'million
N'million
N'million
N'million
N'million
N'million
N'million
14,423
1,128
4,706
1,404
5,504
3,369
11,219
41,752
447
208
604
122
679
1,038
1,837
4,935
1,282
106
48
4
(107)
2
(1,586)
(251)
1
(1)
(1)
(5)
(38)
(289)
(362)
(695)
At 31 December 2011
16,153
1,441
5,357
1,525
6,037
4,120
11,108
45,741
Accumulated
depreciation
At 1 January 2011
(1,003)
(576)
(2,294)
(841)
(3,198)
(2,240)
-
(10,152)
(279)
(248)
(724)
(190)
(892)
(681)
-
(3,014)
6
(6)
1
-
36
-
37
-
-
Cost
At 1 January 2011
Additions
Reclassifications
Disposals
Charge for the year
Reclassifications
Write offs
Disposals
102
50
(371)
18
134
265
-
198
At 31 December 2011
(1,174)
(780)
(3,388)
(1,013)
(3,919)
(2,656)
-
(12,930)
Net book amount at
31 December 2011
14,979
661
1,969
512
2,118
1,464
11,108
32,811
Work in progress relates to capital cost incurred in settling up new branches. When completed and available for use, they are transferred to
the respective property, plant and equipment classes and depreciation commences
122
21
Intangible assets
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
Cost
Balance at beginning of year
Additions
Balance at end of year
1,545
1,545
1,276
269
1,545
1,025
251
1,276
354
17
371
354
354
Amortization and impairment losses
Balance at beginning of year
Amortisation for the year
Balance at end of year
1,075
470
1,545
927
148
1,075
772
155
927
59
59
118
59
59
-
470
349
253
295
Carrying amounts
22
Deferred taxation
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 30 % (2012:
30 %).
Deferred income tax assets and liabilities are attributable to the following items:
IFRS
IFRS
IFRS
IFRS
NGAAP
2013
N'million
-1,230
(1,230)
2012
N'million
(4,128)
(51)
(4,179)
2011
N'million
(3,660)
(3,660)
2010
N'million
(2,948)
(4,818)
(7,766)
2009
N'million
-
2,289
2,611
3,868
171
8,939
(9,664)
(1,995)
1,776
443
5
2,224
762
2,281
3,043
1,931
1,931
-
(1,955)
(617)
(5,835)
-
2,224
2,224
3,043
1,931
-
-
-
-
-
-
4,179
(4,179)
(3,660)
(7,101)
-
-
-
-
-
-
Deferred tax liabilities
Accelerated tax depreciation
Allowances for loan losses
Deferred tax assets
Allowances for loan losses
Pension and other post-retirement benefits
Tax loss carried forward
Other assets
Unrecognised deferred tax credit
Net
Deferred tax assets
- Deferred tax asset to be recovered after more
than 12 months
- Deferred tax asset to be recovered within 12
months
Deferred tax liabilities
- Deferred tax liability to be recovered after more
than 12 months
- Deferred tax liability to be recovered within 12
months
123
Recognised
Recognised
in P&L
2,898
166
2,340
3,425
835
-9,664
-
OCI
-
Recognised
Recognised
in P&L
(468)
5
(813)
443
-505
-1,338
OCI
-
Recognised
Recognised
1 Jan 2011
(2,948)
(4,818)
1,931
-5,835
in P&L
(712)
5,580
350
5,218
OCI
-
31 Dec
2011
(3,660)
762
2,281
-617
2013
N'million
268
1,176
1,444
2012
N'million
4,422
2,128
6,550
2011
N'million
2,845
729
3,574
2010
N'million
1,360
1,030
2,390
2009
N'million
1,510
2,165
3,675
1,444
(3,903)
2,646
(1,125)
2,449
(1,984)
406
2,432
6,463
4,413
10,876
(4,413)
6,463
7,907
15,196
15,196
15,196
17,842
9,392
9,392
9,392
11,841
7,952
7,952
(4,413)
3,539
8,358
3,956
720
4,676
(1,243)
3,433
7,108
2013
N'million
3,903
510
2012
N'million
1,125
2,778
2011
N'million
1,984
(859)
2010
N'million
1,984
-
2009
N'million
1,158
437
4,413
3,903
1,125
1,984
1,595
Movements in temporary differences during the year:
[Other assets]
[Allowances for loan losses]
[Tax loss carry forward]
[Employee benefits]
[Unrecognised Deferred tax credit]
1 Jan 2013
(4,128)
5
(51)
443
1,776
-1,955
[Other assets]
[Employee benefits]
1 Jan 2012
(3,660)
762
2,281
-617
[Other assets]
[Employee benefits]
31 Dec
2013
-1,230
171
2,289
3,868
2,611
-9,664
-1,955
31 Dec
2012
(4,128)
5
(51)
443
1,776
-1,955
Other assets
Financial assets
Sundry receivables
Others
Less:
Specific allowances for impairment
Non financial assets
Prepayments
Other non financial assets
Specific allowances for impairment
Reconciliation of allowance for
impairment account
At beginning of year
Charge for the year
At end of year
124
24
Demand
Savings
Term
Domiciliary
Others
Current
Non-current
25
2012
N'million
363,339
67,129
187,252
94,096
4,934
716,749
2011
N'million
289,987
56,702
163,238
51,162
3,301
564,390
2010
N'million
163,222
39,862
90,723
33,544
1,849
329,200
2011
N'million
132,309
24,380
119,731
12,388
288,808
806,307
13
806,320
716,671
78
716,749
564,325
65
564,390
329,187
13
329,200
285,453
3,355
288,808
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
9,566
15,322
1,943
657
2,798
30,286
4,597
15,411
2,244
4,103
26,354
6,149
6,907
2,024
115
1,340
16,535
2,610
3,310
1,326
116
352
7,714
2,542
2,849
2,850
4,875
13,116
2013
2012
N'million
N'million
6,424
-
16,060
47,844
-
70,328
-
Other liabilities
Customer deposits for letters of
credit
Accounts payable
Manager's cheque
Defined contribution plan
Provisions
Other liabilities/credit balances
26
2013
N'million
315,209
83,325
269,150
132,759
5,877
806,320
Long term loan from SCB London
(see note 26.1)
Long term loan from Citibank and
HSBC London (see note 26.2)
Bond issued (see note 26.3)
26.1
The amount of N6,424 million (US$ 40million) represents the outstanding balance in the on-lending facility granted to the
Bank by Standard Chartered Bank (SCB) London in November 2013 for a period of 2 years at an interest rate of Libor plus
4.25% per annum.
26.2
The amount of N16,060 million (US$ 100million) represents the outstanding balance in the syndicated on-lending facility
granted to the Bank by Citibank London and HSBC London in April 2013 for a period of 3 years at an interest rate of Libor
plus 4.50% per annum.
26.3
The amount of N47,844 million represents the amortised cost of a US$300million, 5 year, 6.875% Eurobond issued at 99.48
percent in May 2013. The Principal amount is repayable in May 2018, while the coupon is paid semi annually. The purpose of
the debt issuance is to finance foreign currency lending to the Power and Oil sectors of the economy.
125
27
Statement of financial position
asset/(liability) for:
Staff Gratuity Plan
Retirement Benefit Scheme
Income statement charge for:
Staff Gratuity Plan
Actuarial gains/(losses) are recognised in
the statement of other comprehensive
income.
Staff Gratuity Plan
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
2,877
4,689
7,566
1,751
3,821
5,572
1,487
6,118
7,605
1,292
5,145
6,437
1,017
282
1,299
431
435
369
786
1,017
967
1,399
434
870
1,634
2,003
2,033
2,819
259
1,276
(886)
(201)
(1,087)
(276)
2,100
1,824
(156)
558
402
-
-
2011
N'million
2010
N'million
2009
N'million
1,487
1,292
1,017
1,487
1,292
1,017
1,292
191
178
156
(330)
1,487
1,017
574
(299)
1,292
1,017
1,017
(a) Gratuity scheme
The amounts recognised in the statement of financial position are as follows:
2013
2012
N'million
N'million
Present value of funded obligations
Fair value of plan assets
Deficit of funded plans
Present value of unfunded obligations
2,877
1,751
Unrecognised past service cost
Liability in the balance sheet
2,877
1,751
The movement in the defined benefit obligation over the year is as follows:
At beginning of the year
Current service cost
Interest cost
Employee contributions
Actuarial losses/(gains)
Past service cost
Benefits paid
Settlements
At end of the year
1,751
208
224
886
(192)
2,877
1,487
211
224
276
(447)
1,751
126
The amounts recognised in the income statement are as follows:
Interest cost
Expected return on plan assets
Past service cost
Total, included in staff costs
The principal actuarial assumptions were as follows:
Average long term discount rate (p.a.)
Average long term rate of inflation (p.a.)
Average long term pay increase (p.a.)
208
224
431
211
224
435
191
178
369
-
-
12%
10%
5%
14%
10%
5%
14%
12%
10%
12%
10%
10%
12%
10%
10%
Mortality
Pre-retirement: A49/52
Withdrawal and Early Retirement
It was assumed that withdrawals and early retirements would be in accordance with the following table:
2013
2012
2011
Age
group
Annual rate of
Withdrawal/Ret
irement
Age group
Annual rate of
Withdrawal/Ret
irement
Age group
Annual rate of
Withdrawal/Retire
ment
20-24
25-29
30-34
34-38
39-42
43-49
50-51
52-53
54
55+
10%
10%
8%
4%
3%
1%
5%
10%
15%
100%
20-24
25-29
30-34
34-38
39-42
43-49
50-51
52-53
54
55+
10%
10%
8%
4%
3%
1%
5%
10%
15%
100%
20-24
25-29
30-34
34-38
39-42
43-49
50-51
52-53
54
55+
10%
10%
8%
4%
3%
1%
5%
10%
15%
100%
The amounts recognised in the statement of financial position are determined as follows:
2013
2012
2011
N'million
N'million
N'million
Present value of funded
obligations
Fair value of plan assets
Deficit of funded plans
Present value of unfunded
obligations
Unrecognised past service
4,689
3,821
6,117
cost
Liability in the balance sheet
4,689
3,821
6,117
2010
N'million
2009
N'million
5,145
-
5,145
-
127
The movement in the defined benefit obligation over the year is as follows:
2013
2012
N'million
N'million
At beginning of the year
3,820
6,117
Interest cost
470
1,017
Employee contributions
497
996
Actuarial losses/(gains)
Past service cost
202
(2,100)
Benefits paid
(1,579)
Settlements
(300)
(631)
At end of the year
4,689
3,820
2011
N'million
2010
N'million
2009
N'million
5,145
908
726
-557
-104
6,118
281
786
(951)
116
288
259
(266)
281
The amounts recognised in the income statement are as follows:
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
470
497
967
1,017
996
(1,579)
434
908
726
1,634
-
-
12%
10%
5%
14%
12%
10%
12%
12%
10%
12%
10%
10%
12%
10%
10%
It was assumed that withdrawals and early retirements would be in accordance with the following table:
2013
2012
Age group Annual rate of
Age group Annual rate of
Age group
Withdrawal/R
Withdrawal/R
etirement
etirement
20-24
10%
20-24
10%
20-24
25-29
10%
25-29
10%
25-29
30-34
8%
30-34
8%
30-34
34-38
4%
34-38
4%
34-38
39-42
3%
39-42
3%
39-42
43-49
1%
43-49
1%
43-49
50-51
5%
50-51
5%
50-51
52-53
10%
52-53
10%
52-53
54
15%
54
15%
54
55+
100%
55+
100%
55+
2011
Annual rate of
Withdrawal/R
etirement
10%
10%
8%
4%
3%
1%
5%
10%
15%
100%
Interest cost
Expected return on plan assets
Past service cost
Total, included in staff costs
The principal actuarial
assumptions were as follows:
Discount rate
Inflation rate
Future salary increases
Mortality
Pre-retirement: A49/52
Withdrawal and Early
Retirement
128
28
Share capital
Authorised
32 billion ordinary shares of 50k each
(2012: 32 billion ordinary shares)
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
16,000
16,000
16,000
16,000
16,000
14,481
14,481
14,481
14,481
14,481
Issued and fully paid
28,963 million ordinary shares of 50k
each (2012: 28,963 million ordinary
shares)
There is no movement in the issued and fully paid shares during the year.
29
Other equity accounts
The nature and purpose of the other equity accounts are as follows:
Share premium
Premiums from the issue of shares are reported in share premium.
Retained earnings
Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to the other
reserves noted below.
Statutory reserve
Undistributable earnings required to be kept by the nation’s central bank in accordance with national law.
SSI reserve
Appropriated from retained earnings by regulation for investment in small scale industries.
Contingency reserve
Appropriation of retained earnings for unspecified future events.
Revaluation reserve
The revaluation reserve shows the effects from the fair value measurement of financial instruments of the category available
for sale after deduction of deferred taxes. Any gains or losses are not recognised in the consolidated income statement until the
asset has been sold or impaired.
129
30
The amount at which the loan loss provision under IFRS is less than the loan loss provision under Nigerian Generally
Accepted Accounting Principles (“GAAP”) is booked to a non-distributable regulatory reserve.
Additional cash flow
information
Change in operating assets
Investments in Securities
Held for maturity
Available for sale
Held for trading
Investments property
Other assets
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
-80,576
(65,080)
31,153
794
(181,186)
104,793
72,930
43
47,861
93,798
-
-
(53,103)
9,934
(91,798)
(636)
(3,282)
(6,000)
(151,391)
12,960
3,476
231,068
-
-
89,571
3,932
93,503
152,359
9,819
162,178
235,190
5,868
241,058
-
-
Change in operating liabilities
Other liabilities
31
31.1
Contingent liabilities and commitments
Capital commitments
At the reporting date, the Bank had capital commitments amounting to N203.4 million (2012: N252 million)
31.2
Confirmed credits and other obligations on behalf of customers
In the normal course of business the Bank is a party to financial instruments with off-balance sheet risk. These instruments are
issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance sheet
financial instruments are:
guarantees
Letters of credit
31.3
2013
N'million
2012
N'million
2011
N'million
2010
N'million
2009
N'million
143,269
35,978
41
179,288
103,152
29,044
27
132,223
93,760
24,420
155
118,335
53,631
19,574
7,385
80,590
91,344
29,816
121,160
Litigation
As at reporting date, the Bank had several claims against it by parties seeking legal compensation in the sum of N3.41 billion
(2012: N726.1 million). Based on the estimates of our legal team and the case facts, the Bank estimates a potential loss of
N295.9 million (2012:6.5 million) upon conclusion of the cases. On the other hand, the Bank has outstanding claims against
various individuals in the sum of N13.583 billion (2012: N627.2 million) that are yet to be settled.
130
32
Related party transactions
The Bank is wholly owned by Nigerian citizens.
Key
Associates
Related
management
Entities
personnel
32.1a
N'million
N'million
N'million
522
2,107
-2,218
411
-
140
3,801
-3,365
577
2
-
6
141
527
146
522
17
733
750
5
136
140
2
17
-
Related entity
Deposits at
31 Dec 2013
13,608,491
Deposits at
31 Dec2012
14,019,156
Related entity
Related entity
Related entity
311,736
11,443
56,635
3,976,288
11,243
82,101
Related entity
Related entity
Related entity
Related entity
15,347
552,067
3,938,877,183
367,746
3,953,800,648
-
188,721
50,791
18,328,300
133
70,512
140,613,347
140,683,992
749,868,519
749,868,519
Deposits from related parties
Year ended 31 December 2013
Due to customers
Deposits as 1 January
Deposits received during the year
Deposits repaid during the year
Deposits at 31 December
Interest expense on deposits
Year ended 31 December 2012
Due to customers
Deposits as 1 January
Deposits received during the year
Deposits repaid during the year
Deposits at 31 December
Interest expense on deposits
32.1b
DEPOSIT FROM RELATED PARTIES
Related party
Geoelis and Co Nig Ltd (Hm)
(Dp)
Rosies Textile Mill Ltd
Cy Incorporated Nig Ltd (dsra)
Equipment Solutions and Logistics Services
Limited
Ass. Haulages (Nig) Ltd 2
The Genesis Restaurant Limited
Next International
Namjid. Com Limited
Total
Fidelity Pension Managers Limited
Finconnekt Nig Ltd
Fidelity Securities Ltd
Total
Unified Payment Services Ltd
Total
Relationship
Subsidiary
Subsidiary
Subsidiary
Associate
131
Related Party
Relationship
AMOUNT
AMOUNT
OUTSTANDING
OUTSTANDING
2013
2012
FACILITY
TYPE
STATUS
SECURITIES
Performing
Perfected
Performing
Perfected
Performing
Perfected
STATUS
ASSOCIATED HAULAGES
(NIGERIA) LIMITED
CY INCORPORATED NIG LTD
Related entity
-
46,024,794
Related entity
244,267,103
240,544,047
ROSIES TEXTILES MILL LTD
Related entity
73,500,365
59,588,050
Term
Loan/Overdraft
Finance
Lease/Overdraft
Overdraft
GEOELIS AND CO NIG LTD
Related entity
242,316,109
187,040,103
Overdraft
Performing
Perfected
EQUIPMENT SOLUTIONS
AND LOGISTICS SERVICES
LIMITED
THE GENESIS RESTAURANT
LIMITED
GENESIS DELUXE CINEMAS
Related entity
398,313,828
379,098,747
Finance
Lease/Overdraft
Performing
Perfected
Related entity
466,677,979
1,132,781,390
Performing
Perfected
Related entity
152,777,778
-
Term
Loan/Overdraft
Term Loan
Performing
Perfected
GENESIS HUB LIMITED
Related entity
550,334,585
-
Performing
Perfected
CMB BUILDING
MAINTENANCE AND
INV.CO. LTD
JOHN HOLT PLC
Related entity
40,484,916
-
Term
Loan/Overdraft
Overdraft
Performing
Perfected
Related entity
179,521,608
-
Term Loan
NAMJID.COM LIMITED
Related entity
156,031,840
-
Overdraft
Performing
Perfected
TRANSCORP UGHELLI
POWER LIMITED
TOTAL
Related entity
3,212,000,000
-
Term Loan
Performing
Perfected
5,716,226,112
2,045,077,131
FIDELITY SECURITIES
LIMITED*
FINCONNECKT
COLLECTION A/C*
TOTAL
Subsidiary
122,368,113
-
Overdraft
Performing
Perfected
Subsidiary
194,814,120
-
Overdraft
Lost
Perfected
317,182,233
-
REGINALD U.IHEJIAHI
Key personnel
-
150,691,719
Term Loan
Performing
Perfected
OBI OKECHUKWU JOHN
Key personnel
-
81,331,202
Term Loan
Performing
Perfected
MR AND MRS A.I. MBAGWU
Key personnel
5,056
102,076,946
Term Loan
Performing
Perfected
UCHE AUGUSTINE OKAM
Key personnel
-
796,680
Term Loan
Performing
Perfected
OLAOLU ONOME JOY
Key personnel
-
155,638,525
Term Loan
Performing
Perfected
OKONKWO NNAMDI JOHN
Key personnel
333,989
58,406,611
Term Loan
Performing
Perfected
CHIJIOKE UGOCHUKWU
Key personnel
9,640,067
67,194,365
Term Loan
Performing
Perfected
UMAR I YAHAYA
Key personnel
7,640,000
46,570,935
Term Loan
Performing
Perfected
MOHAMMED BALARABE
Key personnel
-
8,216,146
Term Loan
Performing
Perfected
CHIEF CHRISTOPHER EZEH
Key personnel
122,778,659
-
Term Loan
Performing
Perfected
DIM ELIAS E NWOSU
Key personnel
651,231
-
Term Loan
Performing
Perfected
ICHIE NNAETO ORAZULIKE
Key personnel
2,456,629
-
Term Loan
Performing
Perfected
143,505,631
670,923,129
TOTAL
132
RELATED PARTY
RELATIONSHIP
Key management personnel
DEPOSITS
2013
N'million
17,692,513
58,104,562
DEPOSITS
2012
N'million
57,548
11,728,572
DEPOSITS
2011
N'million
1,114,025
-
DEPOSITS
2010
N'million
64,725
-
OLOWONIYI KAYODE
OKONKWO NNAMDI
JOHN
MOHAMMED BALARABE
UCHE AUGUSTINE OKAM
IKEMEFUNA MBAGWU
OLAOLU ONOME
REGINALD U.IHEJIAHI
BASHARI M.GUMEL
CHIJIOKE UGOCHUKWU
OBI OKECHUKWU
JOHN
UMAR I YAHAYA
CHIEF CHRISTOPHER
EZEH
ICHIE NNAETO
ORAZULIKE
ROBERT NNANNA-KALU
7,032,940
4,985,272
55,298,800
212,071,388
72,095,788
59,888,924
19,866,008
24,818,864
34,180
33,697,146
6,367,354
2,729,634
43,983,059
7,657,619
18,435,408
32,321.00
18,969,071
2,151,511
2,044,906
10,885,623
532,354
1,472,262
468.00
1,917,554
10,045,588
5,785,014
3,578,194
124,977
8,123,849
27,858,313
30,868,246
-
9,135,572
-
4,540,984
-
1,757,090
-
-
-
397,931
-
-
-
987,044,947
521,936,594
140,683,992
68,260,621
2013
Amount
N'million
2012
Amount
N'million
2011
Amount
N'million
13
13
18
16
18
16
2010
N'million
116
2009
N'million
58
116
58
TOTAL
32.2
32.3
LOANS AND ADVANCES TO RELATED
PARTIES
Other transactions with related parties
Year ended 31 December
Fee and commission income
Guarantees issued by the Bank
32.4
The above guarantees are issued by the Bank in the normal
course of business.
The above deposits carry fixed interest rates and are repayable on maturity on agreed terms.
Key management
compensation
2013
2012
2011
N'million
N'million
N'million
Salaries and other short-term employee benefits
304
330
155
(Executive directors only)
Post-employment benefits
Other long term benefits
Termination benefits
304
330
155
133
33
Employees
The average number of persons employed by the Bank during the year was as follows:
Number
Number
Number
2013
2012
2011
7
7
5
Executive directors
509
534
404
Management
2,968
2,956
2,912
Non-management
3,484
34
3,497
3,321
Number
2010
5
399
2,802
Number
2009
5
444
2,956
3,206
3,405
The number of employees of the Bank, other than directors, who received emoluments in the following ranges (excluding
pension contributions and certain benefits) were:
Number
Number
Number
Number
Number
2013
2012
2011
2010
2012
164
646
1,208
1,537
1,615
N300,000 - N2,000,000
518
1,097
541
254
241
N2,000,001 - N2,800,000
1,052
310
253
232
248
N2,800,001 - N3,500,000
823
640
588
530
638
N3,500,001 - N6,500,000
410
272
413
216
215
N6,500,001 - N7,800,000
250
336
128
188
165
N7,800,001 - N10,000,000
267
196
190
249
283
N10,000,001 and above
3,484
3,497
3,321
3,206
3,405
Directors' emoluments
Remuneration paid to the Bank's executive and non-executive directors (excluding certain allowances) was:
Number
Number
Number
Number
Number
2013
2012
2011
2010
2009
N'millio
N'millio
N'millio
N'millio
N'million
n
n
n
n
56
27
30
32
13
Fees and sitting allowances
241
162
116
138
58
Executive compensation
105
92
61
52
97
Other director expenses
401
281
207
222
168
6
6
2
Fees and other emoluments disclosed above include amounts paid to:
Chairman
11
9.50
67
68
31
31
15
Highest paid director
The number of directors who received fees and other emoluments (excluding pension contributions and certain benefit) in
the following ranges was:
Below N1,000,000
N1,000,000 - N2,000,000
N2,000,001 - N3,000,000
N5,500,001 - and above
Number
Number
Number
Number
Number
2013
2012
2011
2010
2009
-
-
21
21
8
-
17
18
-
-
-
17
18
21
21
8
134
35
Compliance with banking regulation
35.1
The Directors are of the opinion that the financial statement of the Bank is in compliance with the Bank and Other Financial
Institutions act, 2012 CAP B3 LFN 2004 and all relevant CBN circulars. However, the Bank contravened the following which
attracted penalties during the year.
Nature of Contravention
Fine/Penalties (N'000)
Delayed disbursement of Commercial Agriculture Credit
Scheme (“CACS”)
Non compliance with the reporting of Government deposits
66,021
Promotion to top management without CBN approval
12,000
2,000
80,021
35.2
S/N
In line with circular FDR/DIR/CIR/GEN/01/020, the returns on customers' complaint for the year ended 31 December
2013 is set as below:
DESCRIPTION
NUMBER
AMOUNT CLAIMED
AMOUNT REFUNDED
2013
2012
2013[M]
2012[M]
2013[M]
2012[M]
23
0
1,317
N/A
N/A
N/A
1
Pending complaints b/f
2
Received complaints
101
118
2,392
4,330
N/A
N/A
3
Resolved complaints
111
86
3,601
356
289
33
4
Unresolved complaints
escalated to CBN for
intervention
Unresolved complaints
pending with the Bank c/f
-
9
-
2,657
N/A
N/A
13
23
108
1,317
N/A
N/A
5
36
Gender Diversity
WOMEN
TOTAL
Number
%
Number
%
Board Members
3
18%
14
82%
17
Management staff (AGM &
Above)
9
18%
42
82%
51
Total
37
MEN
12
56
68
Events after statement of financial position date
Subsequent to year end, Mr Nnamdi Okonkwo who was announced CEO-designate in October 2013, became the Managing
Director and Chief Executive Officer of the bank effective January 2014. Until, this appointment, Mr Nnamdi Okonkwo was
the Executive Director in charge of the South Directorate of the bank
135
Fidelity Bank Plc
38
STATEMENT OF PRUDENTIAL ADJUSTMENTS
TRANSFER TO REGULATORY RESERVE
The regulatory body Central Bank of Nigeria and the Nigerian Deposit Insurance Commission (“NDIC”) stipulates that
provisions recognized in the profit or loss account shall be determined based on the requirements of IFRS (International
Financial Reporting Standards). The IFRS provisions should be compared with provisions determined under prudential
guidelines and the expected impact/changes in retained earnings should be treated as follows:
(i) Prudential Provisions is greater than IFRS provisions; transfer the difference from the retained earnings to a non
distributable regulatory reserve.
(ii) Prudential Provisions is less than IFRS provisions; the excess charges resulting should be transferred from the regulatory
reserve account to the retained earnings to the extent of the non-distributable regulatory reserve previously recognized.
IFRS
IFRS
IFRS
NGAAP
NGAAP
2013
2012
2011
2010
2009
N'million
N'million
N'million
N'million
N'million
-
-
17,375
51,537
-
Specific provision
11,728
9,195
-
-
-
General provision
4,122
3,400
-
-
-
Provision for other assets
4,413
3,903
-
-
-
Provision for investments
1,581
2,726
-
-
-
21,844
19,224
17,375
51,537
-
10,070
7,605
10,295
21,267
-
6,503
5,778
3,518
5,480
-
Provision for other assets
4,413
3,903
1,125
1,984
-
Provision for investments
1,581
2,726
3,060
1,947
-
Total IFRS provision (B)
22,567
20,012
17,998
30,678
-
(723)
(788)
(463)
20,859
-
Opening non-distributable regulatory reserve
19,608
20,396
20,859
20,859
-
Closing non-distributable regulatory reserve
18,885
19,608
20,396
20,859
-
Transfer to regulatory reserve
Prudential provision:
Total prudential provision (A)
IFRS provision:
Specific impairment
Difference in the impairment provision figures (AB), transfer from Regulatory Reserve
136
FIDELITY BANK
PLC
FINANCIAL SUMMARY
Financial Position
Assets:
Treasury bills and other eligible bills
Due from other banks
Investments
Held for trading(Fair value through P or L)
Available for sale
Held to maturity
Interest in subsidiaries
Insurance receivables
Investment property
Property, plant and equipment
Intangible assets
Other assets
Assets classified as held for sale
Financed by:
Share capital
Share premium
Statutory reserves
Retained earnings
Small scale industries reserve
Contingent reserve
Revaluation reserve
Customer deposits
Current income tax
Deferred income tax liabilities
Other liabilities
31 DECEMBER
IFRS
IFRS
2011
2010
N’million
N’million
IFRS
2013
N’million
IFRS
2012
N’million
NGAAP
2009
N’million
207,834
80,875
426,076
117,291
98,000
345,500
82,271
98,411
280,421
25,505
148,401
207,491
23,720
24,953
136,018
176,398
254,881
21,068
45,105
37,470
7,908
-
201,806
21,835
76,258
35,358
470
17,841
-
20,620
131,849
75,622
343
32,811
349
11,842
3,193
7,660
38,007
27,761
2,173
343
31,601
253
8,358
-
61
40,349
24,335
296
7,923
-
1,081,217
914,360
737,732
497,553
434,053
14,481
101,272
18,861
7,395
764
1,723
18,884
75
70,328
806,320
1,307
1,955
30,286
7,566
14,481
101,272
17,703
6,193
764
1,723
19,608
-289
716,749
2,275
1,955
26,354
5,572
14,481
101,272
12,244
-4,829
764
1,867
20,395
-222
564,390
2,613
617
16,535
7,605
14,481
101,272
10,456
-3,761
764
1,867
20,858
915
329,200
1,515
5,835
7,714
6,437
14,481
101,272
2,249
8,707
764
1,867
288,808
1,491
13,115
1,299
1,081,217
914,360
737,732
497,553
434,053
137
FIDELITY BANK
PLC
FINANCIAL SUMMARY
INCOME
STATEMENT
Operating income
Net interest income
Impairment charge for credit losses
Net interest income after impairment charge for
credit losses
Commission and other operating income
Operating profit
Profit/(loss) from sale of subsidiary
Income tax expense
Profit after taxation
Other comprehensive income
Total comprehensive income for the year
Per share data:
Earnings per share (basic)
Net assets per share
31 DECEMBER
IFRS
2011
NGAAP
2010
NGAAP
2009
N’million
36,810
(4,610)
N’million
30,519
(16,236)
N’million
41,445
(3,885)
N’million
21,226
(3,525)
23,182
40,661
32,200
39,100
14,283
23,551
37,560
-
17,701
-
(54,815)
(50,708)
(36,360)
(29,235)
(15,821)
9,028
-
20,592
757
1,474
-
8,325
-
1,880
-
9,028
(1,307)
21,349
(3,425)
1,474
2,437
8,325
(2,497)
1,880
(466)
7,721
17,924
3,911
5,828
1,414
364
1,757
(736)
-
-
8,085
19,681
3,175
5,828
1,414
27
62
55
20
5
564
2,350
1,854
464
447
IFRS
2013
IFRS
2012
N’million
30,812
(7,630)
Note:
The earnings per share have been computed on the basis of the profit after tax and the number of issued shares as at year end.
Net assets per share have been computed based on the net assets and the number of issued shares at year end.
138
STATUTORY AND GENERAL INFORMATION
HISTORY AND BUSINESS
The Bank was incorporated in Nigeria as a Private Limited Liability Company on November 19, 1987. It
obtained a merchant banking license on December 31, 1987 and commenced banking operations on June 3,
1988. The Bank converted to a commercial bank on July 16, 1999 and registered as a public limited liability
company on August 10, 1999. It obtained its universal banking license on February 6, 2001. The Bank’s
shares were quoted on the floor of The Nigerian Stock Exchange on May 17, 2005.
The principal activity of the Bank continues to be the provision of banking and other financial services to
corporate and individual customers from its headquarters in Lagos and 204 business offices. These services
include retail banking, granting loans and advances, equipment leasing and other related services.
SHARE CAPITAL HISTORY
The following changes have taken place in the Bank’s authorised and issued share capital since
incorporation.
DATE
AUTHORISED
AUTHORISED
CUMULATIVE
N
ISSUED AND
FULLY PAID
N
1988
1989
1989
1990
1991
1992
1993
1994
1995
1997
1998
2000
2001
2002
2003
2004
2004
2005
2005
2007
2007
3,000,000
9,000,000
3,000,000
25,000,000
20,000,000
40,000,000
50,000,000
650,000,000
700,000,000
500,000,000
4,000,000,000
2,000,000,000
2,000,000,000
2,500,000,000
3,500,000,000
3,000,000
12,000,000
12,000,000
15,000,000
40,000,000
60,000,000
100,000,000
150,000,000
150,000,000
800,000,000
800,000,000
1,500,000,000
2,000,000,000
2,000,000,000
2,000,000,000
2,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,500,000,000
16,000,000,000
1,865,000
5,822,000
1,153,050
4,959,950
13,800,000
12,703,000
51,830,000
21,737,000
272,247,000
151,472,000
6,458,920
272,023,960
36,501,911
336,602,981
344,554,220
519,088,134
2,222,101,272
3,956,922,658
249,449,790
6,000,000,000
ISSUED AND
FULLY PAID
(CUMULATIVE)
N
1,865,000
7,687,000
7,687,000
8,840,050
13,800,000
27,600,000
40,303,000
92,133,000
113,870,000
386,117,000
537,589,000
544,047,920
816,071,880
852,573,791
1,189,176,772
1,533,730,992
2,052,819,126
4,274,920,398
8,231,843,056
8,481,292,846
14,481,292,846
CONSIDERATION
N
Cash
Bonus/Cash
Bonus/Cash
Bonus/Cash
Cash
Bonus/Cash
Bonus/Cash
Bonus
Bonus/Cash
Bonus/Cash
Cash
Bonus
Cash
Cash
Bonus/Cash
Bonus
Cash
Merger/Cash
Rights
Public Offer
SHAREHOLDING STRUCTURE
As at the date of this Prospectus, the Bank’s shares are widely held. There is no individual or institutional
investor holding up to 5% in the issued and paid up share capital of the Bank.
139
DIRECTORS’ BENEFICIAL INTEREST
The beneficial shareholdings of the Directors in the issued and paid up share Capital of the Bank as recorded in the
Register of Members are as follows:
S/N
NAME OF DIRECTOR
SHAREHOLDING
DIRECT
INDIRECT
TOTAL
1.
Chief Christopher I. Ezeh, MFR (Chairman)
53,812,533
99,986,005
153,798,538
2.
Mallam Umar Yahaya
1,689,572
NIL
1,689,572
3.
Mr. Ichie Nnaeto Orazulike
1,665,300
1,665,300
3,330,600
4.
Mr. Olowoniyi Kayode
50,000
NIL
50,000
5.
Alhaji Bashari Mohammed Gumel
NIL
NIL
NIL
6.
Mr. Nnamdi J. Okonkwo (Managing Director)
101,000,000
NIL
101,000,000
7.
Mr. Robert Nnana-Kalu
70,006
NIL
70,006
8.
Mr. Ikemefuna Mbagwu
4,782,606
NIL
4,782,606
9.
Mrs. Olaolu Onome
5,160,669
NIL
5,160,669
10.
Mr. John Obi
1,058,483
NIL
1,058,483
11.
Mrs. Chijioke Ugochukwu
74,178,823
NIL
74,178,823
12.
Mr. Mohammed Balarabe
2,002,221
NIL
2,002,221
13.
Mrs. Aku P. Odinkemelu
NIL
NIL
NIL
STATEMENT OF INDEBTEDNESS
As at the December 4, 2014, the Bank has borrowings, in the ordinary course of business amounting to
N90,726,400,000. Save as disclosed, the Bank has no outstanding loans, charges or similar indebtedness.
CLAIMS AND MATERIAL LITIGATIONS
The Bank is, in its ordinary course of business, presently involved in Forty-Three (43) cases. Of the said 43 (fortythree) cases, the Bank is; (i) Claimant in six (6) cases instituted by it; (ii) Defendant in thirty-seven (37) cases instituted
against it by various individuals and organizations; and (iii) Counter-claimant in four (4) cases out of the cases
instituted against it. The total claims against the Bank in the thirty seven (37) cases instituted against it is
N3,682,313,632.02 (Three Billion, Six Hundred and Eighty Two Million, Three Hundred and Thirteen Thousand, Six
Hundred and Thirty Two Naira, Two kobo Only) and $317,000, (Three Hundred and Seventeen Thousand United
States Dollars). In the context of the contemplated transaction, the Solicitors to the Transaction have set a materiality
threshold of Twenty Million Naira (N20,000,000) (the “Materiality Threshold”). Of the thirty-seven (37) cases against
the Bank, only eight (8) cases are in respect of claims above the Materiality Threshold. The total monetary claims in
the said eight (8) litigation cases instituted against the Bank is N3,413,582,799 (Three Billion, Four Hundred and
Thirteen Million, Five Hundred and Eighty-Two Thousand, Seven Hundred and Ninety-Nine Naira Only) and
$317,000 (Three Hundred and Seventeen Thousand United States Dollars) excluding interest and costs, which may be
awarded by the courts hearing those matters after conclusion of same.
The Solicitors to the Transaction believe that the contingent liability to which the Bank may likely be exposed in
respect of the above-referenced 8 cases is the sum of N151,000,000 (One Hundred and Fifty-One Million Naira).
The Solicitors to the Transaction are of the opinion that the claims against the Bank should not have any material
adverse effect on the Transaction.
The Directors of the Bank are also of the opinion that none of the aforementioned cases is likely to have any material
adverse effect on the Bank or on the Transaction, and are not aware of any other pending and/or threatened claim or
litigation.
140
EXTRACT OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION
The following are the relevant extracts from the company’s articles:
Powers and Duties of Directors
86. Subject to the Banks and other Financial Institutions Act, the Directors may exercise all the powers of the
Company to borrow money, and to mortgage or charge its undertaking, property and uncalled capital, or a part thereof
and to issue debentures, debenture stock, and other securities, whether outright or as security for any debt, liability or
obligation of the Company or any third party.
MATERIAL CONTRACTS
The following agreements have been entered into by the Bank and are considered to be material to the
Issue
A. A Vending Agreement dated May 08, 2015 between Fidelity Bank Plc, (as Issuer) and the Issuing
Houses under which the Issuing Houses have agreed to offer on behalf of the Bank, N30 Billion Naira
denominated Fixed Rate Subordinated Unsecured Bond
B. An Underwriting Agreement dated May 08, 2015 between Fidelity Bank Plc (as Issuer) and the
Underwriters under the terms of which the Underwriters have agreed to underwrite the Issue on a firm
commitment basis.
C. A Trust Deed dated May 08, 2015 between Fidelity Bank Plc and FBN Trustees Limited, Stanbic
IBTC Trustees Limited and UBA Trustees Limited
Other than as stated above, the Bank has not entered into any material contracts except in the ordinary
course of business
RELATIONSHIP BETWEEN THE ISSUER AND ITS ADVISERS
Mr. Chidi Agbapu who is a Director in Planet Capital Limited, the Lead Issuing House, is the Chairman of
the Audit Committee of Fidelity Bank Plc. Save from the above, as at the date of this Prospectus, there is
no known relationship between the Issuer and any of its advisers except in the ordinary course of business.
DECLARATION
Except as otherwise disclosed herein:
1. No share of the Bank is under option or agreed conditionally or unconditionally to be put under
option;
2. No commissions, discounts, brokerages or other special terms have been granted to any person in
connection with the issue or sale of any share of the Bank;
3. There are no founders, management or deferred shares or any options outstanding;
4. There are no long-term service agreements between the Bank and any of its Directors and employees;
5. No Director of the Bank has had any interest direct or indirect in any property purchased or to be
purchased by the Bank
6. No shareholder, director or key management personnel has been involved in any of the following (in
or outside Nigeria):
i.
ii.
iii.
A petition under any bankruptcy or insolvency laws filed (and not struck out) against such
person or any partnership in which he was a partner or any Company of which he was a
Director or key personnel
A conviction in a criminal proceeding or is named subject of pending criminal proceedings
relating to fraud or dishonesty
The subject of any order, judgement or ruling of any court of competent jurisdiction or
regulatory body relating to fraud or dishonesty, restraining him from acting as an investment
adviser, dealer in securities, director or employee of a financial institution and engaging in any
type of business practice or activity.
7. No action has been taken against the Company by The NSE in respect of any breach of the listing
requirements of The Exchange.
141
CONSENTS
The following have given and not withdrawn their written consents to the Issue of this Prospectus:
Chief Christopher I. Ezeh, MFR (Chairman)
Mr. Nnamdi J. Okonkwo (Managing Director)
Directors
Mallam Umar Yahaya
Mrs. Olaolu Onome
Mr. John Obi
Mr. Aku P. Odinkemelu
Mrs. Ezinwa Unuigboje (Company Secretary)
Lead Issuing House/Underwriter
Joint Issuing Houses/Underwriters
Dunn Loren Merrifield Advisory Partners Limited
United Capital Plc
Joint Issuing House
Joint Auditors
Ernst & Young
Pannel Kerr Forster Chartered Accountants
Reporting Accountants
Ahmed Zakari & Co Chartered Accountants
Rating Agency
Global Credit Rating Company Limited
Solicitors to the Issuer
George Ikoli & Okagbue
Solicitors to the Trustees
Sefton Fross
Solicitors to the Issue
Banwo & Ighodalo
Stockbrokers To The Issue
Trustees
FBN Trustees Limited
Stanbic IBTC Trustees Limited
UBA Trustees Limited
Registrar to the Issue
First Registrars Limited
Receiving Banks
Guaranty Trust Bank Plc
Stanbic IBTC Bank Plc
United Bank for Africa Plc
142
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents may be inspected at the offices of the Issuing Houses during normal
business hours on any week day (except public holidays), during the offer period:
1.
Certificate of Incorporation of the Bank;
2.
The CAC Form 7 (Particulars of Directors) of the Bank;
3.
The resolution of the Shareholders of the Bank dated December 21, 2009 authorising the Offer;
4.
The resolution of the Board of Directors of Fidelity Bank Plc dated October 23, 2014 authorising the
Offer;
5.
The “No Objection” letter dated January 29, 2015 issued by the Central Bank of Nigeria;
6.
Letter from the Securities & Exchange Commission approving the Bond;
7.
The letter from The Nigerian Stock Exchange approving the Bond and admitting the Bond to its Daily
Official List;
8.
The Vending Agreement dated May 08, 2015 between Fidelity Bank Plc and the Issuing Houses;
9.
The Underwriting Agreement dated May 08, 2015 between Fidelity Bank Plc and the Underwriters;
10. The Trust Deed between Fidelity Bank Plc and FBN Trustees Limited, Stanbic IBTC Trustees Limited
and UBA Trustees Limited dated May 08, 2015;
11. The Audited Financial Statements of the Bank for each of the five years ended 30 June 2009, and 31
December 2010-2013;
12. The Reporting Accountant’s Report by Ahmed Zakari & Co on the audited Financial Statements of
the Bank for the five years ended 30 June 2009, and 31 December 2010-2013;
13. The Reporting Accountant’s Report by Ahmed Zakari & Co on the Profit Forecast of the Bank for
each of the 7 years ending 31st December 2021;
14. The written consents of the Directors of the Bank and professional parties to the Issue;
15. The rating reports of Global Credit Rating Limited, the Rating Agency; and
16. The schedule of claims and litigation and the opinion of the solicitors, Banwo & Ighodalo, thereon.
143
PARTIES TO THE ISSUE
DIRECTORS OF THE BANK
Chief Christopher I. Ezeh, MFR
(Chairman)
2, Kofo Abayomi Street
Victoria Island,
Lagos
Mr. Nnamdi J. Okonkwo
(Managing Director)
Victoria Island,
Lagos
Aku P. Odinkemelu
Victoria Island,
Lagos
Victoria Island,
Lagos
Victoria Island,
Lagos
Victoria Island,
Lagos
Mr. John Obi
Victoria Island,
Lagos
Mallam Umar Yahaya
Victoria Island,
Lagos
Victoria Island,
Lagos
Victoria Island,
Lagos
Victoria Island,
Lagos
Mrs. Olaolu Onome
Victoria Island,
Lagos
Victoria Island,
Lagos
Mrs. Ezinwa Unuigboje
(Company Secretary)
Victoria Island,
Lagos
144
ROLE
NAME OF PARTIES
Issuer
Fidelity Bank Plc
2, Kofo Abayomi Street,
Victoria Island,
Lagos
Lead Issuing
House/Underwriter
Joint Issuing
Houses/Underwriters
Joint Issuing House
Joint Auditors
Reporting Accountant
Rating Agency
3rd Floor St Peter’s House,
3 Ajele Street,
Lagos
Partners Limited
10th Floor, Elephant House,
214 Broad Street,
Lagos
Awolowo Road,
Ikoyi,
Lagos
UAC House (5th Floor)
1-5, Odunlami Street,
Lagos
8B, Ademola Street,
South West Ikoyi,
Lagos
Plot 8A, Elsie Femi Pearse
Victoria Island,
Lagos
Walter Carrington Crescent,
Victoria Island,
Lagos
United Capital Plc
UBA House (12th Floor)
57, Marina,
Lagos
7, Fatai Durosinmi Etti Crescent
Victoria Island,
Lagos
Plot 1319, Karimu Ikotun,
Victoria Island,
Lagos
Ernst & Young
2A, Bayo Kuku Road,
Ikoyi,
Lagos
Pannel Kerr Forster
Toloye House, 362, Ikorodu
Road/Okupe Estate,
Maryland, Lagos
Ahmed Zakari & Co
22B, Oladipo Crescent
2 Avenue Estate, Ikoyi,
Lagos
Global Credit Rating Company
17th Floor, New Africa House
31, Marina,
Lagos
145
Solicitor to the Issuer
George Ikoli & Okagbue
864b Bishop Aboyade Cole Street,
VI,
Lagos
Solicitor to the Issue
Banwo & Ighodalo
98, Awolowo Road,
South West Ikoyi,
Lagos
Solicitors to the Trustee
Sefton Fross
Suite 27, 2nd Floor Canaan Mall
Lekki Expressway,
Lagos
Stockbroker to the Issue
Plot 688 Ahmodu Tijani Close
Victoria Island
Lagos
Joint Trustees
FBN Trustees Limited
16 Keffi Street
Off Awolowo Road, Ikoyi
Lagos
UBA Trustees Limited
UBA House (12th Floor)
57 Marina
Lagos
Stanbic IBTC Trustees Limited
The Wealth House
Plot 1678 Olakunle Bakare Close
Victoria Island
Lagos
Registrar to the Issue
Receiving Banks
First Registrar Limited
Plot 2, Abebe Village Road,
Iganmu
Lagos
Guaranty Trust Bank Plc
Plot 635 Akin Adesola Street
Victoria Island
Lagos
United Bank for Africa Plc
UBA House
57, Marina,
Lagos
Stanbic IBTC Bank Plc
I.B.T.C. Place
Walter Carrington Crescent
Victoria Island
Lagos
146
PROCEDURE FOR APPLICATION AND ALLOTMENT
1. Application
The general investing public is hereby invited to apply for the Bonds through any of the Receiving Agents
listed in the Prospectus.
1.1. Application for the Bonds now being offered must be made in accordance with the instructions set out
on the back of the Application Form. Care must be taken to follow these instructions, as applications which
do not comply will be rejected.
1.2. The Application List for the Bonds now being offered opens on May 13, 2015 and will close on May
13, 2015. Applications must be for a minimum of 20,000 registered Bonds of N1,000 each, representing an
aggregate value of N20,000,000.00 and in integral multiples of 5,000 registered Bonds thereafter,
representing an aggregate value of N5,000,000.
1.3. The subscription currency for the Issue is the Nigerian Naira (N). Foreign currency subscriptions will
be processed at the applicable foreign exchange rate determined at the auction at the CBN as conducted
from time to time.
1.4. The applicant should make only one application, whether in his own name, or in the name of a
nominee. Multiple or suspected multiple applications will be rejected.
1.5. Applicants should complete the Application Form as appropriate. A corporate applicant should affix its
seal in the box provided for this purpose and state its incorporation (RC) Number or in the case of a
corporate foreign subscriber, its appropriate identification number in the jurisdiction in which it is
constituted.
1.6. All applicants are required to indicate their bank account details in the space provided on the
Application Form for the purposes of Coupon and principal e-payments.
1.7. Each duly completed Application should be forwarded ONLY to one of the Receiving Agents listed in
this Prospectus together with evidence of Bank transfer in an amount equivalent to the aggregate number
of bonds applied for. All bank commissions and transfer charges must be prepaid by the applicant. All
cheques and bank drafts will be presented upon receipt and all applications in respect of which cheques or
bank drafts are returned unpaid will be rejected.
2. Allotment
Fidelity Bank Plc and the Issuing Houses reserve the right to accept or reject any application in whole or in
part for not complying with the terms and conditions of the Issue. All irregular or suspected multiple
applications will be rejected. The allotment proposal will be subject to the clearance of the Commission.
Any investor who prefers the issue of the Bonds in dematerialized form should specify the details of
his/her Stockbroking firm, CHN and CSCS account in the space provided on the Application Form. The
CSCS account shall be credited within 7(Seven) business days from the date of obtaining the approval of
the Basis of Allotment from the Commission while Certificates in respect of allotted Bonds will be sent by
registered post not later than 15(fifteen) Business days from the Allotment date to investors who prefer
certificates.
3. Application monies
All application monies will be retained in separate interest-yielding bank accounts with the Receiving Banks
pending allotment. If any application is not accepted, or is accepted for fewer Bonds, than the number
applied for, a crossed cheque for the full amount or the balance of the amount paid (as the case may be)
plus interest will be returned by registered post within 5(five) Business Days of allotment by the Registrar.
Where monies are not sent within the stipulated 5 Business Days, accrued interest will be paid to the
affected applicants at the prevailing Monetary Policy Rate plus a margin of 5% i.e. MPR+5%.
147
APPLICATION FORM
Application
Opening Date
Application
Closing Date
May 13, 2015
May 13, 2015
FIDELITY BANK PLC
Offers
N30,000,000,000.00
7-Years 16.48% Fixed Rate Subordinated Unsecured Bond Due 2022
Issued At Par At N1,000 Per Unit
PLANET CAPITAL LIMITED
RC 986761
Partners Rc 688014
Orders must be made in accordance with the instructions set out in this Prospectus. Care must be taken to follow these instructions as applications that do not comply
may be rejected. If you are in any doubt, please consult your Stockbroker, Accountant, Banker, Solicitor or any professional adviser for guidance.
Please complete all relevant sections of this Form USING BLOCK LETTERS WHERE APPLICABLE
PARTICIPANT STATUS (PLEASE TICK □)
High Net Worth Investors
Fund Managers
Pension Fund Administrators
Insurance Companies
Investment/Unit Trusts
Multilateral/Bilateral Inst.
Market Makers
Staff Schemes
Trustees/Custodians
Stock-broking Firms
DATE (DD/MM/YYYY)
/
/
2
CONTROL NO. (FOR REGISTRARS’ USE ONLY)
0
1
5
DECLARATION
I/We hereby confirm that I am/we are Qualified persons to participate in this Bond Issue in accordance with applicable SEC Rules and
Regulations.
I/We confirm that I/we have read the Prospectus dated May 08 2015 and that my/our Order(s) is/are made on the terms set therein
I/we hereby irrevocably undertake and confirm my/our Order(s) for the Bonds equivalent to my/our Participation Amount(s) set out
below at the indicated Coupon Rate
I/We authorise the Issuer to make the necessary changes in the Prospectus for filing of the Final Prospectus with the SEC without
intimation to me/us.
I/We note that the Issuer and the Issuing Houses are entitled in their absolute discretion to accept or reject this Order.
I/We agree to accept the Participation Amount as may be allocated to me/us subject to the terms in this Prospectus
Resident Corporate Investors
Non-Resident Investors
I/We authorise you to enter my/our name on the Register of Holders as holders of the Bonds that may be allotted to me/us and to register
my/our address as given below
Hedge Funds
Banks
PARTICIPATION DETAILS (The Participation Amount(s) and the Bid Coupon Rate(s) being offered must be set out in the boxes below).
The order must be for a minimum of N20 million and in multiples of N5 million thereafter.
APPLICATION
PARTICIPATION AMOUNT (minimum amount N20 million and in multiples of N5 million thereafter)
IN FIGURES
IN WORDS
PLEASE TURN OVER TO COMPLETE THIS FORM
148
APPLICATION FORM (REVERSE SIDE)
PARTICIPANT DETAILS (INDIVIDUAL/CORPORATE/JOINT) (Please use one box for one alphabet leaving one box blank between first
and second)
SURNAME/CORPORATE NAME
FIRST NAME (FOR INDIVIDUALS ONLY)
OTHER NAMES (FOR INDIVIDUAL ONLY)
JOINT APPLICANT’S FIRST NAME (IF APPLICABLE)
OTHER NAMES (FOR JOINT APPLICANT ONLY)
CONTACT PERSON (FOR CORPORATE APPLICANT)/NEXT OF KIN (FOR INDIVIDUAL APPLICANT)
ADDRESS IN FULL (PLEASE DO NOT REPEAT APPLICANT(S)’ NAME). POST BOX NO. ALONE IS NOT SUFFICIENT
TEL
CITY
STATE
E-MAIL
ALLOTMENT PREFERENCE
Please tick □ in the box to indicate allotment preference – CERTIFICATE
/ ELECTRONIC (BOOK ENTRY)
PARTICIPATION DETAILS (The Participation Amount(s) and the Bid Coupon Rate(s) being
E-ALLOTMENTDETAILS(FOR BOOK-ENTRY ALLOTMENTS ONLY)
be set out in the boxes below).
Please credit my/our CSCS Account as detailed below to the extent of the Bonds allotted:
PARTICIPANT’S
CSCS ACCOUNT NO:
CHN (CLEARING
HOUSE NUMBER):
NAME OF STOCKBROKING FIRM:
BANK DETAILS (FOR PAYMENTS)
BANK NAME
BRANCH
ACCOUNT NO:
CITY/STATE
SIGNATURES
SIGNATURES
2ND SIGNATURE (CORPORATE/JOINT)
NAME OF AUTHORISED SIGNATORY (Corporate only):
NAME OF AUTHORISED SIGNATORY (Corporate/Joint):
DESIGNATION (Corporate only):
DESIGNATION (Corporate only):
OFFICIAL SEAL/RC. NO.
STAMP OF SELLING GROUP MEMBER
(ISSUER/ISSUING HOUSE/STOCKBROKERS TO THE ISSUE/PLACEMENT AGENTS ONLY)
149
INSTRUCTION FOR COMPLETING THE APPLICATION FORM
1. Applications should be made on the Application Form, or photocopies or electronic copies of the
Application Form.
2. The Application List for the Bonds will be open to prospective investors for the duration specified in
the Prospectus.
3. Application must be for a minimum of 20,000 registered Bonds of N1,000 each, representing an
aggregate value of N20,000,000 and in integral multiples of 5,000 registered Bonds thereafter,
representing an aggregate value of N5,000,000 each. The number of registered Bonds for which
application is made and the value of bank draft or cheque attached should be entered in the space
provided.
4. The subscription currency for the Issue is the Nigerian Naira (N)
5. The applicant should make only one application, whether in his own name or in the name of a nominee.
Multiple or suspected multiple applications will be rejected.
6. Applicants should complete the Application Form as appropriate. An application from a corporate body
must bear the corporate body’s common seal and its incorporation (RC) Number and be completed
under the hand of a duly authorised official or in the case of a corporate foreign subscriber its
appropriate identification number in the jurisdiction in which it is constituted. Joint applications must all
sign the Application Form.
7. All applications are required to indicate their bank account details in the space provided on the
Application Form to facilitate future e-payment of Interest and the Principal Amount.
8. Each duly completed Application should be forwarded ONLY to one of the Issuing Houses listed in the
Prospectus together with evidence of Bank transfer in an amount equivalent to the aggregate number of
bonds applied for. All bank commissions and transfer charges must be prepaid by the applicant. All
cheques and bank drafts will be presented upon receipt and all applications in respect of which cheques
on bank drafts are returned unpaid will be rejected.
9. The Receiving Banks will issue Certificates of Capital Importation (“CCIs”) to foreign currency
subscribers. CCJs are required to enable subsequent repatriation, in a freely convertible currency, of the
Interest from or proceeds of any future sale of the Bonds acquired in this Issue.
APPLICATION FORM
FIDELITY BANK PLC
FIXED RATE SUBORDINATED UNSECURED BONDS
150

FIDELITY BANK PLC - FMDQ OTC Securities Exchange

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