Standard Bank Limited Annual Report for the year ended 31 December 2012
ONE VISION
EIGHT VALUES
7. Upholding the highest levels of integrity
2. Guarding against arrogance
3. Delivering to our shareholders
4. Growing our people
5. Respecting each other
6. Working in teams
7. Serving our customers
8. Being proactive Standard Bank Limited Annual Report for the year ended 31 December 2012
Table of Contents
Chairman's and Chief Executive Officer's Report 1
Corporate Governance Statement 7
Risk Management and Control 1 9
Directors' Report 21
Statement of Directors' Responsibilities 23
Report of the Independent Auditors 31
Consolidated and Separate Financial Statements:
Consolidated and separate statement of financial position 33
Consolidated and separate statement of comprehensive income... 34
Consolidated and separate statement of other comprehensive income 35
Consolidated and separate statement of changes in equity 36
Consolidated and separate statement of cash flows ....38
Notes to the consolidated and separate financial statements ..39 Standard Bank Limited Annual Report for the year ended 31 December 2012
STANDARD BANK MALAWI
PROFIT AFTERTAX
2008 2009 2010 201 1 2012 2,072 2,852 2,424 3,546 7,965
2008 2009 2010 2011 2012
EARNINGS AND DIVIDENDS PER SHARE
648 890 2,900 DIVIDEND 1,350 5,000
2008 2009 2010 :?n i ? Earnings Per Share 10.4 14.3 11.4 16.7 37.4 Dividend Per Share 3.2 4.5 6.3 13.6 23.4
40.0
35.0
30.0 '
25.0
20.0
15.0
10.0
2008 2009 2010 2011 2012
Earnings Per Share
Dividend Per Share Standard Bank Limited Annual Report for the year ended 31 December 2012
Etness Chanza Jayesh Patel Kitili Mbathi Head of Legal / Compliance and Director Director Company Secretary B.A (Hons) Economics, M.A Economics B.A (Economics & political Science), Bachelor of Law Hons, ACIS (UK) M.A Banking & Finance for Development
Roderick Phiri Rex Harawa Ngeyi Kanyongolo Director Director Director Bachelor of Social Science (Ecomics & B.Soc.Sc. (Honours, Economics), Bachelor of Laws (Honors), Master of Statistics), Financial Programme For Non PhD. (Finance & Economics), M.A (Finance Laws (Merit), PhD (Law) Financial Managers, IATA FIATA & Economics), MSc. (Economics), Chartered Diploma For Airfreight Institute of Arbitrators, Registered Practic- ing Public Accountant & Auditor - Malawi, Certified Public Accountant - USA, Certified Management Accountant - USA, Certified Financial Manager - USA
O Standard Bank Limited Annual Report for the year ended 37 December 2012
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Economic Overview
The economy in 201 2 was burdened by acute foreign exchange and fuel shortages as well as intermittent power supplies. This position was further worsened by negative growth in agriculture which resulted in lower-than-expected foreign exchange earnings from the country's key export crop, tobacco, to US$1 77m from the previous year's earnings of US$293m.
The change of government in April 201 2, following the death of the sitting President, came with a number of key reforms which aimed at reviving the ailing economy. The Kwacha was devalued by close to 50% and the exchange rate regime shifted from a managed float to a flexible one. Consequently, GDP growth rate forecast for 201 2 was slashed to 1.6% from 6%. Following the adjustment to the exchange rate regime, the Kwacha lost an additional 35% between May and December 201 2 to close the year at MK336.7080/1 US$.
Inflation rate in 201 2 was generally in double digit closing the year at 34.6%. Besides the currency depreciation, inflationary pressures have also fuelled further by soaring food prices caused by a lower-than-expected maize harvest in the 2011 2 growing season.
Treasury bill yields also responded to the movements in the bank rate and to liquidity developments in the banking system. For the 91 - day tenor, its average yield moved from an opening level of 6.38% to a close of 20.11 %. The average yield for the 1 82-day tenor bill closed at 24.78% from the year's opening level of 7.25% and the average yield for the 365-day Treasury bill closed at 26.40% from the year's opening level of 9.14%.
Monetary policy remained tight for the most part of 201 2 such that the bank rate increased three times to close the year at 25% from an opening of 1 3%. This has resulted in liquidity challenges with money markets going short, albeit, despite an improvement during the last quarter of 201 2.
Perfomance The Group delivered a strong set of results despite the challenging operating environment in 201 2. Year on year; total assets grew by 56% due to 47% increase in customer deposits and 29% increase in loans and advances to customers.
Profit after tax at MK7. 9 billion was 1 25% above prior year. Operating income was 93% above prior year due to higher trading income as well as higher income on loans and advances from customers as a result of the positive endowment impact.
Operating costs were 73% above prior year due to general price increases of commodities amidst high inflation rates. However, cost to income ratio has reduced from 43% in 2011 to 39% due to a cost containment drive by management thereby maintaining positive jaws.
Earnings per share has therefore grown from MK16.65 in 2011 to MK37.39 in 201 2. Strategy Our strategy continues to focus on ensuring prudent capital management, superior customer service, and competitive pricing whilst containing costs. We will also focus on efficiency in our processes and timely execution in our service and product offering. Investing in our people is key to preparing the Group for changes in the economic environment. Standard Bank Limited Annual Report for the year ended 37 December 2012
The Group continues to maintain high standards of Corporate Governance and complies with the
requirements of the Malawi code of best practice isr"1 s l corporate governance, Compliance with applicable legislation, regulation and standards is an essentia! part of the Group's operations
Leadership The successful performance achieved by the Group this year is testimony to the ability of our people to execute our strategic objectives effectively and consistently. Therefore in the increasingly competitive environment in which we operate, managing talent is a critical factor in maintaining competitive advantage. As a result, the Group will invest significant resources in talent management.
During the year, many staff members were trained in various aspects of their areas of work in order for us to maintain our competitive advantage in terms of business performance by our staff. Leadership development and training was provided by The Standard Bank's Global Leadership Centre to our managers as part of our continuous efforts to give our leaders focused development to enable the transitions required from one level to another. Corporate Governance and Directorship The Group continues to maintain high standards of corporate governance and complies with the requirements of the Malawi code of best practice in corporate governance. Compliance with applicable legislation, regulation and standards is an essential part of the Group's operations. The Board monitors regulatory compliance through management reporting. Prospects Meaningful economic growth is expected to rebound in 2013 on the expectation that the agriculture sector will register positive and significant growth which should improve the country's foreign exchange reserves and consequently bring in stability of the Kwacha and encourage production. The inflation rate is therefore expected to stabilise and drop in 201 3 due to a better maize harvest and a stable currency. Thus a more stable macroeconomic environment will form a good basis for economic rebound in 201 3 which therefore calls for timely execution of monetary policy interventions and fiscal discipline.
As a Group, we expect to maintain our market share. We will introduce new products in the coming year while keeping our focus on customer service. We will ensure continued profitability by having an efficient statement of financial position and prudent cost control measures.
The main areas of focus for the business in 201 3 will be retaining our customers. The Corporate and Investment Banking (CIB) team will continue to be built around customer centric solutions with a growing focus on the energy, agriculture, telecoms sectors, government initiated projects and transactional banking. The Personal and Business Banking (PBB) unit of the Group will pay attention to personal banking, business banking, wealth management and improving efficiencies in the branch network. Appreciation
We would like to thank the executive team and staff for the great results delivered in 201 2. We thank our customers for their continued support. We also thank our colleagues on the Board for their sound guidance and support during the year.
P A Chitsime C M Mudiwa Chairman Chief Executive Officer 28 February 2013 Standard Bank Limited Annual Report for the year ended 37 December 2012
EXECUTIVE COMMITTEE Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2 Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
EXECUTIVE COMMITTEE
Charles Mudiwa Temwani Simwaka Etness Chanza Chief Executive Officer Chief Financial Officer Head of Legal / Compliance and Company Bachelor of Science Economics Fellow of Chartered Certified Accountants Secretary Bachelor of Law Hons., ACIS (UK)
Martin Siwu Phillip Madinga Frank Chantaya Head of Credit Head of Corporate and Investment Banking Head of Global Markets Master of Science Finance Master of Business Administration Bachelor of Business Administration
Alipo Nyondo Kondwani Mlilima Head of Internal Audit Head of Risk Fellow of Chartered Certified Accountants Master of Science Economics Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
Paul Omara Margret Kubwaio Chaika Head of Personal and Business Banking Head of Personal and Business Banking Master of Business Administration Msc Strategic Management st (Sen/ed up to 31 October, 2012) (Appointed 1st November, 2012)
William Nuka Dan Mbozi Head of Information Technology Head of Operations Bachelors Degree in Electrical Engineering Chartered Management Accountant
Laston Chilando Head of Human Resource Msc Strategic Management Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT
CODES AND REGULATIONS
Compliance with applicable legislation, regulations, standards and codes remains an essential characteristic of the Group's culture. The Board of Directors monitors compliance with these by means of management reports, which include information on the outcomes of any significant interaction with key stakeholders such as the Group's various regulators. The Group complies with all applicable legislation, regulations, standards and codes in Malawi. During the year, the Group complied with the corporate governance guidelines.
BOARD AND DIRECTORS
Ultimate responsibility for governance rests with the Board of Directors. The Group has a unitary Board structure and the roles of Chairman and Chief Executive Officer are separate and distinct. The Chairman is an independent non-executive director. The number and stature of independent non-executive directors ensures that sufficient independence is brought to bear on decision making. There are eight non-executive directors on the Board and three executive directors.
It is the Board's responsibility to ensure that effective management is in place to implement the Group's strategy, and to consider issues relating to succession planning. The Board is satisfied that the current pool of talent available within the Group and the ongoing work to deepen the talent pool provide adequate succession plan, in both the short and long term. During the year, the Board also considered other key people-related challenges including talent retention.
Regular interaction between the Board and Executive Management is encouraged. Directors are provided with unrestricted access to Management and Group information, as well as the resources required to carry out their responsibilities at the Group's expense.
A feature of the way the Board operates is the role played by Board Committees which facilitate the discharge of Board's responsibilities. Each Committee has a Board approved mandate that is regularly reviewed. Details on how these committees operate are provided below.
SKILLS, KNOWLEDGE, EXPERIENCE AND ATTRIBUTES OF DIRECTORS
The Board ensures that directors possess the skills, knowledge and experience necessary to fulfil their obligations. The directors bring a balanced mix of attributes to the Board, including: International and domestic experience; Operational experience; Knowledge and understanding of both the macroeconomic and the microeconomic factors affecting the Group; and Financial, legal, entrepreneurial and banking skills.
BOARD RESPONSIBILITIES
The key terms of reference in the Board's mandate, which forms the basis for its responsibilities, are to: Agree on the Group's objectives, strategies and plans for achieving those objectives; Annually review the corporate governance process and assess achievement against objectives; Delegate to the Chief Executive Officer or any director holding any executive office or any senior executive, any of the powers, authorities and discretions vested in the Board's directors, including the power of sub-delegation. Delegate, similarly, such powers, authorities and discretions to any committee and subsidiary company boards as may exist or be created from time to time; Determine the terms of reference and procedures of all board committees in consultation with Standard Bank Africa ("SBAF"); Consider and evaluate reports submitted by management; Ensure that an effective risk management process exists and is maintained throughout the Group; Monitor the performance of the Chief Executive Officer and the executive team; Establish, review annually and approve major changes to the Group's policies; Ensure that an adequate budget and planning process exists, that performance is measured against budgets and plans and approves annual budgets for the Group, in line with the policies and procedures of the Group; Consider and approve capital expenditure recommended by management; Consider and approve any significant changes proposed in accounting policy or practice and consider the recommendations of the Audit Committee; Assume ultimate responsibility for systems of financial, operational and internal controls, the adequacy and review of which is delegated to sub-committees, and the Board ensures that reporting on these issues is adequate; Take ultimate responsibility for regulatory compliance and ensure that reporting to the Board is comprehensive; Ensure balanced reporting to stakeholders on the Group's position and that such reporting is done in a manner that can be understood by stakeholders; Review non-financial matters that have not been specifically delegated to any sub-committee. The review includes code of ethics, environmental issues and social issues. Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT (continued)
STRATEGY
The Board is responsible for setting the Group's strategy, which is considered and approved at an annual meeting with the Executive Committee. Once the financial and governance objectives for the following year have been agreed, the Board monitors performance on an ongoing basis. Performance against financial objectives is monitored by way of management quarterly reports and representations at board meetings.
BOARD EFFECTIVENESS AND EVALUATION
The Board assesses itself against its objectives by conducting an annual Board Self Evaluation. The aim of the evaluation is to assist the Board in improving its effectiveness. The outcome of the evaluation is discussed at board meetings and any areas of concern are addressed. Relevant action points are also noted for implementation. The performance of the Chairman, Chief Executive Officer and the Board Committees are also assessed annually.
BOARD MEETINGS
The Board meets quarterly with an additional annual meeting to consider the Group's Strategy. Ad hoc meetings are held when necessary. The directors are provided with comprehensive board documentation at least four days prior to each of the scheduled meetings.
Board Meetings - Meeting Attendance
Member 28-Feb-12 14-Jun-12 28-Aug-l 2 07-Dec-12
Mr. P A Chitsime (Chairman) V V V V Mr. A J WChinula** N/A N/A V A Mr. J P Patel V V V V Mr. R K Phiri V A V V Mr. A A Chioko V V A V Dr N R Kanyongolo** N/A N/A V V Dr R Harawa V V V V Mrs. C Mtonda** N/A N/A V V Mr. K Mbathi*** N/A V A V Mr. C Mudiwa V V V V Mrs. T Simwaka V V V V Mr. PWKhembo* A N/A N/A N/A Ms R M Mkandawire* A N/A N/A N/A
Key
V = Attendance
A = Apology
* = Served as Director up to 24th April 2012
** = Appointed to the Board on 14th June 2012
***= Served as Director from 1 5th May 2012 Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT (continued)
BOARD COMMITTEES
Board committees are established to assist the Board in discharging its responsibilities. They operate in terms of Board approved mandates which are reviewed and approved by the Board on an annual basis. The mandates set out their roles, responsibilities, scope of authority, composition and procedures for reporting to the Board.
Board Audit Committee
The role of this Committee is to review the Group's financial position and make recommendations to the Board on all financial matters. This includes assessing the integrity and the effectiveness of the audit, accounting, financial, compliance and internal control systems. The Committee also ensures effective communication between the internal auditors, external auditors, the Board, Management and Regulators. The Committee's key terms of reference comprises various categories of responsibilities and include the following: Annual review and recommendation to the Board for approval of the Board Audit Committee mandate; Review the audit plan with the external auditors, with specific reference to the proposed audit scope and approach to the Group's activities falling within the high risk areas, the effectiveness of the audit and audit fee. Consider with Management areas of special concern and the procedures being developed to monitor and contain risks in those areas; Review with Management copies of reports and letters received from the external auditors concerning deviations from and weaknesses in accounting and operational controls, and ensure that prompt action is taken by Management and that issues are satisfactorily resolved; Obtain assurance from the external auditors that adequate accounting records are being maintained; Review the adequacy of capital, provisions for bad debts and diminution in the value of other assets, and the formulae applied by the Group in determining charges for and levels of general debt provisions, within the framework of the Group policy; Review the accounting policies adopted by the Group and all proposed changes in accounting policies and practices, and recommend such changes where these are considered appropriate in terms of International Financial Reporting Standards. Consider also the adequacy of disclosures in the financial statements; Review the Group's interim and audited annual financial statements and all financial information intended for distribution to the shareholders and the general public, prior to submission to the full Board; Assess the performance of financial management and review the quality of internal accounting control systems and reports produced by management; Review the basis on which the Group has been determined as a going concern and make recommendations to the Board; Review written reports furnished by the Internal Audit Department of the Bank and of the Standard Bank Group, detailing the adequacy and overall effectiveness of the Group's internal audit function and its implementation by Management, the scope and depth of coverage, reports on internal control and any recommendations and confirmation that appropriate action has been taken; Consider reports and letters received from the banking supervisory authorities and other regulatory bodies, and Management's responses thereto where they concern matters of compliance and the duties and responsibilities of the board of directors of the Group; Monitor compliance with the Companies Act, Banking Act and the Stock Exchange Listings Requirements and all other applicable legislation and Code of Best Practices and Corporate Governance and the Group's Code of Ethics; Consider the development of standards and requirements and review statements on ethical standards or requirements for the Group; and
Review and make recommendations on any potential conflicts of interest relating to situations of a material nature.
The membership of this committee comprises:
Dr. R. Harawa - Chairman
Mr A A Chioko - Member
Mr P W Khembo* - Member
Ms R M Mkandawire* - Member
Mr A J WChinula** - Member
Mrs C Mtonda** - Member
The committee met five times during the year.
Key: * = Served as Director up to 24th April 2012 ** = Appointed as Board Member on 14th June 201 2 Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT (continued)
Board Audit Committee- Meeting Attendance
Member 14-Feb-12 15-May-12 1-Aug-12 13-Nov-12 19-Nov-12
Dr R Harawa (Chairman) V V V A V
Mr. A A Chioko V V V V V
Ms R M Mkandawire* V N/A N/A N/A N/A
Mr. P W Khembo* V N/A N/A N/A N/A
Mr. A J W Chinula** N/A N/A N/A V V
Mrs. C Mtonda** N/A N/A N/A V V
Key V = Attendance A = Apology = Served as Director up to 24th April 201 2 * * = Served as a member of the committee from 28th August 201 2 *** = Adhoc Meeting
Board Credit Committee
The role of this Committee is to ensure that effective credit governance is in place in order to provide for the adequate management, measurement, monitoring and control of credit risk including country risk. This involves ensuring that all committees within the Credit governance structure operate within clearly defined mandates and delegated authorities, as delegated to them by the Board, and that an appropriate credit framework and structure exists. The responsibilities of the Committee also include: -
Annual review and recommendation to the Board for approval of the Board Credit Committee mandate, the Credit Risk Management Committee mandate and delegated authorities; and Quarterly review of the credit and country risk portfolio reports; the credit and country risk impairment adequacy, and the credit and country risk sections of the report to the Board.
The membership of this committee comprises:
Mr J P Patel**** Chairman /Member
Mr PW Khembo* Chairman
Mr P A Chitsime*** Member
Mr A J W Chinula** Member
Mrs C Mtonda** Member
The committee met four times during the year.
Key: = Served as Director and Chairman up to 24th April 201 2 ** = Served as Member of the Committee from 28th August 2012 ** * = Served as a Member of the Committee up to 28th August 2012 ** * *= Served as Chairman from 28th August 201 2 Standard Bank Limited Annual Report for the year ended 3 7 December 2012
CORPORATE GOVERNANCE STATEMENT (continued)
Board Credit Committee - Meeting Attendance
Member 13-Feb-12 16-May-12 31-Jul-12 12-Nov-12
Mr. J P Patel (Chairman) V V V V Mr. P A Chitsime** V V V N/A Mr. PW Khembo* V N/A N/A N/A Mr. A J W Chinula*** N/A N/A N/A V Mrs. C Mtonda*** N/A N/A N/A V
Key V : Attendance = Served as Director up to 24th April 2012 ; Served as a member of the committee up to 28th August : Served as a member of the committee from 28th August
Board Risk Committee
The role of this Committee is to ensure quality, integrity and reliability of the Group's risk management procedures. This Committee also assists the Board in the discharge of its duties relating to the corporate accountability and associated risks in terms of management, assurance and reporting. The committee reviews and assesses the integrity of the risk control systems and ensures that risk policies and strategies are effectively identified and managed. The responsibilities of the committee also include:- Annual review and recommendation to the Board for approval of the Board Risk Committee mandate; Reviewing, with the Group's legal Counsel, any legal matters that could have a significant impact on the Group's business; Reviewing of reports by the Compliance Manager on matters of regulatory and reputational risk including such areas as breaches, fines, material malfunctions and changes in legislation; Monitoring of external developments relating to the practice of corporate accountability and reporting of specifically associated risk, including emerging and prospective impact; Reviewing the adequacy and effectiveness of the enterprise risk management framework which, includes the risk strategy, standards, policies, procedures, practices and controls as implemented; Ensuring compliance with such policies, and with the overall risk profile of the Group including market risk, credit risk, operational risk, legal risk, compliance risk, liquidity risk, reputational risk, country risk and other risks appropriate to the business which may be identified from time to time; Monitoring procedures to deal with and review the disclosure of information to customers, the resolution of major customer complaints and compliance with the Group's code of banking practices and ethics;and Review management's progress report on Basel II implementation.
The membership of this committee comprises
MrAAChioko - Chairman
Dr R Harawa** - Member
Mr R K Phiri - Member
Dr N R Kanyongolo* - Member
The committee met four times during the year.
Key: = Served as Member of the Committee from 28th August 2012 ** = Served as a Member of the Committee up to 28th August 201 2
Board Risk Committee- Meeting Attendance
Member 13-Feb-12 16-May-12 31-Jul-12 12-Nov-12
Mr. A A Chioko (Chairman) V V V V
Dr R Harawa** V V V N/A
Mr. R K Phiri V V V V
Dr N R Kanyongolo* N/A N/A N/A V o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT (continued) Board Risk committee- Meeting Attendance (continued)
Key = Attendance * = Served as Member of the Committee from 28th August 2012 ** = Served as Member of the Committee up to 28th August 201 2
Board Human Resources Committee
The role of this Committee is to ensure that appropriate human resource policies are in place to enable the Group source and maintain staff with appropriate skills (and mix of skills) in the right jobs and to have back up skills and resources available at all times. The Committee also ensures that management have put in place measures to ensure that reward packages are fair and in accordance with the market forces, to reward performance initiatives and also motivate the work force. The responsibilities of the Committee also include: Annual review and recommendation to the Board for approval of the Board Human Resources Committee mandate; Recommending to the Board for approval the Group's Human Resources Policies, Strategy and Manual and any amendments on an annual basis, such strategy and policies shall require that Management put in place effective mechanisms for recruiting, management and reward systems to ensure motivation and retention of quality staff; Review and approval of proposals for amendments to the organisational structure in conjunction with Standard Bank Group standards; Recommend for Board approval, major changes in employee benefit structures for the Group; Ensuring that employees of the Group are provided with appropriate incentives to encourage performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group; Providing insight to the recruitment and termination of employment of Senior Management Staff or as may be required by the Reserve Bank of Malawi (RBM) or any regulatory Authority with the power to regulate such appointments; and Making recommendations to the Board on the reinforcement, through transparency of sound corporate governance principles covering among other things, information about the incentive structure of the Group, including compensation policies, executive compensation etc.
The membership of this committee comprises:
Mr R K Phiri Chairman
Mr P A Chitsime** Member
Mr J P Patel Member
Dr N R Kanyongolo* Member
The committee met four times during the year.
Key: = Served as Member of the Committee from 28th August 2012 * * = Served as a Member of the Committee up to 28th August 2012
Board Human Resource Committee - Meeting Attendance
Member 14-Feb-12 15-May-12 01-Aug-12 13-Nov-12
Mr. R K Phiri (Chairman) V V V V
Mr. P A Chitsime** V V V N/A
Mr. J P Patel V V V V
Dr N R Kanyongolo* N/A N/A N/A V
Key v = Served as Member of the Committee from 28th August 201 2 = Served as Member of the Committee up to 28th August 201 2 G Standard Bank Limited Annual Report for the year ended 31 December 2072
CORPORATE GOVERNANCE STATEMENT (continued)
MANAGEMENT COMMITTEES
Credit Risk Management Committee
The main role of this Committee is to ensure compliance with the Group's Credit standards. The Committee is an autonomous credit decision-making function within a defined delegated authority as determined by the Board from time to time. This Committee effectively enhances the credit disciplines within the Group and is responsible for controlling inter alia delegated authorities, concentration risk, and distressed debt, regulatory issues that pertain to credit, credit audits, policy and governance. This Committee comprises of the Chief Executive Officer, Regional Credit Director, Head of Credit, Head of Personal and Business Banking, Head of Corporate and Investment Banking, Head of Global Markets, Head of Personal and Business Banking Credit, Head of Corporate and Investment Banking Credit, Personal and Business Banking Chief Credit Officer and Corporate and Investment Banking Credit Director as voting members. The Head of Finance is a non-voting member of this Committee. The Committee reports to the Board through the Board Credit Committee.
Asset and Liability Committee (ALCO)
This Committee is responsible for the management and monitoring of the trading book risk, market risk, the banking liquidity and interest rate risks. It comprises the Chief Executive Officer and the Departmental Heads for Credit, Finance, Global Markets, Risk, Corporate and Investment Banking, Personal and Business Banking, Operations and the Compliance Manager.
Executive Committee (EXCO)
This committee comprises of senior executives of the Group and its main role is to guide and control the overall direction of the business of the Group including the day to day running of the Group and it is responsible to the Board.
COMPANY SECRETARY
The role of the Company Secretary is to ensure that the Board remains cognisant of its duties and responsibilities. In addition to providing the Board with guidance on its responsibilities, the Company Secretary keeps the Board abreast of relevant changes in legislation and governance best practices. The Company Secretary oversees the induction of new directors, as well as the ongoing training of directors. All directors have access to the services of the Company Secretary.
GOING CONCERN
On the recommendation of the Board Audit Committee, the board annually considers and assesses the going concern basis for the preparation of financial statements at the year end. At the interim reporting period, a similar process is followed to enable the Board to consider whether or not there is sufficient reason for this conclusion to be affirmed.
RELATIONSHIPS WITH SHAREHOLDERS
The shareholders' role is to appoint the Board of Directors and the external auditors. This role is extended to holding the Board accountable and responsible for efficient and effective corporate governance.
SUSTAINABILITY REPORTING
Management of the Group's economic, social and environmental impacts and responsibilities is being systematically entrenched in the Group's culture through the emphasis placed on the application of the Group's vision and values in all its operations.
ETHICS AND ORGANISATIONAL INTEGRITY
The Group's code of ethics is designed to empower employees and enable faster decision making at all levels of our business according to defined ethical principles. It also aims to ensure that, as a significant organisation in the financial services industry, we adhere to the highest standards of responsible business practice.
The code interprets and defines Standard Bank's values in detail and provides values-based decision making principles to guide our conduct. It is aligned with other Standard Bank policies and procedures, and supports the relevant industry regulations and laws of the country.
The code of ethics is supported by the appropriate organisational structure, namely an ethics advice process and an ethics reporting process. These processes link into existing human resources and compliance structures wherever possible, including grievance processes and a fraud hotline. New structures and roles, including those of business unit ethics officers, have been created to ensure that our values and ethics are effectively embedded. The code includes targeted communications, coaching, reference guides and induction packs distributed to all members of staff.
New members of staff are taken through the Code of Ethics and each is given a soft copy. In the year there were no material breaches to the Code of Ethics. G Standard Bank Limited Annual Report for the year ended 31 December 2072
CORPORATE GOVERNANCE STATEMENT (continued)
REMUNERATION
Remuneration Philosophy The Group's remuneration philosophy aligns with its core values, including growing our people and delivering value to our shareholders. The philosophy continues to emphasize the fundamental value of our people and their role in ensuring sustainable growth. This approach is crucial in an environment where skills remain scarce.
The Group's Board of Directors sets the principles for the remuneration philosophy inline with approved business strategy and objectives. The philosophy aims to maintain an appropriate balance between employee and shareholder interests.
A key success factor for the Group is its ability to attract, retain and motivate the talent it requires to achieve its strategic and operational objectives.
Remuneration Governance The remuneration of board members is approved in-country and reviewed by the Standard Bank Group Remuneration Committee ("REMCO"). The remuneration of executive management in-country is reviewed by Standard Bank Africa and, in some instances, approved by REMCO.
The following key factors have formed the implementation of reward policies and procedures that support the achievement of business goals: the provision of rewards that enable the attraction, retention and motivation of employees and the development of a high performance culture; maintaining competitive remuneration in line with our markets, trends and required statutory obligations; rewarding people according to their contribution; allowing a reasonable degree of flexibility in remuneration processes and choice of benefits by employees; moving to a cost-to-company remuneration structure; and educating employees on the full employee value proposition.
REMUNERATION STRUCTURE
Non-Executive Directors
Terms of Service
Directors are appointed by the shareholders at the annual general meeting ("AGM") and interim board appointments are allowed between AGMs. The interim appointees are required to retire at the next AGM where they make themselves available for re-election by shareholders. In addition, one third of the non-executive directors are required to retire at each AGM and may offer themselves for re-election. There is no limitation to the number of times a non-executive director may stand for re-election.
Fees
Non-executive directors receive fixed fees for their service on the board and board committees. This includes a retainer that has been calculated in line with market practices. There are no contractual arrangements for compensation for loss of office. Non-executive directors do not receive short-term incentives, nor do they participate in any long-term incentive schemes.
Management and Staff
Terms of Service
The terms and conditions of employment for managers are guided by the legislation in Malawi and are aligned to Standard Bank Group practice. Notice periods vary from one month to three months depending on seniority. Notice periods also depend on the level of responsibility of a particular manager and whether or not they are leaving to join a competitor.
Most general staff are unionised. Their terms and conditions of employment are therefore guided by collective agreement(s) signed with the Commercial, Industrial and Allied Workers' Union of Malawi.
Fixed Remuneration
Managerial remuneration is moving towards a total cost-to-company structure. Cost-to-company comprises a fixed cash portion, compulsory benefits (medical aid and retirement fund membership) and optional benefits. Market data is used to benchmark salary levels and benefits. Salaries are normally reviewed annually in March.
G Standard Bank Limited Annual Report for the year ended 31 December 2072
CORPORATE GOVERNANCE STATEMENT (continued)
For all employees, performance-related payments have formed an increasing proportion of total remuneration over time to achieve business objectives and reward individual contribution.
All employees (executives, managers and general staff) are rated on the basis of performance and potential and this is used to influence performance-related remuneration.
Rating and the consequent pay decision is done on an individual basis. There is therefore a link between rating, measuring individual performance and reward.
Short-term Incentives
All members of staff participate in a performance bonus scheme. Individual awards are based on a combination of business unit performance, job level and individual performance. In keeping with the remuneration philosophy, the bonus scheme seeks to attract and retain high-performing employees.
Long-term Incentives
It is essential for the Group to retain key skills over the longer term. This is done particularly through group share-based incentive plans. The purpose of these is to align the interests of the Group and its employees, as well as to attract and retain skilled and competent people.
Post-retirement Benefits
The Group operates a contributory pension fund to provide for retirement benefits.
THE GROUP'S HIGHLIGHTS FOR THE YEAR
The following are the highlights of the year:
The Group won the banker of the year award in Malawi, this is the seventh year the Group has won this award; The Group won the Best Investment Banking of the year award for a third year running, awarded by EMEA finance Magazine (Europe, Middle East Africa); The Group was a key partner and provided guarantee facilities to support the construction of the Nacala Rail Project i.e. construction of a Greenfield rail line and rehabilitation of existing rail line to transport coal from Tete to Nacala in Mozambique through Malawi. The Group continued to be the lead provider of seasonal financing facilities to major tobacco merchants; The Group continued to be a lead and major financier of Malawi Government's Input Subsidy Program;and The Group launched Small-to-Medium Enterprise ("SME") Mpamba quick loans.
GROUP SNAPSHOT 2012 2011 Points of representation 25 25 ATMs 58 56 Headcount 701 648
OUR STAKEHOLDERS
Shareholders
Delivering to our shareholders - We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders. We try extremely hard to meet our various targets and deliver on our commitments.
As our existing and prospective shareholders are providers of capital to the Group, we are responsible for providing them with reliable, relevant and timely information to help them make informed investment decisions. Our shareholder base is diverse, including individuals and institutional shareholders both locally and internationally. The composition of the Groups shareholders is analysed on page 22.
To ensure effective and meaningful shareholder engagement, we have developed various communication channels to meet different shareholders' information needs, and to manage shareholders' expectations positively and transparently.
In addition to the various press releases that are published in the papers, the Group's Chairman encourages shareholders to attend the annual general meetings where interaction is welcomed. The other Directors and Group Executives are also available at the meetings to respond to questions from shareholders. G Standard Bank Limited Annual Report for the year ended 31 December 2072
CORPORATE GOVERNANCE STATEMENT (continued)
Customers
Serving our customers - We do everything in our power to ensure that we provide our customers with the products, services and solutions to suit their needs provided that everything we do for them is based on sound business principles.
Our customers range from individuals and small businesses to large corporate and government entities. Sustainable business performance depends on our ability to engage meaningfully with our customers, to be sensitive to their different needs and to provide relevant products and services. Extensive research is conducted to better understand customer needs and market dynamics.
Our customers' worlds are defined largely by the economic and competitive particulars of their industry sectors and local market circumstances. Where we are able to bring insight through deep sector knowledge, drawn globally from across a range of companies, together with local market knowledge, we do so. We have also introduced certain risk-sharing arrangements to improve access to credit for Small and Medium Enterprises (SME's).
Our CIB division serves a wide range of customer requirements for banking, finance, trading, investment and risk management. In line with the growing sophistication of customers' requirements, the division has built a deep understanding of Malawi's market and economic dynamics. This is served by operating a client-centric and distribution-focused business model, supported by a culture that prioritizes client relationships and economic returns, and a business structure that enables an integrated, multi-product service offering. CIB offers this comprehensive range of products and services through our Investment Banking, Global Markets and Transactional Products & Services divisions.
Our Client relationship managers develop close relationships with clients and link in our specialist product and global distribution teams to deliver innovatively and appropriately on individual requirements. We maintain a specific focus on industry sectors that are most relevant to emerging markets and have strong sector value propositions in mining & metals, oil, gas & renewable, telecommunications & media, power & infrastructure, agribusiness and financial institutions.
In PBB we continue to provide personalised banking solutions through our private banking unique proposition and branch network franchise, where achiever and priority banking services are offered. We have also taken particular initiative to serve our personal customers where they work through our robust Work Place Banking proposition. In this regard, we now provide and have become the leading Bank in providing unsecured personal loans to civil servants and corporate employees.
In Business Banking (both Commercial and SME markets), relationship building and management has been key to how we relate with our customers. We provide SME customers with opportunities to access affordable loans in the form of working capital or bridging finance to move their businesses forward.
Whilst we continue to expose our customers to top class banking solutions that are commensurate with latest offerings in the developed world, we strive to remain locally relevant by framing our solutions with a complete understanding of the local dynamics.
Employees
Growing our people - We encourage and help our people to develop to their full potential, and measure our leaders on how well they grow and challenge the people they lead.
Talent Management
The Group believes that critical to the achievement of its business objectives, now and into the future, is the effective attraction, retention of critical talent, and the development of executive talent. Our strategy in this regard primarily relies on internal development and assessment of our staff in order to build and strengthen our future talent pool.
Those that are identified to have high potential are engaged in more intensive development processes which amongst others include being placed in mentoring and coaching relationships with senior level executives outside their reporting structure as well as offering them developmental cross functional and international experience to maximise their development opportunities.
Graduate Development Programme
The Group runs a Graduate Development Programme and in the last 4 years, the programme has offered an opportunity to some top performing university graduates who were yet to start their careers and wished to pursue a career in banking as well as those graduates who had been working with the Group for not more than 2 years. The main objective of the programme is for the successful participants to gain the knowledge, unique skills, authority and confidence necessary to operate successfully within the Group.
Leadership Development
Leadership remains our core competency in order for the Group to continue to have a competitive edge in business performance. With the support of our Global Leadership Centre, we continue to develop and offer the entire spectrum of appropriate leadership development and training interventions at all levels of leadership in the Group. These are customised according to individual development needs, aimed at giving our leaders focused development propositions to enable the transitions required from one level to another. G Standard Bank Limited Annual Report for the year ended 3 7 December 2012
CORPORATE GOVERNANCE STATEMENT [continued)
Occupation-Directed Education, Training and Development
The Group recognizes that to maintain a committed and competent workforce, it needs to ensure that there is adequate training and development provided for all employees. All education, training and development activities are directed at meeting business objectives, developing a culture of continuous improvement, and more importantly, enabling our staff realize their full potential, develop and grow in the organization. Through its Banking Education scheme and support to tertiary education, the Group has continued to support staff that are keen to further their studies provided the further study is considered necessary by the Group and will be beneficial to both the Group and employee.
Health Risk Management
All employees are able to access this service through the intranet. The service enables employees to engage online with specialists such as doctors, pharmacists, physiotherapists, personal trainers and nutritionists, with all queries being responded to within 24 hours.
Independent Counselling and Advisory Services
Independent Counselling and Advisory Services confidentially assists and supports employees and their immediate families with many personal issues including stress management, trauma, HIV/Aids, divorce, bereavement and legal issues.
The Group receives a country report for all staff in Malawi and Standard Bank Africa receives a combined report on what issues are prevalent across the continent. This enables the Group to plan the required interventions around the behavioural risk issues it is facing.
Staff Recognition Programme
The Group has a recognition programme where we publicly recognise achievements that are considered to be beyond what is expected from an individual or teams. Recognition remains key to the upholding of the Group's values and achievement of its strategic goals. To this end, over and above the incentive programmes that it runs which are based on performance and behaviour, the Group encourages a culture of recognition on an ongoing basis formally and informally to acknowledge and reinforce desired behaviour.
Regulators
Being proactive - We strive to stay ahead by anticipating rather than reacting, and our actions are always carefully considered.
We view regulatory compliance not only as a requirement by law, but also as one of the key components of sustainable development. The Reserve Bank of Malawi is our primary regulator and supervisor, and the relationship is one of mutual trust built through regular and open communication. Various other supervisory bodies also monitor our compliance with specific pieces of legislation.
Suppliers
Working in teams - All aspects of our work are interdependent. We appreciate that, as teams, we can achieve much greater things than as individuals. We value teams within and across business units, divisions and countries.
The Group is committed to procure from all levels of suppliers ranging from large corporations to individuals. The Group set up a procurement committee that looks at supplier relationships to ensure that that the Group deals with all suppliers equitably and facilitate a governed process of procuring goods and services from qualified and accredited suppliers in our Group.
Community
We will ensure long-term sustainability by harmonising the needs of our customers, our people and our shareholders and by being relevant to the societies in which we operate.
It makes sense for us to invest in the communities in which we operate as healthy and economically active communities have a direct impact on our long-term business growth. As our stakeholders live and work in the communities in which we operate, it follows that by supporting and investing in the wellbeing of these communities, the Group is investing in its own sustainability.
The Group supports local communities through various corporate social investment initiatives and encourages employee participation in community investment through structured opportunities as well as matching personal donations made by employees to social development. In addition, sponsorships complement and enhance our brand and help to build positive relationships with all stakeholder groups. They also demonstrate our commitment to the development of sports, arts and other activities in the communities in which we operate. o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CORPORATE GOVERNANCE STATEMENT (continued)
Through its corporate social responsibility programme, the Group provides support in sports, education, health, environment and other socio-economic activities that uplift people's lives in the country.
In the health sector, we extended the Dedza District Family Health unit in partnership with the Elizabeth Glaser Foundation at the tune of MK4.5 million. Standard Bank also supported the Presidential initiative for Safe Motherhood by building a MK19 million Maternity Holding Shelter at Mulanje District Hospital. Furthermore, the Group donated US$ 5,000 to Operation Smile towards the operation of kids born with cleft lips in Malawi.
Further, we also supported various sporting activities in the country. During the reporting period, the Group continued with its sponsorship of the Standard Bank Knockout Trophy with an increase in the sponsorship package from MK15 million in 2011 to MK20 million in the current year. This sponsorship was provided with the aim of complimenting the Malawi Government's efforts in developing sports in the country. The Group also sponsored two golf tournaments, one in Nchalo and another in Lilongwe worth MK8million.
Environment
We have the highest regard for the dignity of all people. We respect each other and that is what Standard Bank Limited stands for. We recognise that there are corresponding obligations associated with our individual rights.
As a provider of financial services, the Group has a responsibility and an opportunity to promote sustainable development in areas where it has influence. For instance, project financing operations can potentially indirectly expose the Group to material environmental and social impacts. While customers are directly responsible for managing these impacts, the Group protects its assets and reputation by selecting customers and allocating capital responsibly. The ongoing challenge is to maintain the balance between meeting our customers' needs and protecting our assets. Standard Bank Limited Annual Report for the year ended 31 December 2012
RISK MANAGEMENT AND CONTROL j
The effective management of risk is fundamental to the business activities of the Group as we remain committed to the objective of increasing shareholder value by developing and growing business that is consistent with agreed risk appetite. We seek to achieve an appropriate balance between risk and reward in our business, and continue to build and enhance the risk management capabilities that will assist in delivering our growth plans in a controlled environment.
Risk management is at the core of the operating and management structures of the Group. The Group seeks to limit adverse variations in earnings and equity by managing the statement of financial position and capital within agreed levels of risk appetite. Managing and controlling risks, and in particular avoiding undue concentrations of exposure, limiting potential losses from stress events, and restricting significant positions in less quantifiable risk areas, are essential elements of the Group's risk management and control framework which ultimately leads to the protection of the Group's reputation.
Responsibility and accountability for risk management resides at all levels within the Group, from the executive down through the organisation to each business manager, risk specialist and staff.
Key aspects of risk management are the risk governance and the organisational structures established by the Group to manage risk according to a set of risk governance standards which are implemented across the Group and are supported by appropriate risk policies and procedures. Risk Management Framework
The Group's approach to risk management is based on well established governance processes and relies on both individual responsibility and collective oversight, supported by comprehensive reporting. This approach balances strong corporate oversight at the Board level with independent risk management structures.
Unit heads are specifically responsible for the management of risk within their areas. As such, they are responsible for ensuring that there are appropriate risk management frameworks that are adequate in design, effective in operation and meet minimum Group standards.
The Group has developed a set of risk governance standards for each major risk type. The standards set out and ensure alignment and consistency in the manner in which the major risk types across the Group are governed, identified, measured, managed, controlled and reported. It is the responsibility of each unit's head to ensure that the requirements of the risk governance standards, policies and procedures are implemented within their unit while independent oversight is provided by the Risk Function, Operational Risk and Compliance Management Committee and Board Risk Committee. Each standard is supported by policy and procedural documents as required. The Group is required to self assess, at least annually, its compliance with risk standards and policies.
Basel II
Basel II incentivises banks, through lower capital requirements, to improve their risk management processes. The focus of the Basel II framework is mainly on improving the quantification and management of credit, market and operational risks, enhancements to the supervisory review process and more extensive risk disclosure by banks.
In 201 2, the banking industry in Malawi made significant progress towards Basel II implementation scheduled for January 2014. RBM issued guidelines for all pillars for comments by market players. The central bank also facilitated training workshops for Pillar I risk types, Internal Capital Adequacy Assessment Process (ICAAP) and stress testing, Asset and Liability Management (ALM), and liquidity risk. A new call report was rolled out on trial basis during the year while a second Quantitative Impact Survey (QIS) was undertaken. The most significant achievement was the development and submission of ICAAP documents by banks.
m i Standard Bank
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Authorised financial services and registered credit provider (NCRCP15). Limited (Reg. No. 1962/000738/06). SBSA 101502. Moving forward is a trademark of The Standard Bank of South Africa Limited Moving Forward Standard Bank Limited Annual Report for the year ended 37 December 2072
DIRECTORS REPORT
Incorporation and Registered Office
Standard Bank Limited is a company incorporated in Malawi under the Malawi Companies' Act, 1984 and is domiciled in Malawi. It was listed on the Malawi Stock Exchange on 28 June 1 998. The address of its registered office is:
Standard Bank Centre Africa Unity Avenue. PO Box 30380 Lilongwe 3 Malawi
Principal Activities
Standard Bank Limited is registered as a financial institution under the Ba nking Act, 2009. It is in the business of banking and the provision of other related services. Financial Performance
The results and state of affairs of the Group and the Company are set out in the accompanying statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes to the financial statements. Dividend
The net profit for the year of MK7.9 billion (2011: MK3.5 billion) has been added to retained earnings. An interim dividend of MK9.37 (201 1: MK4.21) per ordinary share was paid in September 201 2 representing MK2 billion (2011: MK900m). The directors recommend a final dividend of MK14.00 (2011: MK9.37) per ordinary share representing MK3.0 billion (2011: MK2 billion) to be tabled at the forthcoming Annual General Meeting. Directorate
Details of directors and company secretary as at the date of the annual report are as follows:
Mr P A Chitsime*** - Chairman and all year Ms R M Mkandawire*** - Served up to 24th April 201 2 Mr RK Phiri*** - All year Mr PW Khembo*** - Served up to 24th April 2012 Dr R Harawa*** - All year Mr A A Chioko*** - All year Mr J Patel** - All year Mr C M Mudiwa**** - All year Mrs T Simwaka*** - All year Mr. KMbathi* - Served from 15th May 2012 Mr A J W Chinula*** - Appointed on 14th June 2012 Dr N R Kanyongolo*** - Appointed on 14th June 201 2 Mrs C Mtonda*** - Appointed on 14th June 2012 Mrs E Chanza*** - Company Secretary and all year
Kenyan British Malawian Zimbabwean
9 i Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
Shareholding Analysis
The shareholders of the Group as at 31 December 2012 are as below:
Name Holding (%) Stanbic Africa Holdings Limited 60.1 8 NICO Holdings Limited 20.00 Old Mutual Life Assurance Company Limited 4.76 Press Trust 2.30 Standard Bank Pension Fund 2.05 Public 10.71 Total 100.00
Auditors
The Group's auditors, KPMG Certified Public Accountants and Business Advisers, have indicated their willingness to continue in office and a resolution will be proposed at the forthcoming Annual General Meeting to re-appoint them as auditors.
P A Chitsime Dr R Harawa Chairman Director
28 February 2013 Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
The Directors are responsible for the preparation and fair presentation of the Consolidated and Separate annual Financial Statements of Standard Bank Limited and the Group, comprising the Statement of Financial Position as at 31 December 201 2, and the Income Statements, the Statements of Comprehensive Income, changes in Equity and Cash flows for the year then ended, and the notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory notes, and the Directors' Report, in accordance with International Financial Reporting Standards, and in the manner required by the Malawi Companies act, 1984.
The Act also requires the directors to ensure that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and ensure the financial statements comply with the Malawi Companies Act, 1984.
In preparing the financial statements, the directors accept responsibility for the following: Maintenance of proper accounting records; Selection of suitable accounting policies and applying them consistently; Making judgements and estimates that are reasonable and prudent; Compliance with applicable accounting standards when preparing financial statements, subject to any material departures being disclosed and explained in the financial statements; and Preparation of financial statements on a going concern basis unless it is inappropriate to presume the company will continue in business.
The Directors are also responsible for such internal controls as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and for maintaining adequate accounting records and an effective system of risk management.
The Directors' responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
The Directors have made an assessment of the Group's ability to continue as a going concern and have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The Directors have made an assessment and they attest to the adequacy of accounting records and effectiveness of the systems of internal controls and effective risk management for the Group.
The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with applicable financial reporting framework.
Approval of financial statements
The consolidated and separate financial statements of the Group, as indicated above, were approved by the Board of Directors on 28 February 2013 and are signed on its behalf by.
By order of the Board.
H,
PA Chitsime Dr R Harawa Chairman Director
28 February 2013 e OUR EVENTS | CORPORATE SOCIAL RESPONSIBILITY
© Stands-.* Bank
In the 2012 financial year, Standard Bank continued to move communities forward in the areas of Health, Education and Sports Development.
In the Health sector, Standard Bank extended the Family Health Unit at Dedza District Hospital in March 2012. Standard Bank also donated a MK19 Million Kwacha Maternity holding Shelter at Mulanje District Hospital in November. In addition to these, Standard Bank touched the lives of many people at all levels through financial support and sponsorship to various worthy causes across Malawi. The 2012 financial year saw Standard Bank increasing the sponsorship package of the Standard Bank Knock-Out Trophy from MK15 Million to MK20 Million. This is a clear testament that the Bank is really dedicated to developing Sports in Malawi.
Standard bank also sponsored two Golf tournaments in Lilongwe on 2nd June and Nchalo on 11th August as one way of developing the sport in Malawi.
i OUR PEOPLE | MOMENTS AT STANDARD BANK
Our people are central to everything that we do as a business. In a quest to keep our staff motivated, Standard Bank rewarded members of Staff who went beyond and above the call of duty through the Sapitwa True Blue Awards. Long serving members were also recognized and awarded accordingly. mg^magmBam^mgm
In ordertofosterteam work and bonding, Standard Bank organized various Team Time Sessions and trainings to all staff members in the year 2012. This has resulted in building a successful team that beats with one heart and delivers excellent and quality service to our customers.
e STANDARD BANK IN PICTURES
he Standard Bank Joy of Jazz was undoubtedly the premier event on Malawi's music scene. The President Hotel in the capital, Lilongwe was a beehive of activity as 1,800 music lovers thronged to the magnificent Thotel to sample the prowess of Zahara of the Loliwe fame. On call was Malawi's music great Wambali Mkandawire to support the South African diva. Just as Zahara, Mkandawire backed by Lilongwe's Mingoli Band did not disappoint. The two treated the country's music lovers to a scintillating performance never seen in recent times. It was a South Africa-Malawi blend that was for all to savour, thanks to Malawi's leading bank, Standard Bank. Standard Bank Joy of Jazz started in South Africa thirteen years ago and has contributed to the cultural exchange between artists. Standard Bank JOJ as is fondly called has been a platform where international performers have mingled with their local counterparts leading to collaboration of musical works in many instances. A picture does not lie, so goes the pun and below is a glimpse of the electrifying encounter between Zahara ail the queer and Wambali that kept fun seekers on their toes for H idressing me the greater part of the night: the Malawi , • «
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It will be nice sharing the stage with you: Mteweti Wambali Mkandawire speaking during a press conference before the show
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3 Jazz: Zahara Ben Wandawanda from Standard Finally the day is here: Standard Banks Linda )f the press on arrival nk addressing the press Kachingwe-Sisya speaking to reporters hours the concert before the Standard Bank Joy of Jazz show
Loliwe: Standard Bank CEO Mr. Charles Mudiwa Dazzled by a scintillating performance: VVIP guests ) could not resist but sing along during the show savouring Zahara music Zahara's Loliwe as it captivated the fans.
This is how we do it: Prof. Denhert of In the thick of things: The queen herself Bulelwa Mkutukana Mingoli Band showcases his talent aka Zahara engrossed in her lines in what was a magical performance ever recorded in recent times in Malawi
. : : : Moving Forward Standard Bank Msmsmm Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
Report on the Consolidated and Separate Financial Statements
We have audited the consolidated and separate financial statements of Standard Bank Limited and it's subsidiary, Standard Bank Bureau De Change Limited, which comprise the consolidated and separate statements of financial position as at 31 December 201 2, the consolidated and separate statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the consolidated and separate financial statements, which include a summary of significant accounting policies and other explanatory notes as set out on pages 33 to 85.
Directors' Responsibility for the Consolidated and Separate Financial Statements
The company's directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Malawi Companies Act 1984, and for such internal control as management determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control systems relevant to the entity's preparation and fair presentation of the consolidated and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Standard Bank Limited and it's subsidiary as at 31 December 201 2, and of its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the provisions of the Malawi Companies Act so far as concerns members of the company.
KPMG Certified Public Accountants and Business Advisers Lilongwe, Malawi
28 February 2013
Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CONSOLIDATED AND SEPARATE STATEMENT OF FINANCIAL POSITION
Group Company Group Company 2012 2012 2011 2011 Note MKm MKm MKm MKm Assets Cash and cash equivalents 8 13,500 13,366 8,541 8,489 Trading assets 9 8,932 8,932 7,683 7,683 Loans and advances to banks and other financial institutions 10 29,153 29,153 4,984 4,984 Loans and advances to customers 11 50,933 50,933 39,434 39,434 Financial investments 12 3,373 3,373 6,157 6,157
Investment in subsidiary 13 - 100 - 52 Other assets 14 4,526 4,537 2,159 2,159 Property and equipment 15 7,066 7,066 6,097 6,097 Intangible assets 16 15 15 24 24 Deferred tax assets 17 698 698 541 541
Total assets 118,196 118,173 75,620 75,620
Liabilities Deposits and loans from banks 18 7,858 7,858 361 361 Deposits from customers 19 84,717 84,717 57,702 57,702 Other liabilities 20 5,030 5,029 2,955 2,955 Income tax payable 1,416 1,416 409 409 Provisions 21 1,536 1,536 535 535 Employee benefits liabilities 38 118 118 159 159 Deferred tax liabilities 17 1,088 1,088 1,098 1,098
Total liabilities 101,763 101,762 63,219 63,219
Shareholders' equity Share capital 22 213 213 213 213 Share premium 22 854 854 854 854 Revaluation reserve 23 2,381 2,381 2,381 2,381 Available for sale reserve 23 (43) (43) 31 31 Share-based payment reserve 23 258 258 117 117 Retained earnings 1 2,770 12,748 8,805 8,805 Total shareholders' equity 16,433 16,411 12,401 12,401
Total equity and liabilities 118,196 118,173 75,620 75,620
The financial statements of the Group were approved for issue by the Board of Directors on 28 February 2013 and were signed on its behalf by:
PA Chitsime Dr R. Harawa Chairman Director
28 February 2013
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CONSOLIDATED AND SEPARATE STATEMENT OF COMPREHENSIVE INCOME
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Net interest income 24 9,130 9,130 4,980 4,980
Net fee and commission income 25 3,754 3,754 2,302 2,302 Net trading income 26 9,300 9,266 4,213 4,213 Other operating income 27 34 36 24 24
Total operating income 22,218 22,186 11,519 11,519
Impairment losses on loans and advances 11 (1,592) (1,592) (998) (998)
Income after credit impairment losses on loans and advances 20,626 20,594 10,521 10,521
Staff costs 28 (4,419) (4,419) (2,067) (2,067) Depreciation and amortisation 29 (623) (623) (496) (496) Other operating expenses 30 (3,560) (3,560) (2,417) (2,417)
Total expenditure (8,602) (8,602) (4,980) (4,980)
Profit before income tax expense 12,024 11,992 5,541 5,541
Income tax expense 31 (4,059) (4,049) (1,995) (1,995)
Profit for the year 7,965 7,943 3,546 3,546
Earnings per share Basic and diluted (MK per share) 32 37.39 37.29 16.65 16.65
The notes on pages 39 to 85 are an integral part of these financial statements. The Independent Auditors' report is on page 31. Standard Bank Limited Annual Report for the year ended 3 7 December 2012
CONSOLIDATED AND SEPARATE STATEMENT OF OTHER COMPREHENSIVE INCOME
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Profit for the year 7,965 7,943 3,546 3,546
Other comprehensive income
Net revaluation gain on property and equipment - - 952 952
Net change in fair value on available for sale financial assets (74) (74) (96) (96)
Other comprehensive income for the year, net of tax (74) (74) 856 856
Total comprehensive income for the year 7,891 7,869 4,402 4,402
The notes on pages 39 to 85 are an integral part of these financial statements. The Independent Auditors' report is on page 31.
Q Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CONSOLIDATED AND SEPARATE STATEMENT OF CHANGES IN EQUITY
Share Available based Share Share for sale payment Revaluation Retained capital premium reserve reserve reserve earnings Total GROUP MKm MKm MKm MKm MKm MKm MKm 2012 Balance at 1 January 213 854 31 1 17 2,381 8,805 12,401 Transaction with owners of the company Dividends paid - - (4,000) (4,000) Share ownership scheme - - 141 - - 141
Total transaction with owners of the company - - - 141 - (4,000) (3,859)
Other comprehensive income Net revaluation Surplus - - Change in fair value of available-for-sale Financial assets net of tax - - (74) - - - (74) Total other comprehensive income - - (74) - - - (74) Profit for the year - - 7,965 7,965 Total comprehensive income for the year - - (74) - - 7,965 7,891
Balance at 31 December 213 854 (43) 258 2,381 12,770 16,433
Share Available based Share Share for sale payment Revaluation Retained capital premium reserve reserve reserve earnings Total COMPANY MKm MKm MKm MKm MKm MKm MKm 2012 Balance at 1 January 213 854 31 1 17 2,381 8,805 12,401 Transaction with owners of the company Dividends paid - - (4,000) (4,000) Share ownership scheme - - - 141 - - 141
Total transaction with owners of the company - - - 141 - (4,000) (3,859)
Other comprehensive income Net revaluation Surplus - - - - - Change in fair value of available-for-sale Financial assets net of tax - - (74) - - - (74) Total other comprehensive income - - (74) - - - (74) Profit for the year - - 7,943 7,943 Total comprehensive income for the year - - (74) - - 7,943 7,869
Balance at 31 December 213 854 (43) 258 2,381 12,748 16,411
The notes on pages 39 to 85 are an integral part of these financial statements. The Independent Auditors' report is on page 31.
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
CONSOLIDATED AND SEPARATE STATEMENT OF CHANGES IN EQUITY
Share Available based
Share Share for sale payment Revaluation Retained capital premium reserve reserve reserve earnings Total GROUP MKm MKm MKm MKm MKm MKm MKm dU II — Balance at 1 January 213 854 127 114 1,429 6,940 9,677 Transaction with owners of the company
Dividends paid - - - - - (1,681) (1,681)
Share ownership scheme - - - 3 - - 3
Total transaction with owners of the company - - - | 3 - (1,681) (1,678)
Other comprehensive income
Net revaluation Surplus - - - - 952 - 952 Change in fair value of available-for-sale Financial assets net of tax - (96) - - - (96) Total other comprehensive income - - (96) - 952 - 856 Profit for the year - - - - - 3,546 3,546
Total comprehensive income for the year - - (96) - 952 3,546 4,402
Balance at 31 December 213 854 (31) 117 2,381 8,805 12,401
Share Available based Share Share for sale payment Revaluation Retained capital premium reserve reserve reserve earnings Total COMPANY MKm MKm MKm MKm MKm MKm MKm 2011 Balance at 1 January 213 854 127 114 1,429 6,940 9,677 Transaction with owners of the company Dividends paid - - (1,681) (1,681) Share ownership scheme - - - 3 - - 3
Total transaction with owners of the company - - - 3 - (1,681) (1,678)
Other comprehensive income
Net revaluation Surplus - - - - 952 - 952 Change in fair value of available-for-sale Financial assets net of tax - - (96) - - - (96) Total other comprehensive income - - (96) - 952 - 856 Profit for the year - - - - - 3,546 3,546 Total comprehensive income for the year - - (96) - 952 3,546 4,402
Balance at 31 December 213 854 (31) 117 2,381 8,805 12,401
The notes on pages 39 to 85 are an integral part of these financial statements. The Independent Auditors' report is on page 31. e Standard Bank Limited Annual Report for the year ended 31 December 2012
CONSOLIDATED AND SEPARATE STATEMENT OF CASH FLOWS
Group Company Group Company 2012 2012 2011 2011 Note MKm MKm MKm MKm
Cash flows from operating activities:
Interest received 11,062 11,062 6,005 6,005 Interest paid (2,448) (2,448) (825) (825) Fee and commission receipts 25 3,754 3,754 2,302 2,302 Trading income receipts 26,27 9,333 9,301 4,237 4,237 Recoveries from impairment losses 160 160 102 102 Payments to employees and suppliers (9,366) (9,366) (5,431) (5,431)
Cash flows from operating activities before changes in operating assets and liabilities 12,495 12,463 6,390 6,390
Changes in operating assets and liabilities:
Loans and advances (11,499) (11,499) (14,209) (14,209) Liquidity reserve requirements 36 (5,556) (5,556) (2,010) (2,010) Treasury bills (1,979) (1,979) (2,550) (2,550) Other investments 2,784 2,784 (1,924) (1,924) Other assets (2,368) (2,379) (1,239) (1,239) Deposits from customers 27,015 27,015 15,341 15,341 Deposits and loans from banks 7,497 7,497 (61) (61) Other liabilities 3,280 3,279 1,893 1,893 Net cash from operating activities before income tax 31,669 31,625 1,631 1,631 Income tax paid (3,219) (3,209) (1,340) (1,340)
Net cash from operating activities 28,450 28,416 291 291
Cash flows to investing activities
Investment in subsidiary 13 (48) (52) Purchase of property and equipment 15 (1,613) (1,613) (2,415) (2,415) Proceeds from sale of property and equipment 6 6 315 315 Net cash used in investing activities (1,607) (1,655) (2,100) (2,152)
Cash flows to financing activities
Dividends paid (4,000) (4,000 (1,681) (1,681)
Net increase/Cdecrease) in cash and cash equivalents 22,843 22,761 (3,490) (3,542) Cash and cash equivalents at 1 January 8,124 8,072 11,614 11,614
Cash and cash equivalents at 31 December 36 30,967 30,833 8,124 8,072
Additional statutory requirements
Net movement in working capital 9,353 9,231 2,724 2,724
The notes on pages 39 to 85 are an integral part of these financial statements. The Independent Auditors' report is on page 31. Q Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
1. Reporting entity (d) Use of estimates and judgements The preparation of consolidated and separate financial state- Standard Bank Limited is a company domiciled in Malawi. The ments in conformity with IFRS requires the use of address of the Group's registered office is Standard Bank Cen- accounting estimates. It also requires management to exer- tre, African Unity Avenue, P 0 Box 30380, Lilongwe 3, Malawi. cise its judgement in the application of policies and reported The Group is primarily involved in investment, corporate and retail amounts in assets and liabilities, income and expenses. The banking, and in providing asset management services. The con- estimates and associated assumptions are based on histori- solidated and separate financial statements comprise the Group cal experience and various other factors that are believed to and its subsidiary, Standard Bank Bureau de Change Limited, be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying (collectively known as The Group). When reference is made to values of assets and liabilities that are not readily apparent the Group in the accounting policies, it should be interpreted as from other sources. Actual results may differ from these es- referring to the company where the context requires, and unless timates. otherwise noted.
General Information The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are rec- Standard Bank Limited provides retail and corporate banking ser- ognised in the period in which the estimate is revised if the vices through its 25 (201 1: 25) service centres located across revision affects only that period or in the period of the revi- Malawi. The Company is listed on the Malawi Stock Exchange. sion and future periods if the revision affects both current and future periods. The Group's ultimate parent company is Standard Bank Group Limited, which is a limited liability company incorporated in South Judgements made by management in the application of the Africa and listed on the Johannesburg Securities Exchange with a IFRSs that have significant effect on the consolidated and secondary listing on the Namibian Stock Exchange. separate financial statements and estimates on the amounts recognised are discussed in Note 5. Standard Bank Bureau de Change Limited is a 100% owned sub- sidiary of Standard Bank Limited whose line of business is foreign exchange trading. 3. Significant accounting policie
The principal accounting policies adopted in the preparation 2. Basis of preparation of these consolidated and separate financial statements are set out below. These policies have been consistently applied (a) Statement of compliance to all the years presented except as explained in note 2(e) These consolidated and separate financial statements have which addresses changes in accounting policies. been prepared in accordance with International Financial Reporting Standards (IFRS) published by the International (a) Basis of consolidation Accounting Standards Board (IASB) that were relevant to its The consolidated financial statements comprise the Bank operations and effective for accounting periods beginning on and its subsidiary, Standard Bank Bureau de Change Limited, 1 January 2012. These consolidated and separate financial which is controlled by the Bank. Under the Malawi Compa- statements have also been prepared in accordance with the nies Act, 1984, control is presumed to exist where a com- provisions of Malawi Companies Act, 1984. pany holds more than one half of the nominal share capital directly or indirectly, or the Group can appoint or prevent (b) Basis of measurement the appointment of not less than half of the directors of the subsidiary company. Under IAS 27, Consolidated and Sepa- The consolidated and separate financial statements have rate Financial Statements, control exists when an entity has been prepared on the historical cost basis except for the the power to govern the financial and operating policies of following: another entity so as to benefit from its activities. The con- investments held for trading are measured at fair value; solidated and separate financial statements of subsidiaries derivative financial instruments are measured at fair are included in the consolidated and separate financial state- value; ments from the date that control commences until the date financial instruments at fair value through profit or loss that control ceases. The financial statements have been pre- are measured at fair value; pared using uniform accounting policies for like transactions available-for-sale financial assets are measured at fair and other events in similar circumstances. value; and property is measured at revalued amounts. Transactions eliminated on consolidation (c) Functional and presentation currency Intra-company balances and transactions and any unrealised These consolidated and separate financial statements are income and expenses arising from intra-company transac- presented in Malawi Kwacha, which is the Company's func- tions are eliminated in preparing the consolidated and sepa- rate financial statements. Unrealized losses are eliminated in tional currency. Except as indicated, financial information the same way as unrealized gains, but only to the extent that presented in Malawi Kwacha has been rounded to the near- there is no evidence of impairment. est million.
(b) Foreign currency transactions Transactions in foreign currencies during the year are con- verted into Malawi Kwacha at rates ruling at the transaction e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
dates. Monetary assets and liabilities at the reporting date, Cash and cash equivalents are measured at amortized cost in which are expressed in foreign currencies, are translated into the statement of financial position. Malawi Kwacha at rates ruling at that date. The resulting differences from translation are recognised in the profit or (e) Trading assets and trading liabilities loss in the year in which they arise. Non-monetary assets and Trading assets and liabilities are those assets and liabilities liabilities that are denominated in foreign currencies that are that the Group acquires or incurs principally for the purpose measured at fair value are translated into the functional cur- of selling or repurchasing in the near term, or holds as part rency at the spot exchange rate at the date that the fair value of a portfolio that is managed together for short-term profit was determined. On retranslation, the resulting differences or position taking. are recognised in profit or loss. Trading assets and trading liabilities are initially recognised (c) Financial assets and financial liabilities and subsequently measured at fair value in the statement of financial position with transaction costs taken directly to (i) Recognition profit or loss. All changes in fair value are recognised as part A financial asset or financial liability is measured initially at of net trading income in profit or loss. Trading assets and li- fair value plus, for an item not at fair value through profit abilities are not re-classified subsequent to their initial recog- or loss, transaction costs that are directly attributable to its nition, except that non-derivative trading assets, other than acquisition or issue. The Group initially recognises loans and those designated at fair value through profit or loss upon advances, deposits, debt securities issued and subordinated initial recognition, may be reclassified out of the fair value liabilities on the date that they are originated. All other fi- through profit or loss (i.e. trading category) if they are no nancial assets and liabilities (including assets and liabilities longer held for the purpose of being sold or repurchased in designated at fair value through profit or loss) are initially the near term and the following terms are met: recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. If the financial asset would have met the definition of loans and receivables (if the financial asset had not been (ii) Derecognition required to be classified as held for trading at initial rec- The Group derecognises a financial asset when the con- ognition), then it may be reclassified if the Group has the tractual rights to the cash flows from the asset expire, or intention and ability to hold the financial asset for the foreseeable future or until maturity. it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially If the financial asset would not have met the definition all risks and rewards of ownership of the financial asset are of loans and receivables, then it may be classified out of transferred or in which the Group neither transfers nor re- the trading category only in 'rare circumstances'. tains substantantially all risks and rewards of ownership and it does not retain control of the financial assets. Any interest in a transferred asset that is created or retained by the Group (f) Treasury bills, bonds and investment securities is recognised as a separate asset or liability. The Group classifies its treasury bills; bonds and investment securities into the following three categories: held for trad- ing, held-to-maturity and available-for-sale assets. Financial On derecognition of a financial asset, the difference between assets that the Group holds for short-term profit taking are the carrying amount of the asset and the sum of the con- classified as assets held for trading. Financial assets with fixed sideration received and any cumulative gain or loss that has maturity where management has both the intent and the been recognised in other comprehensive income is recog- ability to hold to maturity are classified as held-to-maturity. nised in profit or loss. Financial assets intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity The Group derecognises a financial liability when its contrac- or changes in interest rates, exchange rates or equity prices tual obligations are discharged or cancelled or expire. are classified as available-for-sale. Management determines the appropriate classification of its investments at the time (iii) Offsetting of the purchase. All financial assets are initially recognised at Financial assets and financial liabilities are offset and the fair value (plus, for an item not at fair value through profit or net amount presented in the statement of financial position loss, any directly attributable transaction costs). when, and only when, the Group has a legal right to set off the recognised amounts and it intends either to settle on a Subsequent to initial recognition held-for-trading assets are net basis or to realise the asset and settle the liability simul- measured at fair value. All related realised and unrealised taneously. gains and losses arising from the change in fair value are in- cluded in the profit or loss. Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and losses arising from a Financial assets classified as held-to-maturity are carried at group of similar transactions such as in the Group's trading amortised cost using the effective interest method, less any activities. impairment losses.
(d) Cash and cash equivalents Available-for-sale financial assets are subsequently meas- ured at fair value. Any unrealised gains and losses arising For the purposes of the statement of cash flows, cash and from changes in the fair values are recognised in other com- cash equivalents comprise balances with less than three prehensive income. Foreign exchange gains and losses on months' maturity from the date of acquisition, including cash available-for-sale monetary items are recognised in profit or and non-restricted balances with central banks, treasury bills loss. Interest income is recognised in profit or loss using the and other eligible bills, loans and advances to banks, amounts effective interest method. When assets classified as availa- due from other banks and short-term government securities. ble-for-sale are disposed of or impaired, the related accumu- lated fair value adjustments previously recognised in other Standard Bank Limited Annual Report for the year ended 3 7 December 2012
comprehensive income are reclassified to profit or loss as a amounts due according to the original contractual terms of reclassification adjustment. the loans. The amount of the allowance is the difference be- tween the carrying amount and the present value of expected The fair values of held-for-trading and available-for-sale cash flows, including amounts recoverable from guarantees financial assets are based on quoted bid prices or amounts and collateral, discounted at the original effective interest derived from cash flow models. Fair values for unlisted equity rate of loans. securities are estimated using applicable price/ earnings or price/ cash flow ratios refined to reflect the specific circum- A general allowance for loan impairment is established to cov- stances of the issuer. er losses that are judged to be present in the lending portfolio at the reporting date, but which have not been specifically Unquoted equity securities for which fair values cannot be identified as such. This allowance is based on the directors' measured reliably are measured at cost less any impairment assessment of the latent risk of default known to be present losses. in the portfolio of the Group's advances. The Group considers evidence of impairment at both a specif- A review for objective impairment indicators is carried out at ic asset and collective level. All individually significant finan- each reporting date. If impairment indicators are present; an cial assets are assessed for specific impairment. All significant impairment test is carried out. assets found not to be specifically impaired are then collec- tively assessed for any impairment that has been incurred but When a decline in the fair value of an available-for-sale finan- not yet identified. Financial assets that are not individually cial asset has previously been recognised in other compre- significant are then collectively assessed for impairment by hensive income and there is objective evidence that the asset grouping together financial assets (carried at amortised cost) is impaired, the cumulative loss that had been recognised in with similar risk characteristics. other comprehensive income is transferred to profit or loss as reclassification adjustment. When a loan is deemed uncollectible, it is written off and rec- ognised in profit or loss. Subsequent recoveries are recog- Impairment losses in respect of financial assets are measured nised in profit or loss. at amortised cost and are calculated as the difference be- tween its carrying amount and the present value of estimated If the amount of the impairment subsequently decreases due future cash flows discounted at the original effective inter- to an event occurring after the write-down, the release of the est rate. Impairment losses are recognised in profit or loss. allowance is recognised in profit or loss. Impairment losses are reversed through profit or loss if the subsequent increase in the financial asset amount can be re- (h) Property and equipment lated objectively to an event occurring after the impairment loss was recognised. (i) Recognition and measurement All property and equipment is initially recorded at cost. Impairment losses in respect of an investment in an equity Buildings and freehold land are subsequently carried at re- instrument classified as available-for-sale are not reversed valued amount, being its fair value, based on valuations by through the profit or loss but recognised in other compre- external independent valuers, less subsequent accumulated hensive income. If the fair value of a debt instrument classi- depreciation, and subsequent accumulated impairment loss- fied as available-for- sale increases and the increase can be es. All other property and equipment is stated at historical objectively related to an event occurring after the impairment cost less accumulated depreciation and accumulated impair- loss was recognised in the profit or loss, the impairment loss ment losses. is reversed, with the amount of the reversal recognised in the profit or loss. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed Interest earned on financial assets classified as held-to-ma- assets includes the cost of materials and direct labour plus turity or available-for-sale is recognised as interest income. any other cost directly attributable to bringing the asset to a Dividends receivable on held-to-maturity or available-for-sale working condition for its intended use. financial assets are included separately in dividend income when a dividend is declared. Interest earned and dividends Increases in the carrying amount arising on revaluation are received on financial assets classified as held-for-trading are recognised in other comprehensive income and accumulated included in trading income. in equity under the heading revaluation reserve. Decreases that offset previous increases of the same asset are recog- (g) Loans and advances nised in other comprehensive income and charged against the valuation reserve in equity, all other decreases are charged to Loans and advances are non-derivative financial assets with profit or loss. The revaluation reserve is a non-distributable fixed or determinable payments that are not quoted in an reserve and therefore not available for distribution as divi- active market and that the Group does not intend to sell im- dends. mediately or in the short term. Loans and advances are rec- ognised when cash is advanced to borrowers. Loans and ad- (ii) Subsequent costs vances are initially recognised at fair value (plus any directly The cost of replacing part of an item of property or equip- attributable transaction costs). Subsequent to initial recog- ment is recognised in the carrying amount of the item if it is nition, loans and advances are measured at amortised cost, probable that the future economic benefits embodied within using the effective interest method. the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of property and Allowance for loan impairment is established if there is ob- equipment are recognised in profit or loss as incurred. jective evidence that the Group will not be able to collect all o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
(iii) Depreciation Subsequent expenditure on software is capitalised only if Depreciation is calculated on the straight line basis to write it increases the future economic benefits embodied in the down the carrying value or the revalued amounts of each as- specific asset to which it relates. All other expenditure is ex- set, to its residual value over its estimated useful life. The pensed as it is incurred. following are the estimated useful lives for the current and comparative periods: Amortisation is recognised in profit or loss on a straight line basis over the estimated useful life of the software, from the Buildings 13-40 years date it is available for use. The estimated useful life of soft- Capitalised leased assets 5 years ware is between three to five years for the current and com- Fixtures, fittings and equipment 3-13 years parative periods. Motor vehicles and computer equipment 5 years Freehold land is not depreciated as it is deemed to have an The carrying amount of intangible assets, useful lives and indefinite life. residual values are reviewed at each reporting date to de- termine whether there is any indication of impairment. If any Capitalised leased assets are depreciated over the shorter of such indication exists then the asset's recoverable amount the lease term and their useful lives, except where it is rea- is estimated. An impairment loss is recognised if the carry- sonably certain that the Group will obtain ownership at the ing amount exceeds its recoverable amount. Intangible assets end of the lease term, in which case the period of expected that are not yet available for use are tested for impairment useful life of the asset. on an annual basis.
Where parts of an item of property and equipment have dif- (k) Leases ferent useful lives, they are accounted for as separate items of property and equipment. (i) Finance lease Lessee Depreciation methods, useful lives and residual values of Leases where the Group assumes substantially all the ben- property and equipment are reviewed annually at each re- efits and risks of ownership are classified as finance leases. porting date. Gains and losses on disposal of property and Finance leases are capitalised at the lower of the fair value equipment are determined by comparing the proceeds from of the leased asset and the present value of the minimum disposal with the carrying amount of the item of property lease payments. Subsequent to initial recognition, the asset and equipment and are recognised in other income/other is accounted for in accordance with the accounting policy ap- expense in profit or loss. On disposal of revalued assets, plicable to the asset. Lease payments are separated using the amounts in the revaluation reserve relating to that asset are effective interest method to identify the finance cost, which transferred to retained earnings. is charged as an expense over the lease period and the capital repayment which reduces the liability. (i) Work in progress Work in progress represents costs incurred on capital projects Lessor relating to refurbishment of the Group's branch network. It When assets are held subject to a finance lease, the present is measured at cost accumulated to the reporting date. Costs value of the lease payments is recognised as a receivable at include all expenditure related directly to the specific projects an amount equal to the net investment in the lease. The dif- and an allocation of fixed and variable overheads incurred in ference between the gross receivable and the present value normal operating capacity. of the receivable is recognised as unearned finance income. Finance income is recognised over the term of the lease using Work in progress is presented under property and equipment the effective interest method (before tax), which reflects a in the statement of financial position and is transferred to constant periodic rate of return. Lease payments are applied respective class of assets upon completion of the projects. against the gross investment in the lease to reduce both the principal and the unearned finance income. (j) Intangible assets Software acquired by the Group is stated at cost less accumu- (ii) Operating lease lated amortisation and accumulated impairment losses. Lessee Leases of assets are classified as operating leases if the lessor Expenditure on internally developed software is recognised effectively retains substantially all the risks and benefits of as an asset when: ownership. Payments made under operating leases are recog- The Group is able to demonstrate its intention and ability to nised in profit or loss on a straight-line basis over the period complete the development and use the software in a manner of the lease. that will generate future economic benefits; The Group can reliably measure the costs to complete When an operating lease is terminated before the lease pe- the development; riod has expired, any payment required to be made to the It is technically and commercially feasible; and lessor by way of penalty is recognised as an expense in the There are sufficient resources to complete development period in which the termination takes place. and to use the asset. (I) Provisions The capitalised cost of internally developed software includes Provisions are recognised when the Group has a present legal all costs directly attributable to developing the software, and or constructive obligation as a result of past events and it is are amortised over its useful life. Internally developed soft- probable that an outflow of resources embodying economic ware is stated at cost less accumulated amortisation and ac- benefits will be required to settle the obligation and a reli- cumulated impairment losses. able estimate of the amount of the obligation can be made. If such an estimate cannot be made, a contingent liability is disclosed. e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
When the effect of discounting is material, provisions are all the contractual terms of the financial instrument but does discounted using a pre-tax discount rate that reflects current not consider future credit losses. The calculation includes all market assessments of the time value of money and, where fees and points paid or received between parties to the con- appropriate, the risks specific to the liability. tract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. A provision for onerous contracts is recognised when the ex- pected benefits to be derived by the Group from the contract Interest income includes coupons earned on fixed income in- are lower than the unavoidable cost of meeting its obliga- vestments and trading securities loans and receivables, and tions under the contract. The provision is measured at the accrued discount and premium on treasury bills and other present value of the lower of the expected cost of termi- discounted instruments. When loans and advances become nating the contract and the expected net cost of continuing doubtful of collection, they are written down to their recov- with the contract. Before the provision is established, the erable amounts and interest income is thereafter recognised Group recognises any impairment loss on the assets associ- based on the rate of interest that was used to discount the ated with the contract. future cash flows for the purpose of measuring the recover- able amount. (m) Income tax expense Income tax for the year comprises current and deferred tax. Interest income and expense presented in the profit or loss Income tax is recognised in the profit or loss except to the include: extent that it relates to items recognised directly in equity or Interest on financial assets and liabilities at amortised in other comprehensive income in which case it is recognised cost on an effective interest basis. in equity or other comprehensive income. Interest on interest bearing available-for-sale invest- ment securities on an effective interest basis. Current tax is the expected tax payable on the taxable in- come for the year, using tax rates enacted or substantively Interest income and expense on all trading assets and liabili- enacted at the reporting date, and any adjustment to tax ties are considered to be incidental to the Group's trading payable in respect of previous years. operations and presented together with the changes in the fair value of trading assets and in net trading income. Deferred tax is recognised in respect of temporary differenc- es arising between the tax bases of assets and liabilities and Fair value changes on other financial assets and financial li- their carrying values for financial reporting purposes. The abilities carried at fair value through profit or loss, are pre- following temporary differences are not provided for: initial sented in net income on other financial instruments at fair recognition of goodwill and the initial recognition of assets value through profit and loss in the income statement. or liabilities in a transaction that is not a business combina- tion and that affects neither accounting nor taxable profits. (p) Employee benefits Tax rates enacted or substantively enacted at the reporting Employee entitlements to gratuity and long service awards date are used to determine deferred tax, taking considera- are recognised as they accrue to employees. A liability is tion of the expected manner of recovery or realisation or set- recognised for such entitlements as a result of services ren- tlement of the carrying amount of the assets and liabilities. dered by employees up to the reporting date.
Deferred tax assets are recognised only to the extent that it (i) Short-term employee benefits is probable that future taxable profits will be available against Short term employee benefit obligations are measured on an which temporary differences can be utilised. Deferred tax as- undiscounted basis and are expensed as the related service sets are reduced to the extent that it is no longer probable is provided. that the related deferred tax benefit will be realised. An accrual is recognised for the amount expected to be paid Additional income taxes that arise from the distribution of under short-term cash bonus if the Group has a present dividend are recognised at the same time as the liability to legal or constructive obligation to pay this amount as a result pay the related dividend is recognised. of past service provided by the employee and the obligation can be measured reliably. (n) Dividends Dividends are recognised in the period in which they are de- (ii) Leave pay liability clared. Dividends declared after reporting date are disclosed Employee benefits in the form of annual leave entitlements in the dividends note. are provided for when they accrue to employees with refer- ence to services rendered up to the reporting date. (o) Interest income and expense Interest income and expense are recognised in the profit or (iii) Termination benefits loss for all instruments measured at amortised cost using the Termination benefits are recognised as an expense when the effective interest method. Group is demonstratably committed, without realistic pos- sibility of withdrawal, to a formal detailed plan to terminate The effective interest method is a method of calculating the employment before or at the normal retirement date. Termi- amortised cost of a financial asset or financial liability and of nation benefits for voluntary redundancies are recognised if allocating the interest income or interest expense over the the Group has made an offer encouraging voluntary retire- relevant period. The effective interest rate is the rate that ments, it is probable that the offer will be accepted, and the exactly discounts estimated future cash flows through the number of acceptances can be estimated reliably. expected life of the financial instrument or, when appropri- ate, a shorter period to the carrying amount of the financial (iv) Retirement benefit obligations asset or financial liability. When calculating the effective in- The Group operates a defined contribution retirement ben- terest rate the Group estimates future cash flows considering efit scheme for employees. A defined contribution plan is a Standard Bank Limited Annual Report for the year ended 31 December 2012
plan under which the entity pays fixed contributions to a sep- service is provided. arate entity and will have no legal or constructive obligations to pay further amounts. The assets of the schemes are held The same principle is applied for wealth management, finan- in separate trustee administered funds, which are funded by cial planning and custody services that are continuously pro- contributions from both the Group and employees. vided over an extended period of time. Performance linked fees or fee components are recognised when the perfor- The Group's contributions to the defined contribution mance criteria are fulfilled. scheme are recognised in profit or loss in the year to which they relate. Other fees and commission expense relates mainly to trans- actions and service fees which are expensed as the services (v) Share-based payment transactions are received. The fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in (s) Net trading income equity, over the period in which the employees become un- Net trading income includes gains and losses from spot and conditionally entitled to the options. The amount recognised forward contracts, options, futures, and foreign exchange as an expense is adjusted to reflect the number of share op- differences and gains and losses on trading assets and liabili- tions for which the related service and non-market perfor- ties. Interest rate instruments include the results of making mance vesting conditions are expected to be met, such that markets in instruments in government securities, corporate the amount ultimately recognised as an expense is based on debt securities, money market instruments, interest rate and the number of share options that do meet the related service currency swaps, options and other derivatives. and non-market performance conditions at the vesting date. Equities trading income includes the results of making mar- The fair value of employee share options is measured using kets globally in equity securities and equity derivatives such a binomial lattice model. The fair value of share appreciation as swaps, options, futures and forward contracts. rights is measured using the Black-Scholes formula. Meas- urement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based (t) Financial guarantees on weighted average historic volatility adjusted for changes Financial guarantee contracts are contracts that require the expected due to publicly available information), weighted issuer (i.e. the Group) to make specified payments to reim- average expected life of the instruments (base on historical burse the holder for a loss it incurs because a specified debtor experience and general option holder behaviour), expected fails to make payments when due, in accordance with the dividends, and the risk-free interest rate (based on govern- original or modified terms of a debt instrument. Such finan- ment bonds). Service and non-market performance condi- cial guarantees are given to banks, financial institutions and tions attached to the transactions are not taken into account other bodies on behalf of customers to secure loans, over- in determining fair value. drafts and other banking facilities. Financial guarantees are included within other liabilities. The employee share options are valued by independent ex- perts at group level and the values relating to their employ- Financial guarantees are initially recognised at fair value on ees are communicated to the group subsidiaries. the date the guarantee is given and the initial fair value is am- ortised over the life of the financial guarantee. The financial (q) Acceptances, guarantees and letters of credit guarantee is subsequently carried at the higher of this amor- Acceptances, guarantees and letters of credit are accounted tised amount and the present value of any expected payment for as off-statement of financial position transactions and when a payment under the guarantee has become probable. disclosed as contingent liabilities, unless it is probable that These estimates are determined based on experience of simi- the Group will be required to make payments under these lar transactions and history of past losses, supplemented by instruments, in which case they are recognised as provisions. the judgment of management.
(r) Fees and commissions "Any increase in the liability relating to guarantees is included Fees and commissions are generally recognised on an accrual in the profit or loss under other operating expenses. basis as the service is provided. Loan commitment fees for loans that are likely to be drawn down are deferred (together (u) Amortised cost measurement with related direct costs) and recognised as an adjustment to The amortised cost of a financial asset or liability is the the effective interest rate on the loan. Loan syndication fees amount at which the financial asset or liability is measured are recognised as revenue when the syndication has been at initial recognition minus principal repayments, plus or mi- completed and the Group has retained no part of the loan nus the cumulative amortisation using the effective interest package for itself or has retained a part at the same effective method of any difference between the initial amount rec- interest rate as the other participants. ognised and the maturity amount, minus any reduction for impairment. Commission and fees arising from negotiating, or participat- ing in the negotiation of a transaction for a third party - such as the arrangement of the acquisition of shares or other se- curities or the purchase or sale of businesses - are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts, usually on a time- proportionate basis. Asset management fees related to in- vestment funds are recognised over the period in which the O Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
(v) Fair value measurement (x) Earnings per share The determination of fair values of financial assets and li- The Group presents basic and diluted earnings per share abilities is based on quoted market prices or dealer price (EPS) data for its ordinary shares. The basic EPS is deter- quotations for financial instruments traded in active markets. mined by dividing the profit or loss attributable to ordinary For all other financial instruments fair value is determined by shareholders of the Group by the weighted average number using valuation techniques. Valuation techniques include net of ordinary shares outstanding during the year. Diluted EPS present value techniques, the discounted cash flow method, is determined by adjusting the profit or loss attributable to comparison to similar instruments for which market observ- ordinary shareholders and the weighted average number of able prices exist and valuation models. For these financial in- ordinary shares outstanding for the effects of all dilutive po- struments, input into models is market observable. tential ordinary shares.
(w) Identification and measurement of impairment of Cy) Determination and presentation of operating financial assets segments At each reporting date the Group assesses whether there The Group determines and presents operating segments is objective evidence that financial assets not carried at fair based on the information that internally is provided to the value through profit or loss are impaired. Financial assets are Group Executive Committee which is the Group's chief op- impaired when objective evidence demonstrates that a loss erating decision maker. An operating segment is a compo- event has occurred after the initial recognition of the asset, nent of the Group that engages in business activities from and that the loss event has an impact on the future cash which it may earn revenues and incur expenses, including flows on the asset that can be estimated reliably such that revenue and expenses that relate to transactions with any of the carrying value is higher than the net realisable value. the Group's other components, whose operating results are reviewed regularly by the Group's Executive Committee to Objective evidence that financial assets (including equity se- make decisions about resource allocation to the segment and curities) are impaired can include default or delinquency by assess its performance and for which discrete information is a borrower, restructuring of a loan or advance by the Group available. on terms that the Group would not otherwise consider, indi- cations that a borrower or issuer will enter bankruptcy, the Cz) New standards and interpretations not yet adopted disappearance of an active market for a security, or other A number of new standards, amendments to standards and observable data relating to Group assets such as adverse interpretations are not yet effective for the year ended 31 changes in the payment status of borrowers or issuers in the December 2012, and have not been applied in preparing Group or economic conditions that correlate with defaults in these financial statements: the Group. IFRS 9 Financial Instruments (2010) and IFRS 9 In assessing collective impairment the Group uses statistical Financial Instruments (2009) modelling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjust- IFRS 9 (2009) introduces new requirements for the classifi- ed for management's judgement as to whether current eco- cation and measurement of financial assets. IFRS 9 (2010) nomic and credit conditions are such that the actual losses introduces additions relating to financial liabilities. The IASB are likely to be greater or less than suggested by historical currently has an active project to make limited amendments modelling. Default rates, loss rates and the expected timing to the classification and measurement requirements of IFRS of future recoveries are regularly benchmarked against actual 9 and add new requirements to address the impairment of outcomes to ensure that they remain appropriate. financial assets and hedge accounting.
Impairment losses on assets measured at amortised cost are The IFRS 9 (2009) requirements represent a significant measured as the difference between the carrying amount of change from the existing requirements in IAS 39 in respect the financial assets and the present value of estimated cash of financial assets. The standard contains two primary flows discounted at the assets' original effective interest measurement categories for financial assets: amortised rate. Losses are recognised in profit or loss and reflected in cost and fair value. A financial asset would be measured at an allowance account against loans and advances. Interest on amortised cost if it is held within a business model whose the impaired asset continues to be recognised through the objective is to hold assets in order to collect contractual cash unwinding of the discount. flows, and the asset's contractual terms give rise on specified dates to cash flows that are solely payments of principal and When a subsequent event causes the amount of impairment interest on the principal outstanding. All other financial assets loss to decrease, the impairment loss is reversed through would be measured at fair value. The standard eliminates the profit or loss. existing IAS 39 categories of held-to-maturity, available- for-sale and loans and receivables. For an investment in an Impairment losses on available-for-sale investment securities equity instrument which is not held for trading, the standard are recognised by transferring the difference between the permits an irrevocable election, on initial recognition, on acquisition cost and current fair value out of equity to profit an individual share-by-share basis, to present all fairvalue or loss less any previously recognised impairment losses. changes from the investment in other comprehensive income. When a subsequent event causes the amount of impairment No amount recognised in other comprehensive income loss on an available-for-sale debt security to decrease, the would ever be reclassified to profit or loss at a later date. impairment loss is reversed through profit or loss. However, dividends on such investments are recognised in profit or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
investment. Investments in equity instruments in respect of arrangements, associates and unconsolidated structured en- which an entity does not elect to present fair value changes tities. It requires the disclosure of information about the na- in other comprehensive income would be measured at fair ture, risks and financial effects of these interests. The Group value with changes in fair value recognised in profit or loss. is currently assessing the disclosure requirements for inter- The standard requires that derivatives embedded in contracts ests in subsidiaries and unconsolidated structured entities in with a host that is a financial asset within the scope of the comparison with the existing disclosures. standard are not separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should These standards are effective for annual periods beginning be measured at amortised cost or fair value. IFRS 9 (2010) on or after 1 January 2013 with early adoption permitted. introduces a new requirement in respect of financial liabilities designated under the fair value option to generally present IFRS 13 Fair value measurement (2011) fair value changes that are attributable to the liability's credit risk in other comprehensive income rather than in profit or IFRS 13 provides a single source of guidance on how fair loss. Apart from this change, IFRS 9(2010) largely carries value is measured, and replaces the fair value measurement forward without substantive amendment the guidance on guidance that is currently dispersed throughout IFRS. Sub- classification and measurement of financial liabilities from ject to limited exceptions, IFRS 1 3 is applied when fair value IAS 39. measurements or disclosures are required or permitted by other IFRSs. The Group is currently reviewing its methodolo- IFRS 9 is effective for annual periods beginning on or after 1 gies for determining fair values (see Note 5). Although many January 2015 with early adoption permitted. The IASB de- of the IFRS 13 disclosure requirements regarding financial cided to consider making limited amendments to IFRS 9 to assets and financial liabilities are already required, the adop- address practice and other issues. The Group has commenced tion of IFRS 13 will require the Group to provide additional the process of evaluating the potential effect of this standard disclosures. These include fair value hierarchy disclosures for but is awaiting finalisation of the limited amendments be- non financial assets/liabilities and disclosures on fair value fore the evaluation can be completed. Given the nature of measurements that are categorised in Level 3. the Group's operations, this standard is expected to have a IFRS 1 3 is effective for annual periods beginning on or after pervasive impact on the Group's financial statements. 1 January 2013 with early adoption permitted.
Amendments to IFRS 7 and IAS 32 on offsetting finan- • IAS 19 Employee Benefits (2011) cial assets and financial liabilities (2011) IAS 19 (2011) changes the definition of short-term and Disclosures - Offsetting Financial Assets and Financial Lia- other long-term employee benefits to clarify the distinction bilities (amendments to IFRS 7) introduces disclosures about between the two. For defined benefit plans, removal of the the impact of netting arrangements on an entity's financial accounting policy choice for recognition of actuarial gains position. The amendments are effective for annual periods and losses is not expected to have any impact on the Group. beginning on or after 1 January 2013 and interim periods within those annual periods. Based on the new disclosure re- IAS 1 9 (2011) is effective for annual periods beginning on or quirements the Group will have to provide information about after 1 January 201 3 with early adoption permitted. what amounts have been offset in the statement of finan- cial position and the nature and extent of rights of set-off under master netting arrangements or similar arrangements. Offsetting Financial Assets and Financial Liabilities (amend- ments to IAS 32) clarify the offsetting criteria in IAS 32 by explaining when an entity currently has a legally enforceable right to set-off and when gross settlement is equivalent to net settlement.
The amendments are effective for annual periods beginning on or after 1 January 2014 and interim periods within those annual periods. Earlier application is permitted. Based on our initial assessment, the Group is not expecting a significant impact from the adoption of the amendments to IAS 32. However, the adoption of the amendments to IFRS 7requires more extensive disclosures about rights of set-off.
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Inter- ests in Other Entities (2011)
IFRS 10 introduces a single control model to determine whether an investee should be consolidated. As a result, the Group may need to change its consolidation conclusion in respect of its investees, which may lead to changes in the current accounting for these investees (see Notes 3(a)).IFRS 11 is not expected to have any impact on the Group because the Group does not have interests in joint ventures. IFRS 1 2 brings together into a single standard all the disclosure re- quirements about an entity's interests in subsidiaries, joint G Standard Bank Limited Annual Report for the year ended 3 7 December 2012
4. Risk Management
(a) Introduction and overview
The Group has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk
The Group also has exposure to operational and compliance risks.
This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.
Risk measurement and control
The effective management of risk is critical to earnings and statement of financial position growth within Standard Bank Group where the culture encourages sound commercial decision making which adequately balances risk and reward.
Risk Management approach
The Group has governance standards for all major risk types. All standards are applied consistently across the Group and are approved by the board.
The standards form an integral part of the Group's governance infrastructure, reflecting the expectations and requirements of the board in respect of key areas of control across the Group. The standards ensure alignment and consistency in the manner that major risk types across the Group are identified, measured, managed, controlled, and reported.
The Group's Internal Audit Department independently audits the adequacy and effectiveness of the Group's risk management, control and governance processes. The head of internal audit department provides independent assurance to the audit committee and has unrestricted access to the chief executive officer and the chairman of the board.
Risk appetite and risk tolerance
Risk appetite is the quantum of risk the Group is willing to accept in the normal course of business in pursuit of its strategic and financial objectives. Risk taken within "appetite" may give rise to expected losses, but these should be covered by expected earnings.
Risk tolerance is an assessment of the maximum risk the Group is willing to sustain for short periods of time. It emphasises the "downside" of the risk distribution, and the Group's capacity to survive unexpected losses. The capacity to take unexpected losses depends on having sufficient capital and liquidity available to avoid insolvency. Risk tolerance typically provides a useful upper boundary for the Group's risk appetite.
The Group's board of directors has ultimate responsibility for risk management, which includes evaluating key risk areas and ensuring the process for risk management and systems of internal control are implemented. It has delegated its risk-related responsibilities primarily to three committees, the risk management committee, the audit committee and the credit committee, with each committee focusing on different aspects of risk management.
Risk Management
Naturally, the Group faces a number of risks when conducting its business which it may choose to take, transfer or mitigate as described in the notes to the financial statements from 4(b) to 4(h).
(b) Credit risk
Credit risk is the risk that a loss will be incurred if counterparty to a credit transaction does not fulfil its contractual obligations in a timely manner.
The Group's Personal and Business Banking and Corporate and Investment Banking credit policies cover the entire credit risk manage- ment process within the Group. The polices are more stringent than the Banking Act of Malawi and Reserve Bank of Malawi (RBM) Directives. It is subject to review annually and requires the approval of the Group's Board of Directors and Standard Bank Africa Credit Committee. The policies outline issues pertaining to delegated lending limits, risk concentrations and internal lending constraints, security and legal documentation, risk weightings applied to lending, excesses and irregular accounts reporting and the treatment of non-performing loans.
For risk management purposes, credit risk arising on trading securities is managed independently, but reported as a component of market risk exposure. o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (b) Credit risk (continued)
Management of credit risk
The Board of Directors has delegated the responsibility of the management of credit risk to its Credit Committee. A separate Credit Department, that reports quarterly to the Credit Committee of the Board, is responsible for oversight of the credit risk, including:
Formulating credit policies in consultation with business units, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements. Establishing the authorisation structure for approvals and renewals of credit facilities. Authorisation limits are provided to credit officers and credit committees. Large credit limits require approval by the country Credit Risk Management Committee and the Head of Credit as delegated by the Board. Reviewing and assessing credit risk. The Credit Department assesses all credit exposures and prepares a watch list which includes all those clients which have exceeded their limits or repayments are in arrears. Limit concentration of exposure to counterparts' location and type of customer in relation to the Group loans and advances to customers by carrying a balanced portfolio. Reviewing compliance so that exposure limits remain within the acceptable range. Providing advice, guidance and specialist skills to business units to promote best practice throughout the Group in the manage- ment of credit risk.
Regular audits of business units and credit processes are undertaken by the Internal Audit department. Maximum exposure to credit risk without taking into account any collateral or other credit enhancements The table below shows the maximum exposure to credit risk by class of financial instrument. Financial instruments include financial instruments defined and recognised under IAS 39 Financial Instruments: Recognition and Measurement as well as other financial in- struments not recognised. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting and collateral agreements.
Gross maximum exposure
GROUP COMPANY GROUP COMPANY 2012 2012 2011 2011 Note MKm MKm MKm MKm
Cash and cash equivalents 8 13,500 13,366 8,541 8,489 Trading assets 9 8,932 8,932 7,683 7,683 Loans and advances to banks and other financial institutions 10 29,153 29,153 4,984 4,984 Personal and Business Banking - Mortgage Lending 11 2,590 2,590 3,372 3,372 - Installment sales and finance leases 11 5,456 5,456 5,036 5,036 - Other loans and advances net of impairments 11 14,997 14,997 9,345 9,345 Corporate and Investment Banking - Corporate lending 11 27,890 27,890 21,681 21,681 - Financial investments 12 3,373 3,373 6,157 6,157
Total recognised financial instruments 105,891 105,757 66,799 66,747
Acceptances and letters of credit 34 5,289 5,289 1,236 1,236 Guarantees and performance bonds 34 2,687 2,687 1,106 1,106
Total unrecognised financial instruments 7,976 7,976 2,342 2,342
Total credit risk exposure 113,867 113,733 69,141 69,089
Description of collateral held as security and other credit enhancements, in respect of the exposure above. Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (b) Credit risk (continued)
Description of collateral held as security and other credit enhancements, in respect of the exposure
Group and Group and The Group holds mortgages over property, registered securities and guarantees as Company Company collateral within the following classes: 2012 2011 MKm MKm Personal and Business Banking
- Mortgage Lending 3,920 3,890 - Installment sales and finance leases 4,026 5,036 - Other loans and advances 10,046 9,044
Corporate and Investment Banking
- Corporate lending 23,910 14,578
41,902 32,548
Collateral repossessed Nature of assets
Other 122 54
It is the Group's policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Group does not occupy repossessed properties for business use.
Net exposure to credit risk without taking into account any collateral or other credit enhancements
In respect of certain financial assets, the Group has legally enforceable rights to offset them with financial liabilities. However, in normal circumstances, there would be no intention of settling net, or of realising the financial assets and settling the financial liabilities simultaneously. Consequently, the financial assets are not offset against the respective financial liabilities for financial reporting purposes. However, the exposure to credit risk relating to the respective financial assets is mitigated as follows:
Group At 31 December 2012
Carrying Net exposure Notes amount Offset to credit risk MKm MKm MKm
Cash and cash equivalents 8 13,500 - 13,500 Trading assets 9 8,932 - 8,932 Loans and advances to banks and other financial institutions 10 29,153 29,153 Loans and advances to customers 11 50,933 (899) 50,034
Financial investments 12 3,373 - 3,373
Net exposure to credit risk 105,891 (899) 104,992
Company At 31 December 2012 Carrying Net exposure amount Offset to credit risk Notes MKm MKm MKm
Cash and cash equivalents 8 13,366 - 13,366 Trading assets 9 8,932 - 8,932 Loans and advances to banks and other financial institutions 10 29,153 - 29,153 Loans and advances to customers 11 50,933 (899) 50,034
Financial investments 12 3,373 - 3,373
Net exposure to credit risk 105,757 (899) 104,858 e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) \ (b) Credit risk (continued)
At 31 December 2011 Carrying Net exposure GrouP amount Offset to credit risk MKm MKm MKm
Cash and cash equivalents 8 8,541 - 8,541 Trading assets 9 7,683 - 7,683 Loans and advances to banks and other financial institutions 10 4,984 - 4,984 Loans and advances to customers 11 39,434 (891) 38,543 Financial investments 12 6,157 - 6,157
Net exposure to credit risk 66,799 (891) 65,908
At 31 December 2011
Carrying Net exposure Company amount Offset to credit risk MKm MKm MKm
Cash and cash equivalents 8 8,489 - 8,489 Trading assets 9 7,683 - 7,683 Loans and advances to banks and other financial institutions 10 4,984 - 4,984 Loans and advances to customers 11 39,434 (891) 38,543 Financial investments 12 6,157 - 6,157
Net exposure to credit risk 66,747 (891) 65,856
Credit quality per class of financial assets
The credit quality of financial assets is managed by the Bank using internal credit ratings. The table below shows the credit quality by class of financial asset for credit risk related items, based on the Group's credit rating system.
Performing Loans Non - Performing Loans Group and Company security 2012 Past due against Net but not Sub- impaired Credit quality Note Standard Impaired Standard Doubtful Loss Total loans loans MKm MKm MKm MKm MKm MKm MKm MKm Loans and advances to customers Personal and Business Banking:
- Mortgage Lending 2,122 283 42 143 - 2,590 135 50 - Installment sales and finance leases 3,547 985 248 590 86 5,456 415 509 Other loans and advances 14,080 1,123 556 211 502 16,472 742 527 Corporate and Investment Banking: - Corporate lending 27,866 75 185 238 417 28,781 259 581
Total recognised financial instruments 11 47,615 2,466 1,031 1,182 1,005 53,299 1,551 1,667
@ Standard Bank Limited Annual Report for the year ended 3 7 December 2012
4. Risk management (continued) | (b) Credit risk (continued)
Credit quality per class of financial assets
The credit quality of financial assets is managed by the Group using internal credit ratings. The table below shows the credit quality by class of financial asset for credit risk related items, based on the Group's credit rating system.
Performing Loans Non - Performing Loans
Group and Company security Past due against 2011 Net but not Sub- impaired impaired Credit quality Note Standard Impaired Standard Doubtful Loss Total loans loans MKm MKm MKm MKm MKm MKm MKm MKm Loans and advances to customers Personal and Business Banking - Mortgage Lending 3,028 294 32 15 3 3,372 43 7 Installment sales and finance leases 3,675 885 299 155 22 5,036 246 230 - Other loans and advances 8,563 1,291 417 138 273 10,682 471 357 Corporate and Investment Banking
- Corporate lending 21,300 220 - 161 21,681 - 161
Total recognised financial instruments 11 36,566 2,690 748 308 459 40,771 760 755
The fair value of collateral that the Group holds relating to loans individually determined to be impaired at 31 December 2012 amounts to MK1,469 million (2011: MK760 million). The collateral consists of securities, mortgages over property and guarantees.
The amount of renegotiated loans as at 31 December 2012 was MK2,992 million (2011: MK2, 571 million).
Impaired loans and securities
Impaired loans and securities are loans and securities for which the Group determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan/securities agreements.
Past due but not impaired loans
Loans and securities where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the Group.
Loans with renegotiated terms
Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower's financial position and where the Group has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this category regardless of satisfactory performance after restructuring.
Allowances for impairment
The Group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance established for Groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment.
impairment policy
The Group writes off a loan/security balance (and any related allowances for impairment losses) when Group Credit determines that the loans/securities are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in the borrower/issuer's financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardised loans, charge off decisions generally are based on a product specific past due status. o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (b) Credit risk (continued)
The Group monitors concentrations of credit risk by sector. An analysis of concentrations of credit risk at the reporting Ai shown below: Group and Group and Company Company
Loans and advances 2012 2011 Note MKm MKm Segmental analysis - industry Agriculture 8,116 4,763 Construction 1,315 1,493 Energy 586 145 Finance, real estate and other business services 8,434 9,604 Individuals 12,008 10,655 Manufacturing 10,312 3,785 Mining 51 908 Transport 5,550 6,439 Wholesale 6,927 2,979
11 53,299 40,771
Economic sector risk concentrations within the customer loan portfolio were as follows:
Agriculture 15% 12% Construction 2% 4% Energy 1% 0% Finance, real estate and other business services 16% 23% Individuals 23% 26% Manufacturing 19% 10%
Mining - 2% Transport 10% 16% Wholesale 14% 7%
100% 100%
The risk that counterparties to trading instruments might default on their obligations is monitored on an on-going basis. In monitoring credit risk exposure, consideration is given to trading instruments with a positive fair value and the volatility of the fair value of trading instruments.
To manage the level of credit risk, the Group deals with counterparties of good credit standing, enters into master netting agreements whenever possible, and when appropriate, obtains collateral. Master netting agreements provide for the net settlement of contracts with the same counterparty in the event of default. Standard Bank Limited Annual Report for the year ended 31 December 2012
4. Risk management (continued)
(c) Liquidity risk
Liquidity risk arises from exposure to daily calls on the Group's cash resources. It includes both 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.
Management of liquidity risk
The Group has access to a diverse funding base. Funds are raised mainly from deposits and shareholders. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. The Group strives to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities. The Group continually assesses liquidity risk by identifying and monitoring changes in funding required to meet business objectives. In addition the Group holds a portfolio of liquid assets as part of its liquidity risk management strategy.
The table below analyses financial assets and liabilities into relevant maturity rankings based on the remaining period at 31 December 2012 to the contractual maturity date. All figures are in millions of Malawi Kwacha.
Up to At 31 December 2012 Note 1 month 1 -3 months 3-12 months Over 1 year Total
Group MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 13,500 - - - 13,500 Trading assets 9 167 7,025 1,326 414 8,932
Loans and advances to banks 10 28,210 943 - - 29,153 Net Loans and advances to customers 11 11,841 7,596 9,546 21,950 50,933 Investments securities 12 491 990 1,771 121 3,373
Total assets 54,209 16,554 12,643 22,485 105,891
Balances due to other banks 18 7,858 - - _ 7,858 Deposits from customers 19 82,493 1,046 1,170 8 84,717 Total liabilities 90,351 1,046 1,170 8 92,575
Liquidity gap (36,142) 15,508 11,473 22,477 13,316
Up to At 31 December 2012 Note 1 month 1 -3 months 3-12 months Over 1 year Total
Company MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 13,366 - - - 13,366 Trading assets 9 167 7,025 1,326 414 8,932
Loans and advances to banks 10 28,210 943 - - 29,153 Net Loans and advances to customers 11 11,841 7,596 9,546 21,950 50,933 Investments securities 12 491 990 1,771 121 3,373
Total assets 54,075 16,554 12,643 22,485 105,757
Balances due to other banks 18 7,858 - - • - 7,858 Deposits from customers 19 82,493 1,046 1,170 8 84,717 Total liabilities 90,351 1,046 1,170 8 92,575
Liquidity gap (36,276) 15,508 11,473 22,477 13,182 @ Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (c) Liquidity risk (continued)
Up to At 31 December 2011 Note 1 month 1-3 months 3-12 months Over 1 year Total
Group MKm MKm MKm MKm MKm Assets Cash and cash equivalents 8 8,541 - - - 8,541 Trading assets 9 229 1,981 5,088 385 7,683 Loans and advances to banks 10 4,984 - - - 4,984 Net Loans and advances to customers 11 17,508 3,145 7,453 11,328 39,434 Investments securities 12 624 4,456 294 783 6,157
Total assets 31,886 9,582 12,835 12,496 66,799
Balances due to other banks 18 361 - - - 361 Deposits from customers 19 52,672 4,572 364 94 57,702
Total liabilities 53,033 4,572 364 94 58,063
Liquidity gap (21,147) 5,010 12,471 12,402 8,736
Up to At 31 December 2011 Note 1 month 1-3 months 3-12 months Over 1 year Total Company MKm MKm MKm MKm MKm Assets Cash and cash equivalents 8 8,489 - - - 8,489 Trading assets 9 229 1,981 5,088 385 7,683 Loans and advances to banks 10 4,984 - - - 4,984 Net Loans and advances to customers 1 1 17,508 3,145 7,453 11,328 39,434 Investments securities 12 624 4,456 294 783 6,157
Total assets 31,834 9,582 12,835 12,496 66,747
Balances due to other banks 18 361 - - - 3.61 Deposits from customers 19 52,672 4,572 364 94 57,702
Total liabilities 53,033 4,572 364 94 58,063
Liquiditygap (21,199) 5,010 12,471 12,402 8,684
The contractual liquidity gap shows the mismatch before any adjustments are made for product and customer behavioural assumptions. The Group's asset liability committee manages this mismatch by setting guidelines and limits for anticipated liquidity gaps and monitors these gaps daily. The committee reviews the product and customer behavioural assumptions when there is indication that there is a shift in one or more of the variables.
e Standard Bank Limited Annual Report for the year ended 31 December 2012
4. Risk management (continued)! (c) Liquidity risk (continued)
Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarises the remaining contractual maturities of the Group's financial assets and liabilities based on undiscounted cash flows:
Maturing Maturing Maturing after 1 after 6 after 12 Maturing month but months but months but 2012 Redeemable within 1 within 6 within 12 within 5 Group on demand month months months years Total Financial assets MKm MKm MKm MKm MKm MKm Cash and balances with Banks 13,500 13,500 Trading assets 9 167 7,025 1,326 414 8,932 Loans and advances to banks 10 19,107 9,103 943 29,153 Loans and advances to customers 11 9,922 1,919 10,491 6,651 21,950 50,933 Investments securities 12 491 990 1,771 121 3,373
Financial liabilities Deposits and loans from banks 18 (7,858) - (7,858) Deposits from customers 19 (80,207) (2,286) (1,326) (890) (8) (84,717)
Total recognised financial instruments (45,536) 9,394 18,123 8,858 22,477 13,316
Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarises the remaining contractual maturities of the Group's financial assets and liabilities based on undiscounted cash flows:
Maturing Maturing Maturing after 1 after 6 after 12 Maturing month but months but months 2012 Redeemable within 1 within 6 within 12 but within month Company on demand months months 5 years Total Financial assets MKm MKm MKm MKm MKm MKm Cash and balances with Banks 13,366 13,366 Trading assets 9 167 7,025 1,326 414 8,932 Loans and advances to banks 10 19,107 9,103 943 29,153 Loans and advances to customers 11 9,922 1,919 10,491 6,651 21,950 50,933 Investments securities 12 491 990 1,771 121 3,373
Financial liabilities Deposits and loans from banks 18 (7,858) (7,858) Deposits from customers 19 (80,207) (2,286) (1,326) (890) (8) (84,717)
Total recognised financial instruments (45,670) 9,394 18,123 8,858 22,477 13,182 e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (c) Liquidity risk (continued)
Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarises the remaining contractual maturities of the Group's financial assets and liabilities based on undiscounted cash flows:
Maturing Maturing Maturing after 1 after 6 after 12 Maturing th but mon months but months within 1 2011 Redeemable within 6 within 12 but within on demand month Group months months 5 years Total Financial assets MKm MKm MKm MKm MKm MKm Cash and balances with banks 8,541 8,541 Trading assets 9 229 4,229 3,225 7,683 Loans and advances to banks 10 4,984 4,984 Loans and advances to customers 11 10,904 6,604 3,753 6,845 11,328 39,434 Investments securities 12 624 4,750 783 6,157
Financial liabilities Deposits and loans from banks (361) (361) Deposits from customers 19 (40,732) (11,940) (4,753) (183) (94) (57,702)
Total recognised financial instruments (16,664) (4,483) 7,979 9,887 12,017 8,736
Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarizes the remaining contractual maturities of the Company's financial assets and liabilities based on undiscounted cash flows:
Maturing Maturing Maturing after 1 after 6 after 12 Redeemable Maturing month but months but months 2011 on demand within 1 within 6 within 12 but within Company month months months 5 years Total Financial assets MKm MKm MKm MKm MKm MKm Cash and balances with banks 8,489 8,489 Trading assets 9 229 4,229 3,225 7,683 Loans and advances to banks 10 4,984 4,984 Loans and advances to customers 11 10,904 6,604 3,753 6,845 11,328 39,434 Investments securities 12 624 4,750 783 6,157
Financial liabilities Deposits and loans from banks (361) (361) Deposits from customers 19 (40,732) (11,940) (4,753) (183) (94) (57,702)
Total recognised financial instruments (16,716) (4,483) 7,979 9,887 12,017 8,684
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued)
(d) Market risk
Market risk is the risk that changes in market prices, such as interest rate, foreign exchange rates and other price risk will affect the Group's income or the value of holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable pa- rameters, while optimising the return on risk.
Management of market risks
The Group separates its exposure to market risk between trading and non-trading portfolios. Trading portfolios mainly are held by the Global Markets unit, and include positions arising from market making and proprietary position taking, together with financial assets and liabilities that are managed on a fair value basis.
All foreign exchange risk within the Group is transferred and sold down by the banking book. Accordingly, the foreign exchange position is treated as part of the Group's trading portfolios for risk management purposes.
Overall authority for market risk is vested in the Asset and Liability Committee (ALCO). Group Risk is responsible for the development of detailed risk manage- ment policies (subject to review and approval by ALCO) and for the day-to-day review of their implementation.
Exposure to market risks - Trading portfolios
The principal tool used to measure and control market risk exposure with the Group's trading portfolios is Value at Risk (VaR). The VaR of a trading portfolio is the estimated loss that would arise on the portfolio over a specified period of time (holding period) from an adverse market movement with a specified probability (confidence level). The VaR model used by the Group is based upon a 95% confidence level and assumes a one-day holding period. The VaR Model used is based mainly on historical simulation. Taking account of market data from the one-year data or from at least 250 business days, and observed relationships between different markets and prices, the model generates a wide range of plausible future scenarios for market price movements.
Although VaR is an important tool for measuring market risk, the assumptions on which the model is based do give rise to some limitations, including the following:
A one day holding period assumes it is possible to hedge or dispose of positions within that period. This is considered to be a realistic assumption in almost all the cases but may not be the case in situations in which there is severe market illiquidity for a prolonged period; A 95% confidence level does not reflect losses that may occur beyond this level. Even within the model used there is a 5% probability that losses could exceed the VaR; VaR is calculated on an end-of-day basis and does not reflect exposures that may arise on positions during the trading day; The use of historical data as a basis for determining the possible range of future outcomes may not always cover all possible scenarios, especially those of an exceptional nature; The VaR measure is dependent upon the Group's position and the volatility of market prices; and The VaR of an unchanged position reduces if the market price volatility declines and vice versa.
The Group uses VaR limits for specific foreign exchange, Present value (PV01) limit and other price risks. The overall structure of VaR limits is subject to review and approval by ALCO. VaR is measured at least daily. VaR limits are allocated to trading portfolios.
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (d) Market risks (continued)
Sensitivity analysis for each type of market risk
Interest rate risk
The table below indicates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group's profit or loss:
Increase in Sensitivity of net Group and Company basis pojnts interest income
MKm
2012 200 (438)
Group and Company
2011 50 (12.6)
Interest rate risk
The table below indicates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group's equity:
Group and Company Increase in Sensitivity of net basis points interest income
MKm
2012 450 (1,406)
Company
2011 200 (345.1) Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (d) Market risks (continued)
Interest rate gap analysis
The table below summarises the exposure to interest rate risks. Included in the table are the Group's assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. The Group does not bear an interest rate risk on unrecognized financial instruments.
At 31 December 2012 Up to 1 1-3 3-12 Overl Carrying month months months year amount Group Note MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 13,500 - - - 13,500 Trading assets 9 167 7,025 1,326 414 8,932
Loans and advances to banks 10 29,153 - - 29,153
Loans and advances to customers 11 50,933 - - - 50,933 Investments securities 12 491 990 1,771 121 3,373
Total assets 94,244 8,015 3,097 535 105,891
Liabilities and shareholders' funds
Deposits and loans from banks 18 7,858 - 7,858 Deposits from customers 19 80,415 2,677 1,617 8 84,717
Total liabilities 88,273 2,677 1,617 8 92,575
Interest sensitivity gap 5,971 5,338 1,480 527 13,316
Up to 1 1-3 3-12 Overl Carrying months year amount At 31 December 2012 month months
Company Note MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 13,366 - 13,366 Trading assets 9 167 7,025 1,326 414 8,932
Loans and advances to banks 10 29,153 - - - 29,153
Loans and advances to customers 11 50,933 - - 50,933 Investments securities 12 491 990 1,771 121 6,157
Total assets 94,110 8,015 3,097 535 105,757
Liabilities and shareholders' funds
Deposits and loans from banks 18 7,858 - - - 7,858 Deposits from customers 19 80,415 2,677 1,617 8 84,717
Total liabilities 88,273 2,677 1,617 8 92,575
Interest sensitivity gap 5,837 5,338 1,480 527 13,182
9 Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued) | (d) Market risks (continued)
At 31 December 2011 Up to 1 1-3 3-12 Over 1 Carrying month months months year amount Group Note MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 8,541 - - 8,541 Trading assets 9 229 1,981 5,088 385 7,683
Loans and advances to banks 10 4,984 - 4,984
Loans and advances to customers 11 39,434 - - 39,434
Investments securities 12 5,374 - 783 6,157
Total assets 53,188 7,355 5,088 1,168 66,799
Liabilities and shareholders' funds
Deposits and loans from banks 18 361 - - 361 Deposits from customers 19 52,672 4,572 364 94 57,702
Total liabilities 53,033 4,572 364 94 58,063
Interest sensitivity gap 155 2,783 4,724 1,074 8,736
3-12 Over 1 Carrying At 31 December 2011 Up to 1 1-3 month months months year amount Company Note MKm MKm MKm MKm MKm Assets
Cash and cash equivalents 8 8,489 - - - 8,489 Trading assets 9 229 1,981 5,088 385 7,683
Loans and advances to banks 10 4,984 - 4,984
Loans and advances to customers 11 39,434 - - - 39,434
Investments securities 12 - 5,374 - 783 6,157
Total assets 53,136 7,355 5,088 1,168 66,747
Liabilities and shareholders' funds
Deposits and loans from banks 18 361 - - 361 Deposits from customers 19 52,672 4,572 364 94 57,702
Total liabilities 53,033 4,572 364 94 58,063
Interest sensitivity gap 103 2,783 4,724 1,074 8,684 Standard Bank Limited Annual Report for the year ended 31 December 2012
4. Risk management (continued)
(e) Currency risk
This risk relates to the exposure of the Group's foreign exchange position to adverse movements in foreign exchange rates. These movements may impact on the Group's future cash flows. The Group manages this risk by adhering to internally set limits and those set by the Reserve Bank of Malawi. Transactions that require the Group to guarantee the provision of foreign currency in future are only undertaken where the Group is certain that foreign currency will be available. Occasionally the Group buys appropriate derivative instruments to hedge against the risk.
In respect of monetary assets and liabilities in foreign currency, the Group ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies at spot rates when considered appropriate.
The Group had the following significant foreign currency positions (all amounts expressed in millions of Malawi Kwacha):
Group and company
At 31 December 2012 USD GBP Euro ZAR Total Assets Loans and advances to banks 24,195 698 1,346 201 26,440
Loans and advances to customers 3,395 - 1,612 - 5,007
Other assets 462 18 2 - 482
Forward contracts and SWAPs 8,407 - - 40 8,447
Total assets 36,459 716 2,960 241 40,376
Liabilities
Deposits and loans from banks 6,849 1 244 36 7,130 Deposits from customers 25,279 636 1,101 183 27,199
Other liabilities 1,958 64 - 23 2,045
Forward contracts and SWAPs - 1,611 1,611
Total liabilities 34,086 701 2,956 242 37,985
Net position 2,373 15 4 (1) 2,391
Group and company At 31 December 2011 Assets Deposits and loans to banks 4,070 237 476 119 4,902
Loans and advances to customers 3,695 - - - 3,695
Total assets 7,765 237 476 119 8,597
Liabilities Deposits and loans from banks 77 2 49 37 165 Deposits from customers 6,993 250 471 101 7,815
Other liabilities - - - 695 695
Total liabilities 7,070 252 520 833 8,675
Net position 695 (15) (44) (714) (78)
Q Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued)
(f) Derivatives held for risk management purposes
The Group's activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable consequence of being in business. The Group's aim is therefore to achieve an appropriate balance between risk and return and minimize potential adverse effects on the Group's financial performance.
The Group's risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.
Risk management is carried out by a central treasury department (Bank Treasury) under policies approved by the Board of Directors. Bank Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.
Derivatives are recognised initially at fair value and subsequently measured at fair value. Fair values are obtained from appropriate pricing models.
Gains and losses on derivatives are included in net trading income as they arise.
(g) Operational risks
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group's processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group's operations and are faced by all business entities.
The Group's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The management of this risk is done through the implementation of an Operational Risk Management (ORM) Policy and Framework. The ORM model involves use of risk tables, risk control self assessments, key risk indicators, incident management, audit findings, compliance reports, information risk management, loss control programmes and business continuity management. Audits and routine control (or operational integrity) processes provide an independent assurance on the adequacy and effectiveness of the management of operational risk, including, but not limited to, the processes, systems and controls.
Compliance with Group standards is supported by a programme of periodic reviews undertaken by the Internal Audit Department. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group. Standard Bank Limited Annual Report for the year ended 31 December 2012
4. Risk management (continued)
(h) Compliance risk
Compliance is an independent core risk management activity, the head of which also has unrestricted access to the Chief Executive Officer and the Chairman of the Board. The Group is subject to extensive supervisory and regulatory regimes, and the executive management remains responsible for overseeing the management of the Group's compliance risk.
Money laundering control and occupational health and safety (including aspects of environmental risk management) are managed within the compliance function and there are increasingly onerous legislative requirements being imposed in both these areas. The Group has adopted anti-money laundering policies including Know Your Customer policies and procedures and adheres to the country's anti-money laundering legislation and the Reserve Bank of Malawi's regulations/directives.
The management of compliance risk has become a distinct discipline within the Group's overall risk management framework. Ultimate responsibility for this risk lies with the Board of Directors. A combination of key activities are undertaken to manage the risk such as identifying the regulatory universe and developing compliance management plans, training staff and other stakeholders on relevant regulatory requirements, and monitoring compliance. Compliance with the Know-Your-Customer and Anti-money Laundering procedures and legislation remains an area of major focus for the Group. The Group has a dedicated Money Laundering Control Officer who consults the country's Financial Intelligence Unit on money laundering and anti-terrorist financing matters.
(1) Statutory requirements
In accordance with the Banking Act, the Reserve Bank of Malawi has established the following requirements as at the reporting date:
(1) Liquidity reserve requirement The Group is required to maintain a liquidity reserve amount with the Reserve Bank of Malawi, in cash and/or with registered discount houses, calculated on a bi weekly basis, of not less than 15.5 % (2011: 15.5%) of the preceding two weeks' average total deposit liabilities. The Group complied with the liquidity reserve requirement in 2012. In the last week of December 2012, the liquidity reserve was 16% (2011: 17%) of average customer deposits.
(ii) Capital adequacy requirement The Group's available capital is required to be a minimum of 10% of risk weighted assets and contingent liabilities. As at 31 December 2012, the Group's available capital was 19.50% (2011: 19.93%) of its risk weighted assets and contingent liabilities. The Group has complied with this requirement during the year.
(iii) Loan loss Provision The loan loss provision in accordance with Reserve Bank of Malawi guidelines amounts to MK699 million (2011: MK429 million). The amount of impairment provisions included in the financial statements in accordance with IAS 39 is MK1.667 billion (2011: MK908 million) which is in excess of the Reserve Bank of Malawi requirement.
(2) Prudential aspects of Group's liquidity
The Reserve Bank of Malawi has issued the following guidelines on the management of liquidity:
(i) Liquidity ratio 1 Net liquidity (total liquid assets less suspense account in foreign currency) divided by total deposits must be at least 30%.
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
4. Risk management (continued)
(ii) Liquidity ratio 2 Net liquidity (total liquid assets less suspense account in foreign currency and cheques in the course of collection) divided by total deposits must be at least 20%.
The Group complied with the liquidity ratio requirements in 2012. As at 31 December 2012, the Group's liquidity ratio 1 was 57.54% (201 1: 38.67%) and liquidity ratio 2 was 56.69% (2011: 38.41 %).
Implementing current capital requirements of the Reserve Bank of Malawi requires the Group to maintain a prescribed ratio of total capital to total risk-weighted assets. The Group calculates requirements for market risk in its trading portfolios based upon the Group's VaR models and uses its internal grading as the basis for risk weightings for credit risk.
The Group has access to a diverse funding base. Funds are raised mainly from deposits and shareholders. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. The Group strives to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities. The Group continually assesses liquidity risk by identifying and monitoring changes in funding required for meeting business objectives. In addition the Group holds a portfolio of liquid assets as part of its liquidity risk management strategy.
(iii) Capital management Reserve Bank of Malawi sets and monitors the capital requirements for the Bank. In implementing current capital requirements, the Reserve Bank of Malawi requires the Bank to maintain a minimum ratio of 10% of total capital to risk-weighted assets. The Bank's regulatory capital is analyzed in two parts: Tier 1 capital, which includes ordinary share capital, share premium, retained earnings, and other regulatory reserve after taking out any investment in a subsidiary; and Tier II capital, which includes share revaluation reserve investment revaluation reserve, property revaluation reserve and loan loss reserve. The calculation of both of the above ratio is given herein below:-
2012 2011 MKm MKm Tier 1 capital
Share capital and Share Premium 1,067 1,067
Retained earnings 12,648 8,753 Total tier 1 capital 13,715 9,820
Tier 2 capital Loan loss reserve 699 429 Revaluation reserve on property 2,381 2,381 Total regulatory capital 16,795 12,630 Risk weighted assets 70,334 49,265
Capital ratios Total regulatory capital expressed as a percentage of total risk weighted assets 23.88% 25.64%
Total Tier 1 capital expressed as a percentage of total risk weighted assets 19.50% 19.93%
The Group has complied with all capital management requirements during the year ending 31 December 2012. Standard Bank Limited Annual Report for the year ended 3 i December 2012
5. Accounting estimates and judgements
Management discussed with the Board Audit Committee the development, selection and disclosure of the Group's critical accounting poli- cies and estimates and the application of these policies and estimates.
Key sources of estimates and uncertainty
Note 4(b) contains information about the assumptions and their risk factors relating to provision for loan losses. In notes 4(c), 4(d) and 4(e) detailed analysis is given of the exposure to liquidity risk, interest rates and currency risk respectively.
Key sources of estimation uncertainty
(i) Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy 3(f) and 3(g).
The specific counterparty component of the total allowances for impairment applies to claims evaluated individually for impairment and is based upon management's best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about counterparties financial situations and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the Credit Risk function.
Collectively assessed impairment allowances cover credit losses inherent in portfolios of claims with similar economic characteristics where there is objective evidence to suggest that they contain impaired claims, but the individual impaired items cannot yet be identified. A component of collectively assessed allowances is for country risks. In assessing the need for collective loan loss allowances, management considers factors such as credit quality, portfolio size, concentrations, and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on how well these estimate future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.
(ii) Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy 3(e) and 3(g). For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
6. Segment Reporting
Segment information is presented in respect of the Group's operating segments. The format, operating segments, is based on the Group's management and internal reporting structure.
Operating segments pay and receive interest to and from the Central Treasury on an arm's length basis to reflect the allocation of capital and funding costs.
The Group comprises the following main operating segments:
(i) Corporate and Investment Banking
Includes the Group's trading and corporate finance activities, central treasury, loans, deposits and other transactions and balances with corporate customers.
Commercial and investment banking services to larger corporate companies, financial institutions and international counterparties. Global markets - includes foreign exchange, commodities, debt securities and equities trading. Transactional products and services - includes transactional banking, trade finance and investor services. Investment banking - includes equity investment, advisory, project finance, structured finance, structured trade finance, corporate lending, primary markets, acquisition and finance, property finance and the asset and wealth management units.
(ii) Personal and Business Banking
Retail banking - incorporating private banking services, private customer current accounts, savings, deposits, investment savings prod- ucts, custody, debit cards, consumer loans and mortgages. e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
6. Segment reporting (continued)
Transactional and lending products - transactions in products associated with the various points of contact channels such as ATMs, Internet, telephone banking and branches. This includes deposit taking activities, electronic banking, cheque accounts and other lend- ing products. Installment sale and finance leases - comprises two main areas, installment finance in the consumer market, mainly vehicles, and sec- ondly, finance of vehicles and equipment in the business market.
Other Group operations comprise fund management, institutional finance and providing other financial services, none of which constitutes a separately reportable segment.
Transactions between the operating segments are on normal commercial terms and conditions.
Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on the Group's cost of capital. There are no other material items of income or expense between the operating seg- ments.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the statement of financial position, but exclude items such as taxation and borrowings.
Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis.
Operating segments
Corporate and Personnal and business Investment banking banking
2012 2011 2012 2011 2012 2011 MKm MKm MKm MKm MKm MKm
Interest income 5,878 2,854 5,945 2,980 11,823 5,834 Interest expense (1,823) (513) (870) (341) (2,693) (854)
Net interest income 4,055 2,341 5,075 2,639 9,130 4,980
Funding 817 (191) (817) 191 - - Net fee and commission income 513 141 3,241 2,161 3,754 2,302
Net trading income 9,300 4,213 - - 9,300 4,213
Other operating income - 9 34 15 34 24
Operating income 14,685 6,513 7,533 5,006 22,218 11,519
Staff costs (1,078) (558) (3,341) (1,509) (4,419) (2,067) Depreciation and amortisation (250) (198) (373) (298) (623) (496) Other operating expenses (1,128) (843)) (2,432) (1,574) (3,560) (2,417) Impairment losses on loans and advances (513) (349) (1,079) (649) (1,592) (998)
Profit before income tax 11,716 4,565 308 976 12,024 5,541
Income tax expense (3,918) (1,607) (141) (388) (4,059) (1,995)
Profit for the year 7,798 2,958 167 588 7,965 3,546 e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
6. Segment reporting (continued) Operating segments (continued)
Corporate and Personnal and business Investment banking banking Total
2012 2011 2012 2011 2012 2011 MKm MKm MKm MKm MKm MKm
Assets
Cash and cash equivalents 11,064 7,002 2,436 1,539 13,500 8,541
Trading assets 8,932 7,683 - - 8,932 7,683
Loans and advances to banks 29,052 4,984 101 - 29,153 4,984 Loans and advances to customers 27,890 20,625 23,043 18,809 50,933 39,434
Financial investments 3,373 6,157 - - 3,373 6,157
Other assets 1,810 864 2,716 1,295 4,526 2,159
Property and equipment 2,826 2,439 4,240 3,658 7,066 6,097 Intangible assets 2 9 13 15 15 24
Deferred tax assets 279 216 419 325 698 541
Total assets 85,228 49,979 32,968 25,641 118,196 75,620
Liabilities
Deposits and loans from banks 7,858 361 - - 7,858 361 Deposits from customers 54,970 36,097 29,747 21,605 84,717 57,702
Other liabilities 2,013 613 3,017 2,342 5,030 2,955 Current tax payable 748 163 668 246 1,416 409 Provisions 614 214 922 321 1,536 535
Employee benefits liabilities 47 64 71 95 118 159 Deferred tax liabilities 435 439 653 659 1,088 1,098
Total liabilities 66,685 37,951 35,078 25,268 101,763 63,219
Shareholders' equity Share capital and premium 427 811 640 256 1,067 1,067
Reserves 1,038 5,564 1,558 471 2,596 6,035
Funding 11,970 3,533 (11,970) (3,533) - -
Retained earnings 5,108 2,120 7,662 3,179 12,770 5,299
Total shareholders' equity 18,543 12,028 (2,110) 373 16,433 12,401
Total equity and liabilities 85,228 49,979 32,968 25,641 118,196 75,620
e Standard Bank Limited Annual Report for the year ended 31 December 20 J 2
7. Accounting classifications and fair values of financial instruments
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table:
Malawi Government Treasury Bills
The fair value is based on quoted market prices, if available, or is calculated based on discounted expected future principal and interest cash flows.
Malawi Government Local Registered Stocks
The amortised cost is estimated as the present value of future cash flows, discounted at effective interest rates.
Loans and receivables
The amortised cost is estimated as the present value of future cash flows, discounted at effective interest rates.
For receivables and payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables and other payables are discounted to determine the fair value.
Total Designated Other Group Loans and amortised carrying at fair value Fair value receivables cost amount 31 December 2012 Cash and cash equivalents 13,500 13,500 13,500 Trading assets 8,932 8,932 8,932 Loans and advances to customers 50,933 50,933 50,933 Investment securities 3,373 3,373 3,373
Total 12,305 50,933 13,500 76,738 76,738
Trading liabilities
Deposits from customers 84,717 84,717 84,717
Total 84,717 84,717 84,717
Company
31 December 2012
Cash and cash equivalents 13,366 13,366 13,366 Trading assets 8,932 8,932 8,932 Loans and advances to customers 50,933 50,933 50,933 Investment securities 3,373 3,373 3,373
Total 12,305 50,933 13,366 76,604 76,604
Trading liabilities
Deposits from customers 84,717 84,717 84,717
Total 84,717 84,717 84,717
® Standard Bank Limited Annual Report for the year ended 31 December 2012
7. Accounting classifications and fair values of financial instruments (continued)
Other Total Designated Group Loans and amortised carrying at fair value Fair value receivables cost amount 31 December 2011 Cash and cash equivalents 8,541 8,541 8,541 Trading assets 7,683 7,683 7,683 Loans and advances to customers 39,434 39,434 39,434 Investment securities 6,157 6,157 6,157
Total 13,840 39,434 8,541 61,815 61,815
Trading liabilities Deposits from customers 57,702 57,702 57,702
Total 57,702 57,702 57,702
Company 31 December 2011
Cash and cash equivalents 8,489 8,489 8,489 Trading assets 7,683 7,683 7,683 Loans and advances to customers 39,434 39,434 39,434 Investment securities 6,157 6,157 6,157
Total 13,840 39,434 8,489 61,763 61,763
Trading liabilities
Deposits from customers 57,702 57,702 57,702
Total 57,702 57,702 57,702
8. Cash and cash equivalents
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Cash and balances with banks 2,436 2,302 1,539 1,487 Balances with the Reserve Bank of Malawi 11,064 11,064 7,002 7,002
Balances eligible for Liquidity Reserve Requirement (Note 36) 13,500 13,366 8,541 8,489
Banks are required to maintain a prescribed minimum balance in cash, with the Reserve Bank of Malawi and licensed Discount houses that are not available to finance the Bank's day-to-day activities. The amount is determined as 15.5% of the average outstanding local and foreign currency customer deposits, over liquidity reserve cycle period of two weeks.
@ Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
9. Trading Assets
Non Non Total Pledged pledged Pledged pledged Total trading trading trading trading trading trading assets assets assets assets assets assets 2012 2012 2012 2011 2011 2011
MKm MKm MKm MKm MKm MKm
- 385 385 Government bonds 413 413
- 7,298 7,298 Treasury bonds 8,519 8,519
8,932 8,932 - 7,683 7,683
Group and Group and Trading assets Company Company 2012 2011 MKm MKm 8,519 7,298 Listed 413 385 Unlisted 8,932 7,683
Comprising: 8,519 7,298 Treasury Bills 413 385 Government bonds 8,932 7,683
Maturity analysis
The maturities represent periods to contractual redemption of the trading assets recorded 167 229 Maturing within 1 month 7,025 4,229 Maturing after 1 month but within 6 months 1,326 2,840 Maturing after 6 months but within 12 months 414 385 Maturing after 12 months 8,932 7,683
Collateral accepted as security for assets
At 31 December 2012, the fair value of financial assets accepted as collateral that the Group is permitted to sell or repledged in the absence of default is Nil (2011: Nil)
At 31 December 2012, the fair value of financial assets accepted as collateral that have been sold or repledged is Nil (2011: Nil). The Group is obliged to return equivalent securities.
G Standard Bank Limited Annual Report for the year ended 3 7 December 2012
10. Loans and advances to banks and other financial institutions
Group and Group and Company Company 2012 2011 MKm MKm
Loans and advances to other banks 23,230 719
Loans and advances with group banks (note 37) 5,923 4,265
Balances with banking institutions 29,153 4,984
Loans and advances to customers at fair value through profit or loss 929 1,293
Loans and advances to customers at amortised cost 52,370 39,478
53,299 40,771 Less: impairment losses on loans and advances (2,366) ( 1,337)
50,933 39,434
At 31 December 2012, MK21,950 million (2011: MK11,328 million) of loans and advances to customers are expected to be recovered more than twelve months after the reporting date.
Gross loans and advances to customers
Personal and Business Banking
Overdrafts 5,763 2,440 Term loans 10,709 8,242 Finance leases 5,456 5,036
Mortgages 2,590 3,372
24,518 19,090 Corporate and Investment Banking Overdrafts 13,372 11,941 Term loans 10,531 6,200 Finance leases 4,878 3,540
28,781 21,681
Total gross loans and advances to customers 53,299 40,771
Allowances for impairment
Balance at 1 January 908 414
Impairment loss for the year:
Charge for the year 1,831 585
Write-offs (627) 11
Recoveries (445) (102)
Balance at 31 December 1,667 908 o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
I7. Loans and advances to customers (continued)
Group and Group and Company Company 2012 2011 MKm MKm Collective allowances for impairment
Balance at 1 January 429 263
Impairment loss charge for the year 270 166
Balance at 31 December 699 429
Total allowances for impairment 2,366 1,337
Impairment recognized in profit or loss
Balance carried forward 2,366 1,337 Balance brought forward (1,337) (677) Credit impairment adjustment 563 336
Unwind of discount - 2 Charge to profit or loss 1,592 998
Impairment losses on loans and advances charged/credited to profit or loss is analysed as follows:
Non-performing loans 1,322 832
Performing loans 270 166
1,592 998
Finance lease receivables
The loans and advances to customers include the following finance lease receivables, for leases of certain property and equipment where the Group is the lessor:
Gross investment in finance leases receivable 15,064 10,494 Unearned future finance income on finance leases (5,879) (2,334)
Net investment in finance leases 9,185 8,160 Impaired loans 1,149 475
10,334 8,635
The net investment in finance leases may be analysed as follows: Not later than one year 1,325 921 Later than one year but less than five years 8,943 7,675
Later than five years 66 39
10,334 8,635
Loans and advances to customers at fair value through profit or loss
Loans and advances to customers held by investment banking business have been designated at fair value through profit or loss as the Group manages these loans and advances on a fair value basis in accordance with its documented investment strategy. Internal report- ing and performance measurement of these loans and advances are on a fair value basis.
At 31 December 201 2, the maximum exposure to credit risk on loans and advances at fair value through profit or loss was MK 1 2,354 million (2011: MK10,235 million). e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
12. Financial Investments
Group and Group and Company Company
2012 2011 MKm MKm Financial Investment securities at fair value through profit or loss:
Financial investment securities designated as at fair value through profit or loss 3,373 6,157
3,373 6,157
At 31 December 201 2 MK1 21 million (2011: MK783 million) of investment securities are expected to be recovered more than twelve months after the reporting date.
Investment securities have been designated at fair value through profit or loss upon initial recognition when the Group holds related derivatives at fair value through profit or loss and designation therefore eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial Investment securities at fair value through profit or loss:
Government bonds 3,373 6,157
Company
2012 2011
MKm MKm Investment in Standard Bank Bureau de Change Limited 100 52 Standard Bank Limited owns 100% of the Shares in Standard Bank Bureau de Change Limited 100 52
14. Other assets
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Items in transit 784 784 149 149 Staff receivables 18 18 4 4 Consumable stocks 17 17 13 13 Sundry receivables 1,745 1,756 909 909 Prepayments 1,962 1,962 1,084 1,084 4,526 4,537 2,159 2,159
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
15. Property and equipment
Motor Leasehold vehicles, Freehold land and computers, land and Work in buildings fixtures buildings Progress and fittings Total
Cost or valuation MKm MKm MKm MKm MKm Group and Company Balance at 1 January 2011 1,577 1,469 2,044 360 5,450
Additions 217 438 714 1,369 Revaluations 419 412 831 Transfers 789 146 100 (1,035) Disposals (139) (13) (152)
Balance at 31 December 2011 2,863 2,027 2,569 39 7,498
Balance at 1 January 2012 2,863 2,027 2,569 39 7,498
Additions 236 16 458 903 1,613 Transfers 190 64 46 (300) Disposal - - (101) - (101)
Balance at 31 December 2012 3,289 2,107 2,972 642 9,010
Accumulated depreciation and impairment losses
Balance at 1 January 2011 191 188 1,059 - 1,438 Charge for the year 57 81 348 - 486
Disposals (4) - (14) - (18)
Write back of depreciation (242) (263) - - (505)
Balance at 31 December 2011 2 6 1,393 - 1,401
Balance at 1 January 2012 2 6 1,393 - 1,401
Charge for the year 128 87 399 - 614
Disposals - - (71) - (71)
Balance at 31 December 2012 130 93 1,721 - 1,944
Carrying amounts
At 31 December 2012 3,159 2,014 1,251 642 7,066
At 31 December 2011 2,861 2,021 1,176 39 6,097
Mr. Chris Mullock MRICS, MSIM, a Chartered Valuation Surveyor, independent valuer, valued land and buildings as at 31 December 2011. Valuations were made on the basis of the open market value. The carrying values of the properties were adjusted to the revalu- ations and the resultant surplus net of deferred tax was credited to revaluation reserves in shareholders' equity and this reserve is not distributable until realised.
The additions in the property plant and equipment have resulted in the maintaining of the operating capacity of the Group.
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
75. Property and equipment (continued)
If the land and buildings were stated on the historical cost basis, the carrying amounts would be as follows:
Group and Group and Company Company 2012 2011 MKm MKm Cost 3,136 2,150 Accumulated depreciation and impairment losses (575) (412)
Net carrying amount 2,561 1,738
A register of land and buildings as required by Section 16 of the Malawi Companies Act 1 984 is maintained by the Group's registered office and is available for inspection.
16. Intangible assets - software
Group and Group and Company Company 2012 2011 MKm MKm
Balance at 1 January 226 217 Add: Additions 11
Less: Disposals (1) (2)
Balance at 31 December 225 226
Accumulated amortisation and impairment losses
Balance at 1 January 202 192 Disposals (1)
9 10 Charge for the year
210 202 Balance at 31 December
15 24 Carrying amounts
17. Deferred tax assets and liabilities
Analysis of deferred tax assets and liabilities in the statement of financial position is as follows:-
Deferred tax asset Deferred tax liability Net
Group and Company 2012 2011 2012 2011 2012 2011 MKm MKm MKm MKm MKm MKm
Other provisions 407 412 (14) - 393 412
Allowances for loan losses 264 129 - - 264 129
Property and equipment - - (34) (56) (34) (56)
Fair value adjustments 27 - (2) 27 (2) On revaluation reserve - - (1,040) (1,040) (1,040) (1,040)
698 541 (1,088) (1,098) (390) (557) e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
17. Deferred tax assets and liabilities (continued)
Deferred tax is calculated, in full, on all temporary differences under the liability method using the enacted tax rate of 30% (2010:30%). The movement on the deferred tax account is as follows:
2012 2011 MKm MKm
Balance at 1 January (557) (144) Profit or loss (Note 31) (146) (39)
Fair value adjustment 313 (374)
Balance at 31 December (390) (557)
Deferred tax assets and liabilities, deferred tax (credit)/ charge in the profit or loss, and deferred tax charge/(credit) on revaluation reserve in equity are attributable to the following items:
(Charged)/ credited (Charged)/ As at to profit credited As at 1 January or loss to equity 31 December MKm MKm MKm MKm 2012
Other provisions 412 (19) - 393
Allowances for loan losses 129 135 - 264
Property and equipment (56) 22 - (34) Fair value adjustments (2) (284) 313 27
On revaluation reserve (1,040) - - (1,040)
(557) (146) 313 (390)
18. Deposits and loans from banks J
Group and Group and Company Company
2012 2011 MKm MKm
Balances due to group banks (Note 37) 109 91
Balances due to other banks 7,749 270
7,858 361
Maturity analysis
The maturities represent periods to contractual redemption of the deposit from banks recorded.
Redeemable on demand 7,858 361
e Standard Bank Limited Annual Report for the year ended 3 7 December 2012
19; Deposits from customers
Group and Group and Company Company 2012 2011 MKm MKm
Personal and Business Banking
Current and demand deposits 14,601 9,590 Savings accounts 5,121 7,447 Fixed deposit accounts 4,221 2,669
Foreign currency deposit accounts 5,804 1,899
29,747 21,605
Corporate and Investment Banking Current and demand deposits 25,095 26,229
Fixed deposit accounts 7,695 834 Foreign currency deposit accounts 22,180 9,034
54,970 36,097
Total deposits from customers 84,717 57,702
At 31 December 201 2, MK8million (2011 :MK94 million) of deposits from customers are expected to be settled more than twelve months after the reporting date.
Included in customer deposits were deposits of MK1, 999 million (2011: MK1, 236 million) held as collateral for irrevocable commitments under import letters of credit.
Some deposits carry fixed interest rates. Most customer deposits are variable rate.
Maturity analysis
The maturities represent periods to contractual redemption of the deposit and current accounts recorded.
Redeemable on demand 80,207 40,732 Maturing within 1 month 2,286 11,940 Maturing after 1 month but within 3 months 1,047 4,572
Maturing after 3 months but within 6 months 279 181
Maturing after 6 months but within 12 months 890 183 Maturing after 12 months 8 94
84,717 57,702
20. Other liabilities
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Items in transit 693 693 232 232
Trade payables 41 41 29 29 Accruals 1,219 1,219 939 939 Due to Standard Bank of South Africa (Note 37) 2,085 2,085 695 695
Unclaimed balances 526 526 303 303 Other 466 465 757 757 5,030 5,029 2,955 2,955 o Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
21. Provisions
Group and Company Employee leave days & bonus Others Total MKm MKm MKm
Balance at 1 January 2012 512 23 535 Provisions made during the year 641 360 1,001
Balance at 31 December 2012 1,153 383 1,536
Share Group and Group and Company Company 2012 2011
Issued and fully paid up as at 1 January and 31 December 2012 213 213
At 31 December 2012 the total authorised share capital comprised 213 million ordinary shares of MK1 each (31 December 2011: 213 million ordinary shares of MK1 each).
(ii) Share premium
Issue of shares at a premium 854 854
Reserves
(i). Revaluation reserve Balance at 1 January 2,381 1,429
Revaluation Surplus - 1,360
Deferred Tax on revaluation surplus - (408)
Balance at 31 December 2,381 2,381
(ii). Available-for-sale reserve Balance at 1 January 31 127 Net gains/Oosses) from changes in fair value (105) (137) Deferred income taxes 31 41 Balance at 31 December (43) 31
(iii). Share-based payment reserve Balance at 1 January 117 114 Current year movement 141 3
Balance at 31 December 258 117
All these reserves are non-distributable.
The land and buildings revaluation reserve comprises amount that have been revalued on the Groups buildings in accordance with the Group's policy on land and buildings. The carrying values of the properties were adjusted to the revaluations and the resultant surplus net of deferred tax was credited to revaluation reserves in shareholders' equity and this reserve is not distributable until realised.
The available-for-sale revaluation reserve comprises the banking investment book which is available for sale and is measured at fair value. Any unrealised gains and losses arising from such changes in fair values are recognised in equity. As at the reporting date, there is no objective evidence to suggest that the available-for-sale instruments are impaired.
The employee share option scheme is a reserve for share options in Standard Bank Group allocated to the Groups' employees that can be exercised at any time.
G Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
24. Net interest income Group and Group and Company Company 2012 2011 Interest income MKm MKm
Loans and advances 10,601 5,541
Investment securities 639 132 Cash and short term funds 583 161 11,823 5,834
Interest expense
Customer deposits 2,659 820 Deposits by banks 4 15
Borrowed funds 30 19 2,693 854 Net interest income 9,130 4,980
25. Net fee and commission income
Fee and commission income Point of representation fees 1,517 440
Card based commissions 61 90
Electronic banking fees 387 218 Foreign currency service fees 899 437
Documentation and administration fees 352 768 Others 595 385
3,811 2,338
Fee and commission expense
Interbank transactions (57) (36)
Net fee and commission income 3,754 2,302
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Foreign exchange 9,203 9,169 3,647 3,647 Other 97 97 566 566 9,300 9,266 4,213 4,213
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm Profit on sale of property and equipment - - 5 5 Other income - Rent 34 36 19 19 34 36 24 24 e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
Group and Group and Company Company 2012 2011 MKm MKm Salaries and allowances 4,112 2,385
Severance allowance (Note 38) - (531) Share options scheme 20 21 Retirement benefit costs 287 192
4,419 2,067
29. Depreciation and amortisation
Depreciation (Note 15) 614 486
Amortisation of intangible assets (Note 16) 9 10
623 496
30. Other operating expenses
Franchise fees 665 347
Auditor's remuneration - current year 30 30 Motor vehicle costs 26 24
Software and IT development costs 451 291
Communication costs 267 178 Travel and entertainment expenses 280 166
Recurrent expenditure on property and equipment 215 175 Marketing and advertising expenses 168 109 Stationery and printing expenses 192 82
Training expenses 111 61 Insurance and security costs 289 191 Premises expenses 172 81
Other expenses 694 682
3,560 2,417 Standard Bank Limited Annual Report for the year ended 31 December 20 7 2
31. Income tax expense Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Current tax @ 30% (2011:30%) 4,205 4,195 1,956 1,956 Deferred tax (Note 17) (146) (146) 39 39
4,059 4,049 1,995 1,995
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:
Profit before tax 12,024 11,992 5,542 5,542
Tax calculated at the statutory tax rate of 30% 3,607 3,598 1,662 1,662 Tax effect of:
Income not subject to tax (41) (41) 10 10 Expenses not deductible for tax purposes 500 499 330 330
Excess capital allowances (7) (7) (7) (7)
Total income tax expense in profit or loss 4,059 4,049 1,995 1,995
32. Earnings per share
Basic earnings per share are calculated by dividing the net profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year.
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Net profit attributable to equity holders (MKm) 7,965 7,943 3,546 3,546 Weighted average number of ordinary shares in issue (millions) 213 213 213 213 Basic earnings per share (expressed in MK per share) 37.39 37.29 16.65 16.65
Note: there are no dilutive potential ordinary shares
33. Dividends per share
Interim dividends are accounted for as a separate component of equity until they have been ratified at an annual general meeting. The directors proposed a final dividend in respect of the year ended 31 December 2012 of MK14.00 (2011: MK9.37) per ordinary share representing MK3billion (2011: MK2billion).
An interim dividend of MK9.37 (201 1: MK4.21) per ordinary share representing MK2billion (2011: MK900million) was paid in the year and therefore total dividend for the year is MK23.37 per share (2011: MK1 3.58), amounting to a total of MK5 billion (2011: MK2.9 billion).
& Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
34. Unrecognised financial instruments, contingent liabilities and commitments
(a) Legal proceedings There are a number of legal proceedings outstanding against the Group as at 31 December 201 2. If defence against these actions is unsuccessful, the claims and litigation costs could amount to MK362 million (2011: MK301 million).
(b) Capital commitments and contingent liabilities In common with other banks, the Group conducts business involving acceptances, guarantees, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.
The contractual amounts of the Group's off statement of financial position financial instruments that commit it to extend credit to customers are as follows:
2012 2011 MKm MKm Contingent liabilities
Acceptances and letters of credit 5,289 1,236 Guarantees and performance bonds 2,687 1,106
7,976 2,342 Commitments
Undrawn formal stand-by facilities, credit lines and other commitments to lend 4,224 7,732 Authorised but not yet contracted capital commitments on property and equipment 67 18
4,291 7,750
As at 31 December 2012, the authorised but not yet contracted capital commitments were MK67 million (2011: MK18 million).
(c) Government claim of MK287 million The claim made in 2010 by Malawi Government of MK287 million which was outstanding in the Group's suspense account due to a system change error from 2003 and was subsequently taken into the Group's income statement in 2007, pertaining to the Government Credit Ceiling Authority accounts (CCAs) is still outstanding. The Group is still disputing this claim and the issue has gone for arbitration.
35. Effective interest rates of financial assets and financial liabilities
The effective interest rates for the principal financial assets and liabilities at 31 December were in the following ranges:
Group and Company 2012
In MK In US$ Assets Government securities 14%-25% Deposits with banking institutions 24.5%-25.0% 0.2-0.6% Loans and advances to customers 9.3-43% 6.5-8.0% Liabilities
Customer deposits 1-29% 0.5-2%
Company 2011
In MK In US$ Assets 6.38-7.32% Government securities 2.9-12.4% 0.5-5% Deposits with banking institutions 4.95-27.98% 5.6-13.99% Loans and advances to customers
Liabilities Customer deposits 0.25-7% 0.5-2%-e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
36. Analysis of cash and cash equivalents as shown in the statement of cash flows
Group Company Group Company 2012 2012 2011 2011 MKm MKm MKm MKm
Cash and balances with Reserve Bank of Malawi (note 8) 13,500 13,366 8,541 8,489 Less: Liquidity reserve requirement (13,167) (13,167) (7,612) (7,612) 333 199 929 877 Treasury bills and bonds 1,481 1,481 2,211 2,211 Deposits and balances due from banking institutions (Note 10) 29,153 29,153 4,984 4,984
30,967 30,833 8,124 8,072
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including cash and balances with Reserve Bank of Malawi, treasury bills and other eligible bills, and amounts due from other banks. Cash and cash equivalents exclude the liquidity reserve requirement.
37. Related party transactions
The Group is controlled by Stanbic Africa Holdings Ltd, a Bank incorporated in the United Kingdom. The ultimate parent company of the Group is Standard Bank Group Limited, incorporated in the Republic of South Africa. There are other companies which are related to Standard Bank Limited through common shareholdings.
In the normal course of business, a number of banking transactions are entered into with related parties at arm's length. These include loans, deposits and foreign currency transactions. The parent bank also provides professional and technical consultancy services for which it charges market rates. The outstanding balances at the year end and relating expense and income for the year are as follows:
2012 2011 MKm MKm Balances due from related parties
Standard Bank of South Africa-Parent 328 184 Standard Bank of London 550 1,128
Standard Bank Isle of Man - Same ownership 5,045 2,953 Balances due from related banks (Note 10) 5,923 4,265 Balances due from directors and other key management personnel 392 225
Impairment for balance due from directors and key management personnel as per IAS 39 (10) (27)
6,305 4,463
Interest income earned 8 12
The amounts due from related party Banks relate to Nostra accounts and are not secured.
The loans issued to directors are repayable over two years and are granted at market related interest rates and are secured by the asset being purchased". The loans issued to key management personnel follow staff loans policy.
Balances due to related parties
Standard Bank of South Africa - Parent 109 91 Balances due to related party banks (Note 1 8) 109 91 Standard Bank of South Africa - Stanbic Africa - Parent (Note 20) 2,085 695
2,194 786
@ Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
Group and Group and Company Company 2012 2011 Key management compensation MKm MKm Salaries and other short term benefits 261 236
Post employment benefits
Contributions to defined contribution plans 42 26
Share options 20 3 323 265
Franchise fees - Standard Bank of South Africa 665 347
Directors remuneration
Non Executive Directors Fees 9 15
Executive Directors Salaries 74 50 83 65
A listing of members of the Board of Directors is shown on first page of the directors' report.
The fees for the Directors for 2012 was as detailed below:
Mr PA Chitsime MK1.8million
Ms R M Mkandawire MK0.1 million Mr RK Phiri MK1.3million
Mr P W Khembo MK0.1 million Dr R Harawa MK1.3million
Mr A A Chioko MK1.3million
Mr J Patel MK1.3million
Mr AW J Chinula MK0.7million Dr N R Kanyongolo MK0.7million
Mrs C Mtonda MK0.7million
38. Employee benefits
Severance pay provision 2012 2011 MKm MKm Balance at 1 January 159 690 Provision raised/(reversed) during the year - (531) Payments made during the year (41)
Balance at 31 December 118 159
Severance pay provision is for outstanding court cases and retired employees before the amendment of the Malawi Employment Act 2010.
e Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2
39. Inflation and exchange rates
The foreign currencies affecting most the operations of the Group are United States Dollar, British Pound and South African Rand. The average of selling and buying exchange i.e. rate at year end of these currencies and the country's national index price which presents inflation rate were as follows:
2012 2011 2010
United States Dollar (USD) 336.71 163.75 150.80 Sterling Pound (GBP) 558.72 252.44 233.67
South African Rand (ZAR) 41.61 20.03 22.72 Inflation rates as at 31 December (%) 34.6 8.9 6.4
As at the date of approval of the financial statements, the exchange rates were as follows:
United States Dollar (USD) 386.12 Sterling Pound (GBP) 603.30 South African Rand (ZAR) 45.68
40. Subsequent events Subsequent to year end, nothing has happened requiring adjustments to and/or disclosure in these financial statements. / ialaka Service Centre Ginnery Corner Branch Mponela Sevice Centre : P.O Box 306 Balaka. P.O Box 30050 Blantyre 3. P 0 Box 109 Mponela • Tel:+265(0)1552422 Te!:+265(0)1871255 Tel: +265 (0) 1 286 382 : Fax:+265(0)1552593 Fax:+265(0)1876497 Fax: +265 (0) 1 286 381 Email: [email protected] Email: [email protected] Email: [email protected] Isgpjljiljjgj WS^SM&^BMVtX^^^K^SS^i^^W^Si^^SSM. Biililltll » j Blantyre Branch Kanengo Service Centre Mwanza Service Centre : P.O Box 1 297 Blantyre. P.O Box 1297 Lilongwe P.O Box 158 Mwanza • Tel:+265(0)1820222 3 Tel:+265(0)1711 740 Tel:+265(0)1432341 • Fax:265(0)1824107 Fax:+265(0)1711 740 Fax:+265(0)1432351 Email: [email protected] E-mail: [email protected] Email: [email protected]
Bwaila Service Centre Karonga Service Centre Mzimba Service Centre : P.O. box 522 Lilongwe. P 0 Box 104 Mzuzu P.O Box 138 Mzimba 5 Tel 01 724616/ 01724665 Tel:+265 1 362 455 Tel:+265(0)1 342400 J Fax 01 724 614 Fax+265 01 362 433 Fax:+265(0)1 342466 Email: [email protected] Email: [email protected] Email: [email protected]
Capital City Branch Kasungu Service Centre Mzuzu Branch • P.O Box 30386 Lilongwe 3. P.O Box 100 Kasungu P.O Box 104 Mzuzu • Tel:+265(Q)1770988 Te!:+265(0)1253257 Tel:+265(0)132366 : Fax:+265(0)1773497 Fax:265(0)1 253570 Fax:+265(0)131 2574 . Email: [email protected] Email: [email protected] Email: [email protected]
Chichiri Service Centre KIA Sevice Centre Nchalo Service Centre : P.O Box 32070 Blantyre 3 P 0 Box 30386 Lilongwe 3 P 0 Box 30050, Blantyre 3 Tel:+265{0)1 878170 Tel: +265 (0) 1 700 005 Tel:+265 (0) 1 424 417 ; Fax:+265(0)1873462 Fax:+265 (0) 1 700 016 Fax: +265 (0) 1 424 333 Email: [email protected] Email: [email protected] Email: [email protected]
City Mall Service Centre Lilongwe Branch Ntcheu Service Centre P 0 Box 522 Lilongwe. P.O Box 522 Lilongwe P.O Box 31 2 Ntcheu Tel: +265 (0) 1 754 601 Tel:+265(0)1755277 Te!:+265(0)1 235455 Fax: +265 (0) 1 754 606 Fax:+265(0)1755738 Fax:+265(0)1 235332 Email: [email protected] Email: [email protected] Email: [email protected]
Corporate Banking Centre Limbe Branch Salima Branch P.O Box 5091 Limbe. P.O Box 5091 Limbe P.O Box 26 Salima. Tel:+265(0)1 670802 Tel:+265(0)1840166 Tel:+265(0)1262544 Fax:+265(0)1676591 Fax:+265(0)1844406 Fax+265(0)1262024 Email: [email protected] Email: [email protected] Email: [email protected]
Dedza Service Centre Luchenza Service Centre Zomba Branch P.O Box 5 Dedza P.O Box 1 54 Limbe P.O Box 302 Zomba Tel:+265(0)1223346 Tel:+265(0)1476448 Tel:+265(0)1 524144 Fax:+265(0)1 223634 Fax:+265(0)1476078 Fax:+265(0)1 524088 Email: [email protected] Email: [email protected] Email: [email protected]
Dwangwa Service Centre Mangochi Service Centre P.O Box m62 Dwangwa P.O Box 106 Mangochi Tel:+265(0)1 295255 Tel:+265(0)1 594377 Fax:+265(0)1295255 Fax:+265(0)1 594764 Email: [email protected] Email: [email protected] Standard Bank Limited Annuai Report for the year ended 31 December 20 I 2 NOTES