Annual Report 2018 A Digital World Awaits Company profile 1 Vision, mission, core values 2 Financial highlights 4 Our people 8 Directors reports 14 Statement of directors’ responsibilities 20 Our year 24 Independent auditor’s report 30 Financial statements 36 Notes to the financial statements 42 Basel II Pillar III (Market disclosure) report 107 Contents Company prole FDH Bank Limited is a subsidiary of FDH Financial Holdings Limited. The other subsidiaries in the group are First Discount House, FDH Money Bureau, FDH Financial Advisory Services and MSB Properties. FDH Bank Oers rst class personal and business banking services to individual customers and small and medium sized enterprises (SMEs) and corporate and investment banking services to corporates, government, parastatals and local and international non-governmental organisations, among others. Limited First Discount House Oers high yield investment products on the market to personal, business and corporate clients with a view to grow their investments. e services on oer include government securities, repurchase agreements, and commercial papers, among others. FDH Money Bureau Oers seamless transactions in forex trading and international money transfer services including MoneyGram, Western Union, Hello Paisa and Mukuru. FDH Financial Advisory Services Oers professional nancial advice to business and corporate clients to help them navigate complex business challenges so that they thrive in the complex business environments. FDH Bank MSB Properties MSB Properties Limited is a real estate investment company. It currently owns twenty one properties. e company was established to manage properties within the FDH Group. MSB Properties Limited commenced its operations in 2017 aer nalisation of the merger between FDH Bank FDH Financial Holdings Limited and MSB Bank Limited. We are the biggest bank in Malawi in terms of outlets with 52 Service Centres, 96 auto-teller machines (ATMs) and over 400 Banki Pakhomo Agents. We are the leading digital bank in Malawi offering convenient banking solutions to our customers. FDH Bank 1 Annual Report 2018 Vision, mission, values core Financial highlights Our people Directors reports 2 2 Statement of Directors’ responsibilities FDH Bank Annual Report 2018 Independent Auditors’ report Our year Vision, mission, valuescore Financial statements Notes the financial to statements Basel II Pillar III (Market Disclosure) report FDH Bank Annual Report 2018 Vision, mission, core values Our Vision To be the leading provider of first class financial solutions in Malawi and the Southern African region. Our Mission To provide value to all stakeholders through superior returns, sustainable growth, secure and efficient solutions based on sound business values while being an employer of choice. Our Core Values Transparency and accountability Respect - commitment to client Teamwork Innovation Customer satisfaction Employee development FDH Bank 3 Annual Report 2018 Vision, mission, values core Financial highlights Our people Directors reports 44 Statement of Directors’ responsibilities FDH Bank Annual Report 2018 Independent Auditors’ report Our year Financial highlights Financial statements Notes the financial to statements Basel II Pillar III (Market Disclosure) report FDH Bank Annual Report 2018 Financial highlights K5.9 Billion Prot Aer Tax 2017 Loss - K1.0 Billion 39% K152.7 Return On Capital Billion Employed Total Assets 2017 - 7% 2017 - K150 Billion K235 Million 1.41% K112 Amount spent on Non-performing Billion Corporate Social Loan Ratio Deposits Responsibility 2017 - K178 Million 2017 - 31.7% 2017 - K114 billion K29.1 Billion K40.6 90% Operating Billion Interest Earning Income Loan Book Assets 2017 - K39.1 billion 2017 - K21.3 billion 2017 - 55% 16.18% 65% Total Capital Cost to Income Adequacy Ratio 2017 - 7.58% 2017 - 80% FDH Bank 5 Annual Report 2018 Vision, mission, values core Financial highlights Our people Directors reports 6 Statement of Directors’ responsibilities Independent Auditors’ report Our year Financial statements Notes the financial to statements Basel II Pillar III (Market Disclosure) report FDH Bank Annual Report 2018 FDH Bank 7 Annual Report 2018 Vision, mission, values core Financial highlights Our people Directors reports 88 Statement of Directors’ responsibilities FDH Bank Annual Report 2018 Independent Auditors’ report Our year Our people Financial statements Notes the financial to statements Basel II Pillar III (Market Disclosure) report FDH Bank Annual Report 2018 Our peopleOur people ga gin C khulani r O h San D u ai s ire th rm e c r m t A a a o . n J r r ic M r E . r D Certified Public Accountant (CPA) Doctor of Philosophy ganjira , SC pin D nda D M ire Ba ir n c et ec a to n t r a o th J r . a r N D . r D Doctor of Business Administration Doctor of Philosophy in Law Development o o, SC tol D hon D Bo ire k ire n c N c e to ce to B r i r . tr r a M P . r M Master of Arts in Economics Master of Laws in Intellectual Property Board Of ba am D ikw ir M e ct rk o a r M . r M Chartered Financial Analyst (CFA) FDH Bank 9 Annual Report 2018 Vision, mission, values core Vision, mission, values core wa a ir Jiy D h D Financial highlights i C i Financial highlights ith re th re d c di c E to to . Ju s r . r r s r M M Our people Our people Our people Master of Science in Strategic Master of Arts in Strategic Management Management nga seka tu D M D Directors reports Ka ir ity ir u ec ar e Directors Report t h ct m o C o le r . r s U r . r M D Statement of Directors’ responsibilities Doctor of Philosophy in Business Master of Science in Strategic Administration Business Management Independent Auditors’ ande pinganjir uch D . M a report K ir F ld e n D c Our year o t so i r o re a r m c H o t . o r T r . M r D Our year Master of Science in Human Fellow of the Association of Chartered Resources Management Certified Accountants (FCCA) Directors Financial statements anjira ra ing D t a M p e ua a Financial statements M pu O n m t ic a a y r g i M E in ll . i r g a D W n M . a i r r g e i c M n t g o r D Notes the financial to i r e statements c t o r Master of Business Administration, Master of Science in Enterprise Fellow of the Association of Economics Chartered Certified Accountants Basel II Pillar III (Market (FCCA) Disclosure) report FDH Bank 10 Annual Report 2018 Our people Eric Outara William Mpinganjira Managing Director Deputy Managing Director Master of Science in Enterprise Master of Business Administration, Economics Fellow of the Association of Chartered Certified Accountants (FCCA) Pangano Bonongwe Jones Chabwera Company Secretary Head of Audit Bachelor of Laws (Hons) Fellow of the Association of Chartered Certified Accountants (FCCA) Chrispin Chikwama Sammy Chilunga Head of Human Resources Head of Risk and Compliance Bachelor of Arts in Public Administration Master of Banking and Law Executive George Chitera Mary Nkando Jussab Head of Finance Head of Government and International Master of Business Administration, Organisations Fellow of the Association of Chartered Bachelor of Social Science in Certified Accountants (FCCA) Economics FDH Bank 11 Annual Report 2018 Vision, mission, values core Vision, mission, values core Financial highlights Financial highlights Victoria Tina Mbewe Whyghtone Mweta Our people Senior Manager for Digital Financial Head of Operations Our people Services Master of Science in Economics Master of Business Administration Directors reports Directors Report Statement of Directors’ responsibilities Kawawa Msapato Levie Nkunika Head of Personal and Business Banking Head of Marketing and Communication Master of Science in Strategic Master of Business Administration Management Marketing Independent Auditors’ report Our year Our year Kennedy Ouko Bernard Omenda Head of Corporate and Investment Head of Treasury Banking Master of Business Administration Master of Science in Statistics Financial statements Financial statements Notes the financial to Management statements Ganizani Phiri Arthur Yapuwa Head of Credit Head of Information Technology Basel II Pillar III (Market Master of Science in Information Fellow of the Association of Chartered Disclosure) report Technology Certified Accountants (FCCA) FDH Bank 12 Annual Report 2018 Our people Board Commitees Composition INFORMATION TECHNOLOGY (IT) COMMITTEE 1. Dr. Eric J. Sankhulani - Chairperson 1 2. Dr. Nathan Mpinganjira - Member 3. Mrs. Judith Chirwa - Member 4. Dr. Janet Banda, SC - Member 5. Mrs. Edith Jiya - Member CREDIT RISK COMMITTEE 1. Mrs. Judith Chirwa - Chairperson 2 2. Mr. Mark Mikwamba - Member 3. Dr. Janet Banda, SC - Member 4. Dr. Nathan Mpinganjira - Member FINANCE & AUDIT COMMITTEE 1. Mrs. Edith Jiya - Chairperson 3 2. Mr. Patrice Nkhono, SC - Member 3. Mr. Ben Botolo - Member 4. Dr. Ulemu Katunga - Member 5. Mrs. Charity Mseka - Member RISK & CAPITAL MANAGEMENT COMMITTEE 4 1. Dr. Nathan Mpinganjira - Chairperson 2. Mr. Mark Mikwamba - Member 3. Dr. Eric J. Sankhulani - Member 4. Dr. Janet Banda, SC - Member APPOINTMENTS & REMUNERATION COMMITTEE 1. Dr. Eric J. Sankhulani - Chairperson 5 2. Mrs. Judith Chirwa - Member 3. Dr. Janet Banda, SC - Member 4. Mrs. Edith Jiya - Member FDH Bank 13 Annual Report 2018 Vision, mission, values core Financial highlights Our people Directors reports 1414 Statement of Directors’ responsibilities FDH Bank Annual Report 2018 Independent Auditors’ report Our year Directors reports Financial statements Notes the financial to statements Basel II Pillar III (Market Disclosure) report FDH Bank Annual Report 2018 Directors report Chairman’s 1 statement “Te Bank continued to invest in digital products and other distribution“ channels PERFORMANCE The Directors report a profit after tax of K5.965 billion for the year ended 31 December, 2018 from a loss after tax of K1.004 billion reported in 2017.