TPB Bank PLC
ANNUAL REPORT 2019
TPB Bank PLC
Head Office LAPF Towers, Kijitonyama Bagamoyo Road, P. O. Box 9300 Dar Es Salaam Tanzania Telephone: +255 22 2162940 Fax: +255 22 2114815 E-mail [email protected] Website: www.tpbbank.co.tz ANNUAL REPORT 2019
CREATING AND DELIVERING VALUE
Dear Valued Stakeholders,
I strongly believe that public institutions need to create value for their stakeholders, in a sustainable way. TPB Bank is at the forefront of embracing this philosophy and has strove to consistently be a proactive entity in building the United Republic of Tanzania. We firmly believe that over and beyond our zeal for financial inclusion, we must also make a positive socio-economic impact on Tanzanian economy through our every-day operations.
Our contribution in 2019 was one that we are proud of, and the following are some of our substantial achievements:
· TPB paid out a total dividend of TZS 1.2 billion to our shareholders with TZS 1 billion paid to our majority shareholder, the Government of the United Republic of Tanzania. Dr. Edmund Bernard Mndolwa · Corporate tax payments amounting to TZS 7.1 billion remitted to Tanzania Revenue Authority (TRA), up by 38% from the TZS 5.1 billion paid in 2018.
· Employment of 925 Tanzanians.
· Continued in-roads into the rural and un-banked populations through a combination of brick and mortar technology. This has seen a realization of 37 branches, 40 mini branches, 320,000 mobile banking customers, 75 ATM’s and 1,438 point of sale machines.
· A total of TZS 218 billion lent out to 50,000 pensioners, ensuring that they remain in the formal financial system and can engage in various socio-economic activities, promoting their livelihood after retirement.
While I am very proud of the socio-economic value TPB Bank creates, this success is an impetus that we must and will continue to do more to ensure our various stakeholders receive the very best that the bank has to offer. We are fully committed to ensuring a lasting impact on the great people of Tanzania.
Dr. Edmund Bernard Mndolwa
Chairman - Board of Directors TPB Bank PLC
31st March 2020
ii TPB Bank PLC
His Excellency the President of the United Republic of Tanzania, Hon. Dr. John Pombe Joseph Magufuli receiving a dummy cheque from TPB Board Chairman Dr. Edmund Bernard Mndolwa and TPB CEO Mr. Sabasaba Moshingi representing the bank’s dividend payment to the Government of the United Republic of Tanzania from 2018 operations. Second left is Hon. Job Ndugai, Speaker of Parliament and far left is Hon. Dr. Phillip Mpango, Minister for Finance and Planning.
Her Excellency the Vice-President of the United Republic of Tanzania, Ms. Samia Suluhu Hassan in a joint photo with TPB EXCO members during the launch of Tabasamu Account. On her left is Hon. Dr. Ashatu Kijaji, Deputy Minister for Finance and Planning, on her right is TPB Board Chairman - Dr. Edmund Mndolwa and on her far right is TPB CEO Mr. Sabasaba Moshingi.
iii ANNUAL REPORT 2019
OUR VISION
“To be the leading bank in the provision of affordable financial services and promoting financial inclusion in Tanzania. ”
OUR MISSION “To aid in the transformation of the socio-economic landscape of Tanzania by providing and promoting financial solutions in a sustainable way while ensuring stakeholder expectations are met.”
OUR VALUES TPB’s has identified its core values which will shape the culture, define the character of TPB and guide how TPB’s people behave and make decisions going forward. Customer Focus: All our activities are primarily focused on customers’ needs and their fulfillment; we invest to enhance their experience of banking with us. The market we serve determines our choice of products and services and the way we deliver them.
Trustworthy: Our people conduct themselves ethically in a manner that is above reproach to win the trust of our customers and stakeholders.
Professionalism: We always aspire to conduct our business to the highest standard and compliance with best banking practices and regulations.
Teamwork: Our business units will work together in harmony so as to make sure our customers get the best value for money in the services and products we offer.
Quality: Quality is the focus of everything we do. Our continual innovation, spirit of integration, and high standards improve quality in every aspect of our bank.
iv TPB Bank PLC
BANK INFORMATION LEGAL STATUS
TPB Bank is a Public Limited Company incorporated under the Companies Act, 2002 on 29th March 2016, and awarded a certificate of incorporation number 125056. The bank is licensed by the Bank of Tanzania.
PHIYSICAL ADDRESS POSTAL ADDRESS
Head Office LAPF Towers TPB BANK PLC Bagamoyo Road P. O. Box 9300 Dar Es Salaam Dar Es Salaam Tanzania Tanzania Telephone: +255 22 2162940 Fax: +255 22 2114815 E-mail [email protected] Website: www.tpbbank.co.tz
AUDITORS Controller and Auditor General National Audit House Samora Avenue/Ohio Street P.O. Box 9080 Dar es Salaam.
TPB LAWYERS
1. M.A. Ismail & Company 5. Rex Attorneys Plot No. 16, Malik Road, Upanga Rex House, P.O. Box 1553 145 Magore Street, Upanga, Dar es Salaam. P.O.Box 7495, Dar es Salaam. 2. Astute Law Attoneys, Plot No 12, Block K, 6. B & E Ako Law, Nyanza Building, 3rd Floor, Tanhouse Tower (4th Floor) P.O. Box 311, Plot No 34/1-Ursino South Mwanza. P.O.Box 2475 Dar es Salaam
3. Kailu Chambers Advocates, 7. Gabriel & Co, Plot No 75/6, Block S, P l o t N o 1 7 3 6 , K a h a m a R o a d , M a s a k i P.O. Box 127, P.O.Box 106204 Mwanza. Dar es Salaam.
4. Legis Attorneys, 8. Amicus Attorneys 4th City Plaza Building, Raha Towers, 1st Floor, LAPF Building 145 Magore Street, Upanga, P.O.Box 7219 P.O. Box 3750, Dar es Salaam. Dar es Salaam.
1 ANNUAL REPORT 2019 OUTREACH
BRANCHES 37 Branches 40 Mini-branches
WESTERN UNION MONEY TRANSFER 37 Branches of TPB Bank 40 Mini-branches of TPB Bank 1 Dedicated location for Western Union Money Transfers at YWCA Branch 87 Tanzania Posts Corporation Offices 8 Branches of DCB Commercial Bank 2 Branches of Mwanga Community Bank 3 Branches of Uchumi Commercial Bank 4 Branches of Mucoba Bank Plc 25 Branches of Azania Bank Limited 9 Branches of Amana Bank 3 Branches of Maendeleo Bank 11 Branches of Mkombozi Bank Plc
ATM NETWORK 75 TPB Bank’s own ATMs 250 Umoja ATMs
TPB POPOTE POS NETWORK 49 TPC Agents operating via Selcom 1,448 Selcom Individual Agents, and 87 Mobile Agent operators.
2 TPB Bank PLC
FIVE - YEAR FINANCIAL REVIEW
(Figures stated in Billion Shillings)
2019 2018 2017 2016 2015 Dec. Dec. Dec. Dec. Dec.
Interest Income 100.2 95.9 83.1 66.8 49.2
Non-Interest Income 29.5 22.4 23.7 24.9 25.1
TOTAL INCOME 129.7 118.3 106.8 91.7 74.5
Impairment for Loans (10.5) (13.7) (11.2) (7.1) (4.4)
PROFIT BEFORE TAX 23.0 17.1 18.4 15.7 12.0
PROFIT AFTER TAX 15.9 12.7 12.7 10.8 8.3
LOANS AND ADVANCES 420.6 412.8 325.1 297.6 251.9
TOTAL DEPOSITS 517.7 453.5 382.6 337.4 322.2
SHAREHOLDERS’ FUNDS 98.9 82.9 59.8 51.8 41.1
TOTAL ASSETS 647.2 562.3 458.3 400.7 370.7
OTHER INDICATORS
Core Capital to total Risk Weighted Assets 15.86% 13.98% 12.00% 12.10% 12.46%
Total Capital to total Risk Weighted Assets 15.86% 14.86% 12.92% 13.00% 13.32%
Return on Average Assets 2.87% 2.26% 2.87% 4.2% 2.23%
Return on average Shareholders’ Funds 18.40% 15.34% 20.85% 31.5% 20.13%
Number of Branches plus Mini branches 77 75 67 60 59
Number of Staff 925 888 718 700 660
3 ANNUAL REPORT 2019
FINANCIAL HIGHLIGHTS
TPB Bank has had strong financial performance over the last decade on all key financial parameters - revenue, profit before tax, loans and advances, deposit mobilization, total assets and shareholders fund. TPB has strove to consistently deliver superior financial performance as a basis to aid TPB in delivering reliable, timely and world class solutions. This impressive financial performance is underpinned by product diversification, improved service delivery and a key focus on innovation.
During the period 2010 – 2019, total income has grown by 535% while profit before tax has multiplied by factor of 26. Total deposits have more than quadrupled whereas loans and advances have grown by 548%. The bank’s balance sheet has grown by 429% while the shareholders fund has grown by a factor of 12.9.
Revenue - TZS Billion 150 130 118 107 100 92 75
50 53 31 39 15 20 25 16 16 0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Profit Before Tax - TZS Billion 25 23.0
20 18.4 17.2 15.7 15 12.0 10.3 10 7.0 5.7 5 3.8 0.4 0.9 0.5 0.9 0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total Deposits - TZS Billion 600 518 500 454 383 400 337 322 300 265 173 200 146 109 121 100 74 80 88
0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
4 TPB Bank PLC
FINANCIAL HIGHLIGHTS
Loans and Advances - TZS Bilion
500 421 413 400 325 298 300 252 196 200 101 120 100 46 65 66 36 38 0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total Assets - TZS Billion
800 647 600 562 458 371 401 400 298 167 200 136 201 84 86 97 121 0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Shareholders Fund - TZS Billion
120.0 98.9 100.0 82.9 59.8 80.0
60.0 51.8 41.0 40.0 29.8 23.0 16.9 20.0 7.7 11.3 6.0 7.0 5.0 0.0 Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
5 ANNUAL REPORT 2019
COMPOSITION OF SHAREHOLDING AS AT 31 DECEMBER 2019
COMPOSITION OF ASSETS AS AT 31 DECEMBER 2019
COMPOSITION OF LIABILITIES AND EQUITY AS AT 31 DECEMBER 2019
COMPOSITION OF INVESTMENTS AS AT 31 DECEMBER 2019
6 TPB Bank PLC
TABLE OF CONTENTS
CONTENTS Page Creating and delivering value ii
Our Vision, Our Mission & Our Values iv
Bank Information 1
Outreach 2
Five - Year Financial Review 3
Financial Highlights 4
Letter Of Transmittal 8
Statement by The Chairman of The Board of Directors 9
Statement by The Chief Executive Officer 11
Milestones During 2019 13
The Board Of Directors 22
Executive Management 24
Abbreviations 29
Corporate information 30 - 31
Report of the Directors 32
Corporate Governance 33 – 41
Statement of Directors’ Responsibilities 42
Declaration of Head of Finance 43
Report of The Controller and Auditor General 44
Financial statements:
Statement of profit or loss and other comprehensive income 48
Statement of financial position 49
Statement of changes in equity 50
Statement of cash flows 51
Notes to the financial statements 52 – 115
7 ANNUAL REPORT 2019
LETTER OF TRANSMITTAL
TPB BANK PLC P. O. Box 9300 Dar es Salaam
31st March 2020
Hon. Dr. Philip Mpango, Minister for Finance and Planning, The United Republic of Tanzania, Treasury Square Building, P.O. Box 2802, 40468 DODOMA.
Honorable Minister,
In accordance with the Companies Act, 2002 I have the honor to submit, on behalf of the Board of Directors, the Annual Report and Audited Statement of Accounts of the TPB Bank Plc for the year ended 31st December, 2019.
Yours sincerely, TPB Bank PLC
Dr. Edmund Mndolwa Chairman - Board of Directors
8 TPB Bank PLC
Ndugai and the Minister for Finance and Planning, STATEMENT BY THE CHAIRMAN OF Hon. Dr. Philip Mpango. As part of my tenure as Board Chairman, I will ensure that the bank maximizes shareholders’ value and makes a viable THE BOARD OF DIRECTORS and sustainable financial return to the bank’s investors.
It was a special privilege to have the Vice President, Honourable Samia Suluhu Hassan as our Guest of Honour during the launch of Tabasamu Account. We were also joined by Honourable Dr. Ashatu Kijaji, the Deputy Minister of Finance and Planning. As I previously noted, our merger with the former Tanzania Women’s Bank provided an opportunity to expand our outreach to empower and strengthen women socio-economically. The Tabasamu Account presents a path that women at the bottom of the pyramid can follow, toward uplifting their lives.
At this juncture, I feel I must talk about two other new products that were launched in 2019. M-Koba and Songesha really speak to the level of innovation that has come to typify TPB Bank. Both products were launched in partnership with Vodacom Tanzania Limited and are a true testament of the bank’s standing in the market. M-Koba allows a non-TPB customer to save as part of a group while Songesha is an overdraft facility, providing access to credit in a quick and stress-free way.
The two products are market firsts in Tanzania, with new ground broken and a higher standard set in terms of what collaboration can deliver. It is DR. EDMUND BERNARD MNDOLWA very heartening to see firms that are in a similar Our esteemed customers, business partner’s, competitive space coming together to pool their shareholders and stakeholders: It is with immense resources and share their expertise with the result pride that I present to you the Annual Report of being such pioneering solutions. TPB Bank PLC for the year ended 31st December 2019. As the decade came to a close, the bank I would like to welcome on board two new members achieved what can be termed nothing short of to the Board of Directors at TPB Bank. Mr. Gilbert phenomenal, as profit before tax grew from TZS William Chawe represents the Public Service Social 0.9 billion in 2010 to TZS 23.0 billion in 2019 Security Fund (PSSSF) that became one of TPB’s – growth by a factor of 25.5. Year-on-year, this shareholders after the merger with the former equates to an increase of 34% on the TZS 17.2 Twiga Bancorp (Twiga). Mr. Chawe, a holder of a billion profit realized in 2018. Master of Science in Information Technology and Management is the Director of Information and I was greatly honored to present TPB’s dividend Communication Technologies at PSSSF. payment of TZS 1.0 billion from the bank’s 2018 operations to His Excellency, the President of Mr. Bezil Protas Ewala represents the Workers the United Republic of Tanzania, Dr. John Pombe Compensation Fund (WCF) where he is the Director Joseph Magufuli. Accompanying us at the handover of Finance, Planning and Investments. WCF like ceremony was the Speaker of Parliament, Hon. Job PSSSF became a TPB shareholder after the merger
9 ANNUAL REPORT 2019
STATEMENT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
with former Twiga BankCorp. Mr. Ewala has a Masters benchmark visit in 2019. Our partners at Botswana Degree in Business Administration and is a Certified Savings Bank visited us in early 2020 as part of their Public Accountant (Tanzania). I believe both Mr. Chawe drive to see what part of our journey can be impacted and Mr. Ewala will make an immense contribution to as they start their own transformation journey to the governance and trajectory of TPB. becoming a national asset. This is a follow-up visit from the one they made in 2018. The year 2019 also signaled the end of the bank’s Strategic Plan covering the period 2016 - 2019. I look All these successes could not be completed without forward to the next six years as we implement the the support of the following organs: The Ministry of bank’s new Strategic Plan covering the period 2020 Finance and Planning, the Treasury Registrar’s Office, - 2025. Our focus over the medium term is to better Bank of Tanzania and our business partners. A special serve our more traditional customers and new market acknowledgement to our customers who have been segments such as corporate clients, re-engineer what extremely loyal to us - thank you. I would like to extend and how we do things and forge deeper partnerships my sincere thanks to the Board of Directors for their centred on innovation. We also plan to leverage support and insights in taking this bank to new heights. our most important resource people by creating an environment where they can thrive and reach their full To the CEO of TPB Bank PLC, Mr. Sabasaba Moshingi, potential. thank you for your effort in moving the bank forward. To the staff of the bank, your efforts are valued and During the course of the year, I was able to attend the recognized. My hope is that we will tackle 2020 with launch of our mini branches in Nzega and Karagwe as the same passion and zeal as we did in 2019 and make well as have dinner with our staff from our branches in 2020 an even more unforgettable year. Mwanza. It was refreshing to meet staff and see their drive and passion for the bank. This is a call for the bank to continue to grow and provide the appropriate opportunities for our staff.
My confidence is further buoyed by our regional and international partnerships. The bank hosted the Board of Directors of Kenya Post Office Savings Bank for a
Dr. Edmund Bernard Mndolwa Chairman - Board of Directors TPB Bank PLC 31st March 2020
10 TPB Bank PLC
STATEMENT BY THE CHIEF EXECUTIVE OFFICER
TPB Bank as they bring-in their expertise to improve the governance and performance of the bank.
The bank’s four year Strategic Plan covering the period 2016 – 2019 has come to an end and the bank has put in place a six year Strategic Plan covering the period 2020 - 2025. The focus of the 2016 - 2019 Strategic Plan was on major technology enhancements, re-capitalizing the bank and lowering the physical proximity gap.
The Strategic Plan 2020 - 2025 focuses on creating a deeper and more emotive connection with TPB’s target market and simplifying and/or removing processes toward making banking with TPB a more tranquil affair. What is more so exciting is that this is a plan developed in its entirety by internal resources. The strategic objectives of this plan are:
· SO1: Financial Performance. · SO2: Brand Repositioning. · SO4: Process Improvement. · SO4: Human Capital Management. Needless to say, I am very excited about the next six years as we implement our new Strategic Plan. Especially against the backdrop of the very successful implementation of our previousStrategic Plan. Some of the successes we were able to register during the implementation of the previousStrategic Plan are; the upgrade of our core banking system from Equinox 4.3 to Rubikon, acquiring our own MR. SABASABA K. MOSHINGI mobile gateway, repealing the Tanzania Postal Bank Act and registering the bank under the Companies Our esteemed customers, business partners Act as and re-branding the bank as and shareholders, I am honored to share our TPB Bank PLC . performance for 2019 as contained in the ‘TPB Bank’ Audited Accounts of TPB Bank PLC for the year Our staff continue to innovate in ways that are st ended 31 December 2019. As I share the 2019 refreshing and quite literally ‘outside the box’ as performance, I am profoundly delighted that TPB we expand our product suite. The year started Bank has maintained its of outstanding track record with the launch of Tabasamu Account where the performance year in year out since the beginning Vice President of The United Republic of Tanzania, of its transformation that commenced back in 2011. Honorable Samia Suluhu Hassan was our Guest of in 2019 the bank attained a record profit before tax Honour. Honorable Dr. Ashatu Kijaji, the Deputy of TZS 23.0 billion, a 34% increase from TZS 17.2 Minister for Finance and Planning was also in billion realized in year 2018. In a nutshell, despite attendance. Two ‘new to market’ strategic products many challenges that the bank encountered during that followed were M-Koba, a group deposit 2019, we can proudly look back with a deep sense account and Songesha, an overdraft facility. The of accomplishment at what we achieved and how it two were both done in partnership with Vodacom can truly be seen as momentous results. Tanzania Limited. Let me start by welcoming our two new Board The bank also launched Wavuvi Account to Members, Mr. Gilbert William Chawe from the help Tanzanians in the fishing value-chain. The Public Service Social Security Fund (PSSSF) and Mr. products provide a structured way to save and keep Bezil Protas Ewala from Workers Compensation depositors’ money safe. The bank is now a mortgage Fund (WCF). I believe they will be a major asset to
11 ANNUAL REPORT 2019
STATEMENT BY THE CHIEF EXECUTIVE OFFICER
financeprovider, ensuring that Tanzanians can have in money changing business. TPB was one of the access to affordable accommodation. The bank first movers into the bureau-de-change business, began initial work on VISA Card ‘acquiring and which is now conducted at all of TPB’s branches and issuing’, and this is projected to be completed in mini branches countrywide. 2020. The bank became a super-agent for Tanzania Telecommunications Company Limited’s T-Pesa Looking at operating results, the bank’s performance and also integrated its mobile banking product in 2019 was nothing short of excellent. The revenue TPB Popote with Zantel’s Ezy Pesa. This is a way of grew to TZS 130 billion from TZS 118 billion in 2018, improving the banks relationship with mobile money growth of TZS 12 billion or 10%. Profit before tax operators, by creating an enabling environment to jumped to TZS 23.0 billion from TZS 17.2 billion, a promote financial inclusionin the country. 34% leap. Loans and advances grew from TZS 413 billion to TZS 421 billion, an upward movement The bank relocated several of its mini branches of 2%. Total deposits grew by 14% from TZS 454 during the course of 2019: Pemba, Karagwe, and billion on 31st December 2018 to TZS 518 billion. Masasi were re-located to ultra-modern premises. Total assets grew from TZS 562 billion to TZS 647 The bank’s Usa River and Mpanda mini branches billion, recording a growth of TZS 85 billion or relocation will be done in early 2020. During the 15%. Shareholders Fund grew 19% from TZS 82.9 year, the bank conducted minor upgrades at its billion to TZS 98.9 billion. This reflects a significant LAPF branch in Dodoma while Sengerema mini growth on all key financial parameters, and I am branch was renovated and upgraded to a fully- very confident that the bank has the foundation fledged branch. The bank launched operations at for sustained progression in the future. Owing to the Manyoni Post Office as a mini branch and plans successful business, the bank also paid a dividend to start operations at Kibaha Post Office early in totaling TZS 1.2 billion, out of 2018 operations. 2020. The bank rolled out 3 new ATM’s at Karagwe, Masasi and Manyoni, bringing the bank’s total All these milestones could not be achieved were number of ATM’s to 75, 30% of the 250 ATM’s under it not for the support of the Ministry of Finance the Umoja-Switch. and Planning, the Treasury Registrar’s Office, our main regulator - the Bank of Tanzania, our business In order to improve the signage of TPB locations partners as well as our developmental partners. in post offices, joint-branding with TPC was done at Ikwiriri, Kigamboni, Kondoa, Kibondo, Ifakara, I would like to extend my sincere thanks to the Board Korogwe, Geita, Kyela, Chato, Makambako, Mbinga, of Directors under the leadership of Dr. Edmund Bagamoyo, Tunduru, Same, Newala, Nachingwea, Bernard Mndolwa for their support and guidance. Mpwapwa, Manyoni, Tarime and Mpanda, with The Board has truly been a vehicle of imparting Arusha Meru, Pamba and Tunduma to be completed wisdom to us. early in 2020. During the year the bank continued to execute its donor funded projects absolutely well. I wish to make a special recognition of our The Savings at the Frontier project is now operational customers, who have been extremely loyal to the in 15 locations: Iringa, Mtwara, Ifakara, Kyela, bank and are the reason for what the bank is today. Morogoro, Songea, Lindi, Njombe, Makambako, To members of staff of TPB, thank you for your hard Mbinga, Tunduru, Usa River, Masasi, Nachingwea work, dedication and commitment. Let us make and Mbeya. In-roads continue to be made into the 2020 an even more successful year. agricultural value-chain in collaboration with the Tanzania Agricultural Development Bank (TADB) Credit Guarantee Scheme, Alliance for Green Revolution Africa funding and backing from the Private Agricultural Sector Support Trust.
As Bank of Tanzania (BOT) began to clean-up Mr. Sabasaba Kitewita Moshingi the bureau-de-change sub-sector and ensure Chief Executive Officer compliance, banks have taken a more proactive role TPB Bank PLC
31st March 2020
12 TPB Bank PLC
MILESTONES DURING 2019
1.0 Branch Refurbishment
TPB Board Chairman Dr. Edmund Mndolwa with Kagera Regional Commissioner Mr. Marco Gaguti during inauguration of Karagwe Mini Branch.
TPB Board Chairman Dr. Edmund Mndolwa and TPB CEO Mr. Sabasaba Moshingi flank Hon. Mr. Aggrey Mwanri, Regional Commissioner for Tabora during the launch of Nzega Mini Branch. To the left of TPB CEO is Member of Parliament for Nzega and Deputy Minister for Agriculture Hon. Hussein Bashe.
13 ANNUAL REPORT 2019
MILESTONES DURING 2019
Mtwara Regional Commissioner Hon. Gelasius Byakanwa about to cut the tape during the launch of Masasi Mini Branch. Together with him is TPB CEO Mr. Sabasaba Moshingi, TPB Director of Finance Ms. Regina Semakafu, TPB Director of Strategic Planning Mr. Muondakweli Kaniki and Masasi Branch Manager Mr. Julius Mataso.
14 TPB Bank PLC
MILESTONES DURING 2019
2.0 New Products
Deputy Minister for Livestock and Fisheries (Center) Hon. Abdallah Hamis Ulega with TPB CEO Mr. Sabasaba Moshingi in a group photo during the launch of Wavuvi Account.
15 ANNUAL REPORT 2019
MILESTONES DURING 2019
Vodacom Tanzania Limited CEO Mr. Hisham Hendi shaking hands with TPB Director of Marketing and Business Development Mr. Deogratius Kwiyukwa during the official launch of M-KOBA.
Second right is Vodacom Tanzania Limited M-Commerce Director Mr. Epimack Mbeteni holding hands with TPB Director of Marketing and Business Development Mr. Deogratius Kwiyukwa on the right side and TPB Director of Risk Management and Compliance Mr. Moses Manyatta on the left side together with other senior officials, during the official launch of SONGESHA. 16 TPB Bank PLC
MILESTONES DURING 2019
Deputy Minister of Lands, Housing and Human Settlement Development Hon. Angeline Mabula with TPB CEO Mr. Sabasaba Moshingi and TPB’s Director of Marketing and Business Development Mr. Deogratius Kwiyukwa during the launch of Housing Microfinance loans.
3.0 Respected Local Bank
TPB’s CEO Mr. Sabasaba Moshingi talking with The Prime Minister Hon. Kassim Majaliwa Majaliwa, behind is TPB’s Director of Legal Services Mrs. Mystica Mapunda Ngogi and Company Secretary and Director of Retail and Business Banking Mr. Henry Bwogi when they paid him a courtesy call in Dodoma.
17 ANNUAL REPORT 2019
MILESTONES DURING 2019
From left is Theobald Sabi, MD of NBC, Sabasaba Moshingi CEO for TPB, Abdulmajid Nsekela CEO and MD of CRDB, Violet Mordichai MD of AAR Insurance, Sanjay Rughani CEO of Standard Chartered Tanzania, Ruth Zaipuna Ag. MD of NMB and IFC Tanzania Resident Representative Mr. Frank Ajilore during an official launch of finance2equal program. TPB Bank is a participating bank on the Finance2Equal program.
18 TPB Bank PLC
MILESTONES DURING 2019
4.0 Corporate Social Responsibility One of the project that touched on improving the education environment of students was the renovation of 11 classes at Busisi Primary School in Sengerema, at a cost of TZS 10.4 million.
The classrooms before TPB intervention
Block of classrooms at Busisi Primary school in Sengerema, Mwanza after renovation.
19 ANNUAL REPORT 2019
MILESTONES DURING 2019
TPB CEO Mr.Sabasaba Moshingi accompanied with Tanga DC Thobias Mwilapwa during the handing over event of 50 desks to Pongwe Primary School in Tanga.
TPB CEO Mr. Sabasaba Moshingi listening to Sumbawanga prison officials during the handing over of 200 bags of cement which will assist in the construction of a new prison ward, capable of holding 200 inmates.
20 TPB Bank PLC
MILESTONES DURING 2019
TPB Board Chairman Dr. Edmund Mndolwa handing over 50 iron sheets and 100 bags of cement to Rumanyika Primary School in Karagwe district.
TPB Director of Technology and Operations Mr. Jema Msuya handing over a donation of electrical equipment to SSP Simon Pasua of Zanzibar Police Force. The materials will be used to assist in the finishing work of six houses being built for the Fuoni police officers in Zanzibar.
21 ANNUAL REPORT 2019
THE BOARD OF DIRECTORS
Dr. Edmund Bernard Mndolwa has over 40 years’ experience in auditing. Dr. Mndolwa has an immense interest and built expertise in tax, strategy, corporate governance, banking and finance and policy formulation. Dr. Mndolwa holds a Master of Business Administration degree from Mzumbe University and a Doctorate of Philosophy (Finance) from the Commonwealth Open University. Dr. Mndolwa is a Fellow of the Chartered Association of Certified Accountants, a Certified Fraud Examiner and having successfully completed the Corporate Governance Course conducted by the Commonwealth Association for Corporate Governance, Dr. Mndolwa is eligible to be appointed a director in any company in the Commonwealth. Dr. Mndolwa is a former partner at Deloitte and a former partner at PwC and is currently a partner at Globe Accountancy Services. Dr. Mndolwa has previously served as Board Chairman at National Insurance Corporation, Board Chairman DOCTOR EDMUND MNDOLWA at KCB Bank Tanzania and Board Chairman at TPB Bank shortly Board Chairman after it began operations as Tanzania Postal Bank. Dr. Mndolwa has served as Vice Chairman of Consolidated Holdings Company, and has been a Board Member at both the National Bank of Commerce and the Public Procurement Regulatory Authority. Dr. Mndolwa is currently Chairman of Jumuiya ya Wazazi in the Chama cha Mapinduzi.
Mr. Seif Shaaban Seif represents the Revolutionary Government of Zanzibar. He works as a Commissioner of Public Investments and Stock Verification in the Ministry of Finance, Revolutionary Government of Zanzibar. Mr. Seif has a Post Graduate Diploma in Tax Management and an Advanced Diploma in Tax Management, both from the Institute of Finance and Management. Mr. Seif has vast experience on Tax matters, having attended various courses, workshop and short courses inside and outside the country on tax, Value Added tax and Revenue collection.
MR. SEIF SHAABAN SEIF Board Member
22 TPB Bank PLC
Mr. Aman Mathew Ngaga represents the POSTA NA SIMU SACCOS where he has over ten years experience as Chairman of the Supervisory Committee, and is also a Board Member. Mr. Ngaga holds a Master of Business Administration degree in Finance and Banking from Mzumbe University and a Bachelor of Science degree from Makerere University. Mr. Ngaga currently works for Tanzania Telecommunications Company Limited as a Revenue Assurance Analyst and Credit Controller MR.AMAN MATHEW NGAGA with experience in budgeting, investment analysis, financial Board Member planning and credit management.
Mr. Daniel Macrice Mbodo represents the Tanzania Post Corporation where he works as General Manager Corporate Resources Management. Mr. Mbodo has an Advanced Diploma in Accounting from the Institute of Finance Management and is currently pursuing his Masters degree in Business Administration (Corporate Management) at Mzumbe University. He is a Certified Public Accountant (CPA T), a Certified Director, Certified Procurement and Supplies Professional of Tanzania, Certified Internal Auditor MR. DANIEL MACRICE MBODO and a Certified Fraud Examiner. Board Member
Mr. Gilbert William Chawe represents the Public Service Social Security Fund where he works as the Director of Information and Communication Technology. Mr. Chawe holds a Masters of Science degree in Information Technology and Management from Avinashiligam University in collaboration with IFM, and Advanced Diploma in Computer Science from the Institute of Finance Management. He has more than ten years of experience working in pension funds. MR. GILBERT WILLIAM CHAWE Board Member
Mr. Bezil Protas Ewala represents Workers Compensation Fund where he works as Director of Finance, Planning and Investments. He holds a Masters degree in Business Administration (Finance) from University of Dar Es Salaam and Advanced Diploma in Accountancy from Institute of Finance Management. Mr. Ewala is a Certified Public Accountant (CPA T) ACPA with twenty years experience in finance, accounting, investments and planning. Prior to WCF, Mr Ewala also worked as Head of Finance and Accounts at Fair MR. BEZIL PROTAS EWALA Competition Commission for ten years. Board Member
23 ANNUAL REPORT 2019
EXECUTIVE MANAGEMENT
Mr. Moshingi joined TPB bank PLC in 2011 as Chief Executive Officer. Prior to that Mr. Moshingi was Regional Head of Consumer Banking Operational Risk and Sales Governance for Standard Chartered Bank from 2007 in Northern Gulf, Levant and Oman - based in the Kingdom of Bahrain . Mr. Moshingi, a seasoned banker is also a Board Member and Group Vice President - Presidents Committee of the World Savings and Retail Banking Institute (WSBI Headquartered in Brussels, Belgium), Governing Council Member and Representative in East African Community of the Tanzania Bankers Association, Governing Council Member and Chairman Education Committee of the Tanzania Institute of Bankers, MR. SABASABA KITEWITA Board Member of the Association of Savings Banks of East Africa, MOSHINGI Board Member and Chairman of the UmojaSwitch, Board Member Chief Executive Officer Association of Tanzania Employers (ATE), an Advisory Board Member of AIESEC Tanzania and an Eisenhower Fellow. Mr. Moshingi is a certified chartered banker with a Master of Business Administration degree (Finance) from the University of Dar-es-Salaam.
Mr. Nyenyembe serves as the Director of Internal Audit at TPB Bank PLC since year 2011. Prior to that he worked as Chief Manager Audit since year 2006. He is a guru in Auditing, Risk management and Governance in both Banks and Financial Institutions. Additionally, he performs audits for Umoja Switch Company Ltd which provides ATM services for over fifty banks across the country. Mr. Sosthenes sits in the Audit Committee of the E-Government Public Institution as Board Member. He holds a Master of Business Administration (Finance) from the University of Dar-es-Salaam and professionally is the Associate Certified Public Accountant ACPA (T) and registered as Director by Institute of Directors- Tanzania (IoDT). MR SOSTHENES F. NYENYEMBE Director of Internal Audit
Mr. Manyatta joined TPB in 1994 as Banking Operations Officer. During his career in the bank Mr. Manyatta rose through various positions to key positions such as Chief Economist in 2006. In 2009 Mr. Manyatta was appointed Director of Risk Management & Compliance, a position held to-date. Mr. Manyatta holds a Bachelor of Arts degree (Economics) (Hons) from the University of Dar-es-Salaam, a Post Graduate Diploma (Strategic Planning and Finance) from The Institute of Housing and Urban Development Studies in Rotterdam (The Netherlands) and a Master of Science (Economics) from the Inter University Institute of Macau (China) (now St. Joseph University). MR. MOSES MANYATTA Mr. Manyatta is a certified member of Institute of Directors Tanzania Director of Risk (IoDT) and a certified member of Risk Management. Management and Compliance
24 TPB Bank PLC
Mr. Kwiyukwa joined the bank in 2013 as Director of Marketing and Business Development. He has experience from the telecom sector and banking, having previously worked at Celtel (now Airtel Tanzania) as Zonal Sales Manager and Zantel (part of Etisalat) as Head of Retail Sales. Mr. Kwiyukwa holds an Advanced Diploma (Economic Planning) from Mzumbe University, a Post Graduate Diploma (Business Administration) from Institute of Finance Management. Mr.Kwiyukwa also holds a Master of Business Administration (Marketing) degree from the University of Dar-es-Salaam.
MR. DEOGRATIUS KWIYUKWA Director of Marketing and Business Development
Mr. Bwogi is a seasoned banker with more than 20 years of experience. Mr. Bwogi, a Board Member of the Posta na Simu (TP&TC) SACCO’s and a Board Member of Posta Bureau de Change, was appointed Director of Retail and Business Banking in 2015. He previously held key positions such as Senior Manager and Chief Manager. Mr.Bwogi holds a Diploma in Business Management (Marketing Management) and an Advanced Diploma in Business Management (Marketing Management) from the College of Business Education. Mr. Bwogi also holds a Post Graduate Diploma in Financial Management from the Institute of Finance Management and a Master of Business MR. HENRY BWOGI Administration (Marketing Management) from the Open University Director of Retail and of Tanzania. Business Banking
Ms Diana Myonga joined TPB Bank in 2006 as Senior Manager Administration. Ms. Diana was promoted to Chief Manager Administration and Corporate Services in 2009 before being appointed Acting Director of Human Resources and Administration in 2018. Ms. Diana holds an Advanced Diploma in Materials Management from Mzumbe University and a Masters Degree in Business Administration (Corporate Management) from Mzumbe University. She also holds a Certificate in Directorship (IoDT) and attended Bullet Proof Managers Course.
MS. DIANA MYONGA Director of Human Resources and Administration
25 ANNUAL REPORT 2019
EXECUTIVE MANAGEMENT
Mr. Jema Msuya has 16 years of experience in the banking industry. He joined TPB in 2012 as Director of Technology & Operations from Standard Chartered Bank Tanzania, where he worked as Country Head of Information Technology from 2008. Mr. Msuya holds a Bachelor of Science (Computer Science) from the University of Dar-es-Salaam and is a Certified Systems Security Professional (CSSP). Mr. Msuya is currently pursuing a Masters degree in Business Administration from University of Dar-es-Salaam Business School.
MR. JEMA MSUYA Director of Technology and Operations
Ms. Regina Semakafu has 25 years of experience in banking industry. She joined TPB in 1995 and rose through the ranks to hold key positions such as Chief Manager Treasury. She was appointed Director of Finance in 2014. Ms.Semakafu holds a Bachelor of Commerce (Hons.) from the University of Dar-es-Salaam and Master in Business Administration (International Banking and Finance) from the University of Birmingham, United Kingdom. She is a Certified Public Accountant and a holder of ACI certification. Ms. Regina is also a certified Director by Institute of Directors in Tanzania, IoDT.
MS. REGINA SEMAKAFU Director of Finance
Ms. Mystica Ngongi is a registered and practicing advocate and notary public of the High Court of Tanzania and all courts below it, save for Primary Courts - since 2004. She joined TPB in 2006 as a Senior Manager Legal Services from Exim Bank Tanzania and became Chief Manager Legal Services in 2009. Ms. Ngongi was appointed Director of Legal Services and Board Secretary in 2013. She is a holder of Bachelor of Law (Hons.) from the University of Dar-es-Salaam, a Master of Business Administration (Corporate Management) from Mzumbe University and is also an Associate Member Institute of Chartered Secretaries and Administrators (UK Chapter). MRS. MYSTICA MAPUNDA NGONGI Director Legal Services and Company Secretary
26 TPB Bank PLC
EXECUTIVE MANAGEMENT
Mr. Kaniki joined TPB as a Senior Manager Strategic Planning in 2014. Two years later he was promoted to Chief Manager Strategic Planning and then appointed Director of Strategic Planning in 2017. Mr. Kaniki has previously worked for Standard Chartered Bank Tanzania and Vodacom Tanzania, and has consulted in Marketing, Brand Management and Business Strategy. Mr. Kaniki holds a Diploma in Commerce (Distinction) and a Bachelor of Commerce (Marketing) from the University of Swaziland (now called the University of Eswatini). He also graduated in Masters of Business Administration majoring marketing from the University of Dar-es-Salaam Business MR. MUONDAKWELI School. Mr. Kaniki is a Certified Director by the Institute of Directors KANIKI in Tanzania and from the same institute has also attained the level of Director of Strategic Mastery in Directorship. Planning
Ms. Noves Moses joined TPB Bank in 2008 as Senior Public Relations Manager and she was promoted to Chief Manager Corporate Affairs in 2012. Ms. Moses has previously worked at ITV / Radio One and Barclays Bank Tanzania. Ms. Moses holds a Diploma in International Relations and Diplomacy from the Centre of Foreign Relations and a Bachelor of Arts (International Relations and Public Administration) from the University of Dar-es-Salaam. She also holds a Master of Business Administration degree (MBA - Marketing) from the Open University of Tanzania.
MS. NOVES MOSES Chief Manager Corporate Affairs
Mr. Zakayo joined TPB in 2015 as a Senior Procurement Officer and was promoted to Chief Manager Procurement. He previously worked in the pharmaceuticals and construction industries. Mr. Zakayo holds an Advanced Diploma in Procurement and Supplies Management from the College of Business Administration and is a Certified Procurement and Supplies Professional by the Procurement and Supplies Professionals Technical Board.
MR. ERICK ZAKAYO Chief Manager Procurement
27 ANNUAL REPORT 2019
EXECUTIVE MANAGEMENT
Mr. Fungamtama is a financial markets professional with a decade of experience in Treasury Sales and Operations. He joined TPB as a Senior Manager Treasury in 2012 from Standard Chartered Bank where he was responsible for FX Sales. He was promoted to Chief Manager Treasury in 2014. Before that he worked for KCB Bank in Treasury Operations and Trade Finance. Mr. Fungamtama acquired a Bachelor of Science degree from Sokoine University of Agriculture and subsequently an MBA (Finance) from the University of Dar-es- Salaam. He is a certified member of ACI, a leading global Financial Markets Association. MR.WENCESLAUS FUNGAMTAMA Chief Manager Treasury
28 TPB Bank PLC
ABBREVIATIONS
(i) Abbreviations
HIV/AIDS Human Immunodeficiency Virus/Acquired Immuno deficiency Syndrome IFRSs International Financial Reporting Standards ISAs International Standards on Auditing ISSAI International Standards of Supreme Audit Institutions NBAA National Board of Accountants and Auditors PAA Public Audit Act No. 11 of 2008 PAR Public Audit Regulations, 2009 PAC Public Accounts Committee PFA Public Finance Act No.6 of 2001 (Revised 2004) PFR Public Finance Regulations,2001 PPA Public Procurement Act, 2011 PPR Public Procurement Regulations, 2013 Reg. Regulations Sect. Section URT United Republic of Tanzania BOT Bank of Tanzania ARCC Audit, Risk Management and Compliance Committee GRRC Governance, Recruitment and Remuneration Committee TP & TC SACCOS Posta na Simu Savings & Credit Cooperative Society CAG Controller and Auditor General TWB Tanzania Women’s Bank Plc
29 ANNUAL REPORT 2019
CORPORATE INFORMATION
DIRECTORS Name Position Remarks Dr. Edmund B. Mndolwa Chairman Appointed on 23 April 2018 Mr. Seif S. Seif Member Reappointed on 23 June 2017 Mr. Aman M. Ngaga Member Appointed on 1 June 2018 Mr. Gilbert .W. Chawe Member Appointed on 8 July 2019 Mr. Bezil. P. Ewala Member Appointed on 1 August 2019 Mr. Macrice D. Mbodo Member Appointed on 5 June 2017
AUDIT, RISK MANAGEMENT AND COMPLIANCE COMMITTEE Name Position Mr. Macrice .D. Mbodo Chairman Mr. Aman M. Ngaga Member Mr. Gilbert W. Chawe Member GOVERNANCE, RECRUITMENT AND REMUNERATION COMMITTEE Name Position
Mr. Seif S. Seif Chairman Mr. Aman M. Ngaga Member Mr. Gilbert W. Chawe Member
SECRETARY Mystica Mapunda Ngongi Director Legal Services & Company Secretary TPB Bank Public Limited Company LAPF Millennium Towers Bagamoyo Road P.O. Box 9300 Dar es Salaam
REGISTERED OFFICE AND PRINCIPAL LAPF Towers PLACE OF BUSINESS Bagamoyo Road P.O. Box 9300 Dar es Salaam
PRINCIPAL AUDITORS Controller and Auditor General National Audit Office Samora Avenue/Ohio Street P.O. Box 9080 Dar es Salaam
30 TPB Bank PLC
CORPORATE INFORMATION (CONTINUED)
DELEGATED AUDITORS Ernst & Young Tanzania P.O.Box 2475 Dar es salaam Tanzania
LAWYERS M. A. Ismail & Co. Advocates Plot No. 356 U.N. Road, Upanga P.O. Box 1553 Dar es Salaam
Rex Attorneys Rex House 145 Magore Street, Upanga P.O. Box 7495 Dar es Salaam
Kailu Chambers Advocates Plot No 75/6, Block S, P.O. Box 127 Mwanza
Astute Law Attoneys Nyanza Building, 3rd Floor P.O. Box 311 Mwanza
31 ANNUAL REPORT 2019
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2019
INTRODUCTION The Directors present this annual report together with audited financial statements for the year ended 31 December 2019. The report provides a statement of the Directors on the overall performance and state of financial affairs of the TPB Bank Public Limited Company (the “Bank”) and Corporate Governance for the year ended 31 December 2019.
ESTABLISHMENT TPB Bank Public Limited Company, is a Company registered under the Companies Act, Cap 212 of 2002 licensed as a financial institution under the Banking and Financial Institutions Act, 2006 and also governed by the Public Finance Act, 2004, the Public Corporations Act, 1992 and the Public Procurement Act, of 2011.
VISION AND MISSION The Bank’s Vision is “to be the leading Bank in the provision of affordable financial services and promoting financial inclusion in Tanzania”, and its mission statement is “to improve the economic well-being and quality of life of every Tanzanian by actively promoting savings, access to credit and the practice of sound financial management while creating value for our stakeholders”. The Bank’s vision and mission statements direct it to be at the forefront of promoting access, usage and understanding of financial services to a wider range of population in the rural, peri-urban and urban areas while ensuring sustainable financial returns and benefits to its various stakeholders.
PRINCIPAL ACTIVITIES The principal activities of the Bank continued to be provision of banking services as empowered by the Banking and Financial Institutions Act, 2006. The Bank continues to foster a savings culture among Tanzanians, provide affordable credit facilities to pensioners, micro enterprises, groups, small and medium enterprises as well as and salaried employees.
CAPITAL STRUCTURE AND SHAREHOLDING OF THE BANK The capital structure and shareholding position of the Bank as at 31 December 2019 and 31 December 2018, respectively are as follows:
2019 2018 Number of Percentage of Number of Percentage of Name of Shareholder shares shareholding shares shareholding held held Government of the United Republic of 23,423,304 83.44% 23,423,304 83.44% Tanzania
Tanzania Posts Corporation 2,135,540 7.61% 2,135,540 7.61% Revolutionary Government of Zanzibar 816,215 2.91% 816,215 2.91%
Posta na Simu Savings & Credit Cooperative 749,312 2.67% 749,312 2.67% Society Ltd
Public Service Social Security Fund (PSSSF) 660,401 2.35% 660,401 2.35% Workers’ Compensation Fund (WCF) 286,971 1.02% 286,971 1.02% TOTAL SHARES 28,071,743 100.00% 28,071,743 100.00%
32 TPB Bank PLC
CORPORATE GOVERNANCE
The Board of Directors (the “Board”) is responsible for the governance of the Bank and is committed to ensure that its business and operations are conducted with integrity and in compliance with the laws of the United Republic of Tanzania. The Board observes sound corporate governance principles and business ethics in managing the Bank. In this regard, the Board oversees that the Bank complies with all relevant legislation including the provisions of the Banking and Financial Institutions Act, 2006 and the prudential guidelines issued by the Bank of Tanzania. The Board has two committees namely, the Governance, Recruitment and Remuneration Committee; and the Audit, Risk Management and Compliance Committee. The two Board committees discharge their functions as vested onto each one of them under their respective charters. Each of the Committees is required to meet at least once quarterly. The Board delegates the day to day management of the Bank business to Chief Executive Officer who is assisted by senior management. Senior Management are invited to attend board meetings and facilitates the effective control of all the Bank’s operational activities, acting as a medium of communication and coordination between all the various business units. The Bank attaches great importance to sound corporate governance practice because it ensures integrity and transparency in managing the relationship that exists between the Bank and all its stakeholders. It is in that vein that the Bank ensures that it is in compliance with the requirements of various legislations which govern its operations including the Companies Act, Cap 212 of 2002, the Banking and Financial Institutions Act, 2006, the Public Corporations Act, 1992, the Public Procurement Act, 2011, the Public Finance Act, 2001 and the Prudential Regulations and Guidelines, Circulars and Rules issued by the Bank of Tanzania. Members of the Management team also participate in various industry initiatives and affairs through the Tanzania Bankers Association and the Tanzania Institute of Bankers.
The Board of Directors The Board of Directors retains full and effective control of the Bank and monitors executive management. The Board is also responsible for the Bank’s direction, policies and strategies and all investment and divestment decisions. It also ensures that the Bank meets its responsibilities to all its stakeholders and is prudently managed against the major risks inherent in general business dynamics. In this respect, the Board makes key decisions to ensure that it retains proper direction and control of the Bank. The Directors bring in experience and expertise from their own fields of business to ensure that debate on matters of strategy, policy and performance is robust, informed and constructive. Furthermore, the role of the Chairman and the Chief Executive Officer do not vest in one person. The Board structure is such that no one individual or group dominates the decision making process. There is a schedule of matters reserved for the full Board’s approval and clear delegation of authority to Committees of the Board and to management. A procedure exists for the determination of matters arising between scheduled meetings. There are established procedures in existence for planning and capital expenditure, for banking operations and lending activities, for management of investments, for information reporting systems and for monitoring the Bank’s business and performance generally. The Bank has in place a charter for the Board of Directors and charters for the Board Committees. The charters provide and guide Members of the Board and/or Board Committees of the roles, duties and responsibilities of the Board of Directors or Committees, the rights and liabilities of members and also provide for procedural matters relating to the functions of the Board of Directors or the Board Committees. The Chairman and the Chief Executive Officer in consultation with the Company Secretary agree on the agenda for Board meetings, but all Board members are entitled to raise other matters. The Chairman ensures that all Board members are properly briefed on all issues transacted through Board Committees. It is the responsibility of the executive management to ensure that the Board is supplied with information in a timely manner in a form and of a quality appropriate to enable it carry out effectively its duties.
33 ANNUAL REPORT 2019
CORPORATE GOVERNANCE (CONTINUED)
Board Committees The Committee operates under a formal charter The Board which comprises six non-executive approved by the Board of Directors and committee Directors is confident that its members have the members have unlimited access to all information. knowledge, talent and experience to lead the Members of senior management are invited to Bank. The Board of Directors are independent attend and present quarterly performance reports of management and exercise their independent and give feedback at committee meetings. The judgement with their in depth knowledge and Committee also handles recruitment process for experience. During the year, none of the Directors senior management positions and recommends were found to have acted on any matter on which to the Board of Directors appointments and he had conflict of interest. Refer to Directors’ remuneration of senior Management staff. The Report for the Directors who held office in the Committee also is responsible for disciplining year under review. of senior management members. The Company Secretary provides secretariat services to the To enable it discharge its executive functions, the Committee. Board has established two standing committees, each governed by written terms of reference, The Audit, Risk Management and Compliance defining the frequency of meetings, power and Committee duties and reporting obligation. These committees The Audit, Risk Management and Compliance continuously evaluated progress towards meeting Committee is chaired by the Chairperson of the the Bank’s overall objectives in addition to ensuring Committee and consists of two other Board efficient and effective management of the entire members. The Chief Executive Officer, Director of Bank’s core functions. The Chairperson of the Internal Audit and management in attendance. Committees chair the Committees meetings. The committee meets at least once quarterly to The board committees are:- evaluate, among others accounting practices, internal control systems and auditing and financial (i) The Governance, Recruitment and reporting. Its task includes evaluating critical Remuneration Committee; and risk areas identified with the help of the internal (ii) The Audit, Risk Management and auditors. Compliance Committee. The committee operates under a formal charter The Governance, Recruitment and approved by the Board of Directors and committee Remuneration Committee members have unlimited access to all information. Certain members of management are invited to The Governance, Recruitment and Remuneration attend and give feedback at Committee meetings. Committee is chaired by the Chairperson of the The Committee also negotiates with external Committee and consists of two other Board auditors’ their remuneration. The Committee also Members. The Chief Executive Officer and other holds separate meetings with the head of internal senior management members are in attendance. audit department and the external auditors when The committee meets at least once quarterly required to ensure matters are considered without to receive and discuss quarterly performance undue influence. The Company Secretary provides reports and matters relating to Human Resource secretariat services to the Committee. Management.
34 TPB Bank PLC
CORPORATE GOVERNANCE (CONTINUED)
Board Meetings There were Eleven (11) Board meetings, ten (10) ARCC meetings and eleven (11) GRRC meetings conducted during the year and were attended by the Board of Directors as follows:
No. NAME OF DIRECTORS BOARD MEETINGS ARCC GRRC 1. Dr. Edmund B. Mndolwa 11 2 2 2. Mrs. Anne C. Mbughuni * 5 6 2 3. Mr. Seif. S. Seif 11 3 11 4. Mr. Aman M. Ngaga 11 10 10 5. Mrs. Sarah K. Msika * 5 - 2 6. Mr. Macrice D. Mbodo 11 9 5 8. Mr. Gilbert .W. Chawe 4 1 4
Note: those marked with * their tenure ended on 10th May, 2019. The Board of Directors meets on a quarterly basis. Four meetings were ordinary and the other seven were special due to special matters requiring immediate attention. The ARCC had four ordinary meetings and six special meetings due to audit matters. GRCC had four ordinary meetings and seven special meetings due to credit approvals. Board Evaluation The Board recognizes that self-evaluation is a best practice benchmark of assessing the levels of performance of the Board. On an ongoing basis, the Board carries out self-evaluation of its performance. The review seeks to identify specific areas in need of improvement or strengthening and the result on any actions to be taken are discussed by the full Board. In a similar way, Directors also do conduct self- evaluation of their performance as members of the Board. Directors’ Compensation The disclosure of Directors’ fees and remunerations are made in financial statements (Refer to note 33(d)). Directors’ fees or any amendments are approved by shareholders at the Annual General Meeting and cleared by the Minister for Finance and Planning. Risk Management and Internal Control The Board accepts final reasonability for the risk management and internal control systems of the Bank. It is the task of management to ensure adequate internal financial and operational control systems are developed and maintained on an ongoing basis to provide reasonable assurance regarding the:- (i) effectiveness and efficiency of operations; (ii) safeguarding of the Bank’s assets (including information); (iii) compliance with applicable laws, regulations and supervisory requirements; (iv) reliability of accounting records; (v) business sustainability under normal as well as adverse conditions; and (vi) responsible behavior towards all stakeholders.
35 ANNUAL REPORT 2019
CORPORATE GOVERNANCE (CONTINUED)
The efficiency of internal control system is estimates, were used consistently; and dependent on the compliance with prescribed (iv) The financial statements were compiled measures. There is always a risk of non-compliance in accordance with International Financial with such measures by staff. Whilst no system, of Reporting Standards and comply with internal control can provide absolute assurance requirements of the Banking and Financial against misstatement or losses, the Bank system Institutions Act; 2006 the Public Procurement is designed to provide the Board with reasonable Act, 2011; and Companies Act, 2002; and assurance that the procedures in place are National Board of Accountants and Auditors operating effectively. Technical Pronouncements.
Consequently, even a strict and efficient internal Financial Reporting (continued) control system can provide no more reasonable The directors are also satisfied that no material measure of assurance in respect of the above event has occurred between the financial year- mentioned objectives. Internal auditors monitor end and the date of this report. the operations and the internal control systems and report to the Audit committee of the Board Company Secretary their findings and recommendations. All critical The Board of Directors appoints the Company Information Technology (IT) is backed up and the Secretary and all board members have access Bank has put in place well documented Business to the services of the Company Secretary. The Continuity and Disaster Recovery policies and Company Secretary is the principal advisor of the procedures. The procedures are tested periodically Board on legal and corporate governance matters. and the Board is of the opinion they meet the Where necessary the Board seeks independent acceptable criteria. professional advice on some matters. The Financial Reporting Company Secretary ensures that: The Directors accept final responsibility for (i) Annual calendar for Board meetings preparation of the annual financial statements is prepared and circulated to all Board which fairly present: members after approval. (i) the financial position of the Bank as at the (ii) Adequate information is provided to all the end of the year under review; members prior to commencement of the (ii) the financial results of operations; as well as Board and sub-committee meetings. (iii) the cash flows for that year. (iii) Proceedings of the Board and those of Board Committees are recorded and Minutes The responsibility for compiling the annual financial written soon thereafter the meeting. statements was delegated to management. The (iv) Resolutions and directives of the Board and/ Statutory Auditor reports on whether the annual or Board Committees are communicated to financial statements are fairly presented. The Management for implementation and status directors confirm and are satisfied that during the of implementation is reported to the Board year under review: or Committee at the next meeting. (i) adequate accounting records were (v) To promote a culture of good Corporate maintained; Governance. (ii) an effective system of internal control and risk (vi) Maintaining the statutory registers. management, monitored by management, (vii) Communication link between the Board of was maintained; Directors and Management. (iii) appropriate accounting policies supported by reasonable and prudent judgements and
36 TPB Bank PLC
CORPORATE GOVERNANCE (CONTINUED)
Internal Audit COMPOSITION OF THE BOARD OF DIRECTORS
Internal audit is an independent, objective The Chairman of the Board of Directors is appointed assurance and consulting activity designed to add by the President of United Republic of Tanzania value to the Bank and improve operations. It helps while other Board Members are appointed by the the Bank accomplish its objectives by bringing a respective shareholders. The current composition systematic, disciplined approach to evaluate and of the Board of Directors is as per TPB Bank Public improve risk management, control and governance Limited Company Memorandum and Articles of processes. Associations are as follows: Internal audit plans cover matters identified 1 The Government of United Republic of Tanzania in risk management assessments as well as – Appoints Chairman of the Board of Directors issues highlighted by the Board, the Audit, Risk and two other Board Members. The President Management and Compliance Committee and of the United Republic of Tanzania appoints senior management. the Chairman of the Board of Directors and the Minister for Finance and Planning appoints the The Internal Audit directorate administratively two Board Members; reports to the Chief Executive Officer on day-to- 2 Tanzania Posts Corporation – One Board day matters, but reports directly to the Chairman Member; of the Audit Committee on operational matters and on a regular basis. The purpose, authority and 3 Revolutionary Government of Zanzibar – One responsibility of the independent internal audit Board Member activities are formally defined in an Internal Audit 4 Posta na Simu Savings & Credit Cooperative Charter which is updated regularly and approved Society Ltd – One Board Member. by the Audit Committee. Significant audit findings 5 Public Servant Social Security Fund – One are reported to the Audit Committee. All significant Board Member. business operations are subject to internal audit. 6 Workers Compensations Fund – One Board Member. Internal Communication and Labor relations The tenure of Board Members is three years per Members of staff at all levels are kept fully informed of developments within the bank using a range term and they are eligible for reappointment for of communication mechanism. These include three terms. newsletters, website, circulars as well as regular discussions at different management levels. The emphasis is on two-way communication to develop a workforce which understands and supports the business philosophy and ethics of the Bank.
Environment and Social Management Policy
The Bank recognizes that environmental management is the responsibility of all institutions, both public and private. As a good corporate citizen, the Bank has continued to participate and support environmental and social activities through financial donations or employees’ physical participation in such activities.
37 TPB Bank PLC ANNUAL REPORT 2019 CORPORATE GOVERNANCE (CONTINUED)
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED) The Directors of the Bank at the date of this report and who have served since January 2019, except where otherwise stated are:
No. Name, title & country Year of Date of first Position/ of residence birth appointment/ membership to Occupation Qualification Nationality Resignation committee 1. Dr. Edmund B. 1949 23 April 2018 Chairman of the Partner – Global Accountancy Doctor of Philosophy (Finance, Fellow of Tanzanian Mndolwa Board Services. the Chartered Association of Certified Accountants, Certified Fraud Examiner, Chairman – Tanzania Banker,(MBA, Finance &Banking), 2. Mr. Seif S. Seif 1969 23 June 2014, Member- GRRC Commissioner for Public Postgraduate Diploma in Tax Management Tanzanian Re appointed from Investments and Stock Member – Tanzania 23 June 2017 to Verifications (Ministry of 2020 Finance, Zanzibar) 3. Mr. Aman M. Ngaga 1969 1 June 2018 Member – ARCC Revenue Assurance Analyst Masters of Business Administration in Tanzanian and Credit Controller Finance and Banking, B.Sc. (Economics). Member – Tanzania (Tanzania Telecommunications Ltd) 4. Mrs. Anne C. Mbughuni 1959 10 May 2016 – 10th Chairperson – Retired. Formerly Director Masters of Social Science (Accounting & Tanzanian May, 2019 ARCC Corporate Affairs (Fair Development Finance) Member – Tanzania Competition Commission) Member – GRRC CPA (T) 5. Mrs. Sarah K. Msika 1971 10 May 2016- to Member – GRRC Head of Public Relations & B.Com Marketing, Masters Degree in Tanzanian 10th May 2019 Promotion (Social Security Business Administration (MBA) Marketing Member – Tanzania Regulatory Authority)
6. Mr. Macrice D. Mbodo 1983 5 June 2017 Member – ARC General Manager Resources Master’s Degree on Corporate Tanzanian Management (Assistant CEO- Management, Advance Diploma in Member – Tanzania Tanzania Post Corporation) Accounting, CPA (T) 7. Mr. Gilbert W. Chawe 1968 8 July 2019 Member –GRCC Director of Information and Masters of Science in Information and Tanzanian Communication Technologies Technology Member-Tanzania -PSSSF 8. Bezil P. Ewala 1970 1st August 2019 Member –ARCC Director of Finance, Planning Masters in Business Administration (MBA) Tanzanian and Investments-WCF Finance, CPA (T) ACPA Member - Tanzanian
38 TPB Bank PLC
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
SECRETARY The Company Secretary is Mrs. Mystica Mapunda Ngongi (Masters in Corporate Management, LLB (Hons), Associate Member - AMICSA), CiDir.
MANAGEMENT Management of the Bank is under the Chief Executive Officer and is organized into the following Directorates:
· Finance; · Technology and Operations; · Marketing and Business Development; · Risk Management and Compliance; · Human Resources and Administration; · Strategic Planning; · Internal Audit; · Retail & Business Banking; and · Legal Services and Company Secretary.
Key management personnel of the Bank are listed below:
Name Position Sabasaba K. Moshingi Chief Executive Officer Sosthenes F. Nyenyembe Director of Internal Audit Regina E. Semakafu Director of Finance Jema A. Msuya Director of Technology & Operations Henry J. Bwogi Director of Retail & Business Banking Diana W. Myonga Director of Human Resources & Administration Moses S. Manyatta Director of Risk Management & Compliance Deogratius C. Kwiyukwa Director of Marketing & Business Development Mystica M. Ngongi Director of Legal Service & Company Secretary Muondakweli Kaniki Director of Strategic Planning
FUTURE DEVELOPMENT PLANS The Bank is the main financial service provider to the bottom of the pyramid in Tanzania. The bank’s four year Strategic Plan covering the period 2016 – 2019 has come to an end and was successfully implemented. The bank has put in place a six year Strategic Plan covering the period 2020 – 2025.
The Strategic Plan 2016 – 2019 was centered on re-capitalizing the bank, major technology enhancements and reducing the physical proximity gap. The Strategic Plan 2020 – 2025 focuses on reducing the psychological proximity gap by making the TPB brand more relevant to the bank’s customers and simplifying processes.
39 ANNUAL REPORT 2019 COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
A key cornerstone of the Strategic Plan is creating equal access to employment opportunities and a more emotive brand with uncomplicated ensuring that the best available candidate is pan-bank procedures that resonate with the appointed to any given position free from any form target market. High net worth customers, SMEs, of discrimination based on factors like age, gender, corporates, groups, women and pensioners marital status, tribe, religion and disability which represent key market segments for growth in the do not impair the ability the person to discharge medium term. The Bank sees the opportunity to their duties. have socio-economic impact in these areas ensure that it grows and also create lasting effect on the Training Facilities general society. During the year, the Bank spent a sum of TZS 544,480,682 (2018: TZS 794,710,000) for staff PERFORMANCE FOR THE YEAR training in order to improve employees technical During the year, the Bank registered a profit skills and hence effectiveness. Training programs before tax of TZS 23,006,364,000 compared to TZS have been and are continually being developed 17,188,045,000 in the previous year. to ensure employees are adequately trained During the year, assets of the Bank grew at all levels, all employees’ have some form of by TZS 84,838,920,000 or 15.09% from TZS annual training to upgrade skills and enhance 562,344,907,0000 at the end of 2018 to TZS development. 647,183,827,000 at the end of 2019. Customer Medical Assistance deposit base increased from TZS 390,599,533,000 All members of staff are availed medical insurance to TZS 442,177,176,000 while total lending guaranteed by the Board of Directors. This is for portfolio increased from TZS 412,768,650,000 to all members of staffs’ spouse and a maximum TZS 420,593,660,000. number of four dependents who are below the Shareholders’ Funds at the end of 2019 increased age of 18 or 22 if they are still in school. Currently, to TZS 98,892,727,000 from TZS 82,920,431,000 these services are provided by National Health at the end of 2018. Insurance Fund.
DIVIDENDS EMPLOYEES’ WELFARE (CONTINUED) The Board of Directors recommend payment of Health and Safety dividend of 10% of profit after tax for the year The Bank has a strong focus on health and safety 2019 (2018: TZS 1,210,210,100 dividend paid). ensuring that a strong culture of safety prevails at all times. A safe working environment is ensured SOLVENCY for all employees and contractors by providing The Board has reasonable expectation that the adequate and proper personal protective Bank will have adequate resources to continue in equipment, training and supervision as necessary. operational existence for the foreseeable future. Financial Assistance to Staff EMPLOYEES’ WELFARE Bank provides various loans to employees in accordance with Bank’ Staff Loans Policy and Staff Management and Employees’ Relationship Regulations in place. These include Mortgages, There continued to be a very good and healthy Motor Vehicle Loans, Motor Vehicle Insurance relationship between employees and management Loans, House Rent Loans, Personal Loans and in 2019. There were no unresolved complaints Incentive Loans. received by management from the employees during the year. A dynamic relationship continues to exist between management and trade union. The Bank is equal opportunity employer giving
40 TPB Bank PLC
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
Persons with Disabilities Applications for employment by disabled persons are always considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Bank continues and appropriate support and training is arranged. It is the policy of the Bank that training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. The Bank has employed a number of disabled people in its service.
Employees Benefit Plan The Bank makes mandatory contributions to social security funds which qualify to be a defined contribution plan. The number of employees at the end of the year was 925 (2018: 888).
GENDER PARITY The Bank had 925 (2018: 888) employees, out of which 461 (2018: 409) were female and 464 (2018: 479) were male.
POLITICAL AND CHARITABLE DONATIONS Donations amounting to TZS 227,177,988 (2018: TZS 194,242,803) were made to charitable organizations. The bank’s primary focus and spend was on education TZS 108 million (2018: TZS 156 million), health TZS 53 million (2018: TZS 28 million) and social welfare TZS 66 million (2018: TZS 10 million). The key issue here is the fact that the Bank does not operate in a vacuum but needs to have a lasting and uplifting effect on society. During the year, no political donations were made (2018: Nil).
RELATED PARTY TRANSACTIONS Details of related party transactions are set out in note 34 to the financial statements.
AUDITORS The Controller and Auditor-General (“CAG”) is the statutory auditor for the TPB Bank Public Limited Company pursuant to the provisions of Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2005), Sections 30 -33 of the Public Audit Act No. 11 of 2008 and Section 20(6) of the Bank of Tanzania Act, 2006. Ernst and Young, Certified Public Accountants (Tanzania) were appointed by the CAG to audit the Bank’s financial statements on his behalf, pursuant to Section 33 of the Public Audit Act, No 11 of 2008.
Approved by the Board of Directors and signed on its behalf by:
Dr. Edmund B. Mndolwa Mr. Seif S. Seif Mr. Macrice D. Mbodo Chairman Director Director
Date 5th May, 2020
41 ANNUAL REPORT 2019
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Companies Act, 2002 requires the Directors by reasonable and prudent judgements and to prepare financial statements for each financial estimates, in conformity with International year which give a true and fair view of the state Financial Reporting Standards and in the manner of the financial affairs of the Bank as at the end of required by the Companies Act, 2002; the Banking the financial year and of its financial results for the and Financial Institutions Act, 2006; and National year then ended. It also requires the Directors to Board of Accountants and Auditors Technical ensure the Bank keeps proper accounting records Pronouncements. The Directors are of the opinion which disclose with reasonable accuracy at any that the financial statements give a true and fair time the financial position of the Bank. They are view of the state of the financial affairs of the also responsible for safeguarding the assets of the Bank and of its operating results. The Directors Bank. further accept responsibility for the maintenance of accounting records which may be relied upon The Directors are responsible for the preparation in the preparation of financial statements, as well of the financial statements that give true and as adequate systems of internal financial control. fair view in accordance with the International Financial Reporting Standards, and in manner Nothing has come to the attention of the Directors required by the Companies Act, 2002; the Banking to indicate that the Bank will not remain a going and Financial Institutions Act, 2006; National concern for at least the next twelve months from Board of Accountants and Auditors Technical the date of this statement. Pronouncements and for such internal controls as Directors determine are necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error. The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported
Dr. Edmund B. Mndolwa Mr. Seif S. Seif Mr. Macrice D. Mbodo Chairman Director Director
Date 5th May, 2020
42 TPB Bank PLC
DECLARATION OF HEAD OF FINANCE
The National Board of Accountants and Auditors I, Regina E. Semakafu, being the Director of (NBAA) according to the power conferred under Finance of TPB Bank Public Limited Company the Auditors and Accountants (Registration) Act. hereby acknowledge my responsibility of No. 33 of 1972, as amended by Act No. 2 of 1995, ensuring that financial statements for the year requires financial statements to be accompanied ended 31 December 2019 have been prepared in with a Statement of Declaration issued by the compliance with applicable accounting standards Head of Finance responsible for the preparation of and statutory requirements. financial statements of the Bank concerned. I thus confirm that the financial statements It is the duty of a professional accountant to comply with applicable accounting standards assist the Board of Directors to discharge the and statutory requirements as on that date and responsibility of preparing financial statements of that they have been prepared based on properly a Bank showing true and fair view position of the maintained financial records. Bank in accordance with International Accounting Standards and statutory reporting requirements. Full legal responsibility for financial statements rests with the Board of Directors as under Directors Responsibility statement on an earlier page.
Signed by: Regina E. Semakafu Date 5th May, 2020
Director of Finance
NBAA Member No.: ACPA 1322
43 ANNUAL REPORT 2019
REPORT OF THE CONTROLLER AND AUDITOR GENERAL
To: Dr. Edmund B. Mndolwa, Chairman of the Board of Directors, TPB Bank Public Limited Company, P.O. Box 9300, DAR ES SALAAM
RE: REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE AUDIT OF THE FINANCIAL STATEMENTS OF TPB BANK PUBLIC LIMITED COMPANY FOR THE YEAR ENDED 31st DECEMBER 2019 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Introduction I have audited the financial statements of TPB Bank Public Limited Company (the Bank) set out on pages 23 to 88, which comprises the statement of financial position as at 31 December 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
Opinion In my opinion, the financial statements of TPB Bank Public Limited Company (the Bank) are presented fairly, in all material respects, the financial position of the Bank as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act, 2002 and the Banking and Financial Institutions Act, 2006 of Tanzania.
Basis for Opinion I conducted my audit in accordance with Public Audit Act 2008 and International Standards on Auditing (ISAs). My responsibilities under the law and those standards are further amplified in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of TPB Bank Public Limited Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) 2016, together with NBAA Code of Ethics. I have fulfilled my ethical responsibilities in accordance with these Codes. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
44 TPB Bank PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Key Audit Matters (Continued) We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provided the basis for our audit opinion on the accompanying financial statements.
No. Key audit matter How our audit addressed the key audit matter
1. Credit risk and impairment of loans and advances to customers
Impairment is a subjective area due Our audit procedures included the assessment to the level of judgement applied of key controls over the approval, recording and by management in determining monitoring of loans and advances, and evaluating provisions. the methodologies, inputs and assumptions used by the Bank in calculating collectively assessed The Bank is required to calculate impairment losses, and assessing the adequacy of impairment of loans and advances to impairment allowances for individually assessed customers in accordance with both loans and advances for both IFRS and Bank of the Bank of Tanzania regulations and Tanzania impairment allowances. IFRSs. Impairment of loans and as 31 December 2019 is disclosed in Note We compared the Bank’s assumptions for 20(c) to the financial statements. impairment allowances to externally available industry, financial and economic data and our We focused on the measurement own assessments in relation to key inputs. As of impairment, including the part of this, we assessed the Bank’s estimates assessment whether historical and assumptions used including the consistency experience is appropriate when of judgement applied in the determination of assessing the likelihood of the amount and timing of expected future cash incurred losses in respect of loans. flows and consideration of economic factors and Judgement is required to determine historical default rates. the appropriate parameters and assumptions used to calculate We evaluated whether the Bank’s assumptions impairment. For example, the on the estimated future cash flows, including the assumptions of customers that will value of realisable collateral, was based on up to default, the valuation of collateral for date valuations and available market information. secured lending and the estimated We evaluated whether the Bank’s computations for amount and timing of future cash the regulatory impairment allowances were based flows from the loans. on the Bank of Tanzania regulations. This included We also considered there to be a assessing whether the classification of loans and risk that the disclosures in Note 5 to the percentages applied were in accordance with the financial statements which are the regulations. significant to the understanding of We also assessed whether the financial statements the Bank’s credit risk and impairment disclosures in Notes 20appropriately reflect the of loans and advances to customers, Bank’s exposure to credit risk. are not complete.
45 ANNUAL REPORT 2019
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Other Information included in the Bank’s 2019 Responsibilities of the Controller and Auditor Directors’ Report General
Other information consists of the information My responsibility as an auditor is to express an included in the Directors’ Report, other than the independent opinion on the financial statements financial statements and my auditor’s report based on the audit. The audit was conducted thereon. The directors are responsible for the in accordance with International Standards on other information. Auditing (ISA) and such other audit procedures My opinion on the financial statements does not I considered necessary in the circumstances. cover the other information and we do not express These standards require that I comply with ethical any form of assurance conclusion thereon. requirements and plan and perform the audit to obtain reasonable assurance about whether In connection with my audit of the financial the financial statements are free from material statements, my responsibility is to read the other misstatement. information and, in doing so, consider whether the other information is materially inconsistent An audit involves performing procedures to with the financial statements or the knowledge obtain audit evidence about the amounts and obtained in the audit or otherwise appears to be disclosures in the financial statements. The materially misstated. If, based on the work I have procedures selected depend on the auditor’s performed, I conclude that there is a material judgment, including the assessment of the risks of misstatement of this other information; I am material misstatement of the financial statements, required to report that fact. I have nothing to whether due to fraud or error. In making those report in this regard. risk assessments, I considered the internal control relevant to the Bank’s preparation and fair Responsibilities of the directors for the financial presentation of the financial statements in order statements to design audit procedures that are appropriate in the circumstances, but not for the purpose of The directors are responsible for the preparation expressing an opinion on the effectiveness of the and fair presentation of the financial statements Bank’s internal control. in accordance with International Financial Reporting Standards and the requirements of An audit also includes evaluating the the Companies Act, CAP 212 Act No. 12 of 2002, appropriateness of accounting policies used and and for such internal control as the directors the reasonableness of accounting estimates made determine is necessary to enable the preparation by management, as well as evaluating the overall of financial statements that are free from material presentation of the financial statements. misstatement, whether due to fraud or error. In addition, Sect. 10 (2) of the Public Audit Act In preparing the financial statements, the No. 11 of 2008 requires me to satisfy myself that directors are responsible for assessing the ability the financial statements have been prepared to continue as a going concern, disclosing, as in accordance with the appropriate accounting applicable, matters related to going concern and standards and that; reasonable precautions have using the going concern basis of accounting unless been taken to safeguard the collection of revenue, the directors either intend to liquidate the Bank or receipt, custody, disposal, issue and proper use of to cease operations, or have no realistic alternative public property, and that the law, directions and but to do so. The directors are responsible for instructions applicable thereto have been duly overseeing the Bank’s financial reporting process. observed and expenditures of public monies have been properly authorized.
46 TPB Bank PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Further, Sect 48(3) of the Public Procurement Act In my opinion, the capital adequacy ratios as No.11 of 2011 and Regulation 269 of the Public presented in Note 6 to the financial statements Procurement Regulations 2013 requires me to have been computed in accordance with the state in my annual audit report whether or not the Banking and Financial Institutions Act, 2006 and Bank has complied with the provisions of the Law the Banking and Financial Institutions (Capital and its Regulations. Adequacy) Regulations, 2014 of Tanzania. Section 9 of part II of the Banking and Financial Institutions I believe that the audit evidence I have obtained (Capital Adequacy, 2014 requires all Banks and is sufficient and appropriate to provide a basis for financial institutions to maintain at all times, core my audit opinion. capital of not less than twelve and one half per cent of its total risk-weighted assets and off-balance REPORT ON OTHER LEGAL AND REGULATORY sheet exposure; and total capital of not less than REQUIREMENTS fourteen and one half per cent of its total risk This report, including the opinion, has been weighted assets and off-balance sheet exposure. prepared for, and only for, the Bank’s members I state that TPB Bank Public Limited Company as a body in accordance with the Companies Act, maintained a minimum core capital of 15.86% % 2002 of Tanzania and for no other purposes. and 15.86% for Tier 1 and Tier 2 respectively as at 31 December 2019 which comply with the As required by the Companies Act, 2002 of regulation on capital adequacy. Tanzania, we report to you, based on our audit, that: ii. Compliance with Public Procurement Act I have obtained all the information and In view of my responsibility on the procurement explanations which, to the best of my knowledge legislation and taking into consideration the and belief, were necessary for the purpose of the procurement transactions and processes I reviewed as audit; part of this audit, I state that, TPB Bank Public Limited In my opinion, proper books of account have Company procurement processes have generally been kept by the Bank, so far as appears from our complied with the Public Procurement Act, 2011 and examination of those books; its related Regulations of 2013. The Directors’ Report is consistent with the financial statements; Information specified by law regarding directors’ remuneration and transactions with the Bank is disclosed; and, Mr. Charles Edward Kichere CONTROLLER AND AUDITOR GENERAL The Bank’s statement of financial position National Audit Office and statement of profit or loss and other Dodoma, TANZANIA. comprehensive income are in agreement with the books of account. th Date 12 March, 2020 i. Compliance with Banking and Financial Institutions Regulations
As required by the Banking and Financial Institutions (External Auditors) Regulations, 2014 of Tanzania, I report to you, based on my audit, that;
47 ANNUAL REPORT 2019
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 Note TZS ‘000 TZS ‘000
Interest income 7 100,176,542 95,944,964 Interest expense 8 (22,495,671) (17,870,226)
Net interest income 77,680,871 78,074,738
Fees and commission income 9 20,850,792 19,754,296 Fees and commission expense 10 (525,700) (410,897)
Net fee and commission income 20,325,092 19,343,399
Foreign exchange income 11 2,073,659 903,584 Other income 12 6,614,491 1,712,874 Loan impairment loss 20(c) (10,533,347) (13,655,680) Administrative expenses 13 (73,154,402) (69,190,870)
Profit before tax 23,006,364 17,188,045
Income tax expense 15(a) (7,115,062) (5,085,944)
Profit for the year 15,891,302 12,102,101
Other comprehensive income
Actuarial gain from defined benefit obligation 35 190,276 884,037 Deferred tax on actuarial gain from defined benefit obligation (57,083) (265,211) Actuarial gain net of tax 133,193 618,826 Past cost on defined benefit obligation 35 - - Deferred tax on past cost on defined benefit obligation - -
Past cost on defined benefit obligation net of tax - -
Other comprehensive income net of tax 133,193 618,826
Total comprehensive income for the year 16,024,495 12,720,927
48 TPB Bank PLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019 Notes 2019 2018 Assets TZS ‘000 TZS ‘000
Cash and balances with Bank of Tanzania 16 63,576,332 36,914,013 Cheques and items for collection 3,586 231,928 Placement and balances with other banks 17 14,556,678 15,821,018 Treasury bills 18 75,397,988 43,620,066 Treasury bonds 19 25,189,964 13,199,202 Loans and advances to customers 20(a) 420,593,660 412,768,650 Other assets 21 6,607,895 7,488,941 Deferred tax asset 27 6,887,244 6,242,024 Intangible assets 22 3,294,099 3,035,349 Right of Use of Assets 33(a) 9,185,768 - Tax recoverable 15(c) - 465,681 Property and equipment 23 21,890,613 22,558,035
Total assets 647,183,827 562,344,907
Liabilities and equity
Customer deposits 24 442,177,176 390,599,533 Borrowing and balances due to other banks 25 75,572,029 62,930,870 Lease Liability 33(b) 7,313,510 - Other liabilities 26 14,987,266 19,403,952 Tax Payable 15(c) 451,684 - Revenue grant 1,436,064 547,609 Staff benefit obligation 35 6,353,371 5,942,512
Total liabilities 548,291,100 479,424,476
Equity Share capital 28(b) 28,071,743 28,071,743 Regulatory reserve 28(c) - 135,093 General reserve 28(c) - 3,912,553 Fixed asset revaluation reserve 5,220,318 5,220,318 Other reserves (acquired in business combination) 4,999,760 5,041,745 Defined benefit reserve (2,704,829) (2,838,021) Retained earnings 63,305,735 43,377,000 Total equity 98,892,727 82,920,431 Total liabilities and equity 647,183,827 562,344,907
The financial statements were approved and authorized for issue by the Board of Directors on Date 5th May, 2020 and signed on its behalf by:
Dr. Edmund B. Mndolwa Mr. Seif S. Seif Mr. Macrice D. Mbodo Chairman Director Director
49 TPB Bank PLC ANNUAL REPORT 2019 STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share Regulatory General Fixed asset Other Defined Retained revaluation benefit capital Reserve Reserve reserve reserve reserve Earnings Total TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS’000 TZS ‘000 TZS ‘000
At 1 January 2018 28,071,743 288,078 3,100,563 - - (3,456,847) 31,842,995 59,846,532 IFRS 9 Transition adjustment (note 20(c)) ------1,290,909 1,290,909 Transfer to regulatory reserve - 1,290,909 - - - - (1,290,909) - Adjusted balance at 1 January 2018 28,071,743 1,578,987 3,100,563 - - (3,456,847) 31,842,995 61,137,441 Dividend declared but not paid ------(1,200,000) (1,200,000) Fixed asset revaluation reserve - - - 5,220,318 - - - 5,220,318
Actuarial gain on defined benefit obligations net of tax - - - - - 618,826 - 618,826 Profit for the year ------12,102,101 12,102,101 Transfer (from)/to retained earnings - (1,443,894) 811,990 - - - 631,904 - Acquired in business combination (Note 36) - - - - 5,041,745 - - 5,041,745 At 31 December 2018 28,071,743 135,093 3,912,553 5,220,318 5,041,745 (2,838,021) 43,377,000 82,920,431
At 1 January 2019 28,071,743 135,093 3,912,553 5,220,318 5,041,745 (2,838,021) 43,377,000 82,920,431
Dividend paid ------(1,210,211) (1,210,211) Reversal of suspended dividend 2017 1,200,000 1,200,000
Actuarial gain on defined benefit obligations net of tax - - - 133,193 - 133,193 Profit for the year ------15,891,301 15,891,301 Transfer (from)/to retained earnings - (135,093) (3,912,553) - - - 4,047,642 (4) Acquired in business combination (Note 36) - - - - (41,983) - - (41,983)
At 31 December 2019 28,071,743 - - 5,220,318 4,999,762 (2,704,828) 63,305,732 98,892,727
50 TPB Bank PLC
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 Note TZS ‘000 TZS ‘000
Cash generated from operations 29 46,599,553 11,408,572
Tax paid 15(c) (6,900,000) (6,084,000) Employee benefit paid during the year 35 (489,847) (419,752)
Net cash generated from operating activities 39,209,706 4,904,820
Cash flow from investing activities
Purchase of intangible assets 22 (1,409,481) (2,352,638) Purchase of property and equipment 23 (4,001,243) (6,340,689) Proceeds from disposal of property and equipment 1,149 153,851
Net cash used in investing activities (5,409,575) (8,539,476)
Cash flow from financing activities
Dividend paid (1,210,211) - Payments on lease liability 33 (4,991,790) - Grant received 888,457 526,400
Net cash (used in)/generated from financing activities (5,313,544) 526,400
Net decrease in cash and cash equivalents 28,486,587 (3,108,256)
Cash and cash equivalents at 1 January 5,259,564 8,367,820
Cash and cash equivalents at 31 December 33,746,151 5,259,564
Analysis of cash and cash equivalents at 31 December Cash and balances with Bank of Tanzania 16 63,576,332 36,914,013 Placements with other banks maturing within 3 months 17 14,674,790 11,429,051 Cheques and items for collection maturing within 3 months 3,586 231,928 Treasury bills maturing within 3 months 18 26,179,803 19,615,442 Treasury bonds maturing within 3 months 19 4,883,669 - Borrowings and balances due to other banks 25 (75,572,029) (62,930,870) 33,746,151 5,259,564
51 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. REPORTING ENTITY TPB Bank Public Limited Company is domiciled in the United Republic of Tanzania. It was incorporated as limited liability company on 29 March 2016 and took over the business of the former Tanzania Postal Bank following the repeal of Tanzania Postal Bank Act No. 11 of 1991 on 29 May 2015. The Bank is licensed under the Banking and Financial Institutions Act, 2006 and regulated by the Bank of Tanzania. The addresses of its registered office and principal place of business are disclosed in the corporate information section in this report. The principal activities of the Bank are described in the Report of the Directors.
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (a) New standards, amendments and interpretation adopted by the Bank The following new and revised IFRS have been applied in the current year and had no material impact on the amounts reported in these financial statements.
Leases (IFRS 16) The Bank has adopted IFRS 16 as issued by the International Accounting Standards Board (“IASB”) in July 2016 with a date of transition of 1 January 2019, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements. The Bank did not early adopt IFRS 16 in any previous periods. As permitted by the transitional provisions of IFRS 16, the Bank elected not to restate comparative figures. The adoption of IFRS 16 has resulted in changes in the Bank’s accounting policiesfor leases previously classified as operating leases under IAS 17, which were ‑off balance sheet. On initial application of IFRS 16, the Bank has: a) Recognised a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The lease liability has been measured at the present value of the lease payments to be made over the lease term using incremental borrowing rate. b) The right-of-use asset has initially been measured at the amount of the lease liability adjusted to lease prepayments and accruals. c) Recognize depreciation of right‑of‑use assets and interest on lease liabilities in the statement of profit or loss; whereby d) Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the cash flow statement. e) For short‑term leases (lease term of 12 months or less) and leases of low‑value assets (such as personal computers and office furniture), the Bank has opted to recognize a lease expense on a straight‑line basis as permitted by IFRS 16.
52 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued)
Operating Lease (IFRS 16) (continued) f) Measurement of Lease Liabilities
2019 TZS ‘000
Operating lease commitments disclosed as at 31 December 2018 (note 32(b)) 13,010,257 Discounted using the Bank’s incremental borrowing rate; 8% Add: finance lease liabilities recognised as at 31 December 2018 - (Less): short-term leases recognised on a straight-line basis as expense - (Less): low-value leases recognised on a straight-line basis as expense (Less): contracts reassessed as service agreements - Add/(less): adjustments as a result of a different treatment of extension and - termination options Add/(less): adjustments relating to changes in the index or rate affecting variable - payments Lease liablility recognised as at 1 January 2019 11,777,833
g) Measurement of right of use assets
The right-of use assets were measured at the amount of the initial measurement of the lease liability amounts discounted using the lessee’s incremental borrowing rate at the date of initial application, and adjusted for any initial direct costs, direct incentives received and restoration costs.
Adjustments recognised in the balance sheet on 1 January 2019
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
TZS’000 · Property, plant and equipment increased by 13,152,283 · Prepayments reduced by 1,374,450 · Other liabilities increased by 11,777,833
There was no impact on opening retained earnings on 1 January 2019.
53 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued) (a) New standards, amendments and interpretation adopted by the Bank (continued)
Amendments to The amendments to IFRS 9 clarify that for the purpose of assessing whether IFRS 9 Prepayment a prepayment feature meets the SPPI condition, the party exercising the Features with option may pay or receive reasonable compensation for the prepayment Negative irrespective of the reason for prepayment. In other words, prepayment Compensation features with negative compensation do not automatically fail SPPI.
The amendment applies to annual periods beginning on or after 1 January 2019, with earlier application permitted. There are specific transition provisions depending on when the amendments are first applied, relative to the initial application of IFRS 9.
The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s consolidated financial statements.
Amendments to The amendments clarify that the past service cost (or of the gain or loss on IAS 19 Employee settlement) is calculated by measuring the defined benefit liability (asset) Benefits Plan using updated assumptions and comparing benefits offered and plan assets Amendment, before and after the plan amendment (or curtailment or settlement) but Curtailment or ignoring the effect of the asset ceiling (that may arise when the defined Settlement benefit plan is in a surplus position). IAS 19 is now clear that the change in the effect of the asset ceiling that may result from the plan amendment (or curtailment or settlement) is determined in a second step and is recognised in the normal manner in other comprehensive income.
The paragraphs that relate to measuring the current service cost and the net interest on the net defined benefit liability (asset) have also been amended. An entity will now be required to use the updated assumptions from this re-measurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. In the case of the net interest, the amendments make it clear that for the period post plan amendment, the net interest is calculated by multiplying the net defined benefit liability (asset) as re-measured under IAS 19.99 with the discount rate used in the re-measurement (also taking into account the effect of contributions and benefit payments on the net defined benefit liability (asset)).
The amendments are applied prospectively. They apply only to plan amendments, curtailments or settlements that occur on or after the beginning of the annual period in which the amendments to IAS 19 are first applied.
The amendments to IAS 19 must be applied to annual periods beginning on or after 1 January 2019, but they can be applied earlier if an entity elects to do so. The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s consolidated financial statements.
54 TPB Bank PLC
Annual The Annual Improvements include amendments to four standards: Improvements to IFRS Standards IAS 12 Income Taxes 2015–2017 Cycle Amendments to The amendments clarify that an entity should recognize the income tax IFRS 3 Business consequences of dividends in profit or loss, other comprehensive income or Combinations, equity according to where the entity originally recognised the transactions IFRS 11 Joint that generated the distributable profits. This is the case irrespective of Arrangements, whether different tax rates apply to distributed and undistributed profits. IAS 12 Income IAS 23 Taxes and IAS 23 Borrowing Costs Borrowing Costs The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.
IFRS 3 Business Combinations The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, the entity applies the requirements for a business combination achieved in stages, including re-measuring its previously held interest (PHI) in the joint operation at fair value. The PHI to be re-measured includes any unrecognized assets, liabilities and goodwill relating to the joint operation.
IFRS 11 Joint Arrangements The amendments to IFRS 11 clarify that when a party that participates in, but does not have joint control of, a joint operation that is a business obtains joint control of such a joint operation, the entity does not re-measure its PHI in the joint operation.
55 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued) (b) New and revised IFRSs in issue but not yet effective for year ended 31 December 2019
Definition of a Business The amendments in Definition of a Business to IFRS 3, are changes (Amendments to IFRS 3) to Appendix A Defined terms, the application guidance, and the illustrative examples of IFRS 3 only. They:
· clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs; · add guidance and illustrative examples to help entities assess whether a substantive process has been acquired; · remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and · add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. · Business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020
Amendments to IAS 1 and IAS 8 The amendments in Definition of Material (Amendments to IAS 1 and IAS 8)clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards. Effective date: Annual reporting periods beginning on or after 1 January 2020.
Amendments to IFRS 9, IAS 39 The amendments in Interest Rate Benchmark Reform (Amendments and IFRS 7 to IFRS 9, IAS 39 and IFRS 7) clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform. Effective date: Annual reporting periods beginning on or after 1 January 2020.
(c) Early adoption of standards
The Bank did not early-adopt any new or revised standards in 2019. The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s financial statements.
56 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (ii) Fees and commission income Fees and commissions are generally a) Statement of compliance recognised on an accrual basis when The financial statements have been the service has been provided. The Bank prepared in accordance with International earns fees and income from diverse range Financial Reporting Standards (IFRSs) of services it provides to its customers and interpretations as issued by the IFRS and services offered to various mobile Interpretations Committee (IFRS IC) applicable companies and some banks as agent on to companies reporting under IFRS. Additional Mobile Pesa and cash collections. information required by regulatory bodies is included where appropriate. d) Interest expense Interest expense is recognized in the profit or b) Basis of preparation loss using the effective interest method. The financial statements have been prepared The ‘effective interest rate’ is the rate that on the historical cost basis except for certain financial instruments that are measured at exactly discounts the estimated future cash amortised costs. payments through the expected life of financial liability (or, where appropriate, a c) Revenue recognition shorter period) to the carrying amount of the financial liability. When calculating the The Bank recognizes revenue when the amount of revenue can be reliably measured, effective interest rate, the Bank estimates and it is probable that future economic future cash flows considering all contractual benefits will flow to the Bank. The amount terms of the financial liability. of revenue is not considered to be reliably The calculation of the effective interest rate measured until all contingencies relating to includes transaction costs and fees paid that the transaction have been resolved. The Bank bases its estimates on historical results, taking are an integral part of the effective interest into consideration the type of transaction and rate. Transaction costs include incremental specifics of each arrangement. costs that are directly attributable to the acquisition of the financial liability. (i) Interest and similar income Interest income includes interest e) Fees and commission expense on loans and advances, interest on Fees and commission expense that are integral placements with other banks, and to the effective interest rate on a financial interest and discounts on government liability are included in the measurement of securities which is recognised on a the effective interest rate period. time basis by reference to the principal outstanding and at the effective interest Other fees and commission expense relate rate applicable. mainly to transaction and service fees, which are expensed as the services are When an account is classified as non- received. performing the interest on the account is suspended until it is realised in cash.
57 ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f) Employee benefits Defined benefit plan Short term benefits The Bank operates an unfunded lumpsum The cost of all short-term employee benefits Gratuity Arrangement (“the Arrangement”). such as salaries, employees’ entitlements to As the Arrangement is unfunded, gratuity leave pay, medical aid, other contributions, benefits are paid out of the Bank’s general provision of housing to senior management revenues. staff, etc. are recognized during the period in which the employees render the related Under this Gratuity Arrangement, the cost of services. providing benefits is determined using the Projected Unit Credit Method, with actuarial Pension Obligation valuations being carried out at the end of each reporting period. Re-measurement, The Bank and its other employees contribute comprising actuarial gains and losses is to the Public Service Pensions Fund (PSPF), reflected in the statement of financial position which is a defined contribution schemes. with a charge or credit recognised in other The Bank contribute 15% equivalent of comprehensive income in the period in which the employees’ salary to the scheme and they occur. Re-measurement recognised in employees contributes 5%. The Bank has no other comprehensive income is reflected further obligation after such payment. immediately in retained earnings and will not The Bank’s contributions to the defined be reclassified to profit or loss. Service cost is contribution schemes are recognized to the recognised in profit or loss in the period of a profit or loss in the year to which they relate. plan amendment. Net interest is calculated by applying the discount rate at the beginning of Retirement benefit obligations the period to the net defined benefit liability or asset. Defined benefit costs are categorised The Bank has a defined benefit scheme as follows: for staff who were absorbed from the forerunner Tanganyika Postal Savings Bank, · Past service cost; who had worked with the defunct East · Net interest expense or income; and African Community. Under this plan the Bank · Re-measurement. contributes a sum determined as equivalent to the estimated annual liability on monthly The Bank presents the first two components instalment for all who are in the scheme. The of defined benefit cost in profit or loss in the amounts are paid to a Trust namely the Ex- line item Staff costs. East African Posts and Telecommunications Corporation Staff Pension Fund, which manages the fund on behalf of the employer.
58 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING Deferred tax liabilities and assets are measured POLICIES (CONTINUED) at the tax rates that are expected to apply in the year in which the liability is settled or the a) Income tax expense asset realised, based on enacted tax rates by the end of the reporting period. Income tax expense represents the sum of the current tax payable and the deferred taxation. Current and deferred tax are recognised in profit or loss, except when they relate to items (i) Current tax that are recognised in other comprehensive Current taxation is provided on the basis of the income or directly in equity, in which case, the results for the year as shown in the financial current and deferred tax are also recognised statements, adjusted in accordance with the in other comprehensive income or directly in tax legislation using enacted tax rates. equity, respectively.
(ii) Deferred tax (iii) Value Added Tax Deferred tax is recognised on temporary Revenues and expenses and capital items are differences between the carrying amounts of recognised inclusive of the amount of value assets and liabilities in the financial statements added tax except where the value added tax and the corresponding tax bases used in the incurred on a purchase of assets or services computation of taxable profit or loss. Deferred is recoverable from the taxation authority, in tax liabilities are generally recognised for which case the value added tax is recognised all taxable temporary differences. Deferred as an asset. tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
59 ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Financial instruments rate. Any changes are recognised in profit or loss. A financial instrument is defined as any contract that gives rise to both a financial Interest income asset of one entity and a financial liability or equity instrument of another entity. The Interest income is calculated by applying the Bank recognizes all financial instruments on effective interest rate to the gross carrying its statement of financial position when it amount of financial assets, except for: becomes a party to the contractual provision of the instrument. a) POCI financial assets, for which the original credit-adjusted effective interest Measurement Methods rate is applied to the amortised cost of the financial asset. Amortised cost and effective interest rate The amortised cost is the amount at which b) Financial assets that are not ‘POCI’ the financial asset or financial liability is but have subsequently become credit- measured at initial recognition minus the impaired (or ‘stage 3’), for which interest principal repayments, plus or minus the revenue is calculated by applying the cumulative amortization using the effective effective interest rate to their amortised interest method of any difference between cost (i.e. net of the expected credit loss that initial amount and the maturity amount provision). and, for financial assets, adjusted for any loss allowance. Financial assets and financial liabilities are recognised when the entity becomes a party to The effective interest rate is the rate that the contractual provisions of the instrument. exactly discounts estimated future cash Regular way purchases and sales of financial payments or receipts through the expected assets are recognised on trade-date, the date life of the financial assert or liability to the on which the Bank commits to purchase or sell gross carrying amount of a financial asset the asset. (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a (i) Classification and subsequent measurement financial liability. The calculation does not of financial assets consider expected credit losses and includes transaction costs, premiums or discounts Up to 31 December 2019, the Bank classified and fees. For purchased or originated credit- its financial assets into one of the following impaired (‘POCI’) financial assets-assets that categories: are credit-impaired at initial recognition- the Group calculates the credit-adjusted effective · as loans and receivables; or interest rate, which is calculated based on the · at fair value through profit or loss, and amortised cost of the financial asset instead of within this category as: its gross carrying amount and incorporate the impact of expected credit losses in estimated – held for trading; or future cash flows. – designated at fair value through When the Group revises the estimates of profit or loss. future cash flows, the carrying amount of the respective financial assets or financial All financial liabilities were measured at liability is adjusted to reflect the new estimate amortised cost. discount using the original effective interest
60 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Loans and receivables Loans and receivables are non-derivative From 1 January 2018, the Bank has applied financial assets with fixed or determinable IFRS 9 and classifies its financial assets in the payments that are not quoted in an active following measurement categories: market. Loans and receivables are initially recognised at fair value plus any directly · Amortised cost; attributable transaction costs and measured · Fair value through profit or loss (“FVTPL”); subsequently at amortised cost using the or effective interest method. Interest on · Fair value through other comprehensive financial assets is included in profit or loss and income (FVOCI) is reported as interest income”. The classification requirements for debt and The Bank uses settlement date accounting equity instruments are described below: for regular way contracts when recording financial asset transactions. Financial assets, Debt instruments consisting of investment securities, that are transferred to a third party but do not qualify Debt instruments are those instruments that for de-recognition remain within investment meet the definition of a financial liability securities but disclosed as “pledged as from the issuer’s perspective, such as loans collateral”, if the transferee has the right to and government bonds. Classification and sell or re-pledge them. subsequent measurement of debt instruments depend on: (b) Financial assets at fair value through profit or loss · the Bank’s business model for managing the asset; and Fair value through profit or loss category · the cash flow characteristics of the asset. comprises of financial assets designated at fair value through profit or loss. These are initially Business model recognised at fair value, with transaction costs recognised in profit or loss and subsequently The business model reflects how the Bank measured at fair value. Interest on financial manages its assets in order to generate cash assets is included in profit or loss and is flows. That is, whether the Bank’s objective reported as interest income. Dividend is solely to collect the contractual cash flows income is recognised in profit or loss on the from the assets or is to collect both the date on which the right to receive payment is contractual cash flows and cash flows arising established. from the sale of assets. If neither of these is applicable (e.g. financial assets are held for Fair value through profit or loss category trading purposes), then the financial assets comprises of financial assets designated at fair are classified as part of ‘other’ business model value through profit or loss. These are initially and measured at FVTPL. recognised at fair value, with transaction costs recognised in profit or loss and subsequently Factors considered by the Bank in determining measured at fair value. Interest on financial the business model for a group of assets assets is included in profit or loss and is include past experience on how the cash reported as “Interest income”. Dividend flows for these assets were collected, how income is recognised in profit or loss on the the asset’s performance is evaluated and how date on which the right to receive payment is risks are assessed and managed. established.
61 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SIGNIFICANT ACCOUNTING POLICIES recognised and measured as described in Note (CONTINUED) 3.(a) Interest income from these financial assets is included in interest income using the Financial instruments (continued) h) effective interest method.
(iii) Classification and subsequent The amortised cost is the amount at which measurement of financial assets the financial asset or financial liability is (continued) measured at initial recognition minus the Solely Payments of Principal and Interest principal repayments, plus or minus the (“SPPI”) test cumulative amortization using the effective interest method of any difference between Where the business model is to hold assets that initial amount and the maturity amount to collect contractual cash flows or to collect and, for financial assets, adjusted for any loss contractual cash flows and sell, the Bank allowance. assesses whether the financial instruments’ cash flows represent solely payments of The effective interest rate is the rate that principal and interest (the SPPI test). In making exactly discounts estimated future cash this assessment, the Bank considers whether payments or receipts through the expected the contractual cash flows are consistent with a basic lending arrangement i.e. interest life of the financial asset or financial liability to includes only consideration for the time value the gross carrying amount of a financial asset of money, credit risk, other basic lending risks (i.e. its amortised cost before any impairment and a profit margin that is consistent with allowance) or to the amortised cost of a a basic lending arrangement. Where the financial liability. The calculation does not contractual terms introduce exposure to risk consider expected credit losses and includes or volatility that are inconsistent with a basic transaction costs, premiums or discounts lending arrangement, the related financial and fees and points paid or received that are asset is classified and measured at FVTPL. integral to the effective interest rate, such as The Bank reclassifies debt instruments when origination fees.When the Bank revises the and only when its business model for managing estimates of future cash flows, the carrying those assets changes. The reclassification amount of the respective financial assets takes place from the start of the first reporting or financial liability is adjusted to reflect the period following the change. Such changes new estimate discounted using the original are expected to be very infrequent and none effective interest rate. Any changes are occurred during the period. recognised in profit or loss.
(b) Financial assets at fair value through Fair value through profit or loss profit or loss (continued) Assets that do not meet the criteria for Based on these factors, the Bank classifies its amortised cost or fair value through other debt instruments into one of the following comprehensive income (“FVOCI”) are measurement categories: measured at FVTPL. A gain or loss on a debt Amortised cost instrument that is subsequently measured at FVTPL is recognised in profit or loss and Assets that are held for collection of presented in profit or loss within gains arising contractual cash flows where those cash flows from fair valuation of financial assets at fair represent SPPI, and that are not designated at value through profit or loss in the period in FVTPL, are measured at amortised cost. The which it arises. carrying amount of these assets is adjusted by any expected credit loss (“ECL”) allowance
62 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SIGNIFICANT ACCOUNTING POLICIES · the time value of money; and (CONTINUED) · reasonable and supportable information that is available without undue cost or Financial instruments (continued) h) effort at the reporting date about past (iii) Classification and subsequent events, current conditions and forecasts measurement of financial assets of future economic conditions. (continued) Note 5.(a) provides more detail of how the ECL Equity instruments allowance is measured. Equity instruments are instruments that meet (i) Modification of Loans the definition of equity from the issuer’s The Bank sometimes renegotiates or otherwise perspective; that is, instruments that do not modifies the contractual cash flows of loans contain a contractual obligation to pay and to customers. When this happens, the Bank that evidence a residual interest in the issuer’s assesses whether or not the new terms are net assets. substantially different to the original terms . The Bank subsequently measures all equity The Bank does this by considering, among instruments at FVTPL. Dividends, when others, the following factors. representing a return on such investments, continue to be recognised in profit or loss • If the borrower is in financial difficulty, under ‘Other income’ when the Bank’s right whether the modification merely to receive payments is established. Gains reduces the contractual cash flows to and losses on equity investments at FVTPL amounts the borrower is expected to be are included in the ‘Gains arising from fair able to pay. valuation of financial assets at fair value • Whether any substantial new terms are through profit or loss’ line in profit or loss. introduced such as a profit share/equity Immediately after initial recognition, an ECL –based return that substantially affects allowance is recognised for financial assets the risk profile of the loan. measured at amortised cost and investments • Significant extension of the loan term in debt instruments measured at FVOCI, when the borrower is not in financial which results in an accounting loss being difficulty. recognised in profit or loss when an asset is newly originated. At 1 January 2019 and 31 • Significant change in the interest rate. December 2019, the Bank did not have any • Insertion of collateral, other security or financial assets measured at FVOCI. credit enhancements that significantly The Bank assesses on a forward-looking basis affect the credit risk associated with the the ECL associated with its debt instrument loan. assets carried at amortised cost and with the If the terms are substantially different, the exposure arising from loan commitments. The Bank recognizes a loss allowance for such Bank derecognizes the original financial losses at the end of each reporting period. assets and recognizes a new asset at fair The measurement of ECL reflects: value and recalculates a new effective interest rate for the asset. The date of renegotiation · an unbiased and probability-weighted is consequently considered to be the date amount that is determined by evaluating of initial recognition for the impairment a range of possible outcomes; calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred .
63 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SIGNIFICANT ACCOUNTING POLICIES all the risks and rewards of ownership have (CONTINUED) not been transferred, the Bank tests control to ensure that continuing involvement on the h) Financial instruments (continued) basis of any retained powers of control does not prevent de-recognition). (ii) Impairment Financial liabilities are derecognized only However the Bank also assesses whether the when the obligation is discharged, cancelled new financial assets recognised is deemed or expired. to be credit-impaired at initial recognition ,especially in circumstances where the (vi) Fair value measurement renegotiation was driven by the debtor being Fair value is the price that would be received unable being unable to make the originally to sell an asset or paid to transfer a liability agreed payments. Differences in the carrying in an orderly transaction between market amount are also recognized in Profit or loss participants at the measurement date in as a gain or loss on derecognition. the principal or, in its absence, the most advantageous market to which the Bank has (iii) Modification of Loans (continued) access at that date. The fair value of liability reflects its non-performance risk. If the terms are not substantially different, the renegotiation or modification does not result When available, the Bank measures the fair in derecognition, and the Bank recalculates value of an instrument using the quoted price the gross carrying amount based on the in an active market for that instrument. A revised cash flows of the financial assets market is regarded as active if transactions for and recognizes a modification gain or loss in the asset or liability take place with sufficient profit or loss. The new gross carrying amount frequency and volume to provide pricing is recalculated by discounting the modified information on an ongoing basis. cash flows at the original effective interest rate(or Credit –adjusted effective interest rate If there is no quoted price in an active market, for purchased or originated credit –impaired then the Bank uses valuation techniques that financial assets). maximize the use of relevant observable inputs and minimize the use of unobservable (iv) Classification and subsequent inputs. The chosen valuation technique measurement of financial liabilities incorporates all of the factors that market participants would take into account in pricing All the financial liabilities are measured at a transaction. amortised cost under both IAS 39 and IFRS 9.The Bank recognizes all its financial liabilities Financial assets and financial liabilities are initially at the value of the consideration offset and the net amount presented in the received for those liabilities, excluding statement of financial position when there transaction costs and subsequently measures is a legally enforceable right to offset the them at amortised cost. amounts and there is an intention to settle on a net basis, or realize the asset and settle the (v) De-recognition of financial assets and liability simultaneously. liabilities Financial assets are derecognized when the contractual rights to receive cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that is, if substantially
64 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SIGNIFICANT ACCOUNTING POLICIES The assets’ residual values and useful lives are (CONTINUED) reviewed, and adjusted if appropriate, at the end of each reporting period. Depreciable assets are i) Property and equipment reviewed for impairment. Property and equipment is initially recorded Whenever events or changes in circumstances at cost and thereafter stated at historical cost indicate that the carrying amount may not be less accumulated depreciation. Historical recoverable. An asset’s carrying amount is written cost includes expenditure that is directly down immediately to its recoverable amount if attributable to the acquisition of the items. the asset’s carrying amount is greater than its Subsequent costs are included in the asset’s estimated recoverable amount. The recoverable carrying amount or are optimized as a separate amount is the higher of the asset’s fair value less asset, as appropriate, only when it is probable costs to sell and value in use. Gains and losses on that future economic benefits associated with disposals are determined by comparing proceeds the item will flow to the Bank and the cost of with carrying amount and are recognized in profit the item can be measured reliably. All other or loss. repairs and maintenance are charged to profit or loss during the financial year in which they Capital work in progress are incurred. Capital work in progress relates to property and Leasehold improvement costs are related to equipment under construction. Cost includes refurbishment on leased Banking premises. materials, direct labor and any other direct Leasehold improvements are only capitalized expenses incurred in respect of the project less when the cost is above TZS 20 million. The cost any recognised impairment losses. The amounts is amortized to profit or loss for the year using are transferred to the appropriate property straight line method over the remaining lease and equipment categories once the project is period or the expected economic useful life of completed and the asset is available for use. the refurbished costs whichever is shorter. Leases Depreciation The Bank leases office space in various parts of the Depreciation of other assets is calculated region. Rental contracts are typically made for a using the straight-line method to write down periods of 1 to 5, few contracts are up to 10 years their cost to their residual values over their but may have extension options as described estimated useful lives, using the following below, under extension and termination section. annual rates: Lease terms are negotiated on an individual basis and contain a wide range of different terms and Buildings 4% conditions. The lease agreements do not impose Motor vehicles 25% any covenants, but leased assets may not be used as security for borrowing purposes. Data communication 20% equipment Contracts may contain both lease and non-lease Computer hardware 20% components. The Bank allocates the consideration Furniture, fittings and 10% in the contract to the lease and non-lease equipment components based on their relative stand-alone prices. However, for leases of real estate for which Leasehold Over the the Bank is a lessee, it has elected not to separate improvement term of the lease and non-lease components and instead lease or 20% accounts for these as a single lease component.
65 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING lessee’s incremental borrowing rate is used, POLICIES (CONTINUED) being the rate that the individual lessee would have to pay to borrow the funds necessary to i) Property and equipment (continued) obtain an asset of similar value to the right-of- use asset in a similar economic environment Leases (continued) with similar terms, security and conditions.
Until the 2019 financial year, leases of office To determine the incremental borrowing rate, space were classified as operating leases, see the Bank: note 32(b) for details. From 1 January 2019, leases are recognized as a right-of-use asset where possible, uses recent third-party and a corresponding liability at the date at financing received by the individual lessee as which the leased asset is available for use a starting point, adjusted to reflect changes by the Bank. Each lease payment is allocated in financing conditions since third party between the liability and finance cost. The financing was received. finance cost is charged to profit or loss over the lease period so as to produce a constant Right-of-use assets are measured at cost periodic rate of interest on the remaining comprising the following: balance of the liability for each period. The right-of-use asset is depreciated over the · the amount of the initial measurement of shorter of the asset’s useful life and the lease lease liability; term on a straight-line basis. · any lease payments made at or before the commencement date less any lease Assets and liabilities arising from a lease are incentives received initially measured on a present value basis. · any initial direct costs and Lease liabilities include the net present value · restoration costs. of the following lease payments: Payments associated with short-term leases and · fixed payments (including in-substance leases of low-value assets are recognised on a fixed payments), less any lease incentives straight-line basis as an expense in profit or loss. receivable · variable lease payment that are based on Extension and termination options an index or a rate Extension and termination options are included · amounts expected to be payable by the in a number of property leases contracts. These lessee under residual value guarantees terms are used to maximise operational flexibility · the exercise price of a purchase option if in terms of managing contracts.In determining the the lessee is reasonably certain to exercise lease term, management considers all facts and that option, and circumstances that create an economic incentive · payments of penalties for terminating the to exercise an extension option, or not exercise a lease, if the lease term reflects the lessee termination option. Extension options (or periods exercising that option. after termination options) are only included in the lease term if the lease is reasonably certain to be · Lease payments to be made under extended (or not terminated). reasonably certain extension options are also included in the measurement of the For the leases of office space, the following factors liability. are normally the most relevant:
The lease payments are discounted using · If there are significant penalties to terminate the interest rate implicit in the lease. If that (or not extend), the Bank is typically reasonably rate cannot be readily determined, which is certain to extend (or not terminate). generally the case for leases in the Bank, the
66 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING Amortization is recognised in profit or loss on a POLICIES (CONTINUED) straight-line basis over the estimated useful life of the software, from the date that it becomes j) Leases (continued) available for use. The estimate useful life of · If any leasehold improvements are expected software is five years. to have a significant remaining value, the Bank is typically reasonably certain to extend (or l) Impairment of tangible and intangible assets not terminate). At the end of each reporting period, the Bank · Otherwise, the Bank considers other factors reviews the carrying amount of its tangible and including historical lease durations and the intangible assets to determine whether there is costs and business disruption required to any indication that these assets have suffered an replace the leased asset. Most extension impairment loss. options in offices and vehicles leases have not If objective evidence on impairment losses exists, been included in the lease liability, because the recoverable amount of the asset is estimated the Bank could replace the assets without in order to determine the extent of the impairment significant cost or business disruption. loss. The carrying amount of the asset is reduced · The lease term is reassessed if an option is through the use of an allowance account and the actually exercised (or not exercised) or the amount of the loss is recognized in profit or loss. Bank becomes obliged to exercise (or not exercise) it. The assessment of reasonable Assets that have an indefinite useful life are certainty is only revised if a significant event not subject to amortization and are tested for impairment annually. or a significant change in circumstances occurs, which affects this assessment, and In determining the recoverable amount, the Bank that is within the control of the lessee. considers the higher of the fair value of the asset less costs to sell, and value in use. In estimating k) Intangible assets value in use, the Bank iscognizant of the estimated future cash flow discounted to the present value Intangible assets with finite useful lives that using a pre-tax discount rate that is reflective of are acquired separately are carried at cost less the current market assessment of time value of accumulated amortization and accumulated money and the risks specific to the asset itself. impairment losses. Amortization is recognised on a straight-line basis over their estimated useful Where impairment loss subsequently reverses, the lives. The estimated useful life and amortization carrying amount of the asset (or cash-generating method are reviewed at the end of each reporting unit) is increased to the revised estimate of its period, with the effect of any changes in estimate recoverable amount, but so that the increased being accounted for on a prospective basis. carrying amount should not exceed the carrying amount that would have been determined had no Intangible assets with indefinite useful lives impairment loss been recognized. that are acquired separately are carried at cost less accumulated impairment losses. Acquired a) Regulatory reserve computer software and related licenses are stated at cost less accumulated amortization. Subsequent IFRS 9 requires the Bank to recognize immediately expenditure on software assets is capitalized only after initial recognition, an ECL allowance for when it increases the future economic benefits financial assets measured at amortized cost embodied in the specific asset to which it relates. and investments in debt instruments measured All other expenditure is expensed as incurred. at FVOCI, which results in an accounting loss Where software is not an integral part of the being recognized in profit or loss when an asset related hardware it is recognized as an intangible is newly originated. However, Bank of Tanzania asset. prudential guidelines require the Bank to set aside amounts as provision for losses on loans
67 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING Grants POLICIES (CONTINUED) Grants related to assets are treated as deferred a) Regulatory reserve (continued) income and released to the profit or loss over the expected useful lives of the assets concerned. and advances in addition to those losses that have been recognized under IFRS 9. Any such amounts Grants towards improvement of Bank’s processes set aside represent appropriations of retained are recognized to profit or loss over the periods earnings and not expenses in determining profit necessary to match them with the related costs. or loss. Cash and cash equivalents These amounts are dealt with in the regulatory reserve. Bank of Tanzania introduced General For the statement of cash flow purposes, cash provision of 1% on current loans which the Bank and cash equivalents includes cash on hand, has set aside from retained earnings with effect unrestricted balances held with Bank of Tanzania from August 2015. and short-term liquid investments with maturities of three months or less from the acquisition date, Translation of foreign currencies less advances from other banks repayable within three months from date of the advance. Functional and presentation currency Restricted cash balances are those balances that The financial statements of the Bank are measured the Bank cannot use for working capital purposes using the currency of the primary economic as they have been placed as a lien to secure environment in which the Bank operates (‘the functional currency’). The financial statements borrowings. are presented in Tanzania Shillings rounded to the Contingent liabilities nearest TZS ‘000.Tanzania Shillings is the Bank’s functional and presentational currency. Letters of credits, acceptances and guarantees are generally written by the Bank to support Transactions and balances performance of the customer to third parties. The Bank will only be required to meet these Foreign currency transactions that are transactions obligations in the event of the customer’s denominated, or that requires settlement, in a default. These obligations are accounted for as foreign currency are translated into the functional off-balance sheet transactions and disclosed currency using the exchange rates prevailing at as contingent liabilities. the dates of the transactions. Provisions At the end of each reporting period, monetary Provisions are recognised when the Bank has items denominated in foreign currencies are a present obligation (legal or constructive) retranslated at the rates prevailing at that date. as a result of a past event, it is probable Foreign exchange gains and losses resulting from that the Bank will be required to settle the the settlement of such transactions and from obligation, and a reliable estimate can be the translation at year end exchange rates of made of the amount of the obligation. The monetary assets and liabilities denominated in amount recognised as a provision is the best foreign currencies are recognised in profit or loss. estimate of the consideration required to Non-monetary items carried at fair value that are settle the present obligation at the end of the denominated in foreign currencies are retranslated reporting period, taking into account the risks at the rates prevailing at the date when the fair and uncertainties surrounding the obligation. value was determined. Non-monetary items When a provision is measured using the that are measured in terms of historical cost in a cash flows estimated to settle the present foreign currency are not retranslated. obligation, its carrying amount is the present value of those cash flows.
68 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING · Establishing portfolio segmentation of POLICIES (CONTINUED) similar financial assets for the purpose of measuring ECL. b) Comparatives Detailed information about judgements and Where necessary, comparative figures have been adjusted to conform with changes in estimates made by the Bank in the above presentation in the current year. areas is set out in note 5(a).
4. CRITICAL ACCOUNTING ESTIMATES AND Business models and SPPI as Significant JUDGEMENTS IN APPLYING THE BANK’S Judgements. ACCOUNTING POLICIES As well as ECL determining the appropriate business models and assessing the SPPI In application of the Bank’s accounting requirements for financial assets may require policies, the Directors are required to make significant impact on the financial statements judgements, estimates and assumptions as discussed in 3(h). about the carrying amount of assets and liabilities that are not readily apparent from Property and equipment and intangible assets other sources. The estimates and associated assumptions are based on historical Critical estimates are made by the Directors experience and other factors that are in determining useful lives, residual values, considered to be relevant. Actual results may and depreciation and amortization rates differ from these estimates. The estimates of property and equipment, and intangible and underlying assumptions are reviewed on assets respectively. an on-going basis. Defined benefit plan Measurement of the Expected Credit Losses The Bank operates an unfunded defined Allowance. benefit retirement plan for all employees. Employees do not contribute to the plan, The measurement of the expected credit the Bank bears all cost. A provision is made loss allowance for financial assets measured in the financial statements for the estimated at amortised cost and FVOCI is an area cost of the future benefits. The accuracy and that requires the use of complex models completeness of such provisions is confirmed and significant assumptions about future periodically by an independent actuarial economic conditions and credit behavior (e.g. valuation. Refer to note 35 of the financial the likelihood of customers defaulting and the statements for uncertainty and sensitivity resulting losses). Explanation of the inputs, disclosure. assumptions and estimation techniques used in measuring ECL to changes in these elements Taxes are explained in note 5(a). The Bank is subjected to a number of taxes and levies by various government and quasi- A number of significant judgements are government regulatory bodies. As a rule of also required in applying the accounting thumb, the Bank recognizes liabilities for the requirement for measuring ECL, such as anticipated tax/levies payable with utmost care · Determining criteria for significant and diligence. However, significant judgement increase of credit risk. is usually required in the interpretation and · Choosing appropriate models and applicability of those taxes/levies. Should it assumptions for measuring ECL; come to the attention of management, in one way or the other, that the initially recorded Establishing the number and relative · liability should be reassessed or re-estimated, weightings of forward-looking scenarios any differences from the liabilities are dealt for each portfolio segmentation and with through profit or loss for the year. associated ECL; and
69 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES relation to the risks faced by the Bank. On the AND POLICIES other hand, the Governance, Recruitment and Remuneration Committee among other issues The Bank’s activities expose it to a variety also has the mandate to review performance of financial risks and those activities involve of the Bank through various reports submitted the analysis, evaluation, acceptance and by Management. management of some degree of risk or combination of risks. Taking risk is core to These Board committees are assisted in these the financial business, and the operational functions by various management committees risks are an inevitable consequence of being which undertake both regular and ad-hoc in business. The Bank’s aim is therefore to reviews of risk management controls and achieve an appropriate balance between risk procedures, the results of which are reported and return and optimize potential adverse to the Board. effects on the Bank’s financial performance. The most important types of risks which the The Bank’s risk management policies are Bank manages on a day-to-day basis are: designed to identify and analyses these risks, to set appropriate risk limits and controls, and · Credit risk; to monitor the risks and adherence to limits by · Liquidity risk; means of reliable and up-to-date information · Market risk; systems. The Bank regularly reviews its risk - Interest rate risk; and management policies and systems to reflect changes in markets, products and emerging - Foreign exchange/currency risk. best practice. · Operations Risk. The notes below provide detailed information The Board of Directors has overall responsibility on each of the above risks and the Bank’s for the establishment and oversight of the objectives, policies and processes for Bank’s risk management framework. As part measuring and managing the risks. of its governance structure, the Board of Directors has embedded a comprehensive risk b) Credit risk management framework for identification, Credit risk refers to the risk that a counter measuring, monitoring, controlling and party will default on its contractual obligations mitigation of the Bank’s risks. The policies resulting in financial loss to the Bank. It arises are integrated in the overall management principally from lending and treasury activities. information systems of the Bank and The amounts presented in the statement supplemented by a management reporting of financial position are net of impairment structure. for doubtful debts, estimated by the Bank’s Risk management policies and systems are management based on prior experience and reviewed regularly to reflect changes in market their assessment of the current economic conditions, products and services offered, and environment. emerging best practice. The Bank, through The Board of Directors has delegated its training and management standards and responsibility for the management of credit risk procedures, aims to develop a disciplined and to its Audit, Risk management and Compliance constructive control environment, in which Committee which is responsible for oversight all employees/ stakeholders understand their of the Bank’s credit policy, including among roles and obligations. others: · formulating the policies, covering risk The Audit, Risk Management and Compliance acceptance procedures, collateral Committee of the Board of Directors of the Bank have the responsibility for monitoring requirements, credit appraisal, risk compliance with the Bank’s risk management grading and reporting, documentary and policies and procedures, and review of the legal procedures, and compliance with adequacy of risk management framework in regulatory and statutory requirements;
70 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES loss ratios and defaults correlation between AND POLICIES (CONTINUED) counterparties .The Bank measures credit risk using Probability of Default (PD), Exposure at a) Credit risk (continued) Default (EAD) and Loss Given Default (LGD). This is similar to the approach used for the purposes of measuring Expected Credit Loss · establishing the optimized structure for (ECL) under IFRS 9. the approval of credit facilities; Expected credit loss measurement · reviewing and assessing credit risk on all exposures in excess of approval IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality limits of the management prior to since initial recognition as summarized below: facilities being committed to customers; A financial instrument that is not limiting concentrations of exposure to · credit-impaired on initial recognition is counterparties and industries (for loans classified in ‘Stage 1’ and has its credit risk and advances). continuously monitored by the Bank. · Developing and maintaining the Bank’s · If a significant increase in credit risk (‘SICR’) risk grading system in order to categories since initial recognition is identified, the exposures according to the degree of financial instrument is moved to ‘Stage risk of financial loss faced and to focus 2’ but is not yet deemed to be credit- management on the attendant risks. The impaired. risk grading system is used in determining where impairment provisions may be · If the financial is credit-impaired, the required against specific credit exposures; financial instrument is then moved to and ‘Stage 3’. · Financial instruments in Stage 1 have their ECL measured at an amount equal to the · Reviewing reports on compliance with agreed exposure limits, including those portion of lifetime expected credit losses for selected industries and product types. that result from default events possible within the next 12 months. Instruments Day to day management of the Bank’s credit risk in stage 2 or 3 have their ECL measured is vested on the Director of Risk Management based on expected credit losses on a and Compliance who reports to the Chief lifetime basis. Executive Officer of the Bank. Regular audits of the credit processes and management are · A pervasive concept in measuring ECL in undertaken by Internal Audit. accordance with IFRS 9 is that it should (i) Credit Risk measurement consider forward-looking information. Loans and advances (including loan · Purchased or originated credit-impaired commitments and financial guarantees) financial assets are those financial assets that are credit-impaired on initial The estimation for credit exposure for risk recognition. Their ECL is always measured management purposes is complex and requires on a lifetime basis (Stage 3). the use of models as the exposure varies with the changes in the market conditions, Further explanation is also provided of how expected cash flows and the passage of time. the Group determines appropriate groupings The assessment of credit risk of a portfolio when ECL is measured on a collective basis. of assets entails further estimation as the likelihood defaults occurring, of associated
71 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES used for internal credit risk management AND POLICIES (CONTINUED) purposes. The default definition has been applied consistently to model the Probability a) Credit risk (continued) of default (PD), Exposure at Default (EAD) and loss given Default (LGD) throughout the The following diagram summaries the Group’s expected loss calculations. important requirements under IFRS 9 (other than purchased or originated credit-impaired Measuring ECL – Explanation of inputs, financial assets): assumptions and estimation techniques Significant Increase in Credit Risk (SICR) The Expected Credit loss (ECL) is measured on either a 12-month (12M) or lifetime basis The Bank considers a financial instrument depending on whether a significant increase to have experienced a significant increase in in credit risk has occurred since initial credit risk when the borrower is more than recognition or whether an asset is considered 5 days past due on contractual repayments to be credit-impaired. Expected credit losses for microfinance products and 30 days past are the discounted product of the Probability due on its contractual payments for products of Default (PD), Exposure at Default (EAD), and other than microfinance Loss Given Default (LGD), defined as follows: Definition of default and credit-impaired · The PD represents the likelihood of a assets borrower defaulting on its financial obligation (as per “Definition of default The Bank defines a financial instrument as and credit-impaired” above), either over in default, which is fully aligned with the the next 12 months (12M PD), or over the definition of credit-impaired, when it meets one or more of the following criteria: remaining lifetime (Lifetime PD) of the obligation. Quantitative criteria · EAD is based on the amounts the Bank The borrower is more than 90 days past due expects to be owed at the time of default, on its contractual payments (with the sole over the next 12 months (12M EAD) or over exception of microfinance portfolio where 30 days past due on contractual repayment is the remaining lifetime (Lifetime EAD). For default). example, for a revolving commitment, the Bank includes the current drawn balance Qualitative criteria plus any further amount that is expected to be drawn up to the current contractual The borrower meets unlikeliness to pay criteria, limit by the time of default, should it occur. which indicates the borrower is in significant financial difficulty. These are instances where: · Loss Given Default (LGD) represents the · The borrower is in long-term forbearance Bank’s expectation of the extent of loss · The borrower is deceased on a defaulted exposure. LGD varies by · The borrower is insolvent type of counterparty, type and seniority · It is becoming probable that the borrower of claim and availability of collateral or will enter bankruptcy other credit support. LGD is expressed as a · Financial assets are purchased or percentage loss per unit of exposure at the originated at a deep discount that reflects time of default (EAD). LGD is calculated on the incurred credit losses. a 12 –month or lifetime basis, where 12 The criteria above have been applied to all month-month LGD is the percentage of financial instruments held by the Bank and loss expected to be if the default occurs in are consistent with the definition of default the next 12-months and lifetime LGD’s the
72 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
percentage of loss expected to be made · For secured products, this is primarily if the default occurs over the remaining based on collateral type and projected expected lifetime of the loan. collateral values, historical discounts to market/book values due to forced sales, Measuring ECL – Explanation of inputs, time to repossession and recovery costs assumptions and estimation techniques observed. (continued) · For unsecured products, LGD’s are typically The ECL is determined by projecting the set at product level due to the limited PD, LGD and EAD for each future month for differentiation in recoveries achieved collective segments. These three components across different borrowers. Probability of are multiplied together and adjusted for the loans getting back to performing is also likelihood of survival (i.e. the exposure has adjusted to obtain LGD parameter. not prepaid or defaulted in an earlier month). Forward-looking economic information is also This effectively calculates an ECL for each included in determining the 12-month and future quarters, which is then discounted lifetime PD and LGD. back to the reporting date and summed. The discount rate used in the ECL calculation The assumptions underlying the ECL is the original effective interest rate or an calculation – such as how the maturity profile approximation thereof. of the PDs and how collateral values change etc. – are monitored and reviewed on a The 12-month and lifetime EADs are quarterly basis. determined based on the expected payment profile, which varies by product type. There have been no significant changes in estimation techniques or significant · For amortizing products and bullet assumptions made during year. repayment loans, this is based on the contractual repayments owed by the Forward-looking information incorporated in borrower over 12 month or lifetime basis. the ECL models This will also be adjusted for any expected The assessment of SICR and the calculation overpayments made by the borrower. of ECL both incorporate forward-looking Early repayment/refinance assumptions information. The Bank has performed are also incorporated into the calculation. historical analysis and identified the key economic variables impacting credit risk and · For revolving products such as overdrafts, expected credit losses for each portfolio. the exposure at default is predicted by These economic variables and their associated taking current drawn balance and adding a impact on the PD and LGD vary by financial “credit conversion factor” which allows for instrument. Expert judgement has also been the expected drawdown of remaining limit applied in this process. Forecasts of these by the time of default. These assumptions economic variables (the “base economic vary by product type and current limit scenario”) are obtained from independently utilization band, based on an analysis of published information on a quarterly basis the Bank’s recent default data. and provide the best estimate view of the economy over the next ten years. Definition of default and credit-impaired assets (continued) The impact of the economic variables on the PD and LGD has been determined by The 12-month and lifetime LGDs are performing statistical logistic regression determined based on the factors which impact analysis to understand the impact changes the recoveries made post default. These vary in these variables have had historically on by product type. default rates and on the components of LGD.
73 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) In addition to the base economic scenario, the Bank estimates other scenarios along with scenario weightings. The number of other scenarios used is set based on the analysis of each major product type to ensure non-linearity are captured. The number of scenarios and their attributes are reassessed at each reporting date. At 1 January 2018 and 31 December 2018, for all portfolios the Bank concluded that three scenarios appropriately captured non-linearity. The Bank concluded that two additional scenarios, best case and worst case scenarios were required. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario is representative of. These probability –weighted ECLs are determined by running each scenario through the relevant ECL model and multiplying it by the appropriate scenario weighting. As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Bank considers these forecasts to represent its best estimate of the possible outcomes.
Economic variables assumptions The most significant year end assumptions used for ECL estimate as at 31 December 2019 are set out below. The scenarios “Base”, “Best Case” and “Worst Case” were used for each specific portfolios depending on macroeconomic factor correlation with default rates.
CL,STL Estimates Variable Scenarios 2020 2021 2022 2023 2024 Population Base 3.1% 3% 3% 3% 3% Best case 3.2% 3.1% 3.1% 3.1% 3.1% Worst case 3.0% 2.9% 2.9% 2.9% 2.9%
LPF, COL & PSL Estimates Variable Scenarios 2020 2021 2022 2023 2024 Interest rates Base 15.5% 15.5% 15.5% 15.5% 15.5% Best case 15.8% 15.8% 15.8% 15.8% 15.8% Worst case 15.2% 15.2% 15.2% 15.2% 15.2%
GRL & MIC Estimates Variable Scenarios 2020 2021 2022 2023 2024 Household Base 12.4% 12.4% 0% 0% 0% Spending Best case 12.7% 12.7% 0% 0% 0% Worst case 12.1% 12.1% 0% 0% 0%
Forward-looking information incorporated in the ECL models (continued)
74 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) The weightings assigned to each economic scenario as at 31 December 2019 were as follows:
Portfolio Scenarios Weightings All portfolios Base 50% Best case 25% Worst case 25% Groupings of instruments for losses measured on collective basis For expected credit loss provisions modelled on collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such that risk of exposures within a group are homogenous. In performing this grouping, there must be sufficient information for the group to be statistically credible. The Bank has grouped its loans based on loan product type. Exposure to credit risk
2019 2018 % TZS’000 % TZS’000 On balance sheet items Note Cash balance with Bank of Tanzania 16 50,242,685 8.31% 31,056,012 5.89% TPB Mobile Money Balance 13,333,643 2.20% 5,858,011 1.11% Cheques and items for collection 3,586 0.00% 231,928 0.04% Placements and balances with other banks 17 14,556,678 2.41% 15,821,018 3.00% Treasury bills 18 75,397,988 12.47% 43,620,066 8.28% Treasury bonds 19 25,189,964 4.17% 13,199,202 2.50% Loans and advances to customers 20 420,682,541 69.57% 412,768,650 78.32% Other assets 21 5,310,803 0.88% 4,493,508 0.8%
604,717,888 100.00% 527,048,395 100.00%
75 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a) Credit risk (continued) Classification of loans and advances The table below contains an analysis of the risk exposure of financial instruments for which an ECL allowance is recognized. The gross carrying amount of financial assets below also represents the Bank’s maximum exposure to credit risk on these assets.
ECL Staging 2019 Stage 1 Stage 2 Stage 3 TZS ‘000 Purchased 12- month credit ECL Lifetime ECL Lifetime ECL Impaired Total Neither past due nor impaired 361,555,628 - - - 361,555,628 Past due but not impaired 41,998,141 18,262,447 - - 60,260,588 Impaired - - 19,652,830 1,753,742 21,406,572 Gross 403,553,769 18,262,447 19,652,830 1,753,742 443,222,788 Less: allowance for impairment (3,038,817) (3,394,386) (12,308,424) (475,882) (19,217,508) Less: Interest in suspense - - (3,322,738) - (3,322,738)
Total (note 20) 400,514,952 14,868,061 4,021,668 1,277,860 420,682,542
ECL Staging 2018 Stage 1 Stage 2 Stage 3 TZS ‘000 Purchased 12- month credit ECL Lifetime ECL Lifetime ECL Impaired Total Neither past due nor impaired 335,969,681 - - - 335,969,681 Past due but not impaired 45,931,700 21,684,580 - - 67,616,280 Impaired - - 25,024,861 6,065,394 31,090,255 Gross 381,901,381 21,684,580 25,024,861 6,065,394 434,676,216 Less: allowance for impairment (3,612,886) (1,119,899) (9,641,909) (3,431,417) (17,806,111) Less: Interest in suspense - - (4,101,455) - (4,101,455)
Total (note 20) 378,288,495 20,564,681 11,281,497 2,633,977 412,768,650
76 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) a) Credit risk (continued) Classification of loans and advances (continued) Loans and advances that are neither past due nor impaired The Bank classifies loans and advances under this category for those exposures that are up to date, in terms of repayment with contractual agreements as well as quality of legal and loan documentation. Such loans would have demonstrated financial conditions, risk factors, quality of documentation and capacity to repay that are acceptable. These exposures will normally be maintained largely within approved product programs and with no signs of impairment or distress. These exposures are categorized as normal accounts in line with the Bank of Tanzania (BOT) regulations. Past due but not impaired This category includes loans that are superior in quality in repayment to those classified as substandard but they are potentially weak in terms of documentation thus, require closer management supervision. Impaired loans and advances Impaired loans are loans for which the Bank determines that it is probable that it will not be able to collect all outstanding principal and interest due according to the contractual terms of the advance. These accounts under BOT guidelines are termed as non-performing loans.
Loss allowance The loss allowance recognised in the period is impacted by a variety of factors as described below: · Transfer between stage 1 and stage 2 or due to financial instruments experiencing significant increase (or decrease) of credit risk or becoming credit-impaired in the period, and the consequent “step up”( or step down”) between 12-months and lifetime ECL:
· Additional allowance for new financial instruments recognised during the period, as well releases for financial instruments de-recognised in the period;
· Impact on the measurement of ECL due to changes in PDS and LGDs in the period, arising from regular refreshing of inputs to models:
· Impact on the measurement of ECL due to the passage of time, as ECL is measured on present values basis;
· Foreign exchange retranslation for assets denominated in foreign currencies and other movements: and
· Financial assets derecognized during the period and write offs of allowance related to assets that were written off during the period.
77 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 The following tables explain the changes in the loss allowance between the beginning and the end of the annual period due to these factors:
Loss allowance – Loans and advances to Stage 1 Stage 2 Stage 3 2019 customers at amortised cost 12-month ECL Lifetime ECL Lifetime ECL POCI Total TZS 000s TZS 000s TZS 000s TZS 000s TZS 000s
Loss allowance as at 31 December 2018 3,524,704 1,119,899 9,642,136 3,431,417 17,718,156 Off Balance sheet as at 31 December 2018 87,954 87,954 Total On and Off balance sheet Loss allowance as at 01 3,612,658 1,119,899 9,642,136 3,431,417 17,806,111 January 2019
Changes in the loss allowance - – Transfer to stage 1 79,644 (277,658) (1,152,224) - (1,350,238) – Transfer to stage 2 (77,558) 614,950 (202,850) - 334,542 – Transfer to stage 3 (55,400) (176,342) 4,887,338 - 4,655,596 New financial assets originated or purchased 1,893,306 770,824 1,361,467 462,698 4,488,295 Changes in models/risk parameters 184,972 (1,678,463) (2,412,805) (1,201) (3,907,496) Financial assets that have been derecognised other than (1,553,135) (274,853) (2,319,852) (442,424) (4,590,264) write offs Foreign exchange and other movements 2,690,693 4,427,024 18,696,096 2,880,789 28,694,603 Total net P&L charge during the period 3,162,522 3,405,483 18,857,170 2,899,863 (10,533,347) Other movements with no P&L impact – Write-offs (34,824) (11,097) (6,548,746) (2,423,981) (9,033,069) Loss allowance as at 31 December 2019 3,038,817 3,394,386 12,308,424 475,882 19,217,508 Off balance sheet as at 31 December 2019 88,881 88,881 Loss allowance as at 31 December 2019 3,127,698 3,394,386 12,308,424 475,882 19,306,389
78 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Stage 1 Stage 2 Stage 3 Purchased 2018 Credit Impaired Loss allowance – Loans and advances to 12-month ECL Lifetime ECL Lifetime ECL Total customers at amortised cost TZS 000s TZS 000s TZS 000s TZS 000s TZS 000s Loss allowance as at 31 December 2017 3,166,233 511,623 10,432,895 - 14,110,751 Restatement of the prior year - - - - - Loss allowance as at 01 January 2018 3,166,233 511,623 10,432,895 - 14,110,751 Provision allowance (Twiga and TWB) - - - 524,777 524,777 Changes in the loss allowance - – Transfer to stage 1 30,636 (147,642) (661,233) - (778,239) – Transfer to stage 2 (59,642) 263,857 (166,753) - 37,462 – Transfer to stage 3 (73,239) (74,189) 4,617,191 - 4,469,763 New financial assets originated or purchased 2,898,876 785,965 2,781,569 2,906,640 9,373,050 Changes in models/risk parameters (415,140) (3,156) (204,140) - (622,436) Financial assets that have been derecognized other than write off (1,934,943) (216,316) (4,061,724) (6,212,983)
P&L Charge during the year 446,548 608,519 2,304,910 2,906,640 6,266,617
Other Movements with no P&L Impact – Write-offs (227) (279) (3,095,528) - (3,096,034) Loss allowance as at 31 December 2018 3,612,554 1,119,863 9,642,277 3,431,417 17,806,111
79 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 The table below explains changes in the gross carrying amount of Loans and advances to help explain their significance to the changes in the loss allowance for the same portfolio.
Stage 1 Stage 2 Stage 3 2019 12-month Lifetime ECL Lifetime ECL POCI Total Loans and advances to customers at amortised cost ECL TZS 000s TZS 000s TZS 000s TZS 000s TZS 000s
Gross carrying amount as at 31 December 2018 381,901,381 21,684,580 25,024,861 6,065,394 434,676,216 Gross carrying amount as at 01 January 2019 381,901,381 21,684,580 25,024,861 6,065,394 434,676,216 Changes in the gross carrying amount - – Transfer to stage 1 6,300,925 (4,526,263) (1,774,662) - (0) – Transfer to stage 2 (7,202,604) 7,559,309 (356,705) - 0 – Transfer to stage 3 (8,303,297) (2,836,287) 11,139,584 - (0) New financial assets originated or purchased 243,245,957 6,481,706 2,810,157 1,676,040 254,213,860 Financial assets that have been derecognised (174,814,743) (7,259,363) (5,318,746) (931,185) (188,324,036) Write-offs (72,900) (7,909) (8,692,174) (2,374,586) (11,147,568) Other changes (37,500,951) (2,833,327) (3,179,485) (2,681,922) (46,195,685) Gross carrying amount as at 31 December 2019 403,553,769 18,262,447 19,652,830 1,753,742 443,222,787
80 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Stage 1 Stage 2 Stage 3 Purchased 2018 Loans and advances to customers at amortized 12-month ECL Lifetime ECL Lifetime ECL Credit Impaired Total cost TZS 000s TZS 000s TZS 000s TZS 000s TZS 000s
Gross carrying amount as at 31 December 2017 298,409,234 18,968,886 27,090,823 - 344,468,943 Restatement of the prior year - - - - - Gross carrying amount as at 01 January 2018 298,409,234 18,968,886 27,090,823 - 344,468,943 Changes in the gross carrying amount - – Transfer to stage 1 5,493,836 (4,475,615) (1,018,221) - - – Transfer to stage 2 (5,241,772) 5,475,011 (233,239) - - – Transfer to stage 3 (10,084,826) (3,182,766) 13,267,592 - - New financial assets originated or purchased 288,229,596 16,623,967 8,052,960 6,065,394 318,971,917 Financial assets that have been derecognized (159,856,661) (9,037,429) (7,135,237) - (176,029,327) Write-offs (54,020) (222,732) (12,252,309) - (12,529,061) Other changes (34,994,007) (2,464,741) (2,747,508) - (40,206,256)
Gross carrying amount as at 31 December 2018 381,901,380 21,684,581 25,024,861 6,065,394 434,676,216
Write-off policy
The Bank writes off financial asset, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Bank recovery method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of recovering in full. The Bank may write-off financial assets that are still subjected to enforcement activity. The Bank still seek to recover amounts it is legally owed in full, but which have been partially written off due to no reasonable expectation of full recovery.
81 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Concentration of risk The Bank monitors concentration of loans by economic sector in line with set limits per sector. The objective is to ensure diversification of risk by always maintaining a well-diversified product-mix. An analysis of concentrations within the loan and advances to customers.
2019 2018 TZS ‘000 % TZS ‘000 %
Loans and advances to customers (gross) Agriculture fishing, forestry and hunting 2,111,908 0.48% 14,645,212 3.37% Building & construction 3,246,969 0.73% 667,636 0.15% Education 2,971,272 0.67% 15,265,474 3.51% Electricity - 0.00% 17,345 0.00% Financial Intermediaries 229,059 0.05% 1,497,245 0.35% Gas - 0.00% 30,520 0.01% Health 399,100 0.09% 1,769,764 0.41% Hotels & Restaurants 7,027,266 1.59% 3,632,108 0.84% Manufacturing 72,456 0.02% 200,162 0.05% Mining quarrying 462,511 0.10% 130,430 0.03% Personal 362,708,381 81.83% 160,626,989 36.95% Trade 57,171,986 12.90% 41,073,281 9.54% Transport & Communications 6,268,092 1.41% 2,499,412 0.58% Warehousing & storage 888 0.00% 55,137 0.01% Real Estate 552,901 0.12% 17,556,443 4.04% Water - 0.00% 35,122 0.01% Other Services - 0.00% 174,973,936 40.25% 443,222,787 100.0% 344,468,943 100.0%
b) Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations from financial liabilities. The Assets and Liabilities Committee (ALCO), a management committee is tasked with the responsibility of ensuring that all foreseeable funding commitments and deposits withdrawals can be met when due, and that the Bank will not encounter difficulty in meeting obligations from its financial liabilities as they occur. ALCO relies substantially on the Bank’s Treasury Department to coordinate and ensure discipline across the Bank, certify sufficient liquidity under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation.
82 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Liquidity and funding management The Bank manages the liquidity risk by ensuring among others that:
· sufficient funds are maintained to meet demand by customers as well as any statutory obligations; · There is adequate investment in highly liquid assets at all times as well as tracking mismatches in its statement of financial position to identify any liquidity needs; all investments made in financial assets are aimed at diversifying the investment portfolio, timing of cash flows and balancing the maturity ladders of financial assets and financial liabilities; · monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory funding mix; and · Maintaining liquidity contingency plan which identifies early warning indicators of stress conditions and describes actions to be taken in the event of difficulties arising from systemic or other crises while optimizing adverse long-term implications.
Source of funding The Bank’s major source of funding is from customer deposits. To this end, the Bank maintains a diversified and stable funding base comprising current/demand, savings and time deposits. The Bank borrows from the interbank market through transactions with other banks for short term liquidity requirements. Exposure to liquidity risk The key measure used by the Bank for managing and measuring liquidity risk is the ratio of liquid assets to demand deposit. For this purpose liquid assets consist of cash and interbank deposits, investment in securities maturing within one year and clearing accounts maintained with the Bank of Tanzania (BOT). The Bank’s maturing liabilities comprises all deposits and other liabilities with maturity period of less than one year. The Bank’s exposure to liquidity risk at 31 December, 2019 is summarized below.
83 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019 b) Liquidity risk (continued) The following is the liquidity profile of the Bank as at 31 December 2019: Up to 1 1-3 3-6 6-12 Over month months months months 1 year Total Financial assets TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000
Cash and balances with Bank of Tanzania 50,242,685 - - - - 50,242,685 TPB Mobile Money Balance 13,333,647 - - - - 13,333,647 Cheques and items for collection 3,586 - - - - 3,586 Placements and balances with other banks 14,556,678 - - - - 14,556,678 Treasury bills - 26,179,803 - 49,218,185 - 75,397,988 Treasury bonds - 4,883,669 1,577,425 1,582,309 17,146,561 25,189,964 Loans and advances to customers 9,347,365 5,192,251 10,302,735 29,332,677 366,418,632 420,593,660 Other assets 4,539,504 - - - - 4,539,504 92,023,465 36,255,723 11,880,160 80,133,171 383,565,193 603,857,712 Total financial assets Financial liabilities Customer deposits 263,148,757 1,000 29,547,725 59,961,507 89,518,187 442,177,176
Borrowing and balances due to other banks 2,559,063 14,404,018 1 6 , 4 7 2 , 2 1 2 13,296,065 28,840,671 75,572,029 Other liabilities 2,509,686 4,892,991 - - - 7,402,676 Total financial liabilities 268,217,506 19,298,009 46,091,937 73,257,571 118,358,859 525,151,881
Net liquidity gap (176,194,041) 16,957,714 (34,139,777) 6,875,599 265,206,335 78,705,831
At 31 December 2018 Total financial assets 62,095,865 23,274,746 11,367,461 57,685,683 372,624,630 527,052,385 Total financial liabilities 339,403,360 13,803,851 46,423,848 59,430,195 13,573,102 472,634,356
(1,744,512) Net liquidity gap (277,307,495) 9,470,895 (35,056,387) 359,051,528 54,414,029
84 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
c) Market risk Market risk is the risk that movement in In addition to maintaining an appropriate market factors, including interest rates and mix between fixed and floating rates deposit foreign currency exchange rates, will reduce base, interest rates on advances to customers income or value of portfolio. The objective of are pegged to the Bank’s base lending rate. market risk management process is to manage The base rate is adjusted from time to time and control market risk exposures in order to reflect the cost of deposits whereas loans to optimize return on risk while maintaining with a maturity of more than one year are re- a market profile as a provider of financial priced regularly to ensure that the Bank is not products and services. exposed to interest rate risk.
Overall responsibility for management of Interest rate risk – stress tests market risk rests with ALCO. Market Risk Management Policies are in place to guide The Bank monitors the impact of risks management of this risk and are subject to associated with the effects of fluctuations review and approval by the Board on a regular in prevailing interest rates. At 31 December basis. 2019, the following table summarizes the estimated impact on profit or loss ofan Market risk can be further subdivided into immediate increase or decrease in interest interest rate risk and currency risk. rates of 125 basis points on current interest rate risk profile to the Bank’s before tax profit. Interest rate risk The Bank is exposed to the risk that the value of a financial instrument will fluctuate 2019 2018 due to changes in market interest rates. The TZS ‘000 TZS ‘000 maturities of asset and liabilities and the 125 basis points ability to replace at an acceptable cost as they increase or decrease in mature are important factors in assessing the interest rates 732,142 502,163 Bank’s exposure to changes in interest rates.
85 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
The table summarizes the exposure to interest rate risk. Assets and liabilities are categorized by the earliest of contractual repricing or maturity dates. The Bank does not bear interest rate risk on off balance sheet items. Non interest Up to 1 2-3 4-6 7-12 Over Total bearing month months months months 1 year Financial assets TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 Cash and balance with Bank of Tanzania 50,242,685 50,242,685 - - - - - TPB Mobile Money balance 13,333,647 13,333,647 - - - - - Cheques and items for collection 3,586 3,586 - - - - - Placements and balances with other banks 14,556,678 - 14,556,678 - - - - Treasury bills 75,397,988 - - 26,179,803 - 49,218,185 - Treasury bonds 25,189,964 - - 4,883,669 1,577,425 1,582,309 17,146,561 Loans and advances to customers 420,593,660 - 9,347,365 5,192,251 10,302,735 29,332,677 366,418,632 Other assets 4,539,504 4,539,504 ------Total financial assets 603,857,712 68,119,422 23,904,043 36,255,723 11,880,160 80,133,171 383,565,193 Financial liabilities Customer deposits 442,177,176 9,706,053 253,442,704 1,000 29,547,725 59,961,507 89,518,187 Borrowing and balances due to other banks 75,572,029 - 2,559,063 - - 13,296,065 28,840,671 Other liabilities 7,402,676 7,402,676 - - - - -
Total financial liabilities 525,151,882 17,108,729 256,001,767 1,000 29,547,725 73,257,571 118,359 Net Liquidity gap 78,705,831 51,010,693 (232,097,724) 36,254,723 (17,667,565) 6,875,599 265,206,335 At 31 December 2018 Total financial assets 527,052,385 41,639,449 20,456,416 23,274,746 11,371,461 57,685,683 372,624,630 Total financial liabilities 472,634,356 27,394,491 319,974,885 24,570,292 38,705,811 48,415,775 13,573,102
Net position 54,414,029 14,244,958 (299,518,469) (1,295,546) (27,334,350) 9,269,908 359,051,528
86 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
c) Market Risk (continued)
Foreign Exchange Risk
Foreign exchange- Exposure risk The Bank is exposed to the risk on earnings and capital arising from adverse movement of foreign exchange rates. The bank’s exposure risk is managed within the Bank of Tanzania (BOT) exposure guideline of 7.50% of core capital. The Bank’s transactional exposures give rise to foreign currency gains and losses that are recognized in profit or loss. The Bank also has monitoring and control system for its positions in major currencies in which it is active. The Bank ensures that its net exposure is kept to an acceptable level by selling and buying foreign currencies when considered appropriate.
Foreign exchange risk – stress test At 31 December 2019, if the TZS had weakened or strengthened by 10% against the USD and EURO with all other variables held constant, the impact on the profit before tax for the year would have been lower or higher by TZS 3,350,000 (2018: TZS 89,324,000). The carrying amounts of the Bank’s material foreign currency denominated monetary assets and liabilities that will have an impact on profit or loss when exchange rates change, as at 31 December 2019 and 31 December 2018 were as follows:
2019 2018 TZS ‘000 TZS ‘000
Cash and balance with Bank of Tanzania 8,659,580 4,400,674 Placements and balances with other banks 7,548,786 5,991,280 Loans & Advances to customers 4,945,407 4,269,137 Other assets (4,782,669) 377,027 Customer deposits (16,106,885) (15,909,504) Other liabilities (230,724) (21,850)
33,496 (893,236)
87 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
The Bank operates wholly within Tanzania and its assets and liabilities are reported in the local currency. The bank’s currency risk is managed within the Bank of Tanzania exposure guideline of 7.5% of core capital. The bank’s currency position as at 31 December 2019 was as follows: Total USD GBP EURO KENYA RAND TZS TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000
Financial assets Cash and balance with Bank of Tanzania 50,242,685 6,318,510 765,268 878,725 8,196 688,880 41,583,105 TPB Mobile Money balance 13,333,647 - - - - - 13,333,647 Cheques and items for collection 3,586 - - - - - 3,586 Placements and balances with other banks 14,556,678 6,620,230 - 928,557 - - 7,007,892 Treasury bills 75.397,988 - - - - - 75.397,988 Treasury bonds 25,189,964 - - - - - 25,189,964 Loans and advances to customers 420,593,660 4,945,407 - - - - 415,648,253 Other assets 4,539,504 (1,548,948) (762,861) (1,773,784) (8,196) (688,880) 9,322,173 Total financial assets 603,857,712 16,335,198 2,408 33,499 - - 587,486,607
Financial liabilities Customer deposits 442,177,176 16,104,478 2,406 - - - 426,070,291 Borrowing and balances due to other banks 75,572,029 - - - - - 75,572,029 Other liabilities 7,402,676 230,724 - - - - 7,171,952 Total financial liabilities 525,151,881 16,335,202 2,406 - - - 508,814,273
Net position 78,705,831 (4) 1 33,499 - - 78,672,334 At 31 December 2018 Total financial assets 527,148,385 14,404,729 57,271 699,076 6,983 - 511,980,326 Total financial liabilities 472,634,356 15,928,236 575 2,542 - - 456,703,003
Net position 54,514,029 (1,523,507) 56,696 696,534 6,983 - 55,277,323
88 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
d) Categorization of financial assets and liabilities All the Bank’s financial assets are categorized as loans and receivables except for treasury bills and government stocks which were classified as financial assets held to maturity.
All the financial liabilities are carried at amortized costs using the effective interest rate method.
e) Fair value estimation
IFRS 13 requires the Bank to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The Bank specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair value hierarchy:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.
Fair value of the Bank’s financial assets and financial liabilities that are measured at fair value on recurring basis.
The Bank did not have any financial asset and financial liabilities that are measured at fair value (2018: Nil).
89 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) e) Fair value estimate (continued) Financial instruments not measured at fair value The following table analyses within the fair value hierarchy the Bank’s assets and liabilities (by class) not measured at fair value at 31 December 2019.
Level 1 Level 2 Level 3 Total TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 ASSETS
Cash and balances with Bank of Tanzania 50,242,685 - - 50,242,685 TPB Mobile Money balance 13,333,647 - - 13,333,647 Cheques and items for collection 3,586 - - 3,586 Placements and balances with other Banks - 14,556,678 - 14,6556,678 Treasury bills - 75,397,988 - 75,397,988 Government stocks and other securities - 25,189,964 - 25,189,964 Loans and advances to customers - 420,682,541 - 420,682,541 Other assets (excluding prepayments) - 4,539,504 - 4,539,504 Total 63,579,918 540,366,675 - 603,946,593
LIABILITIES
Deposits from customers - (442,177,176) - (442,177,176) Borrowings and balances due to other banks - (75,572,029) - (75,572,029) Other liabilities - 7,797,655 - 7,797,655 Total - (509,951,550) - (509,951,550)
Most of the financial assets and liabilities are short term in nature and those which are long term bear interest at prevailing market rate therefore the carrying amounts approximate fair value.
90 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) e) Fair value estimate (continued) Financial instruments not measured at fair value ( continued)
The following table analyses within the fair value hierarchy the Bank’s assets and liabilities (by class) not measured at fair value at 31 December 2018.
Level 1 Level 2 Level 3 Total TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 ASSETS
Cash and balances with Bank of Tanzania 31,056,012 - - 31,056,012 TPB Mobile Money balance 5,858,001 - - 5,858,001
Cheques and items for collection 231,928 - - 231,928 Placements and balances with other Banks - 15,821,018 - 15,821,018 Treasury bills - 43,620,066 - 43,620,066 Government stocks and other securities - 13,199,202 - 13,199,202 Loans and advances to customers - 412,768,650 - 412,768,650 Other assets - 4,493,508 - 4,493,508 Total 37,145,941 489,902,444 - 527,048,385
LIABILITIES
Deposits from customers - (390,599,533) - (390,599,533) Borrowings and balances due to other banks - (62,930,870) - (62,930,870) Other liabilities - (10,794,909) - (10,794,909) Total - (464,325,312) - (464,325,312) Most of the financial assets and liabilities are short term in nature and those which are long term bear interest at prevailing market rates therefore the carrying amounts approximate fair value.
91 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES
The Bank’s objective when managing capital are driven by the broader concept of capital as defined by the Bank of Tanzania (BOT) which substantially relies on the guidelines developed by the Basel Committee, for supervisory purposes. Those objectives are intended to:
· sustain a strong capital base to support the development of business; · safeguard the Bank’s ability to continue as a going concern; and · comply with the capital requirements set out by the BOT; · to provide an adequate return to shareholders by pricing products and services commensurate with the level of risk; and
· to maintain an optimal capital structure to reduce the cost of capital. As per the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014, the Bank’s total regulatory capital is divided into two tiers:
· Tier 1 Capital (Core Capital): share capital, share premium, capital grants plus retained earnings less prepaid expenses and intangible assets. In July 2019, software balance was removed from computation of core capital;
· Tier 2 Capital (Supplementary Capital): subordinated debts.
The Bank monitors the adequacy of its capital using ratios established by BOT. These ratios measure capital adequacy by comparing the Bank’s eligible capital with its balance sheet assets, off- balance sheet commitments and market and other risk positions at a weighted amount to reflect their relative risk.
The risk-weighted assets are measured by means of a hierarchy of four risk weights classified according to the nature of assets and reflecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses.
The composition and the ratios of the Bank’s regulatory capital and the details of the risk weighted assets for the year ended 31 December 2019 and 2018 are summarized hereunder.
92 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Capital adequacy
2019 2018 Tier 1 Capital TZS ‘000 TZS ‘000
Share capital 28,071,743 28,071,743
Disclosed reserves Retained earnings (excluding profit for the year) 47,281,240 30,791,166 Qualifying year to date profit 16,024,495 12,720,927 Defined benefit reserve (2,704,829) (2,838,021) Other reserves - acquired in business combination 4,999,760 5,041,745
93,672,409 73,787,560 Less deductions from capital Prepaid expenses (1,762,774) (3,461,114) Intangible assets - (3,035,349) Deferred tax asset (6,887,244) (6,242,025) Lease hold (4,714,613) (5,001,673)
Total deductions from capital (13,364,631) (17,740,161) Core capital 80,307,778 56,047,399
93 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Capital adequacy (continued)
2019 2018 TZS ‘000 TZS ‘000 Tier 2 Capital Regulatory reserve-general provisions (note 28(c)) - 3,912,553 Total regulatory capital 80,307,778 59,959,952
Risk-weighted assets
On-balance sheet 447,144,923 438,104,216 Operation Risk exposure 50,759,263 45,958,625 Market Risk exposure 4,891,678 1,908,023 Off-balance sheet exposure (note 32 (c)) 3,428,339 2,453,549
Total risk-weighted assets 506,224,203 488,424,413
Capital adequacy ratios
Tier 1 (BOT minimum – 12.5%) 15.86% 11.48% Tier 1 + Tier 2 (BOT minimum – 14.5%) 15.86% 12.28% As at 31 December 2019, the Bank’s core capital and total regulatory capital were both above the required minimum of 12.50% and 14.50% respectively, as specified under sections 9 (a) and 9 (b) of the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014.
94 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
7. INTEREST INCOME
Interest on loans and advances 92,771,554 89,746,913 Interest on government securities 7,045,238 5,602,504 Interest on placement with other banks 359,750 595,547 100,176,542 95,944,964
8. INTEREST EXPENSE
Interest on savings accounts 7,693,612 7,762,223 Interest on time deposits 14,802,059 10,108,003
22,495,671 17,870,226
9. FEES AND COMMISSION INCOME
Net Western Union transfer fees and settlement gain 2,379,385 2,487,162 Other fees and commissions 18,471,407 17,267,134
20,850,792 19,754,296
95 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
11. FEES AND COMMISSION EXPENSE
Agency service fees to Tanzania Posts Corporation (TPC) 300,000 300,000 Umoja switch fees 225,700 110,897 525,700 410,897
12. FOREIGN EXCHANGE INCOME
Net gain on foreign exchange transactions 117 11,810 Net revaluation gain 2,073,542 891,774
2,073,659 903,584
13. OTHER INCOME
Tender income 19,809 7,001 Revenue Grant recognised in the profit/loss - 247,280 Gain on disposal of property and equipment (2,219) 149,090 Other income 6,596,901 1,309,503
6,614,491 1,712,874
96 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000 15. ADMINISTRATIVE EXPENSES
Staff costs (note 14) 35,718,872 34,693,507 Telephone and electronic mail expenses 2,065,275 2,099,932 Security expenses 2,756,898 2,646,169 Printing, stationery and hire of note counting machines 892,022 955,859 Auditors’ remunerations 600,000 600,000 Board of directors expenses 481,570 456,109 Depreciation and amortization of assets ( Note 23) 4,667,953 4,110,829 Amortization of intangible assets (Note 22) 1,150,116 629,132 Repairs and maintenance 1,737,350 1,429,395 Office rent expense - 6,160,829 Advertisement and promotion expenses 1,788,037 1,138,630 Travelling on duty 1,739,177 1,617,297 Insurance expenses 1,823,675 1,304,073 Consultancy fees 1,233,069 2,000,242 License fees 1,058,670 994,346 Non-claimable taxes 137,598 772,369 Electricity and cleaning expenses 1,233,474 1,353,166 Amortization of Right of Use of Assets (Note 33) 4,712,171 - Interest expense on lease liability (Note 33) 527,468 - Expected Credit Loss- Placements with other Banks (Note 17) 118,112 - Other operating expenses 8,712,895 6,228,986
73,154,402 69,190,870
97 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
17. STAFF COSTS
Salaries and wages 19,252,614 18,348,910 Bonus 2,500,000 2,400,000 Leave travel and transport allowance 3,154,021 1,663,758 Pension funds contributions 2,895,209 2,376,832 Responsibility allowances 1,597,761 1,446,163 Medical expenses 1,456,511 963,396 Post-employment benefit (note 34) 1,090,982 1,950,805 Training 575,001 794,710 Skills and development levy 1,088,066 990,860 Other staff costs 2,108,707 3,758,073
35,718,872 34,693,507 18. TAXATION
(a) Income tax expense
Current taxation at applicable rate of 30% (2018: 30%) 7,817,364 5,820,790
Deferred tax credit - (Note 27) (702,302) (734,446) Prior year deferred tax under provision (Note 27) - (400) 7,115,062 5,085,944
(b) Reconciliation of income tax expense
Profit before tax 23,006,364 17,188,045
Tax at the applicable rate of 30% (2018: 30%) 6,901,909 5,156,414 Effect of expenses not allowable for tax purposes 213,153 195,111 Prior year adjustments - (265,211) Prior year deferred tax under provision - (370) 7,115,062 5,085,944
98 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
(c) Tax movement
Balance at beginning of the year 465,681 202,471 Current tax charge for the year (7,817,364) (5,820,790) Tax paid during the year 6,900,000 6,084,000
Balance as at 31 December (451,684) 465,681
20. CASH AND BALANCES WITH BANK OF TANZANIA
Cash on hand 24,415,640 17,860,064 Balance with Bank of Tanzania 25,827,045 13,195,948 TPB Mobile Money balance 13,333,647 5,858,001
63,576,332 36,914,013
2019 2018 TZS ‘000 TZS ‘000
22. PLACEMENTS AND BALANCES WITH OTHER BANKS
Placements with other local banks 6,728,772 8,626,427 Balances with other local banks 6,175,294 5,111,619 Balances with foreign banks 1,770,724 2,082,972 ECL on Placements with other banks (Note 13) (118,112) -
14,556,678 15,821,018 Placements and balances with other banks of TZS 14,674,790,000 (2018: TZS 15,821,018,000) had maturity of less than 3 months. The weighted average interest rate on placements was 4.72% (2018: 6.26%).
99 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
24. TREASURY BILLS
Treasury bills - Held to maturity
Maturing within 3 months 26,179,803 19,615,442 Maturing between 3 months to 1 year 49,218,185 24,004,624
75,397,988 43,620,066 These are classified as held to maturity and are stated at amortized cost. Treasury bills ofTZS 26,179,803,000 (2017: TZS 19,615,442,000) with maturities of less than 3 months from reporting date form part of cash and cash equivalents for the purpose of the statement of cash flows.
Treasury bills amounting to TZS 25,200,000,000 were pledged as security, whereby seven securities worth TZS 16,200,000,000 were pledged to NBC Bank and two securities worth TZS 9,000,000,000 were pledged to SELF MICROFINANCE to secure interbank borrowings (Note 30).
The weighted average effective interest rate on treasury bills during the year was 8.25% (2018: 7.65%).
25. TREASURY BONDS
2019 2018 Treasury bonds - Held to maturity: TZS ‘000 TZS ‘000
Maturing within 1 to 3 months 4,883,669 - Maturing within 4 to 6 months 1,577,425 565,907 Maturing within 7 to 12 months 1,582,309 1,312,004 Maturity over 1 year 17,146,561 11,321,291
2 5 , 1 8 9 , 9 6 4 13,199,202
Treasury bonds amounting to TZS 16,570,000,000 (2018: TZS 12,951,800,000) were pledged as security to NBC Bank (Note 30).
The weighted average effective interest rate of Treasury Bond at 31 December, 2019 was 10.44% (2018: 14.35%).
100 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
26. LOANS AND ADVANCES TO CUSTOMERS
2019 2018
TZS ‘000 TZS ‘000 (a) Loans and advances
Loans and advances to customers 420,763,217 419,490,766 Loans and advances to staff 22,459,570 15,185,450
Gross loans and advances 443,222,787 434,676,216
Interest in suspense (3,322,738) (4,101,455) Provision for impairment of loans and advances
(note 20(c)) (19,306,389) (17,806,111)
Net loans and advances 420,593,660 412,768,650
(b) Analysis of loans and advances to customers by maturity Maturing:
Within 1 year 54,175,028 54,994,404 Over 3 years 366,418,632 357,774,246
420,593,660 412,768,650
(c) Movement of provision for impairment of loans and advances
At the beginning of the year 17,806,111 15,401,660 IFRS 9 Transition adjustment - (1,290,909)
At 1 January 17,806,111 14,110,751 Write off during the year (9,033,069) (10,485,097) Provision allowance (Twiga and TWB) - 524,777 Loan impairment loss 10,533,347 13,655,680 Write off without prior year provision - 7,389,063 Movement in provision during the year 10,532,420 6,178,663 ECL Off Balance sheet Items 927 87,954
At the end of the year 19,306,389 17,806,111
The effective interest rate on loans and advances to customers during the year was 23.07% (2018:23.55%).
101 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018
TZS’000 TZS’000
28. OTHER ASSETS
Prepayments 1,297,093 2,995,433 Staff receivables 1,643,896 1,715,698 Western Union International receivable 445,055 377,027 Tanzania Posts Corporation Western Union Agents 762,609 738,798 Others receivables 2,459,242 1,661,985 6,607,895 7,488,941
29. INTANGIBLE ASSETS
Equinox Computer POPOTE Channel YEAR 2019 Software Project cost Manager Total TZS ‘000 TZS ‘000 TZS’000 TZS ‘000
COST At 1 January 8,589,530 11,060 40,464 8,641,054 Additions 1,409,481 - - 1,409,481 At 31 December 9,999,011 11,060 40,464 10,050,535
AMORTISATION At 1 January 5,554,181 11,060 40,464 5,605,705 Disposal 615 - - 615 Charge for year 1,150,116 - - 1,150,116
At 31 December 6,704,912 11,060 40,464 6,756,436 NET BOOK VALUE At 31 December 3,294,099 - - 3,294,099
102 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Equinox Computer POPOTE Channel YEAR 2018 Software Project cost Manager Total
TZS ‘000 TZS ‘000 TZS’000 TZS ‘000 COST
At 1 January 4,002,794 11,060 40,464 4,054,318 Additions 823,126 - - 823,126 Additions (Twiga and TWB) 3,763,610 - - 3,763,610 At 31 December 8,589,530 11,060 40,464 8,641,054
AMORTISATION
At 1 January 2,690,951 11,060 40,464 2,742,475 Transferred from Twiga and TWB 2,234,098 - - 2,234,098 Charge for year 629,132 - - 629,132
At 31 December 5,554,181 11,060 40,464 5,605,705 NET BOOK VALUE At 31 December 3,035,349 - - 3,035,349
103 TPB Bank PLC ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
30. PROPERTY AND EQUIPMENT
Office Residential Data furniture, communi- furniture Leasehold Land and Motor cation fittings & fittings & Work in YEAR 2019 i m p r o v e m e n t s buildings vehicles Computers equipment equipment equipment Progress Total TZS’000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 COST
At 1 January 12,312,495 9,458,169 1,951,541 7,349,191 1,959,043 13,632,872 140,275 - 46,803,586 Additions 603,574 - 5,000 1,226,373 225,993 765,294 23,094 1,151,914 4,001,243 Disposals - - - (11,454) - (4,851) - - (16,305) At 31 December 12,916,069 9,458,169 1,956,541 8,564,111 2,185,036 14,393,315 163,369 1,151,914 50,788,524
DEPRECIATION
At 1 January 7,310,820 1,570,282 1,344,961 5,264,100 1,434,085 7,243,706 77,596 - 24,245,550 Charge for year 2,042,548 163,355 267,143 841,569 234,497 1,103,337 15,504 - 4,667,953 Eliminated on Disposals - - - (11,568) - (4,024) - - (15,592) At 31 December 9,353,368 1,733,637 1,612,104 6,094,101 1,668,582 8,343,019 93,100 - 28,897,911
NET BOOK VALUE At 31 December 3,562,701 1,724,532 344,437 2,470,010 516,454 6,050,296 70,269 1,151,914 21,890,613
104 TPB Bank PLC ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
23. PROPERTY AND EQUIPMENT (CONTINUED)
Residential Data Office furniture, communi- furniture Leasehold Land and Motor cation fittings & fittings & Work in YEAR 2018 i m p r o v e m e n t s buildings vehicles Computers equipment equipment equipment Progress Total TZS’000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 COST At 1 January 10,012,386 3,083,525 696,436 5,198,709 1,784,962 8,808,975 140,275 - 29,725,268 Additions 1,717,616 161,027 463,830 656,705 161,278 1,598,162 - - 4,758,618 Transfer (Twiga and TWB) 582,493 850,470 1,056,771 1,493,777 12,803 3,230,496 7,226,810 Transfer - revaluation - 5,363,147 ------5,363,147 Disposals - - (265,496) - - (4,761) - - (270,257) At 31 December 12,312,495 9,458,169 1,951,541 7,349,191 1,959,043 13,632,872 140,275 - 46,803,586
DEPRECIATION At 1 January 5,471,437 602,962 612,473 3,207,568 1,197,014 3,548,186 63,919 - 14,703,559 Transfer (Twiga & TWB) - 676,288 811,551 1,353,535 12,803 2,790,562 - - 5,644,739 Transfer - revaluation - 51,920 ------51,920 Charge for year 1,839,383 239,112 186,434 702,997 224,268 904,958 13,677 - 4,110,829 Disposal - - (265,496) - - - - (265,496) At 31 December 7,310,820 1,570,282 1,344,962 5,264,100 1,434,085 7,243,706 77,596 - 24,245,551 NET BOOK VALUE At 31 December 5,001,675 7,887,887 606,579 2,085,091 524,958 6,389,166 62,679 - 22,558,035
105 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018
TZS ‘000 TZS ‘000
31. CUSTOMER DEPOSITS
(a) Customer deposits
Domicile savings 193,825,709 192,562,540 Time deposits 178,850,343 143,227,872 Call accounts 40,675,034 30,240,304 “WADU” savings 16,961,492 13,977,676 Dormant accounts 9,706,053 8,290,538 Postal savings 2,029,619 2,173,488 Group savings 128,926 127,115
442,177,176 390,599,533
(b) Analysis of customer deposits by maturity
Maturing: Within 1 year 352,658,989 377,026,431 Between 1 year and 3 years 89,518,187 13,573,102
442,177,176 390,599,533
The weighted average interest rate on savings was 3.25% (2018: 3.25%) whereas that on term deposits was 8.93% (2018: 7.83%).
25. BORROWINGS AND BALANCES DUE TO OTHER BANKS
2019 2018 TZS ‘000 TZS ‘000
Maturing within 90 days: Balances due to banking institutions 75,572,029 62,930,870 The weighted average interest rate on balances due to other banking institutions was 8.65% (2018: 8.54%).
106 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
26. OTHER LIABILITIES
2019 2018 TZS ‘000 TZS ‘000
Retention money 211,823 120,635 Payroll liabilities 244,353 192,268 Taxes payable 853,739 585,806 Accrued expenses 633,976 2,396,255 Agency fees payable 300,000 300,000 Supplier liabilities 1,882,248 2,326,312 Indemnity Fund 4,463,974 4,585,969 Un-earned loan administration fee 2,054,138 3,380,047 Other payables 4,343,015 5,516,660
14,987,266 19,403,952
27. DEFERRED TAX Deferred taxation is calculated on all temporary differences under the liability method using corporation tax rate of 30% (2018: 30%).
2019 2018 TZS’000 TZS’000 The movement on the deferred tax account is as follows: At the beginning of the year 6,242,025 5,772,390 Deferred tax credit (Note 15) 702,302 734,476 Prior year deferred tax under-provision ( Note 15) - 370 Deferred tax on actuarial gain from defined benefit (57,082) (265,211)
6,887,745 6,242,025
The deferred tax asset is attributable to:
Accelerated tax allowances (77,095) (213,139) Temporary difference on provisions for loan impairment 5,791,917 5,184,400 Deferred tax on actuarial gain from defined benefit 57,082 265,211 Deferred tax on fixed asset revaluation 1,005,553 1,005,553 Deferred tax on Lease Liability 74,354 - Deferred tax on ECL on placement with other Banks 57,083 -
6,887,245 6,242,025
107 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
29. SHARE CAPITAL
a. Authorized share capital
500,000,000 (2018: 500,000,000) ordinary shares of TZS 1,000 each 500,000,000 500,000,000
b. Paid up capital The issued and paid up share capital is 28,071,743 (2018: 28,071,743) ordinary shares of TZS 1,000 each 28,071,743 28,071,743
Following the repeal of Tanzania Postal Bank Act No. 11 of 1991, the Bank was licensed under the Banking and Financial Institutions Act, 2006 and regulated by the Bank of Tanzania. The Bank was registered under the Companies Act, 2002 as a public limited company on 29 March 2016 with authorized share capital of 500,000,0000 shares at a par value of TZS 1,000 each.
During the year bank did not issue bonus shares to shareholders (2018: TZS Nil) but Board of directors proposed payment of dividend amounting to TZS 1,210,210,000 (2018: Nil), which were approved at the Annual General Meeting held on 24 May 2019.
2019 2018 TZS’000 % TZS’000 % The share capital is held by the following shareholders: Government of the United Republic of Tanzania 23,423,304 83.44 23,423,304 83.44 Tanzania Posts Corporation 2,135,540 7.61 2,135,540 7.61 Revolutionary Government of Zanzibar 816,215 2.91 816,215 2.91 Posta na Simu Savings & Credit Cooperative 749,312 2.67 749,312 2.67 Society Ltd Public Service Social Security Fund (PSSSF) 660,401 2.35 660,401 2.35 Workers’ Compensation Fund (WCF) 286,971 1.02 286,971 1.02
28,071,743 100.0 28,071,743 100.0
c. Regulatory reserve 2019 2018 TZS’000 TZS’000 Regulatory reserve - 135,093 General reserve** - 3,912,553
- 4,047,646 *Regulatory reserve is a statutory reserve that represents the surplus of loan provision computed as per the Bank of Tanzania regulations over the impairment of loans and advances as per International Financial Reporting Standards (IFRS). On 31st December, 2019 bank had nil Regulatory reserve.
**General reserve represents a provision of 1% on current loan and advances which was made as per the Banking and Financial Institutions (Management of Risk Assets) Regulations, 2014. The regulation was abolished by Bank of Tanzania in July 2019.
108 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000
31. CASH GENERATED FROM OPERATIONS
Profit before taxation 23,006,364 17,188,045
Adjustment for:
Depreciation on plant and equipment (note 23) 4,667,953 4,110,829 Amortization of intangible assets (note 22) 1,150,116 629,132 Loss on disposal of plant and equipment 2,219 (149,090) Loan impairment charges (note 20(c)) 1,500,278 2,404,451 Other reserve (Acquired in business combination) (41,983) 5,041,745 Defined benefit cost recognized in profit or loss 1,090,982 1,950,805 Amortization of ROU & Interest on lease liability 5,239,638 - Provision for ECL for Placements with other Banks (note 17) 118,112 - Other Assets written off 1,197,954 (247,280) 37,931,633 30,928,637 Movement in working capital: Decrease/(increase) in treasury bills maturing after 3 months (25,213,562) 196,558
Increase in investment in treasury bonds maturing after 3 months (7,107,093) (946,641) Increase in loans and advances to customers (9,325,288) (90,107,713) Increase in other assets (1,239,060) (888,983) Increase in deposits from customers 51,577,643 67,572,380 Increase in placements maturing over 3 months 4,391,966 (4,391,966) Increase/(decrease) in other liabilities (4,416,686) 9,046,300 Cash generated from operations 46,599,553 11,408,572
32. ASSETS PLEDGED AS SECURITY As at 31 December 2019, there were seven securities worth TZS 32,770,000,000 (2018:TZS 11,157,680,000) pledged as securities to the Bank of Tanzania (BOT) to secure bank borrowing. Seven pledged securities worth TZS 16,200,000,000 (2018: TZS 10,738,880,000) were treasury bills and ten securities worth TZS 16,570,000,000 (2018:TZS 418,800,000) was Treasury bond.
There were another two treasury bills, worth TZS 9,000,000,000 were pledged as security to Self-Micro-finance to secure borrowing. At the end of the year 2019, the outstanding interbank borrowings was TZS 75,397,988 (2018: TZS 62,930,870,000).
109 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
33. CONTINGENT LIABILITIES As at 31 December 2019, there were a number of commercial and labor cases the Bank is involved. In the opinion of the Directors the amount which may be awarded against the Bank in the event of the Bank losing the cases is not likely to be material. Consequently, no provision has been made in the financial statements.
2019 2018 TZS ‘000 TZS ‘000
34. COMMITMENTS
a) Capital commitments Authorized and contracted for 601,166 5,788,294 Authorized but not contracted for 13,422,550 10,151,819
14,023,716 15,940,113
b) Operating lease commitments
Future minimum lease payments in respect of lease of Bank premises:
Payable within 1 year - 5,681,763 Payable between 1 year and not later than 5 years - 13,010,257
- 18,692,020
c) Commitments to extend credit Commitments to extend credit are agreements to lend to a customer in future subject to certain conditions. Such commitments are normally made for a fixed period. The Bank may withdraw from its contractual obligation to extend credit by giving reasonable notice to the customer. At 31 December 2019, outstanding commitments to extend credit were TZS 3,428,339,000 (2018: TZS 2,453,549,000).
35. LEASES Until the 2019 financial year, leases of office space were classified as operating leases, see note 32(b) for details. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Bank. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis
110 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
a) Right of Use Assets 2019 2018 TZS ‘000 TZS ‘000 Right of use asset - opening balance 11,777,833 - Accumulated Amortization RoU (Note 13) (4,712,171) - 7,065,662 - Rent Prepaid 2,144,026 - Rent Payable (23,920) - Right of use asset - Closing balance 9,185,768 -
b) Lease Liability 2019 2018 TZS ‘000 TZS ‘000 Lease liabilities - opening balance 11,777,833 - Interest expense on Lease liability (Note 13) 527,468 - 12,305,301 Rent payments (4,991,791) - Lease liabilities - closing balance 7,313,510 -
36. RELATED PARTY TRANSACTIONS During the year, the Bank entered into several related party transactions in the normal course of business. The transactions were between the Bank and its key management staff and the members of the Board. These include loans, key management compensations and Directors fees. The summary of the transactions is as shown hereunder:
a) Directors and key management personnel-Loans: 2019 2018 TZS ‘000 TZS ‘000
Balance at beginning of the year 1,463,827 810,199 Loans issued 204,542 839,239 Loans repayment (32,225) (185,611)
Balance as at 31 December 1,636,144 1,463,827
Interest rate on loans to Directors and key management personnel is 5% (2018: 5%) per annum.
111 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018 TZS ‘000 TZS ‘000 c) Directors and key management - Deposits: Balance at beginning of the year 1,355,888 539,940 Deposits during the year 4,752,031 5,867,720 Withdrawals during the year (4,552,595) (5,051,772)
Balance as at 31 December 1,555,324 1,355,888
Interest rates on deposits from Directors and key management personnel are at applicable bank commercial rates.
d) Related companies: Tanzania Post Corporation:
2019 2018 TZS ‘000 TZS ‘000 Balance at beginning of the year - - Deposits during the year 1,900,538 - Withdrawals during the year (1,898,689) -
Balance as at 31 December 1,849 -
Savings and Credit Society:
Balance at beginning of the year 11,317 7,434 Deposits during the year 706,857 738,019 Withdrawals during the year (713,583) (734,136)
Balance as at 31 December 4,591 11,317
112 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
f) Directors’ and key management personnel compensation
2019 2018 TZS ‘000 TZS ‘000
Salaries and other benefits 1,812,665 1,441,072 Social security contributions 358,495 292,567 Terminal benefits - - Directors’ fees 66,639 86,880 Other Board expenses 414,932 369,229
g) Outstanding balances
Tanzania Posts Corporation Western Union Agents (Note 21) 762,609 738,798 The transactions entered into with related parties were at arm’s length and in accordance with laid down regulations.
37. EMPLOYMENT BENEFIT OBLIGATION On 1 February 2017 the Bank entered in to a collective bargaining agreement (CBA) with the Tanzania Union of Industrial and Commercial Workers (TUICO). The CBA includes benefits under defined benefits plan whereby, a retiring employee having six years of service is entitled to a lump sum of twelve months basic salary for grade 1 to 3 TPB salary scale and ten months basis salaries for grade 4 and above. Other benefits covered included in are provision of building materials, repatriation benefit, long service awards to permanent employees and funeral services benefit.
The Bank provides for defined benefit obligation cost based on assessments made by independent actuaries. The Bank is recognizing the obligation for the first time in current year. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method as required by IAS 19.
The significant assumptions used for the purposes of the actuarial valuations were as follows: 2019 2018 Discount rate 16.8% 17.7% Future salary increases - Management staff 8% 8.0% - General staff 10% 10.0%
113 ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Amount recognised in statement of profit or loss and other comprehensive income in respect of this defined benefit obligation:
2019 2018 TZS ‘000 TZS ‘000
Recognised in profit or loss (note 14) 1,090,982 1,950,805 - Service cost 70,101 58,468 - Interest cost 1,020,881 813,262 - Past service cost - 1,079,075
Recognised in other comprehensive income - Actuarial (gain)/loss recognised in other comprehensive income
Actuarial (gain)/loss in experience (724,714) 32,497 Actuarial (gain)/loss in assumptions 534,638 (916,534)
Net cost for the year (190,276) 1,066,768
The movement in the Bank defined benefit obligation is as follows:
2019 2018 TZS ‘000 TZS ‘000
Net obligation (asset) at start of period 5,942,512 5,295,496 Service cost 70,101 1,137,543 Interest cost 1,020,881 813,262 Benefit paid during the year (489,847) (419,752) Actuarial (gain)/loss recognised in other comprehensive income (190,276) (884,037)
Closing balance 6,353,371 5,942,512
114 TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
38. RESERVE TWB & TWIGA
The carrying amount of assets and liabilities purchased are as follows:
2019 2018 TZS’000 TZS’000 Opening balance 5,041,745 Twiga Bancorp Limited (41,983) 8,824,973 Tanzania Women’s Bank Plc - (3,783,228) Net Reserve 4,999,762 5,041,745 Other reserve represents total net asset value of Twiga Bancorp Limited and Tanzania Women Bank (TWB) following the merger with TPB Bank in 2018.
39. FAIR VALUE The Directors consider that there is no material difference between the fair value and carrying value of the Bank’s financial assets and liabilities where fair value details have not been presented.
40. CURRENCY Except where indicated otherwise, these financial statements are presented in Tanzania Shillings, rounded to the nearest thousand (TZS’000), which is also the functional currency.
41. EVENTS SUBSEQUENT TO FINANCIAL YEAR END At the date of signing the financial statements, the Directors are not aware of any other matter or circumstance arising since the end of the financial year, not otherwise dealt with in these financial statements, which significantly affect the financial position of the Bank and results of its operations.
42. COMPARATIVES Where necessary comparative figures have been adjusted to conform to changes in presentation in the current year.
115 ANNUAL REPORT 2019 BRANCHES
BRANCH PHYSICAL ADDRESS E-mail Mkwepu Mkwepu Street [email protected] Kariakoo Msimbazi /Mhonda Street [email protected] Manzese Morogoro Road [email protected] Zanzibar Malawi/Malindi Street [email protected] Njombe KKKT Building/Songea Road [email protected] Arusha Uhuru Street [email protected] YWCA Azikiwe Street [email protected] Dodoma DSM Road, Uhindini [email protected] Moshi NSSF Plaza [email protected] Mtwara TANU Road [email protected] Songea Sokoine Street [email protected] Tabora Jamhuri Street/Shule Road [email protected] Tanga Kenyata Road [email protected] Kigoma TRA Building [email protected] Shinyanga Nkomo Street [email protected] Bukoba TRA Building/Uganda Kawawa Road [email protected] Ilala Uhuru Street [email protected] Iringa Uhuru Road [email protected] Mwanza Kenyata Road [email protected] Morogoro Luna Building [email protected] Ubungo Ubungo Plaza [email protected] Sumbawanga Sumbawanga Post Office [email protected] Musoma Musoma Post Office [email protected] Babati Babati Town [email protected] Kijitonyama LAPF Millenium Towers [email protected] Lindi TRA Building [email protected] Singida NIC Building [email protected] Tunduma Tunduma Post Office [email protected] Sokoine Arusha Sokoine Road [email protected] Liberty Mwanza Liberty Street [email protected] Metropolitan Opposite Askari Monument [email protected] Mlimani City Mlimani City [email protected] Mkwepu Women’s Mkwepu St. - Sokoine Rd Junction [email protected] Pamba Post Office/Pamba Road [email protected] Sengerema Telecentre Building (Radio Sengerema) [email protected] Mwanjelwa Soko kuu, Mwanjelwa [email protected] Samora Annex Ex- Telecom Bulding, Samora [email protected] Soko Kuu Dodoma 11th Road Uhuru St. [email protected]
116 TPB Bank PLC
MINI BRANCHES
BRANCH PHYSICAL ADDRESS E-mail Bagamoyo Bagamoyo Post Office [email protected] Temeke Temeke Post Office [email protected] Kigamboni Kigamboni Post Office [email protected] Korogwe Korogwe Post Office [email protected] Mpanda Mpanda Post Office [email protected] Karagwe Karagwe Post Office [email protected] Pemba Pemba Post Office [email protected] Nachingwea Nachingwea Post Office [email protected] Usa River Usa River Post Office usa [email protected] Nzega Nzega Post Office [email protected] Mafinga Mafinga Post Office [email protected] Makambako Makambako Post Office [email protected] Masasi Masasi Post Office [email protected] Kahama Nyasubi Street (Near Nsagali Petrol Station) [email protected] Geita Geita Post Office [email protected] Tegeta Tegeta Wema House (Along Bagamoyo Road) [email protected] Kyela Kyela Post Office [email protected] Ifakara Ifakara Post Office [email protected] Ikwiriri Ikwiriri Post Office [email protected] Mbinga Mbinga Post Office [email protected] Tarime Tarime Post Office [email protected] Kimara Kimara Mwisho (Dawasco Road) [email protected] Bariadi Bariadi Post Office [email protected] Kondoa Kondoa Post Office [email protected] Executive Kijitonyama (LAPF) executive [email protected] Kwa Mrombo Kwa Mrombo Road [email protected] Mpwapwa Mpwapwa Post Office [email protected] Same Same Post Office [email protected] Newala Newala Post Office [email protected] Chato Central Chato Post Office Building [email protected] Mto wa Mbu Migombani Street, Opp. Arusha - Karatu Road [email protected] Tunduru Kalanje Post Office [email protected] Mbeya Karume Street, NSSF Building [email protected] JNIA DIA - Terminal II [email protected] Bunda Ukerewe Road [email protected] Manyoni Barabara ya Bomani [email protected] Kibondo Kibondo Post Office [email protected] Kibaha Kibaha Post Office [email protected] Aggrey Kariakoo Aggrey Street Kariakoo Business area, [email protected]
117 ANNUAL REPORT 2019
118 TPB Bank PLC
119 ANNUAL REPORT 2019
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121 ANNUAL REPORT 2019
122 TPB Bank PLC
123 ANNUAL REPORT 2019
M- Koba inatoa fursa kwa wanakikundi kuona maendeleo ya michango yao kwa urahisi
124 TPB Bank PLC
125 ANNUAL REPORT 2019
126 TPB Bank PLC
Mfungulie mtoto wako Minor Account, timiza ndoto zake
127 ANNUAL REPORT 2019
128 TPB Bank PLC
129 ANNUAL REPORT 2019
130 TPB Bank PLC ANNUAL REPORT 2019
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Head Office, LAPF Towers, Kijitonyama Bagamoyo Road, P. O. Box 9300, Dar es Salaam, Tanzania Telephone: +255 22 2162940, Fax: +255 22 2114815, @ E–mail: [email protected] www.tpbbank.co.tz