Financial Statements

Transcription

Zanaco. Big.
Strong. Reliable.
2012 Annual Report
Vision. Mission. Values. History.
Vision
To be Zambia’s leading, preferred, admired, and
innovative bank that should provide to each of our
chosen customer segments a fair deal as we also
strive to Bank the Unbanked.
Mission
To be the number one bank in each of our chosen
segments with a special focus on Government,
Food and Agriculture and Retail Banking through
appropriate technology and distribution channels
and with empowered and motivated staff.
Values
• Excellence
• Teamwork
• Integrity
• Respect
• Pride
Strategy 2011 - 15
1. Banking the Unbanked, by doubling the number
of Retail and Corporate Customers by 2015;
2. Growing the agricultural client base of Zanaco
even further, and targeting to become the premier
agriculture financier in Zambia;
3. Developing the Small and Medium-sized
Enterprise market , ensuring that entrepreneurs
have the correct training and access to financial
services; and
4. Naturing and further developing the
relationship with the Government of the Republic
of Zambia (GRZ). GRZ remains a significant
shareholder, but also a very important client to
Zanaco, and we will continue to provide
value - added services to all GRZ stakeholders.
History
Zambia National Commercial Bank Plc (“Zanaco”)
was established in 1969 to service the financial
needs of the Zambian economy and it has since
evolved into a leading bank nationwide.
In 2007, GRZ sold a 49% stake in the Bank to
Rabo Financial Institutions Development B.V
(RFID), a subsidiary of the Cooperatieve Centrale
Raiffeisen-Boerenleenbank (Rabobank) of the
Netherlands. Subsequently, RFID sold a 3.41% stake to Lizara
Investments Limited (a nominee of the Zambia National
Farmers Union, ZNFU followed by the Bank’s Initial Public Offering in 2008 and Employee Share Ownership Programme
(ESOP).
The Bank remains majority-owned by Zambians and thus is
considered “citizen owned”.
The relationship with Rabobank enables Zanaco to benefit
from technical assistance and best practices in various areas
of banking.
Our Customers
Our customers are fully representative of Zambia as a whole;
from Government to the private sector, from multinationals
to SMEs, from industrial and agriculture, and from civil
servants to the private sector. Reaching out to the Unbanked, Zanaco can truly be considered the People’s Bank.
As a citizen owned bank, we take pride in serving Zambians
of all walks of life, with fair pricing for our services.
Our People
Most of our 1,019 staff members are also shareholders in
Zanaco and, together with their families, have a direct
interest and stake in the long-term success of the Bank.
They are empowered, motivated and committed to make
a difference.
Ownership Structure Post-Initial Public Offering
The current ownership structure of Zanaco is as follows:
DETAILS
%
Rabo Financial Institutions Development B.V (RFID) 45.59
Public 26.00
Government of the Republic of Zambia (GRZ) 25.00
Lizara Investments Limited (a nominee of ZNFU) 3.41
Total
100.00
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012
Contents
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03
06
08
Financial Highlights
Board of Directors
Chairman’s Report
It is with great pleasure that I present this overview on the performance of Zambia’s leading
bank – the Zambia National Commercial Bank
Plc., or ZANACO. The Annual Report for the year
2012 demonstrates that we continued to solidify
our status as a leading player in the Zambian
economy as evidenced by the stable financial
results of the Bank and our continued growth.
Managing Director’s Report
I am delighted to report on the Bank’s year of success. The year 2012 was our 43rd year in existence
and can be described as a very encouraging year
for the Bank, staff, customers, investors and Zambia
as a whole.
2012 Annual Report
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21
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Directors’ Report
The Directors submit their report, together with the
audited financial statements for the year ended 31
December 2012, which disclose the results for the year
and the state of affairs for the Bank as at that date.
Statement of Corporate Governance
As Zambia National Commercial Bank Plc, we remain
committed to the highest standards of corporate
governance. This is central to the continued strong
performance of the business in a manner which is
sustainable in the long term, and to maintaining the
confidence of investors. For us, good governance is
about managing the business effectively and
responsibly in a way which is transparent and shows
accountability.
Directors’ Responsibility
Section 164(6) of the Companies Act, 1994 (as
amended) requires the Directors to prepare financial
statements for each financial year which give a true
and fair view of the state of affairs of the Bank and of
the profit or loss for that period.
Deloitte.
Auditor’s Report
To the members of Zambia National Commercial Bank
Plc. We have audited the accompanying financial
statements of Zambia National Commercial Bank Plc,
which comprise the statement of financial position
as at 31 December 2012, the statement of profit or
loss and other comprehensive income, the statement
of changes in equity, the statement of cash flows for
the year then ended, and a summary of significant
accounting policies and other explanatory
information.
We have a responsible role to play in sustaining the environment: this paper is environmentally friendly.
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Financial Highlights
2
2012 Annual Report
Board Of Directors
From left to right
Top
• Bruce Dick - Chairman
• Chintu Y. Mulendema - Vice Chairman
Middle
• Gertrude M. Akapelwa-Ehueni (Mrs) - Chairperson Human
Resources & Compensation Committee
• Guy H. Robinson - Non-Executive Director
• Frederikus Weenig- Chairman Loans Review Committee
Bottom
• Martyn H. Schouten - Managing Director
2012 Annual Report
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Promoting
sustainable
Board Of Directors
development
Zanaco’s CSR
seeks to promote
sustainable
development of
the communities in
which the Bank
operates, not just
for the present,
but for future
generations.
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2
We have a responsible role to play in sustaining the environment: This
this paper
paper isis environmentally
environmentally friendly.
friendly.
2012
2012Annual
nnual Report
Executive Management Team
From left to right
Top
• Hamish Chipungu - Director Internal Audit
• Martyn H. Schouten - Managing Director
• Edward Mutale - Director Finance
Middle
• Ngenda Nyambe - Director Treasury & Investments
• Chimango Chikwanda - Director Human Resources
• Ignatius Mwanza - Director Corporate Banking
• Sonny Katowa - Director Corporate Support
Bottom
• Arjan Poels - Director Retail Banking
• Suzyo Ngandu - Bank Secretary
• Tom Borghols - Director Risk Management
2012 Annual Report
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Chairman’s Report
It is with great pleasure that I present this overview on the
performance of Zambia’s leading bank – the Zambia National
Commercial Bank Plc., or ZANACO. The Annual Report for the year
2012 demonstrates that we continued to solidify our status as
a leading player in the Zambian economy, as evidenced by the
stable financial results of the Bank and our continued growth. With
63 branches, 121 Zanaco Xpress outlets and 9 agencies nationwide, ZANACO progressively delivers on its vision to be Zambia’s
bank of choice.
Performance
The 2012 financial year saw the Bank increasing its Profit After Tax
from ZMK 120,513 million to ZMK 156,088 million. The customer
growth rate rose to 32 % during this time, a significant
improvement on the 22 % achieved the year before. ZANACO
now has more than 617,000 customers countrywide, ranging from
private individuals to small-scale farmers, to SMEs, local and
international Corporate customers, multilateral organizations and
to the Government of the Republic of Zambia. Through out all this,
ZANACO is proud to have remained “the People’s Bank” since its
founding in 1969.
The advances portfolio has once again seen positive growth and
has increased to ZMK 2.6 billion - a 40% improvement on the
previous year. This reaffirms ZANACO as being one of the country’s
leading lenders. The review and reduction of operational costs
were effected as per our plans established last year. Costs continue
to be under control and in line with business growth, while they
are scheduled to reduce gradually in the coming years.
Economic Prospects
The Zambian economy continued on a sustained growth path in
2012. Preliminary figures place the real growth in Gross Domestic
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Product at 7.3% compared with 6.8% in 2011. This was largely
driven by agriculture, construction, manufacturing, transport,
mining, storage and communications. Zambia’s economic prospects are underpinned by an expected robust domestic performance driven by the agriculture, mining, construction and tourism
sectors.
Corporate Social Responsibility
As part of our continued strategy to “Bank the Unbanked”, ZANACO
once again reached more than 10,500 people directly through
financial education activities aimed at children, SMEs, farmers,
youth and members of staff. During 2012, the Bank also extended
its programme to include health issues, with a focus on the
provision of clean drinking water, environmental support and
occasional donations to meet various community needs. Five
communities were serviced, with over 2,190 community members
benefiting from the projects. These included Da Gama School for
the disabled, Twamutambula orphanage and Mweembe Health
Post, amongst others.
Another CSR initiative adopted during the year was the Young
Women’s Christian Association (YWCA) where the Bank made a
donation towards an improved service provision. The Management and staff at ZANACO strongly believe that all women deserve
to live in a gender-based violence-free society. However, when
such unfortunate incidents do occur, women have the right to
appropriate safety, counselling and material support. We were
honoured to support the YWCA as they provide these critical
services, and we continue to look forward to a society free of
gender-based violence.
Our CSR strategy also acknowledges that, as the reigning
champions of Africa, Zambia is a proud football nation. Not only
2012 Annual Report
does this sport play an important role for recreation, it also
encourages good mental and physical health while promoting team work and more inclusive social behaviour. At
ZANACO, we are playing our part to offer the children of
Zambia, particularly in underprivileged communities, the opportunity to benefit from the sport and have since donated
400 soccer balls though Play Soccer Zambia to kick-start
an active young society. We firmly believe that all children
should be given equal opportunities in order to succeed in
life and that through CSR and other support, they can grow
into thriving and productive citizens.
Achievements
We are extremely proud to once again be the recipients of
the Best Bank in Zambia Award, an accolade bestowed on us
by Euromoney for the 2nd year time in a row for consistently
reported increases in profitability and lending since
ZANACO’s privatisation in 2007. This was a great honour for
us and a validation of our mission to be Zambia’s number
one bank. In this same light, receiving the Best Corporate
Governance Award from the Lusaka Stock Exchange, also for
the 2nd time in a row, was an additional feather in our cap
and a welcome token of recognition for the hard work and
dedication that goes into ensuring that we remain the steadfast and reliable banking partner that we are. We are very
proud and committed to ensuring that there is full disclosure
and that market-leading governance procedures are always
in place.
Another positive result is that ZANACO’s growth has also led
to a soaring market capitalisation: the Bank’s market capital
grew by more than 65% in 2011, truly cementing our leading
standing in the Zambian banking industry. With all of these
2012 Annual Report
successes firmly under our belt, our commitment to targeting the
two-thirds of Zambia’s population that remains ‘Unbanked’ has truly
been reignited, while our widespread and growing national network
ensures that we remain the bank that is best positioned to do so.
Board of Directors
In an unprecedented move, the Board engaged an external consultant to undertake a Board Self-evaluation Effectiveness Review. This
clearly demonstrated the Board’s willingness to be introspective in
its approach to assessing its own performance. The Board engaged
in both formal and informal interactions during the course of the
year which helped to foster good relationships and create unity of
purpose.
In closing, I would like to once again commend the
Management and Staff of the Bank for their dedication to building
on the successes of the previous years while continuing to work
towards strengthening the areas that need attention. ZANACO
remains committed to its long-term vision of transforming into a
more customer and service-centric organisation and we look forward to working towards that goal as we embark on yet another
new year.
Bruce Dick
Chairman
Future Prospects
We are more positive than ever about the future prospects of the
Bank. Our resolve to be a positive force in the growth of the Zambian
economy remains unchanged and our positive reputation amongst
our partners and customers bodes well for the coming months as
we continue to work towards increasing our distribution network
and customer base.
As we aim to reach our 1,000,000 customer target by 2015, we
will continue to expand our distribution channels and offer costeffective financial services to the ‘Unbanked’. We will also continue
investing in innovative technological solutions to further harness
opportunities in the field of mobile telephone banking, while at the
same time building on the successes of our existing strategic
partnerships. Our unique position in being able to offer financial
services to all existing districts remains a critical factor in our future
growth and prosperity and we will look to strengthening this feature
of our operations as we continue to move forward.
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Managing Director’s Report
I am delighted to report on the Bank’s year of success. The year 2012
was our 43rd year in existence and can be described as a very
encouraging year for the Bank, staff, customers, investors and
Zambia as a whole.
Our results of ZMK 238 billion Profit Before Tax shows an attractive
ZMK 53 billion increase over 2011, continuing the sustained and
meaningful improvement in financial results over the past 5 years.
Our continued strong financial performance ensured that we
delivered consistently against our goals, reconfirming our
commitment to truly being “The People’s Bank” in Zambia.
We remained firmly committed to our primary goal to Bank the
Unbanked and we delivered this year again on our long-term
promise. This is our pledge. This is what we mean to Zambia.
In late 2011, the Government of the Republic of Zambia announced
an official Inquiry into the sale of 49% of ZANACO shares plus
management rights to Rabobank of the Netherlands in 2007.
Management and staff cooperated fully during this investigation.
The outcome of this inquiry was not available at the time of print.
Recognition
Our commitments to quality were demonstrated by back-to-back
awards by Euromoney for being the `Best Bank in Zambia 2012’ and
by the Lusaka Stock Exchange for `Best Corporate Governance’.
ZANACO received both awards in 2012 for its outstanding
performance in 2011, while it received the same awards in 2011 for
an equally excellent performance in 2010. The Bankers Association
of Zambia also recognised ZANACO for its `Excellence in Banking
the Unbanked’ and its ‘Financial Literacy Programme’. We are proud
of this local and international recognition, and we will continue to
strive to exceed these high quality standards.
The spirit of the country was dominated by football both at the start
and the close of the year. We kick-started the year with the
Chipolopolo Boys bringing home the Africa Cup of Nations (AFCON)
2012 trophy. We closed the year with the ZANACO Football Club
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winning the FAZ/MTN Super Division Premier League Cup, thereby
qualifying for the Confederation For African Football (CAF)
tournament 2013.
Economic Overview
ZANACO became the best capitalised Bank in Zambia by being the
first bank to meet the new minimum capitalisation requirements of
the Bank of Zambia. Not only did ZANACO meet the new capital
requirements for local banks (up from USD 2.5 Million to US$20
Million), it also surpassed the significantly higher new minimum
capital requirements for foreign banks (US$100 Million), even though
it is majority owned by Zambians.
Other significant economic highlights introduced by the
Government included the:
• Introduction of the Bank of Zambia Policy Rate - The Policy Rate was
initially set at 9% but closed the year at 9.25%. Bank lending rates
must be benchmarked against the Policy Rate, rather than against
individual Bank Base Rates. Overall, bank lending rates have
continued to drop consistently across the board for all customer
types during the year.
• Introduction of Statutory Instrument No. 33 in May 2012,
prohibiting the use of foreign currency in domestic transactions
in order to reinforce the Kwacha as the country’s legal tender.
The Kwacha appreciated significantly against the US Dollar in
the period immediately after this event to reach a year high of
ZMK 4,840; it closed the year at ZMK 5,235 to the US Dollar.
Performance
During the year, we concentrated on being active in all segments of
the Zambian economy. We focused on SMEs both in terms of training as well as offering a broad array of fundamental banking services.
We continued to focus on Government as our largest stakeholder.
As a citizen-owned Bank we have an obligation to our shareholders
to sustain our financial results. We remain true to this promise and
are delighted to see an increasing volume of Government business
being committed on a regular basis.
2012 Annual Report
In 2012, we invested heavily in reviewing and refining our
products in line with our customers’ needs. We ran a very
popular campaign to “Invest in Zambia” by reducing our
competitive interest rates even further for a limited period of
time. This interest rate reduction attracted a large number
of scheme loan applications and contributed to the growth
of advances by 40% compared with 10% in 2011. Alongside
this, we continue to make impressive improvements to our
Non Performing Loans which are 3% better than the market
average.
Distribution
ZANACO is proud to have more than 617,000 customers and
has firmly positioned itself as the largest bank network in
Zambia with 63 existing branches. We opened 4 new outlets
at Acacia Park, Levy Junction and Crossroads in Lusaka and
Jacaranda Mall in Ndola. Our mobile truck continued operating in the Kabwata, Chelstone and Chilenje areas of Lusaka,
whilst our Zanaco Xpress operations, supported by our 9
agencies, served customers in a further 130 locations nationwide. This is by far the largest branch footprint in the country.
We will continue to expand our outreach by investing in
mobile telephone functionality, ensuring that customers have
a wide range of affordable and practical banking services
through their mobile phones.
Customer Service
Our growing customer base means that we have to improve
the ways in which we serve our diverse array of customers. We
started to strategically address queues by deploying Customer
Service Representatives in all the branches, whilst at the same
time monitoring all the branches for customer service level
improvements. The Bank also undertook its second Customer
Satisfaction Survey, a first full mystery shopping exercise as
well as to hold focus group sessions to gather feedback from
customers, to measure and then act on this feedback. The
Bank also increased operating hours in selected branch and
the Call Centre in response to customer requests. Meanwhile,
2012 Annual Report
our operational challenges continue to reduce and although I
believe we have taken the first important steps towards
customer service improvement, we recognise that we have many
more milestones to meet.
On the back of this, we have invested heavily in our Business
Efficiency Programme (BEP) to improve our processes and therefore
our customer service. The specialised BEP team started to critically
analyse the key processes in the Bank, including card issuance,
loan processing and payments processing. These key areas were
identified as imperative to making business easier for our customers
and to closing the gaps on our internal processes, thereby enhancing security, reducing costs and further improving the customer
experience. We expect the main changes to start bearing fruit in the
fourth quarter of 2013.
We certainly understand that, today, quality service and ease of
doing business is what makes all the difference for customers.
As such, ZANACO acknowledged the constructive feedback and
rewarded 10 customers for their contribution towards our service
improvement efforts.
Our People
Our enhanced communication efforts to and from our staff and
customers provided more platforms for clear and transparent
communication. This took place through the Intranet, the website
and face-to-face gatherings so as to communicate the short,
medium and long term strategies of the Bank.
ZANACO is increasingly well positioned as an attractive and fair
employer of choice, which is evident from the results of the Staff
Engagement Survey results. The Bank also embarked on its first ever
Customer Service Awards where efforts made by staff to improve
service both internally and externally were recognised. This was
coupled with other team building activities and interactions such
as Long Service Awards, an inter-departmental football league and
several events to celebrate our distinguished awards.
Corporate Social Responsibility
As part of our continued strategy to ‘Bank the Unbanked’ through
financial fitness education in 2012, the Bank reached more than
10,500 children, SMEs, farmers, youth and members of staff. During
this time, the Bank also extended its CSR programme to include
health matters, with a focus on the provision of clean drinking water,
environmental support and occasional donations to meet various
community needs.
In addition to this, the Bank started the journey to sensitizing staff
on environmental health, with the aim of providing a sustainable
green working environment in the near future. As the leading bank
in Zambia, we understand our responsibility to demonstrate the
way forward within our communities.
Outlook for 2013
We are positive about the coming year. Our Business Efficiency
Progamme will take centre stage in embedding our focus for 2013
on Service Improvement, Operating Efficiency, Governance, Control
and Customer Growth.
2012 was a very fruitful year for ZANACO and, as always, such
achievements cannot be executed without the direction of the
Board of Directors and the support of Management and Staff. I offer
them all my gratitude and continued support for the coming years
and I look forward to working with both the ZANACO team and our
valued customers in ensuring that 2013 will continue to see the
Bank go from strength to strength.
Martyn H. Schouten
Managing Director
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Directors’ Report
The Directors submit their report, together with the audited financial statements for the year ended 31 December 2012, which discloses the results for the year and the state of affairs for the Bank as at that date.
PRINCIPAL ACTIVITIES
The Bank is engaged in the business of commercial banking and the provision of related services. The Bank has continued with its network expansion programme during the year.
SHARE CAPITAL
There were changes in the authorised and issued share capital during the year with the former increasing from K15,000 million to K100,000 million and the latter increasing from K11,550 million to K86,625 million by the issue of bonus
shares of 13 to 2.
RESULTS AND DIVIDEND
The net profit for the year of K156,088 million has been transferred to retained earnings. The Bank paid dividends during the year amounting to K32,340 million in respect of 2011 profit.
The Board has recommended a final dividend of K42,013 million for the year ended 31 December 2012.
DIRECTORS
The Directors who held office during the year and to the date of this report were:
Mr B Dick
- Chairman
Mr C Y Mulendema
- Vice Chairman
Mr M H Schouten
- Managing Director Mrs G M Akapelwa Ehueni
- Non-Executive Director
Mr G Robinson
Mr F Weenig
NUMBER OF EMPLOYEES AND REMUNERATION
The total remuneration of employees during the year amounted to K235,725 million (2011: K 207,550 million) and the average number of employees for each month of the year was as follows:
Month
Number
Month
Number January
919
July
992
February
945
August
985
March
961
September
980
April
961
October
980
May
989
November
1,007
June
986
December
1,019
The Bank has policies and procedures to safeguard the occupational health, safety and welfare of its employees.
GIFTS AND DONATIONS
During the year, the Bank made donations of K2,709 million (2011: K1,934 million) to charitable organisations and events.
PROPERTY, PLANT AND EQUIPMENT
The Bank purchased property and equipment amounting to K61,527 million (2011: K64,762 million) during the year. In the opinion of the Directors, the recoverable amount of property, plant and equipment is
not less than the carrying value.
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2012 Annual Report
RESEARCH AND DEVELOPMENT
The Bank did not incur any research and development costs for the year 2012 (2011: Nil).
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in Note 32 to the financial statements.
DIRECTORS’ EMOLUMENTS AND INTERESTS
Directors’ emoluments and interests are disclosed in Note 32 to the financial statements.
PROHIBITED BORROWINGS OR LENDING
There were no prohibited borrowings or lendings as defined under Sections 72 and 73 of the Banking and Financial Services Act, 1994 (as amended).
RISK MANAGEMENT AND CONTROL
The Bank, through its normal operations, is exposed to a number of risks, the most significant of which are credit, market, operational and liquidity risks. The Bank’s risk management objectives, policies and strategies are disclosed in Note 4 of the financial statements.
COMPLIANCE FUNCTION
The Bank has a compliance function which has the responsibility to monitor compliance with regulatory requirements and the various internal control processes and procedures.
SIGNIFICANT EVENT
As reported in the last Directors’ Report contained in the 31 December, 2011, Financial Statements, the Commission of Inquiry appointed by the Republic of Zambia (GRZ) completed its hearings and receiving of
submissions on 9th February 2012. In line with the Bank’s highest Standard of Corporate Governance Practice, Management fully cooperated with the Government Commission of inquiry.
As at the reporting date, the announcement of the findings and recommendations of the Commission of Inquiry had not been made public.
KNOW YOUR CUSTOMER (KYC) AND ANTI-MONEY LAUNDERING (AML) POLICIES
The Bank has adopted Know Your Customer (KYC) and Anti-Money Laundering (AML) policies and complies with current legislation in these areas.
AUDITORS
The Bank’s auditors, Messrs Deloitte, indicated their willingness to continue in office. A resolution proposing their reappointment and authorising the Directors to fix their remuneration will be put forward at the
Annual General Meeting.
By order of the Board.
MRS. S. NG’ANDU
SECRETARY
Date: 23 February 2013
2012 Annual Report
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Introduction
As Zambia National Commercial Bank Plc, we remain
committed to the highest standards of corporate governance. This is central to the continued strong performance
of the business in a manner which is sustainable in the long
term, and to maintaining the confidence of investors. For us,
good governance is about managing the business effectively
and responsibly in a way which is transparent and shows
accountability.
On the following pages, we set out our approach to corporate governance, which includes the policies and structures
that we have put in place. This is an effort to ensure that our
reporting on governance matters is clear, concise and well
structured.
Our corporate governance procedures are aligned to
international practices and structures to ensure proper
checks and balances. The Bank is fully in compliance with the
requirements of the Banking Act, Companies Act and
Securities Act and it has adopted the LuSE
Corporate Governance Guidelines and the BOZ Guidelines
on Corporate Governance.
Board Performance
The Board is responsible for the long-term success of the
company. The Board of Directors retains full and effective control of the
Bank and monitors the Executive Management team. The
Board is also responsible for the Bank’s direction, policies and
strategies and all investment and divestment decisions. It
also ensures that the Bank meets its responsibilities towards
all its stakeholders and that it is prudently managed against
the major risks inherent in general business dynamics. In this respect, the Board makes key decisions to ensure
that it retains proper direction and control of the Bank. The
Directors bring in experience and expertise from their own
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fields of business to ensure that the debate on matters of strategy,
policy and performance is robust, informed and constructive. Furthermore, the roles of the Chairman and Managing Director do
not vest in one person.
The Board structure is such that no one individual or group dominates the decision making process. There is a schedule of matters
reserved for the entire Board’s approval and a clear delegation of
authority to the Managing Director and other senior executives
within the Bank for specific matters. A procedure exists for the
determination of matters arising between scheduled meetings.
There are established procedures in existence for planning and
capital expenditure, making of investments, information, reporting systems and for monitoring the Bank’s business and performance.
Newly appointed Directors are not only scrutinised and subjected
to a fit and proper test by the Bank of Zambia, but are also subjected to a final approval by shareholders at the Annual General
Meeting. The Company’s Articles of Association provide that, on a
rotation basis, one third of the Directors resign every year and, if
eligible, they can then offer themselves up for re-election.
In line with accepted best practice, all Directors are subjected to
re-election at regular intervals. Board Members are also exposed to
continuous learning through various initiatives.
The Chairman and Managing Director, in consultation with the
Bank Secretary, agree on the agenda for Board meetings, but all
Board Members are entitled to raise other matters. The Chairman
ensures that all Board Members are properly briefed on all issues
arising from the Board meetings. It is the responsibility of the
Executive Management to ensure that the Board is supplied with
information in a timely manner and of quality appropriate enough
to enable it to carry out its duties.
The Board, which comprises five Non-Executive Directors and the
Managing Director, are confident that they have the knowledge,
talent and experience to lead a listed Bank. The Non-Executive
Directors are independent of Management and exercise their
independent judgement with their in-depth knowledge and
experience. Please refer to the Directors’ Report for a list of the
Directors who held office in the year under review. To ensure transparency, the activities of the Board are documented
and planned. Although the Board has ultimate responsibility for
the success of the Bank, this is managed on a delegated basis.
The Board appoints the Chief Executive Officer and monitors his
or her performance in leading the Bank and providing operational
and performance management in delivering the strategy.
The Chairman, with assistance from the Chief Executive Officer and
Company Secretary, is responsible for ensuring that Directors are
supplied with information in a timely manner to enable them to
discharge their duties.
The Chief Executive Officer provides a regular report to the Board
that includes information on operational matters, the operating
environment, strategic development, corporate social responsibility, human resources and stakeholder relations. Our Board
composition remained intact, with the experience and expertise of
the Board members having been brought to bear.
In an unprecedented move, the Board engaged an external
consultant to undertake a Board evaluation. This clearly demonstrated the Board’s willingness to be introspective in its approach
to assessing its own performance. The Board enganged in both
formal and informal interactions during the course of the year,
which helped to foster good relationships and create unity of
purpose.
Equitable Treatment of Minority Shareholders
The corporate governance framework of the Bank ensures that
equitable treatment of shareholders, including minority shareholders, is achieved by:
• Ensuring that the Board adopts a shareholders’ perspective
when making decisions and ensuring minority interests are
protected
• Improving communications and interactions between
minority shareholders, Board Members and Management
2012 Annual Report
• Appointment of Directors is subjected to the final
approval of all shareholders, including minority
shareholders, at the Annual General Meeting
• Ensuring the minority shareholders are duly accorded
with their three basic rights:o The right to seek information
o The right to voice an opinion
o The right to seek redress
Management Team
Our Executive Management Team remained dynamic. The
team provided leadership and direction for the organisation. Respective members of the Executive Team participated
in various industry initiatives such as those initiated by the
Bankers Association of Zambia (BAZ) and its Committees.
Succession planning also forms part of the responsibility
of Senior Management to ensure that there is continuity in
the organization. The Team conducted a Staff Engagement
Survey, while the Senior Team visited Branches within the
network.
Risk Management and Control
The Board continued to manage both risks and controls in
the organization. The Board regularly reviewed the effectiveness of the Bank’s system of risk management and internal
control processes, including financial, operational and compliance controls and risk management systems.
To this end, the Credit Policy, which was last reviewed in
2008, was amended to include, among other things, set
guidelines on credit risk acceptability. The policy was also
condensed to make it more concise and user friendly to our
staff. The Risk Appetite Statement was also adopted by the
Board in November 2012.
For the Board, a key requirement is that the Bank has robust
2012 Annual Report
processes to identify, evaluate and manage risk so that Directors
have visibility of the major risks.
The Bank has developed a system of internal controls that encompasses the policies, processes, tasks and behaviours that seek to
facilitate the effective and efficient operation of the Bank.
The Internal Audit team independently reviews the risk
identification procedures and control processes implemented
by Management. It provides objective assurance of the operation and validity of the systems of internal control through a
programme of cyclical reviews, making recommendations for business and control improvements as required.
The Bank also developed policies and procedures to drive consistency and clarity on how risks are managed and subsequently
reported. During the year under review, the Frauds Policy and the
Market Risk Policy were approved by the Board.
The Board accepts final responsibility for the risk management
and internal control systems of the Bank. It is the responsibility
of Management to ensure that adequate internal financial and
operational control systems are developed and maintained on an
on-going basis in order to provide reasonable assurance
regarding:
• effectiveness and efficiency of operations
• safeguarding of the Bank’s assets (including information)
• compliance with applicable laws, regulations and supervisory
requirements
• reliability of accounting records
• business sustainability under normal as well as adverse
conditions, and
• responsible behaviour towards all stakeholders.
The efficiency of internal control systems is dependent on their
compliance with prescribed measures. There is always a risk of staff
non-compliance with such measures. Consequently, even a strict
and efficient internal control system can provide no more reason-
able measures of assurance in respect of the above mentioned
objectives.
Internal auditors monitor the operations of the internal controls
and report to Management and the Audit Committee on their
findings and recommendations. All critical Information Technology
(IT) is backed up and the Bank has put in place well documented
business continuity and disaster tolerant procedures for all mission
critical operations and systems.
The procedures are tested periodically and the Board is of the
opinion that they meet the acceptable criteria. Financial Reporting
The Directors accept final responsibility for the preparation of the
annual financial statements which fairly present:
• the financial position of the Bank as at the end of the year under
review, and
• the financial results of operations as well as the cash flows for
that period.
The responsibility for compiling the annual financial statements
was delegated to Management. The external auditors report on
whether the annual financial statements are fairly presented.
The Directors are satisfied that during the year under review:
• adequate accounting records were maintained
• an effective system of internal control and risk management
monitored by Management was maintained
• appropriate accounting policies supported by reasonable and
prudent judgments and estimates were used consistently, and
• the financial statements were compiled in accordance with
International Financial Reporting Standards approved by ZICA, the
Banking and Financial Services and the Zambian Companies Act,
the Securities Act, and the Stock Exchange Listing Rules.
The Directors are also satisfied that no material event has occurred
between the financial year-end and the date of this report.
13
The Board met on a quarterly basis throughout the year.
The attendance by the Directors during the year was as follows:
Director’s Name February Mr B Dick - Mr C Y Mulendema Mrs G M Akapelwa-Ehueni
- Mr G Robinson - Mr F Weenig - Mr M H Schouten - NED NED NED NED NED ED
a a
a
a
a
a
2012
May September November
a a
a
a
a
a
a a a a a
a
a
a
a
a
a
a
*NED - Non-Executive Director
*ED - Executive Director
Directors’ Compensation
The disclosure of Directors’ fees and remunerations is made in Note 32 of the financial statements. The Directors do not have any shares in the Bank and are not entitled to share options. Directors’ fees and any
amendments are approved by shareholders at the Annual General Meeting.
Board Evaluation The Board engaged an external third party to review the effectiveness of the Board in line with accepted best practice. The review sought to identify specific areas in need of improvement or strengthening,
while the recommendations for any actions to be taken where discussed by the entire Board. The review and evaluation include, among other things, the assessments of the Board’s:
• performance against its objectives at the beginning of the year
• effectiveness with respect to the Bank’s strategic direction
• responsiveness to shareholders and stakeholders’ concerns
• maintenance and implementation of the Board’s governance principles
• access to and review of information from Management and the quality of such information
• review of the composition and diversity of the skills and exposure of the Board, and • continuous professional development for Board members.
14
2012 Annual Report
Board Committees
In order to enable it to discharge its executive functions, the Board has established four principal standing Committees, each governed by written terms of reference defining the frequency of
meetings, power and duties, and reporting obligations. These Committees continuously evaluate the progress made towards meeting the Bank’s overall objectives, in addition to ensuring the efficient and
effective management of the entire Bank’s core functions. A Non-Executive Director chairs each of the four Committees. The said committees are Audit, Loans Review, Credit and Human Resources and
Compensation.
Audit and Risk Committee
The Audit and Risk Committee is chaired by a Non-Executive Director and consists of two other Non-Executive Directors. The Committee meets at least four times per year to evaluate, amongst other things,
accounting practices, the internal control systems and the auditing and financial reporting. Its tasks include evaluating critical risk areas identified with the help of Management, as well as reporting on these to
the Board.
The Committee operates under a formal charter approved by the Board and the Committee Members have unlimited access to all information. Certain members of Management including the Managing
Director are invited to attend and give feedback at Committee meetings. The Audit Committee also recommends to the Board the remuneration of the external auditors. The Committee also holds separate
meetings with the Director of Internal Audit and the external auditors when required, in order to ensure that matters are considered without undue influence.
Director’s Name 2012
Feb May Mr C Y Mulendema
- NED a a Mr B Dick - NED a a Mrs G M Akapelwa-Ehueni - NED
a a September a a a November
a
a
a
Loans Review Committee
The Loans Review Committee is chaired by a Non-Executive Director and consists of two Non-Executive Directors and one Executive Director, who is also the Chief Executive Officer of the Bank. On a quarterly
basis, the Committee reviews the collectability of the Bank’s lending portfolio by not only ensuring adherence to statutory and regulatory requirements, but also ensuring that lending practices and procedures
are in line with the credit policy of the Bank, including on matters relating to provisions and allowances for impairment.
2012 Annual Report
15
Director’s Name Mr F Weenig
- NED Mr C Y Mulendema
- NED Mr M H Schouten - ED Mr B Dick - NED 2012
February May a a a a a a a a September November
a a
a a
a a
a a
Credit Committee
The Credit Committee is chaired by a Non-Executive Director and consists of two other Non-Executive Directors and one Executive Director, who is also the Chief Executive Officer of the Bank. Certain members
of the Executive Management Committee attend by invitation. The Credit Committee supervises the effective implementation of credit and risk management policies and ensures the enhancement of the
Bank’s credit risk management systems and processes, in line with best practices in loan rating/credits, risk modelling, loan pricing and strategic loan management, including the identification and control of
the concentration of risk. The Credit Committee also approves credits with values beyond the mandate of Management.
Director’s Name February Mr B Dick - NED a Mrs G M Akapelwa-Ehueni - NED a Mr G Robinson - NED a Mr M H Schouten - ED a 2012
May September a a a a a a a a November
a
a
a
a
Human Resources and Compensation Committee
The Committee provides oversight over the remuneration and compensation for Senior Management and key personnel in the Bank, so as to retain and motivate staff to perform at the level of quality required.
Currently, the Bank participates annually in local market surveys and those focusing on the rest of Africa in order to ensure market related salaries are paid and that market related trends are also followed when
changes are made to employee benefits. The remuneration of all managerial staff in the Bank is also linked to their individual performance. The attendance by the Directors during the year was as follows:
Director’s Name 2012
February May September November
Mrs G M Akapelwa-Ehueni - NED a a a a
Mr G Robinson - NED a a a a
Mr C Y Mulendema - NED a a a a
Mr M H Schouten - ED a a a a
*ED - Executive Director 16
2012 Annual Report
Code of Conduct
The purpose of the Code of Conduct is to regulate the required standards of corporate behaviour by which the Bank is judged in all and its operations. Therefore, the Code of Conduct stipulates the standards
by which individuals within the Bank are judged.
The objectives of the code are:
• integrity • staff interest and gifts • conduct of business / communication with customers • duty to supervise
• skill, care and diligence
• customer due diligence / know your customer
• conflict of interest
Members of staff as well as agents are being subjected to continued training on the contents of the Code of Conduct to enable them to understand and appreciate these important guidelines, which control
their conduct in their daily activities as Bank employees.
In 2012, we introduced a formal procedure requesting Board Members and Management to fill out a Declaration of Interest Form on an annual basis. Directors have a continuing duty to update any changes
in these interests at each Board meeting.
Bank Secretary
The Board appoints the Bank Secretary and all Board Members have access to the services of the Bank Secretary. Where necessary, the Board may seek independent professional advice on some matters.
The Bank Secretary ensures the following:
• annual calendar for Board meetings is circulated to all Board Members after approval
• adequate information is provided to all the Members prior to commencement of the Board and sub-committee meetings
• culture of Good Corporate Governance is promoted
• liaison with Securities and Exchange Commission (SEC), the Lusaka Stock Exchange (LuSE) and Patents and Companies Registration Agency (PACRA)
• statutory registers are maintained
• key liaison for investors and contact point forshareholders, and
• Board is updated on relevant statutory amendments and developments.
External Audit
The external auditors are responsible for reporting on whether the financial statements are fairly presented in accordance with International Financial Reporting Standards and in the manner required by the
Zambian Companies Act and the Banking and Financial Services Act.
Consultation occurs between external and internal auditors to effect an efficient audit process. The external auditors consider all the reports issued by the Internal Audit Department and which are duly
supplied to them by the Bank.
Internal Audit
Internal audit is an independent, objective assurance and consulting activity designed to add value to the Bank as well as to improve its operations. It helps the Bank accomplish its objectives by bringing a
systematic and disciplined approach to evaluating and improving risk management, control and governance processes. 2012 Annual Report
17
Internal audit plans are prepared using a risk assessment model that ensures audit resources are directed towards high risk areas of the Bank. The plan is developed in consultation with Management and approved by the
Audit Committee to ensure independence of the audit function, the Director Internal Audit functionally reports to the Audit Committee and administratively to the Managing Director.
The internal audit function is governed by the Internal Audit Charter which defines the purpose, authority and responsibility of the internal audit function. The Internal Audit Charter is reviewed and updated to meet best
international practices at least once a year.
Compliance Function
The Bank has set up an independent Compliance Function, guided by the Compliance Charter, which defines the fundamental principles, roles and responsibilities of the Compliance Functions within the Bank, as well as its
relationship with Executive Management, the Board of Directors and the business and operational functions. The Charter further stipulates the mission of the Compliance Function, which is to promote, monitor and safeguard
the integrity of the Bank.
The Charter will be updated from time to time to reflect the legal and regulatory evolution which shall be communicated to all staff. The Board of Directors is responsible for formally approving the compliance policy set by the
Executive Management. The efficiency and implementation of the policy will be evaluated on a quarterly basis by means of a status report provided by the Executive Management to the Board. The Compliance Function also
independently reports to the Board Audit and Risk Committee material compliance issues in the Bank through the Compliance Quarterly Report to enable the Board to appreciate the level of compliance risk and to solicit for
their timely guidance.
The objectives of the Independent Compliance Function are to:
• identify and evaluate the compliance risks within the Bank
• organise, co-ordinate and structure compliance related controls
• control and monitor all measures taken to mitigate compliance risks
• report to the Executive Management and the Board of Directors as appropriate, and
• act as the compliance advisor within the Bank.
The Compliance Function and Compliance Monitoring programme are subject to an independent review by both an internal and external audit for the appropriateness of the policies and implementation.
Anti-Money Laundering Policy
The Bank has enhanced its Anti-Money Laundering procedures by gaining access to an internationally reported database for people and entities who are reported to be involved in money laundering and terrorist financing
activities. This is an important control measure that ensures that the Bank only deals with customers and counter-parties with high integrity.
Following the introduction of Anti-Money Laundering directives in 2009 by the Securities and Exchange Commission, the Bank has further endeavoured to ensure that all the requirements of the directives are met. The training
of staff on Anti-Money Laundering matters is an on going critical activity of the Bank which is designed to transfer sufficient knowledge to all members of staff.
Whistle Blowing
The Whistle Blowing Policy is intended to make it easier for members of staff, consultants and other service providers to report irregularities in good faith without needing to fear that those actions may have adverse consequences for them.
The Whistle Blowing Policy is a key element in demonstrating the Bank’s commitment to the highest possible standard of transparency, integrity, probity and accountability in its operations with all stakeholders. Protecting the integrity and reputation of the Bank requires the active support of all members of staff who, in most cases, are the first to notice and who are required to report incidents of suspected fraud,
corruption, collusion and coercion and other serious infringements of the rules and policies in force at the Bank.
By creating an environment of trust and maximum protection for members of staff through this policy, the Bank wants to encourage them to co-operate in full. The policy has put in place arrangements that ensure that
members of staff who report irregularities in good faith are afforded the utmost confidentiality and the greatest degree of protection against any retaliations or reprisals, whether actual or threatened, as a result of their whistle
blowing. In this regard, the Whistle Blowing Policy was revised and approved by the Board in the year under review to reflect the enhanced procedures for reporting malpractice through the Trusted Person.
18
2012 Annual Report
Stakeholder Communication
The Bank continued to engage with its key stakeholders using various channels. This included the following:
• Annual General Meeting which affords the Minority Shareholders the opportunity to interact with Board and Management
• Investor Relations presentations for both Domestic and International Institutional Investors as well as one on one meetings with representatives of various Fund Managers, and
• Online Investor Relations Portal through which both existing and potential investors can access information and have access to Management.
To underscore the governance principles of disseminating timely and relevant information, all presentations made are uploaded on our website.
In addition, we have put in place an Insider Trading Policy which ensures that the release of Price Sensitive Information is properly managed, and particularly prohibits the Board, employees and their related parties from trading
during restricted periods i.e. “closed windows”.
Environmental and Social Management Policy
Compliance with Legislation on Environmental and Social aspects of business are increasingly becoming focal measurement point for Good Governance. Our approach as a Bank has been to develop and implement innovative
monitoring and screening processes that adhere to both our internal guidelines and the Zambian Environmental Laws.
Alongside the environmental laws, the Bank has developed a detailed environmental assessment screening process which is an integral part of loan origination and appraisal processes. Broadly, the process is categorized in
three parts:
• Category A – Projects with potential significant adverse social or environmental impacts
• Category B – Projects with potential limited adverse social or environmental impacts
• Category C – Projects with minimal or no significant social or environmental impacts
As a good corporate citizen, ZANACO intends to actively work towards the realization of sustainable development. Through our business activities and services, the Bank will support environmental conservation efforts within
its operational scope as well as those in the service supply chain in order to contribute to the realization of sustainable development in Zambia.
The Bank is committed to raising staff awareness on environmental issues and sustainable development and encourages staff observance of the following at the workplace:
Basel II
• Prevent pollution by reducing, reusing and recycling materials and goods purchased
• Encourage energy saving, reduce water consumption, and promote good housekeeping practices
• Improve and maintain the quality of the working environment within the Bank and all our branches/affiliates (internal air quality, water quality, waste management, paper use, energy use, etc).
The implementation of the International convergence of Capital Measurement and Capital Standards also known as Basel II has started in earnest following the issuing by Bank of Zambia of draft regulations for Credit risk, Operation risk and Market risk under Pillar 1. Basel II will apply to all Banks operating in Zambia and the implementation process is expected to be completed by December 2013.
Zambia National Commercial Bank has structures and resources in place which will ensure full implementation and compliance of the Basel II requirements in line with guidelines issued by Central Bank.
Corporate Social Responsibility (CSR)
Financial Fitness:
ZANACO’s major CSR strategy focuses on equipping citizens with personal final management skills through the Financial Fitness Programme to help them make informed judgements and take effective actions regarding the
current and future use of money. The target audience for the Financial Fitness Programme comprises children through the school system, youths through colleges, adults through the media and business groups (farmers and
SMEs) through trainings and partnership with membership organisations such as the Zambia National Farmers Union.
2012 Annual Report
19
Financial Fitness 2012 achievements
Target group
Number of people reached in 2012 Number of people reached from 2009
Children
Youths and students
SMEs
Farmers
Members of staff
6,500
2,000
1,072
1,024
46
18,900
2,000
4,072
1,931
1,074
General adult population
Radio station coverage
TV, Radio, print media coverage
Water support
ZANACO recognises the importance of health to society in general and is focusing on water and sanitation support to communities. Water is life and clean water is important for healthy living, including the
prevention of water borne diseases. This component of CSR was introduced in 2012 with 5 communities currently being serviced and over 2,190 community members benefiting. One organisation was supported with sanitation improvement.
Benefiting communities include:
Name of community
District
1. Da Gamma School for the disabled children
2. Twamutambula Orphanage
3. Mweemba Health Post
4. Tafelasoni Basic School
5. Sacha Village
6. University of Zambia
Luanshya
Chisamba
Mazabuka
Chipata
Lundazi
Lusaka
Partnerships and Donations
ZANACO rolls out some of the CSR initiatives through strategic partnerships and donations to meet various community needs. Below are some initiatives supported:
• In recognition of the growing concern around gender-based violence, ZANACO made a donation to YWCA to equip them for service provision. We believe that women need to live in a gender-based
violence free society. Where such unfortunate incidences occur, women have the right to appropriate safety, counselling and material support as provided by YWCA. We look forward to a gender based
violence free society.
• As the reigning champions of Africa, Zambia is a proud football nation. Sport plays an important role in the lives of children and encourages good health and fitness. At ZANACO, we are playing out part
and have donated 400 soccer balls to kick-start an active young society, especially in underprivileged areas. We believe that all children should be given an equal opportunity to succeed.
At ZANACO we remain committed to giving back to our society.
Zanaco Football Club
Zanaco remains the proud sponsor of the Sensational Zanaco Football Club. The club continues to perform very well in the
Zambian Super League and recorded its sixth top title of the league by winning the 2012 MTN/FAZ Premier League.
20
The club will represent Zambia in the Orange Confederation for African Football (CAF) League in 2013. Prior to this, the Bank won
the Super League in 2003,
2005, 2006, 2008, and 2009. The Club’s brilliant performance during the year resulted
the selection
of
2012innnual
Report
We have a responsible role to play in sustaining the environment: This paper is environmentally friendly.
six players who represented Zambia in the 2012 Zone Six games hosted by Zambia.
Directors’ Responsibility
STATEMENT OF RESPONSIBILITY FOR ANNUAL FINANCIAL STATEMENTS
Section 164(6) of the Companies Act, 1994 (as amended) requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Bank and of the profit
or loss for that period.
The Directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information. The Independent external auditors,
Messers Deloitte, have audited the annual financial statements and their report is shown on page 23.
The Directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability for assets and to prevent and detect material misstatements. The systems are implemented and monitored by suitably trained personnel with an appropriate segregation
of authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under
review.
In the opinion of the Directors:
• the profit and loss account is drawn up so as to give a true and fair view of the profit of the Bank for the financial year ended 31 December 2012;
• the statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Bank as at 31 December 2012;
• there are reasonable grounds to believe that the Bank will be able to pay its debts as and when they fall due; and
• the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act, 1994 (as amended) and the Banking
and Financial Services Act,1994 (as amended).
Director
2012 Annual Report
Director
Director
Secretary
21
Deloitte.
Independent Auditor’s Report
To the members of Zambia National Commercial Bank Plc
We have audited the accompanying financial statements of Zambia National Commercial Bank Plc, which comprise the statement of financial position as at 31 December 2012, the statement of profit or loss
and other comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Directors’ responsibility for the financial statements
The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Banking
and Financial Services Act, 1994 (as amended), and the Companies Act, 1994 (as amended), and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Zambia National Commercial Bank Plc as at 31 December 2012, and of its financial performance and cash flows for
the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Banking and Financial Services Act, 1994 (as amended) and the Companies Act, 1994
(as amended).
Report on other legal requirements
The Companies Act, 1994 (as amended) under section 173 (3) requires that in carrying out our audit, we consider and report to you on the following matter. We confirm that, in our opinion, the accounting
and other records and registers have been properly kept in accordance with the Act.
In accordance with section 64 (2) of the Banking and Financial Services Act, 1994 (as amended), we report that in our opinion:
• The Bank made available all the necessary information to enable us to comply with the requirements of this Act, and
• The Bank complied with the provisions of this Act and the regulations, guidelines and prescriptions of this Act.
DELOITTE & TOUCHE
C. CHUNGU
PARTNER
Date: 23 February 2013
22
2012 Annual Report
STATEMENT OF PROFIT OR LOSS
for the year ended 31 December 2012
Interest income
Interest expense
Notes
2012
K’million
2011
K’million
5
6
550,876
(88,926)
453,533
(60,139)
461,950
393,394
(243)
(19,852)
Net interest income
Impairment losses on loans and advances
16
Net interest income after loans impairment charges
461,707
373,542
Net fee and commission income
7
222,293
200,998
Foreign exchange income
Other operating income
8
16,070
14,254
23,692
7,958
30,324
31,650
714,324
606,190
(476,044)
(421,252)
238,280
184,938
(82,192)
(64,425)
156,088
120,513
Total income
Operating expenses
9
Profit before income tax
Income tax expense
11
Profit for the year
Dividend proposed/paid
12
42,013
32,340
Proposed/paid dividend per share (Kwacha)
12
4,85
28
Diluted/Basic earnings per share (Kwacha)
34
18.02
104.34
2012 Annual Report
23
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Notes
2012
K’million
2011
K’million
156,088
120,513
15
813
5,347
29
(5,347)
1,276
(4,534)
6,623
171
11,327
27,293
(8,537)
(7,259)
11,498
11,497
6,964
18,120
163,052
138,633
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss
Net gains on available-for-sale financial assets
Net reclassification adjustment for realised net (losses)
gains on available-for-sale financial assets
Items that will not be reclassified subsquently to profit or loss
Gain on revaluation of properties
Deferred tax arising on gain on revaluation of properties
Surplus (deficit) on defined benefit plan
Other comprehesive income for the year, net of income tax
Total comprehensive income for the year
24
24
2012 Annual Report
STATEMENT OF FINANCIAL POSITION
at 31 December 2012
ASSETS
Cash and balances with Bank of Zambia
Balances with other banks
Withholding tax recoverable
Investment securities
– available-for-sale
– held-to-maturity
Loans and advances to customers
Non-current assets held for sale
Property and equipment
Other assets
Notes
2012
K’ million
2011
K’ million
13
14
11
470,772
364,860
34,957
512,896
404,741
29,505
15
15
16
17
17
19
660,738
1,283,537
2,639,161
236
242,129
115,665
807,272
752,007
1,890,736
1,077
229,140
90,247
5,812,055
4,717,621
4,314,918
22,347
31,229
20,461
200,298
15,354
494,065
3,412,319
1,246
33,425
28,930
110,445
37,509
511,076
5,098,672
4,134,950
86,625
2,622
86,625
109,416
57,264
370,831
11,550
77,697
11,550
105,687
63,577
312,610
713,383
582,671
5,812,055
4,717,621
Total assets
LIABILITIES
Customer deposits
Deposits from other banks
Deferred income tax liabilities
Current tax liabilities
Other liabilities
Provisions for liabilities and charges
Borrowed funds
20
21
18
11
23
24
25
Total liabilities
EQUITY
Share capital
Share premium
Statutory reserve
General banking reserves
Revaluation reserves
Retained earnings
26
26
27
28
29
Total equity
Total equity and liabilities
The financial statements on pages 23 to 82 were approved for issue by the Board of Directors on 20th Feburary 2013 and signed on its behalf.
Director
2012 Annual Report
Director
Director
Secretary
25
STATEMENT OF CHANGES IN EQUITY
Balance at 1 January 2011
Share
capital
K’million
Share
premium
K’million
Statutory
reserve
K’million
Banking
general
reserve
K’million
Revaluation
reserves
K’million
Retained
earnings
K’million
Total
K’million
11,550
77,697
11,550
75,584
39,452
260,545
476,378
120,513
120,513
-
27,293
5,347
(8,537)
Profit for the year
-
-
-
-
-
-
-
-
27,293
5,347
(8,537)
-
-
-
-
1,276
(1,254)
-
-
-
-
24,125
-
-
-
30,103
-
(30,103)
-
-
-
-
-
-
(32,340)
(32,340)
11,550
77,697
11,550
312,610
582,671
Other comprehensive income, net of taxes:
Revaluation surplus
Net gain on available-for-sale financial assets
Deferred tax on revalued properties
Net reclassification adjustment for realised net loss
on available-for-sale financial assets
Transfer of revaluation after disposal
Deficit on employee retirement benefit plan (Note 24)
Total comprehensive income
General reserve transfer
Transactions with owners:
Dividend paid
Balance at 31 December 2011
26
-
105,687
-
63,577
1,254
(7,259)
114,508
1,276
(7,259)
138,633
2012 Annual Report
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Share
capital
K’million
Share
premium
K’million
Statutory
reserve
K’million
Banking
general
reserve
K’million
Revaluation
reserves
K’million
Retained
earnings
K’million
Total
K’million
At 1 January 2012
11,550
77,697
11,550
105,687
63,577
312,610
582,671
Profit for the year
-
-
-
-
156,088
156,088
415
2,361
(826)
11,327
169,365
(3,729)
(75,075)
813
171
(5,347)
11,327
163,052
(32,340)
Other comprehensive income, net of taxes:
Net gain on available-for-sale financial assets
Net reclassification adjustment for realised net
loss on available-for-sale financial assets
Transfer of revaluation surplus after disposal
Transfer of excess depreciation
Deferred tax on excess deprecation
Surplus on employee retirement benefit plan (Note 24)
Total comprehensive income
General reserve transfer
Transfer to paid share capital
Transfer to paid statutory reserve fund
Transactions with owners:
Dividend paid
2012 Annual Report
-
75,075
(75,075)
75,075
3,729
-
-
-
-
-
-
(32,340)
86,625
2,622
86,625
109,416
57,264
370,831
813
171
(5,347)
(415)
(2,361)
826
(6,313)
-
713,383
27
STATEMENT OF CASH FLOWS
Cash flows from operating activities
Interest income
Interest expense
Net fee and commission receipts
Net exchange gains on borrowings
Foreign currency dealings and other income
Gain on disposal on non-current assets held-for-sale
Revaluation loss
Assets written off
Expenditure
Depreciation
Cash flows from operating activities before
changes in operating assets and liabilities
Notes
2012
K’ million
2011
K’ million
550,876
(88,926)
222,293
7,749
30,324
(193)
9,096
(476,287)
39,442
453,533
(60,139)
200,998
17,732
31,651
(421)
2,906
(441,104)
26,664
294,374
231,820
Changes in operating assets and liabilities:
- loans and advances
- statutory deposits
- other assets
- customer deposits
- other liabilities
- government securities
(748,425)
(42,921)
(25,418)
902,599
79,025
(495,197)
(165,232)
35,734
1,568
821,077
(48,285)
(519,467)
(Cash used in) generated from operations
(330,337)
125,395
(98,138)
(67,418)
(428,475)
57,977
Income tax paid
5
6
7 25
9,16
17
11
Net cash (used in) generated from operating activities
Purchase of property and equipment
Proceeds from sale of property and equipment
17
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
25
25
Net cash (used in) generated by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
28
31
(61,527)
1,034
(64,762)
2,629
(60,493)
(62,133)
23,950
(48,710)
(32,340)
375,125
(43,675)
(32,340)
(57,100)
299,110
(251,694)
526,774
891,661
364,887
639,967
891,661
2012 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Bank is incorporated in Zambia under the Companies Act, 1994 (as amended) as a limited liability company, and is domiciled in Zambia. The address of its registered office is:
Plot 2118-2121
P.O. Box 33611
Cairo Road
Lusaka
The Bank’s principal activities are the provision of Commercial Banking and related services to the general public.
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 years presented.
2.1 Statement of compliance and basis of preparation
The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The measurement basis applied is the historical cost basis, except for certain properties and financial
instruments that are measured at revalued amounts or fair values as indicated in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
2.2 Interest income and expense
Interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading or designated at fair value through profit or loss, are recognised within ‘interest income’ or
‘interest expense’ in profit or loss 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. The calculation of the effective interest rate includes all fees 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.
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 that was used to discount the future cash
flows for the purpose of measuring the impairment loss.
2.3 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.
2012 Annual Report
29
2.4 Translation of foreign currencies
(i) Functional and presentation
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the ``functional currency”). The financial statements are presented in
Kwacha (“K”) which is the Bank’s functional currency.
(ii) Transaction and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss account. Monetary items carried at fair
value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items denominated in foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the year in which they arise.
2.5 Financial assets
Financial assets and liabilities are recognised when the Bank becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributed to acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities as appropriate, on initial recognition. Transaction costs directly attributed to the acquisition of financial assets or financial liabilities at fair value through profit
and loss (FVTPL) are recognised immediately in the profit or loss. The Bank classifies its financial assets into the following categories: financial assets at fair value through profit or loss; loans, advances and receivables;
held-to-maturity financial assets; and available-for-sale assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way
purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time
frame established by regulation or convention in the marketplace. Management determines the appropriate classification of its financial assets at initial recognition.
(i) Loans, advances and receivables
Loans, advances and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including bank balances and cash) are
measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of
interest would be immaterial.
(ii) Held-to maturity
Held-to-maturity assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that Management has the positive intention and ability to hold to maturity. Were the Bank to sell
more than an insignificant amount of held-to-maturity assets, the entire category would have to be reclassified as available- for-sale. Subsequent to initial recognition, held to maturity investments are measured at
amortised cost using the effective interest rate method less any impairment.
30
2012 Annual Report
(iii) AvailableFor-Sale
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.
The Bank also has investments in unlisted shares that are not traded in an active market but that are also classified as AFS financial assets and stated at fair value at the end of each reporting period (because the
Directors consider that fair value can be reliably measured). Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates (see below), interest income calculated
using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognised in other
comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.
Dividends on AFS equity instruments are recognised in profit or loss when the Bank’s right to receive the dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.
2.6 Impairment of financial assets
The Bank assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a 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 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:
(a) significant financial difficulty of the issuer or obligor;
(b) a breach of contract, such as a default or delinquency in interest or principal payments;
(c) 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;
(d) it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
(e) the disappearance of an active market for that financial asset because of financial difficulties; or
(f ) observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease can
not yet be identified with the individual financial assets in the portfolio, including: 1) adverse changes in the payment status of borrowers in the portfolio, and
2) national or local economic conditions that correlate with defaults on the assets in the portfolio.
The estimated period between a loss occurring and its identification is determined by Management for each identified portfolio. In general, the periods used vary between 3 months and 6 months.
Assets carried at amortised cost
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
2012 Annual Report
31
Assets carried at amortised cost (Continued)
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.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, 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 instrument’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 account. If a loan or held-to-maturity asset has a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Bank may measure impairment on the basis of an instrument’s fair value using an observable
market price.
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 grouped 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 groups 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 exist currently.
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. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the
debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in profit or loss.
Assets carried at fair value
In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. If, in a
subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit
or loss, the impairment loss is reversed through profit or loss account.
Renegotiated loans
Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. In subsequent years, the renegotiated terms apply in determining whether the asset is considered to be past due.
32
2012 Annual Report
2.7 Derecognition of financial assets
The Bank derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the Bank neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Bank recognises its retained interest in the asset
and an associated liability for amounts it may have to pay. If the Bank retains substantially all the risks and rewards of ownership of a transferred financial asset, the Bank continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been
recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety (e.g. when the Bank retains an option to repurchase part of a transferred asset), the Bank allocates the previous carrying amount of the financial
asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference
between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had
been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to
be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
2.8 Property, Plant and Equipment
(i) Recognition and Measurement
All property, plant and equipment except buildings is stated at historical cost. Items of property plant and equipment are subsequently measured at cost less accumulated depreciation and accumulated impairment losses and property is subsequently measured at fair value less accumulated depreciation.
Buildings are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent impairment losses.
It is the Banks policy to perform revaluations with regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period.
The revaluation differences are credited to other comprehensive income and accumulated in equity under the heading “revaluation surplus” unless it represents the reversal of a revaluation decrease previously
recognized as an expense, in which case it should be recognized as income. A decrease as a result of a revaluation is recognized as an expense to the extent that it exceeds any amount previously credited to the
revaluation surplus relating to the same asset.
When a revalued asset is disposed off, any revaluation surplus is transferred directly to retained earnings.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working
condition for their intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are componentized as separate items of property, plant and equipment.
Capital work in progress relates to items of property, plant and equipment that are under construction and are yet to be commissioned for use. Work in progress is measured at the cost incurred in relation to the
construction up to the reporting date.
2012 Annual Report
33
2.8 Property, Plant and Equipment (Continued)
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognized
net within other operating income.
(ii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the component
will flow to the Bank and its cost can be measured reliably. The carrying amount of the replaced component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized
in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of the asset less its residue value. Components of individual assets are assessed and, if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Capital work in progress is not depreciated.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful life of each component of an item of property, plant and equipment.
The estimated useful lives are as follows:
Buildings
Fixtures, fittings and equipment
Motor vehicles
2% - 50 years
20% - 5 years
20% - 5 years
The assets’ residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
The Bank assesses at each reporting date whether there is any indication that any item of property, plant and equipment is impaired. If any such indication exists, the Bank estimates the recoverable amount of the
relevant assets. 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. For the purposes of assessing impairment, assets are banked at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
2.9 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Bank’s liability for current tax is calculated using tax rates that have been enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
34
2012 Annual Report
2.9 Taxation (Continued)
liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Bank intends to settle its current tax assets and liabilities on a net basis.
2.10 Non-current assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately
before classification as held for sale, the assets, or components of a disposal group, are re-measured in accordance with the Bank’s accounting policies.
Non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.
Any impairment loss on a disposal group is allocated to remaining assets and liabilities. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurements are recognized
in profit or loss.
2.11 Employee benefits
(i) Retirement benefit obligations
The Bank operates a defined benefit scheme for non-fixed term contracted employees. The Bank and all its employees also contribute to the National Pension Scheme, which is a defined contribution scheme.
A defined contribution plan is a retirement benefit plan under which the Bank pays fixed contributions into a separate entity. The Bank has no legal or constructive obligations to pay further contributions if the
fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a retirement benefit plan that is not a defined
contribution plan.
The assets of all schemes are held in separate trustee administered funds, which are funded by contributions from both the Bank and employees.
The Bank’s contributions to the defined contribution schemes are charged to profit or loss in the year in which they fall due.
The liability recognised in the statement of financial position in respect of defined benefit plan is the present value of the defined benefit obligation at reporting date 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 interest rates of high-quality corporate bonds that are denominated in the currency in which the
2012 Annual Report
35
2.11 Employee benefits (Continued)
benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are charged
or credited to profit or loss over the employees’ expected average remaining working lives.
Past-service costs are recognised immediately in profit or loss, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this
case, the past-service costs are amortised on a straight-line basis over the vesting period.
(ii) Other entitlements
The estimated monetary liability for employees’ accrued annual leave entitlement at reporting date is recognised as an expense accrual.
2.12 Borrowings
Borrowings are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
2.13 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the year in which they are incurred.
2.14 Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual agreement.
Financial liabilities
Financial liabilities are classified as borrowed funds, other payables, other liabilities and amounts due to related parties.
Borrowed funds, other payables and other liabilities are initially measured at fair value and are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
36
2012 Annual Report
2.14 Financial liabilities and equity (Continued)
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Bank after deducting all of its liabilities. Equity instruments are recorded at proceeds received, net of direct issue costs.
Derecognition of financial liabilities
The Bank derecognises financial liabilities when, and only when, the Bank’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
2.15 Offsetting
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 set off the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the liability simultaneously.
2.16 Sale and repurchase agreements
Securities sold subject to repurchase agreements (‘repos’) are classified in the financial statements as pledged assets when the transferee has the right by contract or custom to sell or re-pledge the collateral; the
counterparty liability is included in amounts due to other banks, deposits from banks, other deposits or deposits due to customers, as appropriate. Securities purchased under agreements to resell (‘reverse repos’) are
recorded as loans and advances to other banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective
interest method. Securities lent to counterparties are also retained in the financial statements.
2.17 Share capital
Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as ‘share premium’ in equity.
2.18 Dividends payable
Dividends on ordinary shares are charged to equity in the period in which they are declared. Proposed dividends are not recognised as a liability until declared.
2.19 Fiduciary activities
The Bank commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and
income arising thereon are excluded from these financial statements, as they are not assets of the Bank.
2.20 Acceptances and letters of credit
Acceptances and letters of credit are accounted for as off-statement of financial position transactions and disclosed as contingent liabilities.
2012 Annual Report
37
2.21 Provisions
Provisions 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 amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation.
The Bank recognises no provisions for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation.
2.22 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Executive Management Committee. The Executive Management Committee allocates resources to and assesses the performance of the operating segments of an entity. The Executive Management Committee is the Bank’s key management making body.
All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and cost being eliminated in head office. Income and expenses directly associated with each segment
are included in determining business segment performance.
2.23 Application of new and revised International Financial Reporting Standards (IFRSs)
(i) New and revised IFRSs affecting amounts reported
The following new and revised IFRSs have been applied in the current year. There has been no impact on the amounts reported in these financial statements. Details of other new and revised IFRSs applied in these
financial statements that have had no material effect on the financial statements are set out in section 2.23 (iii) below:
(ii) New and revised IFRSs affecting presentation and disclosures only
“Amendments to IAS 1
Presentation of Items of Other
Comprehensive Income”
The amendments introduce new terminology for the statement of comprehensive income. The amendments to IAS 1 retain the option to present profit or loss and other
comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require items of other
comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not reclassified subsequently to profit or loss and
(b) items that maybe reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be
allocated on the same – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax.
The Bank has applied the amendments to IAS 1 presentation of items of other comprehensive income. The amendments have been applied retrospectively, and hence the
presentation of items of other comprehensive income has been modified to reflect the changes
(iii) New and revised IFRSs applied with no material effect on the consolidated financial statements
The following new and revised IFRSs have also been adopted in these financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current
38
2012 Annual Report
2.23 Application of new and revised International Financial Reporting Standards (IFRSs) (Continued)
(iii) New and revised IFRSs applied with no material effect on the consolidated financial statements (Continued)
and prior years but may affect the accounting for future transactions or arrangements.
Amendments to IFRS 7
Disclosures – Transfer of
Financial Assets
Improvements to IFRSs issued in 2011
The amendments increase the disclosure requirements for transactions involving the transfer of financial assets in order to provide greater transparency around risk
exposures when financial assets are transferred.
Except for the amendments to IAS 1 described earlier in section 2.23 (iii), the application of Improvements to IFRSs issued in 2011 has not had any material effect on amounts
reported in the financial statements.
(iv) New and revised IFRSs in issue but not yet effective
The Bank has not applied the following new and revised IFRSs that have been issued but are not yet effective:
IFRS 9
IFRS 13
IAS 19 (as revised in 2011)
Amendments to IFRS 9 and IFRS 7
Amendments to IAS 32
Amendments to IFRSs
Financial Instruments3
Fair Value Measurement1
IAS 19 (as revised in 2011) Employee Benefits1
Mandatory effective date of IFRS 9 and Transition Disclosures3
Offsetting financial assets and financial liabilities2
Annual improvements to IFRSs 2009-2011 cycle exept for the amendments to IAS 11
1 Effective for annual periods beginning on or after 1 January 2013.
IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.
Key requirements of IFRS 9 are described as follows:
IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt
investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal
outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent
accounting periods.
IFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.
2012 Annual Report
39
(iv) New and revised IFRSs in issue but not yet effective (Continued)
The Directors anticipate that IFRS 9 will be adopted in the Bank’s financial statements for the annual period beginning 1 January 2015 and that the application of IFRS 9 may have significant impact on amounts
reported in respect of the Bank’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.
IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.
The Directors anticipate that IFRS 13 will be adopted in the Bank’s financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported
in the financial statements and result in more extensive disclosures in the financial statements.
IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and
requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value
measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current Standards.
For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended
by IFRS 13 to cover all assets and liabilities within its scope.
The Annual Improvements to IFRSs 2009 – 2011 Cycle include a number of amendments to various IFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to
IFRSs include:
• Amendments to IAS 16 Property, Plant and Equipment; and
• Amendments to IAS 32 Financial Instruments: Presentation.
The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in IAS 16 and as inventory otherwise. The Directors do not anticipate that the amendments to IAS 16 will have a significant effect on the Bank’s financial statements.
The amendments to IAS 32 clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12
Income Taxes. The Directors anticipate that the amendments to IAS 32 will have no significant impact on the Bank’s financial statements.
The amendments to IAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of currently has a legally
enforceable right of set-off and simultaneous realisation and settlement.
The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master
netting agreement or similar arrangement.
The amendments to IFRS 7 are effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.
The Directors anticipate that the application of these amendments to IAS 32 and IFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.
40
2012 Annual Report
(iv) New and revised IFRSs in issue but not yet effective (Continued)
The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan
assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous
version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net
pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous
version of IAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.
3 Critical accounting estimates and judgements in applying accounting policies
In the application of the Bank’s accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liablilibilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical expereince and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision affects both current and furture periods.
(a) Impairment losses on loans and advances
The Bank reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recorded in profit or loss, the Bank makes judgements as to whether there is
any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence
may include observable data indicating that there has been an adverse change in the payment status of borrowers in a Bank, or national or local economic conditions that correlate with defaults on assets in the Bank.
Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The
methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
(b) Fair value of financial instruments
The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example, models) are used to determine fair values, they are
validated and periodically reviewed by qualified personnel independent of the area that created them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data
and comparative market prices. To the extent practicable, models use only observable data. However, areas such as credit risk (both own and counterparty), volatilities and correlations require Management to make
estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. For example to the extent that Management used a tightening of 2 basis points in the yield rate, the
fair values would be estimated at K657,609 millions as compared to their reported fair values of K660,738 millions at 31 December 2012.
(c) Held-to-maturity financial assets
The Bank follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturing as held-to-maturity. This classification requires significant judgement. In
making this judgement, the Bank evaluates its intention and ability to hold such assets to maturity. If the Bank fails to keep these assets to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to classify the entire class as available-for-sale. The assets are currently measured at amortised cost.
2012 Annual Report
41
4 Financial risk management
The Bank’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, credit risk and liquidity risk). Those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the Bank’s business, and the financial risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an
appropriate balance between risk and return and minimise potential adverse effects on its financial performance.
Risk management is carried out by the Risk Directorate under policies approved by the Executive Management Committee and Board of Directors. Risk Directorate identifies evaluates and hedges financial risks
in close cooperation with the operating units. In carrying out these functions, Risk Directorate is guided by policies contained in the Credit policy document, Business Lending standards, Environmental and Social
policy, Scheme Loans Policy and Premier Loans Policies.
(a) Credit risk
The Bank takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Bank by failing to pay amounts in full when due. Credit risk is the most important risk for the Bank’s business: Management therefore carefully manages the exposure to credit risk. Credit exposures arise principally in lending and investment activities. There is also credit risk in off-statement of financial position financial
instruments, such as loan commitments and guarantees. Credit risk management and control are centralised in the Risk Directorate which reports regularly to the Board of Directors.
(i) Credit risk measurement
(a) Loans and advances (including commitments and guarantees)
The estimation of credit exposure is complex and requires the use of processes and procedures that will limit the likelihood of default on the loans in the Bank’s portfolio. The assessment of credit risk of a portfolio of
assets entails analysis of various risk aspects and a decision made on whether the risk is bankable. The risks assessed include Business, Financial, Market, Management, Security, Structural and Industry.
The Loan Portfolio of the Bank is segregated into seven rating classes.
Internal ratings
2-Standard
3-Satisfactory risk
4-Watch risk
5-Unacceptable
50-Sub-standard
51-Doubtful
52-Loss
Loan has no arrears
Loan has arrears over 1 day but less than 29 days
Loan has arrears over 30 days but less than 59 days
Loan has arrears over 180 days
(b) Risk limit and mitigation policies
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower and to industry segments. Such risks are monitored on a revolving basis and
subject to annual or more frequent review.
42
2012 Annual Report
4 Financial risk management (Continued)
(b) Risk limit and mitigation policies (Continued)
The exposure to any one borrower including banks is further restricted by sub-limits covering on and off statement of financial position exposures.
For example;
1) There is a single name credit exposure limit of 25% of the regulatory capital.
2) Clean and secured counterparty limits apply for money market operations conducted by the Treasury Division.
(c) Collateral
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advanced, which is common practice. The Bank implements guidelines on
the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are:
•
•
•
•
•
•
Mortgages over residential properties.
Charges over business assets such as premises, inventory and accounts receivable.
Charges over financial instruments such as debt instruments.
Cash cover.
Longer-term finance and lending to corporate entities are generally secured.
Certain personal credit facilities are generally unsecured.
(i) Credit risk measurement
(d) Lending limit
Credit risk exposure is managed as part of overall lending limits with customers, together with potential exposures from market movements.
Settlement risk arises in any situation where a payment in cash or securities is made in the expectation of a corresponding receipt in cash or securities. Daily settlement limits are established for each counterparty to
cover the aggregate of all settlement risk arising from the Bank’s market transactions on any single day.
(e) Credit related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make
payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Bank on
behalf of a customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate
and therefore carry less risk than a direct borrowing.
2012 Annual Report
43
4 Financial risk management (Continued)
(e) Credit related commitments (Continued)
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank
is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are
contingent upon customers maintaining specific credit standards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk
than shorter-term commitments.
(ii) Impairment and provisioning policies
The impairment allowance shown in the statement of financial position at year end is derived from each of the seven internal rating grades. The following table shows the percentage of the Bank’s on Statement of
Financial Position credit related obligations.
44
2012 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4
Financial risk management (Continued)
(ii)
Impairment and provisioning policies (Continued)
2012
Rating
2
3
4
5
50
51
52
Standard
Satisfactory Risk
Watch risk
Unacceptable
Sub-Standard
Doubtful
Loss
Credit
exposure
%
68
21
3
2
1
1
4
100
2011
Impairment
allowance
%
9
3
4
10
7
5
62
100
Maximum exposure to credit risk before collateral held
Balances with Bank of Zambia
Investment securities:
- available-for-sale
- held-to-maturity
Other assets
Credit risk exposures relating to off-statement of financial position items:
- Acceptances and letters of credit
- Guarantee and performance bonds
- Commitments to lend
2012 Annual Report
Credit
exposure
%
75
6
2
7
1
1
8
100
Impairment
allowance
%
6
2
1
4
4
5
78
100
2012
K’ million
2011
K’ million
470,772
364,860
2,639,161
512,896
404,741
1,890,736
660,738
1,283,537
115,665
807,272
752,007
90,247
496,210
17,216
190,050
435,437
65,575
145,001
6,238,209
5,103,912
45
4
The above table represents a worst case scenario of credit risk exposure to the Bank at 31 December 2012 and 2011, without taking account of any collateral held or other credit enhancements attached.
For on-statement of financial position assets, the exposures set out above are based on carrying amounts as reported in the statement of financial position. As shown above, 48% of the total maximum
exposure is derived from loans and advances to banks and customers (2011: 47%).
(ii)
Impairment and provisioning policies
Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Bank resulting from both its loan and advances portfolio and debt securities based on the
following:
· the Bank exercises stringent controls over the granting of new loans.
· 68% (2011: 78%) of the loans and advances portfolio are neither past due nor
impaired.
· 63% (2011: 56%) of the loans and advances portfolio are backed by collateral.
· 100% (2011:100%) of the investments in securities are government securities.
Financial assets that are past due or impaired
Loans and advances are summarised as follows:
2012
K’ million
2011
K’ million
Neither past due nor impaired
Past due but not impaired
Individually impaired
Gross
Less: allowance for impairment (Note 16)
Net
1,836,204
778,705
70,790
2,685,699
(46,538)
2,639,161
1,544,562
288,285
146,542
1,979,389
(88,653)
1,890,736
No other financial assets are either past due or impaired.
Loans and advances 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:
Standard
46
1,836,204
1,544,562
2012 Annual Report
4
Loans and advances past due but not impaired
Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. The gross amounts of loans
and advances that were past due but not impaired were as follows:
2012
K’ million
2011
K’ million
76,416
492,081
113,842
96,366
33,493
34,969
101,757
118,066
Total
778,705
288,285
Fair value of collateral held
1,994,356
1,520,067
Past due up to 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Over 90 days
Loans and advances individually impaired
Of the total gross amount of impaired loans, the following amounts have been individually assessed:
Individually assessed impaired loans and advances
- corporate
- retail
Fair value of collateral held
2012 Annual Report
2012
K million
2011
K million
20,050
50,740
65,569
80,973
70,790
146,542
50,420
88,198
47
4
(a)
Credit risk
(ii)
Impairment and provisioning policies
Loans and advances renegotiated
Restructuring activities include extended payment arrangements, approved external management plans, modifications and deferral of payments. Restructuring policies and practices are based on
indicators or criteria that, in the judgement of local Management, indicate that payment will most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied
to term loans – in particular, customer finance loans. In majority cases restructuring results in the asset continuing to be impaired. Renegotiated loans that would otherwise be past due or impaired
totalled K30,142 million (2011: K152,253 million).
(b)
Concentration of risk
Industry sector risk concentration were as follows for on and off statement of financial position.
2012
48
Financials
Manufacturing
K’million
K’million
Transport &
communication
K’million
Wholesale &
retail trade
K’million
122,135
Agriculture
K’million
976,091
Other
industries
K’million
Individuals
Total
K’million
K’million
602,209
630,651
2,639,161
Loans and advances customers
- held-to-maturity
Other assets
14,342
236,409
57,324
1,283,537
660,738
115,665
-
-
-
-
-
-
1,283,537
660,738
115,665
At 31 December 2011
2,074,282
236,409
57,324
122,135
976,091
602,209
630,651
4,699,101
2012 Annual Report
4
2012
Financials
Manufacturing
Wholesale &
retail trade
K’million
Agriculture
K’million
Transport &
communication
K’million
K’million
Individuals
Total
K’million
Other
industries
K’million
K’million
K’million
10,910
-
787
79,937
3,980
7
4,500
2,153
592
12,405
2,378
79,356
488,872
3,329
13,852
418
-
496,210
17,216
190,050
10,910
80,724
8,487
15,150
81,734
506,053
418
703,476
2,085,192
317,133
65,811
137,285
1,057,825
1,108,262
631,069
5,402,577
Wholesale &
retail trade
K’million
Agriculture
Individuals
Total
K’million
Other
industries
K’million
K’million
K’million
Credit risk exposures relating to off-balance
items:
Acceptances and letters of credit
Guarantee and performance bonds
Commitments to lend
At 31 December 2012
2011
Financials
Loans and advances
- held-to-maturity
Other assets
2012 Annual Report
Manufacturing
K’million
K’million
Transport &
communication
K’million
18,278
173,792
61,693
108,472
597,700
369,239
561,562
1,890,736
807,272
752,007
90,247
-
-
-
-
-
-
807,272
752,007
90,247
1,667,804
173,792
61,693
108,472
597,700
369,239
561,562
3,540,262
49
4
2011
Guarantee and performance bonds
Commitments to lend
31 December 2011
(c)
Financials
Manufacturing
Wholesale &
retail trade
K’million
Agriculture
K’million
Transport &
communication
K’million
K’million
Individuals
Total
K’million
Other
industries
K’million
K’million
K’million
10,762
6,000
16,762
1,048
10
21,725
22,783
13,163
13,163
2,054
3,607
20,510
26,171
45,837
64,549
110,386
432,335
19,054
451,389
5,359
5,359
435,437
65,575
145,001
646,013
1,684,566
196,575
74,856
134,643
708,086
820,628
566,921
4,186,275
Liquidity risk
Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.
The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, and calls on cash settled contingencies. The Bank does not maintain
cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Bank of Zambia requires
that the Bank maintain a cash reserve ratio. In addition, the Board sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of inter-bank
and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand. The Treasury Department monitors liquidity ratios on a daily basis.
The table below presents the undiscounted cash flows payable by the Bank under financial liabilities by the remaining contractual maturities at the statement of financial position date and from
financial assets by expected maturity dates.
50
2012 Annual Report
4
At 31 December 2012
Up to 12
months
K’million
1-3
years
K’million
3-5
years
K’million
Over 5
years
K’million
Total
K’million
Liabilities
Deposits from banks
Deposits due to customers
Borrowed funds
Other liabilities
22,347
4,311,418
51,589
200,298
3,500
297,991
-
129,153
-
15,332
-
22,347
4,314,918
494,065
200,298
Total financial liabilities
4,585,652
301,491
129,153
15,332
5,031,628
470,772
364,860
27,833
956,503
115,901
1,348,781
658,705
-
882,404
322,032
-
426,681
7,035
-
470,772
364,860
2,685,699
1,944,275
115,901
1,935,869
2,007,486
1,204,436
433,716
5,581,507
At 31 December 2011
Liabilities
Deposits from banks
Deposits due to customers
Borrowed funds
Other liabilities
1,246
3,402,319
47,690
110,445
10,000
335,260
-
123,854
-
4,272
-
1,246
3,412,319
511,076
110,445
3,561,700
345,260
123,854
4,272
4,035,086
Assets
Cash and Balances with Bank of Zambia
Balances with other Banks
Investment in securities
Other assets
2012 Annual Report
51
4
At 31 December 2011
Assets
Other assets
Total financial assets
Up to 12
months
K’million
1-3
years
K’million
3-5
years
K’million
Over 5
years
K’million
Total
K’million
512,896
404,741
688,096
1,053,454
64,352
525,287
340,306
-
478,978
145,079
25,895
287,028
20,440
-
512,896
404,741
1,979,389
1,559,279
90,247
2,723,539
865,593
649,952
307,468
4,546,552
(d)
Market risk
Market risk is the risk that changes in market prices, which include currency exchange rates and interest rates, will affect the fair value or future cash flows of a financial instrument. Market risk arises from
open positions in interest rates and foreign currencies, both of which are exposed to general and specific market movements and changes in the level of volatility. The objective of market risk managment
is to manage and control market risk exposures within acceptable limits, while optimising the return on risk. Overall responsibility for managing market risk rests with the Assets and Liabilities Committee
(ALCO).
(e)
Currency risk
The Bank is exposed 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 in total for both overnight and intra-day positions, which are monitored daily.
The table below summarises the Bank’s exposure to foreign currency exchange rate risk at 31 December 2012. Included in the table are the Bank’s financial instruments, categorised by currency.
52
2012 Annual Report
4
At 31 December 2012
Assets
Other financial assets
Liabilities
Deposits from banks
Customer deposits
Borrowed fund
Other liabilities
Net position
At 31 December 2011
Financial assets
Financial liabilities
Net position
2012 Annual Report
USD
K’million
GBP
K’million
Euro
K’million
Total
K’million
13,251
333,827
637,549
791
610
2,800
212
1,000
20,440
14,861
336,627
637,549
21,443
985,418
3,622
21,440
1,010,480
329,334
494,065
74,934
1,381
2,079
5,299
-
6,680
329,334
494,065
77,013
898,333
3,460
5,299
907,092
87,085
162
16,141
103,388
993,711
(1,002,952)
2,527
(2,763)
21,340
(20,349)
1,017,578
(1,026,064)
(9,241)
(236)
991
(8,486)
53
4
(f)
Interest rate risk
The Bank is exposed to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes
but may reduce or create losses in the event that unexpected movements arise. The Board of Directors sets limits on the level of mismatch of interest rate re-pricing that may be undertaken, which is
monitored daily.
The table below summarises the Bank’s exposure to interest rate risks. Included in the table are the Bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual re-pricing or
maturity dates. The Bank does not bear any interest rate risk on off statement of financial position items.
At 31 December 2012
Up to 12
months
K’million
1-3
years
K’million
3-5
years
K’million
Over 5
years
K’million
Total
K’million
15,585
15,173
956,503
1,270,380
658,705
876,645
322,032
476,963
7,035
15,585
2,639,161
1,944,275
987,261
1,929,085
1,198,677
483,998
4,599,021
Liabilities
Deposits from Banks
Deposits from customers
Borrowed funds
22,347
4,311,418
51,589
4,385,354
3,500
297,991
301,491
129,153
129,153
15,332
15,332
22,347
4,314,918
494,065
4,831,330
Interest re-pricing gap
(3,398,093)
1,627,594
1,069,524
468,666
(232,309)
Assets
54
2012 Annual Report
4
At 31 December 2011
Up to 12
months
K’million
1,846,120
(2,090,407)
Total interest repricing gap
(244,287)
1-3
years
K’million
851,420
(304,191)
547,229
3-5
years
K’million
Over 5
years
K’million
Total
K’million
621,093
(193,058)
304,632
(4,641)
3,623,265
(2,592,297)
428,035
299,991
1,030,968
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for banks ever to be completely
matched since business transacted is often of uncertain terms and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses.
The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure
to changes in interest rates and exchange rates.
(g)
Fair values of financial assets and liabilities
The fair value of held-to-maturity investment securities at 31 December 2012 is estimated at K1,283,537 million (2011: K752,007 million). The fair values of the Bank’s other financial assets and liabilities
approximate the respective carrying amounts, due to the generally short periods to contractual re-pricing or maturity dates as set out above. Fair values are based on discounted cash flows
using a discount rates based upon the yield rates on similar financial assets at the Statement of Financial Position date.
Fair value hierarchy
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuations techniques are observable or unobservable. Observable inputs reflect market data obtained from
independent sources; unobservable inputs reflect the Bank market assumptions. The two types of inputs have created the following fair value hierarchy:
•
Level1–Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.Thislevelincludeslistedequitysecuritiesanddebtinstrumentsonexchanges(forexample,LusakaStock
Exchange)
•
Level2–InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices).
•
Level3–inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).Thislevelincludesequityinvestmentsanddebtinstrumentswithsignificantunob
servable components.
This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.
2012 Annual Report
55
4
31 December 2012
Available-for-sale financial assets
Level 1
K’ millions
Level 2
K’ millions
Level 3
K’ millions
Total
K’ millions
-
660,738
-
660,738
-
806,772
-
806,772
31 December 2011
Available-for-sale financial assets
(h)
Capital management
Capital management is a key contributor to shareholder value. The Bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial positions, are:
•
•
•
•
•
tocomplywiththecapitalrequirementssetbytheBankingandFinancialServicesAct,1994(asamended);
tosafeguardtheBank’sabilitytocontinueasagoingconcern,sothatitcancontinuetoprovidereturnsforshareholdersandbenefitsforotherstakeholders;
tomaintainastrongcapitalbasetosupportthedevelopmentofitsbusiness;
toallocatecapitaltobusinessesusingrisk-basedcapitalallocation,tosupporttheBank’sstrategicobjectives,includingoptimisingreturnsonshareholderandregulatorycapitaland maintainthedividendpolicyanddividenddeclarationsoftheBankwhiletakingintoconsiderationshareholderandregulatoryexpectations.
Capital adequacy and use of regulatory capital are monitored regularly by Management, employing techniques based on the guidelines developed by the Basel Committee, as implemented by the Bank
of Zambia for supervisory purposes. The required information is filed with the Bank of Zambia on a monthly basis.
Regulatory capital
The Bank manages its capital base to achieve a prudent balance between maintaining capital levels to support business growth, maintaining depositor and creditor confidence, and providing competitive
returns to shareholders.
The Bank of Zambia requires each local bank to:
(a)
(b)
(c)
(d)
(e)
56
hold the minimum level of regulatory capital of K104,000 million;
maintain a ratio of total regulatory capital to the risk-weighted assets plus risk-weighted off-statement of financial position assets (the ‘Basel ratio’) at or above the required minimum of 10%
maintain primary or tier 1 capital of not less than 5% of total risk weighted assets
maintain primary or tier 1 capital of not less than 5% of total risk weighted assets; and
maintain total capital of not less than 10% of risk-weighted assets plus risk-weighted off-statement of financial position items.
2012 Annual Report
Regulatory capital (Continued)
Regulatory capital adequacy is measured through two risk-based ratios:
•
Tier1capital(primarycapital):commonshareholders’equity,qualifyingpreferredsharesandminorityinterestsintheequityofsubsidiariesthatarelessthanwhollyowned.
•
Tier2capital(secondarycapital):qualifyingpreferredshares,40%ofrevaluationreserves,subordinatedtermdebtorloanstockwithaminimumoriginaltermofmaturityofoverfiveyears
(subject to a straight-line amortisation during the last five years leaving no more than 20% of the original amount outstanding in the final year before redemption) and other capital instruments
which the Bank of Zambia may allow. The maximum amount of secondary capital is limited to 100% of primary capital.
Risk-weighted assets are determined on a granular basis by using risk weights calculated from internally derived risk parameters within the regulatory requirements. The risk weighted assets are measured
by means of a hierarchy of four risk weights classified according to the nature of – and reflecting an estimate of the credit risk associated with – each asset and counterparty. A similar treatment is adopted
for off-Statement of financial position exposure, with some adjustments to reflect the more contingent nature of the potential losses.
The table below summarises the composition of regulatory capital and the ratios of the Bank at 31 December:
Tier 1 capital
Tier 1 + Tier 2 capital
Risk-weighted assets
On-balance sheet
Off-balance sheet
Total risk-weighted assets
2012
K’ million
2011
K’ million
528,844
559,531
391,361
423,159
2,859,618
128,776
2,118,259
218,912
2,988,394
2,337,171
18%
19%
17%
18%
322,973
224,227
2,110
1,566
550,876
322,368
123,878
4,234
3,053
453,533
Regulatory ratios
Tier 1 (Regulatory minimum – 5%)
Tier 1 + Tier 2 (Regulatory minimum – 10%)
5
Interest income arising
from:
Loans and advances
Government and other securities
Cash and short term funds
Banks
2012 Annual Report
57
5
Interest income (Continued)
Interest income recognised on impaired financial assets was K638 million (2011: K nil million)
6
Interest expense
Arising on:
Customer deposits
Deposits by banks
Other
7
Net fees and commission income
Others
Account maintenance fees
ATM issuer fee
Payflex
Arrangement and commitment fees
Letters of credit commissions
Commission on encashment of salary cheques
Fees and commission expenses
8
2012
K’miilion
2011
K’miilion
63,716
25,210
88,926
47,099
12,857
183
60,139
100,206
44,114
33,335
14,457
13,817
12,803
5,129
84,583
52,143
27,785
10,894
16,725
3,907
5,315
223,861
201,352
(1,568)
222,293
(354)
200,998
193
7,710
6,351
14,254
421
2,064
5,473
7,958
Gain on disposal of property and equipment
Technical assistant grant
Gain on disposal of investment
Sundary operating income
58
2012 Annual Report
9
Expenses by nature
The following items are included within operating expenses:
Employee benefits expense (Note10)
Depreciation of property and equipment (Note 17)
Donations
Directors’ remuneration
Auditors’ remuneration
Others
10
2011
K’miilion
207,550
26,664
1,934
1,293
589
183,222
476,044
421,252
215,390
5,761
14,574
188,186
5,008
14,356
235,725
207,550
Employee benefits expense
The following items are included within employee benefits expense:
Salaries and allowances
National pension scheme contributions
Retirement benefit contribution (defined benefit scheme) (Note 22)
11
2012
K’miilion
235,725
39,442
2,709
1,639
550
195,979
Income tax expense
Current tax
Over provision on tax in prior year
Deferred tax (Note 18)
83,979
238
(2,025)
72,779
(5,171)
(3,183)
82,192
64,425
(29,505)
28,178
(33,630)
(34,957)
(49,946)
42,703
(22,262)
(29,505)
Withholding tax recoverable movement in the statement of financial position
At beginning of year
Recoveries offset against tax liability
Withholding tax suffered during the year
At end of year
2012 Annual Report
59
11
Income tax expense (Continued)
2012
K’miilion
2011
K’miilion
Tax payable at the beginning of the year
Payable in respect of the year
Tax paid during the year
Reversal of prior year over provision
WHT tax recoveries in respect of prior years
28,930
84,217
(64,508)
(28,178)
61,319
67,608
(45,156)
(12,138)
(42,703)
Tax payable at the year end
20,461
28,930
The movement during the year in the tax accounts is as follows:
The tax on the Bank’s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows:
Profit before income tax
Tax calculated at the statutory income tax rate of 35% (2011: 40%)
Tax effect of:
Bank of Zambia impairment
Overprovision of tax in prior year
Income taxed separately
Deferred tax income resulting from reduction in of tax rate
Expenses not deductible for tax purposes
Income tax expense
12
238,280
184,938
83,398
73,975
(1,120)
238
(324)
82,192
(10,828)
(5,171)
(14)
(3,555)
10,018
64,425
Dividends per share
The dividend paid in the year 2012 amounted to K32,340 million in respect of the year ended 31 December 2011 representing K28.00 per share. The Board has recommended a dividend
amounting to K42,013million (4.85 per share) for the year ended 31 December 2012.
Payment of dividends is subject to withholding tax (WHT) at the rate of 15% for resident and non-resident shareholders. However, where there is a double tax treaty, the WHT will be subject to
the rates in the treaty. Furthermore the WHT is taxed at zero percent for individuals because the Bank is listed on the Lusaka Stock Exchange.
60
2012 Annual Report
13
Cash in hand
Balances with Bank of Zambia
14
2011
K’ million
134,768
336,004
470,772
133,842
379,054
512,896
10,354
15,585
25,939
338,921
364,860
13,192
173,750
186,942
217,799
404,741
515
660,223
660,738
106,182
700,590
500
807,272
1,283,537
1,944,275
752,007
1,559,279
1,579,415
364,860
1,944,275
1,053,454
505,825
1,559,279
Items in course of collection
Placements with other banks
Current balances with other Banks
Loans and advances to other banks
15
2012
K’ million
Investment securities
Securities available-for-sale
Government securities – at fair value
- Maturing within 90 days of the date of acquisition
- Maturing after 90 days of the date of acquisition
- Equity Investment
Total securities available-for-sale
Securities held-to-maturity
Government securities – at amortised cost
- Maturing after 90 days of the date of acquisition
Total investment securities
Current
Non-current
2012 Annual Report
61
The movement in investment securities available-for-sale may be summarised as follows:
16
Available-for-sale
K’million
Held to maturity
K’million
At January 2011
Additions
Disposals (redemption)
Loss from changes in fair value/amortisation
343,460
801,925
(343,460)
5,347
612,792
209,925
(69,505)
(1,205)
Balance at end of year
807,272
752,007
At January 2012
Additions
Disposals (redemption)
Gain/(loss) from changes in fair value/amortisation
807,272
659,925
(807,272)
813
752,007
745,024
(210,748)
(2,746)
Balance at end of year
660,738
1,283,537
1,944,275
2012
K ‘million
2011
K’ million
500,287
857,879
115,352
1,154,413
57,768
2,685,699
406,006
686,442
83,556
760,022
43,363
1,979,389
(36,913)
(9,625)
(46,538)
2,639,161
(80,376)
(8,277)
(88,653)
1,890,736
Overdrafts
Personal loans
Mortgages
Commercial loans
Others
Gross loans and advances
Less: Provision for impairment of loans and advances
- Individually assessed
- Collectively assessed
62
Total
K’million
956,252
1,011,850
(412,965)
4,142
1,559,279
1,559,279
1,404,949
(1,018,020)
(1,933)
2012 Annual Report
16
Loans and advances to customers (Continued)
2012
K ‘million
2011
K’ million
Current
Non - current
470,772
2,168,389
2,639,161
714,904
1,175,832
1,890,736
Total
Movements in provisions for impairment of loans and advances are as follows:
Personal
overdrafts
K’ million
Commercial
overdraft
K’ million
Personal
loans
K’ million
Commercial
loans
K’ million
At 1 January 2011
Provision for loan impairment
Write- offs
5,127
1,561
-
56,889
3,302
(35,109)
30,682
7,897
(711)
44,015
7,092
(32,092)
136,713
19,852
(67,912)
At 31 December 2011
6,688
25,082
37,868
19,015
88,653
Net impairment charge
1,561
3,302
7,897
7,092
19,852
At 1 January 2012
Provision for loan impairment
Write-offs
6,688
2,344
-
25,082
3,311
(13,946)
37,868
(1,436)
(19,609)
19,015
(3,976)
(8,803)
88,653
243
(42,358)
At 31 December 2012
9,032
14,447
16,823
6,236
46,538
Net impairment charge
2,344
3,311
(1,436)
(3,976)
243
2012 Annual Report
K’ million
63
16
Loans and advances to customers (Continued)
All impaired loans have been written down to their estimated recoverable amount. The aggregate carrying amount of impaired loans at 31 December 2012 was K70.7billion (2011: K146.5 billion).
17
Cost or valuation
Additions
Eliminated on reclassified as held for sale
Disposals
Revaluation increase
Additions
Write-offs
Building at
revalued amount
K’ million
Motor Vehicle
WIP
Total
K’ million
Fixture, fittings
and equipment
K’ million
K’ million
K’ million
94,634
17,202
(1,189)
(2,401)
18,417
126,663
12,439
1,232
13,671
147,877
39,066
186,943
27,678
7,262
34,940
282,628
64,762
(1,189)
(2,401)
18,417
362,217
9,209
-
920
-
60,174
(27,338)
(8,776)
(1,247)
61,527
(28,585)
135,872
14,591
219,779
24,917
395,159
6,303
(192)
(112)
41
(5,973)
9,566
1,377
-
96,821
25,246
-
-
112,690
(192)
(112)
26,664
(5,973)
67
2,735
-
10,943
955
-
122,067
35,752
(19,489)
-
133,077
39,442
(19,489)
Accumulated depreciation and impairment
Eliminated on disposal of assets
Eliminated on reclassification as held for sale
Charge for year
Write back
Charge for year
Eliminated on write-offs
64
2012 Annual Report
Cost or valuation (Continued)
Building at
revalued amount
K’ million
Motor Vehicle
2,802
11,898
138,330
-
153,030
Carrying amount
At 31 December 2011
126,596
2,728
64,876
34,940
229,140
At 31 December 2012
133,070
2,693
81,449
24,917
242,129
K’ million
Fixture, fittings
and equipment
K’ million
WIP
Total
K’ million
K’ million
An independent valuation of the Bank’s buildings was performed by Messer’s Mak Associates Consulting to determine the fair value of the building as at 31 December 2011 and 31 December 2010. The
valuation which conforms to Royal Institute of Chartered Surveyors’ Appraisal and Valuation Manual valuation standards as determined by reference to IAS 16 – Property, Plant and Equipment. Had the
Bank buildings (other than Bank building classified as held for sale) been measured on historical cost basis, their carrying amount would be as follows:
In accordance with section 193 of the Companies Act (as amended), 1994 the Register of Land and Buildings is available for inspection by members and their duly authorised agents at the Registered
Records Office of the Bank.
2012
2011
K’ million
K’ million
Cost
35,300
26,103
Accumulated depreciation
(2,200)
(1,500)
Net book amount
33,100
24,603
Non-current assets held for sale
The movement is as follows:
Reclassified from property and equipment
Disposals
At end of year
1,077
(841)
1,077
-
236
1,077
As at the reporting date, the Bank had not yet disposed of properties with carrying value of K236 million. The Bank continues to seek buyers for these properties.
2012 Annual Report
65
18
Deferred income tax
Deferred income tax is calculated using the enacted income tax rate of 35% (2011: 40%). The movement on the deferred income account tax is as follows:
2012
K’ million
2011
K’ million
At start of year
Credit to profit or loss (note 11)
Credit/(Charge) to equity
(33,425)
2,025
171
(28,071)
3,183
(8,537)
At end of year
(31,229)
(33,425)
The deferred income tax liability, deferred income tax credit to profit or loss , and deferred income tax to equity are attributable to the following items:
At beginning
of year
K’ million
Charged
to P/L
K’ million
Charged
to equity
K’ million
At end
of year
K’ million
(28,287)
2,236
(8,537)
(34,588)
(28,287)
2,236
(8,537)
(34,588)
947
-
(28,071)
3,183
(8,537)
(33,425)
(34,588)
1,903
171
(32,514)
Deferred income tax assets
Other temporary differences
1,163
122
-
1,285
(33,425)
2,025
171
(31,229)
Year ended 31 December 2011
Deferred income tax assets
Other temporary differences
Net deferred income tax liability
216
1,163
Year ended 31 December 2012
Net deferred income tax liability
66
2012 Annual Report
19
Other assets
2012
K’ million
2011
K’ million
Other receivables
Visa Pos Acquirer
Staff loans mark to market (Note 32)
Premiums paid in advance
Prepayment
Investment Zambia Electronic Clearing House
Others
36,236
9,889
50,071
2,449
8,962
307
7,751
115,665
34,000
5,796
25,895
4,241
3,712
307
16,296
90,247
Current
Non-current
105,776
9,889
115,665
70,339
19,908
90,247
The investment in Zambia Electronic Clearing House Limited (“ZECHL”) represents the Bank’s contribution to its set up costs for the establishment of the National Switch to enhance ZECHL functionality,
more specifically to support electronic point of sale transactions to help minimise cash based transactions and their attendant costs and risks. The principal activity of ZECHL is the electronic clearing of
cheques and direct debits and credits in Zambia for its member banks. The ZECHL is funded by contributions from member banks. As there is no reliable measure of the fair value of this investment, it is
carried at cost, and regularly reviewed for impairment at each reporting date.
20
21
Customer deposits
2012
K’ million
2011
K’ million
Current and demand deposits
Savings accounts
Fixed deposit accounts
2,268,102
1,386,401
660,415
4,314,918
1,544,598
1,010,926
856,795
3,412,319
Current
Non-current
4,311,418
3,500
4,314,918
3,402,319
10,000
3,412,319
6,840
15,507
22,347
4
1,242
1,246
Deposits
Items in course of collection
2012 Annual Report
67
22
Retirement benefit obligations
Reconciliation of funded status
Present value of obligations
Fair value of plan assets
Deficit
Unrecognised losses
Prepaid pension cost
Asset ceiling restriction
Prepaid pension cost after asset ceiling restriction
2012
K’ million
2011
K’ million
(132,609)
129,336
(3,273)
19,686
16,413
3,273
19,686
(129,632)
115,030
(14,602)
53,459
38,857
(34,229)
4,628
129,632
15,667
19,445
(12,311)
(19,823)
132,610
97,913
9,202
15,177
31,170
(23,830)
129,632
123,472
17,254
(13,428)
14,574
7,287
(19,823)
129,336
113,819
17,073
(12,570)
14,356
7,316
(1,135)
(23,830)
115,029
Changes in the present value of defined benefit obligation over the year
At start of year
Current service cost
Interest cost
Actuarial gains/(losses)
Benefits paid
At end of year
Changes in the fair value of the plan assets during the year
At start of year
Expected return on plan assets
Actuarial losses
Employer contributions
Employee contributions
Adjustment for outstanding contribution
Benefits paid
At end of year
68
2012 Annual Report
22
Retirement benefit obligations (Continued)
Plan assets comprise:
Equity instruments
Debt instruments
Property
Other
2012
K’ million
2012
%
2011
K’ million
2011
%
40,085
23,275
53,016
12,962
31
18
41
10
35,130
21,660
46,080
12,159
31
19
40
10
129,338
100
115,029
100
The expected return on plan assets is determined by considering the expected returns available on the assets underlying the investment policy. Expected yields on fixed interest investments are based
on gross redemption yields as at the statement of financial position date. Expected returns on equity and property investments reflect long-term real rates of return experienced in the respective
markets.
Benefit cost in the profit and loss for period ended 31 December 2012
Service cost
Contributions
Interest cost
Expected return on assets
Recognition of gains
Change in asset ceiling restriction
Profit and loss (expense) credit
2012
K’ million
2011
K’ million
15,667
(7,287)
19,445
(17,255)
(2,886)
9,202
(7,316)
15,177
(17,073)
(394)
30,507
7,684
30,103
13,070
(7,684)
14,574
20,375
(30,103)
14,356
19,960
4,628
Reconciliation of prepaid pension cost
At start of year
Less pension expense during the year
Plus employer contributions during the year
At year end
2012 Annual Report
69
22
Retirement benefit obligations (Continued)
In line with the provision of IAS 19, the above asset on the defined benefit pension scheme has not been recognised since it is uncertain that any benefit will be available in the future.
The principal actuarial assumptions used were as follows:
Plan assets comprise:
- discount rate
- expected rate of return on scheme assets
- future salary increases
- future pension increases
Four year summary:
Present value of defined benefit obligation
Fair value of plan assets
Deficit/(surplus) in the plan
23
70
Other liabilities
2012
K’ million
(132,608)
129,336
(3,272)
2012
2011
15%
15%
11%
8%
15%
15%
11%
8%
2011
K’ million
2010
K’ million
2009
K’ million
(129,632)
115,030
(14,602)
(97,913)
113,819
15,906
(86,382)
103,144
16,762
2012
K’ million
2011
K’ million
Bills payable
Accrued expenses
Statutory payments
Visa transactions payable
Advance Loan repayment
Deferred arrangement fees
Incoming swifts transfers
Sundry payables
1,455
67,109
11,379
28,690
33,948
5,889
30,746
21,082
200,298
1,636
49,509
11,051
10,022
19,149
3,402
15,676
110,445
Current
Non-current
200,298
200,298
110,445
110,445
2012 Annual Report
24
Provisions for liabilities and charges
Retirement Benefit
Obligation
K’ million
Provisions for
Legal Claims
K’ million
K’ million
At 1 January 2011
Provision
Reclassification
Payment
Increase in defined benefit obligation
34,194
1,371
4,700
(21,074)
7,259
10,628
1,100
(669)
-
44,822
2,471
4,700
(21,743)
7,259
At 31 December 2011
26,450
11,059
37,509
At 1 January 2012
Provision
Payment
Decrease in defined benefit obligation
26,450
60
(11,388)
(11,327)
11,059
500
-
37,509
560
(11,388)
(11,327)
3,795
11,559
15,354
2012
K’ million
2011
K’ million
159,097
129,875
159,097
45,996
494,065
179,375
128,122
179,375
24,204
511,076
Opening balance
Repayments during the year
Additions
Exchange losses
511,076
(48,710)
23,950
7,749
161,894
(43,675)
375,125
17,732
Closing balance
494,065
At 31 December 2012
25
Borrowed funds
Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO)
International Financing corporations (IFC)
Societe de Promotion et de Participation pour la Cooporation Economique (PROPARCO)
African Development Bank (ADB)
The movement during the period was as follows:
2012 Annual Report
Total
511,076
71
25
Borrowed funds (Continued)
Repayable as follows;
1-12 months
1-3 years
3-5 years
Above 5 years
2012
K’ million
2011
K’ million
51,589
297,991
129,153
15,332
47,690
335,260
123,854
4,272
494,065
511,076
The Bank obtained a foreign currency facility of USD$25 million from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V (FMO) and Societe de Promotion et de Participation
pour la Cooporation Economique (PROPARCO) in the year ended 31 December 2008 and secured a further $10 million and USD$50 million in 2009 and 2011 respectively. During the year 2010 and
2011, the Bank secured further amounts of USD$5 million and USD$50 million from African development Bank (ADB) and International Financing corporations (IFC) respectively.
Under the terms of the FMO and PROPARCO loan, the Bank is required to observe inter alia, the following financial covenants:
Covenants
-
Capital adequacy ratio: Minimum
Open loan exposure ratio: not to exceed
Related party lending ratio: not to exceed
Net interest margin: Minimum
Cost to income ratio: not exceed 70% after 2010
10%
25%
20%
2%
The only financial covenant to be observed under the terms of the ADB Loan is as follow:
- Capital adequacy ratio: Minimum
10%
Under the terms of the IFC loan, the Bank is required to observe inter-alia, the following covenants:
Covenants
-
72
Capital adequacy ratio: Minimum
Equity to asset ratio not less than
Economic Group exposure ratio not more than
Aggregate Large exposure ratio of not more than
Related party exposure ratio of not more than
Open credit exposure ratio of not more than
12%
5%
25%
400%
15%
25%
2012 Annual Report
25
Borrowed funds (Continued)
-
26
Covenants
Fixed assets plus equity investment ratio of not more than
Aggregate foreign exchange exposure of not more than
Single Currency Foreign Exchange Risk Ratio of not more
Interest rate risk ratio of not more than
Aggregate interest rate risk ratio of not more than
Foreign Currency Maturity Gap of at least
Aggregate negative maturity gap ratio of not less than
Single industry exposure ratio of not more than
Share capital
35%
25%
10%
10%
20%
-150%
-300%
30%
Number of shares
(millions)
1,155
Ordinary shares
K’ million
11,550
Share premium
K’ million
77,697
8,625
86,625
2,622
During the year, the Bank raised its authorised share capital from K11,550 million to K86,625 million in compliance with the Bank of Zambia minimum capital requirements announced on
30 January 2012. On 30 March, 2012 the Bank made a bonus issue of shares of 13 to 2 to the current shareholders out of share premium. The total authorised number of ordinary shares is 10,000
million (2011: 1,500 million) with a par value of K10 per share. 8,663 (2011: 1,155) million shares are issued and fully paid.
Below is the shareholding structure
RABOBANK
Ministry of finnace and National planning (GRZ)
National Pension Scheme Authourity
LIZARA Investement (as nominies for ZNFU)
Africa Life Financial Services (AFLIFE managed funds)
Public Service Pension Fund
Mukuba Pension Trust Fund
Others
Total
2012
%
45.59
25.00
8.91
3.41
3.04
2.76
2.27
9.02
100.00
2011
%
45.59
25.00
8.91
3.41
3.01
2.50
2.20
9.38
100.00
The Shareholders with a holding of above 2% have been shown seperately and those with less 2% have been included in others.
2012 Annual Report
73
27
Statutory reserve
2012
K’ million
2011
K’ million
11,550
75,075
86,625
11,550
11,550
2012
K’ million
2011
K’ million
Balance brought forward
Transfer from retained earnings
105,687
3,729
75,584
30,103
At end of year
109,416
105,687
At end of year
Transfer from retained earnings
At end of year
The regulatory reserve represents an appropriation from retained earnings to comply with SI 182 of 195.
28
General Banking Reserves
The balance in the general banking reserve represents the excess of impairment provisions determined in accordance with the Central Bank of Zambia Prudential Regulations over the impairment
provisions recognised in accordance with (IFRS). Where the IFRS impairment exceeds the Central Bank provisioning, a reversal is done from general banking reserves to revenue reserves.
74
2012 Annual Report
29
Revaluation reserves
2012
K’ million
2011
K’ million
At begning of year
Transfer of excess depreciation
Revaluation surplus
Deferred tax on revaluation (note 18)
Deferred tax on excess depreciation
Transfer of revaluation after disposal
58,230
(2,361)
826
(415)
40,728
27,293
(8,537)
(1,254)
At end of year
56,280
58,230
5,347
(5,347)
813
(1,276)
5,347
1,276
Available for sale financial assets
At start of year
Net (loss)/gain from changes in fair value
Net gain/(loss) transferred to profit and loss account
At end of year
813
5,347
56,280
813
171
57,264
58,230
5,347
63,577
Total revaluation reserves
Available – for-sale-Investment
At end of year
30
Off statement of financial position, financial instruments, contingent liabilities and commitments
In common with other banks, the Bank conducts business involving acceptances, letters of credit, guarantees, performance bonds and indemnities. The majority of these facilities are offset by
corresponding obligations of third parties.
2012 Annual Report
75
30
Off statement of financial position, financial instruments, contingent liabilities and commitments (Continued)
Contingent liabilities
Guarantees and performance bonds
2012
K’ million
2011
K’ million
496,210
17,216
435,437
65,575
513,426
501,012
Nature of contingent liabilities
An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Bank expects most acceptances to be presented, and reimbursement by the customer is normally
immediate. Letters of credit commit the Bank to make payments to third parties, on production of documents, which are subsequently reimbursed by customers.
Guarantees are generally written by a bank to support performance by a customer to third parties. The Bank will only be required to meet these obligations in the event of the customer’s default.
During the ordinary course of business the Bank is subject to threatened or actual legal proceedings. All such material cases are periodically reassessed, with the assistance of external professional
advisers where appropriate, to determine the likelihood of the Bank incurring a liability. In those instances where it is concluded that it is more likely than not that a payment will be made, a
provision is established to Management’s best estimate of the amount required to settle the obligation at the relevant report date. In some cases, it will not be possible to form a view, either
because the facts are unclear or because further time is needed to properly assess the merits of the case. Provisions for litigation-related expenses totalled K11,559 million on 31 December 2012
(See Note 24).
Other commitments
Undrawn stand-by facilities, credit lines
and other commitments to lend
2012
2011
K’ million
K’ million
190,050
145,001
Nature of commitments
Commitments to lend are agreements to lend to a customer in future subject to certain conditions. Such commitments are normally made for a fixed period. The Bank may withdraw from its
contractual obligation for the undrawn portion of agreed overdraft limits by giving reasonable notice to the customer.
76
2012 Annual Report
31
Analysis of cash and cash equivalents as shown in the statement cash flows statement
2012
K’ million
2011
K’ million
Cash and Balances with Bank of Zambia (Note 13)
Less: Statutory deposits requirement (see below)
Government and other securities (Note 15)
470,772
(173,833)
515
297,454
512,896
(130,912)
106,182
488,166
Balances with other banks (Note 14)
Amounts due to Banking Institutions (Note 21)
364,860
(22,347)
639,967
404,741
(1,246)
891,661
For the purposes of the statement of cash flow, cash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including: cash and balances with the
Central Bank, Treasury bills and other eligible bills, and amounts due from other banks. Cash and cash equivalents exclude the cash reserve requirement held with the Bank of Zambia.
Banks are required to maintain a prescribed minimum cash balance with the Bank of Zambia that is not available to finance the Bank’s day-to-day activities. The amount is determined as 8% of the
average outstanding customer deposits over a cash reserve cycle period of one week.
32
Related party transactions
The Bank’s major shareholder is Rabo International Advisory Services (RIAS) BV a subsidiary of Cooperation Raiffeisen – Boerenleenbank CV (Rabobank) incorporated in The Netherlands. There are
no other companies which are related to Zambia National Commercial Bank Plc, listed on the Lusaka Stock Exchange. The Government of the Republic of Zambia hold a 25% interest in the Bank.
In the normal course of business, current accounts are operated and placings of foreign currencies are made with Rabobank at market rates (arms length).
(a) Placement with shareholder
Placement to Rabobank
Interest Income
2012 Annual Report
2012
2011
K’ million
K’ million
15
66,625
23
77
32 Related party transactions (Continued)
(b) Loans to Directors
2012
K’ million
Loans and advances to companies controlled by Directors
2011
K’ million
54
30
2012
K’ million
2011
K’ million
221,082
(50,071)
168,159
(25,895)
171,011
142,264
(c) Shareholder’s guarantee
During the year under review, the Government guanteed the K400 billion advance
(d) Employee loans
At 31 December 2012, advances to employees amounted to K221,082 million (2011: K168,159 million).
Employee loans recoverable
Employee loans benefit at market value
Movement is staff loan benefit
Current year fair value
Amortisation to profit or loss
25,895
31,320
57,215
(7,144)
50,071
19,908
13,288
33,196
(7,301)
25,895
Employee loans and advances are offered on concessionary rates. House, car and personal development loans are enhanced by collateral of landed property, and in the case of a car loan, the
vehicle registration certificate is endorsed with the Bank as absolute owner.
Where staff loans are issued to members of staff at concessionary rates, fair value is calculated based on market rates. This will result in the long term staff loans benefit as shown above.
78
2012 Annual Report
32
Related party transactions (Continued)
The prevailing interest rates on staff loans were as follows:
House
Personal loan
Car loan
Personal Development loan
Interest income earned on staff loans
Provisions on loans given to related parties
2012
%
2011
%
8
12
8
12
12
13
12
15
2012
K ‘million
2011
K’ million
18,953
16,313
-
-
-
-
33,910
23,991
6,500
6,558
1,639
1,293
1,263,551
585,285
5,564
1,172
(e) Deposits from Directors
Deposits from Directors
(f) Key management personnel compensation
Salaries and other short-term employment benefits
(g) Management fees paid to Rabo International Advisory Services (RIAS)
Fees are computed on the basis of the Management contract
(h) Directors’ remuneration
Sitting allowances
(i) Shareholder deposits
Deposits
Interest expense incurred
2012 Annual Report
79
33
Segment reporting
Following the management approach of IFRS 8, operating segments are reported in accordance with the internal reporting provided to the Executive Management Committee (the chief operating
decision maker), which is responsible for allocating resources to the reportable segments and assesses its performance. All operating segments used by the Bank meet the definition of a
reportable segment under IFRS 8.
The Bank has two main business segments:
· Retail Banking
- incorporating private banking services, private customer current accounts, savings, deposits, investment savings products, safe custody, credit and debit cards,
consumer loans and mortgages.
· Corporate Banking
- incorporating direct debit facilities, current accounts, deposits, overdrafts, loans and other credit facilities and foreign currency.
Other Bank operations comprise treasury management, and credit and computer services, none of which constitute a separate reportable segment and business activities.
As the Bank segment operations are all financial, with a majority of revenues deriving from interest and the Executive Management Committee relying primarily on net interest revenues to assess
the performance of the segment, the total interest income for all reportable segments is presented on a net basis. The Bank’s management reporting is based on a measure of operating profit
comprising net interest income, loan impairment charge, net fee and commission income and other income.
The information provided about each segment is based on the internal reports about segment profit or loss, which are regularly reviewed by the Executive Management Committee.
Business segments
- Corporate Banking
- Retail Banking
80
2012 Annual Report
33
Segment reporting (Continued)
Business segments as at 31 December 2012
Corporate Banking
K’ million
Retail Banking
K’ million
Consolidated
K’ million
Net interest income
321,356
79,255
30,324
140,594
143,038
-
461,950
222,293
30,324
Total income
430,935
283,632
714,567
Corporate Banking
K’ million
Retail Banking
K’ million
Consolidated
K’ million
Net interest income
259,030
105,444
23,736
134,364
95,554
7,914
393,394
200,998
31,650
Total income
388,210
237,832
626,042
Business segments as at 31 December 2012
34
Earnings per share
Basic earnings per share is calculated by dividing the profit after tax attributed to equity holders of the Bank by weighted average number of shares in issue during the year.
Profit attributable to equity holders
Weighted number of ordinary shares in issue (thousands)
Basic/diluted earnings per share
2012
K’ million
2011
K’ million
156,088
120,513
8,663
1,155
18.02
104.34
There are no potentially dilutive shares, hence diluted earnings per share is the same as the basic earnings per share.
2012 Annual Report
81
35
Events after the reporting date
The Government of the Republic of Zambia issued the Re-denomination of Currency Act, No. 8 of 2012. The re-denomination of the existing currency was to be done by dividing the
nominal value of the existing currency by a multiplicand of one thousand so that one thousand Kwacha would yield a face value of one Kwacha.
The Bank of Zambia issued a pronouncement under circular CB Circular No. 15/2012 that the rebased currency would become legal tender on 1 January, 2013. Consequently, the Bank of
Zambia distributed the rebased currency to all commercial banks in the country in readiness for the launch of the currency rebasing programme.
On 31 December 2012, the Bank received the new rebased currency amounting to ZMW163,302,550; equivalent to the old currency of K163,302,550,000 maintained off statement of
financial position. ZMW2.5 million of the new rebased currency could not be accounted for during the transition, post-reporting date period.
As at the date of these financial statements, the matter is still under investgation by both Management and the relevant Authorities
82
2012 Annual Report
5 Year Financial Trends
STATEMENT OF PROFIT OR LOSS
DETAILS
2012
K’m
550,876
(88,926)
461,950
252,617
714,567
(476,044)
(243)
238,280
(82,192)
156,088
2011
K’m
453,533
(60,139)
393,394
232,648
626,042
(421,252)
(19,852)
184,938
(64,425)
120,513
2010
K’m
368,023
(43,828)
324,195
244,088
568,283
(361,624)
(34,364)
172,295
(59,785)
112,510
2009
K’m
363,553
(38,053)
325,500
171,166
496,666
(305,038)
(65,620)
126,008
(46,664)
79,344
2008
K’m
280,398
(19,652)
260,746
138,511
399,257
(280,976)
(32,231)
86,050
(34,065)
51,985
2012
K’m
470,772
364,860
1,944,275
2,639,161
242,129
150,858
5,812,055
2011
K’m
512,896
404,741
1,558,779
1,890,736
229,140
121,329
4,717,621
2010
K’m
404,031
122,034
956,252
1,725,504
169,938
142,261
3,520,020
2009
K’m
624,840
218,656
822,693
1,162,564
139,581
11,812
59,309
3,039,455
2008
K’m
774,674
316,282
634,403
1,000,953
128,148
14,480
45,916
2,914,856
Customer deposits
Borrowed funds
Other liabilities
Total liabilities
4,314,918
22,347
494,065
267,342
5,098,672
3,412,319
1,246
511,076
210,309
4,134,950
2,591,242
24,278
161,894
266,228
3,043,642
2,292,358
3,642
164,870
182,908
2,643,778
2,325,203
4,914
120,009
142,449
2,592,575
Equity
Share capital
Reserves
Total equity and liabilities
Total
86,625
626,758
713,383
5,812,055
11,550
571,121
582,671
4,717,621
11,550
464,828
476,378
3,520,020
11,550
384,127
395,677
3,039,455
11,550
310,731
322,281
2,914,856
Interest income
Interest expenses
Net interest income
Commission and others
Operating income
Operating expenses
Impairment
Profit before tax
Tax charge
Profit for the year
STATEMENT OF FINANCIAL POSITION
ASSETS
Investment properties
Other assets
Total assets
LIABILITIES
BRANCH / AGENCY CONTACT DETAILS
LUSAKA PROVINCE
AVONDALE BRANCH
Tel: 282749/281056
Fax: 282462
CAIRO ROAD BUSINESS CENTRE
Tel: 228167/8/9
Fax: 225186
UNZA AGENCY
Tel: 294939
Fax: 294939
WOODLANDS BRANCH
Tel: 261835/261848
Fax: 261840
COPPERBELT PROVINCE
CIVIC CENTRE BRANCH
Tel: 253052/254624
Fax: 252761
CHINGOLA BRANCH
Tel:311588/311216
Fax: 313891
CALL CENTRE
5000 (MTN & AIRTEL)
Tel:1238881
E-mail:[email protected]
KITWE BUSINESS CENTRE
Tel: 21816/ 221344/
226061 Fax: 224508
EASYBANKING CENTRE
Tel: 221325
Fax: 221320
KITWE INDUSTRIAL
BRANCH
Tel: 214196/214173
Fax: 215727
FINDECO HOUSE BRANCH
Tel: 228239/228239
Fax: 221368
CENTRAL PROVINCE
CHISAMBA BRANCH
Tel: 212115/212697
Fax: 212115
CHISAMBA AGENCY
Tel: 611245
KABWE BUSINESS CENTRE
Tel: 222051/222053
Fax: 221603
KAPIRI MPOSHI BRANCH
Tel: 271083/271084
Fax: 271154
MKUSHI BRANCH
Tel: 362316/362352
Fax: 362201
LIVINGSTONE BUSINESS CENTRE
Tel: 321901/321903
Fax: 320182/320006
LIVINGSTONE AIRPORT AGENCY
TEL: 321901-2 /321903
MAAMBA BRANCH
Tel: 78109/78122
Fax: 78144
MAZABUKA BRANCH
Tel: 30050/30109
Fax: 30072
MONZE BRANCH
Tel: 50565/50411
Fax: 50227
NORTHERN PROVINCE
NAMWALA BRANCH
Tel: 60048/60026
Fax: 60090
LUANSHYA BRANCH
Tel: 511570/511580
Fax: 510560
KASAMA BRANCH
Tel: 222149/221770/221009
Fax: 221085
SIAVONGA BRANCH
Tel: 511062/511379/511118
Fax: 511226
KAFUE BRANCH
Tel: 311601/311273
Fax: 311603
MUFULIRA BRANCH
Tel: 412788/41066/410003
Fax: 411432
LUAPULA PROVINCE
EASTERN PROVINCE
LUSAKA AIRPORT AGENCY
TEL: 271280
MASALA AGENCY
Tel: 660035
KAWAMBWA BRANCH
Tel: 960205/960041
Fax: 960041
CHIPATA BRANCH
Tel: 221478/222229
Fax: 221777
LUSAKA BUSINESS CENTRE
Tel: 221174/221042/221422
Fax: 232393
NDOLA AIRPORT AGENCY
Tel: 612554
MANSA BRANCH
Tel: 821711/821712/821351
Fax: 821730
CHADIZA AGENCY
Tel: 221005/221478
NDOLA BUSINESS CENTRE
Tel: 610601/613849
Fax: 612280
NCHELENGE AGENCY
Tel: 960205/960041
LUSAKA CITY MARKET
Tel: 286398 / 286399 / 286400
Fax: 286390
NDOLA INDUSTRIAL
BRANCH
Tel: 650805-8/650424
Fax: 650425
MPIKA BRANCH
Tel: 370620/370199
Fax: 370251
MANDA HILL BRANCH
Tel: 255524/255525
Fax: 255528
NDOLA WEST BRANCH
Tel: 610745/613885
Fax: 617758
MINISTRY OF FINANCE AGENCY
Tel: 251815 / 255634
NORTH WESTERN
PROVINCE
NORTHMEAD BRANCH
Tel: 294936/294949/294955
Fax: 294933
KASEMPA AGENCY
Tel: 0974 479331
LUSAKA CENTRE BRANCH
Tel: 227882/229173/221034
Fax: 221725/237807
PREMIUM HOUSE BRANCH
Tel: 227122/227117
Fax: 225179
SOLWEZI BRANCH
Tel: 821148/821535
Fax: 821976
MUCHINGA PROVINCE
MPIKA AGENCY
Tel: 370357
SOUTHERN PROVINCE
CHIRUNDU BRANCH
Tel: 515073/515065
Fax: 515093
CHOMA BRANCH
Tel:20252/20292/20439
Fax: 220309, Telex: ZA 24605
KAZUNGULA AGENCY
Cell: 0955 660079
LUNDAZI BRANCH
Tel: 480365/6/7
Fax: 480076
PETAUKE BRANCH
Tel: 71365/71301
Fax: 71322
MFUWE BRANCH
Tel: 45047/45038/45087
Fax: 45038
WESTERN PROVINCE
MONGU BRANCH
Tel: 221144/221203
Fax: 221224
SENANGA BRANCH
Tel: 230129/230130
Fax: 222339
HEAD OFFICE CONTACTS
OUR PRODUCTS
We are proud to announce that Zanaco has been recognised as the
Best bank in Zambia for the second year running. We have all our
staff, customers and investors to thank for helping us achieve this
incredibly important accolade. With our wide coverage of 63 branches
and presence in 74 disctricts of Zambia, we continually strive to stay
true to our promise...Big. Stong. Reliable.
Zanaco...The Best Bank in Zambia - Euromoney awards.

Financial Statements

Transcription

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