INTEGRATED ANNUAL REPORT 2020 WE WELCOME YOU TO THE 2020 GRINDROD BANK LIMITED INTEGRATED ANNUAL REPORT. Navigate our report Indicates where further information on a topic can be found in this report. * Indicates alignment with the principles of the King Report on Corporate GovernanceTM for South Africa, 2016 (King IV)1. Indicates where COVID-19 impacted performance and/or how we responded to the crisis. Feedback Your feedback is important to us and we welcome your input to enhance the quality of our reporting. Please contact us at: [email protected]. CONTENTS Our Bank Reflecting on 2020 Our strategic direction Performance Governing our Bank We have grown through economic The operating environment in 2020 Our strategy is to defend our existing Significant effort went into improving Our governance structures and highs and lows over the past 26 years. presented challenges for all businesses. core operations and diversify into new the Bank’s financial and regulatory approach remained stable throughout By creating wealth for our clients, But it also created opportunities to initiatives to sustain future growth. reporting, risk management practices, the revision of our strategy and enabling small and medium-sized reset and innovate our ways of working, We remained resilient in 2020 by and regulatory and compliance culture. operating model, creating a solid businesses to survive and grow, engaging and transacting. We reflect on consistently implementing our strategy. This included strengthening our human foundation for the long-term and broadening access to financial how Grindrod Bank Limited (the Bank) capital and management in key areas, sustainability of the Bank and value services, we contribute to South Africa’s responded to these challenges and reorganising our operations to support creation for our stakeholders. economy. how our board guided and supported our strategy and continuing our journey us during these times. to integrate environmental, social and governance matters across the Bank. 3 What we do 11 Chairperson’s message 19 Chief executive officer’s review 35 Chief financial officer’s review 56 Creating value through good 80 About this report governance 5 How we do it 15 Navigating our operating 27 Pillar 1: Preserve and consolidate 41 The power of human capital 82 Corporate information environment core operations 78 Remuneration report 7 Our stakeholder relationships 46 Our social impact 83 Glossary 31 Pillar 2: Rebuild and reposition 49 Managing risk and opportunity the Bank 33 Pillar 3: Future-proof the Bank 1 Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved. 1 GRINDROD BANK LIMITED Integrated annual report 2020 Grindrod Bank prides itself on providing clients with innovative and tailored solutions that best serve their needs. Our service excellence is underpinned by these personalised relationships with clients and our proven track record. Our integrated annual report explains to our stakeholders how Grindrod Bank creates value over the short, medium and long term – as a provider of financial services, an investor, a taxpayer and an employer. The report provides an overview of our business, our strategy, our key risks and opportunities, our performance and our governance. How this report was More detail on how this report was prepared, our reporting scope and boundary, the frameworks prepared that guided us and the board’s approval of the report are provided in the About this report section on page 80. The unprecedented health and economic threats associated with the coronavirus pandemic (COVID-19) increased the potential impact of each of our top and emerging risks. The impact of COVID-19 on the Bank and our response to it is discussed throughout this integrated report. CONTENTS Our Bank Reflecting on 2020 Our strategic direction Performance Governing our Bank We have grown through economic The operating environment in 2020 Our strategy is to defend our existing Significant effort went into improving Our governance structures and highs and lows over the past 26 years. presented challenges for all businesses. core operations and diversify into new the Bank’s financial and regulatory approach remained stable throughout By creating wealth for our clients, But it also created opportunities to initiatives to sustain future growth. reporting, risk management practices, the revision of our strategy and enabling small and medium-sized reset and innovate our ways of working, We remained resilient in 2020 by and regulatory and compliance culture. operating model, creating a solid businesses to survive and grow, engaging and transacting. We reflect on consistently implementing our strategy. This included strengthening our human foundation for the long-term and broadening access to financial how Grindrod Bank Limited (the Bank) capital and management in key areas, sustainability of the Bank and value services, we contribute to South Africa’s responded to these challenges and reorganising our operations to support creation for our stakeholders. economy. how our board guided and supported our strategy and continuing our journey us during these times. to integrate environmental, social and governance matters across the Bank. 3 What we do 11 Chairperson’s message 19 Chief executive officer’s review 35 Chief financial officer’s review 56 Creating value through good 80 About this report governance 5 How we do it 15 Navigating our operating 27 Pillar 1: Preserve and consolidate 41 The power of human capital 82 Corporate information environment core operations 78 Remuneration report 7 Our stakeholder relationships 46 Our social impact 83 Glossary 31 Pillar 2: Rebuild and reposition 49 Managing risk and opportunity the Bank 33 Pillar 3: Future-proof the Bank GRINDROD BANK LIMITED 2 Integrated annual report 2020 WHAT WE DO OUR BANK Over the past 26 years we have specialised in managing client deposits and offering corporate lending, property finance services and tailored financial services to our private, corporate and institutional clients. OUR PERFORMANCE Profitability Gross loans and advances 12.49% 11.04% R1.3 billion R75.73 million R8.34 billion lent to SMEs (2019: R86.55 million) (2019: 7.51 billion) (2019: R1.2 billion) Return on average shareholder equity Funding base 148 bps 16.66% R1.25 million 5.83% R9.97 billion invested in employee development (2019: 7.31%) (2019: R11.96 billion) (2019: R2.5 million) Capital adequacy ratio Total assets (unaudited) 23.61% >100 bps Level 2 R11.72 billion 14.66% BEE contributor status (2019: R15.34 billion) (2019: 16.13%) (2019: Level 4) WHAT DIFFERENTIATES US We provide effective, value-driven financial solutions for our clients. » We understand that clients look to us to anticipate their needs and deliver seamless, efficient financial solutions » Our specialist teams integrate banking into our clients’ everyday business or personal experiences, leveraging their deep client and market insights and the Bank’s solid foundation to ensure value and financial security » We have enabled many South African SMEs to access market opportunities and grow their businesses 3 GRINDROD BANK LIMITED Integrated annual report 2020 OUR BANK SPECIALISED INVESTMENTS & PROPERTY SAVINGS FINANCE The Bank’s Treasury manages » Call deposits The Bank is a niche financier, » Vanilla finance client investments and our » Fixed deposits known for its expertise in » Mezzanine finance portfolio managers provide » Prime-linked commercial and industrial deposit solutions that suit notice deposits property finance and is our clients’ needs. We offer differentiated by its mezzanine competitive investment rates. finance product offering. CORPORATE, SME & INVESTMENT PLATFORM BANKING BANKING Our expert teams assist small- » Short-term loans We offer niche platform » Alliance banking and medium-sized enterprise to improve cash banking products and services partnerships (SME) clients to overcome flow in partnership with non- » Access to card and their funding challenges by » Working capital banking businesses to broaden non-card payment providing tailor-made solutions facilities client access to relevant, services to suit their financial needs and » Asset-backed reliable and affordable » Access to relevant growth ambitions. growth finance financial services. deposit and » Management transactional buyout and platforms empowerment » Bill payments finance and value-added services access » Regulatory reporting, settlement and reconciliation services We recognise the importance of partnerships and making meaningful contributions to our valued clients and those they serve. By collaborating with our clients, partners and other financial institutions we continue to grow across a range of industries and sectors. We sustain our growth by remaining relevant to our existing clients and providing solutions to new clients. GRINDROD BANK LIMITED 4 Integrated annual report 2020 HOW WE DO IT We leverage our balance sheet, our skilled human capital and our client relationships to sustain competitive performance. By enabling our clients to generate wealth, grow their businesses or access platform banking services, we create value for our stakeholders and economic growth for South Africa. HOW WE ADD VALUE OUR BANK IS DRIVEN BY Our business activities, products Our vision to be the preferred and services provider of targeted financial services What we do on page 3 in our selected markets based on strong customer relationships. We Assets and Liabilities will strengthen