Bunna International Bank S.C. (BIB) 9 ANNUAL REPORT
For the Year Ended Addis Ababa on June 30, 2018 Ethiopia Use our ATM and POS Machines Located at Convenient Places
በተለያዩ ቦታዎች በሚገኙ የክፍያ መፈፀሚያ ማሽኖቻችን (POS) ይገልገሉ፡፡
Mobile & Internet Banking AND COMING SOONMobile Wallet & Agent Banking
BUNNA INTERNATIONAL BANK S.C. (BIB) ANNUAL REPORT
Bunna International Bank S.C. (BIB)
ANNUAL REPORT For the Year Ended on June 30, 2018
Addis Ababa Ethiopia
1 Bunna International Bank S.C. (BIB) 9 ANNUAL REPORT
For the Year Ended Addis Ababa on June 30, 2018 Ethiopia
CONTENT
The Board Chairman’s and the CEO’s Message ...... 6 The Board of Directors’ Report...... 8 Auditor’s Report...... 17 Directors and Professional Advisers...... 19 Report of the Directors...... 20 Statement of Directors’ Responsibilities...... 21 Independent Auditor’s Report...... 22 Statement of Profit or Loss and other Comprehensive Income...... 25 Statement of Financial Position...... 26 Statement of Changes in Equity...... 27 Statement of Cash Flows...... 28 Notes to the Financial Statements...... 29
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2 140 121 120 98 98 100 80 80 53 60 53 60 44 33 In Million USD 33 In Million USD 40 40 25 ANNUAL REPORT 19 Performance Highlights over the20 Past NineYears Performance Highlights over the Nine Past Years 0 June June June June June June June June June June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 (F.Y. 2009/10 -‐2017/18) (F.Y. 2009/10-2017/18)-‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph1: Deposit Graph6: Branch Network Graph1: Deposit Graph6: Branch Network
200 171 14000 138 12000 150 138 9947 150 10000 102 7532 102 8000 100 80 5385 6000 60 3501
In Million Birr In Million 50 33 4000 In Number 50 33 2152 In Number 1548 21 903 11 2000 239 491 4 11 0 0 June June June June June June June June June June June June June June June June June June June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 -‐50 -‐50 -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph7: Paid-‐Up Capital Graph2:Graph2: Loans Loans & & Advances Advance Graph7: Graph7: Paid Paid-Up-‐Up Capital Capital
1475 9000 1600 1475 8000 6942 1400 7000 1200 1200 1010 6000 5250 1000 5000 686 3675 800 686 4000 600 508 2446 600 417 In Million Birr In Million 3000 Birr In Million In Million Birr In Million 308 400 213 253 308 2000 1360 169 213 652 950 200 1000 192.2 366.3 200 0 0 June June June June June June June June June June June June June June June June June June June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 -‐10 -‐10 -‐11 -‐11 -‐12 -‐12 -‐13 -‐13 -‐14 -‐14 -‐15 -‐15 -‐16 -‐16 -‐17 -‐17 -‐18 -‐18
Graph3: Gross Profit before Tax Graph8: Staff Strength Graph3:500 Gross Profit before Tax Graph8: Graph8: Staff Number Strength of Permanent Staff 427 400 1800 1800 294 1600 1600 1396 1396 300 250 1400 1400 1167 1167 182 1200 1200 200 938 938 1000 1000 107.6 747 747 800 In Million Birr In Million 80.3 800 100 550 550 In Number 26.8 41.3 In Number 600 600 385 0.05 385 400 208 263 263 0 400 119 208 200 119 June June June June June June June June June 200 0 -‐100 -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 0 June June June June June June June June June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph9: Number of Depositors Graph4:Graph4: Asset Asset Graph9: Graph9: Number Number of of Depositors Depositors
16000 450 14000 13021 450 400 349 12000 400 350 349 9841 350 10000 300 242 300 8000 6830 250 242 250 200 175 6000 4500 175 In Million Birr In Million 200 150 124 4000 3012 2129 150 100 77 124 1365 Number in Thousand 2000 781.4 44 480 100 50 13 25 77 Number in Thousand 44 0 50 0 13 25 June June June June June June June June June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 0 June -‐11 June -‐12 -‐13 June -‐14 June -‐15 June -‐16 June -‐17 June -‐18 June
-‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18 Graph5: Foreign Currency Mobilization Graph5: Foreign Currency Mobilization
140 121 120 98 98 100 80 80 53 60 44 33 In Million USD 40 25 19 20 0 June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph6: Branch Network
200 171 3
150 138 102 100 80 60 50 33 In Number 21 4 11 0 June June June June June June June June June -‐50 -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph7: Paid-‐Up Capital
1600 1475 1400 1200 1010 1000 800 686 508 600 417 In Million Birr In Million 400 253 308 169 213 200 0 June June June June June June June June June -‐10 -‐11 -‐12 -‐13 -‐14 -‐15 -‐16 -‐17 -‐18
Graph8: Staff Strength Board of Directors
Eng. Tibebu Eshete Chairman
Dr. Neway Zergie Ato Wudu Yedemie W/ro Wudalat Gedamu Eng. Abebe Ayalew Vice Chairman Director Director Director
W/ro Hindya Zekaria Ato Adam Melaku Ato Gedefaw Baye Ato Leikun Yeshaneh Director Director Director Director (Bunna Insurance Representative)
Asst. Professor Dr. Zelalem Asefa W/ro Sewnet Tizazu Ato Simachew Shiferaw Ato Bekalu Ayalew Director Director Director Board Secretary
4 Executive and Senior Management
Ato Mulugeta Alemayehu Chief Executive Officer
Ato Demelash Demissie Ato Solomon Jebessa Ato Eskezia Mengestu Ato Wolelaw Birhane Chief Resource Management Officer A/Chief Strategy Officer A/Chief Operation Officer A/Chief Information Technology Officer
Ato Gizachew Amare Ato Yohannes Gulelat Ato Zerihun Girma Ato Yohannes Emiru Ato Wubetu Assefa Director, Human Resource Director, Finance Director, Marketing Director, Internal Audit Director, Legal Service Management Directorate Directorate Directorate Directorate Directorate
Ato Tegenu Hailu Ato Samuel Demisew Ato Binyam Tilahun Ato Tewodros Baleh Ato Tesfaye Gezahagn Director, Risk Management A/Director, International A/Director, Credit A/Director, Core Application A/Director, Corporate and Compliance Directorate Banking Directorate Directorate Directorate Planning and Change Management
Ato Tadese Dabi Ato Emishaw Tefera Ato Getachew Tadesse Ato Mekbib Tola A/Director, Infrastructure A/Director, E-Banking A/Director, Domestic A/Director, Procurment and SecurityDirectorate Directorate Banking Operations and Facility Management Directorate Directorate
5 Bunna International Bank S.C.
The Board Chairman’s and the CEO’s Message
It is indeed an honor and a privilege to present Bunna Birr 22.1% but above same period a year ago by Birr 304.5 International Bank s.c.’s Annual Report for the year million (14.5%). concluded June 30, 2018 accompanied by the Audited The Bank has disbursed a total of Birr 2.78 Billion during Financial Statement for the year to the Bank’s esteemed the fiscal year and has managed to collect Birr 1.81 Billion. Shareholders. During the concluded fiscal year, our Bank Relative to last year same period, both disbursement and was able to see yet another year on year performance collection performance were substantially higher by boost and was able to achieve 94% of its balance sheet Birr 516.3 million (22.8%) and Birr 320.9 million (21.5%), and income statement targets set for the fiscal year. This respectively. was a tremendous and encouraging result despite the 15% devaluation of the Birr against the USD and subsequent The total foreign currency mobilized by the Bank during tangible impacts and changes it brought in the macro the review period has reached USD 121.3 million. Despite and microeconomic environment including the revision of encouraging performance registered in export receipt- various directives by the supervisory body. During the Fiscal which rose by USD 14.0 million (20.0%) over annual target; Year, soft targets and projects that the Board of Directors the total mobilized during the year was below the target (BoDs) and Management have agreed upon to execute, in by USD 55.0 million. It, however, was above last year same order to assure the sustainable growth of the Bank in the period by USD 23.0 million (23.3%). years ahead, have also progressed in the right direction. The During same period, the Bank was able to generate a total E-Banking Solutions and the Head Office Building Projects income of Birr 1.39 Billion; lower than the target for the are best examples in that regard where pivotal milestones period by Birr 69.3 million or 4.8% but above last year same were reached. The Board and Management share a period by Birr 464.1 million or 50.0%. Accordingly, the gross common vision: To be public-powered, uniquely flavored profit before tax of the Bank stood at Birr 427.2 million at and the most accessible Bank. To help realize this vision, the the end of June 30, 2018, below the target set for the fiscal Board oversees the Bank’s strategic direction, maintaining year by Birr 68.8 million (14.7%) in a year where number of its focus on markets and segments where our Bank can Banks were forced to revise their annual plan due to the apply its core competence and strength to win business aforementioned devaluation of Birr against USD and the and deepen relationships with various stakeholders. observed subsequent impacts. As compared to last year’s Looking into the key performance areas during the budget profit performance, the current year achievement of the year, the amount of deposit mobilized by the Bank during Bank was remarkably higher by more than 45.0% or 133.0 the 2017/18 Fiscal Year has increased by Birr 2.4 Billion from million. end of June 2017; and the outstanding balance stood at Birr The total assets of the Bank rose by Birr 3.18 Billion and 9.95 Billion as at end of June 2018. The amount mobilized stood at Birr 13 Billion at the end of June 30, 2018. during the year was beneath the target set for the year by
6 Buna Gold Checking Account www.bunnabanksc.com ANNUAL REPORT
of a seasoned advisor hired by the Bank. Also, in relation to E-Payment Projects, major milestones were reached and contracts were concluded with bid winners during the concluded budget year with User Acceptance Testing (UAT), Pilot Test, and full scale implementation to follow during the 1st two quarters of the coming fiscal year.
We recognize that integrity and accountability are the foundation for the Bank’s strong reputation and brand. To this end, we have established standards, revised Board By- laws, and implemented a new organizational and salary structure to meet with the growing needs of the Bank and compete well in the industry. We have also continued our effort on further deepening the implementation and practice of our governance and risk management programs during the year ended June 30, 2018 and the Bank’s Risk Management Program was revised pending final approval at the National Bank of Ethiopia. The bank’s paid up capital during the period July 1,2017 to Moreover, in order to properly implement the National June 30, 2018 grew by Birr 465 million (46.0%) and stood Bank direction and to comply with all legal requirements at Birr 1.48 Billion at the end of the fiscal year. The annual of the country, we have revised and introduced different increment was remarkably above the target for the year policies and procedures. Looking forward, to sustain the (Birr 1.35 billion) by Birr 125 million (36.8%) and same period growth trajectory and maintain the public confidence at of last year by Birr 141 million (44%). All the shares floated large, the Board and Management will focus on the full by the bank during the year were purchased by existing implementation of process improvements. Beyond setting shareholders, reflecting the strong commitment and also prudent structure and strong policies, the Bank will also confidence that the shareholders have on our Bank. focus on implementing the change initiatives identified in During same period, a total of 33 branches were opened its Annual Corporate Plan for the fiscal year 2018/19, which and the total number of branches at the end June 2018 in-turn are cascaded from its Five Year Strategic Plan, and stood at 171. Out of the total 171 Branches, 78 are located make sure that it bears fruit within the intended timeframe. in Addis; while the remaining 93 branches are found in In line with this, the midterm Five Year Strategic Plan regional towns. revision is one of the most important activities planned to These results show how BIB continues to bring its strength be executed during the 2018/19 Budget Year. and capabilities to bear: strong client relationships; prudent Finally, the significant achievements recorded by our Bank capital and risk management; a client focused culture and would not have been possible without the continued highly engaged employees. The Board and Management support of our customers, the wise leadership of the have also been working relentlessly towards the realization Board of Directors of our Bank, the commitment of the of major soft-targets and preoccupations of the Bank Management team and dedication of the staffers of our which were identified and articulated in the previous year’s bank. The National Bank of Ethiopia, as always, continues to annual report. Accordingly, a concerted effort has been contribute to our safe and sound operation, by answering exerted and an encouraging progress has been obtained the support requests we raise to them. We would also like in the area of Project Implementation with the Ethiopian to extend our heartfelt thanks to all the stakeholders. As in Commodity Exchange (ECX) where our Bank became a the past years, we want to assure all our stakeholders that member, the Head Quarter Building Project where pivotal BIB’s years of success are yet to magnify and shine, with the steps were taken including the establishment of a project continued effort of the Bunna Team. office and bid document preparation with the involvement
Eng. Tibebu Eshete Ato Mulugeta Alemayehu Chairman, Board of Directors’ CEO/President
Bunna Bank Gold checking account: you will earn a better offer depending on the amount you put in your 7 account. To qualify, a minimum deposit of Birr 100,000 is required. THE BOARD OF DIRECTORS REPORT (F.Y. 2017/18)
Bunna Bank’s Board of Directors is pleased decline in price of major agricultural to present the Annual Report of the Bank for export commodities following weak world the fiscal year ended 30th June, 2018. In what economic recovery are few among other follows, the Board presents an overview of the contributing factors for the registerd overall performance results of the Bank during performance. (Source: NBE & National the fiscal year 2017/18 and also highlights its Planning Commission: GTP II doc). plans for the year ahead. 1.6 Cash remittance received from private At this juncture, the Board of Directors would individuals living abroad was USD 2.7 like to note that the FY 2017/18 report is billion, up by USD 200 million against last prepared based on International Financial year’s amount of USD 2.5 billion. Reporting Standards (IFRS). In relation, for comparison purpose the previous two fiscal 2. HIGHLIGHTS OF OPERATIONAL years annual reports are also converted to IFRS PERFORMANCE reporting standards. BIB completed the fiscal year 2017/18 with continued growth and encouraging 1. MACROECONOMIC DEVELOPMENTS performance in most areas of activities. The 1.1 Global economic growth is estimated to reported performance is registered in the face of be 3.7 percent in 2017; and projected to domestic challenges like economic slowdown remain at its 2017 position during 2018- associated with political unrest in the country; 19 (IMF: World Economic Outlook Report, sluggish export and remittances; and stringent October 2018). NBE policy measures on credit, interest rate and foreign currency allocation during the review 1.2 The Ethiopian economy is projected to show year. The major operational performances of a high economic growth (7.5% by IMF and the Bank are highlighted below. a double digit by Ethiopian Government) 2.1. Deposit Mobilization during the F.Y. 2017/18. The outstanding deposit balance of the Bank 1.3 Domestic inflation (year-on- year) has shot has reached Birr 9.95 billion at the end of up to 14.7 percent at end June 2018 from June 2018, up by 32.4 percent (Birr 2.4 billion) 8.8 percent last year same period (Source: as compared to FY 2016/17. The registered CSA). performance was 95 percent of the target set for the year. 1.4 The amount of foreign currency generated from export during the Fiscal Year While looking at the composition of deposits, 2017/18 stood at USD 2.8 billion while savings deposit continued to constitute the the total import bill was USD 15.3 billion. largest share (59%) followed by demand (22%) Accordingly, trade deficit balance reached and time deposits (19%). USD 12.5 billion, narrowed by USD 300 Similarly, BIB expanded its number of million from USD 12.8 Billion in a year ago account holders by 44.2 percent and stood (National Bank of Ethiopia). at 349 thousand at the end of June 2018. The performance, however, was lower than the 1.5 The export performance during the fiscal target set for the period by 7.0 percent. Out year was marginally below than what was of these customers, 92.8 percent are savings achieved last year (USD 2.9 Billion) but deposit account holders, distantly followed significantly lower than the target of USD by demand (7.2%) and time deposit account 8.7 billion set for the review year. Prevailed holders (0.04%). political unrest in the country; continued
8 Deposit Account for Investment www.bunnabanksc.com ANNUAL REPORT Fig.3: Composition of Loans & Advances by Economic Sector During FY2017/18 Fig.1: Deposit by Type
Loans and advance extended by the Bank has 2.2 Loans and Advances continued to cover almost all sectors of the The Bank’s loan portfolio channeled to various economy, though slight variation is observed economic sectors has continued to show a in their proportion. Accordingly, building & steady growth of 32.3 percent (i.e Birr 1.70 construction stood 22.6%, domestic trade and billion) during the reporting period and reached services 15.3%, transport 13.0%, manufacturing at Birr 6.94 billion at the end of June 2018. This 9.0%, import & export 31.2%, staff loan 5.5%, performance is equal to the target set for the agriculture 0.25%, and other sectors took the fiscal year. This increment has been achieved in remaining 3.3 percent. the face of the prevailing 27% NBE bill policy; The Bank’s Non-Performing Loan (NPL) was 3.5 and besides the credit cap set on private Banks during fiscal year under review. So far, the percent as at June 30, 2018; slightly above the outstanding balance of NBE Bill purchased by Bank’s 3 percent target but below the 5 percent the Bank stood at Birr 2.87 billion at the end of limit set by the National Bank of Ethiopia. June 2018. 2.3 International Banking Operation
Regarding the type of products of loans, term Despite subdued export earnings at national loan constituted the largest portion (66.1%) of level and the presence of stiff business the total loan portfolio of the Bank followed by environment in foreign exchange mobilization, revolving credit (17.5%) and overdraft (16.4%). the Bank has mobilized foreign currency worth In relation to the composition of term-loans, BIB of USD 121 million during the FY 2017/18, up has continued to allocate the highest share of by USD 23.0 million 23.3% as compared with a its term loans to medium-term loans (58.0%), year ago. It, however, was below the fiscal year followed by short and long term loans, which target by USD 55.0 million (31.2%). make up 36.0 and 6.0 percent, respectively. For compliance reason, the Bank is working to raise Income from international banking activities the share of short-term loans to 40 percent. also grew by 25.1 percent or Birr 42.6 million relative to what was achieved in preceding Fig.2: Loans and Advances by Economic Sector year and stood at Birr 212.0 million. The Bank has exerted a concerted effort to enhance its international banking service delivery to its customers and thereby generate more foreign currency. Accordingly, the Bank was able to provide international remittance services through 10 internationally renowned remittance companies via its 171 branches that are distributed in different areas of the Country. Moreover, work is on progress to commence services with 4 additional remittance
Is intended to encourage enterprises to accumulate capital for future plan of business expansion, purchase 9 of machineries etc. To be eligible, a minimum deposit of Birr 1,500 is required; and in return customers will gain a competitive offer. Bunna International Bank S.C. companies. On top of this, the Bank continued Fig.5: Composition of Revenue by Source During conducting a lottery campaign for remittance the FY 2017/18 service customers and found a very promising result. The scheme is expected to be enhanced more in the coming fiscal year.
The Bank has continued its correspondent banking business relationship with 98 international banks during the fiscal year under review; and strives to start relationship with additional companies. Besides, BIB has strengthened its effort on enhancing relationships with NGOs, international 3.2 Expenses organizations and the Diaspora community to improve its foreign exchange earnings. Total expense of the Bank (including provision for doubtful loans, amortization & depreciation) 3. FINANCIAL PERFORMANCE went up by 52.3 percent (Birr 331.0 million) and stood at Birr 965.2 million at the end of 3.1 Revenue June 2018. The Bank’s operational expenses were dominated by interest expense (Birr The total revenue of the Bank grew by 50.0 389.0 million or 40.0% of total expense), salary percent or by Birr 464.1 million during the fiscal & benefits (Birr 286.0 million or 30.0% of total year 2017/18 and reached at Birr 1,392.4 million expense) and office rent (Birr 100.8 million or as at June 30, 2018. The regesterd performance 10.7% of total expense). was mainly attributed to the growth registered in all sources of revenue. With regard to the composition of expense, general expense, which accounted for 25.6 The largest revenue source was interest income percent of the total expense, grew by 34.2 on loans (74.2%) followed by fees generated percent (Birr 63.0 million) against previous from commission (10.7%) and services (8.0%). year; interest expense by 53.3 percent (Birr Other incomes (gain from foreign exchange 135.3 million) and salary & benefit expenses operations, plus other sources) also accounted by 46.0 percent (Birr 90.0 million). As per IFRS, for 7.1 percent of total revenue generated impairment loss on loans transferred from last during the reporting period. fiscal year was about Birr 43 million. Fig.6: Expense by Type Fig.4: Revenue by Source
As compared to FY 2016/17, the share of interest income on loans and advances substantially The growth in total expenses during the fiscal grew by 6.0 percentage points while the share year under review was mainly driven by National of non- interest income declined by same Bank policy change on minimum deposit rate percentage points during the fiscal year. from 5% to 7%, (which substantially increased interest expense) growth in deposit balance, expansion in overall work volume; and ever
10 Minor’s Trust Deposit Account www.bunnabanksc.com ANNUAL REPORT escalating office rent coupled with branch end of June 2018. Paid-up capital constituted expansion of the Bank. the lion's share (74.0 percent) of total capital and notably went up by Birr 465.0 million or 46.0 3.3 Profit and Loss Accounts percent during the just ended fiscal year and The Bank has kept its growth trajectory on the reached Birr 1.47 billion, mainly attributed to bottom line performance(i.e profit) during the the sales of new shares to existing shareholders. fiscal year under review. Accordingly, BIB has This performance was lower than its target by registered Birr 427.2 million profit before tax 1.7 percent. during the reviewed period, up by 45.0 percent 4. BUSINESS DEVELOPMENT AND OTHER or Birr 133.0 million against a year earlier. This ADMINISTRATIVE ISSUES growth in profit was the result of surge in all income categories and the concerted effort of 4.1 Information Technology the Bank to contain controllable expenses. BIB has continued strengthening the provision The amount of profit registered during the fiscal of ATMs and Point of Sale (POS) services at year constituted about 86 percent of the annual selected branches of the Bank and other target; and the 14 percent below target was convenient commercial centers. As a result, the Bank added 24 ATMs and 23 POS machines Fig.7: Gross Profit into the market during the reviewed year and in-effect, the total number of ATMs and POS of the Bank has reached 45 and 26, respectively at the end of June 2018. Likewise, the number of personalized Debit Cards issued to the Bank’s esteemed customers depicted an increase of 6,017 and stood at 14,879 cards at the end of FY 2017/18.
BIB is also determined to expand its services by availing alternative banking channels to its esteemed customers. To this end, BIB has primarily due to lower than target performance already purchased and started the deployment registered in income from international banking of e-payment solutions like mobile, agent, operations. internet banking and M-wallet solutions. These 3.4 Asset services are planned to be launched during the second quarter of the FY 2018/19. The Bank’s total asset grew by 32.3 percent or Birr 3.2 billion year on year to Birr13.0 billion 4.2 Headquarter Building at the end of June 2018. This annual asset As being noted on the 2016/17 report, the Bank growth was lower than what was targeted for has set the head quarter building of BIB as one the fiscal year by about 6.0 percent. The largest of its top agendas during the reporting fiscal part of the asset is loans and advances (after year. In light of this, the board has continuied provision); which accounted for 52 percent of taking careful steps in each and every process the total asset. on the way towards the construction activity. In 3.5 Capital order to properly manage the project, a project office has been established and a project The total capital of the Bank which consists of manager who is in charge of closely monitoring Paid-up capital, Legal and Special Reserve and the execution of the project on behalf of the Retained Earnings grew by 46.0 percent year- bank is recruited during the reviewed year. on-year to reach at about Birr 2.0 billion at the
Is intended to encourage parents/guardians to save money in the name of their children /under age of 18 11 years/ for future use. Customers opening this account will earn a better offer plus other benefits. Bunna International Bank S.C. On top of this, the design-build bid document programs during the reviewed period so that is prepared and an international bid is floated considerable number of staff attended various during the review period. The selection of a short term trainings organized by different construction company responsible to carry out local and international institutions. On top of jointly the design and building construction these, following its customary practice, the is expected to be completed sooner and Bank has been extending its financial support subsequently the main foundation and for more than 80 employees who are pursuing skeleton work on the secured land is believed their education at different institutions. to commence during the FY 2018/19. Moreover, 4.5 Corporate Social Responsibility in order to have regional and branch offices buildings, the Bank has also continued looking Beyond the provision of financial services, for other opportunities in Addis Ababa and BIB up-holds its values even under difficult Regional Towns to secure land. circumstances and challenges. Discharging its social responsibility is one of such values of BIB 4.3 Branch Expansion that is top on its agenda neither compromise As branch expansion plays major role in nor negotiate. The Bank has continued to increasing accessibility, resource mobilization extend donations and contributions to and expand service outreaches, the Bank has different development activities of the society. exerted utmost effort to expand its branch In line with this, during the fiscal year 2017/18, the Bank has made donations to drought network during the review period. As a result, victims in Afar Region, to displaced people in the Bank has managed to open 33 new branches different parts of the country following social in various locations (12 branches in Addis unrest prevailed in the country and to various Ababa and 21 branches in outlying towns); and households through various initiatives of as a result the total number of branches of BIB charity activities. The Bank’s role in discharging has reached 171at the end of June 2018. its social responsibility is expected to continue 4.4 Human Resources strengthening during the years to come.
During the year under review, BIB recruited 5. STRATEGIC INITIATIVES AND THE WAY 229 permanent new employees to fill various FORWARD job positions. Accordingly, the total number The fiscal year 2017/18 was the second year of permanent staff of the Bank has increased of the 2nd Five Year Strategic Plan period of to 1,396 at the end of FY 2017/18. The number the Bank. Accordingly BIB has exerted its of outsourced non-clerical employees of the utmost effort for the realization of its strategic Bank also reached 1,594. This surge in staff size objectives during the reviewed period. is mainly as a result of rapid branch expansion and increased work volume of the Bank. The following issues shall be the major pre- occupations of the bank which are believed As BIB always believes, to keep on competing decisive and needs to be implemented by the in the dynamic banking industry and to be in Bank during the fiscal year 2018/19. line with the growth trajectory, the presence of qualified and well trained staff has a paramount 1. Conduct mid-term review of the 2nd Five importance. To this end, the Bank has continued Year Strategic Plan of the Bank to be in- giving due attention on recruiting competent tandem with the prevailing economic professionals from the market and thereby fundamentals and current socio-economic developing their skills and knowledge with development of the country; on-the-job and relevant short-term trainings. 2. Finalize the deployment of the e-payment In-effect, the Bank has invested around Birr banking solutions and interest free Banking 7.2 million for staff training and development
12 Special Purpose Deposit Account www.bunnabanksc.com ANNUAL REPORT services and ensure service excellence 75,398,423 to Legal reserve accounts in the by enhancing the Bank’s capability on current year’s operation and other deductions, delivering technology based services and the Board of Directors recommends to the products; General Assembly of Shareholders that Birr 204,478,420 be distributed as dividend. 3. Repositioning and Rebranding of BIB in light of the Bank’s 10th year anniversary of 7. PRESENTATION OF THE FINANCIAL joining the Banking industry; STATEMENTS
4. Expedite the process of the Headquarter The Financial Statements of the Bank comprising building construction by focusing on the Balance Sheet, the Profit and Loss Account, selection of the design-building contractor and the Cash-Flow Statement together with the and start the main foundation and skeleton Notes to the Financial Statements are appended work as early as possible; herewith. The Board of Directors is honored to present the External Auditors Report for the 5. Implementing the newly developed and fiscal year 2017/18 (hereafter Auditors’ Report). approved corporate governance policy framework of the Bank; which in-effect As always, we would like to take the expected to boost the efficiency of internal opportunity to extend our earnest thanks and system and processes of the bank. acknowledgement to the National Bank of Ethiopia for the unreserved support we have 6. Focus on staff development and capacity received during the concluded fiscal year. building at all echelons of the Bank by We believe that this support has a significant providing up-to-date trainings (hands-on contribution to our safe and sound operation and short term). Ineffect, their capability and in-effect to the achievements we have on providing efficient and effective services registered during the year. to our esteemed customers using new technologies and systems shall be boosted;
6. RECOMMENDATION ON APPROPRIATION OF THE PROFIT Eng. Tibebu Eshete After making appropriate tax deduction from Chairman, Board of Directors’ the gross profit earned during the fiscal year 2017/18, Bunna International Bank S.C. was able to generate a net profit of Birr 315,263,000. However, after previous years IFRS adjustment on retained earnings and transfer of Birr
Is designed for customers who want to save for special purposes like weeding, graduation, vacation etc; 13 and help customers earn a better offer. The minimum amount of deposit required to open the account is Birr 200. Picture Gallery
A Partial View of BIB's 8th Ordinary General Meeting of Shareholders
A Partial View of BIB's Managment & Board Annual Performance Review Joint Meeting
Sercond round lottery winners for remittance
14 Star Demand Deposit Account www.bunnabanksc.com Picture Gallery
Some of the Projects Financed by BIB
AD Import and Export Sunrise Realestate Romina Import and Export Yergalem Agro Industry
is designed for government and public organizations. Customers will get a 1% interest and above. To 15 qualify a minimum of Birr 100,000 deposit is required. For deposits exceeding Birr 200,000, the Bank will offer a Door-to-Door services for the customer. Picture Gallery
Some of Newly Opened Branches
DEMBEL AREA Branch TELE MEDHANEALEM Branch ARADA GIORGIS Branch
SELASSIE Branch MESKEL SQUARE Branch WESSEN Branch
Partial View of BIB Staff Day Celebration
16 Salary Drawing Account Salaried staff of an organization or a company are eligible customers. www.bunnabanksc.com Customers will enjoy from free commission charge for their local money transfers. AUDITOR’S REPORT
AUDITORS’ REPORT For the Year Ended 30 June 2018
17 Bunna International Bank S.C.
Bunna International Bank Share Company Annual Report For the Year Ended 30 June 2018
18 AUDITOR’S REPORT
Bunna International Bank Share Company Directors, Senior Managements, professional advisers and registered office For the year ended 30 June 2018
Directors
Date of appointment Eng Tibebu Eshete Chairman, Board Of Directors 23-Feb-16 Dr Neway Zergie Vice chairman, Board Of Directors 23-Feb-16 Ato Wudu Yedemie Director 23-Feb-16 W/ro Wudalat Gedamu Director 23-Feb-16 Eng Abebe Ayalew Director 23-Feb-16 W/ro Hindya Zekaria Director 31-May-16 Ato Adam Melaku Director 23-Feb-16 Ato Gedefaw Baye Director 23-Feb-16 Ato Leikun Yeshaneh Director 23-Feb-16 Dr Zelalem Asefa (Ass. Prof) Director 23-Feb-16 W/ro Sewnet Tizazu Director 31-May-16 Ato Simachew Shiferaw Director 23-Feb-16 Ato Bekalu Ayalew BOD’s Secretary 1-Jul-16
Senior Managements
Date of appointment Ato Mulugeta Alemayehu Chief Executive Officer 1-Sep-18 Ato Demelash Demissie Chief Resource Management Officer 10-Mar-18 Ato Solomon Jebessa A/Chief Strategy Officer 10-Mar-18 Ato Eskezia Mengestu A/Chief Operation Officer 10-Mar-18 Ato Wolelaw Birhane A/Chief Information Technology Officer 10-Mar-18 Ato Gizachew Amare Director, Human Resource Management Directorate 15-Jul-09 Ato Yohannes Gulelat Director, Finance Directorate 1-Sep-09 Ato Zerihun Girma Director, Marketing Directorate 1-Apr-18 Ato Yohannes Emiru Director, Internal Audit Directorate 20-Dec-12 Ato Wubetu Assefa Director, Legal Service Directorate 24-Nov-11 Ato Tegenu Hailu Director, Risk Management and Compliance Directorate 19-Jun-18 Ato Samuel Demisew A/Director, International Banking Directorate 1-Apr-18 Ato Binyam Tilahun A/Director, Credit Directorate 1-Apr-18 Ato Tewodros Baleh A/Director, Core Application Directorate 1-Apr-18 Ato Tesfaye Gezahagn A/Director, Corporate Planning and Change Management 1-Apr-18 Ato Tadese Dabi A/Director, Infrastructure and SecurityDirectorate 1-Apr-18 Ato Emishaw Tefera A/Director, E-Banking Directorate 1-Apr-18 Ato Getachew Tadesse A/Director, Domestic Banking Operations Directorate 1-Apr-18 Ato Mekbib Tola A/Director, Procurment and Facility Management Directorate 1-Apr-18
Independent auditor Corporate office Principal bankers TAY & Co. Chartered Certified Daber building Near Birhanena Selam Commerze Bank -Frankfurt Deutsche Accountants and Authorised Printing Press Arat Kilo Addis Ababa, Bank Trust Company Americas- New Auditors Addis Ababa Ethiopia Ethiopia York Bank of Africa Mer Rouge- Djibouti ECO Bank -Paries Bank of Beirut-Lebanon CAC International Bank-Djibouti Exim Bank Djibouti Current Aktif Bank Turky Current National Bank of Ethiopia Bank of Abyssinia Dashen Bank Zemen Bank Enat Bank
19 Bunna International Bank S.C.
Bunna International Bank Share Company Report of the Directors For the year ended 30 June 2018
The directors submit their report together with the financial statements for the period ended 30 June 2018, to the mem- bers of Bunna International Bank Share Company. This report discloses the financial performance and state of affairs of the Bank.
Incorporation and address Bunna International Bank SC. was incorporated on 17th of June 2009 in accordance with the Commercial Code of Ethiopia 1960, and it was licenced by the National Bank of Ethiopia on June 25, 2009 to transact commercial banking.
Principal activities The Bank’s principal activity is commercial banking.
Results and dividends The Bank’s results for the year ended 30 June 2018 are set out on page 7. The profit for the year has been transferred to retained earnings. The summarised results are presented below.
30 June 2018 30 June 2017 Birr’000 Birr’000 Interest income 1,032,553 633,149
Profit before income tax 427,228 294,610 Income tax expense (111,965) (57,777) Profit for the year 315,263 236,833
Other comprehensive income net of taxes (3,612) 267 Total comprehensive income for the year 311,651 237,099
Eng Tibebu Eshete Chairman, Board Of Directors 24-Oct-18
20 AUDITOR’S REPORT
Bunna International Bank Share Company Statement of Directors' Responsibilities For the year ended 30 June 2018
In accordance with the Banking Business Proclamation No. 592/2008, the National Bank of Ethiopia (NBE) may direct the Bank to prepare financial statements in accordance with International Financial Reporting Standards, whether their designation changes or they are replaced, from time to time.
The Bank's Directors are responsible for the preparation and fair presentation of these financial statements in conformity with International Financial Reporting Standards and in the manner required by the Commercial Code of Ethiopia of 1960, 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. The Bank is required keep such records as are necessary to:" a) Exhibit clearly and correctly the state of its affairs; b) Explain its transactions and financial position; and c) Enable the National Bank to determine whether the Bank had complied with the provisions of the Banking Busi ness Proclamation and regulations and directives issued for the implementation of the aforementioned Proclamation.
The Bank's Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards, Banking Business Proclamation, Commercial code of Ethiopia 1960 and the relevant Directives issued by the National Bank of Ethiopia.
The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company and of its profit or loss.
The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Directors to indicate that the company will not remain a going concern for at least twelve months from the date of this statement.
Signed on behalf of the Directors by:
Eng Tibebu Eshete Ato Mulugeta Alemayehu Chairman, Board Of Directors Chief Executive Officer 24-Oct-18 24-Oct-18
21 Bunna International Bank S.C.
Bunna International Bank Share Company Independent Auditors' Report To the shareholders of Bunna International Bank S.C. For the year ended 30 June 2018
Opinion We have audited the financial statements of Bunna International Bank S.C, which comprise the statement of the financial position as at 30 June 2018, and the statement of profit or loss and other comprehensive income, statement of changes in equity, and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements present fairly, the financial position of Bunna International bank S.C as at 30 June 2018 and its financial performance, and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
We have no comments to make on the report of the Board of Directors of the Bank in so far as it relates to these financial statements and pursuant to Article 375 of the Commercial Code of Ethiopia 1960 recommend approval of these financial statements.
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the international Ethics Standards Board for Accountants’ code of Ethics for Professional Accounts (IESBA Code) together with the ethical requirmets that are relevant to our audit of the financil statmetns in Ethiopia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The bank has been in IFRS conversation process as a first time adopter. As a result, various new accounting policies have been selected and implemented. The comparative figures as well as opening balances of the previous year were reinstated based on the accounting policy selected. Proper selection and application of the new accounting policies starting from the date of transition i.e 1 July 2016 have been considered as key audit matters for our audit during the year. As a result our audit covered verification of the conversation process with effect from 1 July 2016 and consistency of the accounting policy.
22 AUDITOR’S REPORT
Bunna International Bank Share Company Independent Auditors' Report To the shareholders of Bunna International Bank S.C. For the year ended 30 June 2018
Responsibilities of the Management and those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of a Company report that is free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Company's report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise form fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
23 Bunna International Bank S.C.
Bunna International Bank Share Company Independent Auditors' Report To the shareholders of Bunna International Bank S.C. For the year ended 30 June 2018
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonable be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statement of the current period and are therefore the key audit matters. We describe these ,matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Ato Tesfa Tadesse.
TAY & Company Chartered Certified Accountants & Addis Ababa Authorized Auditors 26 October 2018
24 AUDITOR’S REPORT
Bunna International Bank Share Company Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2018 30 June 2018 30 June 2017 Notes Birr’000 Birr’000
Interest income 5 1,032,553 633,149 Interest expense 6 (389,398) (253,734)
Net interest income 643,154 379,415
Fee and commission income 7 260,749 193,483 Fee commission and expense -
Net fee and commission income 260,749 193,483
Net gain on foreign exchange translation 10 63,190 50,385 Other operating income 8 35,922 22,955
Total operating income 1,003,015 646,238
Impairment losses/reversal on loan 9 (40,738) 29,456 Impairment losses on other assets 9 (1,983) (577)
Net operating income 960,293 675,117
Personnel expenses 12 (286,299) (196,544) Amortisation of intangible assets 21 (6,283) (5,469) Depreciation of property, plant and equipment 22 (26,231) (21,637) Administration and general expenses 11 (214,253) (156,857)
Profit before income tax 427,228 294,610
Income tax expense 13 (111,965) (57,777)
Profit for the year 315,263 236,833
Other comprehensive income (OCI) net on income tax
Items that will not be subsequently reclassified into profit or loss: Remeasurement gain(loss) on retirement benefits obligations 27 (5,160) 381 Deferred tax (liability)/asset on remeasurement gain or loss 13 1,548 (114) (3,612) 267
Total comprehensive income for the period 311,651 237,099
Earnings per share of Ethiopian Birr,1000 30 286 284
The notes on pages 11 to72 are an integral part of these financial statements.
25 Bunna International Bank S.C.
Bunna International Bank Share Company Statement of Financial Position As At 30 June 2018
30 June 2018 30 June 2017 1 July 2016 Notes Birr’000 Birr’000 Birr’000 ASSETS
Cash and bank balances 15 2,669,835 2,062,917 1,252,902 Loans and advances to customers 16 6,841,603 5,189,649 3,585,688 Investment securities: - Available for sale 17 42,002 36,370 31,370 - Loans and receivables 17 2,872,237 2,030,951 1,609,971 Other assets 18 364,729 326,969 192,072 Prepayment for leasehold land 20 18,357 19,504 - Intangible assets 21 23,312 26,228 25,793 Property, plant and equipment 22 170,839 147,344 132,207 13,002,914 9,839,932 6,830,003
Non-current assets held for sale 19 18,238 1,410 -
Total assets 13,021,152 9,841,342 6,830,003
LIABILITIES
Deposits from customers 23 9,153,261 6,864,812 4,698,040 Due to other financial institutions 24 794,113 669,228 722,691 Borrowings 25 24,715 24,610 - Current income tax liability 13c 94,976 46,169 51,653 Defined benefit obligation 27 11,554 5,244 4,533 Provisions 28 34,296 18,072 15,263 Deferred tax liabilities 13d 7,675 9,943 9,977 Other liabilities 26 917,143 845,047 397,249
Total liabilities 11,037,733 8,483,125 5,899,406
EQUITY
Share capital 29 1,474,788 1,009,895 686,422 Share premium 29 14,454 14,206 6,874 Retained earnings 31 204,479 120,130 104,566 Other comprehensive Income 32 (3,345) 267 Legal reserve 33 253,279 177,881 127,560 Special reserve 34 606 606 606 Regulatory risk reserve 35 39,158 35,232 4,569
Total equity 1,983,419 1,358,216 930,597
Total equity and liabilities 13,021,152 9,841,342 6,830,003
The notes on pages 11 to 72 are an integral part of these financial statements. The financial statements on pages 7 to 72 were approved and authorised for issue by the board of directors on 24 October 2018 and were signed on its behalf by:
Eng Tibebu Eshete Ato Mulugeta Alemayehu Chairman, Board Of Directors Chief Executive Officer 24-Oct-18 24-Oct-18
26 AUDITOR’S REPORT
Bunna International Bank Share Company Statement of Changes in Equity For the year ended 30 June 2018
Other Share Share Retained comprehensive Legal Special Regulatory capital premium earnings income reserve reserve risk reserve Total Notes Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
As at 1 July 2016 686,422 6,874 104,566 127,560 606 4,569 930,597
Additional shares ssued 323,473 7,332 - - - 330,805 Dividend declared - - (139,085) - - (139,085)
Profit for the year 31 - - 236,833 - - 236,833 Directors’ share on profit (1,200) (1,200) Re-measurement gains on 27 - - - 267 - - 267 defined benefit plans (net of tax) Total comprehensive income - - 235,633 267 - - 235,899 for the period
Transfer to legal reserve 33 - - (50,321) 50,321 - - Transfer to regulatory risk reserve 35 (30,662) 30,662 -
As at 30 June 2017 1,009,895 14,206 120,130 267 177,881 606 35,232 1,358,216
As at 1 July 2017 1,009,895 14,206 120,130 267 177,881 606 35,232 1,358,216 Additional shares ssued 464,893 248 465,141 Dividend declared (150,389) (150,389) - Profit for the period 31 315,263 315,263 Directors’ share on profit (1,200) (1,200)
Re-measurement gains on 27 (3,612) (3,612) defined benefit plans (net of tax) Total comprehensive income - - 314,063 (3,612) - - - 310,451 for the period
Transfer to legal reserve 33 (75,398) 75,398 - Transfer to regulatory risk reserve 35 (3,926) 3,926 - As at 30 June 2018 1,474,788 14,454 204,479 (3,345) 253,279 606 39,158 1,983,419
The notes on pages 11 to 72 are an integral part of these financial statements.
27 Bunna International Bank S.C.
Bunna International Bank Share Company Statement of Cash Flows For the year ended 30 June 2018
30 June 2018 30 June 2017 Notes Birr’000 Birr’000
Cash flows from operating activities Cash generated from operations 36 549,471 716,219 Interest received 1,032,553 626,574 Interest paid )389,398( )253,734( Benefit paid )557( )471( Income tax paid )63,878( )63,409(
Net cash inflow from operating activities 1,128,189 1,025,179
Cash flows from investing activities Purchase of shares )1,009,133( )628,552( Investment in debt securities )5,632( )5,000( NBE Bills collection/Redemption 167,847 214,147 Purchase of intangible assets 21 )3,366( )5,904( Purchase of property, plant and equipment 22 )50,235( )37,857( Proceeds from sale of property, plant and equipment 36 1,201 1,938 Payment for leasehold land - )20,651(
Net cash outflow from investing activities )899,318( )481,879(
Cash flows from financing activities Restricted balance held with NBE 15 )130,000( )100,000( Proceeds from issues of shares 465,141 330,805 Dividends )150,389( )139,085(
Net cash inflow from financing activities 184,752 91,720
Net increase in cash and cash equivalents 413,623 635,020
Cash and cash equivalents at the beginning of the year 15 1,668,307 982,902 Foreign exchange gains on cash and cash equivalents 63,190 50,385
15 2,145,120 1,668,307 Cash and cash equivalents at the end of the year
The notes on pages 11 to 72 are an integral part of these financial statements.
28 AUDITOR’S REPORT
Bunna International Bank Share Company Notes to the Financial Statements For the year ended 30 June 2018
1. General information Bunna International Bank SC. Was incorporated on 17th of June 2009 in accordance with the commercial code of Ethiopia 1960, and it was licenced by the National Bank of Ethiopia on June 25, 2009 to transact commercial banking. The Bank's registered address is as follows: Daber building Near Birhanena Selam Printing Press Arat Kilo Addis Ababa, Ethiopia The Bank is principally engaged in the provision of commercial banking services.
2. Summary of significant accounting policies 2.1. Introduction to summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.2. Basis of preparation
The financial statements for the period ended 30 June 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Additional information required by National regulations is included where appropriate. The financial statements comprise the statement of profit or loss and other comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and the notes to the financial statements. The financial statements for the period ended 30 June 2018 are the first the Bank has prepared in accordance with IFRS. Refer to note 44 & 45 for information on how the Bank adopted IFRS. The financial statements have been prepared in accordance with the going concern principle under the historical cost concept, except for the defined benefit pension plans (plan assests measured at fair value). All values are rounded to the nearest thousand, except when otherwise indicated. The financial statements are presented in thousands of Ethiopian Birr (Birr' 000). The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank’s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate and that the Bank's financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. 2.2.1. Going concern
The financial statements have been prepared on a going concern basis. The management have no doubt that the Bank would remain in existence after 12 months.
29 Bunna International Bank S.C.
2.2.2. Changes in accounting policies and disclosures
New Standards, amendments, interpretations issued but not yet effective. A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 30 June 2018, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Bank, except the following set out below:
IFRS 9 - Financial Instruments
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.
Based on the initial assessement carried out by the Bank, the impact of the application of the new standard is as follows:
Classification and measurement
IFRS 9 require all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity’s business model for managing the assets and the instruments’ contractual cash flow characteristics. The IAS 39 measurement categories will be replaced by: fair value through profit or loss (FVPL), fair value through other comprehensive income (FVOCI), and amortised cost. IFRS 9 will also allow entities to continue to irrevocably designate instruments that qualify for amortised cost or fair value through OCI instruments as FVPL, if doing so eliminates or significantly reduces a measurement or recognition inconsistency. Equity instruments that are not held for trading may be irrevocably designated as FVOCI, with no subsequent reclassification of gains or losses to the income statement. The accounting for financial liabilities will largely be the same as the requirements of IAS 39, except for the treatment of gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVPL. Such movements will be presented in OCI with no subsequent reclassification to the income statement, unless an accounting mismatch in profit or loss would arise.
Having completed its initial assessments, the Bank has concluded that:
• Its cash and bank balances, loans and advances to customers and government securities that are classified as loans and receivables under IAS 39 are expected to be measured at amortised cost under IFRS 9. • Its equity investments will be classified as fair value through other comprehensive income. Impairment of financial assets
IFRS 9 will also fundamentally change the loan loss impairment methodology. The standard will replace IAS 39’s incurred loss approach with a forward-looking expected loss (ECL) approach. The Group will be required to record an allowance for expected losses for all loans and other debt financial assets not held at FVPL, together with loan commitments and financial guarantee contracts. The allowance is based on the expected credit losses associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination, in which case, the allowance is based on the probability of default over the life of the asset.
The Bank will establish a policy to perform an assessment at the end of each reporting period of whether credit risk has increased significantly since initial recognition by considering the change in the risk of default occurring over the remaining life of the financial instrument.
To calculate ECL, the Bank will estimates the risk of a default occurring on the financial instrument during
30 AUDITOR’S REPORT its expected life. ECLs are estimated based on the present value of all cash shortfalls over the remaining expected life of the financial asset, i.e., the difference between: the contractual cash flows that are due to the Bank under the contract, and the cash flows that the Bank expects to receive, discounted at the effective interest rate of the loan.
In comparison to IAS 39, the Bank expects the impairment charge under IFRS 9 to be more volatile than under IAS 39 and to result in an increase in the total level of current impairment allowances.
In comparison to IAS 39, the Bank expects the impairment charge under IFRS 9 to be more volatile than under IAS 39 and to result in an increase in the total level of current impairment allowances.
Under IFRS 9, the Bank will group its loans into Stage 1, Stage 2 and Stage 3, based on the applied impairment methodology, as described below:
• Stage 1 – Performing loans: when loans are first recognised, the Bank recognises an allowance based on 12-month expected credit losses. • Stage 2 – Underperforming loans: when a loan shows a significant increase in credit risk, the Bank records an allowance for the lifetime expected credit loss. • Stage 3 – Impaired loans: the Bank recognises the lifetime expected credit losses for these loans. In addition, in Stage 3 the Bank accrues interest income on the amortised cost of the loan net of allowances. When estimating lifetime ECLs for undrawn loan commitments, the Bank will:
• Estimate the expected portion of the loan commitment that will be drawn down over the expected life of the loan commitment and,
• Calculate the present value of cash shortfalls between the contractual cash flows that are due to the entity if the holder of the loan commitment draws down that expected portion of the loan and the cash flows that the entity expects to receive if that expected portion of the loan is drawn down.
For financial guarantee contracts, the Bank will estimate the lifetime ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the guarantor expects to receive from the holder, the debtor or any other party. If a loan is fully guaranteed, the ECL estimate for the financial guarantee contract would be the same as the estimated cash shortfall estimate for the loan subject to the guarantee.
For revolving facilities such as Pre-shipment credit and overdrafts, the Bank measures ECLs by determining the period over which it expects to be exposed to credit risk, taking into account the credit risk management actions that it expects to take once the credit risk has increased and that serve to mitigate losses.
"The Bank will incorporate forward-looking information in both the assessment of significant increase in credit risk and the measurement of ECLs.
The Bank will considers forward-looking information such as macroeconomic factors (e.g., unemployment, GDP growth, interest rates, etc.) and economic forecasts. "
Hedge accounting
IFRS 9 allows entities to continue with the hedge accounting under IAS 39 even when other elements of IFRS 9 become mandatory on 1 January 2018. The new hedging rules are, however, not expected to impact the Bank.
IFRS 15 - Revenue from contracts with customers
"IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration
31 Bunna International Bank S.C.
to which an entity expects to be entitled in exchange for transferring goods or services to a customer."
This standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service.
The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The Bank is yet to assess the expected impact on this standard.
IFRS 16 - Leases
This standard was issued in January 2016 (Effective 1 January 2019) . It sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. The standard introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. it also substantially carries forward the lessor accounting requirements in IAS 17. The Bank is yet to assess the expected impact of this standard.
Amendment to IFRS 2 - Classification and Measurement of Share-based Payment Transactions
The amendments to IFRS 2 in July 2016 clarify the measurement basis for cash-settled share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. They also introduce an exception to the classification principles in IFRS 2. Where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority, the whole award will be treated as if it was equity-settled provided it would have been equity- settled without the net settlement feature.
"Entities with the following arrangements are likely to be affected by these changes:
• equity-settled awards that include net settlement features relating to tax obligations • cash-settled share-based payments that include performance conditions, and; • cash-settled arrangements that are modified to equity-settled share-based payments. IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration
"The interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non- monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration.
Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the interpretation prospectively to all assets, expenses and income in its scope that are initially recognised on or after:
(i) The beginning of the reporting period in which the entity first applies the interpretation or;
(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation."
32 AUDITOR’S REPORT
2.4. Foreign currency translation a) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates ('the functional currency'). The functional currency and presentation currency of the Bank is the Ethiopian Birr (Birr). b) Transactions 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 foreign currency transactions and from the translation at exchange rates of monetary assets and liabilities denominated in currencies other than the Bank's functional currency are recognised in profit or loss within other (loss)/income. Monetary items denominated in foreign currency are translated using the closing rate as at the reporting date.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measure at fair value, such as equities classified as available for sale, are included in other comprehensive income.
2.5. Recognition of income and expenses
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
The Bank, earns income from interest on loans given for domestic trade and services, building and construction, manufacturing, agriculture and personal loans etc. Other incomes includes commission and service charge on letter of credits, commission on gaurantees and other fees and charges.
2.5.1. Interest income and expense
For all financial instruments measured at amortised cost and interest bearing financial assets classified as available– for–sale interest income or expense is recorded using the Effective Interest rate (EIR), which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the Effective Interest Rate (EIR), but not future credit losses.
The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as 'Interest and similar income' for financial assets and Interest and similar expense for financial liabilities.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the
33 Bunna International Bank S.C.
future cash flows for the purpose of measuring the impairment loss.
2.5.2. Fees and commission
Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income (letter of credit fees, letter of guarantee issued fees, etc) are recognised as the related services are performed.
When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees are recognised on a straight-line basis over the commitment period.
Other fees and commission expenses relates mainly to transaction and service fees are expensed as the services are received.
2.5.3. Dividend income
This is recognised when the Bank’s right to receive the payment is established, which is generally when the shareholders approve and declare the dividend.
2.5.4 Foreign exchange revaluation gains or losses
These are gains and losses arising on settlement and translation of monetary assets and liabilities denominated in foreign currencies at the functional currency’s spot rate of exchange at the reporting date. This amount is recognised in the income statement and it is further broken down into realised and unrealised portion.
The monetary assets and liabilities include financial assets within the foreign currencies deposits received and held on behalf of third parties etc.
2.6. Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.6.1 Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Bank commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, the Bank's financial assets are classified into two categories:
• Loans and receivables
• Available-for-sale financial investments
a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by
34 AUDITOR’S REPORT taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in interest and similar income in income statement. The losses arising from impairment are recognised in income statement in loan impairment charge.
The Bank did not directly calculate the effective interest rate as it requires system modifications to handle the enormous data of individual borrowers. However, as a temporary work-around, the contractual rate was used while the loan related fees were deferred to be amortized for the loan life time against loans. Our analysis found out that there is no material diffrences between the contract rate and EIR.
The Bank's loans and receivables comprise of loans and advances to customers, National Bank of Ethiopia bills and government bonds. b) Available-for-sale (AFS) financial assets
AFS investments include equity securities. Equity investments classified as AFS are those which are neither classified as held–for–trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, AFS financial investments are subsequently measured at fair value with unrealised gains or losses recognised in OCI and credited in the AFS reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to income statement in impairment loss on financial investment. Interest earned whilst holding AFS financial investments is reported as interest and similar income using the EIR method. Unquoted equity securities whose fair value cannot be reliably measured are carried at cost. All other available-for-sale investments are carried at fair value.
The Bank evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Bank is unable to trade these financial assets due to inactive markets, the Bank may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for foreseeable future or until maturity.
For a financial asset reclassified from the AFS category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to profit or loss. Refer to the information below under reclassification.
'Day 1' profit or loss
When the transaction price differs from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets, the Bank immediately recognises the difference between the transaction price and fair value (a ‘Day 1’ profit or loss) in ‘Other operating income’. In cases where fair value is determined using data which is not observable, the difference between the transaction price and model value is only recognised in the profit or loss when the inputs become observable, or when the instrument is derecognised.
Reclassification of financial assets
"Reclassification is at the election of management, and is determined on an instrument by instrument basis. The Bank does not reclassify any financial instrument into the fair value through profit or loss category after initial recognition.
"For a financial asset reclassified out of the ’Available–for–sale’ category, any previous gain or loss on that
35 Bunna International Bank S.C.
asset that has been recognised in equity is amortised to income statement over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired then the amount recorded in equity is reclassified to income statement.
The Bank may reclassify a non–derivative trading asset out of the ‘held–for–trading’ category and into the ‘loans and receivables’ category if it meets the definition of loans and receivables and the Bank has the intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset is reclassified, and if the Bank subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the EIR from the date of the change in estimate.
Derecognition of financial assets
"A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Bank’s statement of financial position) when:
• the rights to receive cash flows from the asset have expired, or
• the Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement; and either
(a) the Bank has transferred substantially all the risks and rewards of the asset, or
(b) the Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset."
When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Bank continues to recognise the transferred asset to the extent of the Bank’s continuing involvement. In that case, the Bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay.
Impairment of financial assets
The Bank assesses at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter Bankruptcy or other financial reorganisation, default or delinquency in interest or principal payments and where observable data indicates that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
(i) Financial assets carried at amortised cost
For financial assets carried at amortised cost (such as loans and receivables), the Bank first assesses individually whether objective evidence of impairment exists for financial assets that are individually
36 BRANCHES’ ADDRESS significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, 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 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 expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
The interest income is recorded as part of ‘Interest and similar income’. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write–off is later recovered, the recovery is credited to the ’loan impairment charge’. The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.
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 purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Bank’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past–due status and other relevant factors.
Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the Bank and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
(ii) Available-for-sale (AFS) financial instruments
Available-for-sale financial assets are impaired if there is objective evidence of impairment, resulting from one or more loss events that occurred after initial recognition but before the reporting date, that have an impact on the future cash flows of the asset. In addition, an available-for-sale equity instrument is generally considered impaired if a significant or prolonged decline in the fair value of the instrument below its cost has occurred. Where an available-for-sale asset, which has been remeasured to fair value directly through equity, is impaired, the impairment loss is recognised in profit or loss. If any loss on the financial asset was previously recognised directly in equity as a reduction in fair value, the cumulative net loss that had been recognised in equity is transferred to profit or loss and is recognised as part of the impairment loss. The amount of the loss recognised in profit or loss is the difference between the acquisition cost and the current fair value, less any previously recognised impairment loss.
If, in a subsequent period, the amount relating to an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, where the instrument is a debt instrument, the impairment loss is reversed through profit or loss. An impairment loss in respect of
37 Bunna International Bank S.C.
an equity instrument classified as available-for-sale is not reversed through profit or loss but accounted for directly in equity.
Renegotiated loans
Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due. Management continually reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR.
Collateral valuation
The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as buildings, machineries and motor vehicle. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Bank's reporting schedule.
To the extent possible, the Bank uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models.
Collateral repossessed
Repossessed collateral represents financial and non-financial assets acquired by the Bank in settlement of overdue loans. The Bank’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be used for internal operations are initially recognised at the lower of their repossessed value or the carrying value of the original secured asset and included in the relevant assets depending on the nature and the Bank’s intention in respect of recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets. Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the repossession date in line with the Bank’s policy.
2.6.2 Financial liabilities
Initial recognition and measurement
Financial liabilities are classified at initial recognition, as financial liabilities at fair value through profit or loss and other financial liabilities.
All financial liabilities are recognised initially at fair value and, in the case of other financial liabilities, net of directly attributable transaction costs.
The Bank's financial liabilities include customer deposits, due to financial institutions, margin held on letters of credit, borrowings and other liabilities. Interest expenditure is recognised in interest and similar expense.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortised cost
Financial instruments issued by the Bank, that are not designated at fair value through profit or loss but are classified as financial liabilities at amortised cost, where the substance of the contractual arrangement results in the Bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy
38 AUDITOR’S REPORT the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares.
After initial measurement, financial liabilities at amortised cost are subsequently measured at amortised cost using the effective interest rate (EIR). Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR.
The Bank’s financial liabilities carried at amortised cost comprise of deposit from customers, margin held and other liabilities.
Derecognition of financial liabilities
As financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that is, if substantially all the risks and rewards have not been transferred, the Bank tests control to ensure that continuing involvement on the basis of any retained powers of control does not prevent derecognition).
Financial liabilities are derecognised when they have been redeemed or otherwise extinguished.
2.6.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position where The Bank has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.The legal enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Bank or the counterparty.
2.7. Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash in hand, deposits held at call with Banks and other short-term highly liquid investments with original maturities of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents include cash and restricted balances with National Bank of Ethiopia.
2.8 Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Bank recognises such parts as individual assets with specific useful lives and depreciates them accordingly. All other repair and maintenance costs are recognised in income statement as incurred.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.
39 Bunna International Bank S.C.
Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
Asset class Depreciation rate (years)
Motor vehicles 10
Computer equipment 7
Office and other equipment 5-20
Furniture and fittings 10-20
The Bank commences depreciation when the asset is available for use.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
2.9 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in income statement in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life, or the expected pattern of consumption of future economic benefits embodied in the asset, are accounted for by changing the amortisation period or methodology, as appropriate, which are then treated as changes in accounting estimates. The amortisation expenses on intangible assets with finite lives is presented as a separate line item in the income statement.
Amortisation is calculated using the straight–line method to write down the cost of intangible assets to their residual values over their estimated useful lives as follows:
• Core application software – 6 years
2.10 Impairment of non-financial assets
The Bank assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Bank estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
40 AUDITOR’S REPORT discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Bank bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Bank’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Bank estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement.
2.11 Other assets
Other assets are generally defined as claims held against other entities for the future receipt of money. The other assets in the Bank's financial statements include the following:
(a) Prepayment
Prepayments are payments made in advance for services to be enjoyed in future. The amount is initially capitalised in the reporting period in which the payment is made and subsequently amortised over the period in which the service is to be enjoyed.
(b) Other receivables
Other receivables are recognised upon the occurrence of event or transaction as they arise and cancelled when payment is received. The Bank's other receivables are advance payments for purchase of goods and services and other receivables from debtors.
2.12 Fair value measurement
The Bank measures financial instruments classified as available-for-sale at fair value at each statement of financial position date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are, summarised in the following notes:
• Disclosures for valuation methods, significant estimates and assumptions Notes 3 and Note 4.7.3
• Quantitative disclosures of fair value measurement hierarchy Note 4.7.2
• Financial instruments (including those carried at amortised cost) Note 4.2
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
41 Bunna International Bank S.C.
The principal or the most advantageous market must be accessible to by the Bank.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Bank’s management determines the policies and procedures for both recurring fair value measurement, such as available-for-sale financial assets.
For the purpose of fair value disclosures, the Bank has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.13 Employee benefits
The Bank operates various post-employment schemes, including both defined benefit and defined contribution pension plans and post employment benefits.
(a) Defined contribution plan
"The Bank operates two defined contribution plans;
i) pension scheme in line with the provisions of Ethiopian pension of private organisation employees proclamation 715/2011. Funding under the scheme is 7% and 11% by employees and the Bank respectively;
ii) provident fund contribution, funding under this scheme is 7% and 13% by employees and the Bank respectively. Based on the employees' salary, employer's contributions to this scheme are charged to profit or loss and other comprehensive income in the period in which they relate."
(b) Defined benefit plan
The liability or asset recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
The liability recognised in the statement of financial position in respect of defined benefit pension plans
42 AUDITOR’S REPORT is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. 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 benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes curtailments and settlements.
Past-service costs are recognised immediately in income.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise."
(c ) Termination benefits
Termination benefits are payable to executive directors when employment is terminated by the Bank before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
(d ) Profit-sharing and bonus plans
The Banks recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit attributable to the Bank’s shareholders after certain adjustments. The Bank recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
2.14 Provisions
"Provisions are recognised when the Bank has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Bank expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in income statement net of any reimbursement."
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as other operating expenses.
2.15. Share capital
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity.
2.16. Earnings per share
The Bank presents basic and diluted Earnings Per Share (EPS) for its ordinary shares. Basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding for the effects of all diluted potential ordinary shares.
43 Bunna International Bank S.C.
2.17. Leases
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset. Bank as a lessee
Leases that do not transfer to the Bank substantially all of the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Contingent rental payable is recognised as an expense in the period in which they are incurred.
2.18 Dividend
Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the financial statements are authorised for issue, are disclosed in the subsequent events note. The statutory accounting reports of the Bank are the basis for profit distribution and other appropriations. Ethiopian legislation identifies the basis of distribution as the current year net profit.
Dividend distribution to the Bank’s shareholders is recognised as a liability in the Bank’s financial statements in the period in which the dividends are approved by the Bank’s shareholders.
2.19 Income taxation
(a) Current income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in Ethiopia. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
(b) Deferred tax
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
44 AUDITOR’S REPORT
Deferred tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
3 Significant accounting judgements, estimates and assumptions The preparation of the Bank’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Other disclosures relating to the Bank’s exposure to risks and uncertainties includes:
• Capital management Note 4.6
• Financial risk management and policies Note 4.1
• Sensitivity analyses disclosures Note 4.5.2
The key assumptions concerning the future and other key sources of estimation at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Bank based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Bank. Such changes are reflected in the assumptions when they occur.
Impairment losses on loans and receivables
The Bank reviews its loan portfolios for impairment on an on-going basis. The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Impairment provisions are also recognised for losses not specifically identified but which, experience and observable data indicate, are present in the portfolio at the date of assessment. For individually significant financial assets that has been deemed to be impaired, management has deemed that cashflow from collateral obtained would arise in less than 12 months where the financial asset is collaterised.
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.
The use of historical loss experience is supplemented with significant management judgment to assess whether current economic and credit conditions are such that the actual level of inherent losses is likely to differ from that suggested by historical experience. In normal circumstances, historical experience provides objective and relevant information from which to assess inherent loss within each portfolio. In other circumstances, historical loss experience provides less relevant information about the inherent loss in a given portfolio at the balance sheet date, for example, where there have been changes in economic conditions such that the most recent trends in risk factors are not fully reflected in the historical information. In these circumstances, such risk factors are taken into account when calculating the appropriate levels of impairment allowances, by adjusting the impairment loss derived solely from historical loss experience.
The detailed methodologies, areas of estimation and judgement applied in the calculation of the Bank's impairment charge on financial assets are set out in the Financial risk management section.
45 Bunna International Bank S.C.
The estimation of impairment losses is subject to uncertainty, which has increased in the current economic environment, and is highly sensitive to factors such as the level of economic activity, unemployment rates, property price trends, and interest rates. The assumptions underlying this judgement are highly subjective. The methodology and the assumptions used in calculating impairment losses are reviewed regularly in the light of differences between loss estimates and actual loss experience.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. There are no financial instruments currently measured at fair value. See note 4.7.2 for further discussion on fair value disclosures of financial instruments.
Defined benefit plans
The cost of the defined benefit pension plan, long service awards, gratuity scheme and post-employment medical benefits and the present value of these defined benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long- term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Impairment of non-financial assets
"Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Bank is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash- inflows and the growth rate used for extrapolation purposes."
Income taxes
"Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies."
46 AUDITOR’S REPORT
4 Financial risk management
4.1 Introduction
Risk is inherent in the Bank’s activities, but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Bank’s continuing profitability and each individual within the Bank is accountable for the risk exposures relating to his or her responsibilities. The Bank is exposed to credit risk, liquidity risk and market risk. It is also subject to country risk and various operating risks.
The independent risk control process does not include business risks such as changes in the environment, technology and industry. The Bank’s policy is to monitor those business risks through the Bank’s strategic planning process.
4.1.1 Risk management structure
Bunna Bank assesses and evaluates broad spectrum of risks that the bank face including Strategic Risk, Credit Risk, Market Risk, Operational risk, Liquidity risk, Reputational risk, Systemic risk, and Moral hazard.
There has been effective risk management framework that implemented on an enterprise-wide basis based on the three (3) lines of defense concept, whereby risks are managed collectively by all functions, namely the business/support functions, risk and compliance management and internal control directorates. Moreover, there shall be other organizations such as National Bank of Ethiopia (NBE) and external auditor which ensure the soundness and safety of the Bank. NBE has been conducted the periodic reviews of bank’s risk profile through quarterly off- and on-site surveillance and full on-site examination once in two years. On the other hand, external auditor has been conducted its reviews on elements of bank’s financial statement such as assets, liabilities, equities, income and expenses in an annual basis.
4.1.2 Risk measurement and reporting systems
The Bank’s risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment. The Bank also runs worst-case scenarios that would arise in the event that extreme events which are unlikely to occur do, in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the Bank. These limits reflect the business strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept, with additional emphasis on selected regions. In addition, the Bank’s policy is to measure and monitor the overall risk bearing capacity in relation to the aggregate risk exposure across all risk types and activities.
4.1.3 Risk mitigation
Risk controls and mitigants, identified and approved for the Bank, are documented for existing and new processes and systems.
The adequacy of these mitigants is tested on a periodic basis through administration of control self- assessment questionnaires, using an operational risk management tool which requires risk owners to confirm the effectiveness of established controls. These are subsequently audited as part of the review process.
4.2 Financial instruments by category
The Bank’s financial assets are classified into the following measurement categories: available-for-sale and loans and receivables and the financial liabilities are classified into other liabilities at amortised cost.
47 Bunna International Bank S.C.
Financial instruments are classified in the statement of financial position in accordance with their legal form and substance.
The Bank’s classification of its financial assets is summarised in the table below:
Notes Available-For-Sale Loans and receivables Total 30 June 2018 Birr’000 Birr’000 Birr’000
Cash and bank balances 15 2,669,835 2,669,835 Loans and advances to customers 16 6,841,603 6,841,603 Investment securities: - - Available for sale 17 42,002 42,002
- Loans and receivables 17 2,872,237 2,872,237 Other assets 18 89,778 89,778
Total financial assets 42,002 12,473,453 12,515,455
Notes Available-For-Sale Loans and receivables Total 30 June 2017 Birr’000 Birr’000 Birr’000
Cash and bank balances 15 - 2,062,917 2,062,917 Loans and advances to customers 16 - 5,189,649 5,189,649 Investment securities: - Available for sale 17 36,370 - 36,370 - Loans and receivables 17 - 2,030,951 2,030,951 Other assets 18 - 74,737 74,737
Total financial assets 36,370 9,358,254 9,394,624
Notes Available-For-Sale Loans and receivables Total 1 July 2016 Birr’000 Birr’000 Birr’000
Cash and bank balances 15 - 1,252,902 1,252,902 Loans and advances to customers 16 - 3,585,688 3,585,688 Investment securities: - Available for sale 17 31,370 - 31,370 - Loans and receivables 17 - 1,609,971 1,609,971 Other assets 18 - 46,567 46,567
Total financial assets 31,370 6,495,128 6,526,498
4.3 Credit risk
Credit risk is the probability that a counterparty of the Bank will not meet its obligations in accordance with agreed terms and conditions which may lead to financial loss. The Bank is exposed to credit risk due to activities such as loans and advances, loan commitments arising from lending activities, credit enhancement provided such as financial guarantees and letter of credit.
48 AUDITOR’S REPORT
The Bank adopts a conservative approach to credit risk. Where appropriate, the Bank intervenes in the economy and provides guarantees in the financial system to prevent systemic risk.
4.3.1 Management of credit risk
In measuring credit risk of loans and receivables to various counterparties, the Bank considers the character and capacity of the obligor to pay or meet contractual obligations, current exposures to the counter party/ obligor and its likely future developments, credit history of the counterparty/obligor; and the likely recovery ratio in case of default obligations-value of collateral and other ways out. Our credit exposure comprises wholesale and retail loans and receivables which are developed to reflect the needs of our customers. The Bank’s policy is to lend principally on the basis of our customer’s repayment capacity through quantitative and qualitative evaluation. However we ensure that our loans are backed by collateral to reflect the risk of the obligors and the nature of the facility.
In the estimation of credit risk, the Bank estimate the following parameters:
(a) Probability of Default
This is the probability that an obligor or counterparty will default over a given period, usually one year. This can be calculated on portfolio by portfolio basis or collectively depending on availability of historical data.
(b) Loss Given Default
Loss Given Default is defined as the portion of the loan determined to be irrecoverable at the time of loan default (1 – recovery rate). Our methods for estimating LGD includes both quantitative and qualitative factors.
(c) Exposure at Default
This represents the amount that is outstanding at the point of default. Its estimation includes the drawn amount and expected utilisation of the undrawn commitment at default.
4.3.2 Impairment assessment
The Bank assesses its impairment for the purpose of IFRS reporting using a two-way approach which are Individual assessment and portfolio assessment.
(a) Individual assessment
The Bank reviewed and revised existing impairment triggers for each loan asset portfolio to ensure that a trigger identifies a loss event as early as possible, which would result in the earliest possible recognition of losses within the IFRS framework. The Bank then estimated the impairment based on the shortfall between the present value of estimated future cash flows and the asset carrying amount.
(b) Collective assessment
Loans and receivables that are not specifically impaired are assessed under collective impairment. For the purpose of collective impairment, financial assets are grouped on the basis of similar credit risk characteristics that are indicative of the debtors’ ability to pay all amounts due according to contractual terms.
The Bank generally bases its analyses on historical experience. The collective assessment takes account of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilisation, loan to collateral ratios and expected receipts and recoveries once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry–specific problems). The approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance is also taken into consideration. The impairment allowance is reviewed by credit management to ensure alignment with the Bank’s overall policy.
49 Bunna International Bank S.C.
4.3.3 Credit related commitments risks
The Bank holds collateral against loans and receivables to customers in the form of bank guarantees and property. Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as impaired.
4.3.4 Credit risk exposure
(a) Maximum exposure to credit risk before collateral held or credit enhancements
The Bank’s maximum exposure to credit risk at 30 June 2018, 30 June 2017 and 30 June 2016 respectively, is represented by the net carrying amounts in the statement of financial position.
30 June 30 June 1 July 2018 2017 2016 Birr’000 Birr’000 Birr’000
Cash and bank balances 2,669,835 2,062,917 1,252,902 Loans and advances to customers 6,841,603 5,189,649 3,585,688 Investment securities: - Available for sale 42,002 36,370 31,370 - Loans and receivables 2,872,237 2,030,951 1,609,971 Other assets 89,778 74,737 46,567 12,515,455 9,394,624 6,526,498
Credit risk exposures relating to off balance sheets are as follows: Guarantees issued and outstanding 4,455,785 2,591,516 1,619,361 Commitments on Letter of Credit net of Margin 360,339 362,586 54,457 paid Unutilised overdraft 222,865 122,662 43,460 Loan approved but not disbursed 239,724 277,041 111,001 5,278,714 3,353,805 1,828,279
Total maximum exposure 17,794,169 12,748,429 8,354,777
The Bank’s policy is to pursue timely realisation of the collateral in a timely manner. The Bank does not generally use the non-cash collateral for its own operations.
(b) Assets obtained by taking possession of collateral
Details of assets obtained by the Bank by taking possession of collaterals held as security against loan and advances to customers at the end of the year are below:
30 June 30 June 1 July 2018 2017 2016 Birr’000 Birr’000 Birr’000 Residential Building 10,433 405 - Motor Vehicle 2,855 205 - Iveco Tracker- Motor Vehicle 4,950 800 -
18,238 1,410 - The Bank’s policy is to pursue timely realisation of the collateral in a timely manner. The Bank does not generally use the cash collateral for its own operations. This repossesed collaterals are held for sale.
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(c) Loans and advances to customers at amortised cost
(i) Gross loans and advances to customers per sector is analysed as follows:
June 30 June 30 July 1 2018 2017 2016 Birr’000 Birr’000 Birr’000
Agriculture 8,364 17,120 13,375 Transportation loan 905,403 886,228 835,878 Manufacturing/Industry 625,011 271,297 138,992 Domestic Trade and Services 1,060,897 1,077,253 880,969 Import and Export 2,168,780 839,863 606,964 Building and construction 1,569,424 1,283,929 685,127 Personal non-staff 51,336 34,950 8,050 Staff Loan 373,031 198,684 104,417 Real estate loan 103,851 43,569 13,209 Health, Hotel & Tourism 76,224 Pre-shipment credit - Advance - 520,355 330,651 Merchandising term loan - 76,379 57,490
6,942,320 5,249,627 3,675,122
Pre-shipment credit and merchandising loans are reclassfied to export sector in the year 2018
(ii) Gross loans and advances to customers per National Bank of Ethiopia’s impairment guidelines is analysed as follows:
30 June 30 June 1 July 2018 2017 2016 Birr’000 Birr’000 Birr’000
Pass 6,182,062 4,287,894 3,121,927 Special mention 492,589 813,289 431,711 Substandard 105,709 74,731 73,344 Doubtful 88,797 41,834 23,497 Lost 73,163 31,879 24,644
6,942,320 5,249,627 3,675,122
The above table represents a worse case scenario of credit risk exposure of the Bank as at the reporting dates without taking account of any collateral held or other credit enhancements attached. The exposures are based on net carrying amounts as reported in the statement of financial position.
Management is confident in its ability to continue to control and effectively manage the credit risk exposure in the Bank’s loan and advances portfolio.
51 Bunna International Bank S.C.
4.3.5 Credit quality analysis
(a) Credit quality of cash and cash equivalents
The credit quality of cash and cash equivalents and short-term investments that were neither past due nor impaired at as 30 June 2018, 30 June 2017 and 30 June 2016 and are held in Ethiopian banks have been classified as non-rated as there are no credit rating agencies in Ethiopia. However, cash and cash equivalents that held in foreign banks can be assessed by reference to credit rating agency designation as shown in the table below;
30 June 30 June 1 July 2018 2017 2016 Birr’000 Birr’000 Birr’000
A- - 769 127,599 BBB+ 14,790 153,772 95,722 B 39,622 46,650 21,059 Not rated 2,615,424 1,861,726 1,008,522
2,669,835 2,062,917 1,252,902
Definitions of ratings
A: High credit quality
This denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality
This indicates that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.
B: Good credit quality
B’ ratings indicate that material default risk is present but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
Not rated
This indicates financial institutions or other counterparties with no available ratings and cash in hand.
“+ “(plus) or “-” (minus) may be appended to a rating to indicate the relative position of a credit within the rating category. This is based on Fitch national long-term issuer default ratings.
52 AUDITOR’S REPORT
(b) Credit quality of loans and advances to customers
Neither past due Past due but not Individually nor impaired impaired impaired Total 30 June 2018 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 8,062 301 - 8,364 Transportation loan 719,869 179,816 5,718 905,403 Manufacturing/Industry 618,339 6,672 - 625,011 Domestic Trade and Services 907,391 148,007 5,499 1,060,897 Import and Export 1,888,388 272,660 7,733 2,168,780 Building and construction 1,333,623 215,375 20,426 1,569,424 Personal non-staff 42,119 9,217 - 51,336 Staff Loan 365,409 7,622 - 373,031 Real estate loan 103,851 - - 103,851 Health, Hotel & Tourism 65,324 10,899 76,224 Pre-shipment credit - Advance - - Merchandising term loan - - - - Gross 6,052,375 850,569 39,376 6,942,320 Less: Impairment allowance (note 16a) (47,596) (39,915) (13,206) (100,717)
Net 6,004,779 810,654 26,170 6,841,603
Neither past due Past due but not Individually nor impaired impaired impaired Total 30 June 2017 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 8,172 8,948 - 17,120 Transportation loan 689,923 196,305 - 886,228 Manufacturing/Industry 242,061 29,236 - 271,297 Domestic Trade and Services 783,119 294,134 - 1,077,253 Import and Export 445,621 387,250 6,992 839,863 Building and construction 1,060,320 223,609 - 1,283,929 Personal non-staff 32,044 1,971 - 34,015 Staff Loan 193,028 6,591 - 199,619 Real estate loan 43,569 - - 43,569 Pre-shipment credit - Advance 520,355 - - 520,355.0 Merchandising term loan 76,379 - - 76,379.0 Gross 4,094,591 1,148,044 6,992 5,249,627 Less: Impairment allowance (note 16a) (26,680) (26,306) (6,992) (59,978)
Net 4,067,911 1,121,737 - 5,189,649
53 Bunna International Bank S.C.
Neither past due Past due but not Individually nor impaired impaired impaired Total 1 July 2016 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 8,997 4,378 - 13,375 Transportation loan 677,469 158,409 - 835,878 Manufacturing/ industry 101,868 37,124 - 138,992 Domestic Trade and Services 692,046 188,923 - 880,969 Import and Export 440,744 159,893 6,327 606,964 Building and construction 594,031 91,096 - 685,127 Personal non-staff 7,444 606 - 8,050 Staff Loan 102,650 1,767 - 104,417 Real estate loan 13,209 - - 13,209 Pre-shipment credit - Advance 330,651 - - 330,651 Merchandising term loan 57,490 - - 57,490 Gross 3,026,599 642,196 6,327 3,675,122 Less: Impairment allowance (note 16a) (41,093) (42,014) (6,327) (89,434)
Net 2,985,506 600,182 - 3,585,688 Individually impaired loans are loans that has well passed their recovery period. The counterparties are under liquidation. Individually impaired staff loans are loans given to staffs that are no longer staff of the Bank hence the recoverability of the loans is doubtful.
(i) Loans and advances to customers - neither past due nor impaired
The credit quality of the portfolio of loans and receivables that were neither past due nor impaired can be assessed by reference to the customer’s ability to pay based on loss experience. Loans and receivables in this category are loans and receivables which are not past due.
1 July Neither past due nor impaired 30 June 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000
Neither past due nor impaired 6,052,375 4,094,591 3,026,599 Collective impairment (47,596) (26,680) (41,093)
6,004,779 4,067,911 2,985,506
(ii) Loans and advances to customers - past due but not impaired 1 July 30 June 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000
Past due up to 30 days 129,686 193,303 95,327 Past due by 30 to 89 days 492,589 813,289 431,711 Past due by 90 to 179 days 105,709 74,731 73,344 Past due by 180 to 360 days 88,797 41,834 23,497 Past due by more than 360 days 73,163 24,887 18,317 889,945 1,148,044 642,195 Collective impairment (53,121) (26,306) (42,014)
Loan and advances to customers (net) 836,824 1,121,737 600,181 Loans and receivables that have been classified as neither past due nor impaired or past due but not impaired are assessed on a collective basis.
54 AUDITOR’S REPORT
(iii) Loans and advances to customers - individually impaired loans
1 July 30 June 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000
Substandard - - Doubtful 13,755 - - Lost 25,621 6,992 6,327 39,376 6,992 6,327 Specific impairment (13,206) (6,992) (6,327)
26,170 - -
(iv) Allowance for impairment
1 July 30 June 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000
Specific impairment 13,206 6,992 6,327 Collective impairment 87,511 52,986 83,107
Total allowance for impairment 100,717 59,978 89,434
4.3.6 Types of collateral or credit enhancement
Collaterals held
Maximum Secured Machinery exposure to against real and credit risk estate equipment Motor vehicles Others Total 30 June 2018 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 8,364 27,471 8,974 - - 36,446 Transportation loan 905,403 291,530 2,477,248 191,740 - 2,960,518 Manufacturing/Industry 625,011 1,645,997 103,554 171,128 - 1,920,679 Domestic Trade and Services 1,060,897 2,716,079 915,743 213,793 28,668 3,874,283 Import and Export 2,168,780 1,837,197 337,341 77,780 73,248 2,325,566 Building and construction 1,569,424 2,071,744 2,848,378 105,378 231,777 5,257,277 Personal non-staff 51,336 122,939 2,497 13,172 2,947 141,556 Staff Loan 373,031 335,052 - 36,326 300 371,678 Real estate loan 103,851 214,185 - - - 214,185 Health, Hotel & Tourism 76,224 276,207 7,000 2,050 - 285,257 Pre-shipment credit ------Merchandising term loan - - - -
6,942,320 9,538,402 6,700,736 811,367 336,940 17,387,444
55 Bunna International Bank S.C.
Collaterals held
Maximum Secured Machinery exposure to against real and Motor vehicles Others Total credit risk estate equipment
30 June 2017 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 17,120 33,259 4,136 3,300 40,695 Transportation loan 886,228 289,821 610,298 1,783,987 300 2,684,406 Manufacturing/Industry 271,297 574,060 43,078 94,603 500 712,241 Domestic Trade and Services 1,077,253 2,935,117 168,656 1,130,618 35,280 4,269,671 Import and Export 839,863 1,542,930 25,557 170,312 17,400 1,756,199 Building and construction 1,283,929 1,910,364 966,239 1,309,024 83,780 4,269,407 Personal non-staff 34,950 48,962 - 6,300 91 55,353 Staff Loan 198,684 - - 70 70 Real estate loan 43,569 107,903 - - 107,903 Pre-shipment credit 520,355 - - - - - Merchandising term loan 76,379 - - - 72,231 72,231
5,249,627 7,442,416 1,817,964 4,498,214 209,582 13,968,176
Collaterals held
Maximum Secured Machinery exposure to against real and credit risk estate equipment Motor vehicles Others Total 1 July 2016 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 13,375 30,494 2,700 1,200 - 34,394 Transportation loan 835,878 215,332 1,838,531 138,253 - 2,192,116 Manufacturing/Industry 138,992 292,071 56,632 3,580 - 352,283 Domestic Trade and Services 880,969 2,120,881 1,113,513 108,307 86,247 3,428,948 Import and Export 606,964 826,875 233,150 55,589 20,000 1,135,614 Building and construction 685,127 1,252,047 1,394,674 28,063 31,748 2,706,532 Personal non-staff 8,050 253,152 1,500 2,150 91 256,893 Staff Loan 104,417 - - - - 0 Real estate loan 13,209 50,574 - - - 50,574 Pre-shipment credit 330,651 20,606 - - - 20,606 Merchandising term loan 57,490 - - - - -
3,675,122 5,062,032 4,640,700 337,142 138,086 10,177,960
56 AUDITOR’S REPORT
4.3.7 Collateral held and their financial effect
The general creditworthiness of a customer tends to be the most relevant indicator of credit quality of a loan extended to it. However, collateral provides additional security and the Bank generally requests that corporate borrowers provide it. Staff loans are secured to the extent of the employee’s continued employment in the Bank.
The Bank may take collateral in the form of a first charge over real estate, liens and guarantees. The Bank does not sell or repledge the collateral in the absence of default by the owner of the collateral. In addition to the Bank’s focus on creditworthiness, the Bank aligns with its credit policy guide to periodically update the validation of collaterals held against all loans to customers.
For impaired loans, the Bank obtains appraisals of collateral because the fair value of the collateral is an input to the impairment measurement.
The fair value of the collaterals are based on the last revaluations carried out by the Bank’s in-house engineers. The valuation technique adopted for properties is in line with the Bank’s valuation manual and the revalued amount is similar to fair values of properties with similar size and location. The fair value of collaterals other than properties such as share certificates, cash, NBE bills etc. as disclosed at the carrying amount as management is of the opinion that the cost of the process of establishing the fair value of the collateral exceeds benefits accruable from the exercise.
4.4 Liquidity risk
Liquidity risk is the risk that the Bank cannot meet its maturing obligations when they become due, at reasonable cost and in a timely manner. Liquidity risk arises because of the possibility that the Bank might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Bank on acceptable terms. Liquidity risk management in the Bank is solely determined by Asset and Liability Committee, which bears the overall responsibility for liquidity risk. The main objective of the Bank’s liquidity risk framework is to maintain sufficient liquidity in order to ensure that we meet our maturing obligations.
4.4.1 Management of liquidity risk
Liquidity risk arises in the general funding activities of the Bank and the management of positions. It includes the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. The Bank has a reasonable funding base. Funds are raised mainly from customers’ deposits. An asset and liability management committee is responsible for managing funding mismatches and attaining the desired level of liquidity in the manner described in the risk management policy.
57 Bunna International Bank S.C.
4.4.2 Maturity analysis of financial liabilities
The table below analyses the Bank’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The cash flows presented are the undiscounted amounts to be settled in future.
0 - 30 days 31 - 90 days 91 - 180 days 181 - 365 days Over 1 year Total
Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Deposit from customers 8,259,337 138,188 421,263 322,052 12,420 9,153,261 Due to financial institutions 167,298 64,000 279,344 167,968 115,504 794,113 Other liabilities 916,517 916,517
Total financial liabilities 9,343,152 202,188 700,607 490,020 127,923 10,863,890
0 - 30 Over 1 31 - 90 days 91 - 180 days 181 - 365 days Total days year 30 June 2017 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Deposit from customers 6,065,305 65,991 403,241 259,303 70,972 6,864,812 Due to financial institutions 68,656 60,951 221,273 295,754 22,593 669,227 Other liabilities 845,047 - - - - 845,047
Total financial liabilities 6,979,008 126,942 624,514 555,057 93,565 8,379,086
0 - 30 Over 1 31 - 90 days 91 - 180 days 181 - 365 days Total days year 1 July 2016 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Deposit from customers 4,222,433 61,500 232,839 142,941 38,327 4,698,040 Due to financial institutions 110,521 15,000 218,438 378,732 - 722,691 Other liabilities 397,249 - - - - 397,249
Total financial liabilities 4,730,203 76,500 451,277 521,673 38,327 5,817,980 4.5 Market risk
Market risk is defined as the risk of loss that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market risk factors such as interest rates, foreign exchange rates, equity prices, credit spreads and their volatilities. Market risk can arise in conjunction with trading and non-trading activities of a financial institutions.
The Bank does not ordinarily engage in trading activities as there are no active markets in Ethiopia.
The Bank does not ordinarily engage in trading activities as there are no active markets in Ethiopia.
4.5.1 Management of market risk
The main objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
Market risk is monitored by the risk management department on regularly, to identify any adverse movement in the underlying variables.
58 AUDITOR’S REPORT
(i) Interest rate risk
Interest rate risk is a risk resulting from changes in interest rates. It is the probability that the rising and falling of interest rates will adversely affect the Bank’s interest margin or the value of its net worth. The Bank often revises its lending rate across segments of the credit portfolio based on the changes in the cost of funds, reserve requirements and the perceived risk in each credit portfolio segment to keep the overall profitability.
The asset and liability management committee is responsible for managing rate-sensitive assets and liabilities and the effects of rate, volume and mix changes in order to preserve and optimise the interest return. The Bank has the discretion of setting and revising interest rates but it is required to notify the National Bank of Ethiopia of any such changes accompanied by Board approvals.
30 June 2018 Fixed Non-interest bearing Total
Birr’000 Birr’000 Birr’000 Assets Cash and bank balances 45,437 2,624,398 2,669,835 Loans and advances to customers 6,841,603 - 6,841,603 Investment securities - - - - Available for sale - 42,002 42,002 - Loans and receivables 2,872,237 2,872,237 Other assets - 89,778 89,778 Total 9,759,277 2,756,178 12,515,455
Liabilities Deposit from customers 9,153,261 9,153,261 Due to financial institutions 794,113 794,113 Borrowing 24,715 24,715 Other liabilities 859,493 859,493 Total 9,972,089 859,493 10,831,582
30 June 2017 Fixed Non-interest bearing Total
Birr’000 Birr’000 Birr’000 Assets Cash and bank balances 512,551 1,550,366 2,062,917 Loans and advances to customers 5,189,649 - 5,189,649 Investment securities - Available for sale - 36,370 36,370 - Loans and receivables 2,030,951 - 2,030,951 Other assets - 74,737 74,737 Total 7,733,151 1,661,473 9,394,624
Liabilities Deposit from customers 6,864,812 - 6,864,812 Due to financial institutions 669,228 - 669,228 Borrowing 24,610 24,610 Other liabilities 790,596 790,596 Total 7,558,650 790,596 8,349,246
59 Bunna International Bank S.C.
1 July 2016 Fixed Non-interest bearing Total
Birr’000 Birr’000 Birr’000 Assets Cash and bank balances 245,624 1,007,278 1,252,902 Loans and advances to customers 3,585,688 - 3,585,688 Investment securities - Available for sale - 31,370 31,370 - Loans and receivables 1,609,971 - 1,609,971 Other assets - 46,567 46,567 Total 5,441,283 1,085,215 6,526,498
Liabilities Deposit from customers 4,698,040 - 4,698,040 Due to financial institutions 722,691 - 722,691 Other liabilities - 372,969 372,969 Total 5,420,731 372,969 5,793,700
(ii) Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to the changes in foreign exchange rates.
The Bank is exposed to exchange rate risks to the extent of balances and transactions denominated in a currency other than the Ethiopian Birr. The Bank’s foreign currency bank accounts act as a natural hedge for these transactions. Management has set up a policy to manage the Bank’s foreign exchange risk against its functional currency.
The table below summarises the impact of increases/decreases of 10% on equity and profit or loss arising from the Bank’s foreign denominated borrowings and cash and bank balances.
The total foreign currency denominated assets and liabilities exposed to risk as at year end was Birr 57.38 million (30 June 2017: Birr 562.15 million, 1 July 2016: Birr 221.95 million).
Foreign currency denominated balances
30 June 2018 USD GBP EURO AED SAR Total Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Financial assets
Cash and bank balances 161,203 142 23,492 39 108 184,984 Other assets 65,562 65,562 226,765 142 23,492 39 108 250,546 Financial liabilities
Deposit from customers 41,928 27 5,358 47,314 Other liabilities 145,845 145,845 Net foreign currency 187,773 27 5,358 - - 193,158 denominated balances 38,992 115 18,133 39 108 57,388
60 AUDITOR’S REPORT
30 June 2017 USD GBP EURO AED SAR Total Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Financial assets
Cash and bank balances 581,600 41 17,952 46 644 600,283 Other assets 39,764 - - - - 39,764 621,364 41 17,952 46 644 640,047
Financial liabilities
Deposit from customers 77,760 24 109 - - 77,893 Net foreign currency denominated balances 543,604 17 17,843 46 644 562,154
1 July 2016 USD GBP EURO AED SAR Total EURO Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Financial assets
Cash and bank balances 256,231 94 6,840 13 263 263,441 Other assets 10,771 - - - - 10,771 267,002 94 6,840 13 263 274,212
Financial liabilities
Deposit from customers 30,066 18 159 - - 30,243 Other liabilities 22,018 - - - - 22,018 52,084 18 159 - - 52,261 Net foreign currency denominated balances 214,918 76 6,681 13 263 221,951
61 Bunna International Bank S.C.
Sensitivity analysis for foreign exchange risk
The sensitivity analysis for currency rate risk shows how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates at the reporting date.
The sensitivity of the Bank’s earnings to fluctuations in exchange rates is reflected by varying the exchange rates at 10% as shown below:
30 June 1 July 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000 Effect of 10% increase in USD on profit or loss 3,899 54,360 21,492 Effect of 10% decrease in USD on profit or loss )3,899( )54,360( )21,492(
30 June 1 July 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000 Effect of 10% increase in GBP on profit or loss 12 2 8 Effect of 10% decrease in GBP on profit or loss )12( )2( )8(
30 June 1 July 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000 Effect of 10% increase in EURO on profit or loss 1,813 1,784 668 Effect of 10% decrease in EURO on profit or loss )1,813( )1,784( )668(
30 June 1 July 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000 Effect of 10% increase in AED on profit or loss 4 5 1 Effect of 10% decrease in AED on profit or loss )4( )5( )1(
30 June 1 July 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000 Effect of 10% increase in SAR on profit or loss 11 64 26 Effect of 10% decrease in SAR on profit or loss )11( )64( )26(
4.6 Capital management
The Bank’s objectives when managing capital are:
• To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for the shareholders and benefits for the other stakeholders.
• To maintain a strong capital base to support the current and future development needs of the business.
• To comply with the capital requirements set by the National Bank of Ethiopia (NBE).
4.6.1 Regulatory capital
Capital adequacy and use of regulatory capital are monitored by management employing techniques based on the guidelines developed by the National Bank of Ethiopia for supervisory purposes. The required information is filed with the National Bank of Ethiopia on a monthly basis.
With effect from 19 September 2011, the National Bank of Ethiopia requires that:
a) The minimum paid up capital required to obtain a Banking business license shall be ETB 500 million, which shall be fully paid in cash and deposited in a Bank in the name and to the account of the Bank under
62 AUDITOR’S REPORT establishment. For existing Banks, whose paid up capital is below ETB 500 million shall raise their paid-up capital to the said amount by June 30, 2016. b) The Bank at a minimum maintains a capital to risk weighted assets ratio of 8% at all times.
‘The Bank is also required to maintain a legal reserve which is a statutory reserve to which not less than 25% of the net profits after taxation shall be transferred each year until such fund is equal to the capital. When the legal reserve account equals the capital of the Bank, the amount to be transferred to the legal reserve account shall be 10% of the annual net profit.
The Bank had met all the above requirements by the National Bank of Ethiopia as at 30 June 2018, 30 June 2017 and 30 June 2016. The makeup of the Bank’s capital is as presented in the statement of changes in equity.
The Bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and the Bank recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position.
There have been no material changes in the Bank’s management of capital during the period.
4.6.2 Capital adequacy ratio
According to the Licensing & Supervision of Banking Business Directive No SBB/50/2011 of the National Bank of Ethiopia, the Bank has to maintain capital to risk weighted assets ratio of 8% at all times, the risk weighted assets being calculated as per the provisions of Directive No SBB/9/95 issued on August 18, 1995.
The capital adequacy ratio is the quotient of the capital base of the Bank and the Bank’s risk weighted asset base.
1 July 30 June 2018 30 June 2017 2016 Birr’000 Birr’000 Birr’000
Capital Share capital 1,474,788 1,009,895 686,422 Share premium 14,454 14,206 6,874 Retained earnings 204,479 120,130 104,566 Other comprehensive Equity )3,345( 267 - Legal reserve 253,279 177,881 127,560 Special reserve 606 606 606 Regulatory risk reserve 39,158 35,232 4,569 1,983,419 1,358,216 930,597
Risk weighted assets
On balance sheet items Claims on domestic and foreign banks Less than 1 year - 9,087 102,510 49,125 Loans and advances to customers 6,841,603 5,189,649 3,585,688 :Investment securities Available for sale investments - 42,002 36,370 31,370 Property, plant and equipment 170,839 147,344 132,207 Intangible assets 23,312 26,228 25,793 Non-current assets held for sale 18,238 1,410 0 Other assets 383,086 346,473 192,072 7,488,167 5,849,984 4,016,255
63 Bunna International Bank S.C.
Off balance sheet items Loan commitment 231,295 199,852 77,231 Letter of credit and other credit related obligations 72,068 72,517 10,891 Guarantees 2,227,893 1,295,758 809,680 2,531,255 1,568,127 897,802
)Total Risk weighted Assets (RWA 10,019,422 7,418,111 4,914,057
)Risk-weighted Capital Adequacy Ratio (CAR 20% 18% 19%
4.7 Fair value of financial assets and liabilities
IFRS 13 requires an entity to classify measured or disclosed fair values according to a hierarchy that reflects the significance of observable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, which comprises of three levels as described below, based on the lowest level input that is significant to the fair value measurement as a whole.
4.7.1 Valuation models
IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable input reflect market data obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.
Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) .This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active, or other valuation technique in which all significant inputs are directly or indirectly observable from market data.
In conclusion, this category is for valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This category includes all assets and liabilities for which the valuation technique includes inputs not based on observable date and the unobservable inputs have a significant effect on the asset or liability’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
4.7.2 Financial instruments not measured at fair value - Fair value hierarchy
The following table summarises the carrying amounts of financial assets and liabilities not measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position.
64 AUDITOR’S REPORT
30 June 2018 30 June 2017 1 July 2016 Carrying Carrying Carrying Financial assets Fair value Fair value Fair value amount amount amount Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Cash and bank balances 2,669,835 2,669,835 2,062,917 2,062,917 1,252,902 1,252,902 Loans & advances to customers 6,942,320 6,841,603 5,249,627 5,189,649 3,675,122 3,585,688 Investment securities - Available for sale 42,002 42,002 36,370 36,370 31,370 31,370 - Loans and receivable 2,872,237 2,872,237 2,030,951 2,030,951 1,609,971 1,609,971 Other assets 89,778 86,797 74,737 73,739 46,567 46,146 Total 12,616,172 12,512,474 9,454,602 9,393,626 6,615,932 6,526,077
Financial liabilities Deposit from customers 9,153,261 9,153,261 6,864,812 6,864,812 4,698,040 4,698,040 Due to financial institutions 794,113 794,113 669,228 669,228 722,691 722,691 Other liabilities 859,493 859,493 790,596 790,596 372,969 372,969 Total 10,806,866 10,806,866 8,324,636 8,324,636 5,793,700 5,793,700
4.7.3 Valuation technique using significant unobservable inputs – Level 3
The Bank has no financial asset measured at fair value on subsequent recognition.
4.7.4 Transfers between the fair value hierarchy categories
During the three reporting periods covered by these annual financial statements, there were no movements between levels as a result of significant inputs to the fair valuation process becoming observable or unobservable.
4.8 Offsetting financial assets and financial liabilities
There are no offsetting arrangements. Financial assets and liabilities are settled and disclosed on a gross basis.
30 June 2018 30 June 2017 Birr’000 Birr’000
5 Interest income
Loans and advances to customers 958,828 578,529 Investment securities 73,406 54,141 Cash and cash equivalents 318 479
1,032,553 633,149
Interest income on loans and advances to customers for the Bank includes interest income on impaired financial assets of Birr 19.53 million(2017: Birr 2.95 million), recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
65 Bunna International Bank S.C.
30 June 2018 30 June 2017 Birr’000 Birr’000
6 Interest expense
Savings deposits 207,201 107,636 Fixed time deposits 179,292 144,502 Overdrafts 2,905 1,596
389,398 253,734
30 June 2018 30 June 2017 Birr’000 Birr’000
7 Net fee and commission income
Fee and commission income Letter of guarantee 106,450 81,386 Service charge 107,096 67,898 Letter of credit 42,251 41,596 Other services 3,653 1,683 Cash payment orders 1,298 920 260,749 193,483 Fee and commission expense - - Net fees and commission income 260,749 193,483
30 June 2018 30 June 2017 Birr’000 Birr’000
8 Other operating income
Loan administration fee 22,519 13,969 Estimation and inspection fee 1,522 2,272 Swift charge 874 640 Disposal of property, plant and equipment 692 855 Sundries 10,314 5,219
35,922 22,955
66 AUDITOR’S REPORT
30 June 2018 30 June 2017 Birr’000 Birr’000
9 Impairment charge
Loans and advances from customers - charge/ (reversal) for the year (note 16a) 40,738 (29,456) Other assets - charge for the year (note 18a) 1,983 577
42,721 (28,879)
30 June 2018 30 June 2017 Birr’000 Birr’000
10 Net gain on foreign exchange
Gain on foreign exchange 239,069 105,268 Loss on foreign exchange (175,879) (54,883)
63,190 50,385
30 June 2018 30 June 2017 Birr’000 Birr’000
11 Administration and general expenses
Rent 100,841 74,921 Amortisation of leasehold land 1,147 1,147 Stationery and office supplies 8,323 8,667 Business travel and transportation 2,837 1,609 Perdiem and travel postsign 2,619 2,276 Telephone, internet and fax 10,522 8,727 Repair and maintenance 5,624 3,242 Insurance premium 3,771 2,851 Fuel and lubricant 6,173 5,067 Core banking solution technical support fee 3,088 2,218 Conference and meeting 1,869 1,159 Inaguration 166 - Utilities 895 955 Correspondent’s charges 284 202 Advertisement/ publicity 17,484 8,469 Donation and contribution 223 259 Subscription and publication 183 100
67 Bunna International Bank S.C.
Consultancy fees 793 - Bank charges 1,823 1,436 Directors allowance 634 580 Security and janitorial service 36,872 26,447 Audit fee 255 150 Entertainment 2,544 2,027 Other administrative expenses postsign 5,281 4,348
214,253 156,857
30 June 2018 30 June 2017 Birr’000 Birr’000 12 Personnel expenses
Shaort term employee benefits: Basic salaries 170,263 123,022 Staff allowances 7,879 14,913 Training and education 7,262 3,711 Leave pay 11,516 132 Medical 3,110 2,668 Staff insurance 982 524 Bonus 34,300 18,072 Overtime payment 6,766 4,850 Post employement benefits: Severance pay (note 26) 1,707 1,563 Provident/ pension fund 21,867 15,696 Other allowances and benefits 20,646 11,393
286,299 196,544
30 June 2018 30 June 2017 Birr’000 Birr’000 13 Company income and deferred tax 13a Current income tax
Company income tax 112,685 57,925 Deferred income tax/(credit) to profit or loss (720) (148) Total charge to profit or loss 111,965 57,777 Tax (credit) on other comprehensive income (1,548) 114 Total tax in statement of comprehensive income 110,417 57,892
68 AUDITOR’S REPORT
13b Reconciliation of effective tax to statutory tax 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: 30 June 2018 30 June 2017 Birr’000 Birr’000
Profit before tax 427,228 294,610
Add: Disallowed expenses Entertainment 2,544 2,027 Donation 223 259 Severance expense 1,707 1,563 Penalty 541 10 Employee Allowance in excess of tax exeption 85 74 Provision for other claims 1,983 577 Provision for loans and advances IFRS accounting 40,738 (29,456) Depreciation for accounting purpose 26,230 21,638 Amortization for accounting purpose 6,283 5,469 Total disallowable expenses 80,333 2,161
Less: Allowed expenses Depreciation for tax purpose 31,262 27,706 Provision for loans and advances tax purpose (80%NBE) 24,796 20,481 Provision for other claims (80% as NBE) 1,586 462 Severance pay-paid 557 471 Interest income taxed at source- NBE Bills 73,424 54,088 Interest income taxed at source- local deposit 318 479 Total allowed expenses 131,944 103,687
Taxable profit 375,617 193,084
Current tax at 30% 112,685 57,925 Deferred tax (720) (148) Income tax expense/ (credit) recognised in profit or loss 111,965 57,777
69 Bunna International Bank S.C.
30 June 2018 30 June 2017 1 July 2016 13c Current income tax liability Birr’000 Birr’000 Birr’000
Balance at the beginning of the year 46,169 51,653 47,389 Income tax expense 112,685 57,925 51,653 WHT Notes utilised (17) - Payment during the year (63,878) (63,392) (47,389)
Balance at the end of the year 94,976 46,169 51,653
All tax payable are current in nature. 13d Deferred income tax
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be avail- able against which the temporary differences can be utilised.
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
The analysis of deferred tax assets/(liabilities) is as follows: To be recovered after more than 12 months 7,675 9,943 9,977 To be recovered within 12 months ` 7,675 9,943 9,977
Deferred income tax assets and liabilities, deferred income tax charge/(credit) in profit or loss (“P/L), in equity and other comprehensive income are attributable to the following items:
Credit/ (charge) Credit/ (charge) Deferred income tax At 1 July to P/L to equity assets/(liabilities): 2017 30 June 2018 Birr’000 Birr’000 Birr’000 Birr’000
Property, plant and equipment (11,516) 375 (11,141) Post employment benefit obligation 1,573 345 1,548 3,466 Total deferred tax assets/(liabilities) (9,943) 720 1,548 (7,675)
Credit/ (charge) Credit/ (charge) Deferred income tax At 1 July to P/L to equity 30 June assets/(liabilities): 2016 2017 Birr’000 Birr’000 Birr’000 Birr’000
Property, plant and equipment (11,337) (180) (11,516) Post employment benefit obligation 1,360 328 (114) 1,573 Total deferred tax assets/(liabilities) (9,977) 148 (114) (9,943)
70 AUDITOR’S REPORT
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 15 Cash and bank balances
Cash in hand 1,503,282 1,098,927 606,511 Balance held with National Bank of Ethiopia 1,121,116 451,439 400,767 Deposits with local banks 20,777 459 1,245 Deposits with foreign banks 24,660 512,092 244,379
2,669,835 2,062,917 1,252,902
Maturity analysis 30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Current 2,169,835 1,692,917 982,902 Non- current 500,000 370,000 270,000
2,669,835 2,062,917 1,252,902
For the purpose of the cash flow statement, cash and cash equivalents comprise of cash in hand, cash at bank, short term deposit with banks and net of overdraft. Cash and cash equivalent does not include restricted cash with NBE which is not available for use by the bank for normal day to day cash operations.
Cash and cash equivalents 30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Cash in hand 1,503,282 1,098,927 606,511 Balance held with National Bank of Ethiopia 621,116 81,439 130,767 Deposits with local banks 20,777 459 1,245 Deposits with foreign banks 24,660 512,092 244,379 Bank overdrafts (note 24) (24,715) (24,610) -
2,145,120 1,668,307 982,902
71 Bunna International Bank S.C.
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 Loans and advances to 16 customers
Agriculture 8,364 17,120 13,375 Transportation loan 905,403 886,228 835,878 Manufacturing/industry 625,011 271,297 138,992 Domestic trade and services 1,060,897 1,077,253 880,969 Import and export 2,168,780 839,863 606,964 Building and construction 1,569,424 1,283,929 685,127 Personal non-staff 51,336 34,950 8,050 Staff Loan 373,031 198,684 104,417 Real estate loan 103,851 43,569 13,209 Health, Hotel & Tourism 76,224 Pre-shipment credit - advance - 520,355 330,651 Merchandising term loan - 76,379 57,490 Gross amount 6,942,320 5,249,627 3,675,122 Less: Impairment allowance (note 16a) - Specific impairment (13,206) (6,992) (6,327) - Collective impairment (87,511) (52,986) (83,107)
6,841,603 5,189,649 3,585,688
Maturity analysis 30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Current 4,344,255 3,484,262 2,308,396 Non- current 2,497,348 1,705,387 1,277,292
Loans and advances to customers (net) 6,841,603 5,189,649 3,585,688
Impairment allowance on loans and advances to 16a customers
A reconciliation of the allowance for impairment losses for loans and advances to customers by class, is as follows:
As at Specific allowance for 1 July Charge for As at 30 June Charge for the As at 30 June impairment 2016 the year 2017 year 2018 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Import and Export 6,327 665 6,992 741 7,733 Transportation loan 1,913 1,913 Domestic trade and services - - - 3,560 3,560
6,327 665 6,992 6,214 13,206
72 AUDITOR’S REPORT
As at Collective allowance for 1 July Charge for As at 30 June Charge for the As at 30 June impairment 2016 the year 2017 year 2018 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Agriculture 483 291 774 -624 150 Transportation loan 25,296 (8,880) 16,416 6,852 23,268 Manufacturing/industry 3,204 (1,169) 2,035 3,559 5,594 Domestic trade and services 24,161 (11,941) 12,220 3,356 15,576 Import and export 12,611 (5,194) 7,417 7,731 15,148 Building and construction 15,728 (3,400) 12,328 9,720 22,047 Personal non-staff 536 231 767 1,645 2,411 Staff Loan 807 (87) 720 516 1,236 Real estate loan 281 29 310 326 636 Health, Hotel & Tourism 1,445 1,445
83,107 (30,121) 52,986 34,525 87,511
30 June 2018 30 June 2017 1 July 2016 Percentage shareholding Birr’000 Birr’000 Birr’000 17 Investment securities
Available for sale equity Bunna Insurance S.C 5% 5,000 5,000 5,000 EthSwitch S.C 6% 12,002 11,370 11,370 Abay Industrail Development S.C 0.6% 10,000 5,000 - Ethiopian Re-Insurance S.C 3% 15,000 15,000 15,000 42,002 36,370 31,370 Loans and receivables: NBE bills 2,869,844 2,028,678 1,607,818 Great Reniassance Dam Bond 2,393 2,273 2,153 2,872,237 2,030,951 1,609,971
2,914,239 2,067,321 1,641,341
Maturity analysis 30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Current 253,488 196,609 236,454 Non- current 2,660,751 1,870,712 1,404,887
2,914,239 2,067,321 1,641,341
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 18 Other assets
Financial assets
Un-cleared effects local and foreign 78,674 60,738 32,667 Other receivables 11,104 13,999 13,900 89,778 74,737 46,567
73 Bunna International Bank S.C.
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 Non-financial assets Shares awaiting resale 92 5,734 - Advance for purchases of goods and services 12,395 5,931 1,134 Assets in stock 3,343 2,997 1,793 Stock of stationery and printing materials 6,582 6,006 6,135 Prepaid rent 236,439 194,793 119,024 Prepaid insurance 1,447 904 548 Prepaid staff assets 17,634 36,865 17,292 277,932 253,230 145,926
Gross amount 367,710 327,967 192,493 Less: Impairment provision (note 18a) (2,981) (998) (421)
364,729 326,969 192,072
Maturity analysis 30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Current 209,196 179,335 108,941 Non- current 155,533 147,634 83,131
364,729 326,969 192,072
18a Impairment allowance on other assets
A reconciliation of the allowance for impairment losses for other assets is as follows: 30 June 2018 30 June 2017 Birr’000 Birr’000 Balance at the beginning of the year 998 421 (Reversal)/charge for the year (note 10) 1,983 577
Balance at the end of the year 2,981 998
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 19 Non-current assets held for sale
Balance as at the beginning of the year 1,410 - - Repossessed collateral 16,828 1,410 - Disposals - - - Fair value gain/(loss) on assets held for sale - - -
Balance at the end of the year 18,238 1,410 -
Bunna International Bank S.C. took over collateral of some customers and these were recorded in the books as Assets classified as held for sale as the Bank had no intention to make use of the property for administrative use. Management initiated a plan to dispose of these assets to willing buyers and expects to have completed the transaction before the end of the next financial period.
These assets have been valued by in-house engineers responsible for collateral valuation using the market approach determined using Level 3 inputs.
There is no cumulative income or expenses in OCI relating to assets held for sale.
74 AUDITOR’S REPORT
Prepayment for leasehold 20 land As at 1 July, 19,504 - Payments during the year 20,651 Amortisation for the year (1,147) (1,147)
As at 30 June 18,357 19,504 The bank acquired a 1,043 square meter of land through lease for 60 years from Addis Ababa City Government Land Development and Management Bureau Tenure Administration Transitional Period Service Project Office on July 14, 2016. The total cost of the leasedhold land is Birr 68,838,000, which shall be amortized over sixty years. The bank has paid Birr 20,651,400 (30%) as down payment. The remaining Birr 48,186,000 will be paid over 30 years period starting from July 13, 2019, after a grace period of 2 years, with annual regular installment payment of Birr 1,606,220 and accrued interest thereoff at 9.5% interest rate per annum.
21 Intangible assets
As at 1 July 2016 32,016 )6,223( 25,793 Additions/(amortisation) 5,904 )5,469( 435 As at 30 June 2017 37,920 )11,692( 26,228 Additions/(amortisation) 3,366 )6,283( )2,916( As at 30 June 2018 41,286 )17,975( 23,312
This includes the cost of core banking application software. No borrowing cost was capitalised during the year. Office and other Computer & Furniture Motor Under equipments Accessories and fittings vehicles progress Total Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 22 Property, plant and equipment
Cost:
As at 1 July 2016 34,426 47,021 30,547 66,738 - 178,732 Additions 13,814 14,284 9,554 205 - 37,857 Disposals - - - (2,464) - (2,464) As at 30 June 2017 48,240 61,305 40,101 64,479 - 214,125
As at 1 July 2017 48,240 61,305 40,101 64,479 - 214,125 Additions 12,047 12,547 10,213 14,254 1,173 50,235 Disposals - - - (1,578) (1,578) Reclassification - - - - - As at 30 June 2018 60,287 73,852 50,314 77,156 1,173 262,782
Accumulated depreciation
As at 1 July 2016 9,898 15,409 7,909 13,309 - 46,525 Charge for the year 4,628 6,965 3,306 6,738 - 21,637 Disposals - - - (1,381) - (1,381) As at 30 June 2017 14,526 22,374 11,215 18,666 - 66,781
As at 1 July 2017 14,526 22,374 11,215 18,666 - 66,781 Charge for the year 6,282 8,734 4,455 6,760 - 26,231 Disposals - - - (1,069) - (1,069) As at 30 June 2018 20,808 31,108 15,670 24,357 - 91,943
Net book value As at 1 July 2016 24,528 31,612 22,638 53,429 132,207 As at 30 June 2017 33,714 38,931 28,886 45,813 - 147,344 As at 30 June 2018 39,479 42,744 34,645 52,798 1,173 170,839
75 Bunna International Bank S.C.
30 June 2018 30 June 2017 1 July 2016 23 Deposit from customers Birr’000 Birr’000 Birr’000
Demand deposits 2,231,392 1,906,468 1,421,646 Savings deposits 4,922,296 3,408,473 2,366,616 Special savings 908,363 662,331 377,023 Fixed time deposits 1,091,209 887,540 532,755
9,153,261 6,864,812 4,698,040
30 June 2018 30 June 2017 1 July 2016 Maturity analysis Birr’000 Birr’000 Birr’000
Current 9,140,841 6,848,292 4,695,840 Non- current 12,420 16,520 2,200
9,153,261 6,864,812 4,698,040
30 June 2018 30 June 2017 1 July 2016 24 Due to other banks Birr’000 Birr’000 Birr’000
Demend deposits 13,409 21,626 18,362 Savings deposits 10,715 10,811 10,357 Fixed time deposits 769,989 636,791 693,972
794,113 669,228 722,691
30 June 2018 30 June 2017 1 July 2016 Maturity analysis Birr’000 Birr’000 Birr’000
Current 678,609 646,635 722,691 Non-current 115,504 22,593 -
794,113 669,228 722,691
30 June 2018 30 June 2017 1 July 2016 25 Borrowings Birr’000 Birr’000 Birr’000
Current Bank overdrafts 24,715 24,610 -
24,715 24,610 -
This represents an amount drawn down out of the 6 months overdraft facility of Birr 25,000,000 obtained from a local bank, Zemen Bank on 14 June 2016 and renewable quarterly. The facility will matures on 26 Septmber 2018 and attracts interest at 14%(12% for 2017) for the year. It is secured on the Banks NBE bill cretificate amounting to Birr 51,217,000.
The Bank had no long term borrowings at the reporting date.
76 AUDITOR’S REPORT
30 June 2018 30 June 2017 1 July 2016 26 Other liabilities Birr’000 Birr’000 Birr’000 Financial liabilities Audit fee payable 255 150 119 Accrued leave payable 18,457 7,367 7,578 Blocked Amounts 1,387 8,618 7,565 Cashier’s payment order (CPO) payable 130,707 106,845 109,259 Telegraphic Transfer (TT) payable 7,000 6,897 7,485 Board of directors’ fee payable 1,200 1,200 575 Allocation for promoters - 10,088 10,088 Allocation for founders 5,389 6,088 6,369 Deposit for guarantee issued - - 22,170 Exchange payable to NBE 10,397 15,486 5,750 Dividend payable 34,091 26,054 22,000 Share holders service charge payable 5,494 5,501 5,574 Old drafts and payments outstanding 14,936 6,067 3,832 Credit Reference System (CRS) fund payable 136 128 391 Margins held in LCs and CAD 468,487 575,943 149,901 Other payables 161,557 14,164 14,313
859,493 790,596 372,969
30 June 2018 30 June 2017 1 July 2016 Non-financial liabilities Birr’000 Birr’000 Birr’000
Unearned income 51,203 48,742 21,586 Employees’ income tax payable 2,572 1,853 1,437 tax on interest on deposits 5% 1,533 727 472 Pension fund payable 1,504 1,148 476 Capital Gain Tax 37 - - Stamp duty charge 411 1,187 141 Vat payable 39 265 - Graduate tax payable 2 28 - Witholding tax payable 349 501 168
57,650 54,451 24,280
Gross amount 917,143 845,047 397,249
June 2018 30 June 2017 30 July 2016 1 Maturity analysis Birr’000 Birr’000 Birr’000
Current 917,143 845,047 397,249 Non-current - - -
917,143 845,047 397,249
77 Bunna International Bank S.C.
27 Defined benefit obligations
The Bank operates an unfunded severance pay plan for its management staff who have served the Bank for 3 years and above and are below the retirement age (i.e. has not met the requirement to access the pension fund). The final pay-out is determined by reference to current benefit’s level (monthly salary) and number of years in service and is calculated as 1 month salary for the first year in employment plus 1/2 of monthly salary for each subsequent in employment to a maximum of 18 months final monthly salary.
Below are the details of movements and amounts recognised in the financial statements:
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 A Liability recognised in the financial position
Severance pay 11,554 5,244 4,533
30 June 30 June 2018 2017 B Amount recognised in the profit or loss Birr’000 Birr’000
Current service cost 875 830 Interest cost 832 733
1,707 1,563
C Amount recognised in other comprehensive income: Remeasurement gains on economic assumptions 4,054 )1,236( Remeasurement loss on experience 1,106 855
5,160 )381(
The movement in the defined benefit obligation over the years is as follows:
30 June 30 June 2018 2017 Birr’000 Birr’000 At the beginning of the year 5,244 4,533 Current service cost 875 830 Interest cost 832 733 Remeasurement losses 5,160 )381( Benefits paid )557( )471(
At the end of the year 11,554 5,244
The significant actuarial assumptions were as follows:
78 AUDITOR’S REPORT
i) Financial Assumption Long term Average 30 June 2018 30 June 2017 1 July 2016 Discount rate (p.a) 13.03% 14.25% 14.30% Long term salary increase(p.a) 12.00% 9.70% 11.60% ii) Mortality in Service
The rate of mortality assumed for employees are those according to the Demographic and Health Survey (“DHS”) 2016 report. The DHS report provides male and female mortality rates for 5 year age bands from age 15 to age 49. Since the rates are provided in 5 year bands, the rate provided per band were applied as the mortality rate for the age in the middle of each band, and interpolated linearly for rates in between these ages.
For ages over 47, mortality was assumed to be line with the SA85/90 ultimate standard South African mortality tables published by the Actuarial Society of South Africa (“ASSA”), since the rates in these tables are similar to the DHS female mortality rate at age 47.
These rates combined are approximately summarized as follows:
Age Mortality rate Male Female 20 30.6% 22.3% 25 30.3% 22.8% 30 35.5% 31.4% 35 40.5% 27.9% 40 51.5% 31.9% 45 45% 42.8% 50 62.8% 62.8% 55 97.9% 97.9% 60 153.6% 153.6%
iii) Withdrawal from Service
The withdrawal rates are believed to be reasonably representative of the Ethiopian experience. The valuation as- sumed that resignation rates decrease by 0.5% for each age from 15% at age 20 (and below) to 0% at age 50.
The sensitivity of the overall defined benefit liability to changes in the weighted principal assumption is:
Impact on defined benefit obligation 30 June 2018 30 June 2017 Change in as- Impact of an Impact of a Impact of an Impact of a sumption increase decrease increase decrease Birr’000 Birr’000 Birr’000 Birr’000 Discount rate 0.5% )736,162( 789,863 )261,481( 276,441 Long term salary increase 0.5% rate )736,162( 789,863 )261,481( 276,441
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the report- ing period) has been applied as when calculating the pension liability recognised within the statement of financial position.
79 Bunna International Bank S.C.
30 June 2018 30 June 2017 1 July 2016 28 Provisions Birr’000 Birr’000 Birr’000
Balance as at 1 July 18,072 15,263 11,066 Provisions made during the year 34,296 18,072 15,263 Provisions used during the year )18,072( )15,263( )11,066(
Balance as at 30 June 34,296 18,072 15,263
30 June 2018 30 June 2017 1 July 2016 29 Share capital Birr’000 Birr’000 Birr’000
Authorised 20,000,000 ordinary shares of ETB100 each 2,000,000.0 2,000,000 2,000,000
Issued and fully paid 14,747,882 ordinary shares of ETB 100 each 1,474,788 1,009,895 686,422
Share premium 14,454 14,206 6,874
According to NBE Directive No. SBB/ 50/2011 titled “Minimum Capital Requirement for Banks”, existing banks whose paid up capital is below Birr 500 million shall raise their paid-up capital to the said amount by June 30, 2016. The Bank has already surpassed the limit. The bank’s authorized capital has been raised to Birr 2,000,000,000 at the shareholders’ extraordinatry meeting held on 13 December 2015.
Share premium represents the excess of contributions received over the nominal value of shares issued.
30 Earnings per share
Earnings per share (EPS) is calculated by dividing the profit after tax by the weighted average number of ordinary shares outstanding during the period. 30 June 30 June 2018 2017 Birr’000 Birr’000
Profit after tax 315,263 236,833
Weighted average number of ordinary shares in issue 1,101,887 832,9s46
Basic earnings per share (Birr) 0.29 0.28
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstand- ing to assume conversion of all dilutive potential ordinary shares. There were no potentially dilutive shares at the reporting date (30 June 2017: nil), hence, the basic and diluted earnings per share have the same.
80 AUDITOR’S REPORT
30 June 30 June 2018 2017 31 Retained earnings Birr’000 Birr’000
At the beginning of the year 120,130 104,566 Dividend declared )150,389( )139,085( Profit for the year 315,263 236,833 Director’s Share on profit )1,200( )1,200( Transfer to legal reserve )75,398( )50,321( Transfer to/from regulatory risk reserve )3,926( )30,662(
At the end of the year 204,479 120,130
30 June 30 June 2018 2017 32 Other comprehensive income Birr’000 Birr’000
At the beginning of the year 267 - Remeasurement gain/loss on retirement benefits obligations )5,160( 381 Tax (credit) on other comprehensive income 1,548 )114(
At the end of the year )3,345( 267
30 June 30 June 2018 2017 33 Legal reserve Birr’000 Birr’000
At the beginning of the year 177,881 127,560 Transfer from profit or loss 75,398 50,321
At the end of the year 253,279 177,881
The NBE Directive No. SBB/4/95 states requires the Bank to transfer annually 25% of its annual net profit to its legal reserve account until such account equals its capital. When the legal reserve account equals the capital of the Bank, the amount to be transferred to the legal reserve account will be 10% (ten percent) of the annual net profit.
34 Special reserve
The bank’s executive management has established a special reserve for unexpected matters.
30 June 30 June 2018 2017 Birr’000 Birr’000 35 Regulatory risk reserve
At the beginning of the year 35,232 4,569 Transfer from provision on impaired loans )9,743( 28,594 )Transfer from suspended interest (net of tax 13,669 2,068
At the end of the year 39,158 35,232
81 Bunna International Bank S.C.
The Regulatory risk reserve is a non-distributable reserves required by the regulations of the National Bank of Ethiopia (NBE) to be kept for impairment losses on loans and receivables in excess of IFRS charge as derived using the incurred loss model.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE) guidelines is higher than the loan loss impairment determined using the incurred loss model under IFRS, the difference is transferred to regulatory risk reserve and it is non-distributable to the owners of the Bank.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE) guidelines is less than the loan loss impairment determined using the incurred loss model under IFRS, the difference is transferred from regulatory risk reserve to the retained earning to the extent of the non-distributable reserve previously recognised. Moreover, according to NBE directives interest income on impaired loans are not distributable to shareholders of the Bank, the amount net of tax is transferred to regulatory risk reserve.
30 June 30 June 2018 2017 36 Cash generated from operating activities Notes Birr’000 Birr’000
Profit before tax 427,228 294,610
Adjustments for non-cash items: Depreciation of property, plant and equipment 21 26,231 21,637 Amortisation of prepayment for leasehold land 19 1,147 1,147 Amortisation of intangible assets 6,283 5,469 Gain/ (loss) on disposal of property, plant and equipment )692( )855( Impairment on loans and receivables 40,738 )29,456( Impairment on other assets 1,983 577 Provisions 16,224 2,809 Income statement charge on defined benefit obligations 1,707 1,563 Foreign currency revaluation loss/(gain) )63,190( )50,385( Net interest income )643,154( )379,415(
Changes in working capital: -Decrease/ (increase) in loans and advances to customers )1,692,692( )1,574,505( -Decrease/ (increase) in other assets )39,743( )135,474( -Decrease/ (increase) in non-current asset held for sale )16,828( )1,410( -Increase/ (decrease) in deposits from customers 2,288,449 2,166,772 -Increase/ (decrease) in due to other financial institutions 124,885 )53,463( -Increase/ (decrease) in other liabilities 70,896 446,598
549,471 716,219 In the statement of cash flows, profit on sale of property, plant and equipment (PPE) comprise:
30 June 30 June 2018 2017 Birr’000 Birr’000
Proceeds on disposal 1,201 1,938 )Net book value of property, plant and equipment disposed (Note 20 )509( )1,083(
Gain/(loss) on sale of property, plant and equipment 692 855
82 AUDITOR’S REPORT
37 Related party transactions
The Bank is owned by several diverse shareholders without ultimate parent company.
A number of transactions were entered into with related parties in the normal course of business. These are dis- closed below:
Nature of 30 June relationship 2018 30 June 2017 1 July 2016
Birr’000 Birr’000 Birr’000 a Transactions with related parties
Loans to related parties - Loans to key management per- sonnel Director 7,311 4,448 2,264
b Key management compensation
Key management has been determined to be the members of the Board of Directors and the Executive Manage- ment of the Bank. The compensation paid or payable to key management is shown below. There were no sales or purchase of goods and services between the Bank and key management personnel as at 30 June 2018.
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000 Salaries and other short-term employee benefits 3,747 1,251 1,468 Share of annual profit 1,200 1,200 575 Sitting allowance 576 576 296
5,523 3,027 2,339
38 Directors and employees
The average number of persons employed by the Bank during the year was as follows:
30 June 2018 30 June 2017 1 July 2016 Number Number Number Executive directors 5 2 3 Management 208 201 117 Non-management 1,167 964 818
1,380 1,167 938
83 Bunna International Bank S.C.
39 Contingent assets and liabilities
a Contingent assets
The Bank has lodged criminal cases against some of its former employees for embezzling the Bank’s money. The total amount that the Bank estimates that it would possibly receive from these cases as at 30 June 2018 is Birr 77,441.09(2017, is nil and 2016: Birr 1,120,000). These cases have been referred to the court of law and the bank believe that a favourable outcome is probable. However no receivable has been recognised as the receipt of the amount is dependent on the final outcome of the court decision.
b Contingent liabilities
Some of the Bank’s customers have brought legal charges against the Bank in the process of carrying out its normal business operations. The maximum exposure of the Bank to these legal cases as at 30 June 2018 is nil, as at June 30,2017 is Birr 1,080,954 and as at June 30, 2016 is Birr 700,000. No provision has been made in the financial statements as the bank believe that it is not probable that the economic benefits would flow out of the Bank in respect of these legal actions.
40 Guarantees and letters of credit
The Bank conducts business involving performance bonds and guarantees. These instruments are given as a security to support the performance of a customer to third parties. As the Bank will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts.
The table below summarises the fair value amount of contingent liabilities for the account of customers:
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Guarantees issued and outstanding 4,455,785 2,591,516 1,619,361 Commitment on letter of credit net of margin paid 360,339 362,586 54,457
4,816,124 2,954,102 1,673,817
41 Commitments
The Bank has commitments, not provided for in these financial statements as follows:
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Undisbursed loan 239,724 277,041 111,001 Unutilised overdraft 222,865 122,662 43,460
462,590 399,703 154,461
42 Operating lease commitments - Bank as lessee
The Bank leases various properties under non-cancellable operating lease agreements. The lease terms are between two and five years, and majority of these lease agreements are renewable at the end of the each lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
84 AUDITOR’S REPORT
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
No later than 1 year 38,209 39,951 36,719 Later than 1 year and no later than 5 years 101,355 75,876 51,737 Later than 5 years 32,142 17,543 3,892
Total 171,706 133,370 92,348
The Company has a land lease agreement. The folowing is the future agreegate minimum lease payments:
30 June 2018 30 June 2017 1 July 2016 Birr’000 Birr’000 Birr’000
Later than 1 year and no later than 5 years 29,394 29,394 - Later than 5 years 89,748 89,748 -
Total 119,142 119,142 -
43 Events after reporting period
In the opinion of the Directors, there were no significant post balance sheet events which could have a material effect on the state of affairs of the Bank as at 30 June 2018 and on the profit for the period ended on that date, which have not been adequately provided for or disclosed.
85 Bunna International Bank S.C.
44 First-time adoption of IFRS for the Bank
These financial statements, for the year ended 30 June 2018, are the first the Bank has prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
For periods up to and including the year ended 30 June 2017, the Bank prepared its financial statements in accordance with its accounting framework. Accordingly, the Bank has prepared financial statements which comply with IFRS applicable for periods ending on or after 30 June 2018, together with the comparative period data as at and for the year ended 30 June 2017, as described in the summary of significant accounting policies.
In preparing these financial statements, the Bank’s opening statement of financial position was prepared as at 1 July 2016, the Bank’s date of transition to IFRS. This note explains the principal adjustments made by the Bank in restating its financial statements prepared under the previous framework, including the statement of financial position as at 1 July 2016 and the financial statements as at and for the year ended 30 June 2017.
In preparing its opening IFRS statement of financial position, the Bank has adjusted amounts reported previously in financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) of Ethiopia and the Commercial code of 1960. An explanation of how the transition from GAAP to IFRS has affected the Bank’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.
The most significant IFRS impact for the Bank resulted from the implementation of IAS 39 Financial Instruments: Recognition and Measurement which requires the bank to classify its financial instruments into available for sale, fair value through profit and loss, loans and receivables and held to maturity. Also the impairment of financial assets only in cases where there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset (referred to as an “incurred loss” model).
In preparing these financial statements in accordance with IFRS 1, the Bank has applied the mandatory exceptions from full retrospective application of IFRS. The optional exemptions from full retrospective application selected by the Bank are summarised below. Exemptions applied
IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain requirements under IFRS. Following from the principles underpinning IFRS 1, the Bank has applied the following exemptions
a) Leases
Banks are required to determine whether an arrangement contains a lease based on the facts and circumstances existing on 1 July 2016. Any contracts that exist would result in a classification based on the facts and circumstances that exist at transition date
b) Designation of previously recognised financial instruments
Applying this exemption means that Banks are permitted to designate a financial asset as available-for-sale at the date of transition to IFRS. The Bank has designated unquoted equity instruments held at 1 July 2016 as available- for-sale investments.
c) Fair value measurement of financial instruments at initial recognition
Banks may apply this requirements to recognise day 1 gain or loss prospectively to transactions entered into on or after the date of transition to IFRS. This will result in no gain or loss being recognised on the initial recognition of a financial asset or financial liability held prior to 1 July 2016.
86 AUDITOR’S REPORT
Exceptions applied a) Estimates
Estimates made in accordance with IFRSs at the date of transition to IFRS should be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error or where application of previous framework did not require estimation such as post-employment benefits.
b) De-recognition of financial assets and financial liabilities
This exception exempts a first-time adopter from full retrospective application of the de-reconition rules in IAS 39, ‘Financial instruments: Recognition and measurement’, for all financial assets and liabilities derecognised before 1 January 2004 or transition date. Therefore, financial assets and liabilities derecognised before 1 July 2016 are not re-recognised under IFRS.
a Reconciliation of Statement of total comprehensive income for the year ended 30 June 2017
IFRS as at 30 GAAP Reclassification Remeasurement June 2017 Notes Birr’000 Birr’000 Birr’000 Birr’000
Interest income A 631,486 - 1,663 633,149 Interest expense (253,734) - - (253,734)
Net interest income 377,752 - 1,663 379,415
Fee and commission income K 143,849 76,790 (27,156) 193,483 Net gain on foreign exchange translation 50,385 - - 50,385 Service charge 76,790 (76,790) - - Other operating income 22,955 - - 22,955 Total operating income 671,731 - (25,493) 646,238
Loan impairment charge A (26,178) 577 55,057 29,456 Impairment losses on other assets - (577) - (577)
Net operating income 645,553 - 29,564 675,117
Personnel expenses I,J (189,682) - (6,862) (196,544) Amortisation of intangible assets F - (5,936) 467 (5,469) Depreciation of PPE G - (27,896) 6,258 (21,637) Audit fees (150) 150 - - Directors allowance (580) 580 - - Other operating expenses (189,959) 33,102 (156,857) Profit before tax 265,182 - 29,427 294,610
Income tax expense (63,895) - 6,118 (57,777)
87 Bunna International Bank S.C.
Profit after tax 201,287 - 35,545 236,833
Other comprehensive income (OCI) net on income tax
Items that will not be subsequently reclassified into profit or loss: Remeasurement gain on defined I 381 381 benefits obligations Deferred tax (liability)/asset on (114) (114) remeasurement gain or loss - - 267 267
Total comprehensive income 201,287 - 35,812 237,100
b Reconciliation of equity as at 30 June 2017
IFRS as at 30 GAAP Reclassification Remeasurement June 2017 Notes Birr’000 Birr’000 Birr’000 Birr’000 ASSETS
Cash and bank balances 2,062,917 - - 2,062,917 Loans and advances to customers A 5,201,674 - (12,025) 5,189,649 Investment in shares B 36,370 (36,370) - - Investment in debt securities C 2,001,916 (2,001,916) - - Investment securities - Available for sale B - 36,370 - 36,370 - Loans and receivables C - 2,030,775 176 2,030,951 Other assets D 328,419 (38,297) 36,847 326,969 Leasedhold land E 67,691 (67,691) - - Prepayment for leasedhold land E 19,504 - 19,504 Intangible assets F - 17,807 8,421 26,228 Property, plant and equipment G 121,030 (9,779) 36,093 147,344 Deferred tax assets - - - - Non-current assets held for sale - 1,410 - 1,410
Total assets 9,820,017 (48,187) 69,512 9,841,342
LIABILITIES
Deposit from customers H 7,479,586 (614,774) - 6,864,812 Due to financial institutions H - 669,228 - 669,228 Margin held in letter of credit and - CAD K 575,945 (575,945) - Current income tax liability L 63,895 - (17,726) 46,169 Defined benefit obligation I - - 5,244 5,244 Leasehold payables E 48,187 (48,187) - - Borrowings 24,610 - - 24,610
88 AUDITOR’S REPORT
Provision J - - 18,072 18,072 Deferred tax liabilities - - 9,944 9,944 Other liabilities K 274,815 521,491 48,741 845,047
Total liabilities 8,467,038 (48,187) 64,275 8,483,126
EQUITY
Share capital 1,009,895 - - 1,009,895 Share premium 14,206 - - 14,206 Retained earnings M 150,391 - (30,262) 120,129 Other comprehensive income M 267 267 Legal reserve 177,881 - - 177,881 Special reserve 606 - - 606 Regulatory risk reserve - - 35,232 35,232
1,352,979 - 5,236 1,358,215
Total equity and liabilities - 9,820,017 (48,187) 69,511 9,841,341 c. Reconciliation of equity as at 1 July 2016
IFRS as at GAAP Reclassification Remeasurement 1 July 2016 Notes Birr’000 Birr’000 Birr’000 Birr’000 ASSETS
Cash and balances with banks 1,252,902 - - 1,252,902 Loans and advances to customers A 3,631,846 - (46,158) 3,585,688 Investment in shares B 31,370 (31,370) - - Investment in debt securities C 1,587,512 (1,587,512) - - Investment securities - - Available for sale B - 31,370 - 31,370 - Loans and receivables C - 1,609,848 123 1,609,971 Other assets D 204,499 (29,717) 17,290 192,072 Intangible assets F - 17,839 7,954 25,793 Property, plant and equipment G 112,830 (10,458) 29,835 132,207 Deferred tax assets - - -
Total assets 6,820,959 - 9,044 6,830,003
89 Bunna International Bank S.C.
LIABILITIES
Deposit from customers H 5,384,603 (686,563) - 4,698,040 Due to financial institutions H - 722,691 - 722,691 Margin held in letter of credit and K CAD 149,901 (149,901) - - Current income tax liability 63,392 - (11,739) 51,653 Defined benefit obligation I - - 4,533 4,533 Provision J - - 15,263 15,263 Deferred tax liabilities - - 9,977 9,977 Other liabilities K 262,515 113,773 20,961 397,249
Total liabilities 5,860,411 - 50,734 5,899,406
EQUITY
Share capital 686,422 - - 686,422 Share premium 6,874 - - 6,874 Retained earnings L 139,086 - (34,520) 104,566 Legal reserve L 127,560 - 127,560 Special reserve 606 - - 606 Regulatory risk reserve 4,569 4,569
960,548 - (29,951) 930,597
Total equity and liabilities 6,820,959 - 20,783 6,830,003
45 Notes to the reconciliation of equity as at 1 July 2016 and 30 June 2017 and total comprehensive income for the year ended 30 June 2017. 30 June 2017 1 July 2016 Loans and advances to Birr’000 Birr’000 A customers
Loans and advances under previous GAAP 5,201,674 3,631,846 Remeasurement Roll over adjustment from 1 July 2016 (46,158) - i) Adjustment to recognise difference between loan loss provisioning recognised under NBE directive and IFRS 55,058 (26,464)
ii) Adjustment to recognise suspended interest receivable on non-performing 2,955 6,527 loans iii) Adjustments to amortise transaction costs on loans and advances to customers (3,118) (9,393) iv) Adjustments to recognise staff loans at fair value (22,555) (19,631) v) Adjustments to recognise the difference between interest on staff loans at 1,773 2,803 market rate and below market rate 34,133 (46,158)
Loans and advances to customers under IFRS 5,189,649 3,585,688
90 AUDITOR’S REPORT i) Under the previous GAAP, loan loss provisioning on the loans and advances to customers were computed based on the directive from the National Bank of Ethiopia. This loan loss provisioning has been recomputed in line with the requirement of IFRS. ii) Under the previous GAAP, interest receivable on non-performing loans were suspended as off-balance sheet item. Under IFRS, these suspended interest have been added to the related loan. The interest income suspended is calculated on the net loan amount after deducting impairmrnt allowance. iii) Under the previous GAAP, transaction costs on loan and advances to customers were not amortised. These transaction costs have been amortised under IFRS. iv) Under the previous GAAP, interest on individually impaired loans were not recognised. These interests income have been recomputed under IFRS. v) Under the previous GAAP, the staff loan recognised was the amount disbursed. Under IFRS, the fair value of the loan on initial recognition has been determined by discounting all future cash flows to present value using a market rate of 10.32%.
vi) Under the previous GAAP, interest on staff loans were recognised at below market interest rate. These interests have been recomputed at market rate under IFRS.
30 June 2017 1 July 2016 B Available for sale investments Birr’000 Birr’000
Available for sale investments under previous GAAP - Reclassification Reclassification from investment in equity shares 36,370 31,370 Available for sale investments under IFRS 36,370 31,370
Under the previous GAAP, investment in the equity shares of other companies were classified as investment in shares. These investments have been reclassified as available for sale investments under IFRS.
30 June 2017 1 July 2016 C Loans and receivables investments Birr’000 Birr’000
Loans and receivables investments under previous GAAP - Reclassification i) Reclassification from investment in debt securities 2,001,916 1,587,512 ii) Reclassification of accrued interest receivable on government securities from other assets 28,859 22,336 Roll over adjustment from 1 July 2016 123 - Remeasurement iii) Adjustment to restate NBE bills and government bonds at amortised cost using the Effective Interest Rate (EIR) method 53 123 Loans and receivables investments under IFRS 2,030,951 1,609,971 i) Under the previous GAAP, NBE bills and government bonds were classified as government securities. These securities have been reclassified as loans and receivables investment under IFRS.
91 Bunna International Bank S.C.
ii) Under the previous GAAP, accrued interest on NBE bills and government bonds were recognised as interest receivable under other assets. These receivables have been reclassified from other assets to the related government security.
iii) Under the previous GAAP, interest on NBE bills and government bonds were computed at the contractual rate. These interests have been recomputed using the EIR. This resulted in the restatement of the carrying amount of these governemnt securities at amortised cost using the EIR.
30 June 2017 1 July 2016 D Other assets Birr’000 Birr’000 Other assets under previous GAAP 328,419 204,499 Reclassifications i) Reclassification of interest receivable on NBE bills and government bonds to the related government security (28,859) (22,337) Reclassification of fixed assets in stock to property, plant and equipment (8,028) (7,381) (Note G) Withhold tax receviable adjustment (17) - Roll over adjustment from 1 July 2016 17,291 - Remeasurement ii) Adjustment to recognise prepaid employee benefits 20,828 19,504 iii) Amortisation of cummulative prepaid employee benefit on staff loans (1,256) (2,213) Reclassification of of repossessed collaterals to non-current asset held for (1,410) - iv) sale Other assets under IFRS 326,969 192,072
i) Under the previous GAAP, interest receivable from NBE bills and government bonds were classified as other assets. This receivables have been reclassified to the related government security.
ii) This relates to the amortisation of prepaid employee benefits initially recognised. iii) Under IFRS, the fair value of the staff loan have been determined by discounting all future cash flows to present values. The difference between the amount disbursed and the fair value of the staff loan has been recognised as prepaid staff expenses (i.e prepared employee benefit on staff loans).
30 June 2017 1 July 2016 E Prepayment for leasehold land Birr’000 Birr’000 Prepayment for leasehold land under previous GAAP - - Reclassification Reclassification from leasehold payable 67,691 - Reclassification from leasehold land (48,187) - Prepayement for leasehold land under IFRS 19,504 -
Under the previous GAAP, leasehold land as being separately recognised as an assets and corresponding leasehold payable. These are prepaid costs and have now being recognised properly in line with IFRS.
92 AUDITOR’S REPORT
30 June 2017 1 July 2016 F Intangible assets Birr’000 Birr’000 Intangible assets under previous GAAP - - Reclassification Reclassification from property, plant and equipment 17,807 17,839 Roll over adjustment from 1 July 2016 7,954 Remeasurements Adjustment to accumulated amortisation due to review of useful life 467 7,954 Intangible assets under IFRS 26,228 25,793
Under the previous GAAP, separately identifiable softwares purchased by the Bank were classified as part of computer equipment. These softwares have been reclassified out of property, plant and equipment and recognised separately as intangible assets.
30 June 2017 1 July 2016 G Property, plant and equipment Birr’000 Birr’000
Property, plant and equipment under previous GAAP 121,030 112,830 Reclassifications i) Reclassification to intangible asset (Note D) (17,807) (17,839) ii) Reclassification of fixed asset in stock from inventory 8,028 7,381 Roll over adjustment from 1 July 2016 29,835 Remeasurements Adjustments to accumulated depreciation due to review of useful lives and 6,258 29,835 iii) residual values Property, plant and equipment under IFRS 147,344 132,207
Under the previous GAAP, property, plant and equipment purchased but not yet utilised were classified under other assets as fixed assets in stock. These assets have been reclassified out of other assets into property, plant and i) equipment. ii) The useful lives and the residual values of the property, plant and equipment have been reviewed in line with IFRS. This resulted in the adjustment to accumulated depreciation recognised under the previous GAAP.
30 June 2017 1 July 2016 Hi Deposit from customers Birr’000 Birr’000 Deposit from customers under previous GAAP 7,479,586 5,384,603 Reclassification Reclassification of accrued interest payable on fixed deposit from other liabilities 54,454 36,127 Reclassification to due to financial institution (669,228) (722,691) Deposit from customers under IFRS 6,864,812 4,698,039
93 Bunna International Bank S.C. 30 June 2017 1 July 2016 Hii Due to financial institutions Birr’000 Birr’000 Due to financial institutions under previous GAAP - - Reclassification Reclassification of due to financial institutions from deposit from customers 669,228 722,691 Due to financial institutions under IFRS 669,228 722,691
Under the previous GAAP, balances due to other financial institutions were classified under deposit from customers. Under IFRS, balances due to other financial institutions have been reclassified from deposit from customers and recognised separately.
30 June 2017 1 July 2016 I Defined benefit obligation Birr’000 Birr’000 Defined benefit obligation under previous GAAP - - Remeasurement Severance pay 711 4,533 Roll over adjustment from 1 July 2016 4,533 - Provisions under IFRS 5,244 4,533
IFRS adjustments have been raised to recognise the defined benefit obligations in line with the actuarial valuation computed by an independent valuer. As a result, a remeasurement gain of Birr 381,000 was also recognised.
30 June 2017 1 July 2016 J Provisions Birr’000 Birr’000 Provisions under previous GAAP - - Roll over adjustment from 1 July 15,263 2016 - Remeasurement Adjustment to provide for 2016 bonus 2,809 15,263 Provisions under IFRS 18,072 15,263
Under the previous GAAP, no provision was made for bonus paid to staff. This bonus is based on the performance of the Bank subject to Board of Director’s approval. However, payment of this bonus is customary (there is constructive obligation to pay and the amount to be paid can be estimated reliably based on precedence). Under IFRS, provision was made to recognise bonuses in the year it is earned.
30 June 2017 1 July 2016 K Other liabilities Birr’000 Birr’000 Other liabilities under previous GAAP 274,815 262,515 Reclassifications i) Reclassification from margins held in letters of credit and CAD 575,945 149,901 Reclassification of accrued interest payable on fixed deposits to deposit from ii) customers (54,454) (36,127) Roll over adjustment from 1 July 2016 20,961 Remeasurement iii) Unearned income 27,155 21,586
94 AUDITOR’S REPORT
Withholding tax Correction of error: Directors allowance 625 (625) Other liabilities under IFRS 845,047 397,250 i) Under the previous GAAP, margins held in letters of credit and CAD was recognised separately. This liability has been reclassified to other liabilities. ii) Under the previous GAAP, accrued interest payable on fixed deposits from customers was classified under other liabilities. This accrued interest payable has been reclassified to deposit from customers. iii) Under IFRS, unearned income portion is now deferred to be recognised in furture periods.
Correction of error As per decision of the shareholders of the bank in an annual general meeting held on 26 November 2016, the amount held and reported as Directors share of profit has been reduced by 625,000 birr (to 50,000 Birr per director).
30 June 2017 1 July 2016 L Income tax Birr’000 Birr’000 Income tax under previous GAAP 63,895 63,392 Roll over adjustment from 1 July 2016 (11,739) - Remeasurement Adjustment to income tax (5,987) (11,739) 46,169 51,653
Deferred tax adjustment Roll over adjustment from 1 July 2016 9,977 - Remeasurement Adjustment to deferred tax (33) 9,977 9,944 9,977
30 June 2017 1 July 2016 M Retained earnings Birr’000 Birr’000 Retained earnings under previous GAAP 150,391 139,086 Roll over adjustment from 1 July 2016 (34,520) - Remeasurements i) Adjustment to recognise difference between loan loss provisioning recognised under NBE directive and IFRS (Note A) 55,058 (26,464) Adjustment to recognise suspended interest receivable on non-performing ii) loans (Note A) 2,955 6,527 iii) Adjustments to accumulated amortisation due to review of useful lives (Note F) 467 7,953
95 Bunna International Bank S.C. iv) Adjustments to accumulated depreciation due to review of useful lives (Note G) 6,258 29,835 v) Adjustments to recognise the difference between interest on staff loans recognised at market rate and below market rate (Note A) 1,773 2,803 vi) Amortisation of cummulative prepaid employee benefit on staff loans (Note E) (1,256) (2,213) vii) Adjustment to restate NBE bills and government bonds at amortised cost 53 123 using the Effective Interest Rate (EIR) method (Note C) viii) Adjustment to provide for bonus (Note I) (2,809) (15,263) ix) Unearned income (Note K) (27,155) (21,586) x) Adjustments to amortise transaction costs on loans and advances to customers (3,118) (9,393) xi) Adjustments to recognise defined benefit obligation in line with IFRS (note I) (711) (4,533) xii) Adjustment to recognise prepaid employee benefits 20,828 19,504 xiii) Adjustments to recognise staff loans at fair value (22,535) (19,631) xiv) Directors allowance (625) 625 xv) Income tax adjustment 5,987 11,739 xvi) Deferred tax adjustment 33 (9,977) xvii Withholding tax adjustment (16) Total remeasurement adjustments 667 (29,951) xviii Transfer to Regulatory Risk reserve from loan impairment (28,594) xix Transfer to Regulatory Risk reserve from suspended interest (net of tax) (2,068) Balance in retained earnings (29,995) (34,520)
Retained earnings under IFRS 120,396 104,566
As per regulatory requirement, the surplus (deficit) on impairment /Loan loss provision computed as per NBE xx requirment and as per IFRS requirement is transferred to the regulatory risk reserve.
96 BRANCHES’ ADDRESS
Bunna International Bank S.C (BIB) Branches’ Address
No. Branches City/ Town Telephone Fax CITY BRANCHES 1 Main Branch Addis Ababa 011-1-58-08-84 011-1-58 08 26 011-1-58 -08-65 011-1-58-08-24 2 Hayahulet Mazoria Branch Addis Ababa 011-6-61-30-69 011-6-61 30 68 011-6-62-21-28 3 Mesalemia Branch Addis Ababa 011-2-78-22-43 011-2-78-22 42 011-2-78-22-46 4 Bole-Medhanealem Branch Addis Ababa 011-6-62-24-47 011-6-62 24 45 011-6-62-24-42 011-6-62-24-43 5 Genet Branch Addis Ababa 011-5-52-90-10 011-5-52 90 11 011-5-53-69-49 6 Ayer-Tena Branch Addis Ababa 011-3-486500 011-3-48 77 20 011-3-48-71-25 011-3-48-73-95 7 Habtegiorgis Branch Addis Ababa 011-1-55-82-24 011-1-55 82 26 011-1-55-82-05 8 Asrasement Mazoria Branch Addis Ababa 011-2-80-07-48 011-2-80 07 49 011-2-80-07-86 011-2-80-07-97 9 Beklo-Bet Branch Addis Ababa 011-4-16 32 55 011-4- 16 32 56 011-4-16 35 41 011-4 -16 32 30 10 Merkato Branch Addis Ababa 011-2-78 14 35 011-278 17 42 011-2-78 02 23 11 Olympia Branch Addis Ababa 011-1-572119/57 011-1-572112
12 Kotebe Branch Addis Ababa 011-89 6 26 22 011-660 32 51 011-89 6 26 21 13 Gerji Branch Addis Ababa 011-6- 39 40 45 011-6-39 40 06 011-6-39 40 11 14 Gojjam Berenda Addis Ababa 011-2-130307 011-2-130223 15 Bole Rwanda Branch Addis Ababa 011-6-392088/13 011-6-392089 16 Bole Aserasement Branch Addis Ababa 011-6-631289 011-6-638589
97 Bunna International Bank S.C.
No. Branches City/ Town Telephone Fax 17 Lideta Branch Addis Ababa 011-5-576260/09 011-5-576259 18 Sholla Gebeya Branch Addis Ababa 066-7-673648 066-7-673576 19 Imperial Branch Addis Ababa 066-7-376162 066-7-673793 20 Wollosefer Corporate Branch Addis Ababa 011-4-700468 011-4-700493 21 Summit Branch Addis Ababa 011-6-678493 011-6-678519 22 Millinium Branch Addis Ababa 011-6-672573 011-6-672592 23 Shala Menafesha Branch Addis Ababa 011-6-672773 011-6-672758 24 Kality Branch Addis Ababa 011-4-717231 011-4-717214 25 Bethel Branch Addis Ababa 011-3-493499 011-3-493348 26 Meskel Flower Branch Addis Ababa 011-4-702469 011-4-702494 27 Gulele Branch Addis Ababa 011-2-734238 011-2-734236 28 CMC Branch Addis Ababa 011-6-675705 011-6-675161 29 Kolfe Branch Addis Ababa 011-2-738733 011-2-738587 30 Addisu Gebeya Branch Addis Ababa 011-1-268268 011-1-268282 31 Kazanchise Branch Addis Ababa 011-5-571354 011-5-571360 32 Piazza Branch Addis Ababa 011-1-264083 011-1-264117 33 Kahen Sefer Branch Addis Ababa 011-5-586413 0115-586474 34 Megenagna Branch Addis Ababa 011-6-674416 011-6-674423 35 Mexico Addis Ababa 0115-57-33-35 0115-57-33-26 36 Kebede Michael Addis Ababa 0116-67-42-64 0116-67-45-01 37 Haile Gebreselassie Street Addis Ababa 011-6-67-32-74 011-6-67-33-12 38 Lebu Addis Ababa 011-4-71-31-85 011-4-71-31-09 39 Lafto Branch Addis Ababa 011-4-71-09-49 011-4-71-09-64 40 Gerji -Mebrat Hail Branch Addis Ababa 011-6-39-43-34 011-6-39-43-35 41 Jemo Branch Addis Ababa 011-4-71-32-13 011-4-71-32-16 42 Kotebe 02 Branch Addis Ababa 0116-39-81-43 011-6-53-88-58 0116-44-79-19 43 Goffa Branch Addis Ababa 011-4-70-38-36 011-4-70-54-35 44 Abinet Branch Addis Ababa 011-5-57-88-70 011-5-57-85-12 45 Ehel Berenda Branch Addis Ababa 011-2-29-10-44 011-2-29-13-79 46 Sosit Kutir Mazoria Branch Addis Ababa 011-3-69-26-39 011-3-69-29-06 47 Nefas silk Branch Addis Ababa 011-4-70-82-93 0114-70-86-83 48 Wuha Limat Branch Addis Ababa 011-6-89-30-3 011-6-89-22-06 49 Torhailoch Branch Addis Ababa 011-3-84-20-35 0113-84-20-45 50 Atlas Branch Addis Ababa 011-6-67-22-94 011-6-67-34-72 51 Lancha Branch Addis Ababa 0114-70-16-78 011-4-70-21-35 52 Raguel Branch Addis Ababa 011-2-73-47-39 011-2-73-52-80
98 BRANCHES’ ADDRESS
No. Branches City/ Town Telephone Fax CITY BRANCHES Cont’d 53 Goma Tera Branch Addis Ababa 011-2-31-60-20 011-2-31-61-10 54 Urael Branch Addis Ababa 011-5-57-80-13 55 Alem Bank Branch Addis Ababa 011-3-69-52-00 56 Lideta Dessie Hotel Area Addis Ababa 011-5-57-99-59 011-5-57-86-25 Branch 57 Bole Bulbula Branch Addis Ababa 011-4-71-40-26 011-4-71-40-70 58 Hanna Mariam Branch Addis Ababa 011-4-71-12-05 011-4-71-13-84 59 Summit-Safari Branch Addis Ababa 011-6-68-00-60 011-6-68-01-46 60 Ayat Branch Addis Ababa 011-6-39-14-82 61 Gullele Fenance Addis Ababa 011-2-73-33-47 011-2-73-30-34 62 Asko Branch Addis Ababa 011-2-73-14-91 011-2-73-16-65 63 Signal Branch Addis Ababa 011-6-68-41-45 64 Kera Branch Addis Ababa 011-4-702566 011-4-702613 011-4-702264 65 Quas Meda Branch Addis Ababa 011-2-304001/04 66 Tekelehaimanot Branch Addis Ababa 011-2-73-58-12 011273-58-11 67 Meskel square Addis Ababa 0115-57-46-78 68 Mekanisa abo Addis Ababa 0113-69-08-58 0113-69-26-65 69 Kechene Medhanialem Branch Addis Ababa 0111-72-51-32 70 Selassie branch Addis Ababa 011-1-72-52-36 71 Wessen Branch Addis Ababa 011-6-68-07-98 011-6-68-04-99 72 Yeka Abado Branch Addis Ababa 011-8-78-79-76 73 Dembel Area Branch Addis Ababa 011-5-57-16-72 74 Mehal Ehil Berenda Addis Ababa 0112-73-53-15 0112-73-52-16 75 Arada Giorgis Branch Addis Ababa 011-126-70-53 011-1-26-71-49 76 Tele Medhanealem Addis Ababa 0116-50-68-68 011-6-50-63-14 Branch 77 Merab Merkato Branch Addis Ababa 011-2-73-36-07 0112-73-36-72 OUTLYING BRANCHES 78 Adama Branch Adama 022-1-12-16-00 022-1- 12 05 00 022-1-12 05 35 022- 1-12 20 70 79 Bahirdar Bahir-Dar 058-2-22-22-00 058- 2- 22 22 40 058-2-22-20-60
80 Mekelle Branch Mekelle 034-4 -40 00 94 034-4-40 01 10 034-4 -40 00 93 81 Gondar Branch Gonder 058-1-11 24 43 058-1-11-24-73
99 Bunna International Bank S.C.
No. Branches City/ Town Telephone Fax 82 Bichena Branch Bichena 058-6 -65 15 15 058-6-65 15 16 058- 6 -65 15 17 058- 6 -65 10 53 83 Hossana Branch Hosanna 046-5-55 21 61 046-5-55 38 21 046-5-55 09 32 84 Kobo Branch Kobo 033-3-341274 033-334 12 75 033-3-34 12 78 85 Jimma Branch Jimma 047-1-12 20 85 047- 112 33 58 047-1-12 33 94 047-1-12 34 51 86 Gambella Branch Gambella 047-5-51 00 79 047-5-51 00 57 047-5-51 01 49 87 Shashemene Branch Shashemene 046-2-10 02 45 046-1-10 02 48 046-1-10 00 71 046- 1-10 01 17 88 Hawassa Branch Hawassa 046-2-20 55 85 046-2-20 79 40 046-2-21 48 97 046-2-20 40 73 89 Desse Branch Dessie 033-1-12 01 72 033-1-12-00-90 033-1-12 01 88 033-1-12 00 50 90 Debire Birhan Branch Debire Birhan 011-6-81 12 44 011-6-81 13 64 91 Halaba Branch Halaba 046-5-56 06 43 046-5-56 06 29 046-5- 56 05 68 92 Bale Robe Branch Robe 022-6-65 28 00 022-6- 65 28 43 022-6-65 28 48 022- 6-65 24 13 93 Bale Goba Branch Goba 022-6-61 25 28 022-6-61 25 29 022-6-61 25 30 94 Kobo Robit Branch Kobo 033-1-130234 046-2-11 00 40 033-1-13 01 68 95 Shashemene Arada Branch Shashemene 0046-2-11 00 52 046-2-11 00 40 046-2-11 00 57 96 Yirgalem Branch Yirgalem 046-2-25 -17-49 046-2-25-07 59 046-2-25 12 95 97 BahirDar Belay Zeleke Branch Bahir Dar 058-2-200010 058-2-264171 98 DebreMarkos Branch DebreMarkos 058-7-711645 058-7-71-14-59 99 Hawassa Tabor Branch Hawassa 046-2-120039 046-2-12-00-39 100 Moyale Branch Moyale 046-4-440335 046-4-440286
100 BRANCHES’ ADDRESS
No. Branches City/ Town Telephone Fax OUTLYING BRANCHES Cont’d 101 Dejen Branch Dejen 058-7-760019 058-7-760484 102 Mekele Enkodo Branch Mekelle 034-4-406750 034-4-40-67-55 103 Nekemte Branch Nekemt 057-6-611207 057-6-611289 104 Adama Dembella Branch Adama 022-1-100672 022-1-114181 022-1-127362 105 DireDawa Branch DireDawa 025-4-110115/42 025-4-110128 106 Harar Branch Harar 025-4-660032/85 025-4-660035 107 DolloMenna Branch DolloMenna 022-6-680025 022-6-680298 022-6-680169 108 Asossa Branch Asossa 057-7-750411 057-7-750413 057-7-750615 109 Gimbi Branch Gimbi 057-7-710457/95 057-7-710516 110 Angergutin Branch Angergutin 057-6-340191/14 057-6-340160 111 Woreta Branch Woreta 058-4-461155 058-4-461304 112 Togochale Branch Togochale 025-8-820112 025-8-820126 113 Woldiya Branch Woldiya 033-3-311105 033-3-311171 114 Korem Branch Korem 034-5-510156 034-5-510188 115 Wukro Branch Wukro 034-4-431132 034-4-431189 116 Merawi Branch Merawi 058-3-300473 058-3-300797 117 Bonga Branch Bonga 047-3-311193 047-3-310130 118 Jigjiga Branch Jigjiga 025-2-780000 025-2-780248 119 Sekota Branch Sekota 033-4-400009 033-4-400079 120 Alamata Branch Alamata 034-7-740071 034-7-740197 121 Adigrat Branch Adigrat 034-4-450342 034-4-450370 122 Bahir Dar Mehal Gebeya Bahir Dar 058-2-222103 058-2-201875 123 Welete Branch Welete 011-3-67-91-95 011-3-67-92-13 124 Bishoftu Branch Bishoftu 011-4-30-04-89 011-4-30-05-02 125 Arbaminch Branch Arbaminch 046-8-81-40-38 046-8-81-37-88 126 Castle Branch Mekele 034-2-41-53-48 0342-41-54-09 127 Dessie Tossa Branch Dessie 033-3-12-01-07 033-3-12-01-07 128 Shire Branch Shire 034-2-44-01-97 034-2-44-02-36 129 Legetafo Branch Legetafo 011-6-67-92-54 011-667-92-44 130 Ashewa Meda Branch Ashewa Meda 011-2-60-18-89 011-2-60-14-83 131 Bahir Dar -Abay Bahir Dar 058-3-21-14-03 058-3-21-40-92 Mado Branch
101 Bunna International Bank S.C.
No. Branches City/ Town Telephone Fax 132 Humera Branch Humera 034-2-48-01-32 034-2-48-01-17 034-2-48-01-16 133 Metema Branch Metema 058-8-26-91-94 134 Alemgena Branch Alemgena 011-3-67-96-79 011-3-67-94-31 135 Debrework Branch Debrework 058-6-63-06-10 136 Adet Branch Adet 058-3-38-11-93 058-3-38-11-20 137 Gode Branch Gode 138 Adama Arada Branch Adama 022-2-11-48-23 022-2-11-38-69 139 Burayu Branch Burayu 011-2-60-48-54 140 Mota Branch Mota 058-6-61-19-96 058-6-61-20-55 141 Dire Dawa Sabian Branch Dire Dawa 025-4-11-09-89 025-4-11-49-64 142 Asela Branch Asela 022-2-38-34-12 022-2-38-08-69 143 Logia Branch Logia 033-5-50-08-62 033-5-50-14-84 144 Kombolcha Branch Kombolcha 033-3-51-15-16 033-3-51-38-22 145 Nejo Branch Nejo 057-7-74-12-83 146 Gambella New Land Branch Gambella 047-5-51-24-81 047-5-51-00-62 147 Bahir Dar Tana Branch Bahirdar 058-3-20-58-64 058-3-20-61-56 148 Shewa Robit Branch Shewa Robit 033-6-64-20-77 033-6-64-20-14 149 Atsbi Branch Atsbi 034-3-40-05-59 034-3-40-04-28 150 Gonder Fasil Branch Gonder 058-2-11-76-96 058-2-11-68-48 151 Gobye Branch Gobye 033-4-56-02-20 033-4-56-02-33 152 Axum branch Axum 0342-75-77-17 034-275-96-55 153 Enticho Branch Enticho 034-4-49-11-22 034-4-49-12-00 154 Edaga Hamus Branch Edaga Hamus 034-7-73-07-02 034-7-73-07-04 155 Konso Karat Branch Karat 156 Wolaita Sodo Branch Wolita 157 Wuchale Branch Wuchale 033-2-24-03-32 033-2-24-02-44 158 Mersa Branch Mersa 0920-19-92-84 159 Angacha Branch Angacha 046-3-40-04-01 046-3-40-04-92 160 Ataye Branch Ataye 033-6-61-08-62 161 Amanuel Branch Gojam 058-7-77-03-73 058-7-77-02-35 162 Bure Branch Bure 058-7-74-14-46 163 Fiche branch Fiche 011-1-60-97-13 164 Jimma-Abajifar Branch Jimma 047-2-21-82-80 165 Dembecha Branch Dembecha 058-7-73-07-89 166 Damboya Branch Damboya 0462-45-03-97 046-2-45-04-74
102 BRANCHES’ ADDRESS
No. Branches City/ Town Telephone Fax Debark Branch Debark 058-4-17-36-17 058-4-17-52-54 167 0912-89-24-02 168 Sululta Branch Sululta 0111-61-73-92 011-1-61-79-69 169 Maksegnit Branch Gondar 058-332-06-97 170 Hossana Gombora Branch Hossana 046-1-78-53-95 171 Gerba Branch Gerba 033-4-54-06-18 033-4-54-02-28
103 Recieve Money Fast from all over the world with Bunna Bank's Money Transfer Services
ቡና ኢንተርናሽናል ባንክ አ.ማ. BUNNA INTERNATIONAL BANK S.C. (BIB) Bunna International Bank S.C. (BIB) Vision Statement “Our vision is to be a public -powered, uniquely flavored and the most accessible Bank.” Mission Statement “Our mission is to provide distinctly flavored banking services, at conveniently accessible locations/outlets, with unparalleled commitment to enhance values of key stakeholders and ensure public trust through diversification, state - of - the – art technology, and ethically motivated and knowledge driven human capital.” Value statements •• BIB persistently encourages the prevalence of a team spirit so as to be truly successful;
•• BIB considers its employees to be the greatest assets and resources of the Bank;
•• BIB is committed to meritocracy and promotes professionalism and rewards excellence in performance;
•• BIB promotes “Out of the Box” thinking and invests in feasible ideas;
•• BIB promotes good corporate governance;
•• BIB respects diversification;
•• BIB respects towards sustainable growth and profitability;
•• BIB is committed to high quality; and
•• As corporate citizen, BIB believes in discharging its corporate, social and environmental responsibilities. BUNNA INTERNATIONAL BANK S.C. (BIB)