CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
1
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN Holdings Plc
Annual Report and Accounts 2018
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
2
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBNHoldings Group is an enduring institution with a rich heritage
woven into the fabric of society. Like a precious gem, our ability to
innovate, regenerate and transform makes us dynamic and ageless.
Over the years, the Group has remained resilient, overcoming
varying challenges to set the pace on many fronts across the
financial landscape. This unique attribute has engendered the
iconic brand to all stakeholders as a dominant and reliable
franchise.
As we commemorate the 125th anniversary of our flagship
business - FirstBank, the Group is geared to shape the future
more than ever before and deliver sustainable value.
TIMELESS
Timeless |/ˈtʌɪmləs/
Denition: Not aected by the passage of time.
Synonyms: Lasting, enduring, ageless
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
3
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP OVERVIEW
OUR PROFILE 8
OUR NETWORK 9
OUR STRUCTURE 10
FINANCIAL HIGHLIGHTS 12
NONFINANCIAL HIGHLIGHTS 14
RECOGNITION AND AWARDS 18
STRATEGIC REPORT
MACROECONOMIC REVIEW 23
GROUP CHAIRMAN’S STATEMENT 25
GROUP MANAGING DIRECTOR’S REVIEW 29
OUR BUSINESS MODEL 36
LEADERSHIP AND GOVERNANCE 40
RISK MANAGEMENT 44
COMPLAINTS HANDLING 65
FINANCIAL REVIEW
PERFORMANCE SUMMARY 68
GROUP PERFORMANCE 69
PERFORMANCE BY BUSINESS GROUPS 73
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
OUR SOCIAL COMMITMENT 78
COMMUNITY DEVELOPMENT 80
SCORE CARD 87
STANDARDS AND CODES 89
STAKEHOLDER ENGAGEMENT 96
GOVERNANCE
BOARD OF DIRECTORS 99
ATTENDANCE AT BOARD MEETINGS 106
BOARD COMMITTEES 107
DIRECTORS’ REPORT 120
REPORT OF THE INDEPENDENT CONSULTANT 125
FINANCIAL STATEMENTS
RESPONSIBILITY FOR ANNUAL FINANCIAL STATEMENTS 128
REPORT OF THE AUDIT COMMITTEE 130
INDEPENDENT AUDITORS’ REPORT 131
INCOME STATEMENT 137
STATEMENT OF COMPREHENSIVE INCOME 138
STATEMENT OF FINANCIAL POSITION 139
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 141
STATEMENT OF CASH FLOWS 143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 144
STATEMENT OF VALUE ADDED 313
FIVEYEAR FINANCIAL SUMMARYGROUP 315
FIVEYEAR FINANCIAL SUMMARYCOMPANY 317
SHAREHOLDER INFORMATION
SHAREHOLDER RESOURCES 319
NOTICE OF ANNUAL GENERAL MEETING 322
PROXY FORM 325
EPRODUCTS ACTIVATION FORM 327
EDIVIDEND MANDATE MANAGEMENT SYSTEM EDMMS 329
EBONUS FORM 331
SHAREHOLDERS DATA UPDATE FORM 333
GLOSSARY OF RATIOS 335
ABBREVIATIONS 337
APPENDIXCOMPLAINTS MANAGEMENT POLICY 339
CONTACT INFORMATION 343
CONTENT OUTLINE
The term ‘FBN Holdings Plc’ or the ‘Group’ means
FBNHoldings together with its subsidiaries. FBN Holdings Plc
is a financial holding company incorporated in Nigeria on
14 October 2010. The Company was listed on the Nigerian
Stock Exchange under the ‘Other financial services’ sector
on 26 November 2012 and has issued and fully paid-up
share capital of 35,895,292,791 ordinary shares of 50
kobo each (N17,947,646,396). In this report, the
abbreviations ‘Nmn’, ‘Nbn’ and ‘Ntn’ represent millions,
billions and trillions of naira respectively.
FBN Holdings Plc is structured along the following business
groups, namely: Commercial Banking, Merchant Banking and
Asset Management, Insurance and Others.
The Commercial Banking business comprises
First Bank of Nigeria Ltd, FBNBank (UK) Ltd,
FBNBank DRC Ltd, FBNBank Ghana Ltd, FBNBank
The Gambia Ltd, FBNBank Guinea Ltd, FBNBank
Sierra Leone Ltd, FBNBank Senegal Ltd and First
Pension Custodian Nigeria Ltd. First Bank of
Nigeria Ltd is the lead entity of the Commercial
Banking business.
The Merchant Banking and Asset Management
business consists of FBNQuest Merchant Bank Ltd
and FBNQuest Capital Ltd. The subsidiaries of
FBNQuest Merchant Bank Ltd are: FBNQuest Asset
Management Ltd and FBNQuest Securities Ltd while
the subsidiaries of FBNQuest Capital Ltd are: FBNQuest
Trustees Ltd and FBNQuest Funds Ltd.
The Insurance business comprises FBN Insurance Ltd,
FBN General Insurance Ltd and FBN Insurance Brokers Ltd.
This report has been prepared under the International
Financial Reporting Standards (IFRS), and unless otherwise
stated, the income statement compares the 12 months to
December 2018 to the corresponding 12 months of 2017,
and the statement of financial position comparison relates
to the corresponding position at 31 December 2017. Except
as disclosed, all the balances and figures relate to continuous
operations. Relevant terms that are used in this document
but not defined under applicable regulatory guidance or the
IFRS are explained in the glossary or abbreviation section of
this report.
Shareholders will receive a compact disc (CD) containing
the Annual Report and Accounts of FBN Holdings Plc, as
well as information on outstanding dividend claims and a list
of all our business locations.
There will be an option to view a navigable PDF copy of the
FBNHoldings report as well as PDFs of certain subsidiary
reports at the annual report portal of the Investor Relations
section of the FBNHoldings website.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
4
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
We have deployed cutting-edge technology and
solutions to drive our digital and other product
oerings in an ecient manner to better serve
our customers.
SHAPING
THE FUTURE
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
5
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
We continually improve our processes, services and
people, deliberately reinforcing our solid foundation and
strengthening the fundamentals of our business towards
delivering sustainable value to our stakeholders.
DELIVERING
SUSTAINABLE
VALUE
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
6
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
As we reflect on our rich heritage and
ongoing transformation, we forge ahead
with the confidence of a brighter future.
BRIGHTER
FUTURE
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
7
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Our Profile >> 8 Financial Highlights >> 12 Recognition and Awards >> 18
GROUP OVERVIEW
As at 31 December 2018, the Group closed with gross earnings of N583.5bn and
total assets of N5.6tn.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
8
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR PROFILE
FBN Holdings Plc is one of Africa’s largest diversified non-operating financial holding company, oering
a broad range of services including commercial banking, merchant banking and asset management as
well as insurance to millions of customers. FBNHoldings through its subsidiaries oer innovative and
competitive financial solutions across Africa, Europe and Asia.
First Bank of Nigeria Ltd (FirstBank) is the largest
subsidiary of the FBNHoldings Group, oering
commercial banking services in 10 countries. FirstBank
also has a subsidiary that provides pension custody
services.
FBNQuest Merchant Bank Ltd and FBNQuest Capital Ltd
are subsidiaries of FBNHoldings, providing merchant
banking, asset management and investment banking
services. FBNQuest Merchant Bank Ltd is the parent
company to FBNQuest Asset Management Ltd and
FBNQuest Securities Ltd while the subsidiaries of
FBNQuest Capital Ltd are FBNQuest Funds Ltd and
FBNQuest Trustees Ltd.
FBNHoldings offers life insurance services through
FBN Insurance Ltd and general insurance through
its subsidiary, FBN General Insurance Ltd. The
business group also offers brokerage services
through FBN Insurance Brokers Ltd.
Notable milestones of the Group:
One of the largest financial institutions in Nigeria
The Commercial Banking subsidiary, FirstBank, was
founded in 1894
A rich history on the Nigerian Stock Exchange from
1971 and specifically as FBNHoldings since November
2012
Over 2 million active users on FirstMobile application
Over 15.7 million* customer accounts
888 business locations
2,895 ATMs and 9,771 POS terminals.
* Commercial Banking group
Customer Accounts:
15.7million*
Business Locations:
888
Total Assets:
N5.6tn
Gross Earnings:
N583.5bn
ATMs:
2,895
The
Strategic
Vision:
Our
Mission:
Our
Core
Values:
To become the
leading financial
services group
in Middle Africa,
providing
value to our
stakeholders.
To be the
undisputed leader
in every business
we choose to
participate in,
delivering superior
returns to our
shareholders.
Passion,
Partnership and
People underpin
everything we
do and apply to
everyone across
the Group.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
9
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR NETWORK
UNITED KINGDOM (UK)
Name: FBNBank (UK) Ltd
Type: Licensed Bank
Founded: 2002
Products/Services: International Banking and Trade Services
DEMOCRATIC
REPUBLIC OF CONGO
Name: FBNBank DRC Ltd
Type: Licensed Bank
Founded: 1994
Products/Services: Commercial Banking
GHANA
Name: FBNBank Ghana Ltd
Type: Licensed Bank
Founded: 1996
Products/Services: Commercial Banking
REPRESENTATIVE OFFICE
Name: FBNBank China
Founded: 2009
Products/Services: Banking Services
NIGERIA
Name: FBN Holdings Plc
Type: Licensed Financial Holding Company
Founded: 2012
Products/Services: Commercial Banking, Merchant Banking
and Asset Management, Insurance
Name: FBNQuest Merchant Bank Ltd
Type: Licensed Bank
Founded: 1995
Products/Services: Merchant Banking and
Asset Management Services
Name: FBNQuest Capital Ltd
Type: Licensed Capital Market Operator
Founded: 2002
Products/Services: Private Advisory and Investments
NIGERIA
Name: First Bank of Nigeria Ltd
(Formerly First Bank of Nigeria Plc)
Type: Licensed Bank
Founded: 1894
Products/Services: Commercial Banking
Name: FBN Insurance Ltd
Type: Licensed Insurance company
Founded: 2010
Products/Services: Life Insurance Product and Services
Name: FBN Insurance Brokers Ltd
Type: Licensed Insurance Brokerage company
Founded: 2000
Products/Services: Insurance Brokerage Services
FRANCE
Name: FBNBank (UK) Ltd
Type: Bank Branch
Founded: 2008
Products/Services: Commercial Banking, International Banking
GUINEA
Name: FBNBank Guinea Ltd
Type: Licensed Bank
Founded: 1996
Products/Services: Commercial Banking
SIERRA LEONE
Name: FBNBank Sierra Leone Ltd
Type: Licensed Bank
Founded: 2004
Products/Services: Commercial Banking
THE GAMBIA
Name: FBNBank The Gambia Ltd
Type: Licensed Bank
Founded: 2004
Products/Services: Commercial Banking
SENEGAL
Name: FBNBank Senegal Ltd
Type: Licensed Bank
Founded: 2014
Products/Services: Commercial Banking
9
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
10
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC
COMMERCIAL BANKING
First Bank of Nigeria Limited
• FBNBank(UK)Limited
• FBNBankDRCLimited
• FBNBankGhanaLimited
• FBNBankTheGambiaLimited
• FBNBankGuineaLimited
• FBNBankSierraLeoneLimited
• FBNBankSenegalLimited
• FirstPensionCustodianNigeriaLimited
MERCHANT BANKING AND
ASSET MANAGEMENT
FBNQuest Merchant Bank Limited
• FBNQuestAssetManagementLimited
• FBNQuestSecuritiesLimited
FBNQuest Capital Limited
• FBNQuestTrusteesLimited
• FBNQuestFundsLimited
FBN Insurance Limited
FBN General Insurance Limited
FBN Insurance Brokers Limited
INSURANCE
OUR STRUCTURE
Our business groups provide financial services to a variety of customers across commercial banking,
merchant banking and asset management and insurance.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
11
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR STRUCTURE
Our products and services are designed to meet the requirements
of our customers.
Percentages represent
contribution to gross
earnings in 2018
COMMERCIAL BANKING
The Group’s core business is providing
financial services to individuals,
corporate and public sector customers.
This business segment includes
the Group’s local, international
and representative oces oering
commercial banking services.
88.2%
MERCHANT BANKING
AND ASSET MANAGEMENT
The Group’s key businesses comprise
Corporate Banking Investment Banking,
Wealth Management and Fixed Income
Securities Trading; as well as its subsidiary
businesses; Asset Management and
Equity Brokerage. The Group serves a
diverse customer base of corporates,
banks, public institutions, institutional
investors and high networth individuals.
7.7%
INSURANCE
This Group oers life, general
insurance and insurance brokerage
services.
OTHERS
3.8%
0.3%
100%
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
12
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FINANCIAL HIGHLIGHTS
Gross earnings dropped due to a decline in interest income
on the back of a decrease in the loan book as well as the
depressed yield environment but partially oset by the
growth in non-interest income.
Increase in non-interest was driven by growth in fees and
commission income, on the back of growing contribution
from digital banking channels.
Sustained improvement in profit before tax on the back of
declining impairment charge on credit losses.
Net Interest income decreased largely on account of the
contraction in the loan book and the decline in investment
securities’ income, which were in part mitigated by an
increase in income from loans to banks.
The growth in operating expenses remained below the
headline inflation rate of 11.4%.
Increase in total customer deposits is driven by growth in
current and savings accounts.
N331.5bn
N240.3bn
N3,143.3bn
N595.4bn
N113.7bn
N54.5bn
2017
2017
2017
2017
2017
2017
N284.2bn
N263.7bn
N3,486.7bn
N583.5bn
N131.7bn
N65.3bn
2018
2018
2018
2018
2018
2018
GROSS EARNINGS NET INTEREST INCOME
14.3%
NONINTEREST INCOME OPERATING EXPENSES
15.8%
9.7%
PROFIT BEFORE TAX CUSTOMER DEPOSITS
19.7%
10.9%
2.0%
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
13
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FINANCIAL HIGHLIGHTS
The decline in net customer loans and advances is reflective
of the weak macroeconomic environment that does not
support aggressive risk asset creation.
The improvement in return on average equity follows an
increase in profitability over equity.
The growth in earnings per share reflects improved
profitability.
Return on average assets for the year indicate improvement
in the financial performance.
N2,001.2bn
7.3%
N1.15
0.9%
2017
2017
2017
2017
N1.65
1.1%
N1,683.8bn
9.9%
2018
2018
2018
2018
CUSTOMER LOANS AND ADVANCES NET EARNINGS PER SHARE EPS
RETURN ON AVERAGE EQUITY RETURN ON AVERAGE ASSETS
15.9%
43.5%
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
14
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
NONFINANCIAL HIGHLIGHTS
STRENGTHENING TECHNOLOGY INFRASTRUCTURE
end-to-end technology platform for digital and business
growth, this has led to an increased volume of transactions
processed by the Bank. The Enterprise Resource Planning
(ERP) suite was also deployed and integrated across major
facets of our operations including human resources, finance,
procurement and general services functions. These
tools would drive eciency and productivity across
our processes and systems.
The Merchant Banking and Asset Management
business is at the tail end of the IT Transformation
project and has successfully articulated the
digital strategy to address current and future digital
capabilities.
Across the Group, sta were migrated to the Group-wide
Microsoft Oce 365 to ensure a single platform for
eective collaboration.
The Commercial Banking Subsidiary strengthened its
technology infrastructure, Information Technology (IT) risk
management, as well as IT security to drive automation,
increase sta productivity and transaction capacity.
In line with our digital and customer acquisition
drive, digital implementation in 2018 cut across
our various channels, products and services.
Pilot deployment of these applications are at
advanced stages while continuous enhancement
is underway. As part of the IT infrastructure
modernisation initiative, the enterprise IT
architecture design project was completed in
2018. The enterprise IT architecture provides the
blueprint for a modern IT infrastructure and operating
model that is appropriate for the Bank’s growth and digital
agenda. In addition, to leverage innovative technology
that would drive customer acquisition and retention, the
Bank implemented a robust, unified and rapidly scalable
ENHANCING DIGITAL BANKING OFFERING
The Group’s aspiration to drive a digitalised Bank would
be achieved through enhanced omni-channel capabilities,
automation, analytics and leveraging the Commercial Bank’s
existing brand and target digital customer segments. In 2018,
our service model for mass market was transformed
using the USSD and Agent Banking platforms.
FirstBank’s agents have been enabled to conduct
various transactions, such as funds transfers,
cash withdrawal, cash deposits, bills payments,
etc., for both FirstBank and non-FirstBank
customers. In addition, the Bank successfully
received the mandate for exclusive partnership
with National Union of Road Transport Workers to
activate agents in all motor parks in Nigeria.
There has been significant improvement in the total
number of subscribers on the USSD platform with
appreciable growth in transaction volume and value. Our
*894# quick banking application steadily grew to emerge
as the industry’s clear leader, having processed the highest
volume of transactions. In 2018, subscribers on our USSD
platform grew on a year-on-year basis from 4.1 million to
6.7 million bringing about a substantial growth in
revenue, transaction count and value processed.
Our digital channels were enhanced through
the incorporation of an account opening
feature. Non-FirstBank customers can now open
accounts via our USSD Banking, FirstMobile app,
ATMs, and Agent Banking channels. In 2018,
we had an impressive number of accounts opened
through our digital channels. Subsequently, our mobile and
online banking applications have recorded significant growth
in subscriber base and transaction value relative to prior
year.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
15
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
NONFINANCIAL HIGHLIGHTS
DRIVING INNOVATION
We commenced operations of our Digital Innovation
Laboratory (Lab) which has provided an eective
platform for engaging the Fintech community and
harnessing opportunities within the ecosystem. The Lab
hosted a hackathon with focus on innovative solutions to
challenges in the financial industry through the use of
Artificial Intelligence and Big Data. In addition, the Lab
implemented the innovative chat banking facility
on the Commercial Bank’s WhatsApp handle
which was launched in October 2018.
In line with our innovation drive, additional
value-added services were enabled on the
Commercial Bank’s e-channel platforms to
further enrich customer experience. For example,
the Visa card cash withdrawal capability on Agent
Banking; Foreign Currency limit increase on FirstMobile;
and mobile data vending services on USSD, were among
other ongoing enhancements.
The Commercial Bank deployed a Transaction Banking group
solution called FirstDirect. FirstDirect is a Trade finance
solution (Finastra) upgrade and integrated cash management
solution (Polaris).
Another critical component of the Bank’s strategic
plan is the First Shared Services, that involves the
centralisation and migration of repetitive non-core
back-oce processes. For example, the ATM funds
transfer dispute resolution process was automated using
workflow Business Process Management Solution. This
recorded progress with the Bank-wide migration of
automated payments across the branches.
Furthermore, the Group secured regulatory
approval to roll out the Group Shared Services
model to drive eciency and ultimately
improve cost-to-income ratio.
In addition, the Merchant Banking and Asset
Management business rolled out the FBN Edge app
to enhance operational eciency and improve customer
experience. FBN Edge was designed to simplify investing
by allowing users set-up mutual fund accounts, manage
their investments and track their progress on-the-go.
This way, users enjoy an edge in investing and can take
control and meet their financial goals sooner.
REVAMPED CUSTOMER VALUE PROPOSITION
In 2018, an online account opening process was
implemented for seamless account opening at any location
by potential customers. The instant account opening features
were deployed across all digital channels (USSD, ATM,
Web, Agent Banking). The Commercial Bank also
commenced a best-in-class enterprise CRM
framework to proactively manage and analyse
customer interactions and data throughout the
customer lifecycle. In addition, the upgrade and
digitalisation of customer onboarding process
and a revamp of customer value proposition
across various business segments were initiated
while a more ecient value chain model that takes an
enterprise-wide view of customers to extract more value,
unlock revenue pools, grow customer base and increase
profitability per customer was implemented.
The Merchant Banking and Asset Management
business have completed the integration to the
NIBSS platform and have registered with CSCS
to obtain the Legal Entity Identifier (LEI)
that enables clear and unique identification
of the Bank as a legal entity participating in
international financial transactions. Obtaining
the LEI has enhanced transactions by oshore
counterparties of the Fixed Income, Currencies
and Treasury as well as FBNQuest Securities.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
16
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
REVAMPED STRATEGIC FOCUS (PR1MUS)
The Group remains focused on driving its performance
through key strategic initiatives across its businesses.
Specifically, the Commercial Bank continues to
recalibrate its execution strategy by reviewing the
corporate strategic priorities. The recalibration is
focused on the execution of the seven corporate
strategic themes, realigned along six business
and functional work streams (Retail Banking,
Corporate Banking, Commercial Banking;
Public Sector, Cost Optimisation, Risk
Management, and Subsidiaries).
The work streams are supported by three key
enablers to achieve the strategic aspirations.
These include core IT infrastructure platforms to scale
and support business growth ambition, data and digital
tools to drive down cost, as well as talent and culture
management to improve performance. Consequently,
the strategic initiatives were consolidated into one
integrated transformation program, ‘PR1MUS’.
PR1MUS reflects the transformative path to
regaining industry leadership position. The
5-strategic pillars under the umbrella of PR1MUS
include Customer-led innovation, Safeguarding
our business, Re-igniting FirstBankers’ passion
and pride, Building a Digital Bank as well as
Reimagining and re-engineering the process.
Overall, PR1MUS is expected to improve stakeholder
engagements and accelerate both user adoption and
value realisation of our various initiatives.
PEOPLE AGENDA
The People Agenda is a critical element of our overall
goal towards entrenching a strong employee value
proposition (EVP) in line with our aspiration – ‘to develop
FBNHoldings into a hub for choice industry talent
anywhere’. As instituted, the People agenda is a means
of cultivating an innovative and high-performance work
environment through eective implementation of
group-wide synergistic initiatives around resourcing,
performance and reward management,
talent management, career development,
learning and leadership development, culture
transformation, employee engagement and
experience.
These initiatives are being implemented at the
group-level and customised to suit each operating
company with the objective of building and harnessing
the full potential of a robust and multi-skilled workforce
to consistently deliver on strategic objectives in the short,
mid and long-term.
Specifically, the Commercial Banking group reinvented
itself as a dynamic and customer-centric institution.
With this brand relaunch came a brand promise of ‘You
First’. To fulfil this promise, the Bank recognised the need
to make some critical changes to its culture. As such,
the Bank’s culture transformation initiative has been
redesigned to promote the internalisation of certain core
behaviours expected from FirstBank sta. This will also
facilitate various ways through which sta can develop
the identified behaviours within their roles and in
addition reinforce positive behaviours to sustain
the desired Group-wide transformation. The
activities around the culture transformation
initiatives include: Talent resourcing, leadership
development and continuous learning,
succession planning as well as improved
employee experience management.
On the other hand, the Merchant Banking and Asset
Management group also successfully embedded the
Corporate and Individual Performance Management
process during the year and launched the High Potential
(HiPo) initiative to identify and retain high performing and
high potential employees.
NONFINANCIAL HIGHLIGHTS
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
17
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
NONFINANCIAL HIGHLIGHTS
RENEWED APPROACH TO SYNERGY REALISATION
In line with our priority to extract value through synergy
and collaboration, we have seen significant results in
our revenue generation aspiration in 2018 relative to
the prior year. This remarkable achievement in synergy
revenues, reflects the execution of key synergy initiatives
to drive collaboration and cross-sell across all
operating companies. As a result, there has
been steady growth in the contribution to the
revenue pool of the Group, helping to further
diversify the revenue portfolio. Similarly, with
the approval to implement the Group Shared
Services, we expect to experience the benefits
of the cost synergies across our business.
To further deepen revenue synergies, our businesses
have continued to drive synergy growth by providing
complementary products and services, thereby
enhancing the overall value proposition of the Group.
These complementary products and services provide
a platform for complete financial solutions to our
large customer base in the quest to create wealth
and meet financial needs. Consequently, harnessing
the natural synergy that exists across our businesses
has progressively improved the deals’ pipeline thereby
enhancing revenue generation capabilities.
Considering the enormous potential of synergy
realisation in the Group’s overall strategy, the
synergy and collaboration initiatives have been
elevated to drive revenues from cross-sell across
the Group. We are not relenting our eorts,
and our ‘Think Group’ approach to synergy and
collaboration will further drive and unlock earnings
potential across the Group. We believe that our eorts to
integrate our oerings and provide end-to-end solutions
for our customers will create a competitive advantage in
our markets.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
18
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RECOGNITION AND AWARDS
BEST BANK IN NIGERIA
GLOBAL FINANCE MAGAZINE
FINANCIAL HOLDING COMPANY OF THE YEAR
BUSINESSDAY BANKING AND FINANCIAL INSTITUTIONS
FirstBank was rearmed the ‘Best
Bank in Nigeria’ for the 15th time. This
Award is in recognition of the Bank’s
consistent leadership role in enterprise
and innovative banking in Nigeria,
Middle Africa and beyond.
FBNHoldings won the ‘Financial
Holding Company of the Year’ Award
at the 5th BusinessDay Banking and
Financial Institutions Awards. This is in
recognition of its leadership role in the
financial services industry.
BEST RETAIL BANK IN NIGERIA
ASIAN BANKER INTERNATIONAL EXCELLENCE IN RETAIL
FINANCIAL SERVICES AWARDS
FirstBank won the ‘Best Retail Bank,
Nigeria’ Award for the seventh
consecutive year by the Asian Banker.
This Award is in recognition of the
Bank’s exceptional performance in the
nation’s retail market.
BEST RETAIL BANK BRAND
BRAND POWER GOLDEN ICON
FirstBank clinched the ‘Best Retail
Bank Brand’ Award for its lead role
in the revitalisation of the Nigerian
Industrial Brand for the development
and growth in a modern economy.
BANK OF THE DECADE
BUSINESS JOURNAL
FirstBank won the ‘Bank of the Decade’
Award in recognition of its performance
and consistent leadership in the
banking industry.
BEST PRIVATE BANK IN NIGERIA
GLOBAL FINANCE MAGAZINE
FirstBank was named the ‘Best Private
Bank, Nigeria’ for the Bank’s excellent
delivery of specialised service to high
networth individuals towards enhancing,
preserving and passing on their wealth.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
19
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RECOGNITION AND AWARDS
OUTSTANDING FINANCIAL BRAND IN ICT
AND SOCIAL MEDIA DEPLOYMENT
MARKETING EDGE PUBLICATIONS LIMITED
FirstBank was named the ‘Outstanding
Financial Brand in ICT and Social Media
Deployment’. This Award is in recognition
of the Bank’s contribution to the growth,
development and continuing evolution of
the Nigerian Banking industry.
SECURITY CONSCIOUS BANK OF THE YEAR
NATIONAL CRIMEWATCH AWARDS
The ‘Security Conscious Bank of
the Year’ Award was conferred
on FirstBank in recognition of its
partnership against crime.
BEST BANK IN AGRICULTURE LENDING AND SUPPORT
BUSINESSDAY BANKING AND FINANCIAL INSTITUTIONS’
AWARDS
FirstBank clinched the ‘Best Bank in
Agriculture Lending and Support’ Award. This
is in recognition of the Bank’s leadership
in the Agricultural space and its valuable
contributions towards the development of
Agriculture at the Federal and State levels as
well as its support to private individuals and
organisations.
FMDQ MONEY MARKET LIQUIDITY PROVIDER
FMDQ OTC SECURITIES EXCHANGE
FirstBank was named ‘FMDQ Money
Market Liquidity Provider’ for its
promotion of operational excellence in
Nigerian financial markets.
BEST INVESTMENT BANK IN NIGERIA
GLOBAL FINANCE AWARDS
For the sixth consecutive year,
FBNQuest Merchant Bank received
the ‘Best Investment Bank in Nigeria’
Award. This is in recognition of its
leadership position in key business
areas.
BEST SOCIAL DEVELOPMENT BOND
EMEA FINANCE ACHIEVEMENT AWARDS
FBNQuest Merchant Bank was named
‘Best Social Development Bond’. This
Award is in recognition of its role in the
Mixta Real Estate transaction.
BEST LOCAL CURRENCY BOND HOUSE
EMEA FINANCE ACHIEVEMENT AWARDS
FBNQuest Merchant Bank received the
Award of ‘Best Local Currency Bond
House’. This is in recognition of the role
played by the Bank in the Mixta Real
Estate transaction.
BEST PRIVATE BANK IN NIGERIA
WORLD FINANCE MAGAZINE
FirstBank won the ‘Best Private Bank in
Nigeria’ Award for distinguishing itself
with its unique product oerings and
quality advisory services.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
20
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RECOGNITION AND AWARDS
MOST INNOVATIVE BOND
EMEA FINANCE ACHIEVEMENT AWARDS
FBNQuest Merchant Bank clinched the
‘Most Innovative Bond’ Award. This is
in recognition of the Bank’s role as the
Nigerian Book runner to the Federal
Republic of Nigeria on the inaugural SEC-
Registered Diaspora Bond transaction.
BEST M&A DEAL AFRICA MIDMARKET
EMEA FINANCE ACHIEVEMENT AWARDS
FBNQuest Merchant Bank won the ‘Best
M&A Deal Africa (Mid-Market)’. This is
in recognition of the role played by the
Bank as the Joint Financial Advisers to
AMCON on the divestment of AMCON’s
100% shareholding in Keystone Bank
Limited.
DEAL OF THE YEAR  AFRICA: ISLAMIC FINANCE
THE BANKER DEALS OF THE YEAR
FBNQuest Merchant Bank won the
‘Prestigious Deal of the Year in Africa’.
The Award recognises top financial
institutions in the world with sterling
performance. The Award was presented
to FBNQuest Merchant Bank on
account of the Debt Management
Oce of the Federal Government of
Nigeria on the seven-year inaugural
Sovereign Sukuk transaction.
DEAL OF THE YEAR  DEBT
AFRICAN BANKER AWARDS
FBNQuest Merchant Bank received the
‘Deal of the Year – Debt’ Award. This is
in recognition of the role played by the
Bank in the Federal Republic of Nigeria
inaugural SEC-Registered Diaspora Bond
transaction.
BEST LOCAL INVESTMENT BANK IN NIGERIA
EMEA FINANCE AFRICAN BANKING AWARDS
FBNQuest Merchant Bank was
recognised as the ‘Best Local
Investment Bank in Nigeria’. The Award
is in recognition of the Bank’s leading
role in key transactions across various
sectors.
BEST NAIRA BOND
EMEA FINANCE ACHIEVEMENT AWARDS
FBNQuest Merchant Bank won the
‘Best Naira Bond’ Award. The Award
recognises the significant role played
by the Bank in the Debt Management
Oce of the Federal Government of
Nigeria on the seven-year inaugural
Sovereign Sukuk.
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
21
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RECOGNITION AND AWARDS
ISSUING HOUSE WITH HIGHEST NUMBER OF
DEBT ISSUANCE
NIGERIAN STOCK EXCHANGE CEO AWARDS
FBNQuest Merchant Bank clinched the
‘Issuing House with the highest number
of Debt Issuance’ Award. This is in
recognition of the Bank’s continuous
delivery of increased value to its clients
on debt-related transactions.
BEST BROKER IN NIGERIA
EMEA FINANCE AFRICAN BANKING AWARDS
FBNQuest Securities won the ‘Best
Broker’ Award. This is in recognition
of its dealings on the Nigerian
Stock Exchange and Market Making
activities, including acting as the Lead
Stockbroker on the Notore Chemical
Industries transaction.
BEST ASSET MANAGER IN NIGERIA
EMEA FINANCE AFRICAN BANKING AWARDS
FBNQuest Asset Management won the
‘Best Asset Manager’ Award in Nigeria.
BEST ASSET MANAGER PANAFRICAN
EMEA FINANCE AFRICAN BANKING AWARDS
FBNQuest Asset Management won
the ‘Best Asset Manager’ (Pan-Africa)
Award. This is in recognition of the
sterling performance of its mutual funds
across all public funds and customised
portfolios over the last 12 months.
BOND FUND OF THE YEAR  FBN NIGERIA
EUROBOND USD FUND
BUSINESSDAY: BANKING AND FINANCIAL INSTITUTIONS AWARDS
FBNQuest Asset Management won the
‘Bond Fund of the Year’ Award. This is in
recognition of its strong mutual funds’
performance across all public funds and
portfolios.
EQUITY FUND OF THE YEAR  FBN NIGERIA SMART
BETA EQUITY FUND
BUSINESSDAY: BANKING AND FINANCIAL INSTITUTIONS AWARDS
AFRICA RE/AFRICAN INSURANCE ORGANISATION
INSURANCE COMPANY OF THE YEAR
FBNQuest Asset Management received
the ‘Equity Fund of the Year’ Award. The
FBN Nigeria Smart Beta Equity Fund
was the first of its kind in the Nigerian
market.
FBN Insurance won the prestigious
Insurance Company of the Year Award
at the 45th AfricaRe/African Insurance
Organisation conference in Accra, Ghana.
PRESIDENT’S AWARD
LAGOS BUSINESS SCHOOL ALUMNI
FBNQuest Merchant Bank received
the President’s Award from the Lagos
Business School for the significant role
played in the development of employees’
talent and for the promotion of
sustainable development.
22
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Group Chairman’s Statement >> 25 Group Managing Director’s Review >> 29 Leadership and Governance >> 40
STRATEGIC REPORT
The thrust of our business is to build a fully-integrated financial institution. This
is reflected in the diversity of our business portfolio which enables us to provide
a range of financial products and services to our customers.
23
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
MACROECONOMIC REVIEW
The year 2018 was characterised by growing evidence of pass-throughs from a more protectionist global trade
regime, rising United States treasury yields, and a strengthening dollar which took their toll on stock markets around
the world. Furthermore, weak output performance in the 19-member Eurozone and Japan appeared even worse in the
context of the increasing uncertainty over the direction of Brexit in the United Kingdom.
The International Monetary Fund (IMF), World Bank, and the
Organisation for Economic Co-operation and Development
lowered their estimates of global growth for 2018 and
2019 during the last quarter of the year. Rising protectionist
sentiments around the world led by the United States and
the threat of a trade war between the United States and
China were the main downsides to the respective outlooks.
China remains critical to the short-to-medium-term global
economic outlook to the extent that China’s economic
growth engine is being refocused from exports to increased
domestic demand, a trend to serve as a major pull back on
the world trade.
Domestic Economy
In 2018, the economy was on a path to recovery. However, with
the third quarter output growth at 1.81% year-on-year relative
to 1.50% in the second quarter, there is only marginal room for
improvement. Crop production, trade, telecommunications
and information services were the main drivers of growth.
Concerned about the economy operating below its
potential, the IMF’s Article IV Consultation report on the
economy in 2018, suggested a number of policy changes
in the fiscal, monetary, foreign exchange, and banking
spaces to improve private sector supply responses.
By the middle of the second quarter, inflation had re-emerged
as a concern. The National Bureau of Statistics reported that
the consumer price index had risen by 11.44% year-on-year.
This increase was 0.16% above the rate recorded in November
2018 at 11.28% but 3.69% below the rate at which inflation
started the year at 15.13%. However, core inflation was largely
subdued in 2018.
In the third quarter, the country’s unemployment rate closed
at 23.1%, representing a major rise from 18.8% in 2017.
Underemployment rate on the other hand dropped to 20.1%
by the third quarter from 21.2% over the same period of
2017. The country’s labour force grew by 5.4million from
85.1million to 90.5million in the third quarter of 2017. In
addition, at N22.3tn, the country’s debt portfolio was about
20% of the country’s domestic output. The economy’s
medium-term prospects are modest without an increase in
domestic productivity. At 6% revenue to Gross Domestic
Product ratio, growth prospects are relatively modest,
although CBN data indicates that manufacturers Purchasing
Managers’ Index was at 56.2 index points in September
2018.
Concerns about the passing of the budget bill by the
National Assembly in the first quarter combined with
a soft global economy heightened fiscal vulnerability in
2018. However, in the first quarter of 2018, oil prices
recovered some of its losses as Russia and Saudi Arabia
agreed on production cuts. Oil market economists note
that a price below a benchmark of USD60 per barrel could
adversely aect Nigeria’s 2019 budget revenue projections
and widen the estimated 2019 fiscal deficit of N2.4tn.
Nigeria’s ranking on the World Bank’s 2018 ‘Doing Business’
Report fell one notch from the 145th position last year to
146th. According to the World Bank, among the reforms
embarked upon, ‘Nigeria made business start-up easier by
introducing an online platform for stamp duty payment’.
Furthermore, gaining access to electricity was easier by
requiring distribution companies to obtain the right of
way on behalf of their customers and by switching on the
electricity upon meter installation.
24
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
MACROECONOMIC REVIEW
Banking Industry
In 2018, reforms to the domestic financial services industry
architecture were pronounced. In an exposure draft, CBN
indicated its plan to set the minimum capital requirement
for Mortgage Guarantee Companies (MGC) at N6bn.
Licencing of MGCs was designed to deepen the mortgage
banking sub-sector by boosting access to mortgage
finance and establishing better risk management.
In the course of the year, CBN raised the minimum capital
requirement for Microfinance Banks (MFBs) to N5bn for
national MFBs (previously N2bn), N1bn for state MFBs
(previously N100mn), and N200mn for unit MFBs
(previously N20mn). During the year, the bank regulators
also appointed four domestic money banks as settlement
banks for the USD2.5bn bilateral currency swap. According
to CBN’s, recent Financial Stability Report, ‘only large
banks can withstand a further deterioration of their NPLs
by up to 50%’.
In 2018, the nation’s gross external reserves rose by 11%.
As at December 2018, the reserves were USD43.195bn
compared to USD38.912bn at the beginning of the year.
During the year, the balance on the reserves fluctuated
considerably as CBN continued to intervene in support of
the naira. The Federal Government’s 2018 USD5.36bn
Eurobond issue was crucial to the firming up of the
reserves. In addition, the healthy reserve position allowed
Standard and Poor’s (S&P) rearm its ‘B/B’ long and
short-term sovereign credit ratings for the economy, while
assigning the economy a ‘stable outlook’.
Outlook
In 2019, by broad consensus of global economic institutions,
the world economy will slow. However, the issue is where
and by how much. Reporting on this, the London-based
magazine, The Economist, noted that economists at
Investment Bank, JP Morgan developed their model based
only on the historical predictive power of the stock market,
credit spreads and the yield curve. This implies a probability
of a recession in the United States in 2019 which could be
as high as 91%.
The main drivers of global deceleration in 2019 are clear,
poor performance in China (down to a trend average
growth rate of 6% per annum from 10%, which the world
has become more familiar with), waning fiscal stimulus
(from recent tax reforms) which provided a boost to the
United States economy and an increased federal deficit
as well as the consequence of the tax breaks in 2018 are
all factors for considerations. The partial fiscal shut down
in the United States equally contribute to the concerns
resulting from the global economic growth decline.
In 2019, increased growth is expected from emerging
and frontier economies compared to 2018. However,
collectively, they lack the strength to compensate for
the decline in more advanced economies. A few of these
middle-income countries (Turkey, Argentina and Brazil to
some extent) face strong currency and external balance
of payment pressures (as yields rise in the United States
and the dollar strengthens). In countries like South Africa,
successful reforms will be crucial to sustaining momentum.
In Nigeria, a lot will depend on the condition of the
international oil market. If the global economy slumps,
oil prices will come under severe pressure and the rising
dollar would result in oil price decline. Furthermore, in an
election cycle, Nigeria’s fiscal and monetary policy may not
witness traction until the third quarter of 2019.
There are strong reasons to believe that monetary
conditions will tighten in the year as CBN seeks to rein
in liquidity. There are concerns that this might not be
adequate to refrain the naira from falling against major
foreign currencies.
Tighter liquidity may suggest that the banking sector will
aggressively defend current deposits while mobilising
new liabilities. It will become increasingly important for
the banking industry to mobilise retail deposits through
salary-type accounts and other self-liquidating, short-dated
instruments.
25
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Distinguished Shareholders,
I am pleased to welcome you all to
the 7th Annual General Meeting of
our company, FBN Holdings Plc. I
will now present to you an overview
of the company’s performance and
outlook as we progress into the
final year of our current three-year
strategic planning cycle.
Dr Oba Otudeko,
CFR
Group Chairman
FBN Holdings Plc
GROUP
CHAIRMAN’S
STATEMENT
26
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP CHAIRMAN’S STATEMENT
securities reduced companies’ borrowing cost and made
financing expansion plans more aordable. These metrics
underscored renewed optimism in consumer and investor
confidence, resulting in a rally in the stock market at the
beginning of the year, as foreign portfolio investment flows
into the country grew substantially. Nigeria’s economy
grew by 1.95% in the first quarter of 2018 compared to
a contraction in the similar period of the previous year.
Conversely, by the end of 2018, bond yields were up
to 15.0% from 13.0% at the beginning of the year and
inflationary pressures led to a 16bps increase in inflation to
11.4% in the month of December. External Reserves which
had declined month-on-month since June, increased in
December following the Federal Government’s Eurobond
sale which raised over USD2.86billion but falling oil price
and drop in oil production allocation by Organisation of
Petroleum-Exporting Countries (OPEC) resulted in the year
ending on a more cautious note.
Operationalising Our Group Structure
Amidst the contrasting halves of the 2018 economy, our
businesses rose to the challenge to seek out new growth
opportunities through product innovations and new business
models. With a focus on financial inclusion and meeting the
varying and evolving financial needs of customers across
Nigeria, the Commercial Bank scaled up its Agent Banking
business to over 15,000 agents operating in 98% of
local government areas in Nigeria. Furthermore, to ensure
continuous product innovation, in the course of the year,
the Commercial Bank launched the FBN Digital Lab, and the
Chat Banking on WhatsApp with other innovations in the
pipeline to enhance the competitiveness of the business.
The benefits of these innovations are expected to be
realised in 2019 and beyond.
In line with our mandate as a holding company, FBNHoldings
continues to drive eciency in the management of risks and
allocation of capital across our financial services subsidiaries
in multiple geographies. As such, we recapitalized our Ghana
subsidiary, FBNBank Ghana, by increasing the paid-up capital
to GH¢400mn in line with the new capital regime of the
Bank of Ghana (BoG).
At the beginning of 2018, the global economy continued
on a synchronised upswing with investment, manufacturing
and trade showing strong signs of growth. However, trade
wars ensued, first initiated by the United States and
reciprocated by China, European Union, Canada, Mexico
and other economies. This dampened investor confidence
and impacted global economic growth significantly. Despite
the impact of the trade war, the United States’ economy
grew largely as a result of tax cuts for corporations and
associated increased spending. Consequently, the Federal
Reserve Bank intensified its tightening stance which
commenced in 2017, increasing the federal funds rate four
times in 2018 from 1.8% at the beginning of the year to
2.5% in December with a promise to further tighten to
circa 3.0% in 2019. In the same vein, the general stability
in the Euro zone resulted in the European Central Bank
ending its quantitative easing programme as it began
tapering its asset purchases in the second half of 2018.
In emerging markets, China’s economy expanded at the
slowest pace on the back of spillovers from financial
deleveraging and dampened economic sentiment resulting
from the trade war with the United States. Nevertheless,
the economy recorded a growth of 6.6% in 2018 as a result
of tax reforms and increased infrastructure spending. The
Sub-Saharan Africa region faced a challenging economic
environment; tightening financing conditions as external
borrowing costs increased and reversal of capital flow from
these markets to developed markets owing to attractive
rates in developed markets, particularly the United States.
Overall, the performance of this economic bloc was driven
by the largest economies with South Africa and Angola in
recession and Nigeria barely emerging from the negative
territory. Nevertheless, the rest of the region maintained
steady growth including Ghana and Kenya, which resulted in
a regional growth of 2.7% in 2018, a marginal improvement
from 2.6% in 2017.
In 2018, the Nigerian economy marginally benefitted
from increase in oil price and production, helping to
shore up foreign reserves which reached a five-year high
of USD48billion in June 2018. This enabled the Central
Bank maintain foreign exchange stability by intervening
in the markets. During the year under review, inflation
trended downwards, achieving 11.4% compared to 15.4%
in 2017. In addition, the decline in returns on government
27
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP CHAIRMAN’S STATEMENT
In 2018, the increased
group-wide collaboration
has resulted in a remarkable
achievement...
“
”
During the year, we took steps to maximise our investment
in innovation by ensuring that benefits from rolling out
new products, services and channels from the Digital Lab
are extended to other entities within the Group, thereby
harnessing the inherent cost reduction advantages of the
Group-structure. To achieve this, the Group coordination
and collaboration were improved, with the expectation of
more cost-eective and strategic interventions being rolled
out across the Group.
In 2018, the increased group-wide collaboration resulted in
a remarkable achievement of N20bn in synergy revenues,
representing three-year revenue synergy targets for the
Group between 2017 and 2019. The execution of key
synergy initiatives by employees to drive collaboration
and cross-sell across all operating companies, contributed
significantly to the achievement of this impressive result for
the Group. In furtherance of our cost synergy objective, we
recently secured approval of the Central Bank of Nigeria to
roll out our Group Shared Services model to drive eciency
and ultimately improve the cost-to-income ratio of the
Group.
Board Development and Corporate Governance
We continued our pursuit of high standards in corporate
governance during the year as our Board ensured provision
of strategic direction and dedicated oversight to our
businesses. Boards of our subsidiaries also remain strong
and well experienced to guide the respective businesses to
achieve their goals for 2019. The appointments of Moruf
Apampa and Festus Izevbizua, as Executive Directors in our
Life Insurance business, add wealth of experience to the
Board of FBN Insurance Limited and position the business
to sustain its strong performance as one of the leading life
insurance companies in Nigeria.
Looking into the Future
Established in 1894 as the Bank for British West Africa,
the Group has traversed an incredible journey of delivering
impeccable financial services to its customers and supporting
the building of a contemporary Nigeria and indeed, West
Africa. Consequently, we are celebrating 125 years of our
iconic institution in 2019. That is a major milestone for a
company of African heritage. Despite our long heritage, we
continue to evolve to meet our customer’s needs resulting
in local and international recognitions, as evidenced by the
numerous awards and accolades received in 2018. The
Holding Company was named the Best Financial Holding
Company in Nigeria by the BusinessDay Newspaper.
FirstBank was named the Best Bank by the prestigious
Global Finance magazine in the 2018 series of the World
Best Bank Awards. FBNQuest Merchant Bank, FBNQuest
Asset Management and FBNQuest Securities received
multiple awards including Best Local Investment Bank, Best
Asset Manager in Nigeria, Best Asset Manager Pan-Africa
and Best Broker in Nigeria at the EMEA Finance Awards
2018, and the Insurance group was crowned the Insurance
Company of the Year at the Africa Re Insurance Awards
in 2018. Our capacity to continually attract international
recognition is testament to the quality of service, talent and
infrastructure within our Group, and these are key pillars
that we will continue to build on as we progress in 2019.
The economic outlook for 2019 suggests a lethargic
expansion of the economy as the IMF recently revised its
economic growth forecast downwards from 2.3% to 2.0%.
The downside risk of fall in oil price and oil production could
lead to lower reserves and a weakened currency towards
the end of the year. Rising food prices from low harvests
as a result of the herdsmen conflict and severe floods in
2018, and the implementation of the new minimum wage
are expected to increase inflationary pressures during the
year which could lead to tighter monetary policy.
In addition, as we commence the final year of our 2017-2019
Strategic Planning Programme, we expect increased competition
and changing industry dynamics in the financial services space.
This is primarily due to the Central Bank’s published guidelines
on the licensing of Payment Service Banks in Nigeria, which
will allow non-financial institutions such as telecommunication
companies to provide basic financial services to customers for
the first time.
28
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Nevertheless, we are resolute about delivering on our strategic
objectives for this year, as the Board and Management work
together to ensure that we create shareholder value and build
strong foundations for the future. We are not resting on our
laurels, and our renewed approach to synergy and innovation
will be major drivers to unlocking earnings potential for our
Group. We believe that our eorts to integrate our oerings
and provide end-to-end solutions for our customers will
create a competitive advantage in our markets.
Finally, on behalf of the Board of FBNHoldings, I would like
to express my sincere gratitude to our customers for their
continued patronage and trust in us; to our distinguished
shareholders for their support; and to the entire sta of the
FBNHoldings Group for their dedication and commitment to
the company.
Thank you and God bless you all.
Dr Oba Otudeko, CFR
Group Chairman
FBN Holdings Plc
GROUP CHAIRMAN’S STATEMENT
29
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
The Company delivered excellent
results despite volatile market
conditions and operating environment.
We made significant progress towards
our strategic targets and our goal of
being the custodian of first choice for
our customers.
We recorded increased underlying
profit, continued to improve the
eciency of the business and have
taken steps to further reinforce
a customer focused culture.
Considering the dynamism of the
global economy, we are convinced
that this focus provides the best
prospect to build a strong and
successful organisation that can
deliver sustainable shareholder
returns. We equally recognise that
technology is transforming the way
our customers interact with us,
and our core processes and our
UK Eke, MFR
Group Managing Director
TO BE UPDATED
U.K. Eke, MFR
Group Managing Director
FBN Holdings Plc
GROUP
MANAGING
DIRECTOR’S
REVIEW
Distinguished Shareholders,
It is my pleasure to present the
financial results of FBN Holdings Plc
for the year ended 31 December 2018.
30
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
2018 in Review
From the debilitating trade war between the United States
and China, concerns around rising rates in the United States
to the unfolding events as a result of Brexit and sustained
pressure on crude oil price, 2018 was characterised by
an uneven growth across markets and regions, a sharp
contrast to the synchronised global growth experienced
in 2017. These risks were heightened by the economic
implications of a spree of high profile elections in 2019,
which kept investors on edge in economies such as India,
South Africa, Argentina, Indonesia, Thailand, and Nigeria.
Consequently, the global economy is forecasted to have
grown by 3.1% in 2018, spurred by the 2.2% growth
recorded in the developed markets and a 4.5% growth
in emerging economies, driven by activities of major
commodity exporting countries recovering from the slump
in 2017.
As expected by the market, the Federal Reserve raised the
target range of the Federal Funds rate four times in 2018,
consistent with its tightening stance to rein in growing
consumer exuberance and avert economic bubble. Similarly,
during the year, the European Central Bank announced an
extension of its asset purchase program through the end of
the year, albeit a reduction in the monthly purchases from
€30bn to €15bn in October.
Consistent with global growth, the Nigeria economy continued
its recovery path in 2018 from the recent economic recession,
although at a slow rate, on the back of the recovery of crude-oil
price above the budget benchmark price of USD60pb which
peaked at USD81.2 in September 24, 2018, driving external
reserves to USD48bn, its highest in five years. Despite the
decent growth rate during the year, the economy remained
on the backfoot for the larger part of 2018 owing to the
numerous challenges including the escalated farmers/
herdsmen crisis, deteriorating state of key infrastructure and
increased political tension in the run-in to the general election
of 2019. The farmers/herdsmen crisis in the middle-belt
region impacted food outputs in 2018 and elevated prospect
for food inflation in the short-term as farmers abandoned
their farm settlements amid security challenges. In addition,
businesses dependent on importation suered significant
challenges in meeting raw material inputs as a result of the
gridlock at the two functional ports in the country, the Lagos
Apapa and Tin-Can Island Ports. Similarly, international trade,
haulage businesses and other ancillary business activities at
the Apapa corridor recorded muted growth during the year
The 2018 financial year was the penultimate year in the
current Strategic Planning Cycle for FBNHoldings which
runs between 2017-2019. This planning programme has
oered the Group the opportunity to take a critical look
at our businesses, review our processes and undertake
detailed evaluation of the market. This is to ensure our
Group is well-positioned to remain relevant in the evolving
financial services landscape whilst delivering quality returns
to our shareholders. The implementation of the initiatives
that emerged from this review process are at various stages
and our numbers have begun to justify the investment,
time and resources deployed to this process.
Whilst the strategic planning process is a vital part of our
operating model, the unique challenges encountered by the
Group in the last few years, the growing competition in the
financial services landscape, the regulatory dynamics and
the increasingly challenging macroeconomic environment
have ensured this planning cycle is approached dierently.
In summary, our priority over this period has been
three-pronged: strive to grow the topline by enhancing
the traditional income streams, developing new markets
through innovation and extracting value through synergy
and cross-sell; drive eciency in our processes by deploying
technology; and ensure ecient capital management to
retain value for shareholders.
Even though these initiatives are targeted at enhancing the
long-term fundamentals of the Group, there have been
short-term gains that have accrued to these dedicated
eorts. Recently, FBNHoldings was awarded the company
with the best corporate governance practices in Nigeria by
the prestigious World Finance Magazine. This is a testament
to the implementation of best-in-class governance
practices in all our operating companies. Similarly, in 2018,
we launched FBN Digital Lab in the heart of Yaba, Nigeria’s
‘Silicon Valley’. The Lab provides an excellent platform for
the Group, working with Fintechs, to drive its innovation
agenda, enhance its processes and open new markets for
subsidiaries within the Group. In terms of eciency, the
financial results are key leading indicators that the various
interventions including IT projects have started delivering
enhanced returns on investment.
GROUP MANAGING DIRECTOR’S REVIEW
31
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
as evidenced by the less-than-impressive readings from the
Purchasing Manager Indexes.
In 2018, Nigeria’s external reserves experienced wide
movement at two ends of the spectrum, enjoying the
benefit of oil price appreciation and suering from capital
flow reversals owing to increased yields in other developed
and emerging economies. In the first half of the year, the
external reserves rose by a significant sum of USD9bn,
peaking at USD48bn in July largely supported by stable
crude oil production, the issuance of the USD2.5bn
Eurobond and the rally in oil price. This gave the CBN the
needed war chest to pursue its defence of the Naira with
the convenience of being able to meet up to 10 months
of import bill. However, the second half of the year saw a
dwindling of the external reserves following exits of foreign
portfolio investors amid rising rates in the United States,
prompting increased foreign exchange intervention by the
CBN. The much-needed succour came with the successful
closure of the USD2.8bn Eurobond issuance in November
2018 allowing external reserves to close the year at a
healthy USD43.2bn.
Through 2018, the Monetary Policy Committee kept key
policy variables unchanged, retaining Monetary Policy Rate
(MPR) at 14.0%; Cash Reserve Ratio at 22.5%; Liquidity
Ratio at 30%; and the Asymmetric Window around the
MPR at +200/-500bps. Despite expectations of a less
hawkish stance in the early parts of 2018, the Committee
held rates unchanged due to sustained global uncertainties,
policy normalisation in the United States, fears of a stronger
United States Dollar, faltering output as well as anticipated
inflationary pressure as a result of political/election
spending. Consistent with the above, the CBN also sustained
its aggressive liquidity mop-up in the money market, driving
up average yield on short-term instruments to 13.0%, to
check excess liquidity in the system. Furthermore, the CBN
commenced the sale of Chinese Yuan in the second quarter
of 2018, following the currency swap agreement, worth
USD2.5bn, signed with the People’s Bank of China on April
27, 2018.
The Nigerian Stock Exchange All Share Index (ASI) fell
17.8% in 2018. The equity market started the year on a
high with the ASI reaching a 10-year peak of 45,092.83
in January 2018, emerging as the best performing bourse
in Africa. The ASI experienced a decline which began in
the second quarter of 2018 thereby ending the year in
red. During this period, foreign portfolio investments
outpaced domestic participation by 1.7%, accounting for
50.9% of total transactions in the market, while domestic
transactions accounted for 49.1%. The fixed income
market capitalisation increased by 11.8% to N10.17tn
from N9.10tn, recorded in 2017 and dominated by the
Federal Government with a capital raise of N1.16tn in a
bid to finance fiscal and infrastructure deficits. Similarly,
State Governments raised N125.59bn in new debt while
corporates raised a total of N31.47bn. The market also
witnessed the listing of a N100bn Federal Government of
Nigeria (FGN) Ijarah Sukuk designed to finance critical road
infrastructure across the country.
Headline inflation moderated considerably in 2018, touching
a low of 11.1% in July 2018, in contrast to the high regime
experienced in 2017 which continued into the first quarter
of 2018. The high inflation rate was largely due to the
base eect of the food inflation sub-index and sustained
liquidity in the foreign exchange market. Notwithstanding
the success in containing headline inflation, food inflation
pressure mounted due to incessant incidents of flooding
across food producing states, especially in the middle belt
region, complicated by the escalation of clashes between
farmers and herdsmen. Consequently, headline inflation
rose in August and September before easing in October
by 2bps to 11.3%, closing the year slightly higher at 11.4%.
Financial Services Industry Review
In 2018, the Nigeria financial services industry posted a
satisfactory performance on the back of the recovering
economy, improving macroeconomic variables such as
crude oil price, declining inflation and stable value of the
Naira relative to major global currencies. Compared to 2017
financial year, the sector’s contribution to GDP improved
slightly from -4.5% to -2.9%. The negative contribution
was due to declining credit to private sector by banks
amid escalating NPLs even though other sectors such as
insurance and mortgage recorded positive contributions.
Considering that the banking sector represents 80% of
the assets of the financial services industry, the muted
growth of the banking sector swayed overall contribution
of the financial services industry to the GDP in 2018.
Despite concerted eort by the Central Bank of Nigeria
to drive increased support of the banking industry to
the economic growth agenda, lending by banks to the
private sector dropped during the year by 4.0%, albeit
with a minimal rise in the fourth quarter of 2018. Even
though the industry witnessed a slight improvement in
capital adequacy ratio, liquidity ratio and asset quality, the
GROUP MANAGING DIRECTOR’S REVIEW
32
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP MANAGING DIRECTOR’S REVIEW
environment remained challenging during the year, leading
to paucity of quality obligors, thereby escalating the risk
aversion stance of industry players, and driving credit to
government instruments. Some of the other developments
in the industry which impacted the performance of the
sector in 2018 include the implementation of IFRS 9 which
became mandatory on January 1, 2018 and the release
of Guidelines for Regulation of Payment Services Banks in
pursuit of the financial inclusion objective of the CBN which
will potentially result in entrance of new players.
During the year, the CBN published a new licensing
framework for all payment service providers and financial
technology companies, pursuant to its objective of
combating the escalating risks of cyber security in relation
to the broader mandate of maintaining financial system
stability. This proactive approach of the CBN has been
designed to regulate and structure the impact of Fintechs
in the Nigerian financial services industry as explained by
the growing number of payment solution providers and
the activities of e-commerce companies. Similarly, in the
fourth quarter of 2018, the CBN introduced the automated
Consumer Complaint Management System to curb the
emerging challenges associated with the digitisation of the
industry and the need to maintain public confidence in the
financial system.
The insurance industry experienced moderate growth
in 2018 as a result of the improving macroeconomic
environment and financial capacity of consumers of
insurance products. As part of the implementation of
the Risk-Based Supervision of the National Insurance
Commission, the Tier-Based Minimum Solvency Capital
was exposed to the industry. Even though this policy
was subsequently suspended by the insurance regulator,
it essentially signalled the direction of regulation in the
industry in achieving the objective of a stronger insurance
sector to the growth of the Nigerian economy.
Global banking industry is undergoing rapid changes; driven by
customers expectations, emerging technological capabilities
including analytics and regulatory changes, as well as evolving
demographics and economics. Growth is becoming dicult
to achieve, costs are proving hard to contain and eciency
ratios remain persistently low. Regulation is impacting business
models and economics. Technology is rapidly morphing from
expensive ‘nice-to-haves’ into a potent enabler of both
customer experience and eective operations. Non-traditional
players are challenging the established order, leading with
customer-centric innovation while new service providers are
emerging. Customers are demanding higher levels of service
and value.
It is indeed a challenging time for traditional players, yet we
are resolute that the future of this institution remains bright
and we are poised to harness the windfall from surmounting
these challenges. Even though these changes are a lot more
pronounced for the banking industry, other players in the
financial services industry will encounter similar challenges
in varying degrees.
Business Review
Globally, the financial services industry is rapidly evolving
with the increasing pace of technological transformation
both in delivery channels as well as back-end to mid-oce
transaction processing capabilities. This is fundamentally
shaping how transactions are consummated and defining
the interaction model for existing and future consumers of
financial services products. These changes have resulted in
emergence of risks that are unfamiliar to financial services
companies and throwing-up opportunities for new entrants
as well as traditional players that are positioned for this
new-normal.
As part of our mid-range strategic planning process, we
had anticipated these developments and pro-actively
devised strategies to guarantee FBNHoldings’ relevance in
the present and future. Over the last 12 months, we have
made significant strides in strengthening our hold in the
Electronic Banking space through the launch of the Agent
Banking program that has grown to over 15,000 agents,
ramped-up our share of the USSD (*894#) Banking
revenue and now occupy first position in the industry, while
expanding our reach through alternative channels. Also,
we deployed the WhatsApp Banking platform. Although
these are early days, the numbers have begun to justify
our strategy and provide indication of the strength of our
fundamentals as a business. For example, our non-interest
revenue from e-Banking grew from N113.7bn in 2017 to
N131.7bn in 2018, representing 15.8% growth during this
period.
These channels have not only grown our revenue pool, they
have also reduced our cost to serve in a manner that is
dicult to achieve through traditional platforms such as
is oered from brick and mortar branches, alluding to the
broad consensus on the prognosis of the future of the
33
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
industry. The ongoing migration of customers to alternative
platforms remains on track and the proof of our success
reflects in the fact that 85% of all customer-initiated
transactions are consummated through these alternative
channels. As part of the broader IT transformation program,
we have deployed the Oracle ERP solution to deepen
our data analytics capabilities, overhaul the budgeting
process, drive enterprise risk management with technology,
centralise our back-end banking processes such as account
maintenance, overhaul key processes including procurement,
fixed asset and inventory management. This project upon
full implementation will drive down cost, enhance our drive
to allocate resources to market facing activities, deepen
the analytic capabilities of our applications and streamline
processes to enhance speed to market. Consequently, we
have seen non-interest income as a percentage of total
revenue grow from 19.1% in 2017 to 22.6% in 2018.
Our commitment to best-in-class corporate governance
practices is one of the secrets to the longevity, success
and the resilience of the Group. Across the Group, we have
made deliberate eort at ensuring the implementation
of our governance framework which derives from the
principal-agent relationship between Boards of all
operating companies within the FBNHoldings Group and
the shareholders of the institution. During the year, key
appointments were made to the Boards of all operating
companies, ensured the functioning of all Committees of
the Boards and revised the performance benchmarks for all
Boards and its committees. On the back of the corporate
governance practices of this Group, FBNHoldings won the
Best Corporate Governance Award in 2018 from the World
Finance Magazine.
Commercial Banking Group
Over the last three years, FBNHoldings had to deal with
challenging non-performing loan (NPL) book in the
Commercial Bank group from its exposure to the oil and
gas sector and a number of obligors in other sectors. These
legacy delinquent loans resulted from macro challenges and
the dip in the crude oil prices. Consequently, the decision
was taken to revamp the entire risk management processes
to address the legacy loan books through various remedial
actions including recoveries and to forestall formation of
new NPL in the Commercial Banking vintage loan book.
It is noteworthy to highlight that our vintage book which
represents new risk assets portfolio at the Commercial Bank
has NPL ratio of 0.3% as at end of the 2018 financial year,
an early indication of the strength of our risk management
processes.
Consistent with our commitment to the market, we continue
to grow the capital of the Group through organic route by
retaining all earnings of the commercial banking business to
maintain a healthy buer above the regulatory limit to fund
future growth. At 17.3% as at 2018 year-end, our CAR is
230 basis points above the regulatory capital requirement.
Now that our franchises outside Nigeria have been fully
capitalised and integrated with the parent company,
eorts are now being channelled towards driving business
growth and deploying our retail sector capabilities through
e-business to secure significant share in these markets.
In the third quarter of 2018, we obtained the approval of
CBN to implement the group shared services program, one
of the initiatives of FBNHoldings to leverage our buying
power to drive economies of scale. The Group is currently
in the pilot phase of some areas where we intend to share
costs across the Group with implementation scheduled to
commence in 2019 for Facility Management Information
Technology and Legal Services. Based on the investments in
critical resources, people and technology, the commercial
bank has been designated as the Centre of Excellence and
through executed Service Level Agreements, services will
be rendered to CBN-regulated entities within the Group
at arm’s length. Similarly, we have concluded several bold
initiatives targeted at developing winning toolkits around
the middle and back-oce functions to reduce turnaround
time, decongest bureaucratic processes and engender
discipline in our use of resources.
GROUP MANAGING DIRECTOR’S REVIEW
Over the last 12 months, we
have made significant strides in
strengthening our hold in the
Electronic Banking space through
the launch of the Agent Banking
program that has grown to over
15,000 agents, ramped-up our
share of the USSD (*894#)
Banking revenue...
“
”
34
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Merchant Banking and Asset Management Group
Our Merchant Banking and Asset Management business
remains one of the key pillars of FBNHoldings from a revenue
contribution standpoint and has continued to drive the
synergy growth of the Group by providing complementary
products and services to the commercial banking business
thereby enhancing the overall value proposition of the
Group to its large customer base in their quest to create
wealth and meet financial needs. Considering the enormous
potential of synergy realisation in our overall strategy,
the status of the program has been elevated including
resources allocated to drive revenue from cross-sell across
the Group. Consequent to this action and other initiatives
to drive collaboration, we have seen significant growth
during the year with synergy revenue of N19.8bn in 2018
from N6.4bn in 2017, representing 211.0% growth over the
period. Harnessing the natural synergy that exists between
the corporate banking division of the Commercial Bank and
the debt solution business of FBNQuest Merchant Bank,
the Merchant Banking business has significantly grown its
deals pipeline resulting in awards during the year including
being named in the deal of the year by the EMEA Finance
for its role in raising the second tranche of the N100bn
seven-year Sukuk during the year, following successful
closure of the first tranche in 2017. Total revenue from
the Quest business has grown by 16.0% year-on-year with
PBT growing at 55.0% and representing 26.3% of the PBT
of the Group.
Total revenue for the Quest business increased by 16.0%
to N45.3bn from N39.0bn in December 2017, while
profit before tax grew from N10.5bn in 2017 to N16.3bn
in December 2018. Assets under management across
the Group increased by 5.0% to close at N261bn from
N248.5bn in 2017. The Asset Management business has
remained strong in the competitive ranking amongst its
peers, maintaining the second position in the industry.
Overall, total assets closed at N218.6bn, representing
a growth of 0.8% year-on-year from N216.9bn. The
businesses in the group remain well-capitalised with total
group equity of N44.0bn, while the capital adequacy of the
Merchant Bank stands at 12.2%, 220 basis points above
the regulatory requirement.
The Insurance Group
The Insurance group posted a stellar performance in
2018 growing its topline by 32.5%, PBT by 44.0% and
contributing 9.4% of the Group’s PBT. These numbers place
the business at the top of the industry ladder in revenue
generation as well as profitability. Unpacking the 2018
performance shows strong growth trajectory for both the
life business and the general business that has resolved its
legacy issues and is poised for greater share of the general
insurance business with the target of breaking into top 10
in 2019.
On the back of this, the Insurance business further reinforced
its leadership position as one of the fastest growing
underwriting businesses in Nigeria with a compounded
annual growth rate of 26.1% in Gross Written Premium over
the last four years. Total revenue of the Insurance business
group increased by 21.0% to N22.7bn from N18.7bn in
2017, while profit before tax rose to N6.8bn from N4.7bn.
The Business group’s total assets increased by 49.8% to
N76.6bn in 2018 from N51.1bn.
Distinguished shareholders, it is important to highlight
that the financial services industry landscape is rapidly
evolving and so is our business. Our long heritage as an
iconic institution has endowed us with certain unparalleled
competitive advantages and our longevity has ingrained in
us the resilience that can only come with experience and
passage of time. These have informed our ability to withstand
enormous stress and challenging times that include the great
depression, series of economic recessions, debilitating civil
war and a host of market boom and bust cycles. As a Group,
we have evolved with time and displayed tremendous ability
to forge relationship with our stakeholders in co-creating
the future of this industry since we commenced business
in 1894. In furtherance of this aspiration to remain relevant
in the future of the financial services industry in this digital
age, we sought and secured approval of the Board to make
the required investment in deepening our existing market and
opening new vista of opportunities. I am pleased to announce
that in 2018, we launched the FBN Digital Lab. This world
class facility is the engine room for developing innovative
products, services and channels that will drive our interaction
with our customers in the future, working with fintechs and
deploying the excellent proprietary resources of the Group.
Overall Performance Review
Consistent with our guidance to the market, our performance
demonstrated strong resilience during the period with a PBT
of N65.3bn, up 19.7% from N54.5bn in 2017 despite the
15.9% decline in customer loans and advances from N2.0tn
in 2017 to N1.7tn in 2018. Similarly, PAT grew by 31.4%
from N45.5bn in 2017 to N59.7bn in 2018 despite the
GROUP MANAGING DIRECTOR’S REVIEW
35
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
2.0% year-on-year decline in gross earnings from N595.4bn
in 2017 to N583.5bn in 2018. This significant growth in
the bottom line is down to several factors including the
improved risk management processes which ensured that
impairment charges dropped year-on-year, leaner and more
ecient balance sheet as well as progress made in the
implementation of several cost containment initiatives.
Of the many positives from the 2018 financial results, our
growing non-interest income portfolio remains the most
important development for the Group, laying credence
to our strategy of diversifying our income streams and a
testament to our investment in the digital banking space.
A 15.8% growth in non-interest income from N113.7bn in
2017 to N131.7bn in 2018 ensures we have increased the
contribution of non-interest income to the gross earnings
to 22.6% from 19.1% in 2017. We expect this ratio to
continue to improve as we fully on-board some of our
initiatives tailored at driving income from alternative
channels deployed by the Commercial Banking group.
During the year under review, we saw growth in total assets
by 6.3% from N5.2tn in 2017 to N5.6tn in 2018 whilst
customer deposits expanded by 10.9% from N3.1tn in
2017 to N3.5tn in 2018. The year also recorded absolute
reduction in our impairment charges which declined to
N87.3bn from N150.4bn, representing 42.0% drop and a
proof to the improving loan book of the Commercial Bank.
Consequently, we recorded a growth in pre-tax return on
average equity and pre-tax return on average assets from
8.7% to 10.8% and 1.1% to 1.2% respectively. CAR also
remained at a healthy 17.3% for the Commercial Bank, a
226 basis points above the regulatory requirement.
However, cost-to-income ratio increased from 54.0%
to 63.3% during the period driven by the constrained
operating income from a muted loan book growth and
the declining yield environment. Despite these constraints,
year-on-year growth in operating expenses remained below
average inflation rate during the year. Some of the factors
above explain the dip in net interest margin to 7.5% from
8.4% in 2017.
Our esteemed shareholders, I would like to commend
your unwavering support to the Group over the years and
reiterate our commitment to the shareholders as well as
the larger market that the aspirations of rebuilding the
institution has garnered increasing momentum with the
strong support of the Boards of our operating companies
and our large base of dedicated workforce. This resolve not
only has consequences for the short-term value creation
for the shareholders of this institution but fundamentally
seeks to position the Group for a prosperous future.
Consequently, we will continue the implementation of our
various initiatives, sacrifice immediate financial gains when
necessary, for the greater good of securing a sustainable
future for the institution. A clear example is our investment
in innovation and digital transformation which continues to
provide a platform to lead the industry into the future.
On March 26, 2019, your iconic institution, FirstBank
celebrated 125 years of providing excellent services to its
customers, leading the development of the financial services
industry and driving the growth of modern-day Nigeria.
Over this period, FirstBank has forged resilient relationship
with its numerous stakeholders and we can rightfully assert
that we are woven into the fabric of society, making us a
truly timeless heritage. As one of few institutions globally
that have crossed the 100-year mark, I am incredibly proud
of what we have accomplished with your support as we
look forward to greater exploits in the future in our drive to
deliver value to our shareholders.
In conclusion, I would like to reiterate our promise to you
and the entire market that 2019 represents for us the
year of inflection. All leading indicators, derived from our
numbers, point to the commencement of growth across
businesses, markets and indices. As we transition to a
new strategic planning cycle post-2019, we are confident
that the focused execution of our strategy, investment in
future-enabling technologies, development of our talents
and our re-engineered processes will quicken our journey
to repositioning the Group for the ultimate benefit of the
shareholders.
Thank you and God bless you.
U.K. Eke, MFR
Group Managing Director
FBN Holdings Plc
GROUP MANAGING DIRECTOR’S REVIEW
36
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR BUSINESS MODEL
The Group seeks to leverage the diversity of our various business portfolio to develop an integrated
financial institution, providing innovative products and services to our customers as well as sustainable
value to our stakeholders.
Our competitive advantage is in the synchrony of our people, structure and geographical footprint, which enables us to maintain
the leading position in the financial services industry across Middle Africa.
People
We aim to hire and retain the
best talent that will reflect our
corporate values and culture.
Structure
Extraction of synergies across
our multifaceted businesses while
expanding customer
touch-points to ensure ecient
and convenient value delivery to
our customers.
Geographical Footprint
Our presence across African,
European and Asian markets increases
our opportunities to partner with our
customers to enable us meet their
needs wherever they choose to do
business.
37
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR BUSINESS MODEL
OUR BUSINESS MODEL
With an experienced Board of Directors providing strategic leadership, the committed Management
team executes the strategic plan.
Business group
COMMERCIAL
BANKING
How we create value
We make a spread
from the deposit
received from
customers and the
credit assets created.
Fee income is
generated from
transaction charges
on funds and
commissions earned
in facilitating other
transactions.
Services provided
Retail Banking
Commercial Banking
Corporate Banking
Public Sector
Banking
International Banking
Pension Custodian
How we deliver value
Retail Banking: Serves
mass retail and aluent
with annual income of
up to N50mn, as well
as local governments
with an annual turnover
of up to N500mn.
Commercial Banking:
Serves large to
middle-sized businesses
with a turnover of
N500mn to N5bn.
Corporate Banking:
Serves high-end
and bluechip
corporate customers,
multinationals and
specialised industries.
Public Sector:
Concentrates on the
Federal Government
and select State
Governments with
emphasis on providing
payments and
collections services.
International Banking:
Serves business growth
and profitability of our
International Banking
subsidiaries.
38
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR BUSINESS MODEL
Investment Banking:
Arranges finance
through the banks and
capital markets as well
as provides strategic
advice.
Corporate Banking:
Oers a platform
for the provision of a
full range of creative
investment and
wholesale banking
services to mid-size
and large institutions.
Wealth Management:
Provides a holistic
approach for High
Networth Individuals
(HNI) by helping them
grow, manage and
transfer their wealth to
future generations.
Capital Markets:
Provide clients with
strong products and
sector expertise
through our Equities
team.
Trust and Agency
Services:
Provides private and
public trusteeships
and estate planning to
clients.
Asset Management:
Provides mutual funds
to manage liquidity.
Assist individuals and
institutional investors
with a strategy
best suited for their
investment goals and
portfolio.
We serve diverse
institutional and
individual client-base
across various markets
and industries.
Value is created
for our clients and
shareholders through
securities trading,
assets administration,
funds management,
sales of investment
and risk management
products.
Corporate Banking
Investment Banking
Fixed Income and
Currencies Trading
Wealth Management
Asset Management
Trust and Agency
Services
Securities Trading
Alternative
Investments
MERCHANT
BANKING AND ASSET
MANAGEMENT
Business group
How we create value
Services provided
How we deliver value
39
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Business group
How we create value
Services provided
How we deliver value
Life Insurance:
Provides insurance
coverage to individual
and corporate
customers.
Non-life Insurance:
Provides a wide range
of non-life products
and services that
address the needs of
both the corporate and
retail segments of the
economy.
Insurance Brokerage:
Provides insurance
brokerage solutions
to help clients better
manage risks.
We help customers
manage risks
by pooling and
redistributing these
risks for a premium.
Additional income
is generated from
investing the
premiums.
Insurance brokerage
services are
also provided on
commission.
Life Underwriting
General Underwriting
Insurance Brokerage
INSURANCE
OUR BUSINESS MODEL
INNOVATION
Leveraging innovation to
exploit the Group structure
for value realisation and
operating eciencies.
RISK AND COMPLIANCE
Managing the Group risk
profile and adhering to the
regulations that govern our
businesses.
SYNERGY
Extracting revenue and cost
synergies through cross-selling and
shared services.
HOW WE
GROW AND
DELIVER
VALUE
On an annual basis, we set
strategic initiatives to drive
the eective implementation
of our business model
towards achieving our vision
of being the leading financial
services Group in Middle
Africa. These initiatives
centre on the extraction
of natural synergies among
our business groups,
restructuring for profitable
growth and identifying
growth segments for our
businesses, taking into
consideration current and
future realities of our
operating environment.
Successful execution of
our strategic initiatives
will ultimately reflect in
our financial results and
increased value to our
stakeholders.
40
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
LEADERSHIP AND GOVERNANCE
At FBNHoldings, we recognise that good corporate governance practices are best initiated in the Boardroom.
Consequently, there is a conscious eort by the Board to promote good governance by setting the right
‘tone at the top’ and this commitment is reflected by actions through policy directions.
A high level of responsibility is demanded and expected
of our Directors, given the systemic importance of our
financial institution to national economy and our impact on
the societies in which we operate. A review of our Board
structure reveals that it is strategically composed to drive
good governance.
The Group’s oversight functions are discharged through
the Boards of respective operating entities; this ensures
compliance with statutory and regulatory requirements of
their respective industries. At the Holding Company and in
all operating entities, the Boards operate through various
Committees, and the Group’s robust governance framework
ensures that there is a good blend of Board autonomy and
Group coordination at the operating company level.
Governance Framework
The governance framework is in alignment with global best
practices and in compliance with the requirements of the
Central Bank of Nigeria, National Insurance Commission,
Securities and Exchange Commission as well as the Nigerian
Stock Exchange.
The Group’s governance practice provides the solid
foundation for the realisation of the benefits inherent in
our extensive footprint, rich heritage, extended product and
service oerings, and excellent management.
Quality of Disclosure
The Board and Management are aligned in the quest to
provide the investing community with timely information.
Transparency and disclosure is demonstrated in the Group’s
financial reports, through detailed and comprehensive
reporting, providing shareholders with sucient context and
a clear picture of the dealings of the institution.
Diversity
The Group recognises the value of diversity in the employee
base and the Board. Diversity originates from a broad and
representative mix of background and experience, as dierent
perspectives allow for the development of new and varied
opportunities. Internal initiatives to support diversity and
inclusion within the Group are consciously promoted, with
the conviction that strategic objectives are better achieved
by combining various perspectives towards building a sound
reputation founded on the highest standards of responsible
behaviour.
The overriding principles guiding Board appointments are
merit, skill and experience of appointees to deliver the
Company’s strategy. In line with CBN’s recommendation, the
Board of FBNHoldings has a 30% female Board membership.
Shareholder and Regulatory Engagement
Given the interest of shareholders in the performance of
the Group, the Board and Management have adopted a
policy of continuous engagement and consultation with
shareholders and stakeholder groups. These engagements
have created improved awareness and better understanding
of the Group’s governance mechanism, strategic direction,
financial performance and outlook.
In recognition of the importance of regulatory bodies to
the dierent business entities within the Group, Regulators
are constantly engaged to foster an atmosphere of trust
and ensure compliance with extant regulations. These
engagements will be sustained on an ongoing basis.
Internal initiatives to support
diversity and inclusion within the
Group are consciously promoted,
with the conviction that strategic
objectives are better achieved by
combining various perspectives
towards building a sound reputation
founded on the highest standards
of responsible behaviour.
“
”
41
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
BGNC
Dr Hamza Wuro Bokki
Non–Executive Director
BFIC
Omatseyin Ayida
Non–Executive Director
BGNC BARAC
Oye Hassan-Odukale, MFR
Non–Executive Director
BFIC SAC
Oluwande Muoyo
Independent Non-Executive Director
BGNC BARAC
Chidi Anya
Non–Executive Director
BGNCBARAC SAC
BOARD OF DIRECTORS
‘Debola Osibogun
Non–Executive Director
BGNC BARAC
Dr Oba Otudeko, CFR
Group Chairman
Dr Adesola Adeduntan
Non-Executive Director
Oluseye Kosoko
Company Secretary
U.K. Eke, MFR
Group Managing Director
BFIC
Cecilia Akintomide, OON
Independent Non-Executive Director
BFIC SAC
COMMITTEE MEMBERSHIP KEY
BGNC BARAC
BFIC
SAC
Board Governance and
Nominations Committee
Board Audit and Risk
Assessment Committee
Board Finance and
Investment Committee
Statutory Audit
Committee
LEADERSHIP AND GOVERNANCE
42
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Oluseye Kosoko
Company Secretary
Tolulope Oluwole
Head, Investor Relations
Idris Shittu
Head, Risk Management and Compliance
FBNHOLDINGS MANAGEMENT
STATUTORY AUDIT COMMITTEE
’Yemi Okojie
Ag. Head, Strategy and Corporate Development
Bode Oguntoke
Head, Internal Audit
Oyinade Kuku
Head, Human Resources
U.K. Eke, MFR
Group Managing Director
Oyewale Ariyibi
Chief Financial Ocer
Oye Hassan-Odukale, MFR
Non–Executive Director
Cecilia Akintomide, OON
Independent Non-Executive Director
Ismail Adamu
Chairman
Christopher Okereke
Kolawole Durojaiye
Chidi Anya
Non–Executive Director
LEADERSHIP AND GOVERNANCE
43
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
OUR SUBSIDIARIES
Ibukun Awosika
Chairman, First Bank of Nigeria Ltd
COMMERCIAL
BANKING
FIRST BANK OF NIGERIA LTD
MERCHANT BANKING AND
ASSET MANAGEMENT
FBNQUEST MERCHANT BANK LTD | FBNQUEST CAPITAL LTD
INSURANCE
FBN INSURANCE LTD | FBN INSURANCE BROKERS LTD
DIRECTORS
Gbenga Shobo
Deputy Managing Director
Lawal Ibrahim
Non-Executive Director
Dr Ijeoma Jidenma
Independent
Non-Executive Director
U.K. Eke, MFR,
Non-Executive Director
Olusola Oworu
Independent
Non-Executive Director
Ibrahim Waziri
Non-Executive Director
Obafemi Otudeko
Non-Executive Director
Tunde Hassan-Odukale
Non-Executive Director
Lateef Bakare
Independent
Non-Executive Director
Dr Remi Oni
Executive Director,
Corporate Banking
Abdullahi Ibrahim
Executive Director,
Public Sector
DIRECTORS
Taiwo Okeowo
Deputy Managing Director
Oluyele Delano
Independent
Non-Executive Director
Dr Omobola Johnson
Non-Executive Director
U.K. Eke, MFR,
Non-Executive Director
Akinlolu Osinbajo
Non-Executive Director
Babatunde Odunayo
Non-Executive Director
DIRECTORS
Ijeoma Agboti
Non-Executive Director
Ike Onyia
Non-Executive Director
Adekunle Awojobi
Non-Executive Director
DIRECTORS
Seyi Oyefeso
Non-Executive Director
Seye Kosoko
Non-Executive Director
DIRECTORS
Margaret Dawes
Non-Executive Director
Caleb Yaro
Independent
Non-Executive Director
Aderemi Ogunmefun
Non-Executive Director
Oyewale Ariyibi
Non-Executive Director
Theuns Botha
Non-Executive Director
Festus Izevbizua
Executive Director, Finance
and Administration
Moruf Apampa
Executive Director, Business
Development
Oyewale Ariyibi
Chairman, FBNQuest Capital Ltd
Folake Ani-Mumuney
Chairperson, FBN Insurance Brokers Ltd
Bello Maccido
Chairman, FBNQuest Merchant Bank Ltd
Kehinde Adenrele
Chairperson, FBN Insurance Ltd
Dr Adesola Adeduntan
Managing Director
First Bank of Nigeria Ltd
Olumide Ibidapo
Managing Director
FBN Insurance Brokers Ltd
Valentine Ojumah
Managing Director
FBN Insurance Ltd
Tseyi Hammond
Ag. Managing Director
FBNQuest Capital Ltd
Kayode Akinkugbe
Managing Director
FBNQuest Merchant Bank Ltd
LEADERSHIP AND GOVERNANCE
44
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RISK MANAGEMENT
OVERVIEW
The diversity of our business model requires us to identify, assess, measure, aggregate and manage our
risks as well as allocate capital among our businesses. Across the Group, our resilience is seen in the
holistic approach adopted in the management of risk and return, capital and the reputational profile.
The main objective of risk management is to balance the level of risk connected with our business,
growth and profitability goals, providing integrated customer solutions while achieving consistent and
sustainable performance. The following principles underpin our risk management framework:
Risk is taken within a defined risk appetite;
Every risk taken requires approval within the risk
management framework;
Risk taken requires adequate compensation; and
Continuous monitoring and management of risk.
Identified risks are monitored and mitigated to safeguard
and ensure consistent value is returned to our stakeholders.
The Board and Senior Management regularly assess the
risks exposed to the Group and ensure adequate control
is put in place.
Enterprise Risk Management Framework
The Group Enterprise Risk Management (ERM) Framework
provides a structured approach towards risk taking and risk
management activities across the Enterprise, supporting
the Group’s long-term revenue, earnings and investment
growth strategy. The is communicated through risk policies
and standards consistent with the Group’s strategic intent.
As a Group, we have a common approach to managing
enterprise-wide risk and evaluating comparable risk-adjusted
returns on prospective business activities. The entities within
the Group are primarily accountable for the risks undertaken
and are expected to hedge adverse outcomes through a
three-pronged approach. The independent risk function
provides proactive support and constructive challenges to
first line risk owners to deliver sustainable growth within the
Group’s risk preferences.
The Group’s Risk Policies and Standards Cover the
following:
A clear definition of the three-pronged line of
defence management system and the assignment
of accountability and delegation of authority for risk
oversight and management;
The alignment of the various types and levels of
risk the Group seeks with its strategic plan and risk
appetite;
Risk identification, measurement, assessment and
mitigation methodologies which enable eective
management and monitoring of risk; and
An independent oversight by the internal audit to
provide reasonable assurance, requires that the
Group’s generated risk profile are in line with the
management processes embedded in the various
policies.
Our risk management practices are influenced and
impacted by internal and external factors such as economic
conditions, political environments, technology and risk
culture, which can significantly impact the levels and
types of risks the Company could encounter in its pursuit
to strategically optimise risk taking and management.
Our ERM framework incorporates relevant impacts and
mitigating actions as appropriate.
The Management is responsible for managing risk within the
risk appetite and has established risk management strategies
and monitoring practices. This includes a ‘three-pronged
line of defence’ governance model that segregates duties
45
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
RISK MANAGEMENT
of risk-taking activities, risk monitoring, risk oversight and
establishes appropriate accountability for those who assume
risk and those who oversee risk. The Group’s management
practices are aligned to assess the influence of internal
and external factors such as political, economic, social and
technological (PEST) factors. These factors can significantly
influence the levels and types of risk the Company could
encounter in optimising shareholder returns and operating
profitability. The Management is responsible for the
nature of risk undertaken by the respective subsidiaries
and defines the risk decision process to make sure that
risk returns are optimised across businesses within the
Group. The risk management three-pronged model adopts
an approach in which risk-taking, risk monitoring and risk
oversight activities are kept in operating ‘silos’ that interface
at times of strategic need. An accountability framework has
been adopted to dierentiate those that assume risk and
those that provide risk oversight.
Risk Governance
The Board of Directors oversees the Group’s culture of
integrity and ethics, strategic planning, risk management,
and corporate governance. The Board carries out its
responsibilities directly and through its various committees.
The Board Audit and Risk Assessment Committee oversees
the management of the Group’s principal risks and
programmes as well as policies and procedures.
Risk governance across the Group is maintained through
eective delegation of authority from the Board through
the Management hierarchy, supported by a committee
structure at Board and Management levels. The delegation
of risk management responsibilities across the Group is
structured to make sure that decisions are enacted at the
most appropriate level in line with business objectives,
subject to robust and eective review. Strategic business
decisions are taken within Board-approved risk appetite,
with the Executives and Risk Committees closely monitoring
risk profiles against this appetite.
The Group continues to modify and enhance its risk
management policies and systems to reflect changes
across markets, products and international best practices.
The diagram illustrates how risk management across the
Group is a joint responsibility.
CONCENTRATION RISK
CREDIT RISK
ENVIRONMENTAL
SUSTAINABILITY RISK
TRADING
BOOK
MARKET
LIQUIDITY
BANKING
BOOK
FUNDING
LIQUIDITY
LIQUIDITY RISK
MARKET RISK STRATEGIC RISK
OPERATIONAL
RISK
INSURANCE
RISK
INFORMATION
SECURITY RISK
CYBER SECURITY
RISK
EMERGING
BUSINESS RISK
REGULATORY
COMPLIANCE RISK
REPUTATIONAL RISKLEGAL RISK
GENERALLIFE
FBNHOLDINGS RISK UNIVERSE
The Group Risk Profile
The diversity of our business model exposes the Group to various risks. The diagram below highlights the key risks:
46
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
To further strengthen the way risk is being managed across
the Group, we continue to monitor the various initiatives
introduced in 2017, as well as new initiatives introduced
and executed in 2018.
The Group continues to monitor large credit exposure
to single obligors across the operating entities to curb
excessive concentration to an individual obligor or group
of connected counterparties.
A Credit and Sanction Policy for all credit-related oences
and regulatory breaches is fully operational and applied
appropriately.
The Group also introduced and implemented a Group
Reputational Risk Policy aimed at protecting the various
franchises from reputational risk exposures. In 2018, the
Risk Stakeholders Committee (GRSC) met regularly and
was actively involved in the continuous review of the
proposed Large Exposure Policy, Reputational Risk Policy,
Group Risk Appetite and the Group ERM framework. GRSC
also made sure measures were put in place to manage
evolving risks across the Group. The activities of the
Committee has reinforced the Group’s strong risk culture.
As a Group, we have a common approach and process
to identify, measure and assess the risks undertaken. All
new business initiatives, acquisitions, product oerings,
reinsurance arrangements, investment and financing
transactions are evaluated on a comparable risk-adjusted
basis.
To ensure quality at entry and appropriate risk selection,
the first line of defence of the Group is responsible
for identifying and assessing key risks in new products,
markets and emerging risks on an ongoing basis. A
standard inventory of risks that the Group is exposed to is
developed and updated on all aspects of risk identification,
measurement, assessment, monitoring and reporting.
Risk exposures are evaluated using a variety of risk
measures focused on both short-term net income
attributed to shareholders and long-term economic value
with certain measures adopted across all risk categories
while others apply only to some risks or a single risk
type. The measures include; stress tests, scenario impact
analyses and stochastic scenario modelling. Qualitative risk
assessments are performed for the types of risks types
that cannot be quantified.
RISK MANAGEMENT
1ST LINE OF DEFENCE
Daily risk management
monitoring and high level
oversight
Business units and
risk-takers
2ND LINE OF DEFENCE
Risk oversight and challenges,
policies and methodologies
Risk Committees
Chief Risk Ocers, Heads of
Risk across the Group
Risk Management function
3RD LINE OF DEFENCE
Independent assurance of risk
management
Audit Committee
Internal Audit
External Audit
Regulators
External Assessors
47
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Economic capital and earnings-at-risk provide measures of
enterprise-wide risk that can be aggregated and compared
across business activities and risk types. Economic
capital measures the amount of capital required to meet
obligations with a high and pre-defined confidence level.
Our earnings-at-risk metric measures the potential
variance from quarterly expected earnings at a confidence
level. Economic capital and earnings-at-risk are both
determined using internal models.
RISK FACTORS OVERVIEW
In 2018, the business environment had significant impact
on the Group’s business activities and this was indicated
on the specific risk encountered as a Group. Key among
environmental issues were:
slowdown of the Nigerian economic growth;
uncertain political and social environment;
rise and fall of global oil prices and the consequent
impact on Nigeria’s monolithic economy;
rising capital outflows from emerging markets;
threats to the stability of the financial sector in
Nigeria and across the African continent; and
implementation of the IFRS9 standard.
In line with its principle and policy, the Group continued to
identify the attendant risk on an ongoing basis and ensure
controls are reflected in the Group-wide risk appetite.
General Macroeconomic Risk Factors
The macroeconomic environment in which the Group is
exposed to has a significant impact on our financial plans
and business strategy implementation.
Our business strategy and associated financial plans
are developed by taking into consideration forecasts
of economic growth, both globally and in the specific
countries of operation. Actual economic growth can be
significantly impacted by the macroeconomic environment
and can deviate significantly from forecast, thus impacting
our financial results and the ability to implement our
business strategy.
Specific changes in the macroeconomic environment can
have dierent impacts across dierent parts of the business.
For example, a rise in interest rates is beneficial to us in the
long-term but can adversely aect valuations of some of
our assets especially those involving contractual cash flows.
The spending and saving patterns of our customers can be
significantly influenced by the macroeconomic environment
and this could have an impact on our product and service
oerings.
Customer behaviour and emergence of claims on our
liabilities can significantly be impacted by the macroeconomic
environment. For example, a prolonged period of economic
weakness could impact the health and well-being of our
customers resulting in increased claims for certain insurance
risks.
The following sections describe the risk management
strategies for each of our six principal risk categories:
Strategic Risk, Market Risk, Liquidity Risk, Credit Risk,
Insurance Risk and Operational Risk.
RISK MANAGEMENT
48
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
STRATEGIC RISKS
The risk of loss resulting from the inability to adequately plan or implement an appropriate
business strategy or to adapt to changes in the external business, political or regulatory
environment.
Strategic Risk Mitigating Strategies
It is the responsibility of the various Executive Committees of our operating entities to establish
and oversee execution of our business strategies, identify and manage the risks embedded in
these strategies. These are supported by several processes:
The Group commences every financial year with a review and analyses of previous strategies,
thereafter develop strategic business, risk and capital planning that is reviewed with the
Board of Directors and the Executive Committees of the operating entities.
Performance and risk reviews of all key businesses with the CEO and annual reviews with
the Board of Directors.
CREDIT RISKS
The risk of loss due to the inability or unwillingness of a borrower or counterparty to fulfil its
payment obligations. The Group’s credit risk arises from direct and contingent lending as well as
counterparty risk from trading activities. Credit risk are: Default/counterparty risk, Performance
risk, Payment risk, Diversion risk, Managerial risk.
Regulatory Development Under Credit Risk
The Group complied with the CBN’s guidance on IFRS9 Expected Credit loss for Regulatory
Capital purpose. CBN guidance is consistent with the Basel Committee on Banking Supervision’s
standard titled ‘Regulatory Treatment of Accounting Provision’, which addresses the uncertainties
surrounding the capital eects of the change from the Incurred loss model to the Expected
Credit Loss accounting model.
Credit Risk Mitigating Strategies
Credit risk is governed by the Credit Committees which oversees the overall Credit Risk
Management Programme. The Group has objectives for overall quality and diversification
of our credit portfolio and criteria for the selection of obligors, counterparties, including
derivative counterparties and reinsurers. Our policies establish exposure limits by single or
connected borrowers, corporate connections, quality rating, industry, and geographic region,
that govern the usage of credit derivatives. Corporate connection limits are governed by our
large exposure policy;
Our credit granting subsidiaries follow a defined evaluation process that provides an objective
assessment of credit proposals. A risk rating is assigned based on a detailed examination of
the borrower that includes a review of the business strategy, market competitiveness, industry
trends, financial strength, access to funds, and other risks exposed to the organisation;
RISK MANAGEMENT
49
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Established delegated credit approval authorities that make credit decisions on a case-by-case
basis at a Management level appropriate to the size and risk level of the transaction which is
based on the delegated authorities which could vary according to the risk rating; and
Regular monitoring and review of the credits within the various portfolios are undertaken
with the objective of identifying changes to credit quality and where appropriate take
corrective action. Prompt identification of problematic credits is a key objective.
Credit Risk Measurement
The Group lending subsidiaries have put in place, a clear defined risk rating system and model
for countries, industries, products and obligors as well as scoring models for retail customers
to measure and manage related risks. The establishment of the overall risk rating process is
the responsibility of the Credit Risk Management in conjunction with other risk management
strategic units within each subsidiary.
MARKET AND LIQUIDITY RISKS
Market Risks
The risk that the value of a trading or an investment portfolio could decrease due to changes in
market risk factors, such as stock prices, interest rates, foreign exchange rates and commodity
prices. It represents the potential for a negative impact on the balance sheet or income statement
resulting from adverse changes in the value of financial instruments as a result of movements
in certain market variables and implied volatilities.
Potential Impacts On Business
This could result in significant financial loss from reduction in net interest income and impairment
of interest-rate-related instruments, including fixed-rate and floating-rate debt securities and
instruments that are similar as well as non-convertible preference shares.
Market Risk Mitigating Strategies
Market risk is governed by the Asset and Liability Committee of each operating entity which
oversees the overall market and liquidity risk program. The Group’s overall strategy for managing
market risks incorporates several component strategies, each targeted at managing one or more
of the market risks arising from our businesses. At the Group level, these strategies are designed
to manage our aggregate exposures to market risks against economic or regulatory capital and
earnings-at-risk.
RISK MANAGEMENT
50
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Foreign Exchange Mitigating Strategies
The Group’s policy on foreign exchange is to match the currency of our assets against the
currency of the liabilities and match the currency of the assets in our shareholders’ equity
account against the currency of our required capital. Where assets and liabilities do not match,
there is a need to stabilise the capital ratios using forward contracts and currency swaps.
Other strategies are:
Daily monitoring of foreign exchange trading position against risk limits;
Daily reporting of all foreign exchange exposures to the Executive Management;
Hedging policy put in place; and
Regular review of the Group’s currency exposures and limiting transactions to approved
counterparties.
Investment Risks
The probability that the actual return on an investment will be lower than expectations.
Potential Impacts on Business
This could lead to diminution in the value of investments.
Investment Risk Mitigating Strategies
Significant investments are approved by the Board and all others by the Management
Committee;
Counterparties for investments are approved by the Executive Management and the Board;
Highly experienced professionals in the strategy unit provide advise on strategic investments;
Strong supervision by the parent Company’s Board of subsidiaries; and
Portfolio selection and diversification strategies.
Counterparty Risk
The Group is also exposed to counterparty risks arising from pre-settlement and settlement
risks. Pre-settlement risk is the risk that one party to a contract will fail to meet the terms of
the contract and default before the contract’s settlement date. Settlement risk is the risk that
one party will fail to deliver the terms of a contract at the time of settlement.
Potential Impacts on Business
This could lead to financial losses due to the default of a trading counterparty
RISK MANAGEMENT
51
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Counterparty Mitigating Strategies
Approved counterparties with pre-settlement risk lines;
Measurement and reporting of pre-settlement risk exposures to the Executive Management;
Hedging policy put in place; and
Regular review of the Group’s currency exposures and limit transactions to approved
counterparties.
LIQUIDITY RISK
The Group is exposed to liquidity risk in each of our operating companies as well as the holding
company. In the operating companies, expected cash and collateral demands arise day-to-day to
fund anticipated withdrawals of customer deposit, policyholder benefits, reinsurance settlements,
derivative instrument settlements/collateral pledging, expenses, investment and hedging activities.
For the Holding Company, the Group depends on the ability of its subsidiaries to upstream funds
to meet its obligations and pay dividends.
Potential Impacts on Business
This could lead to insolvency and eventual reputational risk.
Liquidity Risk Mitigating Strategies
The asset mix of our balance sheet takes into account the need to retain adequate unencumbered
and appropriate liquid assets to satisfy the requirements arising under stressed scenarios and to
strengthen our ratios:
Diversifying our business across dierent products, markets, geographical regions, funding
sources and policyholders;
Insurance products are designed to encourage policyholders maintain their policies in-force,
to generate a diversified and stable flow of recurring premium income;
Policyholder termination features of our wealth management products and related
investment strategies are designed with the objective of mitigating the financial exposure
and liquidity risk related to unexpected policyholder terminations;
We establish and implement investment strategies intended to match the term profile of
the assets to the liabilities they support;
We forecast and monitor daily operating liquidity and cash movements in various individual
entities and operations as well as centrally, with a view to ensure liquidity is retained and
cash is utilised optimally;
Controlling risk-taking by setting appropriate portfolio and risk limits;
Maximising returns on treasury portfolios within the approved risk limits;
RISK MANAGEMENT
52
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Having a contingency plan in place to address possible liquidity challenges;
Ensuring that assets are liquid enough to be liquidated without significant losses; and
The operating entities monitor the obligations and commitments by estimating the cash
flows to be derived from all assets and liabilities for the dierent maturity tenure and
determine the net surplus or funding requirement. Limits will be set for tenure in relation
to the estimated liquidity requirement.
OPERATIONAL RISKS
The risk resulting from inadequate or failed internal processes, system failures, human-
performance failures (People Risk) or from external events. The Group recognises the significance
of operational risk which is inherent in all areas of our businesses and managed same within
acceptable levels through an appropriate level of management focus and resources.
People, process, system, technology and external events as well as third-party risks are explained
further.
PEOPLE RISKS
The risk of loss; financial, reputational or otherwise arising from a failure to properly manage
the Group’s human capital. This can present as sta fraud, high sta attrition, knowledge gaps,
unmotivated and disgruntled workforce.
Potential Impacts on Business
This can impact the Group by way of negative service experiences for customers and the
attendant loss in market share, financial loss and reputational damage. It also includes the
inability to deliver strong business performance that meets or exceeds stakeholders’ expectations.
People Risk Mitigating Strategies
Each Operating Company has a robust Operational Risk Management Framework that sets
out the processes employed to identify, assess, manage, mitigate and report on significant
people risk exposures. Execution of our operational risk management strategy focuses on change
management and working to achieve a cultural shift towards greater awareness and better
understanding of operational risk. We have Enterprise-wide Risk Management Programmes for
specific operational risks that can materially impact our ability to do business or impact our
reputation.
Other component strategies are:
Robust Human Capital Management and Development (HCMD) practices to achieve a
strong workplace;
Eective background checks and thorough confirmation process on new hires;
RISK MANAGEMENT
53
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Competitive remuneration package and other hygiene factors to attract and retain the best
talent;
Enforcement of strong supervisory control;
Zero tolerance for sta integrity issues and fraud;
Strict enforcement of the requirements of the sta handbook;
A disciplinary committee that meets regularly to deal with and resolve employee issues;
A comprehensive reliable insurance policy; and
Encouragement of a healthy work–life balance.
Responsibility
Strategic Business Units and support functions, e.g. branches, operations group, e-business and
HCMD.
PROCESS RISKS
The risk of incurring financial loss as a result of inadequacies or failures in operational processes,
systems or sta. This also includes the risk arising from disruption of operational activities as a
result of external events.
Examples are:
Transaction capture, execution and maintenance errors or failures;
Failures in the customer intake and documentation process;
Failed mandatory reporting obligations;
Breach of limit due to inadequate internal processes;
Inadequate reconciliation processes; and
Manual–intensive processes.
Potential Impacts on Business
The impacts on business range from negative customer impact and the attendant loss in
market share, financial loss, reputational damage and the inability to deliver a strong business
performance that meets or exceeds stakeholders’ expectations.
Process Risk Mitigating Strategies
A Comprehensive Control Administrative and Accounting Procedure manual to guide
operational activities and processes of the Group;
RISK MANAGEMENT
54
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Introduction of a functional reporting structure to the operations to allow for eective
supervisory control of the operations of the Group;
Introduction of a self-assessment programme to allow process owners to identify and
control weaknesses with a view to taking proactive remedial action;
Institute a robust business continuity plan and disaster recovery programme;
Automation and re-engineering of our processes; and
Increase operational risk awareness training and programs.
SYSTEM OR TECHNOLOGY RISKS
The risk of failing to develop, implement or operate the Group’s technology platforms and
solutions to meet stakeholders’ requirements.
Potential Impacts on Business
This could present in system failure, resulting in irate customers and tarnished reputation,
software failures, seizure of technical support, hardware failures, obsolete hardware and lack of
support from the manufacturers.
System or Technology Risk Mitigating Strategies
The Group has:
Disaster Recovery Centre;
Comprehensive Service Level Agreement with Information Technology Service Providers;
Regular Information Technology audit and control;
Hardware policies covering hardware purchase, usage, replacement and disposal;
Software policies covering purchase or design, usage, enhancement, patching, replacement
and disposal;
Resilience built into the Group’s network platform through the installation of a backup link
to over 99% of our branches; and
An articulated medium-term transformation plan to optimise the Group’s investment in
technology.
EXTERNAL EVENTS AND THIRD-PARTY RISKS
The risk arises from external events such as external fraud, natural disaster and third-party
failure.
RISK MANAGEMENT
55
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Potential Impacts on Business
External events could lead to disruption of business and financial loss to the Group. Third-party
failure could lead to poor service, reputational damage and financial loss to the Group. Technology
failure due to activities of hackers and inadequate financial capacity to fulfil obligations could
negatively impact the Group’s service delivery.
External Events and Third-Party Risk Mitigating Strategies:
Hedging against external events with adequate insurance cover;
Robust business continuity management system that has passed the ISO22301 certification
to support the Group’s resilience;
Regular monitoring and review of all outsourcing arrangements in the Group;
Strict adherence to the Group’s outsourcing policy;
Enforcement of SLA and sanctions for breach of contracts;
Real-time reporting of high-risk incidents or exposure; and
Physical security and personal and business protection policy to mitigate internal and
external threats.
INFORMATION AND CYBER SECURITY RISK
CYBER SECURITY RISKS
The global cyber threat landscape is constantly evolving, with increasing reports of cyber attacks
on governments and corporate organisations. Cybercrime syndicates are taking advantage of
the speed, convenience, anonymity of the internet or network in committing crimes that cause
serious harm and pose real life threats to individuals and organisations worldwide.
Globally, cybercrime remains a major challenge, influencing how organisations operate. Emerging
technologies have facilitated the growth and spread of cybercrime. Many global organisations
have fallen victim of cybercrimes and the impact is often monumental. Organisations including
banks are exposed to various cyber threats as a result of size, business footprint, legacy systems,
governance practices, software and the complexity of operating model.
Trust remains the key product oering of the Banking and Financial Services Industry, a trust
contract with the customers must be defended to assure the integrity, confidentiality and
availability of data and information. In today’s world, electronic commerce services is accessible
from anywhere in the world. Anything that jeopardises that trust relationship poses a major risk
to the industry.
RISK MANAGEMENT
56
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
At FBNHoldings, safeguarding our assets from cybercrime is at the heart of our strategy and
initiatives. Our operations are mostly technology-driven across geographies where we operate;
hence we are vulnerable to the growing cyber risks. To promote sustainability, interventions are
being pursued in many critical areas such as; obsolescence, patch management, standardisation,
capacity, etc. We have adopted domain layered security methodology to achieve holistic defence
against cyber threats and attacks. This approach required that we fix the basics, deploy solutions
to close known gaps and build predictive capabilities for the long-term sustainability of our
security interventions.
Our banking subsidiary has strongly identified with the CBN recently released risk-based cyber
security framework and guideline to Money Deposit Banks and Payment Services Providers, which
is the minimum baseline expected from MDBs and PSPs in their cybersecurity programmes. The
programme will foster a more secure financial environment and encourage standard security
practices in the economy. Over the next 12 months, we will continue to execute programs to
further strengthen internal capacity, upgrade cyber threat management solutions, upskill sta
to reduce the risk levels. We will continue to monitor the cyber threats landscape and apply
eective and reliable responses on a going concern basis.
Potential Impacts on Business
Cyber attacks on infrastructure and devices are increasing in sophistication and impact, as basic
methods of compromising information continue to result in severe damage.
Organisations across the world are exposed to cyber-attacks directed at critical network,
databases, applications and systems infrastructure. Cybercriminals and terrorist groups inflict
financial loss and widespread economic damage on organisations. Recent trends indicate
increasing probability of attacks to take advantage of the increasing numbers of physical assets
connected through the Internet of Things (IoT). Ransomware, one of the most prevalent ways
to exploit the value that organisations place on digital information will threaten the lives of
customers and employees, interrupting operations as well as causing heavy financial losses.
Cyber Security Risk Mitigation Strategies
Cybersecurity continues to remain a top priority for organisations across the globe. In
2018, the Group continued to revamp and evaluate its cybersecurity capabilities and
secure computing practices. The Group through its Contain–Treat–Sustain strategic
security initiatives continued its implementation of globally acclaimed security initiatives
and practices to predict, identify, detect, prevent, protect, respond and recover from
cyber-attacks across the subsidiaries.
The Group’s cybersecurity approach focuses on three key implementations which include:
the adoption of reliable solutions and revamp of existing solutions making them more
eective; equipping of our 24/7 Security Operations Center with capabilities of full depth
and breadth visibility of the Group’s IT infrastructure layout and transactional activities
across the enterprise; and attracting key skill-sets across the globe, sta training and
retention to ensure they possess the requisite skill to drive our strategy through, thereby
ensuring optimal value extraction.
The banking subsidiary PR1MUS initiatives have continued to deliver innovative products to
our customers in Nigeria and our subsidiaries across Middle Africa. Through the Operational
Risk and Governance as well as Compliance Management, we now have a centralised
repository of key regulations, policies, processes, risks and controls with issue log and
corrective action plans with monitoring, escalation and reporting capabilities.
RISK MANAGEMENT
57
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
INFORMATION SECURITY RISKS
Unauthorised access, use, disclosure, modification, perusal, inspection, recording or destruction
of information assets which could result in possible disruption of operations.
The Group, in line with its Governance, Risk Management and Compliance practices continue to
focus on improving its overall information security level across the subsidiaries with the objective of
reducing cyber attacks launched on its customers. The Group has put in place structures to establish,
implement, operate, monitor, review, maintain and improve its documented Information Security
Management Systems within the context of the Group’s overall business risks. Following structured
security investments over the years, the Group continues to witness huge improvements in our risk
indicators. This includes 80% reduction in successful phishing email delivery to customers, expedited
takedown of cloned websites, 98% uptime on the Bank’s web-facing infrastructure. In 2018, the
Group did not record any significant cyber-related breach.
In line with the Group’s strategy, stakeholders have been kept abreast of recent security trends
across the world with consistent security awareness communication on global security trends
and best practices to ensure the safety of its customers and the general public. The Group has
identified with the European Union led General Data Protection Regulation in relation to handling
of customers’ data. This is due to the fact that our customers and other stakeholders are spread
across the entire globe. The Group will continue to reinvent and re-innovate to respond to
changes in the global cybersecurity landscape with future-ready initiatives to ensure the safety
of the institution and its stakeholders.
The Group will continue to reinvent and re-innovate its security systems with improved
technology, automated governance practices, and adoption of a robust international acclaimed
security structure with future-ready capabilities. The Group is well-positioned for emerging
cybersecurity threats and challenges.
Potential Impacts on Business
Information assets are critical to the Group’s operations and crucial to the eective and ecient
delivery of service by the Group to its customers. Disruptions to these assets could have dire
consequences for the Group.
Information Security Risk Mitigating Strategies
Continued risk evaluation using proven risk assessment methodology that identifies key risk
areas and prescribes the necessary controls to reduce these risks to an acceptable level;
Documenting and standardising the processes within the Group while building appropriate
controls into them;
Classifying all information assets with appropriate priorities, assigning ownership and making
sure all assets are handled in line with the documented handling procedures;
Group-wide security risk assessment carried out by an independent security assessment
company to determine the security risk posture of the Group and recommend appropriate
safeguards to its information assets;
RISK MANAGEMENT
58
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Developing a Group-wide awareness program and making information security the
responsibility of all sta; and
Aligning the Group’s processes to international standards and best practices such as the ISO
27001 and PCI DSS.
Responsibility
The primary responsibility for the security of the Group’s information assets and applicable
legislations lies with members of sta, while the Board and the Management have the overall
responsibility to ensure that all information assets within the Group are adequately protected.
SUSTAINABILITY RISKS
The risk that financial services provided to customers by the Group indirectly, result in
unacceptable impacts on people or the environment.
Potential Impacts on Business
This could damage the reputation of the Group’s business across all lines and result in regulatory
sanction. The long-term sustainability of the business is paramount in assessing the impact of
this risk while providing financial services to companies or projects.
Sustainability Risk Mitigating Strategies
At FBNHoldings, the operating entities ensure that sustainability risk is reduced to its barest
minimum by:
Measuring and assessing the potential environmental impact of a customer’s activities and
assigning a sustainability risk rating to all high-risk transactions;
Monitoring on a quarterly basis by the Group Risk Management team and monthly by the
operating companies; and
Sustainability Risk Management, using risk policies, covering project finance lending
and sector-based sustainability policies for sectors and themes with potentially large
environmental or social impacts.
LEGAL AND REGULATORY COMPLIANCE RISK
Regulatory Compliance
The regulatory compliance programme is designed to promote compliance with regulatory
obligations in all the environments we operate and to assist in making the operating entities
aware of the laws and regulations that aect the Group as well as the risks associated with
failing to comply. Underlying causes of regulatory compliance risk can be one or more of the
following:
RISK MANAGEMENT
59
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Lack of understanding of laws and regulations;
Misinterpretation of their meaning;
Lack of awareness of the regulatory change;
Failure to communicate changes to all interested parties;
Inadequate controls to ensure requirements are met; and
Failure to monitor procedural eectiveness.
Potential Impacts on Business
The impact of this risk category on the Group ranges from financial loss arising from fines and
penalties, loss of revenue due to temporary suspension or bans from certain market activities,
possible loss in share price and negative investors’ perception occasioned by disclosure of
regulatory infractions in our annual report and withdrawal of license.
Regulatory and Compliance Risk Mitigating Strategies
Fully-fledged compliance team to drive and implement the Group’s compliance framework;
Eective monitoring of the Group’s compliance with laws and regulations, its code of
conduct and corporate governance practices;
Process for ensuring new and changed legal and regulatory requirements are identified,
monitored and reflected in the Group’s process and rule book;
Ensure regulatory requirements are incorporated in the operational procedures manual
where appropriate;
Prompt submission of regulatory reports; and
Sound corporate governance practices and setting the right tone at the top with regards to
regulatory issues.
LEGAL RISKS
Legal risk stems from the contractual agreements that financial services firms undertake. These
consists of the risk that loan agreement may not be enforceable under the relevant law and
that the nature of the product/services may render the financial services company exposed to
litigation. This risk could also emanate when governments suddenly amend laws in a way that
negatively aects an investor’s position. Legal risk could also occur through lawsuits or adverse
court judgements that can disrupt or negatively aect the conditions of the business entity.
RISK MANAGEMENT
60
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Potential Impacts on Business
Increased costs, loss of revenue, abuse or loss of intellectual property, distraction, negative brand
equity, strained relationships with customers, employees, service providers, investors, regulators,
other stakeholders and possible disruption of business activities.
Legal Risk Mitigating Strategies
Consistent application of professional standards;
Transparency and fairness while transacting;
Bespoke documentation and clarity to reduce areas of possible conflict;
Availability of a dependable record retention system;
Protection of intellectual property through licensing; and
Engagement of an external counsel with proven competence in the prosecution of the
Group’s claims against third parties and in the conduct of the Group’s defence as well as
exploring alternative dispute resolution mechanisms, among others.
COLLATERAL COVER RISKS
The risk of loss arising from errors in the nature, quantity, pricing, or characteristics of collateral
securing a transaction with credit risk. As an institution that actively accepts and delivers
collateral, the Group is faced with collateral risk when it is unable to manage the process
accurately and therefore susceptible to loss.
Potential Impacts on Business
Loss of revenues, weak legal position in recovery eorts, increase in litigations and an attendant
negative impact.
Collateral Cover Risk Mitigating Strategies
Thorough and experienced credit proposal reviews;
Use of independent experts for asset valuations;
Conducting due diligence on security of assets;
Watertight and legally defensible documentation to protect the Group’s security interest;
Use of result-oriented solicitors for end-to-end perfection exercises; and
Eective and proactive monitoring of credit.
RISK MANAGEMENT
61
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
REPUTATIONAL RISK
The risk that an organisation’s reputation may be damaged by one or more reputational events
from negative publicity about the organisation’s business practices, conduct or financial condition.
It arises when such reputational event has the potential to materially influence the public and
stakeholders’ perceived trust and confidence in an institution. It may also be seen in a broader
sense as falling short of the expectations of an organisation’s stakeholders.
Reputational risk may result from many of the Group’s activities, including those related to the
management of our strategic, operational, compliance and credit risks.
The Group manages reputational risk through established policies and controls in its businesses
and risk management processes to mitigate reputational risks in a timely manner and through
proactive monitoring and identification of potential reputational risk events.
The Group ensures processes and procedures are in place to respond to events that give
rise to reputational risk, including educating individuals and organisations that influence public
opinion, implementing external communication strategies to mitigate the risk, and informing key
stakeholders of potential reputational risks. The Group’s organisation and governance structure
provide oversight of reputational risks, and reputational risk reporting is provided regularly and
directly to Business Risk and Compliance Committee and Management.
Potential Impacts on Business
Negative publicity
Loss of revenue
Litigation
Loss of customers
Exit of key employees
Share price decline
Diculty in recruiting talent
Loss of correspondent banking relationships
Loss of investor community confidence
Significant financial loss.
RISK MANAGEMENT
62
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Reputational Risk Mitigating Strategies
Maintaining timely and ecient communication among shareholders, customers, Board of
Directors and employees;
Establishing strong enterprise risk management policies and procedures throughout the
organisation, including an eective anti-fraud program;
Reinforcing a risk management culture by creating awareness throughout the organisation;
Responding promptly and accurately to the bank regulators, oversight professionals such as
internal and external auditors, and law enforcement agencies; and
Establishing a crisis management team in the event of a significant action that may trigger
a negative impact on the organisation.
Responsibility
The Group Managing Director and the Executive Committee are ultimately responsible for our
reputation; however, our employees and representatives are responsible for conducting their
business activities in a manner that upholds our reputation. This responsibility is executed
through an enterprise-wide reputation risk policy that specifies the oversight responsibilities of
the Board of Directors and the responsibilities of the Executive Management, communication to
and education of all Directors, ocers, employees and representatives, including our Code of
Business Conduct and Ethics, and application of guiding principles in conducting all our business
activities.
INSURANCE RISK
The risk of loss due to actual experience being dierent from that assumed when an insurance
product was designed and priced. The unpredictability that can arise from assuming long-term
policy liabilities or from the uncertainty of future events. Insurance risk exists in all our insurance
businesses, including annuities and life, accident and sickness and creditor insurance as well as
our reinsurance business.
Insurance risk consists of:
Claims risk – the risk that the actual magnitude or frequency of claims will dier from
the levels assumed in the pricing or underwriting process. Claims risk includes mortality risk,
morbidity risk, longevity risk and catastrophe risk.
Policyholder behaviour risk – the risk that the behaviour of Policyholders relating to
premium payments, withdrawals or loans, policy lapses and surrenders and other voluntary
terminations will dier from the behaviour assumed in the pricing calculations.
Expense risk – the risk that actual expenses associated with acquiring and administering
policies and claims processing will exceed the expected expenses assumed in pricing
calculations.
RISK MANAGEMENT
63
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Reinsurance risk - This is the risk of inadequate reinsurance cover which may be triggered
by a situation such as the insolvency of a reinsurer, discoveries of exposures without current
reinsurance coverage, or exhaustion of reinsurance covers through multiple losses. The
Company has documented reinsurance policies for adequate reinsurance arrangements and
treaties for all categories of insurance business transacted. The policies include the process
for reinsurer selection, monitoring, claims recovery, etc.
Underwriting risk - This is the risk of loss borne by an underwriter and refers to the risk
of loss from underwriting activity. This may arise from an inaccurate assessment of the risks
associated with writing an insurance policy or from uncontrollable factors.
Potential Impacts on Business
Financial loss due to the variation of actual claim from budgeted, possibly leading to impairment
of shareholders’ funds.
Insurance Risk Mitigating Strategies
A robust product approval process is a cornerstone for identifying, assessing and mitigating
risks associated with new insurance products or changes to existing products;
This process, combined with guidelines and practices for underwriting and claims
management, promotes the eective identification, measurement and management of
insurance risk; and
Reinsurance, which involves transactions that transfer insurance risk to independent
reinsurance companies, is also used to manage our exposure to insurance risk by diversifying
risk and limiting claims.
RISK MANAGEMENT
64
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FOCUS AREAS AND RISK INITIATIVES IN 2019
Monitoring the significance of several events, including: regulatory policy and political changes in Nigeria
and across subsidiaries, activities of rating agencies with regards to the Nigerian sovereign rating and those
of its subsidiaries, volatile macroeconomic environment in key financial markets, entrenching qualitative and
quantitative risk appetite across the Group;
The Group will continue to manage trading and non-trading market exposures within overall Group risk
appetite and tolerance level to aptly protect the Bank’s shareholders’ wealth. Utmost attention will be paid to
monitoring and managing market risk factors in the context of current market volatility, including monetary
policy decisions;
The Group is poised to proactively forecasting the fusion between Basel II/III standard and IFRS9 in the
areas of measurement and disclosure. The risk team is in good stead to take advantage of various regulatory
provisions to improve on current level of risk management oerings, optimise the current level and
composition of capital with due consideration to current and future business plans;
Eectively allocating resources, including capital and liquidity between product lines, trading desks, industry
sectors and legal entities to enhance the overall Group economic profit and return on equity;
Increasing the attention on mitigating ongoing portfolio risks related to variable crude oil prices, foreign
currency liquidity concerns and political volatility;
Driving ecient cost management system through robust Group shared service programme;
Continue to apply appropriate and responsible lending criteria and focus on risk appetite always to ensure
prudent lending prevails;
Managing exposure concentrations across counterparties, portfolios, products, industries and regions;
Continue to enhance the credit risk governance framework that underpins the Group’s credit risk appetite;
Continue to diversify the Group’s funding base across local and foreign currencies with a view to minimising
funding costs for the Group;
Current and emerging cybercrime and cybersecurity threats will receive increased focus through continued
improvement of people, process and system vulnerabilities, including increased internal and third-party
attention. This will enable the proactive deployment of resources to better manage cyber threats and crimes
and allow for protection of our information assets;
The Group’s insurance programme will continue to evolve to ensure coverage for emerging cyber-related
risks; and
Focus on Risk-Adjusted Performance Measurement to maximise shareholder value by optimally managing
financial resources within the Board-approved risk appetite.
RISK MANAGEMENT
65
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
COMPLAINTS HANDLING
Service Improvement Initiatives
As a Customer-Centric organisation, providing world class customer experience remains our core focus.
Several initiatives have been deployed to improve the service experience of our customers and position
the Group as the undisputed leader in the industry. Some of the initiatives are:
Customer Value Proposition project (CVP)
The objective of the CVP project is to develop a
better understanding of the Bank’s customers towards
providing targeted, personalised and dierentiated
customer experience.
Branch Remodeling
The objective of the Branch remodelling exercise is
to improve the look and feel of our branches. This
will portray the Bank as a New Generation Bank
with structural designs that appeal to all customer
segments.
Executive Branch Visit
With this initiative, Senior Executives of the Bank visit
carefully selected branches across the country on a
2-day work trip during which the Executives work with
the branch sta, interact with customers, and address
issues relating to customer experience in the Bank.
Client Services Team Model (CST)
A CST is a client-centric multi-functional team
delegated with the authority to make decisions on how
to serve the client. The Bank is adopting this model to
serve its wholesale customers.
ATM Service Improvement
An ATM service review committee was set up
to address all issues relating to ATM service and
performance. Upon completion, this would position the
Bank as the undisputed number one in ATM service and
performance.
Customer Complaints Management
In 2018, the primary focus of the Customer Complaints
Management team were:
Improved visibility of customer complaints
Ensure customer’s accessibility across our channels
Improved visibility of customer complaints
In line with our commitment, the Customer Experience
and Complaints Management team made sure customer
experience on all channels were adequately captured across
all segments, prior to this, the focus was on Retail Banking
segment alone. As part of the initiatives, the new Customer
Relationship Management tool known as CRM 365 was
developed and deployed to increase the Bank’s visualisation
of customer experience from the Corporate and Commercial
segments. The CRM 365 will significantly improve the
complaints turn-around time and ensure optimal complaint
tracking process is achieved.
In keeping with current trend of customers’ increased
preference for electronic channels in processing transactions,
the Bank and its customers are susceptible to risk of fraud
through social engineering and manipulation. To mitigate
this risk, the Bank’s transaction monitoring capacity on
mobile banking platforms have been upgraded, in line
with the regulatory requirements. This has resulted in a
substantial decline in reported fraud cases.
Customer’s accessibility across channels
To improve customers’ service experience across channels,
a number of stakeholders were contacted to promote
the adoption of the online complaints portal attached to
the Online Banking platform. This is to make sure that
complaints are promptly transmitted to early responders,
who will resolve the problems. The deployment of the
CRM 365 facilitates a mobile complaint response and
resolution process using the FirstMobile platform. This is
part of the improvement adopted by the Bank in line with
ISO 9001:2015 certification guidance for which the Bank
was evaluated between September 2nd and 7th, 2018.
The Bank achieved recertification and its license has been
renewed for another year.
66
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
CONSUMER COMPLAINTS RECEIVED IN 2018
DESCRIPTION
Pending complaints brought forward
Received complaints
Resolved complaints
Unresolved complaints escalated to
CBN for intervention
Unresolved complaints pending with
the Bank carried forward
S/N
1
2
3
4
5
Amount Refunded (N)
2018 2017
126,758,709.00 108,735,478.80
5,266,502,554.53 7,092,749,481.61
5,393,261,263.53 7,201,484,960.41
- -
- -
Amount Claimed (N)
2018 2017
4,557,205,949.16 139,739,723.80
30,968,320,673.42 45,563,075,066.83
33,755,455,126.27 41,145,608,841.48
- -
1,770,071,496.31 4,557,205,949.16
Number of Complaints
2018 2017
11,627 9,981
652,301 437,522
644,499 435,876
- -
19,429 11,627
COMPLAINTS HANDLING
67
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Performance Summary >> 68 Group Performance >> 69 Performance by Business Groups >> 73
FINANCIAL REVIEW
This section provides an overview of the Group’s 2018 performance.
68
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
* Commercial Banking group
**others represents -3.8% contribution
PERFORMANCE SUMMARY
COMMERCIAL BANKING
The Group’s core business is providing
financial services to individuals,
corporate and public sector customers.
This business segment includes
the Group’s local, international
and representative oces oering
commercial banking services.
FBN Holdings Plc is the most diversified financial services group in Nigeria. The Holding Company maintains
a robust balance sheet size of N5,568.3bn, a 6.3% growth from N5,236.5bn in 2017.
68.1%
MERCHANT BANKING
AND ASSET MANAGEMENT
The Group’s key businesses comprise
Corporate Banking, Investment Banking,
Wealth Management and Fixed Income
Securities Trading; as well as its subsidiary
businesses; Asset Management and
Equity Brokerage. The Group serves a
diverse customer base of corporates,
banks, public institutions, institutional
investors and high networth individuals.
26.3%
INSURANCE
This Group oers life, general
insurance and insurance brokerage
services.
OTHERS**
9.4%
100%
FBN Holdings Plc is a leading diversified financial services group in Middle Africa
oering broad range of products and services across commercial banking in 10
countries (Lagos, Nigeria; London, United Kingdom; Paris, France; Beijing, China;
Kinshasa, Democratic Republic of Congo, Accra, Ghana; Banjul, Gambia, Conakry,
Guinea, Freetown, Sierra Leone and Dakar, Senegal), merchant banking and asset
management as well as insurance. The Group, with over 15.7 million* customer
accounts, has 888 business locations (615 local branches, 143 quick service
points and agencies for FirstBank (Nigeria) and 130 (local and international)
subsidiary locations).
Percentages
represent
contribution to profit
before tax in 2018
69
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP PERFORMANCE
INTRODUCTION
Over the course of the 2017–2019 strategic cycle, the
priority for the Management has been to strengthen the
various businesses across the Group and position for
sustainable growth over the long-term. Our three-pronged
approach has primarily been to drive long-term revenue
generation capabilities, overhaul risk management processes
and drive eciency across our businesses.
We have seen significant results in our revenue
diversification aspiration, with improving digital banking
oerings which have enhanced our non-interest income
from the Commercial Banking group. Similarly, there has
been steady growth in contribution to the revenue pool of
the Group from the Insurance business and the Merchant
Banking business, helping to further reinforce the revenue
generation capacity of the Group.
The revamp of our risk management architecture, which is
one of the key enablers to our shareholder value creation
aspiration, will ensure our revenue generating capacity
translates to stronger growth in profitability now that we
have materially progressed in resolving the legacy issues as
evidenced by the full provision for the largest non-performing
loan in our loan book.
In addition, we have focused on driving operational
eciencies across the Group by leveraging technology,
improving processes and increasing synergies across various
entities.
Finally, in 2019, we expect growth in interest income
to complement our growing non-interest revenue as
we undertake guided expansion of the loan book which
contracted in the last two financial years.
GROUP FINANCIAL REVIEW
Income Statement
Gross earnings amounted to N583.5bn (2017: N595.4bn),
representing a marginal drop of 2.0% year-on-year. This was
due to a 7.5% decline in interest income on the back of a
decrease in the loan book as well as the depressed yield
environment which led to a decline in income from investment
securities. However, the drop in gross earnings was partially
oset by the 15.8%* year-on-year growth in non-interest
income. Interest income and non-interest income contributed
74.5% and 22.6%** (2017: 78.9% and 19.1%) respectively
to gross earnings.
Net-interest income decreased by 14.3% year-on-year to
N284.2bn (2017: N331.5bn) largely on account of the
contraction in the loan book and the decline in investment
securities’ income, which were in part mitigated by
an increase in income from loan to banks. Income from
customer loans declined by 9.1% year-on-year to N262.4bn
(2017: N288.6bn). Investment securities’ income declined
by 13.0% year-on-year to N150.8bn (2017: N173.3bn).
Income from loan to banks was up 174.4% year-on-year to
N21.2bn (2017: N7.7bn). Income from customer loans and
income from investment securities accounted for 60.4%
and 34.7% of total interest income in 2018 respectively,
compared to 61.5% and 36.9% in 2017. Interest expense
however, increased by 8.8% year-on-year to N150.2bn
(2017: N138.1bn) largely driven by 7.6% year-on-year
increase in interest on customer deposits resulting from
10.9% year-on-year growth in deposits from customers.
Cost of funds remained flat at 3.4% (2017: 3.4%),
primarily on the back of the improvement in the Group’s
funding mix evidenced by the 18.7% year-on-year growth
in low-cost deposits which now account for 77% of total
deposits (2017: 72%). We have remained focused on
keeping our cost of funds low despite the tight liquidity
and competition in the market.
*Growth is 12.4% excluding foreign exchange revaluation gains
**Net of fees and commission expense
1
Non-interest income here is gross and does not account for fee and commission expense
GROSS EARNINGS BREAKDOWN (Nbn)
1
FY 189M 18H1 18Q1 18FY 17
26%
74%
24%
76%
N583
N442
23%
77%
N293
20%
80%
N139
21%
79%
N595
Interest
Income
Non-Interest
Income
-2.0%
y-o-y
70
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP PERFORMANCE
On the other hand, yields declined during the year.
Accordingly, average yields on customer loans closed at
13.2% (2017: 14.1%) while yields on investment securities
declined to 10.1% (2017: 13.4%). Overall, the blended yield
on interest earning assets declined to 11.4% from 11.9% in
the previous year resulting in net interest margin declining
to 7.5% (2017: 8.4%).
Non-interest income (NII) increased by 15.8% year-on-year
to N131.7bn from N113.7bn in the prior year, driven by the
24.5% year-on-year growth in fees and commission income
to N92.7bn (2017: N74.5bn) on the back of growing
contribution from digital banking channels. Furthermore, as a
result of increased foreign currency volatility, foreign exchange
income increased by 55.0% to N32.6bn (2017: N21.1bn)
representing 24.8% of non-interest income against 18.5% in
the prior year. Excluding foreign exchange revaluation gains,
NII increased by 12.4% demonstrating the sustainability of our
non-interest revenue streams.
The contribution of fees and commission (F&C) income to
total non-interest income further increased from 65.5% in
the previous year to 70.4%. The key drivers of F&C remained
electronic banking fees and account maintenance fees which
grew by 36.2% year-on-year and 84.4% year-on-year to
N34.0bn (2017: N25.0bn) and N12.3bn (2017: N6.7bn)
respectively. In addition, brokerage and intermediation fees
recorded a marked 665.9% year-on-year growth to N11.9bn
(2017: N1.6bn). Other drivers include: 7.6% year-on-year
growth in custodian fees to N6.4bn (2017: N6.0bn); 51.4%
year-on-year increase in fund management fees to N3.0bn
(2017: N2.0bn); as well as 48.8% year-on-year growth
in other fees and commissions income to N3.9bn (2017:
N2.6bn). The improvement in F&C was partly oset by the
combined eect of a 28.9% year-on-year decline in letters
of credit commission and fees to N4.3bn (2017: N6.0bn),
34.2% year-on-year decline in money transfer commission
to N2.4bn (2017: N3.6bn) as well as 67.5% year-on-year
decline in credit related fees to N2.4bn (2017: N7.4bn).
Operating expenses increased by 9.7% year-on-year to
N263.7bn (2017: N240.3bn) but remained below the
headline inflation rate of 11.4%. Sta related costs (35.4%)
and regulatory cost (13.3%) jointly accounted for about half
of operating expenses. While sta cost increased by 9.0%
year-on-year following employee rejuvenation initiatives to
drive increased productivity, regulatory costs grew by 3.9%
year-on-year due to the 6.2% year-on-year increase in
total asset of the commercial bank in 2017. Other cost
drivers can be attributed to inflationary pressures as well
as the Group’s ongoing transformation related expenses
expected to enhance revenue generating capacity, improve
operational eciencies and enhance risk governance.
The Group remains focused on growing its non-interest income
as shown in the improving contribution of the non-commercial
banking business to the Group revenue and profitability. This
has been driven by increasing synergies and collaboration
across our businesses. During the year, net insurance premium
increased by 51.9% to N15.5bn (2017: N10.2bn), representing
11.8% contribution to non-interest revenue from 9.0% in 2017.
In addition, the Commercial Banking business continues to
deepen the strategic push of increasing the transaction-based
revenue through innovations and continuous digitalisation of
financial products and services to better serve the customers.
NET INTEREST MARGIN DRIVERS
FY 189M 18H1 18Q1 18FY 17
3.4%
11.4%
7.5%
3.6%
11.7%
7.7%
3.5%
10.7%
7.1%
3.3%
10.5%
7.2%
3.4%
11.9%
8.4%
Cost of funds
Net interest margin (NIM)Asset yield
NON-INTEREST INCOME (NII) BREAKDOWN (Nbn)
FY 189M 18H1 18Q1 18FY 17
N132N93N61 N25
0%
8%
3%
30%
11%
4%
13%
30%
12%
16%
3%
24%
10%
4%
10%
21%
3%
23%
3%
22%
12%
4%
14%
19%
N114
Foreign
exchange
Insurance
premium
e-business Other
income
3
18%
16%
5%
22%
6%
6%
9%
19%
6%
18%
2%
26%
9%
2%
12%
25%
Credit
related fee
Financial
advisory
Account
maintenance
Other fees and
commission
2
COST GROWTH & INFLATION RATE | FBNHOLDINGS
Cost Growth
Inflation
11.4%
15.4%
18.6%
9.6%
2015 2016 2017 2018
(6.0)
(0.8)
8.8 9.7
71
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Cost-to-income ratio closed at 63.4% (Dec 2017: 54.0%).
The weakened ratio is essentially driven by the constrained
operating income from the moderated lending and the
declining yield environment even as operating expenses
remain below inflation. Notwithstanding the current position,
we remain optimistic on further enhancing our eciencies
in the near term, as we begin to derive the benefits of our
investments in people, processes, innovation, technology
and synergies.
Impairment charge for losses declined by 42.2% year-on-year
to N86.9bn (2017: N150.4bn) as we continue to focus on
remediation and recovery activities towards improving asset
quality. Consequently, cost of credit risk decreased to 3.5%
(2017: 6.4%). We remain committed to materially resolving
legacy non-performing loans and achieving a single digit NPL
ratio in the current financial year.
Profit before tax increased by 19.7% year-on-year to
N65.3bn (2017: N54.5bn). Income tax expense for the year
was N5.5bn (2017: N9.0bn). Earnings per share increased
by 43.5% year-on-year to N1.65 (Dec 2017: N1.15).
GROUP PERFORMANCE
COST OF CREDIT RISK RATIO | FBNHOLDINGS
FY 189M 18H1 18Q1 18FY 17
3.5%
4.5%
4.7%
4.5%
6.4%
Statement of Financial Position
Total assets increased by 6.3% year-on-year to N5.6tn (Dec
2017: N5.2tn) driven by 33.3% year-on-year increase in
investment securities to N1.7tn (Dec 2017: N1.2tn). Loan to
banks and customers and investment securities constitute
76% of total assets (Dec 2017: 76%).
Total customer deposits grew by 10.9% year-on-year to
N3.49tn (Dec 2017: N3.14tn). The growth in deposits was
driven by a 21.8% year-on-year and 15.9% year-on-year
increase in current and savings accounts to N915.3bn
(Dec 2017: N751.3bn) and N1.2tn (Dec 2017: N1.0tn)
respectively. In addition, domiciliary deposits grew by
20.6% year-on-year to N583.5bn (Dec 2017: N484.0bn).
The continued healthy growth in the face of heightened
competition underscores the confidence reposed in the Group
by the public, the strength of our franchise as a time-tested
financial institution. As a result, the ratio of the low-cost
deposit to total deposits has further improved from 72.0%
in 2017 to 77.0% at the Group and from 82.9% to 85.0%
at FirstBank Nigeria respectively. Furthermore, core current
and savings deposits are now 77.8% and 88.8% from 68.2%
and 80.7% respectively in 2017, indicating the relative stable
nature of these deposits.
INCOME STATEMENT EVOLUTION
72
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP PERFORMANCE
Benefiting from our strong franchise, we are increasing the
number of customers across our businesses with customers’
accounts at FirstBank currently at 15.7 million from 14.7
million in the prior year. We expect to continuously increase
the number of customers leveraging on our Agency Banking
network now located across the country. The retail business,
with over 95% of total customer accounts in the books,
generates approximately 67% of deposit base, and continues
to provide very stable funding.
Total loans and advances to customers (net) declined by
15.9% year-on-year to N1.7tn (Dec 2017: N2.0tn). This is
reflective of the weak macroeconomic environment that does
not support aggressive risk asset creation. Nevertheless, the
Group will fulfil its commitment to balance sheet growth
and materially reduce its NPLs in the current financial year.
As a testament to keeping the financial position of our
business strong, we have made appreciable provisions with
coverage ratio at 78.3% (Dec 2017: 61.9%). Moreover, at
the end of the year, our biggest challenged exposure, was
fully provisioned.
Shareholders’ Funds closed at N530.6bn (Dec 2017:
N673.7bn), this was on the back of the implementation of
IFRS 9. However, while statutory reserve, foreign currency
translation reserve and contingency reserve were up by
11.0%, 1.8% and 60.8% respectively to N93.3bn (Dec 2017:
N84.1bn), N49.0bn (Dec 2017: N48.1bn) and N2.0bn (Dec
2017: N1.3bn), statutory credit reserve was down to N33.6bn
from N42.8bn in the prior year.
Capital adequacy ratio for FirstBank (Nigeria) remains strong
at 17.3% (Dec 2017: 17.7%), 230bps above the regulatory
minimum of 15%, while the capital adequacy ratio for FBN
Merchant Bank closed at 12.2% (Dec 2017: 13.5%) above
the 10% regulatory requirement for Merchant Banks.
Liquidity ratio for FirstBank (Nigeria) remains healthy at
45.2% (Dec 2017: 49.3%) above the 30% regulatory mark.
DEPOSITS BY TYPE in Nbn
FY 189M 18H1 18Q1 18FY 17
17%
23%
34%
27%
14%
29%
32%
25%
N3,487 N3,384
17%
29%
34%
20%
N3,120
15%
32%
32%
21%
N3,246
15%
28%
33%
24%
N3,143
Current
accounts
Term
deposits
Savings
accounts
Domiciliary
accounts
LOANS AND ADVANCES BY SECTOR : FirstBank
1
Government loans are loans to the public sector (federal and state)
2
Represents loans in our retail portfolio < N 50mn
3
Finance and Insurance, capital market, residential mortgage;
4
General includes personal & professional, hotel & leisure, logistics and religious bodies
(FY17: N1,837.5bn)
BALANCE SHEET EFFICIENCY
FY 18
59.3%
45.2%
10.5
9M 18
65.9%
42.2%
7.7
H1 18
67.0%
55.0%
8.0
Q1 18
67.3%
Leverage (times) Gross loans to deposits Liquidity (FirstBank -Nigeria)
54.8%
8.1
FY 17
72.5%
49.3%
7.7
73
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
PERFORMANCE BY BUSINESS GROUPS
The performance of the Commercial Banking group in 2018
reflects its strong franchise that helped navigate the tough
operating market conditions.
The Bank remains focused on enhancing revenue generation
capacity by leveraging new technologies and platforms,
improving operational eciencies and enhancing the Bank’s
risk management framework to deal with asset quality
challenges. The Bank has intensified eorts to grow the
business by driving customer acquisition and promoting
a full digital and transaction banking oering which has
resulted in steady increase in non-interest revenues. In
addition, the Commercial Banking group has continued to
rejuvenate its workforce to ensure it is a hub of talents
towards increasing overall productivity and remaining
Nigeria’s bank of first choice. Furthermore, several initiatives
have been implemented across the businesses in line with
the enterprise transformation program which will enable the
Bank to deepen market penetration in the markets where
it operates.
FirstBank (Nigeria) contributed 86.4% to the Group’s
earnings of N514.8bn, a 129-basis points reduction
from the prior year. Profit before tax increased by
16.5% year-on-year to N58.2bn due to the 9% growth
in non-interest income. Customer deposits grew by
13.4% to N3.03tn while loans to customers declined by
12.5% year-on-year to N1.45tn (Dec 2017: N 1.66tn).
In 2019, our focus is on optimising yields from risk assets
as we take advantage of growth opportunities in key sectors
of the economy whilst resolving asset quality challenges. We
are confident that the risk management structures which we
have put in place will enable us to increase recoveries and
reduce loan losses. Importantly and in line with guidance,
the Bank has fully provisioned the largest NPL and on course
to a logical conclusion. Consequently, we have enhanced
capital absorbing capacity and will continue to build strong
capital buers through earnings retention to meet any
business risks across the commercial banking group.
Below are the performance highlights of the Commercial
Banking group:
Gross earnings of N514.8bn, down 4.9% year-on-year
(2017: N541.6bn)
Net interest income of N268. 0bn, down 16.2%
year-on-year (2017: N319.7bn)
Non-interest income of N95.7bn, up 8.5% year-on-year
(2017: N88.2bn)
Operating expenses of N231.8bn, up 9.4% year-on-year
(2017: N211.8bn)
Profit before tax of N40.1bn, down 26.9% year-on-year
(2017: N54.8bn)
Profit after tax of N40.3bn, down 18.1% year-on-year
(2017: N49.2bn)
Total assets of N5.3tn, up 5.8% year-on-year
(Dec 2017: N5.0tn)
Customers’ loans and advances (net) of N1.71tn, down
15.7% year-on-year (Dec 2017: N2.03tn)
Customers’ deposits of N3.4tn, up 10.7% year-on-year
(Dec 2017: N3.1tn)
The Commercial Banking business contributed 88.2% (Dec
2017: 90.1%) to gross earnings of the Group and 68.1%
(Dec 2017: 76.7%) to its profit before tax.
The operating environment in 2018 was particularly
COMMERCIAL BANKING
EVOLUTION OF GROSS EARNINGS : CBG
FY 15 FY 16 FY 17 FY 18
N483.4bn
N535.5bn
N541.5bn
N514.8bn
CAGR: 1.6%
74
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
challenging for our business. The year was characterised by
contracting spreads in the fixed income market, a sluggish
equity/M&A market and a fairly stable foreign exchange
environment. With fewer transactions, the competitive
landscape also became more intense.
Nonetheless, the MBAM Business group maintained
profitability and recorded steady growth in certain business
lines. This again demonstrates the resilient and diversified
nature of the business portfolio. The main contributors
to the fairly strong financial performance were the Asset
Management, Corporate Banking, Trustees and Fixed
Income, Currencies and Trading (FICT) businesses.
Total revenue increased by 16.0% year-on-year to N45.3bn
from N39.0bn in 2017, while profit before tax grew by
55.0% year-on-year to N16.3bn from N10.5bn in 2017.
Assets under management (AuM) across the Group
(FBNQuest Asset Management and FBNQuest Trustees)
increased by 5.0% to close at N261bn (2017: N248.5bn).
The Asset Management business has remained strong in the
competitive ranking amongst its peers, based on Securities and
Exchange Commission (SEC) registered funds, maintaining
the 2nd position in the industry, same as the prior year.
Overall, total assets closed at N218.6bn, representing a 0.8%
year-on-year increase (2017: N216.9bn). The businesses in
the Group remain well capitalised with total group equity of
N44.0bn, while the capital adequacy of the Merchant Bank
stands at 12.2%, above the regulatory requirement of 10%.
In 2019, we will continue to look for ways of creating
more value for our customers. In achieving this objective,
we will focus on our strategic goals of increasing group
collaboration and enhancing revenue generation across all
businesses, improving eciencies as well as deepening
innovation and digitisation to enhance the client experience.
Below are the performance highlights of the Merchant Banking
and Asset Management group:
Gross earnings increased by 16% year-on-year to
N45.3bn (Dec 2017: N39.0bn)
Operating income of N28.7bn, up 29.2% year-on-year
(Dec 2017: N22.2bn)
Operating expenses of N13.4bn, up 16.9 % year-on-year
(Dec 2017: N11.5bn)
Profit before tax of N16.3bn, up 55.0% year-on-year
(Dec 2017: N10.5bn)
Profit after tax of N11.5bn, up 40.9% year-on-year
(Dec 2017: N8.2bn)
Total assets of N218.6bn, up 0.8% year-on-year
(Dec 2017: N216.9bn)
Customer’ loans and advances (net) of N35.6bn, down
9.4% year-on-year (Dec 2017: N39.2bn)
Customer’ deposits of N127.3bn, up 10.8% year-on-year
(Dec 2017: N114.8bn)
The Merchant Banking and Asset Management business
contributed 7.7% (Dec 2017: 6.5%) to gross earnings
of the Group and 26.3% (Dec 2017: 19.2%) to its profit
before tax.
The Insurance business sustained its steady growth
MERCHANT BANKING AND ASSET MANAGEMENT MBAM
PERFORMANCE BY BUSINESS GROUPS
EVOLUTION OF GROSS EARNINGS : MBAM
FY 15 FY 16 FY 17 FY 18
N35,508.0bn
N37,663.0bn
N39,028.0bn
N45,258.6bn
CAGR: 6.3%
75
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
trajectory across the dierent segments despite prevailing
macroeconomic headwinds. The performance was driven by
further deepening customer engagements, growing business
activities and generating improved income from eective
investment portfolio mix. The retail business continues to
generate the highest contribution to revenue followed by
the growing Annuity business and the non-life business.
To further increase the insurance penetration and enhance
revenue as well as profitability, the life business scaled up its
direct distribution through the agency network.
Consequently, Gross Premium Written (GPW) increased by
32.5% year-on-year to close at N30.6bn (2017: N23.1bn). On
the back of this, the Insurance business further reinforced its
leadership position as one of the fastest growing underwriting
businesses in Nigeria with a Compounded Annual Growth
Rate (CAGR) of 26.1% in GPW over the last four years. Total
revenue of the Insurance business group increased by 21.0%
year-on-year to N22.7bn (2017: N18.7bn), while profit before
tax rose by 44.4% year-on-year to N6.8bn (2017: N4.7bn).
The Business group’s total assets increased by 49.8%
year-on-year to N76.6bn (2017: N51.1bn).
During the period under review, the Insurance group
continued to deepen its underwriting capabilities working
with our Partner, Sanlam Emerging Market. As a result,
the Insurance group witnessed significant improvement in
underwriting results and achieved greater cost eciency as
well as impressive growth across product lines.
The key sectors driving the growth of the Insurance group
remain the retail, corporate and annuity businesses. We
are confident of our ability to sustain this growth in 2019
as we continue to enhance revenue generation across
all segments, deepen customer engagement, improve
operational eciency and build a competent workforce.
Below are the performance highlights of the Insurance
group:
Gross premium written of N30.6bn, up 32.5%
year-on-year (Dec 2017: N23.1bn)
Operating income of N21.8bn, up 21.5% year-on-year
(Dec 2017: N17.9bn)
Operating expenses of N14.9bn, up 13.5% year-on-year
(Dec 2017: N13.1bn)
Profit before tax of N6.8bn, up 44.4% year-on-year
(Dec 2017: N4.7bn)
Profit after tax of N6.0bn, up 59.1% year-on-year
(Dec 2017: N3.7bn)
Total assets of N76.6bn, up 49.8% year-to-year
(Dec 2017: N51.1bn)
The Insurance business contributed 3.8% (2017: 3.1%) to
the Group’s gross earnings and 9.4% (2017: 7.9%) to its
profit before tax.
INSURANCE
PERFORMANCE BY BUSINESS GROUPS
EVOLUTION OF GROSS PREMIUM : INSURANCE GROUP
FY 15 FY 16 FY 17 FY 18
N12,118.0bn N12,103.0bn
N23.097.0bn
N30,611.4bn
CAGR: 26.1%
76
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Our Social Commitment >> 78 Standards and Codes >> 89 Stakeholder Engagement >>96
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
Our corporate responsibility and sustainability approach is designed to deliver
value to our stakeholders.
77
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
INTRODUCTION
Corporate Responsibility and Sustainability (CR&S) involves meeting the needs of our current stakeholders
now and in the future. It goes beyond financing economic activity in a responsible way to ensuring an
inclusive, positive impact on our communities. It is about creating long-term stakeholder value by adopting
the opportunities and managing the associated environmental, social and governance risks. Corporate
Responsibility and Sustainability is not bolted on to our corporate strategy, it is embedded in our business
strategy and our daily operations.
Our CR&S approach is three-pronged: citizenship, stakeholder
management and impact management. Citizenship and
stakeholder management involve considering the needs
of stakeholders when making decisions, while impact
management is about minimising our negative impacts and
increasing our positive impacts on the society. The CR&S
approach is contained in the Group’s corporate responsibility
policy. The policy clearly outlines our commitments and
approach to corporate responsibility as well as the Group’s
CR&S governance framework. The policy’s scope and
respective guidelines apply to operations and activities
across the Group, including the subsidiaries in all locations,
Corporate Responsibility and
Sustainability is not bolted on
to our corporate strategy, it is
embedded in our business strategy
and our daily operations.
“
”
stakeholders and associated partners representing the
Group.
The CR&S approach is designed to deliver value in a structured way along four key areas within the subsidiaries
of FBNHoldings:
Drive sustainable finance
and investments
People
empowerment
Support to
communities
Contribution to
environmental sustainability
78
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
OUR SOCIAL COMMITMENT
FBNHoldings has had another successful year of collaborating with our esteemed customers in fulfilling their
personal and business needs. Our commitment to putting our customers ‘first’ continues to drive our product
and service oerings and ensure customer satisfaction across all segments. During the year, a new money
transfer company was signed up to provide additional options to our customers. At the same time, we deepened
our engagement with women and youth through wealth creation and youth empowerment initiatives.
Deepening Wealth Creation for Women across the
Nation
Through FirstGem, our passion and drive to increase the
number of women who take pride of place in business and
wealth creation intensified. FirstGem is a bespoke solution
to foster women empowerment across all socio-economic
strata. This solution has recorded significant milestones
since its launch in November 2016. The growth and
success of women-owned businesses is one of the most
profound changes taking place in today’s business world,
and FirstGem is at the heart of far-reaching initiatives to
drive financial inclusiveness and development of women. In
being true to this vision, the Bank has leveraged dierent
women empowerment programmes across dierent
cities and states within the country through conferences,
seminars, workshops and roadshows, connecting with
women for sustainable wealth creation. In 2018, a total of
1,261 women benefited from these workshops.
In the same year, the 2nd Anniversary of the FirstGem
was celebrated having supported over 4,000 women at
various interactive sessions across Nigeria and the United
Kingdom. These events provided a platform to deepen
women’s insight on the principles of wealth management,
investments and savings.
FirstGem also partnered with the Nigerian Liquefied
Natural Gas in Port Harcourt to promote education and
the importance of financial empowerment. This provided
an avenue to expand the reach of FirstGem to strategic
parts of the country. The initiative continues to witness
significant growth from inception with an addition of over
50,000 female customers to FirstBank and a deposit base
exceeding N3bn (total turnover from inception is N27bn).
Supporting SMEs in Growing the Nation’s GDP
The Bank organised several empowerment programs for
SMEs tagged ‘SME Connect Series’. This initiative provides
360 degree support to startups and scaleups, oering
practical and realistic solutions to numerous business
challenges encountered. This is ultimately aimed at
improving the country’s GDP by enhancing the performance
of the SMEs. The SME Connect Series were facilitated by
experts in the fields of marketing, legal and regulatory,
human resources management, finance as well as research
and development to engage the SME customers. The
maiden edition of the workshop held in Lagos, attracting
about 587 startups.
As a follow-up on the gains of the workshops, an SME
Virtual Desk was set up to provide similar services through
the use of telephone, with over 100 customers benefitting
from the initiative. This empowerment program will continue
in 2019 at various locations. To support the SME segment
across various industries, new loans disbursed in 2018 was
above N65bn.
Left–Right: Dr Adesola Adeduntan (MD/CEO, FirstBank); Ibukun Awosika
(Chairman, FirstBank); Arunma Oteh (Vice-President/Treasurer,
World Bank); Nimi Akinkugbe (CEO, Bestman Games); Gbenga Shobo
(Deputy Managing Director, FirstBank) at the second anniversary of
FirstGem in Lagos.
79
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Youth Empowerment Initiatives
The Youth Empowerment Series is a program designed to
sensitise children and young adults on issues relating to
financial literacy with focus on financial discipline, savings,
investment and career guidance. In 2018, children between
the ages of 10 to 24 years were hosted at the 2nd edition
of the Youth Empowerment Series which attracted about
1,350 youths across the Lagos metropolis.
In addition, Campus Storm was organised at the University
of Lagos and Obafemi Awolowo University, Ile-Ife to
harness untapped potentials of youths, sensitising them
with the right information and exposure. The campus storm
were mentoring sessions tagged ‘Entrepreneur’s Mindset’
aimed at teaching young adults to develop entrepreneurial
mindset in business as well as alternative career choices
upon completion of their first degree. Over 3,200 students
benefitted from these engagements. This initiative is
primarily designed to foster and establish partnerships
towards our customers’ success.
The Bank, in the 2018 National School Entrepreneurship
Exhibition and Award provided a platform for teenage
entrepreneurs across Nigeria to showcase innovative
business ideas and community service projects. Our
commitment was necessitated by our deep-rooted
understanding that adequate investment in the nation’s
youth is instrumental to sustainable national development.
Exceeding our Customers’ expectations through
Money Transfer Services
In meeting our customers’ service delivery needs and in
line with compliance and regulatory requirements, in 2017,
there was a Western Union ‘Win Back Your Fee Promo’
designed to cushion the ‘send’ cost for customers in the
face of industry-wide increase in such costs, resulting from
the harmonisation between ocial and parallel market
exchange rates. Over 400 customers were rewarded
with the full fees charged for send transactions. Other
promotional campaigns held during the year were the
‘Money Transfer Easter Promo’ and the ‘MoneyGram
‘Back-to-School Promo’.
Towards oering our customers various options in
remittance services, we pioneered an industry-wide agency
relationship with WorldRemit, a renowned International
Money Transfer Organisation with mobile app-based
services. This ‘first-of-its-kind’ in the market was launched
by a media awareness with the Management of FirstBank
and WorldRemit in attendance. Our financial inclusion
initiatives continued during the year by encouraging walk-in
customers to open accounts with part of their inflows, thereby
supporting the CBN initiative to on-board the unbanked and
underbanked segment of the population for formal banking
services. In 2018, the Bank processed over N172bn inbound
transfers and remitted over N9.5bn outbound transfers.
FirstBank remains the leading Agent Bank in Nigeria in
International Money Transfer remittances.
OUR SOCIAL COMMITMENT
FirstBank Youth Empowerment Programme 2018
Left-Right: Motunrayo Ade-Famoti (CEO, MoneyStewards); Aderemi
Banjoko (CEO - dkbMARKETS Limited); Gbenga Shobo (Deputy
Managing Director, FirstBank) and Ibukun Awosika (Chairman,
FirstBank) at the FirstBank Youth Empowerment Programme.
FirstBank – WorldRemit Media Launch
Left-Right: Pardon Mujakachi (Head, Business Development South
Africa and Africa, WorldRemit); Tunde Owolabi (Group Executive, Retail
Banking Lagos and West, FirstBank); Adeyemi Ogunmoyela (Group Chief
Compliance Ocer, FirstBank); Andrew Stewart, (Managing Director,
Middle East and Africa, WorldRemit); Gbenga Shobo (Deputy Managing
Director, FirstBank); Lydia Mawby (Assistant Finance Manager,
WorldRemit); and Abiodun Famuyiwa (Group Head, Products and
Marketing Support, FirstBank).
80
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY DEVELOPMENT
FirstBank is committed to nation-building and we have been driving sustainable social, economic and
environmental growth for about 125 years. Our community development initiatives are anchored on our
strategic education, health and welfare pillars. Our engagement in sustainable business practices is based
on our commitment to enhancing economic development and stability for the present and future generation.
Our key programmes include; FutureFirst, Infrastructure
Development, Start Performing Acts of Random Kindness
(SPARK) as well as Employee Giving and Volunteering.
FutureFirst Programme
The FutureFirst programme is designed to drive financial
literacy, career counselling and entrepreneurship for young
ones. We work with non-governmental organisations such as
Junior Achievement Nigeria (JAN) to implement FutureFirst
projects. JAN’s programme aligns with the FutureFirst’s
vision and based on the curriculum, the Bank has positively
impacted students in dierent locations across the country.
Through our partnership with JAN, senior secondary school
students were provided with practical business experience
through the organisation and operation of an after-school
business enterprise incubation programme.
The programme oers an experiential supplement to the
students’ business and economics studies. It provides
insight to how businesses are organised and operated, it
develops critical thinking, speaking and leadership skills,
provides better understanding of the rewards of the free
enterprise system, creates a platform to learn about career
opportunities, and gain basic workforce-readiness skills.
The programme also fosters positive relationship between
young people and the business community.
The JAN programme is also connected to the Company of
the Year (COY) competition. COY, sponsored by FirstBank,
is a competition organised to promote financial inclusion,
creativity, entrepreneurship, collective thinking and team
work amongst secondary school students, whilst driving
their preparedness for university education and subsequent
stages of life. This programme is aimed at influencing the
economic growth and development in the respective Junior
Achievement Worldwide member countries and the world
at large.
The Inventive Explorers from Caro Favoured School,
Ajegunle in Nigeria won three dierent categories: Regional
Company of the Year, National Company of the Year, and
Company of the Year Africa competitions. The latter took
place in Accra, Ghana on Friday, 8 December 2018. The
Inventive Explorers won the competitions with an inventive
user-friendly and portable mobile trac light designed to
reduce accidents. The team won the Coca-Cola ‘Excellence
in Teamwork’ Award and the FedEx Access Award for
developing a business that best demonstrates the ability to
transcend national borders.
The FutureFirst programme has impacted over 80,000
secondary students across dierent parts of the country
including Lagos, Port Harcourt and Abuja with the
knowledge of financial literacy and entrepreneurship. Sta
volunteers were recruited from the Bank for the programme
and 38,000 volunteering hours expended.
CFA Universities Ethics Challenge and Samuel
Asabia Chair on Business Ethics
To demonstrate the Bank’s commitment to ethics,
professional excellence, capacity building and inclusive
growth of Nigerians as well as support youth education
and the drive towards nation building, the Bank partnered
with CFA Society in its yearly Universities Ethics Challenge.
CFA Institute is a global, not-for-profit association of
investment professionals with a mission to lead the
investment profession globally by promoting the highest
standards of ethics, education and professional excellence
for the benefit of society.
81
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
The Ethics Challenge aligns with the CRS strategic approach
and the objective of FirstBank’s Endowment programme
and the Samuel Asabia Chair for Business Ethics at the
University of Lagos. We believe that promoting ethics in
business is not only important for the reputation of our
brand but also one of the solid pillars that eectively
support sustainable financial institutions.
Infrastructural Development Programme
FirstBank Infrastructural Development programme
promotes and supports infrastructure development. Some
of the identified areas of support include provision of
infrastructure to schools, hospitals and our communities.
Ten universities and three secondary schools are currently
being supported.
Celebrating Corporate Responsibility and
Sustainability Week
As part of the Employee Giving and Volunteering programme,
FirstBank commenced a week-long celebration of its annual
Corporate Responsibility and Sustainability initiatives.
The maiden edition held in September 2017, while the
second edition took place in June 2018. The theme for the
FirstBank CR&S week in 2017 was ‘Promoting Kindness;
Putting ‘YouFirst’ while the 2018 theme was ‘Touching
lives; ‘YouFirst’ This is a culmination and consolidation of
the Bank’s interventions in social responsibility, promoting
random acts of kindness across communities in Nigeria’s six
geo-political zones and the Bank’s subsidiaries in the United
Kingdom as well as Middle Africa. The programme reflects
the FirstBank’s brand promise to always put its customers
first while reinforcing the Bank’s role in driving sustainable
development in the communities where it operates.
The CR&S week is specially designed to show acts of
kindness in our society. The events are tailored towards
re-orientating the society along the right values;
encouraging the citizenry to intentionally create positive
impact in their immediate environment. One of the
major highlights of the week has been dubbed the SPARK
initiative; Start Performing Acts of Random Kindness.
During the week-long activities, FirstBank’s employees
volunteer their time and resources to promote random
acts of kindness within their communities, driving welfare
through giving and visits to orphanages, homes of the less
privileged and Internally Displaced Persons camps. The
Bank also holds career counselling sessions with secondary
school students across the country. The career counselling
sessions involve FirstBank sta coordinating sessions that
will include financial literacy and inclusion in young students,
supporting women empowerment initiatives as well as
advancing social engagement by providing vision screening
and aordable eyeglasses for low-income earners.
FirstBank’s CR&S week is the first of its kind in the financial
service industry in Nigeria.
COMMUNITY DEVELOPMENT
SPARK (Start Performing Acts of Random Kindness)
SPARK is an initiative that focuses on creating and reinforcing
an attitude of going beyond meeting the material needs
of people who are unable to help themselves, to showing
compassion, empathy and aection. It highlights the need
to collectively perform acts of kindness towards restoring
hope in humanity and inspiring people to make a dierence.
An approach has been adopted to deepen our engagement
in communities where we operate by integrating and
institutionalising random acts of kindness.
Since 1894, FirstBank has contributed to various aspects of
nation building. Given the Bank’s historical role in developing
the nation, we believe it is important to raise people that
choose to do the right things.
A renovated lecture theatre at the University of Ibadan as part of
the Infrastructural Development Programme
FirstBank’s CR&S week is the
first of its kind in the financial
service industry in Nigeria.
“
”
82
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY DEVELOPMENT
The FirstBank orphanage visit during the 2018 CR&S week at Abuja.
The team was led by Abdullahi Ibrahim, Executive Director, Public
Sector.
Visit to the Down Syndrome Foundation
Left-Right: Muyiwa Majekodunmi (Vice President, Down Syndrome
Foundation Nigeria), Anthonia Jones-Nduka (Head, Retail Business
Advisory, HCMD FirstBank), Gbenga Shobo (Deputy Managing Director,
FirstBank) Solomon Omiere, Student of the Down Syndrome Foundation
Nigeria, Rose Mordi (Founder, Down Syndrome Foundation Nigeria)
and Abiodun Famuyiwa (Group Head, Products and Marketing Support,
FirstBank).
Winners of a charity fundraising event at FBNBank UK during the 2018
CR&S Week.
Employee Giving and Volunteering
Our Employee Giving and Volunteering programme was set
up to encourage employees to give back to the community
and instil the integral corporate culture of giving.
The programme is structured around two elements:
Volunteering: this involves employees volunteering their time
and skills to support philanthropic activities. This provides
opportunities for employees to use their capabilities in
various contexts, develop new skills, partner with people
within and outside the Bank towards expanding their
horizons.
Giving: this involves employees donating material resources
including cash to the less privileged. Our giving is mainly
driven through a crowdfunding approach. Crowd funding
enables large numbers of people to make small contributions
or donations towards a cause.
The approach is three-pronged:
Strategic alignment: our volunteering activities and
initiatives must align with our corporate responsibility
and sustainability strategy.
Partnerships: the initiatives are also implemented by
leveraging existing partnerships, such as LEAP Africa,
the Down Syndrome Foundation, Junior Achievement
Nigeria and the Nigerian Conservation Foundation.
Participation: employee giving and volunteering is
open to all employees; for some projects, a subset
of employees who possess the required expertise
are targeted. For example, the FutureFirst financial
literacy and career counselling programme is driven by
employees with the appropriate skills and knowledge.
In addition, employees are encouraged to begin and
promote their personal initiatives. These initiatives
are often recognised and rewarded by the Bank for
outstanding performance.
The programme aligns with the four core areas of our
Community Support Pillar: education, health and welfare,
economic empowerment, and the environment:
83
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY DEVELOPMENT
In 2018, sta volunteers participated in dierent CR&S activities of the Bank which included Global Money Week, World
Savings Day as well as the Youth Empowerment Series. These activities were designed to provide students with practical
business experience through the organisation and operation of an after-school business enterprise programme as well as
passing on the relevant skills and values, such as good judgement, hard work, integrity, confidence and collaboration.
Education:
Volunteers are
expected to train or
mentor students and
members of the local
community on specific
subjects identified
as knowledge gaps
that are hindering
these students from
doing business.
Programmes include;
FutureFirst as well as
the Youth Leadership
and Development
programme.
Economic
empowerment:
Volunteers make
use of their skills to
empower students,
community groups
and displaced people
through coaching
and teaching. Such
programmes are;
FutureFirst and
Entrepreneurship.
Health and
welfare:
Volunteers give their
time, energy and
financial resources to
the aged, orphans, the
less privileged and the
sick. Such initiatives
are; the Hope Rising
programme and
visiting the less
privileged.
Environment:
The Bank supports
training that
encourage employees’
adoption of
responsible practices
that positively impact
the community.
Such initiatives are;
sta training and
the Environment
Conservation
programme.
84
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY DEVELOPMENT
Partnership with Teach for Nigeria: Teach for
Nigeria (TFN) is a non-profit organisation designed
to address poor educational outcomes of Nigeria’s
most marginalised pupils by enlisting our nation’s
most promising future leaders in the eort to expand
education and life opportunities for all children. Through
a two-year Leadership Development programme, TFN
recruits outstanding university graduates and young
professionals of all academic disciplines to teach as
full-time teachers (known as Fellows) in underserved
and low-income schools. FBNQuest has committed to
sponsoring a minimum of five fellows at the training
institute who will directly impact a minimum number of
300 students in low-income schools across dierent
parts of the country.
Women Economic Empowerment: A diverse workforce
allows us to continue to develop innovative products
and oer unique services. It helps us attract and retain
the best talent and ultimately helps us make our
customers more successful. In 2018, over 25 women
of FBNQuest participated in various female economic
empowerment and capacity building initiatives which
included: Women in Management, Business and Public
Service (WIMBIZ) Annual Lecture Series, WIMBIZ 2018
Annual Conference, Women in Successful Careers
(WISCAR) Annual Conference and internal women
mentorship initiatives tagged the Women Interactive
Network.
FBNQUEST MERCHANT BANK
FBNQuest Merchant Bank has remained committed to
CR&S. Its sustainability statement is ‘We are an ethical
organisation committed to conducting business in an
innovative and sustainable manner, delivering value to all
stakeholders’.
In 2018, FBNQuest Merchant Bank activities focused on:
Deepening existing initiatives and partnerships at various
stakeholder levels and initiating new partnerships based
on our CR&S drivers. However, a number of these
initiatives are still in the initial phases.
Increased active employee engagement in fundraising
and charitable giving as well as employee volunteering
aligned with our business objectives.
Leveraging activities of the Group; ensuring cohesion
in implementation to drive eciencies and deliver
maximum value.
FBNQuest Merchant Bank achieved the following in 2018:
Capacity Building: due to the importance of
sustainability to the operations, competence
development for improved environmental and social
performance and other related areas has been made
compulsory. In line with this, capacity training sessions
were held across the business for Management,
Employees and Key Stakeholders on the concept of
Sustainable and Responsible Investing, Environmental,
Social and Governance Principles, Business Ethics,
Value Chain, Reporting Standards and Sustainability
Reporting.
Financial Literacy: sta of FBNQuest Merchant Bank
trained over 1,700 students on the importance of
earning, saving and growing money. This was done in
alignment with the global and local drive for financial
literacy which is regulated by the CBN under the Global
Money Week and the World Savings Day initiatives. Our
impact spanned secondary school students in dierent
geopolitical zones which include; Abuja and Delta State.
85
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY DEVELOPMENT
Commissioning of the renovated blocks of classrooms and the
donation of a borehole at Aragba Primary and Secondary School
Left–Right: Ineh Francis and Mrs Ajemuaire (Teachers at the
Aragaba Secondary School), Prince Otedo Chukudi (Representative
of the traditional ruler), Chokor Patience (Principal, Aragaba
Secondary School), Val Ojumah (MD/CEO, FBNInsurance), Chief
Benson Ndakara (President General, Aragba Development Union).
WFM Skills Acquisition Programme
As our contribution towards building employable graduates
and job seekers, we supported a two-day Job Entry and
Skills Acquisition programme organised by WFM 91.7 for
job seekers. In addition to supporting financially, we also
availed them the use of our Human Resources Manager as
a resource person over the two-day period.
Renovation of classrooms and donation of Boreholes
In line with our community support initiative, the Company
renovated two blocks of classrooms at a primary school
and also donated boreholes to both the primary school and
the neighbouring secondary school located in a village near
Abraka, Delta State.
Left-Right: Adenrele Kehinde, Chairperson, FBNInsurance; Val Ojumah,
MD/CEO, FBNInsurance and Caleb Yaro, Non-Executive Director,
FBNInsurance at the commissioning of the second Dialysis Machine
donated to Gbagada General Hospital, Lagos.
Donation of a second dialysis machine and an
ultrasound scan machine to Gbagada General
Hospital
The rising scourge of kidney diseases has necessitated
concerted eorts towards arresting this epidemic.
FBNInsurance donated a second dialysis machine to one
of Lagos’ busiest dialysis clinic situated in Gbagada General
Hospital. The members of the Board also supported the
company by donating a state-of-the-art ultrasound scan
machine to ameliorate the burden on the neo-natal unit of
the hospital.
FBNInsurance
As part of the Group’s drive to enhance corporate
responsibility and sustainability, FBNInsurance is committed
to sustainable insurance to reduce risk, develop innovative
solutions, improve business performance and contribute to
environmental, social and economic sustainability.
Kids’ Voice Reality Show
Kids Voice Reality Show is a 13-week musical talent hunt
conceptualised and produced by Rwells Media, owners of JYB TV.
This is a platform to showcase prodigies to a diverse audience.
We supported the show as a way of reinforcing our place in the
minds of parents and guardians as well as an avenue to educate
tomorrow’s customers (the children) about insurance.
Guests at the JYB TV Kids Voice Reality Show
86
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Val Ojumah, MD/CEO, FBNInsurance at the Jakin NGO Dress-A-Child
Initiative event.
Jakin NGO Dress-A-Child for School
Jakin NGO has been a veritable partner in aiding access
to education for over 750 needy students in Lagos.
For the past four years, we have supported the NGO’s
Dress-A-Child-for-School initiative, a project that
provides back-to-school kits for needy and vulnerable
children in Lagos and environs.
COMMUNITY DEVELOPMENT
87
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY SUPPORT SCORE CARD
Objective/
Programme Measure
Promote and support
infrastructural
development in schools
and the society
Engender inclusion and
diversity through
education, advocacy and
skills acquisition
Measure
Cost of
projects or
programmes
Number of
projects and
beneficiaries
impacted
Number of
beneficiaries
impacted
2019 Targets
Rehabilitation
of the existing
infrastructure in
select universities
Construction of
one additional
infrastructure
in select
universities
5% increase in ratings
Infrastructure
Development
Programme
Hope Rising
Initiative
2018 Accomplishments
Construction of an auditorium
for Abolarin College, Oke-Ila
Orangun, Osun State Nigeria.
Consistent partnership
with the Down Syndrome
Foundation Nigeria
Support for others
include:
- Nigeria Blind Association;
- Benola Cerebral Palsy;
- Chinwe Bode-Akinwande
(CBA) Foundation;
- International Women
Society;
- Red Cross Society;
- Hope 4 Sure Foundation;
- Segun Aina Foundation;
- Pacelli School for the
Blind and Partially
Sighted Children;
- Patrick Speech and
Languages Centre;
- Rotary Club;
- Nigerian Conservation
Foundation; and
- CFA Society Nigeria.
Impact
Expended N10mn
Over 30 charity
homes in Nigeria and
six countries were
supported
S/N
1.
2.
88
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
COMMUNITY SUPPORT SCORE CARD
Objective/
Programme Measure
Measure 2019 Targets2018 Accomplishments ImpactS/N
5% increase in the
number of students
impacted
10% increase in the
number of beneficiaries
5% increase in the
number of volunteering
hours
Over 8,000 students
were impacted with
knowledge of financial
literacy
34 beneficiaries across
six geo-political zones
of the country
Over 39,000
volunteering hours
Number of
students
Impacted
Number of
beneficiaries and
programmes
implemented
Number of
volunteering
hours and
beneficiaries
Partnership with Junior
Achievement Nigeria (JAN)
in driving financial literacy,
career counselling and
entrepreneurship initiatives
Project designed to support
people deserving of kindness
across dierent geo-political
zones in Nigeria
Employee Volunteering
and Future First events
held in Port Harcourt,
Ebonyi and Lagos
Other events such as
Financial Literacy Day and
World Savings Day which
were sta-supported
initiatives also held
Ensure financial literacy,
career counselling and
entrepreneurship skills for
young ones
To influence
the mindsets of
stakeholders to
give; empathise,
be compassionate
towards others
thereby promoting
these values
To awaken the
consciousness of
performing acts of
random kindness
Provide a platform
for employee giving,
volunteering and
engagement
FutureFirst
Programme
SPARK
Employee
Giving and
Volunteering
3.
4.
5.
89
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
STANDARDS AND CODES
To further drive our performance and to demonstrate our commitment to integrating corporate
responsibility and sustainability into our business strategies and management processes, we continue to
adopt relevant frameworks, guidelines and standards in line with global best practice. Below are some of
the key codes and standards adopted by the Group. Similar to the previous years, the following guidelines
and standards applied in 2018.
GLOBAL REPORTING INITIATIVE GUIDELINES
The Global Reporting Initiative (GRI) is the most widely
used sustainability reporting framework in the world
which provides a platform for organisations to report
on their economic, environmental as well as the social
and governance performance. The initiative provides an
opportunity for organisations to measure, understand
and communicate information. GRI is an international
not-for-profit, network-based organisation. Its activity
involves thousands of professionals and organisations from
various sectors, constituencies and regions. GRI encourages
the use of sustainability reporting to promote sustainability
within the organisations and at the macro-economic level.
FirstBank has adopted the GRI 4 reporting framework for
its Sustainability Reporting and this began in 2015.
The Bank actively participated in two of the sub-committees; agriculture and oil and gas which made submissions that
were approved by the Bankers’ Committee for implementation by the sector’s regulator, banks and other related financial
institutions.
FirstBank is a member of the steering committee responsible for providing implementation guidance on the NSBP for
signatories to the principles.
THE NIGERIAN SUSTAINABLE BANKING PRINCIPLES (NSBP)
The Nigerian Sustainable Banking Principles programme was Initiated by CBN and the Bankers’ Committee to
formulate sustainable banking standards and guidelines for Nigerian banks. This led to the establishment of the
Strategic Sustainability Working Group and FirstBank is a member.
The focus areas for the sustainability programme were:
Agriculture:
This includes water resource-related issues
and the Nigeria Incentive-Based Risk-Sharing
System for Agricultural Lending
Power:
Emphasis on renewable
energy
Oil and gas
90
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Below is our implementation update:
NSBP IMPLEMENTATION UPDATE
STANDARDS AND CODES
Principle 1:
Our Business Activities:
Environmental and Social Risk
Management
Integrate environmental and social
considerations into decision-making
processes relating to our business
activities to avoid, minimise or oset
negative impacts.
Requirements
Develop appropriate E&S
policies
Develop appropriate E&S
procedures
Develop and customise E&S due
diligence procedures
Articulate E&S governance and
approval authority measures
Monitor E&S risks and review
E&S conditions
Provide client engagement
guidance on E&S issues
Develop appropriate E&S
reporting criteria
Report on implementation
progress and support for
investment in sustainable,
innovative business opportunities
Status Update
Environmental, Social and
Governance Management
System document (ESGMS) has
been developed.
The document has been
reviewed and approved by
relevant stakeholders in the
Bank.
The framework for
implementation has been
developed.
Adoption of the ESGMS to
screen credit transactions.
Group Heads and Relationship
Managers have been trained on
responsible lending including
technical and compulsory areas
as part of the implementation of
the ESGMS.
Automation of ESG risks
screening on-going.
Transactions valued at N2.8tn
have been screened and
assessed for ESG risks.
91
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Principle 2
Our Business Operations:
Environmental and Social
(E&S) Footprint
Avoid the negative impacts of
our business operations on the
environment and local communities
where we operate and where possible
promote positive impact.
Principle 3
Human Rights:
Respect human rights in our business
operations and business activities.
Develop environmental
management programme
with facility management.
This should address climate
change and greenhouse gas
emissions reduction, water
eciency, waste management
and environment-friendly facility
construction and management
Comply with relevant labour and
social standards
Implement a community
investment programme
Apply the E&S standards to
relevant party
Develop and implement human
rights policy (including labour
and working conditions)
Integrate human rights due
diligence into E&S procedures
Invest in resources and training
of sta on human rights issues
Restriction of sta printing,
particularly colour printing.
Increased use of conference
calls for meetings as against
physical attendance at
meetings, thereby minimising
fuel consumption and carbon
emission from vehicles.
Implemented community
development programmes to
promote positive impacts on
stakeholders i.e. Infrastructural
development, FutureFirst,
HopeRising Programme, SPARK
Programmes.
Our respect for human rights
forms a major part of our
ESGMS.
Conducted training on human
rights.
The Group maintains an
organisational culture that
encourages an open line of
communication between
superiors and subordinates.
The Group maintains a fair and
ecient procedure for resolving
disputes and ensures disciplinary
measures are fair and eective
without breaching labour laws or
standards.
Requirements Status Update
STANDARDS AND CODES
92
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Requirements Status Update
The Group’s Corporate
Responsibility and Sustainability
policy covers this principle.
Granted about N736.7mn loan
to female entrepreneurs.
Over 3,000 SMEs run by
women received support from
FirstBank.
A total of 2,758 sta are
women, representing 38% of
the total sta strength.
Established women economic
empowerment policy which
includes policies such as:
maternity leave policy, study
leave policy, training policy,
career mobility policy etc.
Partnered with Women Of
West Africa Entrepreneurship
(WOWE), Women in
Management, Business and
Public Service (WIMBIZ); Chinwe
Bode-Akinwande Foundation
(CBA), on women development.
Financial Inclusion is part of the
Group’s Corporate Sustainability
policy.
Increased volume and value of
financial transactions through
FirstMonie agents in over
14,000 locations.
Promoted financial literacy
through FutureFirst, participation
in the Financial Literacy and
World Savings Days as well as
several other programmes.
Develop and implement women
economic empowerment policy
Establish women economic
empowerment committee
Develop initiatives and
programmes to promote and
celebrate women empowerment
Invest and dedicate resources
for female talent
Support the establishment
of a sector-wide women
empowerment fund
Develop and implement a
financial inclusion policy
Provide development and growth
support to SMEs
Improve financial literacy and
institutional practices
Improve access to Bank facilities
and services
Principle 4
Women’s Economic
Empowerment:
Promote women’s economic
empowerment through a gender
inclusive workplace culture in our
business operations and provide
products and services designed
specifically for women.
Principle 5
Financial Inclusion:
Promote financial inclusion by
providing financial services to
individuals and communities that
traditionally have had limited or no
access to the formal financial sector.
STANDARDS AND CODES
93
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Requirements Status Update
The Bank has in place a
Sustainability Committee chaired
by the Chief Risk Ocer.
FirstBank is a member of
the NSBP network steering
committee responsible for
implementing the principles
across sectors.
The Board and the Executive
have been trained on
sustainability.
A total of 15,038 sta were
trained.
Partnered with NSBP and
IFC in training key sta. The
target is to train all sta on
sustainability.
Establish E&S governance
responsibility
Develop institutional E&S
governance practices
Active support of key industry
initiatives aimed to address
E&S governance issues
with customers operating in
sensitive sectors
Implement E&S performance-
linked compensation and
incentive schemes
Establish internal and where
appropriate, external E&S
audit procedures
Identify relevant roles and
responsibilities towards
delivering sustainable banking
commitments
Provide sustainable banking
training sessions
Create practical E&S training
tools and resources
Multi-stakeholder capacity
building
Principle 6
E&S Governance:
Implement robust and transparent
E&S governance practices in our
respective institutions and assess the
governance practices of our clients.
Principle 7
Capacity Building:
Develop individual, institutional
and sector capacity necessary to
identify, assess and manage the
environmental and social risks as
well as opportunities associated
with our business activities and
operations.
STANDARDS AND CODES
94
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
Requirements Status Update
FirstBank is a member of
the NSBP network steering
committee responsible for
implementing the principles
across sectors.
FirstBank participated in
industry-wide workshops.
FirstBank is a member of
the United Nations Global
Compact (UNGC) and in
line with the guidance, the
Bank has submitted its 2017
Communication on progress
(COP) report.
The Bank participated in the
development of a work plan for the
local network aimed at energising
the activities of the network among
business actors in Nigeria and
encourages non-participants to
adopt the UNGC principles.
Developed a reporting template.
Targets and KPIs have been set.
The implementation commenced in
2014.
Developed a system for data
collection. Yearly internal reporting
and quarterly external reporting.
Internal reports provided quarterly
while external reports provided
yearly. The 2013, 2014, 2015,
2016, 2017 and 2018 corporate
responsibility and sustainability
reports have been published and
distributed to stakeholders.
NSBP half-yearly reports submitted
to the CBN.
Collaborate and coordinate
with other banks
Organise sector-wide
workshops and events
Align with international
standards and best practice
initiatives
Establish and participate in
Nigerian sector-level initiatives
Establish a sustainable banking
reporting template
Set clear targets and relevant
performance indicators
Ensure systems are in place
for data collection
Agree on the frequency,
nature and format of internal
and external reporting
Contribute to sector-level
reporting
Principle 8
Collaborative Partnership:
Collaborate across sectors and
leverage international partnerships
to accelerate our collective progress
towards aligning with international
standards and Nigerian development
needs.
Principle 9
Reporting:
Regular review of the principles
and reporting on the progress at
the individual institution and sector
levels.
STANDARDS AND CODES
95
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
STANDARDS AND CODES
UNITED NATIONS GLOBAL COMPACT
The United Nations Global Compact (UNGC) is currently
the highest body for corporate citizenship in the world
today. It was established in 2000 to serve as a platform
for dialogue, learning and partnership for organisations
willing to commit to adopting corporate responsibility
as part of their business strategy and daily operations.
The UNGC has successfully attracted and mobilised over
12,000 businesses to become members in over 170
countries across the world.
Membership into the UNGC implies an organisation’s
willingness to align with the UN values and support initiatives
that advance the UN goals as contained in the Millennium
Development Goals – now Sustainable Development Goals.
Participants simply commit to align their strategies and
operations with 10 principles in the areas of labour, human
rights, environment and anti-corruption.
FirstBank became a member of the United Nations Global
Compact in January 2013 having commenced the process
in 2012. To ensure all other subsidiaries under FBNHoldings
of which FirstBank is a part, synchronise their activities
and align their practices to the 10 principles of the UNGC,
FBNHoldings became a member of the UNGC in the stead
of FirstBank.
The Group maintains a Global Compact active membership
status in the United Nations Global Compact and has
published its Communication on the Progress Reports for
2013, 2014, 2015, 2016 and 2017 in the UNGC website.
The 2018 report has also been concluded. The 2018
Communication on the Progress Report can be accessed
using the link on the United Nations Global Compact
Website.
96
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
STAKEHOLDER ENGAGEMENT
Stakeholder engagement is one of the tripod of our Corporate Responsibility and Sustainability. The other
two are citizenship and impact management. Stakeholder engagement involves putting into consideration
the needs of our stakeholders when making business decisions.
Our stakeholders are broadly categorised into two: Internal
and External. Our main internal stakeholders are our employees
and shareholders while our external stakeholders consist of
our customers, host communities, regulators, the media,
government agencies, amongst others.
As in previous years, our robust engagement with our
stakeholders provided opportunities to further align our
business practices with societal needs and expectations
and drive long-term sustainability as well as shareholder
value.
EMPLOYEES
CUSTOMERS
Reasons for the engagement
To ensure the Group remains a
great place to work by providing a
secure, positive and inspiring working
environment.
To ensure employees are connected and
in tune with the culture of the Group
thereby encouraging communication,
dialogue and ultimately increase
productivity and sta retention.
To ensure members of sta are aware
of the Group’s vision and activities and
the role they are required to play.
To better understand the financial
services need of our customers and
provide appropriate solutions.
Types of engagement
These include:
Focus groups
Knowledge sharing sessions
Roadshows
Engagement surveys
Emails
Intranet
Communications
Magazines
Training
Interactions through branch service
points; relationship managers, contact
centres, complaint lines (First Contact
and specific e-mail addresses),
customer engagement forums; social
media (Facebook, LinkedIn, Twitter,
YouTube etc.) surveys as well as
marketing and advertising activities in
the traditional media.
97
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
N
FINANCIAL REVIEW
N
STAKEHOLDER ENGAGEMENT
COMMUNITIES
INVESTORS
Types of engagement
 Roadshows
Shareholder Association visits
Communication and responses to
investor and analyst queries
Investor meetings
Annual General Meeting
Conferences and presentations.
Meetings
Statutory reporting
Citizenship and stakeholder engagement
approach; ongoing support of projects
and interaction with a wide variety of
NGOs and government organisations.
Steering Committee – Sustainability
Champions of NSBP
Reasons for the engagement
 To improve the market’s understanding
of the Company’s investment
proposition
To provide the necessary information
to existing and prospective Investors,
shareholders and analysts
To keep the market informed of
developments and events in a reliable,
consistent and transparent manner
To manage the relationships with the
market, project the intrinsic value of
the business and enhance investors’
confidence
Enable the Group succeed in the
competition for capital
To foster deeper relationships with
regulators by making sure all legal
and compliance requirements are met
thereby minimising associated risks and
safeguarding our license to operate.
To foster a mutually beneficial and
meaningful relationship with our
communities, focusing on the Group’s
corporate sustainability and responsibility
goals.
To obtain inputs from the communities
regarding the Group’s corporate
responsibility programmes and how to
meet their needs.
To partner with persons, groups and
NGOs in ensuring that the Group’s
activities and operations are conducted
responsibly.
To create awareness of the Group’s
corporate sustainability and responsibility
initiatives.
REGULATORS
98
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBNHoldings’ staunch commitment to the highest standards of Corporate
Governance practices and ethical conduct continues to undergird our approach
to doing business the right way.
Board of Directors >> 99 Board Committees >> 107 Directors’ Report >> 120
GOVERNANCE
99
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
BOARD OF DIRECTORS
+66.5% +16.4% +27.2%
Shareholders
On behalf of the Board, we would
like to thank UK Eke, MFR for his
tremendous contributions to the
success of the organisation during his
Technology
period on the Board. The appointment
of Dr. Remi Oni brings a good balance
of additional skills and experience to our
Board. More information can be found
Regulation
The regulatory landscape in which we
operate continues to evolve. As a result
of the volatile and challenging economic
environment, there have been changes
Front left to right: ‘Debola Osibogun, Cecilia Akintomide, OON; U.K. Eke, MFR; Dr Oba Otudeko, CFR; Dr Adesola Adeduntan, Oluwande Muoyo.
Back left to right: Dr Hamza Wuro Bokki, Omatseyin Ayida, Seye Kosoko, Chidi Anya, Oye Hassan-Odukale, MFR.
Appointment Philosophy
The process of appointments to the Board of FBN Holdings Plc
is transparent and in accordance with relevant regulatory laws
and guidelines. Directors are selected based on their skills,
competencies and experience. The Board Governance and
Nomination Committee identifies and considers a pool of
candidates for appointment. Thereafter, recommendations
on candidates’ suitability are made to the Board to
decide on the appointment of the candidate subject to
the approval of the relevant regulatory authorities and
ratification of shareholders at the annual general meeting.
Training Philosophy
Local and international training programmes are organised
for Board members to improve their decision-making
capacity as well as enhance their contribution to the
eectiveness of the Board, regardless of their expected
indepth knowledge and experience. An annual Training Plan
is approved by the Board while the Company Secretariat
ensures the implementation of the plan.
Directors are selected based on
their skills, competencies and
experience.
“
”
100
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
BOARD OF DIRECTORS
Detailed below are the profiles of the members of the Board:
Dr Oba Otudeko,
CFR, is the pioneer Chairman of FBN Holdings Plc and founding Chairman,
Honeywell Group. He is a foremost and visionary Nigerian entrepreneur reputed for his
highly successful domestic and foreign investments, cutting across diverse sectors of the
economy. He served on the Board of FirstBank between May 1997 and December 2010,
when he retired as Chairman. He became the Chairman of FBNHoldings in 2012. He was
also the founding Chairman of FBNBank (UK) Ltd. He has at various times, served on the
Boards of the Central Bank of Nigeria (1990–1997), Guinness Nigeria Plc (1999–2003),
British American Tobacco Ltd (2001–2004) and Ecobank Transnational Incorporated,
headquartered in Lome, Togo (2002–2010).
Dr Otudeko was the 16th President and Chairman of Council of the Nigerian Stock
Exchange between 2006-2009. He was the pioneer Chairman of the Nigerian-South
African Chamber of Commerce between 2013-2014; he was the Chairman of the Business
Support Group (BSG) for the delivery of the National Integrated Infrastructure Master Plan.
In 2011, Dr Otudeko was conferred with the Nigerian National Honour of Commander of
the Order of the Federal Republic (CFR).
Dr Otudeko is a Chartered Banker, Chartered Accountant and Chartered Corporate Secretary.
He has also attended executive management training programmes at the International
Institute for Management Development, Lausanne, Switzerland; Harvard Business School,
Boston, USA; and the Arthur D. Little School of Management, USA. He was the Chancellor
of Olabisi Onabanjo University, Ogun State, and currently serves as a member of the Oce
of Distinguished Friends of London Business School, United Kingdom. He is the founder
of the Oba Otudeko Foundation, a not-for-profit organisation. Dr Otudeko is married with
children.
Dr Oba Otudeko, CFR
Group Chairman
U.K. Eke, MFR
Group Managing Director
BFIC
U.K. Eke, MFR, assumed oce as the Group Managing Director, FBN Holdings Plc on
January 1, 2016. He joined the Board of FirstBank, a subsidiary of FBNHoldings in 2011
as the Executive Director, Public Sector South and until his appointment as the GMD of
FBNHoldings, he was the Executive Director, South. His sound managerial and motivational
skills, coupled with his vast experience, helped develop FirstBank’s businesses within the
Public Sector, Retail and Private Banking groups as well as on the Board. In 2017, he was
appointed to the Board of Nigeria Sovereign Investment Authority.
Prior to his appointment to the Board of FirstBank, he was the Executive Director, Regional
Businesses, Lagos and West, Diamond Bank Plc. His work experience spans Deloitte Haskins
& Sells International where he rose to a Senior Audit Consultant. At Diamond Bank Plc,
he was a Branch Manager, Regional Manager and Divisional Head before he became
an Executive Director. He has over 30 years’ experience in financial services, auditing,
consulting, taxation, process engineering and capital market operations.
101
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
BOARD OF DIRECTORS
U.K. is a Fellow of the Institute of Management Consultants, Fellow of the Institute of
Directors and a Fellow of the Institute of Chartered Accountants of Nigeria. He holds a first
degree in Political Science from the University of Lagos and an MBA in Project Management
Technology from the Federal University of Technology, Owerri. He is a Non-Executive Director
of First Bank of Nigeria Ltd and FBNQuest Merchant Bank Ltd.
A philanthropist and mentor to many, he is a ruling Elder of the Presbyterian Church of
Nigeria, Lekki Parish and a Paul Harris Fellow of The Rotary Club International. He is a
recipient of Nigeria’s National Honour of Member of the Order of the Federal Republic
(MFR). U.K. is married with children.
Oye Hassan-Odukale,
MFR, is a pioneer Director on the Board of FBN Holdings Plc. He holds
Bachelor and Masters’ degrees in Business Administration from the University of Houston.
He is the current Managing Director/CEO of Leadway Assurance Company Ltd, a leading
Insurance company in Nigeria, a position he has held for several years. His appointment was
preceded by several years of experience in insurance brokerage, underwriting, investments
and general management.
He is a recipient of the Nigerian National Honour of Member of the Order of the Federal Republic
of Nigeria (MFR) and sits on the Board of several companies in Nigeria, both for-profit and
non-profit. He was a Non-Executive Director on the Board of First Bank of Nigeria Plc; and
currently Chairman of FBNBank (UK) Ltd, a wholly-owned subsidiary of FirstBank. He is a
Securities and Exchange Commission-accredited investment manager and portfolio advisor.
Oye is married with children and enjoys listening to music, reading and travelling.
Chidi Anya
Non–Executive Director
BARAC SAC
Oye Hassan-Odukale, MFR
Non–Executive Director
BFIC SAC
Chidi Anya joined the Board of FBN Holdings Plc in 2013. He has nearly three decades of
professional practice within the Nigerian legal system, including pupillage with LN Mbanefo
SAN, and roles as an Associate Counsel at Akin Delano & Company, Ibadan, Nigeria and
Senior Associate Counsel at Debo Akande & Company, Lagos, Nigeria. Since 1997, he
is the founding Partner of The Channings Law Firm, providing leadership and strategic
direction as it has grown. The firm currently acts as Company Secretary to several leading
indigenous conglomerates operating in strategic sectors of the Nigerian economy, provides
guidance on corporate governance and compliance matters. For many years, Chidi has
been recognised by clients and peers as a leading commercial and corporate law specialist
and his legal career has equipped him with high-level skills in negotiation, administration,
communication, management, advocacy and ethical leadership, all of which he brings to
the Board. Chidi is a member of the Nigerian Bar Association, and its section on Business
Law, and a Notary Public. He is married with children and his interests include gardening,
reading, writing and intellectual debates. He also contributes to the building of stronger
and more resilient communities.
102
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Hamza Wuro Bokki PhD joined the Board of FBN Holdings Plc as a Non-Executive Director
in 2014. He is an alumnus of Harvard Business School and an experienced Chief Executive
Ocer with a demonstrated history of working in the financial services industry. He
currently serves as Managing Director/CEO of NPF Pensions Ltd.
He is a strong business development professional, skilled in Negotiation, Business start-up,
Planning, Analytical Skills, Capital Markets, Board administration (having served on Boards
of about 20 companies and currently serving), and Business Transformation. Hamza was
the first student to be awarded a first-class degree in Public Administration from the
University of Maiduguri and holds a Master’s degree and a PhD in Public Administration
and Policy Analysis. A Fellow of the Chartered Pension Institute of Nigeria and a member
of the Nigerian Institute of Management, he serves on the Boards and Audit Committees
of several companies in the public and private sectors.
He was the Managing Director of the Gombe State Investment and Property Development
Company Ltd, where he revamped the company’s financial position. He was also the pioneer
MD/CEO of APT Pensions and he brought the company to profitability within four years.
He served as the Honourable Commissioner for Trade and Industry, Gombe State between
2012 and 2014. During this time, he successfully ran the GMSG/BOI entrepreneurship
development programme which was adjudged the best in the country. He has attended
several executive programmes on Corporate Governance and Audit Committee. Dr Wuro
Bokki is married with children and enjoys reading as well as travelling.
‘Debola Osibogun was appointed to the Board of FBN Holdings Plc in 2015. She has
extensive financial services experience, covering real estate financing, trusteeship, retail
savings and loans at various institutions having spent over 33 years in these fields.
‘Debola has considerable experience of Boards at both Executive and Non-Executive level as
she is currently the Managing Director of Davidfinn Global Concept Limited and the President
of Consumer Awareness and Financial Enlightenment Initiative (CAFEi), a non-for profit
organisation, limited by guarantee. She also served as the Managing Director of COOP Savings
& Loans Limited, Skye Trustees Limited and as Non-Executive Director of FBN Mortgages
Limited. She was the National President of the Mortgage Bankers Association of Nigeria.
’Debola is a Fellow and former President of the Chartered Institute of Bankers of Nigeria,
a Fellow of the Chartered Institute of Taxation of Nigeria, the Nigerian Institute of
Management, Association of Enterprise Risk Management Professionals and a member of
Institute of Directors. She earned a Master of Science degree in Banking and Finance and a
Bachelor of Education degree in Economics, both from the prestigious University of Ibadan.
An astute researcher and writer, she has published several articles and papers on primary
mortgage institutions, creation of mortgages as well as financial literacy. At the National
level, she served as a member of the Presidential Committee on Urban Development and
Housing, Presidential Committee on Mortgage Finance as well as an Executive Member of
the Nigerian Real Estate Developers Association.’Debola has attended several executive
programmes at both local and international prestigious institutions which include INSEAD,
Kellogs School of Management and Euromoney. She is married with children and enjoys
playing basketball, polo and golf.
BOARD OF DIRECTORS
BGNC BARAC
‘Debola Osibogun
Non–Executive Director
Dr Hamza Wuro Bokki
Non–Executive Director
BGNC BFIC
103
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Omatseyin Ayida joined the Board of FBN Holdings Plc in 2015. He brings to the Board vast
experience in the field of portfolio management and strategic human resource management.
He is also very knowledgeable in risk and corporate regulatory issues. He holds a Bachelor
of Arts degree in Economics and Politics from the University of Kent, Canterbury. He is
currently the Managing Director of Saken Capital Partners Ltd.
He was previously the Managing Director of Capital Bank International Ltd, where he led the
well-executed buyout of the bank from Commercial Bank (Credit Lyonnaise Nigeria) over
an 11-month period in 2001 as well as the subsequent successful merger with Access Bank
Plc and Marina International Bank Ltd in 2005. During his successful banking career with
Commercial Bank (Credit Lyonnaise Nigeria), he worked in various departments in the bank
and rose to become the Deputy Managing Director in 1998.
After his banking career, Omatseyin set up Ruyat Oil Ltd which he ran for just over a decade
before selling it to an international food processing group. He is an honorary member of the
Chartered Institute of Bankers and has attended several executive programmes including at
Harvard Business School, Lagos Business School, Centre International de Management et
d’Enseignement Strategique, as well as the Kellogg School of Management. He is married
with children and enjoys playing golf.
Dr Adesola Adeduntan joined the Board of FBN Holdings Plc as a Non-Executive Director
in 2016. Sola attended the University of Ibadan, where he obtained a Doctor of Veterinary
Medicine degree. He also holds a Master’s Degree in Business Administration from Cranfield
University Business School, United Kingdom, which he attended as a British Chevening
Scholar. He has attended executive/leadership programmes at Harvard, Cambridge, Oxford
and INSEAD, and he is a Fellow of the Institute of Chartered Accountants of Nigeria. Sola
is the Managing Director/CEO of First Bank of Nigeria Ltd and subsidiaries. Prior to this
appointment, he was an Executive Director and the Chief Financial Ocer of FirstBank.
Prior to joining FirstBank in 2014, Sola was the pioneer Chief Financial Ocer and Business
Manager of the Africa Finance Corporation, where he remains a Director. He has served as
a Senior Vice-President and Chief Financial Ocer at Citibank Nigeria Ltd. He was a Senior
Manager in the Financial Services Group of KPMG Professional Services and a Manager at
Arthur Andersen Nigeria. He also had a brief stint at the defunct Afribank Nigeria Plc as a
graduate trainee where he worked mainly in Banking Operations.
He is a Director of the Nigeria Interbank Settlement System Plc and FMDQ OTC Securities
Exchange as well as a member of the Sigma Educational Foundation, which focuses on
enhancing the quality of tertiary education system in Nigeria. Over the course of his sterling
career, he has garnered expertise in diverse areas of management including; financial and
risk management, treasury, performance management, strategy design and execution,
information technology and compliance. Sola is married with children and enjoys listening to
music, especially African folk music.
BOARD OF DIRECTORS
Omatseyin Ayida
Non–Executive Director
BGNC BARAC
Dr Adesola Adeduntan
Non-Executive Director
104
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Oluwande Muoyo was appointed to the Board of FBN Holdings Plc in 2016. She brings to the
Board well over three decades of post-professional qualification experience in the private
and public sectors, with key strengths in policy formulation, relationship management and
business development. She is a Chartered Accountant and Banker and past Honourable
Commissioner for Budget and Planning in Ogun State.
Prior to this appointment, she had worked with Stanbic IBTC Bank for over 22 years, in
various parts of the bank, including Financial Control, Treasury and Financial Services,
Trade Finance and Corporate Banking. Oluwande holds a BSc degree in Accounting from
the University of Lagos. She started her professional career with the international firm,
PricewaterhouseCoopers. A Fellow of both the Institute of Chartered Accountants of Nigeria
and the Chartered Institute of Taxation of Nigeria, Oluwande has acquired competencies and
skills in public financial management, banking, budgeting, planning, auditing and taxation.
Her past Directorships include the Governing Board of the International Crop Research
Institute for the Semi-Arid Tropics. Oluwande has attended many training programmes
including Strategic Marketing Management at Harvard Business School and Advanced
Management Programme at the Lagos Business School. Oluwande is married with children
and enjoys walking, cycling and playing golf.
Cecilia Akintomide,
OON, joined the Board of FBN Holdings Plc in 2016 and brings considerable
executive-level management experience. She was until recently, Vice President Secretary
General of the African Development Bank, where she was responsible for managing the
secretariat as well as shareholder relations involving 80-member states. She was also
responsible for the delivery of the work programmes of the Boards of Governors and
Directors, and the institution’s diplomatic relations. In addition, she was a member of the
Senior Management Coordination and Operations Committees and chaired the Committee
for the preparation of the annual meetings. Prior to this, Cecilia headed the public and
private sector financing legal services team, covering projects across Africa, and served as
Chief Counsel Institutional Aairs as well as Finance Counsel.
She brings to the Board of FBNHoldings her wealth of management experience, particularly from
an international financial institution, and her legal experience spans over 31 years since her call to
Bar. She has expertise in corporate governance, institutional aairs, business reorganisations and
financing. She has practiced law in dierent jurisdictions, which includes business reorganisation
associate in the law firm of Weil, Gotshal & Manges in New York, and as a Junior Associate at
O. Thomas & Co., Lagos. She was a member of the United Nations Election Monitoring Team for
the 1994 presidential election in South Africa, won by Nelson Mandela.
She was conferred with the honour of Ocer of the Order of the Niger (OON) by the
Government of the Federal Republic of Nigeria for her meritorious contributions in the field
of international development in 2014. Cecilia is experienced in working and leading in a
multicultural and bilingual environment and is a frequent speaker at international events
on law, development and gender. Cecilia is a member of the Nigerian Bar and the New
York Bar.
BOARD OF DIRECTORS
Oluwande Muoyo
Independent Non-Executive Director
BGNC BARAC
BFIC SAC
Cecilia Akintomide, OON
Independent Non-Executive Director
105
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Oluseye Kosoko was appointed Company Secretary of FBN Holdings Plc in 2017. Prior to
his appointment, he was the Head, Legal (Nigeria and West Africa) and Company Secretary,
Standard Chartered Bank Nigeria Ltd. He is an experienced business executive and legal
practitioner with a versatile and diversified professional background.
Seye brings to the FBNHoldings his experience in Banking and Finance, Telecommunications,
Law teaching and practice and Taxation planning and advisory. He was the Managing Solicitor,
Henley Crankshaw Solicitors, prior to which he was the Chief Legal Ocer/Company Secretary,
Econet Wireless Nigeria Ltd (now Airtel Networks) with responsibility for the Legal, Regulatory
and Company Secretarial Group.
Seye has both Bachelor’s and Master’s degrees in Law from the University of Ife (now
Obafemi Awolowo University) and the University of Lagos, respectively. He was called to
the Nigerian Bar in 1985. Seye began his career as Counsel at Professor A.B. Kasunmu’s
Chambers while he taught Law at the Lagos State University. He was a Tax Consultant at
Price Waterhouse and General Counsel/Company Secretary/Head of Compliance/Head of
External Aairs at Citibank Nigeria.
He served as an Advisory Board Member of the General Counsel Summit, Association of
Corporate Counsel from 2014-2018. He is a member of the Nigerian Bar Association and
the International Bar Association. He is a member of the Governing Council of the Federal
University of Technology, Akure. He loves reading, community activity, music, sports and
enjoys meeting people. Seye is married with children.
BOARD OF DIRECTORS
Oluseye Kosoko
Company Secretary
106
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
ATTENDANCE AT BOARD MEETINGS
In 2018, the Board of FBNHoldings met eight times. The record of attendance is provided below:
Names
Dr Oba Otudeko, CFR
U.K. Eke, MFR
Oye Hassan-Odukale, MFR
Omatseyin Ayida
Chidi Anya
Dr Hamza Wuro Bokki
‘Debola Osibogun
Oluwande Muoyo
Cecilia Akintomide,
OON
Dr Adesola Adeduntan
January
30
July
26
April
26
November
1
March
23
October
24
May
14
December
18
BOARD COMMITTEE REPORTS
Board and Committee Governance Structure
The Board carries out its oversight function through its
Standing Committees, each of which has a charter that
clearly defines its purpose, composition and structure,
frequency of meetings, duties, tenure and reporting lines
to the Board. The Board monitors these responsibilities for
eective coverage of, and control over, the operations of
the Group. In line with best practice, the Chairman of the
Board does not sit on any of the Committees.
BOARD OF DIRECTORS
107
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
‘Debola Osibogun
Chairman
Names
‘Debola Osibogun
Dr Hamza Wuro Bokki
Oluwande Muoyo
Omatseyin Ayida
April
25
January
29
October
23
July
25
March
20
December
13
Attendance at the Board Governance and Nomination Committee meetings in 2018
In 2018, the Committee met six times. The record of attendance is provided below:
identify individuals for consideration for Board
appointment and present to the Board for ratification;
recommend potential appointment and re-election of
Directors (including the GMD) to the Board, in line
with FBNHoldings approved Director selection criteria;
ensure the Board composition includes at least two
Independent Directors who meet the independence
criteria as defined in CBN circular;
make recommendations on the amount and structure
of the remuneration of the Chairman and other
Non-Executive Directors to the Board for ratification;
review and make recommendations to the Board on
all retirement and termination payment plans to the
Executive Directors;
ensure proper disclosure of the Directors’ remuneration
to the stakeholders;
ensure compliance with the regulatory requirements
and other international best practices in corporate
governance;
Key responsibilities
The responsibilities of the Committee are to:
develop and maintain an appropriate corporate
governance framework for the Group;
develop and maintain an appropriate policy on remuneration
of Directors, both Executive and Non-Executive;
nominate new Directors to the Board;
succession plan for the Board of Directors and key
Management sta across the Group;
nominate and endorse Board appointments for the
subsidiary companies;
recommend Directors’ remuneration for the Group;
oversee Board performance and evaluation within the
Group;
BOARD COMMITTEES
FBNHoldings has the following constituted Board Committees:
BOARD GOVERNANCE AND NOMINATION COMMITTEE
Membership
� ‘Debola Osibogun
� Dr Hamza Wuro Bokki
� Oluwande Muoyo
� Omatseyin Ayida
108
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
review and approve amendments to the Group’s
Corporate Governance framework;
review and approve the corporate governance
disclosures to be included in the annual report;
ensure the performance evaluation of the GMD is
performed by the Board on an annual basis and formal
feedback provided to the GMD;
nominate independent consultants to conduct an
annual review and appraisal of the performance of the
Board and make recommendations to the Board in this
regard. This review and appraisal will cover all aspects
of the Board’s structure, composition, responsibilities,
individual competencies, operations, role in strategy
setting, oversight over corporate culture, monitoring
role and evaluation of Management performance and
stewardship towards shareholders;
evaluate the performance of the Board Committees
and Boards of subsidiary companies on an annual
basis. The Committee may utilise the service of the
independent consultant approved by the Board for the
annual board appraisal as it deems fit. The evaluation
process will be in line with the Groups Evaluation
policy;
perform such other matters relating to the operations
of the Group as may be specifically delegated to the
Committee by the Board;
evaluate the role of the Board Committees and Boards
of subsidiary companies, and ratify the performance
appraisals of the Executive Directors as presented by
the GMD; and
ensure compliance with the SEC, CBN and FRCN
Codes of Corporate Governance and other global best
practices on corporate governance.
BOARD COMMITTEES
109
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Names
Oluwande Muoyo
‘Debola Osibogun
Omatseyin Ayida
Chidi Anya
March
22
July
17
April
12
January
23
October
16
Key Responsibilities
The responsibilities of the Committee are to:
ensure there is an ecient risk management
framework for the identification, quantification and
management of the business risks facing the Group;
evaluate the Group’s risk profile and the action plans
in place to manage the risk;
ensure the development of a comprehensive internal
control framework for the Group;
review the Group’s system of internal control to
ascertain its adequacy and eectiveness;
evaluate internal processes for identifying, assessing,
monitoring and managing key risk areas, particularly:
market, liquidity and operational risks; the exposures
in each category, significant concentrations within
those risk categories, the metrics used to monitor the
exposures and Management’s views on the acceptable
and appropriate levels of those risk exposures;
review the independence and authority of the Risk
Management function;
review the Group’s legal representation letter presented
to the external auditors and discuss significant
items, if any, with the Company Secretary;
receive the decisions of the Statutory Audit Committee
on the statutory audit report from the Company
Secretary and ensure its full implementation; and
assess and confirm the independence of the statutory
auditor annually. The report of this assessment should
be submitted to the Board and the Statutory Audit
Committee.
BOARD COMMITTEES
Oluwande Muoyo
Chairman
BOARD AUDIT AND RISK ASSESSMENT COMMITTEE
Membership
� Oluwande Muoyo
� ‘Debola Osibogun
� Omatseyin Ayida
� Chidi Anya
Attendance at the Board Audit and Risk Assessment Committee meetings in 2018
In 2018, the Board Audit and Risk Assessment Committee met five times. The record of attendance is provided below:
110
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Names
Oye Hassan-Odukale, MFR
Cecilia Akintomide, OON
Dr Hamza Wuro Bokki
U.K. Eke,
MFR
April
16
October
16
July
23
January
23
December
11
Key Responsibilities
The responsibilities of the Committee are to:
understand, identify and discuss with the Management
the key issues, assumptions, risks and opportunities
relating to the development and implementation of
the Group’s strategy;
participate in an annual strategy retreat for the Board
and Management, ensuring the Board retains sucient
knowledge of the Group’s business and the industries
in which it operates to provide strategic input and
identify any critical strategic discontinuities in the
Management’s assumptions and planning premises;
critically evaluate and make recommendations to the
Board for approval of the Group’s business strategy,
at least annually;
periodically engage the Management and act as a
sounding board on strategic issues;
regularly review the eectiveness of the Group’s
strategic planning and implementation monitoring
process;
review and make recommendations to the Board
regarding the Group’s investment strategy, policy and
guidelines, its implementation and compliance with
those policies and guidelines, and the performance of
the Group’s investments portfolios;
oversee the Group’s investment planning, execution
and monitoring process;
oversee the long-term financing options for the
Group;
review the Group’s financial projections as well
as capital and operating budgets, and review on a
quarterly basis with the Management, the progress
of key initiatives, including actual financial results
against targets and projections;
review and recommend for Board approval the Group’s
capital structure which should not be limited to
mergers, acquisitions, business expansions, allotment
of new capital, debt limits and any changes to
the existing capital structure;
recommend for Board approval the Group’s dividend
policy, including nature and timing; and
ensure an eective tax policy is implemented.
BOARD COMMITTEES
Oye Hassan-Odukale, MFR
Chairman
BOARD FINANCE AND INVESTMENT COMMITTEE
Membership
� Oye Hassan-Odukale, MFR
� Cecilia Akintomide, OON
� Dr Hamza Wuro Bokki
� U.K. Eke,
MFR
Attendance at the Board Finance and Investment Committee meeting in 2018
In 2018, the Board Finance and Investment Committee met five times. The record of attendance is provided below:
111
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GROUP EXECUTIVE COMMITTEE GEC
Key Responsibilities
The responsibilities of the Committee are to:
review and ratify the quarterly and annual financial
statements;
review and approve the annual internal audit plan
encompassing all the Group’s auditable activities and
entities and on a quarterly basis, discuss the status of
implementation of the internal audit plan;
annually review and reassess the internal audit
division’s responsibilities and functions, making
changes as necessary, and arrange an independent
evaluation of the internal audit function’s activities
every three years in line with SEC Code of Corporate
Governance; and
oversee the establishment of whistleblowing
procedures for the receipt, retention, and treatment
of complaints received by the Group regarding
accounting, internal controls, auditing matters,
unethical activity and breaches of the corporate
governance code, and ensure confidentiality and
anonymity of the submissions received regarding such
complaints.
BOARD COMMITTEES
U.K. Eke, MFR
Chairman
The role of the Committee is to ensure implementation
and alignment of the Group’s strategy. The GEC is a
management committee that meets quarterly, or as may
be required. In 2018, the Committee met five times.
Membership
The GMD of FBNHoldings serves as the Chairman while
other members are:
MD/CEO, First Bank of Nigeria Limited and
Subsidiaries;
MD/CEO, FBNQuest Merchant Bank Limited;
MD/CEO, FBNQuest Capital Limited;
MD/CEO, FBN Insurance Limited;
MD/CEO, FBN Insurance Brokers Limited;
MD/CEO FBN General Insurance Limited;
Chief Financial Ocer, FBN Holdings Plc;
Company Secretary, FBN Holdings Plc;
Head, Strategy and Corporate Development,
FBN Holdings Plc;
Chief Financial Ocer, First Bank of Nigeria Limited;
and
Chief Risk Ocer, First Bank of Nigeria Limited.
112
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
BOARD COMMITTEES
STATUTORY AUDIT COMMITTEE
Section 359 (3) of the Companies and Allied Matters Act) requires every public company to establish a Statutory
Audit Committee (SAC) composed of an equal number of Directors and representatives of its shareholders, subject to a
maximum of six members of the SAC.
Shareholder Representative’s Profiles
Ismail Adamu was appointed member of the Audit Committee in May 2016. A Fellow of the
Chartered Institute of Credit Administration and an Honorary Senior Member of the Chartered
Institute of Bankers, Ismail holds a Master’s degree in Banking and Finance from Bayero University
Kano. He has over 33 years’ banking experience which cuts across Banking Operation, Credit
Administration, Mortgage Banking, Business Development, Management, Finance and Investment.
While in the banking service, he held several positions including pioneer Bank Manager, Guyuk
Branch, Adamawa; Branch Manager, Murtala Mohammed Way Branch, Kano; and Relationship
Manager, Corporate Banking Group, Union Bank Plc.
He is skilled in general banking practices, internal control and internal audit. He is the Executive
Director of Adona Property Support Services Ltd. Ismail is a purposeful and result-oriented leader
with excellent interpersonal skills and professional ethical conduct. Ismail is married with children
and enjoys music and football.
Christopher Okereke was appointed member of the Audit Committee in May 2016. Chris has
over 18 years’ experience with the Securities and Exchange Commission, where he initiated and
extensively contributed to policy formulation for the Regulation of the Nigerian Capital Market and
initiated and collaborated with others in developing and implementing the strategic and structural
agenda for the Commission.
He spent about 12 years as Audit Manager, Chief Accountant/Company Secretary, Finance
Controller and Senior Auditor in dierent investment and auditing companies. He was also a
lecturer at the Federal Polytechnic, Unwana, Afikpo. He was the Honourable Commissioner,
Economic Empowerment and Poverty Reduction, Ebonyi State from 2007-2009. He served as a
member of several committees including Technical Committee of National Council on Privatisation
and Committee on Guidelines for Universal Banking in Nigeria.
He holds a Doctor of Philosophy degree in Economics from the University of Lagos, a Fellow
of the Institute of Chartered Accountants of Nigeria; an Associate Member of the Institute of
Chartered Stockbrokers and a Member of American Economics Society. Chris is a Principal Partner
at Onyejekwe Okereke & Co and Director, KST Investment & Financial Services Ltd. Christopher is
married with children and enjoys reading and playing golf.
Ismail Adamu
Chairman, Statutory Audit Committee
Christopher Okereke
113
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Kolawole Durojaiye was appointed Shareholders’ Representative of the Statutory Audit
Committee of FBN Holdings Plc in May 2018. Prior to his appointment, he had worked with the
Central Bank of Nigeria, Lagos for close to 14 years where he rose to the position of Director.
He was an Assistant Manager at KPMG, Nigeria between 1986 and 1996, leading teams to
commercial and merchant banks, finance companies and other financial institutions. Kolawole
brings to the Committee 25 years’ experience in Audit and Banking.
He was part of the team that codified the Nigeria Microfinance Policy Framework following
the international study tour of countries with successful Microfinance history and was fully
involved in the implementation as Secretary, Joint CBN-NDIC Consultative Committee on
Microfinance Banking. A Fellow of the Institute of Chartered Accountants of Nigeria, Kolawole
has attended several trainings and conferences; he participated in the 6th Global Housing
Finance Conference by the World Bank Group, Washington DC, USA in May 2014 and led the
Specialist Team that formulated the recent Reforms for Primary Mortgage Banks in Nigeria.
Kolawole is married with children.
Financial Literacy on the Statutory Audit Committee
All the shareholder representatives on the SAC are financially literate and knowledgeable in internal control processes, as
may be gleaned from their educational qualifications detailed below.
Names
Ismail Adamu
Christopher Okereke
Kolawole Durojaiye
Oye Hassan-Odukale,
MFR ***
Chidi Anya ***
Cecilia Akintomide,
OON ***
S/N
1.
2.
3.
4.
5.
6.
Educational Qualification
FCICA, MSc Banking & Finance, HND
(Banking & Finance)
FCA, MNI, MSc (Econs), PhD (Econs)
FCA, MBF, BSc (Agric Econs)
MBA Finance, BBA, BSc (Bus Admin)
MILD. BL, LLB
LLM, BL, LLB
Role
Chairman
Member
Member
Member
Member
Member
Status
Shareholder Representative
Shareholder Representative
Shareholder Representative
Non-Executive Director
Non-Executive Director
Independent Non-Executive
Director
Summary of the educational qualifications of the Statutory Audit Committee Members:
*** Please refer to the Leadership section for the profile of the Directors.
BOARD COMMITTEES
Kolawole Durojaiye
114
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Independence of the Statutory Audit Committee
The independence of the SAC is fundamental to upholding
public confidence in the reliability of the SAC’s reports and
the Company’s financials. The Committee has access to
the external auditors to seek explanations and additional
information.
Names
Ismail Adamu
Christopher Okereke
*Kolawole Durojaiye,
FCA
Oye Hassan-Odukale, MFR
Chidi Anya
Cecilia Akintomide,
OON
*Kolawole Durojaiye, FCA, was elected at the Annual General Meeting of May 15, 2018
March
23
September
25
July
3
December
10
Attendance at Statutory Audit Committee Meeting
In 2018, the Statutory Audit Committee met four times. The record of attendance is provided below:
The Responsibilities of the Committee
The statutory duties and role of the SAC are clearly
encapsulated in Section 359 (3) and (4) of CAMA. In
addition, the various Codes of Corporate Governance, the
CBN and SEC Codes, set out the corporate governance
role and responsibilities of the SAC to include the following:
ascertain whether the accounting and reporting
policies of the Company are in accordance with legal
requirements and agreed ethical practices;
review the scope and planning of audit requirements;
review the findings on Management matters in
conjunction with the external auditor and departmental
responses thereon (Management letter);
keep under review the eectiveness of the Company’s
system of accounting and internal control;
make recommendations to the Board regarding
the appointment, removal and remuneration of the
external auditors of the Company, ensuring the
independence and objectivity of the external auditors
and making sure that there are no conflicts of interest
which could impair the independent judgement of the
external auditors;
authorise the internal auditor to carry out
investigations into any activity of the Company which
may be of interest or concern to the committee; and
assist in the oversight of the integrity of the
Company’s financial statements, establish and develop
the internal audit function.
Going Concern
On the recommendation of the SAC, the Board annually
considers and assesses the going concern basis for the
preparation of the financial statements at year-end. The
Board views the Company as a going concern for the
foreseeable future.
External Auditors
The external auditors for the 2018 financial year was
Messrs.’ PricewaterhouseCoopers (PwC).
FBNHoldings is in full compliance with the Code as
its external auditors were appointed as sole auditors
commencing 2014 financial year and have been retained
for five years. They are subject to re-appointment annually
and will be considered for re-appointment at the 2018
Annual General Meeting.
BOARD COMMITTEES
The Committee is composed of six members as statutorily
required, three are shareholder representatives, including the
Chairman. The shareholder representatives are independent
and answerable to the shareholders.
The other three members are; two Non-Executive Directors
and an Independent Director. This composition underpins
the independence of the SAC from executive influence.
N/A
115
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
2018 Audit Fees
The audit fees paid by FBNHoldings to the external auditors
for the 2018 statutory audit was N25mn. There were no
non-audit services rendered to the Company during the
year.
Prohibition of Insider Dealings
In line with Section 17.2 of the Amendment to the Listing
Rules of the Nigerian Stock Exchange, structures have been
put in place to ensure compliance and to communicate
closed periods to insiders as well as the Nigerian Stock
Exchange. The Registrars ensure that within this period,
Directors, persons discharging managerial responsibility,
advisers and other persons with access to insider
information or their connected persons are not allowed to
deal in the securities of FBNHoldings.
Succession Planning
The Board Governance and Nomination Committee is tasked
with the responsibility for the Group’s succession planning
process. The Committee identifies critical positions on the
Board and Executive Management level that are deemed
important to the achievement of the Company’s business
objectives and strategies and have a significant impact
on the operations of the Group. These critical positions
include:
Board Chairman
Non-Executive Directors
Executive Management
Subsidiary Managing Directors
Subsidiary Board Chairmen
Thereafter, the Committee defines the competency
requirements for the key positions. The requirements provide
a blueprint of what is needed to succeed at each position
and include the required knowledge, skills, attitudes, ethics,
values and code of conduct. The competency requirements
are identified and defined in line with the future needs
and strategic objectives of the Group. This provides the
basis to assess potential successors for the identified key
positions, skills gaps and developmental needs.
Upon conclusion of this phase, the Committee thereafter
identifies a talent pool, following which the skills and
competency gaps are determined.
For the Chairman’s position, the existing Chairman of the
Board will articulate the developmental needs of each
individual Non-Executive Director on the Board towards
developing a plan to bridge that gap and position them as
potential successors.
For Non-Executive Directors, the Governance Committee
will periodically undertake a careful analysis of the existing
Board’s strengths and weaknesses, skills and experience
gaps based on the exit of Directors from the Board and
current deficiencies, while noting the Company’s long-term
business strategy and plans. Based on this assessment,
the Governance Committee shall define the skills and
competency profile that reflect the needs of the Board.
For Executive Management positions, the Governance
Committee in conjunction with the GMD, shall note and
review the skills gap of the possible successors against
expected competency requirements.
BOARD COMMITTEES
116
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Oluseye Kosoko
Company Secretary
Dr Oba Otudeko, CFR
Group Chairman
Oluseye Kosoko
Company Secretary
Dr Oba Otudeko, CFR
Group Chairman
Oluseye Kosoko
Company Secretary
Dr Oba Otudeko, CFR
Group Chairman
Oluseye Kosoko
Company Secretary
Dr Oba Otudeko, CFR
Group Chairman
STATEMENT OF COMPLIANCE
STATEMENT OF COMPLIANCE WITH THE NIGERIAN
STOCK EXCHANGE (NSE) LISTING RULES ON
SECURITIES TRADING POLICY
STATEMENT OF COMPLIANCE WITH NIGERIAN STOCK
EXCHANGE ON LISTING ON THE PREMIUM BOARD
In line with Section 14 of the Nigerian Stock
Exchange (NSE) Amendments to the Listing Rules
(Rules), we wish to state that we have adopted a
code of conduct regarding securities transactions
by our Directors and it is in line with the required
standard set out in the Rules.
The FBNHolding’s Securities Trading Policy (Policy) is
embedded in the Board-approved Group Disclosure
Policy and having made specific enquiries from all
our Directors regarding compliance with the Policy,
we hereby confirm to the best of our knowledge
that our Board of Directors are compliant with
FBNHoldings’ Securities Trading Policy and the
Rules on Securities Trading.
In compliance with Section 4 of the Rules of
the Nigerian Stock Exchange on Listing on the
Premium Board, we wish to state that the SEC
Code of Corporate Governance (Code) governs the
operations of FBN Holdings Plc.
We hereby confirm to the best of our knowledge
that FBNHoldings is in full compliance with the
Code.
STATEMENT OF COMPLIANCE WITH SECTION 34 OF
THE SEC CODE OF CORPORATE GOVERNANCE
STATEMENT OF COMPLIANCE WITH THE CENTRAL BANK
OF NIGERIA (CBN) AND SECURITIES AND EXCHANGE
COMMISSION’S (SEC) CODES OF CORPORATE GOVERNANCE
In compliance with Section 34 of the SEC Code
of Corporate Governance (SEC Code), we hereby
confirm to the best of our knowledge the following:
That FBNHoldings has in place eective
internal audit functions and the Risk
Management Control and Compliance system
operates eciently and eectively.
That FBNHoldings’ sustainability initiatives are
in alignment with Part D of the SEC Code.
That FBNHoldings’ related party transactions
are being monitored in compliance with the
provisions of the SEC Code.
In compliance with Section 4.2 of the Listings
Rules of the Nigerian Stock Exchange on Listing on
the Premium Board, we wish to state that the CBN
and SEC Codes of Corporate Governance (Code)
governs the operations of FBN Holdings Plc.
We hereby confirm that to the best of our
knowledge we are in compliance with the Codes.
117
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Commitment to High Ethical Standards
Whistleblowing is the process of raising concerns about wrongdoing, an illegal act or an unlawful
conduct e.g. fraud, corruption, bribery or theft. The Board of FBN Holdings Plc attaches priority
to high ethical standards and probity, and expects all its employees as well as ocers to do the
same in all their dealings.
WHISTLEBLOWING PROCEDURES
The Board recognises that there may be instances where
ethical guidelines may be violated. The Whistleblowing
Policy (‘Policy’) was adopted by the Group to ensure such
violations receive attention from the appropriate authorities.
The Policy provides a channel for the employees’ of the
Group and other relevant stakeholders to confidentially
raise concerns about workplace malpractices to enable
the relevant authorities investigate and deal with such
malpractice in a manner consistent with the Group’s
policies and relevant regulations.
This Policy complies with the requirements of various
regulatory authorities with oversight on the activities of the
Group, including the CBN ‘Guidelines for Whistleblowing
for Banks and other Financial Institutions in Nigeria’.
The Policy
The Policy applies to both internal whistleblowers (sta,
contract employees, Management or Directors) and
external whistleblowers (customers, service providers,
applicants, auditors, consultants, regulators and other
stakeholders) and it is intended to encourage sta and
other relevant stakeholders to report perceived unethical
or illegal conduct of employees, Management, Directors
and other stakeholders within the Group to appropriate
authorities without fear of harassment, intimidation,
victimisation or reprisal of any kind for raising concern(s)
under the Policy.
Subsidiaries within the Group have a localised version of
the whistleblowing policy and provide channels through
which whistleblowers can report perceived acts of
impropriety, unethical or illegal conduct. Such reports
should not be based on mere speculation, rumours and
gossips, but on factual knowledge. The full version of the
Group Whistleblowing Policy can be viewed on our website:
www.fbnholdings.com.
The Culture of Whistleblowing
To entrench the culture of whistleblowing among sta,
emails and flyers on the advantages of whistleblowing, and
the channels through which the whistleblowers can report
perceived act of impropriety, unethical or illegal conduct
are publicised. The provisions of the Whistleblowing Policy,
and the Group’s core values, encourage sta to speak up
without fear and with the assurance that such reported
cases will be thoroughly investigated by the Management
and the findings will be communicated to the parties
involved.
Internal Whistleblowing Procedure
Internal whistleblowing involves members of sta within
the Group raising concerns about unethical conduct.
An internal whistleblower can report perceived acts of
impropriety, unethical or illegal conduct through any of
the following channels, either declaration, in confidence
or anonymously:
Formal letter to the Group Managing Director
FBN Holdings Plc or the Head, Internal Audit,
FBN Holdings Plc
Call or text a dedicated phone number 0812 716 6777;
0817 597 8505
Internal instant messaging platform
Dedicated email address
([email protected])
If the concern is reported to a sta other than the GMD
or the Head, Internal Audit, the recipient is required to
immediately forward same to the Head, Internal Audit with
the GMD, FBN Holdings Plc in copy.
118
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
WHISTLEBLOWING PROCEDURES
Regulator
Central Bank of Nigeria (CBN)
Nigeria Deposit Insurance Corporation (NDIC)
Securities and Exchange Commission (SEC)
Nigeria Insurance Commission (NAICOM)
National Pension Commission (PENCOM)
Nigerian Stock Exchange (NSE)
Address
Central Business District. P.M.B. 0187 Garki Abuja.
+234 9 462 39246
[email protected].ng
Plot 447/448 Constitution Avenue
Central Business District P.M.B. 284, Garki Abuja
+234 (0) 9460 1380-9
[email protected]g.ng, [email protected]
SEC Towers, Plot 272, Samuel Adesujo Ademulegun
Street, Central Business District P.M.B. 315 Garki Abuja.
+234 (0) 94621159
[email protected].ng
Plot 1239, Ladoke Akintola Boulevard,
Garki II, P.M.B. 457 Garki, Abuja, Nigeria.
+234 (0) 92915101
[email protected].ng
Plot 174, Adetokunbo Ademola Crescent, Wuse, Abuja,
+234 (0) 94603930
[email protected].ng
Stock Exchange House
2-4, Customs Street, P. O. Box 2457 Marina, Lagos
+234 (0) 14489373, 0817243061, 08120160463
[email protected]
S/N
1.
2.
3.
4.
5.
6.
If the concerns aect the Head, Internal Audit, the GMD
is notified and when a Director is involved, such concern
shall be directed to the Chairman of the Board Audit and
Risk Assessment Committee.
The concern(s) shall be presented in the following format:
Background of the concerns with relevant dates;
Reason(s) why the whistleblower is particularly
concerned about the situation.
Disciplinary measures in line with the sta handbook shall be
taken against any employee that receives a whistleblowing
report and fails to act or an internal whistleblower that
acts out of malice.
External Whistleblowing Procedure
External whistleblowers are non-members of sta such
as contractors, service providers, shareholders, depositors,
analysts, consultants, job applicants or members of the
public. An external whistleblower may raise concerns
through any of the following channels, either by declaration,
in confidence or anonymously:
Formal letter to the Group Managing Director,
FBN Holdings Plc or Head, Internal Audit FBN Holdings Plc;
Dedicated phone number 0817 597 8505;
Dedicated email address;
[email protected];
Protection and Compensation for Whistleblowers
The Group’s Policy protects whistleblowers who disclose
concerns, provided the disclosure is made:
With the reasonable belief that it is intended to show
malpractice or impropriety;
To an appropriate person or authority; and
In good faith without malice or mischief.
The Group will not subject a whistleblower to any
punishment and where necessary, compensation of
whistleblowers that have suered loss shall be at the
discretion of the Management taking into consideration
the appropriate regulatory guidance on compensation of
whistleblowers which may be issued from time-to-time.
Wider Disclosure
A whistleblower, whether internal or external, may elect to
disclose directly to any of the following regulatory bodies
that have oversight on the activities of FBN Holdings Plc:
119
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBNHoldings two-year analysis of whistleblowing cases
WHISTLEBLOWING PROCEDURES
Probable irregularities and non-compliance
with the policies of the Group
Disciplinary measures
Cases under investigation
Unsuccessful attempts by outsiders to lure
members of sta into committing fraud
Cases investigated but found to be untrue
0 4
8
2 6
10
2018 22
2017 32
Whistleblowing cases
*
*includes all subsidiaries within the Group
120
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
DIRECTORS’ REPORT
The Directors present their report on the aairs of FBN Holdings Plc (“the Company”) together with the
financial statements and auditors' report for the period ended 31 December 2018.
a. Legal Form
The Company was incorporated as a private limited liability company in Nigeria in 2010 and was converted to a public
company in September 2012, when it commenced operations. The Company’s shares were listed on the floor of the Nigerian
Stock Exchange on 26 November 2012 after the shares of First Bank of Nigeria Plc were delisted on 23 November 2012.
b. Principal Activity and Business Review
The principal activity of the Company is the raising and allocation of capital and resources.
The Company is also responsible for coordinating Group-wide financial reporting to shareholders and managing shareholder,
investor and external relations to the Group and the task of developing and coordinating implementation of Group
strategies.
The Company consists of three groups namely:
Commercial Banking Group comprising First Bank of Nigeria Ltd, FBNBank (UK) Ltd, First Pension Custodian Nigeria Ltd, and
FBNBank DR Congo, FBNBank Ghana, FBNBank Sierra Leone, FBNBank Guinea, FBNBank Gambia and FBNBank Senegal.
Merchant Banking and Assets Management Group comprising FBNQuest Merchant Bank Limited, FBNQuest Capital
Ltd, FBNQuest Securities Ltd, FBNQuest Funds Ltd and FBNQuest Trustees Ltd.
Insurance Group comprising FBN Insurance Ltd, FBN General Insurance Ltd and FBN Insurance Brokers Ltd.
The Company prepares separate and consolidated financial statements.
121
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
DIRECTORS’ REPORT
DIRECTORS’ SHAREHOLDINGS AS AT 31 DECEMBER 2018
Name
Dr Oba Otudeko, CFR
TOTAL
Oye Hassan-Odukale, MFR
TOTAL
Chidi Anya
Dr Hamza Wuro Bokki
‘Debola Osibogun
Omatseyin Ayida
TOTAL
U.K. Eke, MFR
Dr Adesola Adeduntan
Oluwande Muoyo
Cecilia Akintomide, OON
Entities
Metropolitan Trust Nig. Ltd
Honeywell Sta Ct & Cs
Orbit International Ltd
Springwater Ltd
Landbond Ltd
Coral Products Ltd
Network Securities Ltd
Lac Investments Ltd
Haskal Holdings Ltd
Oho Investments Ltd
Leadway Capital & Trusts Ltd
Leadway Assurance Co. Ltd
Muonta And Guonta Ltd
Alemaje and Company Ltd
Apricot Securities Ltd
Jurewa Investment Ltd
Clayder Ltd
Direct
5,895,264
5,895,264
1,854,003
1,854,003
-
5,389,061
1,171,612
1,100,000
1,100,000
22,453,436
18,871,689
771,481
5,500
Direct
5,895,264
5,895,264
1,854,003
1,854,003
-
3,389,061
1,171,612
1,100,000
1,100,000
14,575,178
10,942,189
674,043
5,500
S/N
1
2
3
4
5
6
7
8
9
10
Indirect
113,079,843
44,188,168
70,206,271
111,663,659
72,138,423
52,394,669
68,404,806
532,075,839
112,552
13,229,148
24,223,469
2,175,578
266,697,449
306,438,196
52,168
-
-
-
4,018,131
9,914,780
79,994,505
93,927,416
-
-
-
798,596
-
Indirect
113,079,843
44,188,168
70,206,271
111,663,659
72,138,423
52,394,669
68,404,806
532,075,839
112,552
1,467,506
28,723,469
2,175,578
266,697,449
299,176,554
52,168
-
-
-
-
-
-
-
-
-
-
798,596
-
2018 HOLDINGS 2017 HOLDINGS
c. Directors’ Shareholdings
The direct and indirect interests of Directors in the issued share capital of the Company as recorded in the register of
Directors’ shareholding or as notified by the Directors for the purposes of Sections 275 and 276 of the Companies and
Allied Matters Act and the listing requirements of the Nigerian Stock Exchange are noted as follows:
122
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
DIRECTORS’ REPORT
e. Directors’ Interests in Contracts
For the purpose of Section 277 of the Companies and Allied Matters Act, CAP C20 LFN 2004, none of the Directors
had direct or indirect interest in contracts or proposed contracts with the Company during the year.
f. Property and Equipment
Information relating to changes in property and equipment is given in Note 32 to the Accounts. In the Directors’ opinion,
the market value of the Company’s properties is not less than the value shown in the financial statements.
g. Shareholding Analysis
Shareholding Range Analysis as at 31 December 2018.
% Units
0.59
3.31
3.29
11.78
4.14
9.65
4.03
8.79
3.88
9.69
5.55
35.30
100.00
% Holders
24.06
40.91
14.23
17.24
1.77
1.45
0.17
0.14
0.02
0.01
0.00
0.00
100.00
% Units
212,330,313
1,188,571,073
1,181,566,058
4,229,261,089
1,486,200,326
3,464,795,921
1,444,799,335
3,154,847,892
1,392,579,662
3,478,532,596
1,991,286,018
12,670,522,508
35,895,292,791
No. of Holders
290,486
493,961
171,852
208,129
21,349
17,486
2,058
1,668
199
168
28
39
1,207,423
RANGE
1 - 1000
1001 - 5000
5001 - 10000
10001 - 50000
50001 - 100000
100001 - 500000
500001 - 1000000
1000001 - 5000000
5000001 - 10000000
10000001 - 50000000
50000001 - 100000000
100000001 - 35895292791
31 Dec 2017
N’m
13,715
9,382
(107)
9,275
9,275
-
-
-
-
9,275
31 Dec 2017
N’m
595,446
54,522
(9,040)
45,482
37,708
7,877
19,176
530
(3,620)
13,745
31 Dec 2018
N’m
13,649
9,440
(98)
9,342
9,342
-
-
-
-
9,342
31 Dec 2018
N’m
583, 477
65,288
(5,544)
59,744
59,667
9,221
33,621
764
668
15,393
GROUP COMPANY
Gross earnings
Profit before tax
Taxation
Profit for the year from continuing operations
Total profit for the year
Appropriation:
Transfer to statutory reserve
Transfer from statutory credit reserve
Transfer to contingency reserve
Transfer to non-controlling interest
Transfer to retained earnings reserve
d. Operating results
The Directors recommend for approval a dividend of N0.26 per share, amounting to N9,332,776,126. Highlights of the
operating results for the period under review are as follows:
123
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
h. Substantial Interest in Shares
According to the Register of Members as at 31 December 2018, there is no shareholder with up to 5% of the shares of
FBN Holdings Plc.
i. Donations and Charitable Gifts
The Company did not make any donations during the year ended 31 December 2018.
j. Human Resources
Employment of Disabled
It is the policy of the Company that there should be no discrimination in considering applications for employment
including those from physically challenged persons. All employees, whether or not physically challenged, are given equal
opportunities to develop.
In the event of members of sta becoming disabled, eorts will be made to ensure that their employment with the
Company continues and appropriate training arranged to ensure that they fit into the Company’s working environment.
k. Health, Safety and Welfare at Work
Health and safety regulations are in force within the Company’s premises and employees are aware of existing regulations.
The Company provides subsidy to all levels of employees for medical, transportation, housing, etc.
Fire prevention and fire-fighting equipment are installed in strategic locations within the Company’s premises.
The Company has a Group Life Assurance cover and operates a defined contributory pension plan in line with Pension
Reform Act 2014. It also operates Employees Compensation scheme (which replaced the Workmen Compensation
scheme) in line with Employee’s Compensation Act 2011 for the benefit of its employees.
l. Employee Involvement and Training
The Company ensures, through various fora, that employees are informed on matters concerning them. Formal and
informal channels are also employed in communication with employees with an appropriate two-way feedback mechanism.
In accordance with the Company’s policy of continuous development, training facilities are provided in a well-equipped
Training School. In addition, employees of the Company are sponsored to both local and foreign courses and trainings.
These are complemented by on-the-job training.
DIRECTORS’ REPORT
Shareholding Analysis as at 31 December 2018
Types of Shareholdings
Retail
Domestic Institutional
Foreign Institutional
Government–Related Holdings
% Holdings
51.92
32.97
14.68
0.43
100.00
Holdings
18,634,546,633
11,835,953,679
5,271,100,370
153,689,109
35,895,292,791
124
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
m. Auditors
The Auditors, Messrs. PricewaterhouseCoopers, have indicated their willingness to continue to act in that oce.
BY ORDER OF THE BOARD
Seye Kosoko
Company Secretary FRC/2013/NBA/00000002006
Lagos, Nigeria.
DIRECTORS’ REPORT
125
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
REPORT OF THE INDEPENDENT CONSULTANT TO THE
BOARD OF DIRECTORS OF FBN HOLDINGS PLC ON THEIR
APPRAISAL FOR THE YEAR ENDED 31 DECEMBER 2018
In compliance with the guidelines of Section 2.8.3 of the Central Bank of Nigeria (CBN) Code of Corporate
Governance for Banks and Discount Houses in Nigeria (‘the CBN Code’) and the Securities and Exchange
Commission (SEC) Code of Corporate Governance (‘the SEC Code’), FBN Holdings Plc. (‘FBNHoldings’ or
‘the Company’) engaged KPMG Advisory Services to carry out an appraisal of the Board of Directors (‘the
Board’) for the year ended 31 December 2018. The CBN Code mandates an annual appraisal of the Board
with specific focus on the Board's structure and composition, responsibilities, processes and relationships,
individual Director competencies and respective roles in the performance of the Board.
We have performed the procedures agreed with FBNHoldings in respect of the appraisal of the Board in
accordance with the provisions of the Central Bank of Nigeria (CBN). These procedures, which are limited
in scope but sucient for the Board's objectives in line with the CBN Code, are dierent in scope from an
external audit. Consequently, no opinion is expressed by us on the activities reported upon.
Our approach to the appraisal of the Board involved a review of the Company's board papers and minutes.
key corporate governance structures, policies and practices. This included the review of the corporate
governance framework and representations obtained from questionnaires, interviews with the members of
the Board and Senior Management.
On the basis of our review, the Company's corporate governance practices are largely in compliance
with the key provisions of the CBN Code. Specific recommendations for further improving the Bank's
governance practices have been articulated and included in our detailed report to the Board. These include
recommendations to continue the improvement in the disclosure process.
Olumide Olayinka
Partner, KPMG Advisory Services
FRC/2013/ICAN/00000000427
March, 2019
FINANCIAL STATEMENTS
Our financial statements for the year ended 31 December 2018 have been
prepared in accordance with the International Financial Reporting Standards (IFRS).
Income Statement >> 137 Statement of Cash flows >> 143 Notes to the Financial Statements >> 144
127
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
DIRECTORS AND ADVISORS
DIRECTORS
Dr. Oba Otudeko, CFR Group Chairman
U.K. Eke,
MFR Group Managing Director/CEO
Oye Hassan-Odukale,
MFR Non-Executive Director
Chidi Anya Non-Executive Director
Dr Sule Hamza Wuro Bokki Non-Executive Director
'Debola Osibogun Non-Executive Director
Omatseyin Ayida Non-Executive Director
Dr Adesola Adeduntan Non-Executive Director
Cecilia Akintomide,
OON Independent Non-Executive Director
Oluwande Muoyo Independent Non-Executive Director
COMPANY SECRETARY Oluseye Kosoko
REGISTERED OFFICE Samuel Asabia House
35 Marina
Lagos
AUDITOR PricewaterhouseCoopers
(Chartered Accountants)
Landmark Towers, Plot 5B, Water Corporation Road
Victoria Island, Lagos
REGISTRAR First Registrars & Investor Services Limited
Plot 2 Abebe Village Road
Iganmu
Lagos
BANKERS First Bank of Nigeria Limited
35 Marina
Lagos
FBNQuest Merchant Bank Limited
10 Ke Street, Ikoyi
Lagos
128
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
RESPONSIBILITY FOR ANNUAL FINANCIAL STATEMENTS
The Companies and Allied Matters Act and the Banks and Other Financial Institutions Act, require the Directors to prepare financial
statements for each financial year that gives a true and fair view of the state of financial aairs of the Group at the end of the year
and of its profit or loss. The responsibilities include ensuring that the Group:
i. keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Group and comply with
the requirements of the Companies and Allied Matters Act and the Banks and Other Financial Institutions Act;
ii. establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and
iii. prepares its financial statements using suitable accounting policies supported by reasonable and prudent judgements and
estimates, that are consistently applied.
The Directors accept responsibility for annual financial statements, which have been prepared using appropriate accounting policies
supported by reasonable and prudent judgements and estimates, in conformity with:
International Financial Reporting Standards (IFRS);
Financial Reporting Council of Nigeria (FRC) Act;
Guidelines for licensing and regulation of Financial Holding Companies in Nigeria;
Relevant circulars issued by the Central Bank of Nigeria;
the requirements of the Banks and Other Financial Institutions Act; and
the requirements of the Companies and Allied Matters Act.
The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of
financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Directors to indicate that FBN Holdings Plc will not remain a going concern for at least twelve
(12) months from the date of this statement.
U.K. Eke,
MFR
Group Managing Director/CEO
FRC/2013/ICAN/00000002352
129
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
STATEMENT OF COMPLIANCE WITH NIGERIAN STOCK EXCHANGE
NSE LISTING RULES ON SECURITIES TRADING POLICY
In line with Section 14.4 of the Nigerian Stock Exchange (NSE) Amendments to the Listing Rules (Rules), we wish to state that we
have adopted a code of conduct regarding securities transactions by our Directors and it is in line with the required standard set out
in the Rules.
The FBN Holdings Plc’s Securities Trading Policy (Policy) is embedded in the Board-approved Group Disclosure Policy and having made
specific enquiry of all our Directors regarding compliance with the Policy, we hereby confirm to the best of our knowledge that our
Board of Directors are in compliance with our Securities Trading Policy and the provisions of the Rules on Securities Trading.
Dr Oba Otudeko, CFR Oluseye Kosoko
Group Chairman Company Secretary
FRC/2013/ICAN/00000002365 FRC/2013/NBA/00000002006
130
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
REPORT OF THE AUDIT COMMITTEE
In compliance with Section 359 (6) of the Companies and Allied Matters Act 2004, we have reviewed the Audit Report for the year
ended 31 December 2018 and hereby state as follows:
1. The scope and planning of the audit were adequate in our opinion.
2. The accounting and reporting policies of the Company conformed to statutory requirements and agreed ethical practices.
3. The internal control was being constantly and eectively monitored.
4. The external auditors' management report received satisfactory response from Management.
5. The Committee reviewed the Audit Report on insider-related party transactions and is satisfied with their status as required
by Central Bank of Nigeria (CBN).
Dated 12 March 2019
Ismail Adamu
Chairman, Audit Committee
FRC/2019/CIBN/00000019286
Members of the Committee
Ismail Adamu
Christopher Okereke,
FCA, mni
Kolawole Durojaiye, FCA
Oye Hassan-Odukale, MFR
Chidi Anya
Cecilia Akintomide,
OON
131
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
INDEPENDENT AUDITOR'S REPORT TO THE
MEMBERS OF FBN HOLDINGS PLC
Report on the audit of the consolidated and separate financial statements
Our opinion
In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial
position of FBN Holdings Plc (“the Company”) and its subsidiaries (together “the Group”) as at 31 December 2018, and of their
consolidated and separate financial performance and their consolidated and separate cash flows for the year then ended in accordance
with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act, the Banks and Other
Financial Institutions Act and the Financial Reporting Council of Nigeria Act.
What we have audited
FBN Holdings Plc’s consolidated and separate financial statements comprise:
the consolidated and separate income statements for the year ended 31 December 2018;
the consolidated and separate statements of comprehensive income for the year ended 31 December 2018;
the consolidated and separate statements of financial position as at 31 December 2018;
the consolidated and separate statements of changes in equity for the year then ended;
the consolidated and separate statements of cash flows for the year then ended; and
the notes to the consolidated and separate financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our
report.
We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
132
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
Key audit matter How our audit addressed the key audit matter
The gross balance of loans and advances to customers
as at 31 December 2018 was N2,069billion for the
Group. The associated impairment reserve on loans and
advances to customers was N385billion.
The measurement of impairment losses is highly
subjective and involves the exercise of significant
judgements and the use of complex models and
assumptions. The significant judgements include:
determination of the Group’s definition of default;
determination of the criteria for assessing
significant increase in credit risk (SICR);
methodology used to determine the 12 month and
lifetime probability of default (PD) used in the
Expected credit loss (ECL) model.
estimation of Loss Given Default (LGD) by
considering collateral values and the haircut
adjustment as well as estimation of unsecured
LGD;
determination of the credit conversion factor for
undrawn loan commitments and the key inputs
used in determining the lifetime exposure at default
(EAD);
methodology for incorporating forward looking
macroeconomic information into impairment
parameters as well as determination of multiple
economic scenarios used in the ECL model;
This matter is considered a key audit matter in the
consolidated financial statements only.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated
and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
We adopted a substantive approach in assessing the allowance for
impairment made by management.
We applied a risk based target testing approach in selecting a sample of
customers for detailed checking of customer information and account
history, and assessing whether events or changes have occurred that
may aect the performance and the stage allocation of the loans.
For a sample of loans, we tested the collateral values used in the
computation of secured loss given default, by comparing the collateral
values to the results of valuation performed by Management’s
valuation experts. We assessed the competence and independence of
the Management’s experts.
We obtained the ECL models, and tested the appropriateness of the
historical data used. We used our credit modelling experts to perform
the following procedures on the ECL models:
Checked that the Group’s definition of default is consistent with
the requirements of the standard.
Checked the reasonableness of the criteria defined by the Group
as indicating a significant increase in credit risk. Staging rules were
reviewed by establishing that quantitative, qualitative and backstop
indicators are considered in classifying loans and advances to
customers into dierent stages as required under IFRS 9.
Examined the appropriateness of the probability of default (PD)
by checking that PDs were correctly assigned to each customer
based on the customer rating.
Examined the appropriateness of PD term structure by checking
the reasonableness of the adjustment factors.
Checked that individual maturities of selected facilities was
considered in the determination of the PD term structure used in
the ECL computation.
Evaluated the reasonableness of the Loss Given Default (LGD) assumptions
on haircut and unsecured recovery rates. We also re-performed the LGD
calculations to test for accuracy.
Impairment allowance on loans and advances to
customers (refer to Notes 2.9.1e, 9 and 23)
133
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
Key audit matter How our audit addressed the key audit matter
The balance of Liability on insurance contracts is
N34.2billion.
We focused on this balance because of the complexity
involved in the estimation process, and the significant
judgements that management makes in determining
the reserve for insurance contract liabilities.
Determination of the fair value of the contracts is an
area that involves the exercise of significant judgements
and use of key inputs and assumptions. Some of these
include operating assumptions in relation to uncertain
future outcomes such as mortality, morbidity, lapse
and surrender, and also economic assumptions relating
to inflation rates, expenses, return on investments,
discount rates and future growth rates. These are the
key inputs used to estimate these long-term liabilities.
An in-house actuary assesses on a periodic basis,
an estimate of the insurance liabilities for the
various portfolios. At the end of each financial year,
management employs the services of an external
actuary in the determination of its insurance liability
after considering the accuracy and integrity of data
used in the valuation.
This matter is considered a key audit matter in the
consolidated financial statements only.
Reviewed the appropriateness of the credit conversion factor used
in determining the exposure at default for loan commitments. We
also checked the accuracy of the methodology used in forecasting
the EAD term structure for a select sample of loans.
Tested sensitivity of the expected loss measurements to macro-
economic factors (forward-looking assumptions) and checked the
appropriateness of the multiple economic scenarios chosen as well
as their probability weights. The forward looking information was
checked to the data source.
Reviewed the IFRS 9 disclosures for reasonableness.
Our procedures included the following:
We reviewed the methodology and processes adopted by
management for making reserves in the books;
We tested controls around the reserving process and maintenance
of data for valuation of insurance contract liabilities;
We considered the validity of Management’s liability adequacy
testing which is a key test performed to check that the liabilities
are adequate. The work on the liability adequacy test included
assessing the reasonableness of the projected cash flows and
challenging the assumptions adopted in the context of company
and industry experience and specific product features;
We checked the data used in the valuation of the insurance
contract liabilities for consistency with internal records;
With the assistance of the auditor’s expert, we reviewed the
operating assumptions relating to mortality, morbidity lapse and
surrender, economic assumptions around inflation rates, expenses,
return on investments, discount rates and future growth rates;
We checked the figures disclosed in the financial statements to
the amounts stated in the actuarial valuation report; and
We reviewed the financial statement disclosures for reasonableness.
Impairment allowance on loans and advances to
customers (refer to Notes 2.9.1e, 9 and 23)
Valuation of liability on insurance contracts – (refer to
Notes 2.22, 5f and 39)
134
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
Other information
The Directors are responsible for the other information. The other information comprise Directors and Advisors, Corporate governance
report, Directors Report, Responsibility for annual financial statements, Statement of compliance with NSE listing rule on securities
trading policy, Report of the audit committee, Statement of value added, and Five-year financial summary (but does not include the
consolidated and separate financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s
report, and the other sections of the FBN Holdings Plc 2018 Annual Report, which are expected to be made available to us after that
date.
Our opinion on the consolidated and separate financial statements does not cover the other information and we do not and will not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
When we read the other sections of the FBN Holdings Plc 2018 Annual Report, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to those charged with governance.
Responsibilities of the Directors and those charged with governance for the consolidated and separate
financial statements
The Directors are responsible for the preparation of the consolidated and separate financial statements that give a true and fair view
in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act, the
Financial Reporting Council of Nigeria Act, the Banks and Other Financial Institutions Act, and for such internal control as the Directors
determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the Directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated and separate financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
and separate financial statements.
135
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the
audit. We also:
Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sucient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the eectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the
disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
Obtain sucient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated and separate financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
136
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
Report on other legal and regulatory requirements
The Companies and Allied Matters Act and the Banks and Other Financial Institutions Act require that in carrying out our audit we
consider and report to you on the following matters. We confirm that:
i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the
purposes of our audit;
ii) the Company has kept proper books of account, so far as appears from our examination of those books and returns adequate for
our audit have been received from branches not visited by us;
iii) the Company’s statement of financial position, income statement and statement of comprehensive income are in agreement with
the books of account;
iv) the information required by Central Bank of Nigeria Circular BSD/1/2004 on insider related credits is disclosed in Note 47 to the
consolidated and separate financial statements; and
v) contraventions of the Banks and Other Financial Institutions Act and relevant circulars issued by the Central Bank of Nigeria during
the year ended 31 December 2018 are disclosed in Note 49 to the consolidated and separate financial statements.
For: PricewaterhouseCoopers
Chartered Accountants
Lagos, Nigeria
Engagement Partner:
Samuel Abu 12 April 2019
FRC/2013/ICAN/00000001495
137
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
INCOME STATEMENT
GROUP COMPANY
Notes
31 December
2018
N'million
Restated
31 December
2017
N'million
31 December
2018
N'million
31 December
2017
N'million
Continuing operations
Interest income 7 434,410 469,586 2,163 2,215
Interest expense 8 (150,242) (138,064) - -
Net interest income 284,168 331,522 2,163 2,215
Impairment charge for losses 9 (86,911) (150,424) - -
Net interest income after impairment charge for losses 197,257 181,098 2,163 2,215
Insurance premium revenue 10 18,035 12,973 - -
Insurance premium revenue ceded to reinsurers (2,494) (2,739) - -
Net insurance premium revenue 15,541 10,234 - -
Fee and commission income 11 92,724 74,453 - -
Fee and commission expense 11b (17,330) (12,117) - -
Net gains on foreign exchange 12 32,636 21,062 52 8
Net gains/(losses) on investment securities 13 5,733 2,610 (21) 16
Net (losses)/gains from financial instruments at fair
value through profit or loss 14
(3,135) 11,117 575 -
Dividend income 15 2,312 2,053 10,840 11,437
Other operating income 16 3,233 3,901 40 38
Insurance claims (4,717) (4,041) - -
Personnel expenses 17 (93,395) (85,678) (904) (982)
Depreciation of property and equipment 32 (12,282) (11,600) (397) (398)
Amortisation of intangible assets 33 (5,336) (4,201) - -
Other operating expenses 18 (147,976) (134,799) (2,908) (2,952)
Operating profit 65,265 54,092 9,440 9,382
Share of profit of associates 23 430 - -
Profit before tax 65,288 54,522 9,440 9,382
Income tax expense 19a (5,544) (9,040) (98) (107)
PROFIT FOR THE YEAR FROM CONTINUING
OPERATIONS 59,744 45,482 9,342 9,275
Discontinued operations
Loss for the year from discontinued operations 31 (77) (7,774) - -
PROFIT FOR THE YEAR 59,667 37,708 9,342 9,275
Profit/(loss) attributable to:
Owners of the parent 58,999 41,328 9,342 9,275
Non-controlling interest 668 (3,620) - -
59,667 37,708 9,342 9,275
Earnings per share for profit attributable to
owners of the parent
Basic/diluted earnings/loss per share (in Naira): 52
From continuing operations 1.65 1.37 0.26 0.26
From discontinued operations (0.00) (0.22) - -
From profit for the year 1.65 1.15 0.26 0.26
138
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
STATEMENT OF COMPREHENSIVE INCOME
GROUP COMPANY
Notes
31 December
2018
N'million
31 December
2017
N'million
31 December
2018
N'million
31 December
2017
N'million
PROFIT FOR THE YEAR 59,667 37,708 9,342 9,275
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Net (losses)/gains on FVOCI debt assets
- Unrealised net (losses)/gains arising during the year (20,512) 16,208 (144) 144
- Net reclassification adjustments for realised net gains 5,776 659 - -
- Net changes in allowance on FVOCI financial instruments 983 - - -
Share of other comprehensive income of associates (5) (65) - -
Exchange dierence on translation of foreign operations 880 13,362 - -
Items that will not be reclassified to profit or loss
Net gains on FVOCI equity instruments 12,694 34,032 - 19
Remeasurement of defined benefit pension scheme 41 597 744 - -
Income tax relating to components of other comprehensive income 34 (1,934) (784) - -
Total Other comprehensive (loss)/income for the year (1,521) 64,156 (144) 163
COMPREHENSIVE INCOME FOR THE YEAR 58,146 101,864 9,198 9,438
Comprehensive income/(loss) attributable to:
Owners of the parent 57,654 105,123 9,198 9,438
Non-controlling interest 492 (3,259) - -
58,146 101,864 9,198 9,438
Total comprehensive income/(loss) attributable to owners of the
parent arises from:
Continuing operations 57,696 107,920 9,198 9,438
Discontinued operations (42) (2,797) - -
57,654 105,123 9,198 9,438
139
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
STATEMENT OF FINANCIAL POSITION
GROUP COMPANY
Notes
31 December
2018
N'million
Restated
31 December
2017
N'million
Restated
1 January
2017
N'million
31 December
2018
N'million
31 December
2017
N'million
ASSETS
Cash and balances with Central Banks 20 653,335 641,881 690,165 - -
Loans and advances to banks 22 863,435 742,929 444,871 16,639 7,585
Loans and advances to customers 23 1,683,813 2,001,223 2,083,894 110 108
Financial assets at fair value through profit or loss 24 109,162 83,713 46,711 3,427 -
Investment securities 25 1,663,821 1,248,608 1,050,588 7,079 9,842
Asset pledged as collateral 26 309,051 208,925 197,420 - -
Other assets 27 112,362 132,731 47,786 292 9,011
Investment properties 28 515 1,993 3,003 - -
Investments in associates accounted for using
the equity method 29 625 1,357 1,114 - -
Investment in subsidiaries 30 - - - 242,395 242,395
Property and equipment 32 91,515 88,263 88,315 382 680
Intangible assets 33 16,134 16,211 15,328 - -
Deferred tax assets 34 25,558 18,554 17,278 - -
5,529,326 5,186,388 4,686,473 270,324 269,621
Assets held-for-sale 31 38,990 50,149 50,332 - -
Total assets 5,568,316 5,236,537 4,736,805 270,324 269,621
LIABILITIES
Deposits from banks 35 749,315 665,366 416,078 - -
Deposits from customers 36 3,486,691 3,143,338 3,104,221 - -
Derivative liabilities 24a 15,791 9,404 37,137 - -
Current income tax liability 19b 15,656 10,194 8,897 102 104
Other liabilities 37 373,345 266,198 237,557 8,034 7,553
Liability on investment contracts 38 19,766 13,399 9,440 - -
Liability on insurance contracts 39 34,192 21,734 10,287 - -
Borrowings 40 338,214 420,919 316,792 - -
Retirement benefit obligations 41 1,940 2,203 2,662 - -
Deferred tax liabilities 34 266 606 813 - -
5,035,176 4,553,361 4,143,884 8,136 7,657
Liabilities held-for-sale 31 2,493 9,457 12,515 - -
Total liabilities 5,037,669 4,562,818 4,156,399 8,136 7,657
140
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
STATEMENT OF FINANCIAL POSITION CONTINUED
GROUP COMPANY
Notes
31 December
2018
N'million
Restated
31 December
2017
N'million
Restated
1 January
2017
N'million
31 December
2018
N'million
31 December
2017
N'million
EQUITY
Share capital 42 17,948 17,948 17,948 17,948 17,948
Share premium 43 233,392 233,392 233,392 233,392 233,392
Retained earnings 43 4,373 166,303 159,462 10,850 10,104
Statutory reserve 43 93,325 84,103 76,226 - -
Capital reserve 43 1,223 1,223 1,223 10 10
Small scale investments reserve 43 6,076 6,076 6,076 - -
Fair value reserve 43 77,276 77,981 27,507 (12) 510
Contingency reserve 43 2,022 1,257 727 - -
Statutory credit reserve 43 33,599 42,816 23,640 - -
Foreign currency translation reserve 43 48,995 48,115 34,753 - -
518,229 679,214 580,954 262,188 261,964
Non-controlling interest 12,418 (5,494) (548) - -
Total equity 530,647 673,719 580,406 262,188 261,964
Total equity and liabilities 5,568,316 5,236,537 4,736,805 270,324 269,621
The financial statements were approved and authorised for issue by the Board of Directors on 13 March 2019 and signed on its behalf by:
Dr Oba Otudeko,
CFR U.K. Eke, MFR Oyewale Ariyibi
Group Chairman Group Managing Director Chief Financial Ocer
FRC/2013/ICAN/00000002365 FRC/2013/ICAN/00000002352 FRC/2013/ICAN/00000001251
141
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Share Share Retained Capital Statutory
Small scale
investments
Fair value Contingency Statutory credit
Foreign currency
translation Non-controlling Total
capital premium earnings reserve reserve reserve reserve reserve reserve reserve Total interest equity
N'million N'million N'million N'million N'million N'million N'million N'million N'million N'million N'million N'million N'million
Balance at 1 January 2017 17,948 233,392 161,631 1,223 76,226 6,076 27,507 727 23,640 34,753 583,123 (548) 582,575
Restatement- AMCON levy Note 54 - - (2,169) - - - - - - - (2,169) - (2,169)
Restated Balance at 1 January 2017 17,948 233,392 159,462 1,223 76,226 6,076 27,507 727 23,640 34,753 580,954 (548) 580,406
Profit/(loss) for the year - - 41,328 - - - - - - - 41,328 (3,620) 37,708
Other comprehensive income - -
Foreign currency translation dierences, net of tax - - - - - - - - - 13,362 13,362 - 13,362
Fair value movements on financial assets - - - - - - 50,539 - - - 50,539 360 50,899
Income tax relating to components of other
comprehensive income
- - (784) - - - - - - - (784) -
(784)
Remeasurement of defined benefit pension
scheme, net of tax
- - 744 - - - - - - - 744 - 744
Share of OCI of associates, net of tax - - - - - - (65) - - - (65) - (65)
Total comprehensive income - - 41,288 - - - 50,474 - - 13,362 105,124 (3,260) 101,864
Transactions with owners
Dividends - - (7,179) - - - - - - - (7,179) (760) (7,939)
Acquisition of Non controlling interest - - - - - - - - - - - (611) (611)
Transfer to retained earnings - - 315 - - - - - - - 315 (315) -
Transfer between reserves - - (27,583) - 7,877 - - 530 19,176 - - - -
Total transactions with Owners - - (34,447) - 7,877 - - 530 19,176 - (6,864) (1,686) (8,550)
At 31 December 2017 17,948 233,392 166,303 1,223 84,103 6,076 77,981 1,257 42,816 48,115 679,214 (5,494) 673,719
Balance at 1 January 2018 17,948 233,392 166,303 1,223 84,103 6,076 77,981 1,257 42,816 48,115 679,214 (5,494) 673,719
Initial application of IFRS 9 (169,700) 204 (42,838) (212,334) (212,334)
Impact of IFRS 9 on deferred tax 2,743 2,743 2,743
Restated opening balance 17,948 233,392 (654) 1,223 84,103 6,076 78,185 1,257 (22) 48,115 469,623 (5,494) 464,129
Profit/(loss) for the year - - 58,999 - - - - - - - 58,999 668 59,667
Other comprehensive income
Foreign currency translation dierences, net of tax - - - - - - - - - 880 880 - 880
Fair value movements on financial assets - - - - - - (1,867) - - - (1,867) (176) (2,043)
Changes in allowance on FVOCI financial
instruments
983 983 983
Income tax relating to components of other
comprehensive income
-
- (1,934) - - - - - - - (1,934) - (1,934)
Remeasurement of defined benefit pension scheme - - 597 - - - - - - - 597 - 597
Share of other comprehensive income of
associates, net of tax
- - - - - - (5) - - - (5) - (5)
Total comprehensive income - - 57,662 - - (889) - - 880 57,653 492 58,146
Transactions with owners
Dividends - - (8,974) - - - - - - (8,974) (1,027) (10,001)
Investment by Non controlling interest - - - - - - - - - - - 18,371 18,371
Transfer to retained earnings - - - - - - - - - - - -
Transfer between reserves - - (43,661) - 9,221 - (20) 764 33,621 - (75) 75 -
Total transactions with Owners - - (52,636) - 9,221 - (20) 764 33,622 - (9,049) 17,419 8,370
At 31 December 2018 17,948 233,392 4,373 1,223 93,324 6,076 77,276 2,022 33,599 48,995 518,229 12,418 530,647
142
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
capital
Share
premium
Retained
earnings
Capital
reserve
Fair value
reserve Total
N'million N'million N'million N'million N'million N'million
Balance at 1 January 2017 17,948 233,392 8,008 10 347 259,705
Profit for the year - - 9,275 - - 9,275
Other comprehensive income
Fair value movements on financial assets - - - - 163 163
Total comprehensive income - - 9,275 - 163 9,438
Transactions with owners
Dividends - - (7,179) - - (7,179)
Total transactions with Owners - - (7,179) - - (7,179)
At 31 December 2017 17,948 233,392 10,104 10 510 261,964
Balance at 1 January 2018 17,948 233,392 10,104 10 510 261,964
Initial application of IFRS 9 - - 378 - (378) -
Restated opening balance 17,948 233,392 10,482 10 132 261,964
Profit for the year - - 9,342 - - 9,342
Other comprehensive income
Fair value movements on financial assets - - - - (144) (144)
Total comprehensive income - - 9,342 - (144) 9,198
Transactions with owners
Dividends - - (8,974) - - (8,974)
Total transactions with Owners - - (8,974) - - (8,974)
At 31 December 2018 17,948 233,392 10,850 10 (12) 262,188
143
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
STATEMENT OF CASH FLOWS
GROUP COMPANY
Notes
31 December
2018
N'million
31 December
2017
N'million
31 December
2018
N'million
31 December
2017
N'million
Operating activities
Cash flow (used in)/generated from operations 44 233,563 116,302 (3,590) (3,609)
Income taxes paid 19 (6,026) (6,761) (63) (87)
Interest received 437,392 459,401 2,410 2,110
Interest paid (126,472) (138,939) - -
Net cash flow generated from/(used in) operating activities 538,458 430,003 (1,243) (1,586)
Investing activities
Disposal of subsidiaries, net of cash disposed 500 - - -
Purchase of investment securities (1,295,228) (1,036,882) (10,691) (13,142)
Proceeds from the sale of investment securities 1,114,808 895,237 10,181 15,934
Dividends received 2,312 2,054 19,825 13,139
Purchase of property and equipment 32 (15,615) (12,816) (105) (235)
Purchase of intangible assets 33 (5,542) (6,114) - -
Proceeds on disposal of property and equipment 388 576 9 1
Net cash flow (used in)/generated from investing activities (197,377) (157,945) 19,219 15,697
Financing activities
Dividend paid (10,001) (7,939) (8,974) (7,179)
Proceeds from new borrowings 40 41,709 92,800 - -
Repayment of borrowings 40 (148,749) (17,596) - -
Interest paid on borrowings 40 (31,926) (23,416) - -
Acquisition of/(disposal) Non-controlling interest 18,373 (611) - -
Net cash flow (used in)/generated from financing activities (130,594) 43,238 (8,974) (7,179)
Increase in cash and cash equivalents 209,487 315,296 9,002 6,932
Cash and cash equivalents at start of year 1,166,447 746,231 7,585 645
Eect of exchange rate fluctuations on cash held 43,955 104,920 52 8
Cash and cash equivalents at end of year 21 1,419,889 1,166,447 16,639 7,585
144
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information
These financial statements are the consolidated financial statements of FBN Holdings Plc. (the Company), and its subsidiaries (hereafter
referred to as 'the Group'). The Registered oce address of the Company is at Samuel Asabia House, 35 Marina, Lagos, Nigeria.
The principal activities of the Group are mainly the provision of commercial banking services, investment banking services, insurance
business services and provision of other financial servises and corporate banking.
The consolidated financial statements for the year ended 31 December 2018 were approved and authorised for issue by the Board of
Directors on 13 March 2019.
2 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of separate and consolidated financial statements of the parent and the
Group are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The Group’s consolidated financial statements for the year ended 31 December 2018 have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and with the
applicable interpretations – International Financial Reporting Interpretations Committee (IFRIC) and Standard Interpretation Committee
(SIC) as issued by IFRS Interpretation Committee. Additional information required by national regulations is included where appropriate.
The consolidated financial statements comprise the income statement, statement of comprehensive income, statement of financial
position, the statement of changes in equity, statement of cash flows and the related notes for the Group and the Company.
The consolidated financial statements have been prepared in accordance with the going concern principle under the historical cost
convention, modified to include fair valuation of particular financial instruments, to the extent required or permitted under IFRS as set
out in the relevant accounting policies.
The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires directors to exercise judgement in the process of applying the accounting policies. Changes in assumptions
may have a significant impact on the consolidated financial statements in the period the assumptions changed.
The Directors believe that the underlying assumptions are appropriate and that the Group’s consolidated financial statements therefore
present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 5.
2.1.1 Basis of measurement
These financial statements have been prepared on the historical cost basis except for the following:
- Derivative financial instruments which are measured at fair value.
- Non-derivative financial instruments, carried at fair value through profit or loss, are measured at fair value.
- Financial assets at fair value through other comprehensive income (FVOCI).
- The liability for defined benefit obligations is recognised as the present value of the defined benefit obligation less the fair
value of the plan assets.
- The plan assets for defined benefit obligations are measured at fair value.
145
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
2.2 Changes in accounting policy and disclosures
2.2.1 New and amended standards adopted by the Group
Below are the standards that have become eective for the period beginning on or after 1 January 2018 that are relevant to the Group:
i. IFRS 9 Financial Instruments
ii. IFRS 15 Revenue from contracts with customers
None of these standards were early adopted by the Group.
(i) IFRS 9 - Financial Instruments
The Group has adopted IFRS 9: Financial Instruments from 1 January 2018. As permitted by the transitional provisions of IFRS 9, the
Group elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the
date of transition were recognized in the opening retained earnings and other reserves of the current period. Consequently, for notes
disclosures, the consequential amendments to IFRS 7 disclosures have only been applied to the current period. The comparative period
notes disclosures made in the prior year.
The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial
assets and financial liabilities and impairments of financial assets.
See details in Section 2.9 and Note 53.
(ii) IFRS 15 - Revenue from contracts with customers
IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial
statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied
to all contracts with customers.
The Group has adopted IFRS 15 Revenue from contracts with customers from 1 January 2018 which resulted in changes to the wording
of the accounting policies. However, the adoption of IFRS 15 does not have any significant impact on the Group.
See details in Section 2.10(b) and Note 11a.
2.2.2 New standards, interpretations and amendments to existing standards that are not yet eective.
A number of new standards, interpretations and amendments thereto, had been issued by IASB which are not yet eective, and have
not been applied in preparing these consolidated financial statements.
(i) IFRS 16 - Leases (eective annual periods beginning on or after 1 January 2019)
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or
the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor
accounting substantially unchanged from its predecessor, IAS 17.
The Group is close to concluding the impact assessment resulting from the application of IFRS 16 on its consolidated financial
statements.
The Group intends to adopt IFRS 16 not later than the accounting period beginning on or after January 2019.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
146
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
2.3 Consolidation
The financial statements of the consolidated subsidiaries used to prepare the consolidated financial statements were prepared as of
the parent company’s reporting date.
a. Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aect those returns
through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
Investment in subsidiaries is measured at cost less accumulated impairments in the separate financial statements of the parent.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable
net assets.
Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value
of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses
arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either
in profit or loss or as a change to other comprehensive income.
Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair
value of the net assets of the subsidiary acquired in the case of a bargain purchase, the dierence is recognised directly in the income
statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses
are also eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting
policies.
b. Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as
transactions with the owners in their capacity as owners. The dierence between fair value of any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
147
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
c. Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is
lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the
related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit
or loss.
d. Associates
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investment in associates is measured at cost in the separate financial statements of the
investor. Investments in associates are accounted for using the equity method of accounting in the Consolidated Financial Statements
of the Group. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased
to recognise the investor’s share of the profit or loss of the investee after the date of acquisition.
The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts
previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements
in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount
of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made
payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in an associate is impaired.
If this is the case, the Group calculates the amount of impairment as the dierence between the recoverable amount of the associate
and its carrying value and recognises the amount adjacent to share of profit/(loss) of associates in the income statement.
e. Investment entities
Some of the entities within the Group are investment entities. Equity investments held by these entities in the investee companies
are carried in the balance sheet at fair value through profit or loss even though the Group may have significant influence over those
companies. This treatment is permitted by IAS 28, `Investment in associates', which allows investments that are held by Investment
Entities to be recognised and measured as at fair value through profit or loss and accounted for in accordance with IFRS 9 and IFRS
13, with changes in fair value recognised in the income statement in the period of the change.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Group Executive Committee.
All transactions between business segments are conducted at arm’s length, with inter-segment revenue and expenditure eliminated at
the Group. Income and expenses directly associated with each segment is included in determining the segment’s performance.
2.5 Common control transactions
A business combination involving entities or businesses under common control is excluded from the scope of IFRS 3: Business
Combinations. The exemption is applicable where the combining entities or businesses are controlled by the same party both before
and after the combination. Where such transactions occur, the Group, in accordance with IAS 8, uses its judgement in developing
148
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
and applying an accounting policy that is relevant and reliable. In making this judgement, Directors consider the requirements of IFRS
dealing with similar and related issues and the definitions, recognition criteria and measurement concepts for assets, liabilities, income
and expenses in the framework.
Directors also consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to
develop accounting standards, to the extent that these do not conflict with the IFRS Framework or any other IFRS or interpretation.
Accordingly, the Group's policy is that the assets and liabilities of the business transferred are measured at their existing book value in
the consolidated financial statements of the parent, as measured under IFRS. The Company incorporates the results of the acquired
businesses only from the date on which the business combination occurs.
2.6 Foreign currency translation
a. Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Nigerian Naira which is the Group's presentation currency.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement.
Changes in the fair value of monetary securities denominated in foreign currency classified as fair value through other comprehensive
income are analysed between translation dierences resulting from changes in the amortised cost of the security and other changes in
the carrying amount of the security. Translation dierences related to changes in amortised cost are recognised in profit or loss, and
other changes in carrying amount are recognised in other comprehensive income.
Translation dierences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss. Translation dierences on non-monetary financial assets, such as
equities classified as fair value through other comprehensive income, are included in other comprehensive income.
c. Group companies
The results and financial position of all the Group entities which have functional currency dierent from the Group’s presentation
currency, are translated into the Group’s presentation currency as follows:
assets and liabilities of each foreign operation are translated at the rates of exchange ruling at the reporting date;
income and expenses of each foreign operation are translated at the average exchange rate for the period, unless this average
is not a reasonable approximation of the rate prevailing on transaction date, in which case income and expenses are translated
at the exchange rate ruling at transaction date; and
all resulting exchange dierences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange dierences arising are recognised in other comprehensive income.
149
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
2.7 Income taxation
a. Current income tax
Income tax payable is calculated on the basis of the applicable tax law in the respective jurisdiction and is recognised as an expense
(income) for the period except to the extent that current tax related to items that are charged or credited in other comprehensive
income or directly to equity. In these circumstances, current tax is charged or credited to other comprehensive income or to equity
(for example, current tax on equity instruments for which the entity has elected to present gains and losses in other comprehensive
income).
b. Deferred tax
Deferred tax is recognised on temporary dierences arising between the tax bases of assets and liabilities and their carrying amounts
in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition
of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction aects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary dierences can be utilised.
Deferred tax liabilities are provided on taxable temporary dierences arising from investments in subsidiaries, associates and joint
arrangements, except for deferred tax liability where the timing of the reversal of the temporary dierence is controlled by the Group
and it is probable that the temporary dierence will not reverse in the foreseeable future.
Deferred tax assets are recognised on deductible temporary dierences arising from investments in subsidiaries, associates and joint
arrangements only to the extent that it is probable the temporary dierence will reverse in the future and there is sucient taxable
profit available against which the temporary dierence can be utilised.
Deferred tax assets and liabilities are oset when there is a legally enforceable right to oset current tax assets against current tax
liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or dierent taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are only oset when they arise in the same tax reporting group and where there is both the legal
right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
2.8 Inventories
The Group purchases and constructs properties for resale.
The Group recognises Property as inventory under the following circumstances:
i. property purchased for the specific purpose of resale.
ii. property constructed for the specific purpose of resale (work in progress under the scope of IFRS 15, ‘Revenue from Contracts
with Customers’).
iii. property transferred from investment property to inventories. This is permitted when the Group commences the property's
development with a view to sale.
150
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
They are valued at the lower of cost and net realisable value. Cost comprises direct materials and, where appropriate, labour and
production overheads which have been incurred in bringing the inventories and work in progress to their present location and condition.
Cost is determined using weighted average cost. Net realisable value represents the estimated selling price less estimated costs to
completion and costs to be incurred in marketing, selling and distribution.
2.9 Financial assets and liabilities
In accordance with IFRS 9, all financial assets and liabilities – which include derivative financial instruments – have to be recognised
in the statement of financial position and measured in accordance with their assigned category.
Initial recognition
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.
The Group uses settlement date accounting for regular way contracts when recording financial asset transactions. Financial assets
that are transferred to a third party but do not qualify for derecognition are presented in the statement of financial position as ‘Assets
pledged as collateral’, if the transferee has the right to sell or repledge them.
At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial
asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to
the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets
and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an
expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI, as described in Note 3.2.11, which results in an accounting loss being recognised in profit or loss when an asset
is newly originated.
When the fair value of financial assets and liabilities diers from the transaction price on initial recognition, the entity recognises the
dierence as follows:
(a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input)
or based on a valuation technique that uses only data from observable markets, the dierence is recognised as a gain or loss.
(b) In all other cases, the dierence is deferred and the timing of recognition of deferred day one profit or loss is determined
individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using
market observable inputs or realised through settlement.
2.9.1 Financial assets
Classification and measurement
From 1 January 2018, the Group classifies its debt financial assets in the following measurement categories:
Fair Value through Other Comprehensive Income (FVOCI)
Fair Value through Profit or Loss (FVPL)
Amortised Cost
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
Business Model Assessment
Business Model assessment involves determining whether financial assets are held to collect the contractual cashflows (rather than
sell the instrument prior to its contractual maturity to realise its fair value changes).
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
151
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and
is based on observable factors such as:
Investment strategy for holding or selling the assets.
Past experience on how cash flows for these assets were collected.
How the asset’s performance is evaluated and reported to key management personnel.
The risks that aect the performance of the business model (and the financial assets held within that business model) and,
in particular, the way those risks are managed.
How managers of the business are compensated (for example, whether the compensation is based on the fair value of the
assets managed or on the contractual cash flows collected).
The expected frequency, value and timing of sales are also important aspects of the Group’s assessment.
The business model for each portfolio of financial assets are to be categorized into one of the following models:
Hold-to-collect contractual cash flows: Financial assets held with the sole objective to collect contractual cashflows;
Hold-to-collect contractual cash flows and sell: Financial assets held with the objective to both collect contractual cashflows
and sell;
Fair value through profit or loss (FVTPL) business model: Financial assets held with neither of the objectives mentioned in the
two categories above. They are basically financial assets held with the sole objective to trade and realise fair value changes.
Cash flow characteristics assessment
The assessment aims to identify whether the contractual cash flows are solely payments of principal and interest (SPPI) on the principal
amount outstanding.
The contractual cash flow characteristics assessment involves assessing the contractual features of an instrument to determine if they
give rise to cash flows that are consistent with a basic lending arrangement.
The SPPI test is based on the premise that it is only when the variability in the contractual cash flows arises to maintain the holder’s
return in line with a ‘basic lending arrangement’ that the application of the eective interest method provides useful information.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life
of the financial asset due to repayments. Thus the principal is not the legal amount due under the contractual terms of an instrument
This definition allows assets acquired at a discount or premium pass the SPPI test.
The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in which
the financial asset is denominated, and the period for which the interest rate is set.
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that
are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and
interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVPL.
a. Financial assets measured at amortised cost
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal
repayments, plus or minus the cumulative amortisation using the eective interest method of any dierence between that initial
amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
The gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is
recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is determined using
the eective interest method and reported in profit or loss as ‘Interest income’.
152
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
A financial asset qualifies for amortised cost measurement only if it meets both of the following conditions and is not designated as
at FVTPL:
The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
If a financial asset does not meet both of these conditions, then it is measured at fair value.
b. Financial assets measured at FVOCI
A debt instrument shall be measured at FVOCI if both of the following conditions are met and is not designated as at FVTPL:
The asset is held within a business model in which assets are managed to achieve a particular objective by both collecting
contractual cash flows and selling financial assets;
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Gains and losses are recognised in OCI within a separate component of equity, except for the following items, which are recognised in
profit or loss in the same manner as for financial assets measured at amortised cost:
interest revenue using the eective interest method;
expected credit losses and reversals; and
foreign exchange gains and losses.
When the debt instrument is disposed or derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss and recognised in “other gains or (losses)”.
c. Financial assets measured at FVTPL
A debt instrument that is not measured at amortised cost or at FVOCI must be measured at FVTPL. These would include debt
instruments that are held-for-trading and those that have been designated as fair value through profit or loss at initial recognition.
Gains and losses both on subsequent measurement and derecognition are recognised in profit or loss and reported as “Net gains or
(losses)” in the period in which it arose.
The Group may irrevocably designate a debt instrument as measured at FVTPL on initial recognition only if doing so eliminates
or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch'). Such
mismatches would otherwise arise from measuring assets or liabilities, or recognising the gains and losses on them, on dierent bases.
d. Equity Instruments
Equity investments are measured at FVTPL. However on initial recognition, the Group can make an irrevocable election to measure an
equity investment at FVOCI. This option only applies to instruments that are neither held-for-trading nor contingent consideration,
recognised by an acquirer in a business combination to which IFRS 3 applies.
For equities measured at FVOCI, fair value gains and losses on the equity remeasurements are recognised in OCI. However, dividends
are recognised in profit or loss unless they clearly represent a repayment of part of the cost of the investment.
The amounts recognised in OCI are never reclassified from equity to profit or loss.
153
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
e. Impairment of Financial Assets
From 1 January 2018, the Group will recognise expected credit losses (“ECL”) on forward-looking basis for its financial assets measured
at amortised cost, lease receivables, debt instrument at fair value through other comprehensive income, loan commitments and
financial guarantee contracts not measured at fair value through profit or loss.
No impairment is recognised on equity investments. This is because the fair value changes would incorporate impairment gains or
losses if any.
The measurement of ECL reflects:
An unbiased and probability-weighted amount that is determined by a range of possible outcomes;
The time value of money; and
Reasonable and supportable information that is available without undue cost or eort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
f. Modification and renegotiation of financial assets
Where the terms of a financial asset are modified, the Group assesses whether the new terms are substantially dierent to the original
terms. If the terms are substantially dierent, the Group derecognises the original financial assets and recognises a new asset at fair
value and recalculates the eective interest rate.
Any dierence between the amortised cost and the present value of the estimated future cash flows of the modified asset or
consideration received on derecognition is recorded as a separate line item in profit or loss as ‘gains and losses arising from the
derecognition of financial assets measured at amortised cost’.
If the cash flows of the modified asset carried at amortised cost are not substantially dierent, then the modification does not result in
derecognition of the financial asset. In this case, the Group recalculates the gross carrying amount of the financial asset and recognises
the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss as part of impairment charge
for the year.
g. Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have
expired, or when they have been transferred and either.
(i) the Group transfers substantially all the risks and rewards of ownership, or
(ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and the Group has not retained
control.
The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual
obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are
accounted for as 'pass through' transfers that result in derecognition if the Group:
(i) Has no obligation to make payments unless it collects equivalent amounts from the assets;
(ii) Is prohibited from selling or pledging the assets; and
(iii) Has an obligation to remit any cash it collects from the assets without material delay.
Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing
transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined
repurchase price, and the criteria for derecognition are therefore not met.
154
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
h. Reclassifications
From 1 January 2018, the Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which Group changes its business model for managing financial assets, the Group acquires, disposes of, or terminates
a business line. Financial liabilities are never reclassified.
When reclassification occurs, the Group reclassifies all aected financial assets in accordance with the new business model. The
reclassification should be applied prospectively from the 'reclassification date', which is defined as, 'the first day of the first reporting
period following the change in business model that results in the Group reclassifying financial assets’. Accordingly, any previously
recognised gains, losses or interest should not be restated.
i. Derivative financial instruments
Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. Derivative assets
and liabilities arising from dierent transactions are only oset where there is a legal right of oset of the recognised amounts and the
parties intend to settle the cash flows on a net basis, or realise the asset and settle the liability simultaneously.
j. Embedded derivatives
Hybrid contracts contain both a derivative and a non-derivative component. In such cases, the derivative component is termed an
embedded derivative. Where the economic characteristics and risks of the embedded derivatives are not closely related to those of the
host contract, and the host contract itself is not carried at fair value through profit or loss, the embedded derivative is bifurcated and
measured at fair value with gains and losses being recognised in the income statement.
k. Financial assets under IAS 39
For the purpose of measuring a financial asset after initial recognition, IAS 39 classifies financial assets into fair value through profit
or loss, held-to-maturity, loans and receivables and available-for-sale instruments. Impairment on financial assets was based on an
incurred loss model.
2.9.2 Financial liabilities
Financial liabilities are classified into one of the following measurement categories:
Fair value through profit or loss (FVTPL)
Amortised cost
a. Financial liabilities at fair value through profit or loss (FVTPL)
Financial liabilities are measured at FVTPL when they are designated as such on initial recognition using the fair value option or when
they meet the definition of held-for-trading i.e.
it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit taking;
or it is a derivative [except for a derivative that is a financial guarantee contract or a designated and eective hedging
instrument].
For financial liabilities designated as at FVTPL using the fair value option, the elements of gains or losses attributable to changes in the
Group’s own credit risk are recognised in OCI, with the remainder recognised in profit or loss. The movement in fair value attributable
155
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
to changes in the Group’s own credit quality is calculated by determining the changes in credit spread above observable market interest
rates. These amounts recognised in OCI are not recycled to profit or loss if the liability is ever repurchased at a discount.
However, if presentation of the fair value change in respect of the liability’s credit risk in OCI creates or enlarges an accounting
mismatch in profit or loss, gains and losses must be entirely presented in profit or loss. To determine whether the treatment would
create or enlarge an accounting mismatch, the Group assesses whether it expects the eect of the change in the liability’s credit risk
to be oset in profit or loss by a change in fair value of another financial instrument, such as when the fair value of an asset is linked
to the fair value of the liability. If such a mismatch does arise, the Group will be required to present all fair value changes of the liability
in profit or loss.
b. Financial liabilities at amortised cost
Financial liabilities not held at FVTPL are subsequently measured at amortised cost using the eective interest method.
Financial liabilities measured at amortised costs are deposits from banks or customers, debt securities in issue for which the fair value
option is not applied, convertible bonds and subordinated debts.
c. Derecognition of financial liabilities
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged,
cancelled or expires).
The exchange between the Group and its original lenders of debt instruments with substantially dierent terms, as well as substantial
modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability. The terms are substantially dierent if the discounted present value of the cash flows under
the new terms, including any fees paid net of any fees received and discounted using the original eective interest rate, is at least 10%
dierent from the discounted present value of the remaining cash flows of the original financial liability.
In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate,
new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of
debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of
the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees
incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
2.9.3 Determination of fair value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
For financial instruments traded in active markets, the determination of fair values of financial assets and financial liabilities is based on
quoted market prices or dealer price quotations. This includes listed equity securities and quoted debt instruments on major exchanges
(for example, the Nigerian Stock Exchange (NSE)) and broker quotes from Bloomberg and Reuters.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
If the above criteria are not met, the market is regarded as being inactive. Indications that a market is inactive are when there is a wide
bid-oer spread or significant increase in the bid-oer spread or there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair values are estimated
from observable data in respect of similar financial instruments, using models to estimate the present value of expected future cash
flows or other valuation techniques, using inputs (for example, LIBOR yield curve, foreign exchange rates, volatilities and counterparty
spreads) existing at the dates of the statement of financial position.
156
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group uses widely recognised valuation models for determining fair values of non-standardised financial instruments of lower
complexity, such as options or interest rate and currency swaps. For these financial instruments, inputs into models are generally
market-observable.
For more complex instruments, the Group uses internally developed models, which are usually based on valuation methods and
techniques generally recognised as standard within the industry. Valuation models are used primarily to value derivatives transacted in
the over-the-counter market, unlisted securities (including those with embedded derivatives) and other instruments for which markets
were or have become illiquid. Some of the inputs to these models may not be market observable and are therefore estimated based
on assumptions.
The impact on other comprehensive income of financial instrument valuations reflecting non-market observable inputs (level 3
valuations) is disclosed in Note 3.7.
The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation
techniques employed may not fully reflect all factors relevant to the positions the Group holds. Valuations are therefore adjusted, where
appropriate, to allow for additional factors including model risks, liquidity risk and counterparty credit risk.
Based on the established fair value model governance policies, and related controls and procedures applied, Management believes that
these valuation adjustments are necessary and appropriate to fairly state the values of financial instruments carried at fair value in the
statement of financial position. Price data and parameters used in the measurement procedures applied are generally reviewed carefully
and adjusted, if necessary – particularly in view of the current market developments.
The estimated fair value of loans and advances represents an estimation of the value of the loans using average benchmarked lending
rates which were adjusted for specific entity risks based on history of losses.
The Group makes transfers between levels of fair value hierarchy when reliable market information becomes available (such as
an active market or observable market input) to the Group. This transfer is done on the date in which the market information
becomes available.
2.9.4 Osetting financial instruments
Master agreements provide that, if an event of default occurs, all outstanding transactions with the counterparty will fall due and all
amounts outstanding will be settled on a net basis.
Financial assets and liabilities are oset and the net amount reported in the statement of financial position when there is a currently
legally enforceable right to oset the recognised amounts and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the
normal course of business and in event of default, insolvency or bankruptcy of the Company or the counterparty.
2.10 Revenue recognition
a. Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest income’ and ‘interest expense’
in profit or loss using the eective interest method.
The eective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of
the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment
allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes
transaction costs, premiums or discounts and fees and points paid or received that are integral to the eective interest rate, such
as origination fees. For purchased or originated credit-impaired (`POCI') financial assets — assets that are credit-impaired at initial
recognition — the Group calculates the credit-adjusted eective interest rate, which is calculated based on the amortised cost of the
financial asset, instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash
flows.
157
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
When the Group revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is
adjusted to reflect the new estimate discounted using the original eective interest rate. Any changes are recognised in profit or loss.
Interest income is calculated by applying the eective interest rate to the gross carrying amount of financial assets, except for:
(a) POCI financial assets, for which the original credit-adjusted eective interest rate is applied to the amortised cost of the
financial asset.
(b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest revenue
is calculated by applying the eective interest rate to their amortised cost (i.e. net of the expected credit loss provision).
b. Fees and commission income
Fees and commission income and expenses that are integral to the eective interest rate on a financial asset or liability are included
in the measurement of the eective interest rate. For other fees and commission income, it is the Group’s policy to recognise revenue
from a contract when it has been approved by both parties, rights have been clearly identified, payment terms have been defined,
the contract has commercial substance, and collectability has been ascertained as probable. Revenue is recognised when control of
goods or services have been transferred. Control of an asset refers to the ability to direct the use of and obtain substantially all of the
remaining benefits (potential cash inflows or savings in cash outflows) associated with the asset.
Credit related fees: This includes advisory and commitment fees. These are fees charged for administration and advisory services to
the customer up to the customer's acceptance of the oer letter. The advisory and commitment fees are earned at the point in time
where the customer accepts the oer letter which is when the Group recognises its income. These fees are not integral to the loan,
therefore, they are not considered in determining the eective interest rate.
Letter of credit and commission fees: This represents commission earned on Letter of credit contracts initiated at the request of
customers. The nature of this income is such that the performance obligation is the execution of customer’s instruction: a direct
payment is made on behalf of our customers to the beneficiary (as stated by our customer) when goods/services are received; OR,
a payment is made to the stated beneficiary only when our customer cannot fulfill its obligation. Income earned on letter of credit
contracts is satisfied at a point in time. This is because revenue is recognised only when payments have been received by the intended
beneficiary.
Electronic banking fees: Electronic banking fees relate to fees and commission charged by the banking subsidiaries on electronic
transactions carried out by its customers e.g. USSD income, Agency banking commission. The nature of this income is such that the
performance obligation of the Group is the provision of the platform for the execution of the transactions. Income is earned when
these transactions have been successfully executed on these platforms. Income from electronic banking is satisfied at a 'point in time.
Money transfer commission: This represents commission earned on local and foreign money transfers initiated by the Group's customers.
The nature of this income is such that the performance obligation of the Group is the delivery of transferred monies to the intended
beneficiaries. Income on money transfers is satisfied at a "point in time". This is because commission is recognised only when the
transferred sums have been delivered to their intended recipients.
Commission on bonds and guarantees: This represents commission earned on bond and guarantees contracts. It includes commissions
earned on advanced payment guarantees, performance bonds, bid bonds etc. This fee is earned over the tenor of the bond and
guarantee on a straight line basis.
Funds transfer and intermediation fees: This is principally made of commission on collections. The Group acts as a collecting agent
for corporate bodies or government organisations; thus, earns commissions on these collection services. The Group's performance
obligation is the collection of funds on behalf of the customer. Income from funds transfer and intermediation is satisfied at a point in
time as the commissioned earned is deducted and recognised when remitting these funds to the respective customer.
Account maintenance fees: This represents the fee charged by banking subsidiaries within the Group on current accounts maintained
by customers. This fee is charged with respect to customer induced debit transactions to third parties as well as debit transfers/
lodgements to customer's account in another bank. This was introduced by the CBN to replace Commission on turnover (COT) fee
which was abolished by the regulator in 2016. The performance obligation required from the Group in the maintenance/safe keeping
of the customers’ fund. Income earned from account maintenance is satisfied at a 'point in time.
158
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Brokerage and intermediation fees: This represents fees charged by the Group in order to execute transactions or provide specialised
services as requested by customers. Such transaction/services include execution of primary and secondary market transaction on behalf
of customers. Income from brokerage and intermediation services are satisfied at a point in time as they are earned and recognised
when such services have been executed on behalf of customers.
Custodian fees: This represents commission earned by the Group while rendering custodian services to its customers. These custodian
services are to a large extent the safe keeping of financial assets. Income earned on custodian services are earned at a point in time.
Dividend income: Dividend income is recognised when the right to receive income is established.
2.11 Impairment of non-financial assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Additionally, assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). The impairment test also
can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. Non-financial
assets other than goodwill that suered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect
of goodwill is not reversed.
2.12 Discontinued operations
The Group presents discontinued operations in a separate line in the income statement if an entity or a component of an entity has
been disposed or is classified as held-for-sale and:
i. represents a separate major line of business or geographical area of operations;
ii. is a part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
iii. is a subsidiary aquired exlusively with a view to resale.
Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative income statement is re-presented as if the operation had
been discontinued from the start of the comparative year.
Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered principally
through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less
cost to sell.
Investment property classified as non-current asset held-for-sale are measured at fair value, gain or loss arising from a change in the
fair value of investment property is recognised in income statement for the period in which it arises.
2.13 Collateral
The Group obtains collateral where appropriate, from customers to manage their credit risk exposure to the customer. The collateral
normally takes the form of a lien over the customer’s assets and gives the Group a claim on these assets for both existing and future
customer in the event that the customer defaults.
159
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group may also use other credit instruments, such as stock borrowing contracts, and derivative contracts in order to reduce their
credit risk.
Collateral received in the form of securities is not recorded on the statement of financial position. Collateral received in the form of
cash is recorded on the statement of financial position with a corresponding liability. These items are assigned to deposits received from
bank or other counterparties. Any interest payable or receivable arising is recorded as interest expense or interest income respectively.
2.14 Leases
Leases are divided into finance leases and operating leases.
a. The Group is the lessee
(i) Operating lease
Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as
operating leases.
Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period
has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which
termination takes place.
(ii) Finance lease
Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate
on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in deposits from banks
or deposits from customers depending on the counter party.
The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period.
b The Group is the lessor
(i) Operating lease
When assets are subject to an operating lease, the assets continue to be recognised as property and equipment based on the nature
of the asset. Lease income is recognised on a straight line basis.
(ii) Finance lease
When assets are held subject to a finance lease, the related asset is derecognised and the present value of the lease payments
(discounted at the interest rate implicit in the lease) is recognised as a receivable. The dierence between the gross receivable and
the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease
using the net investment method which allocates rentals between finance income and repayment of capital in each accounting period
in such a way that finance income will emerge as a constant rate of return on the lessor's net investment in the lease.
2.15 Investment properties
Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the entities in the
consolidated Group, are classified as investment properties. Investment properties comprise residential buildings constructed with the
aim of leasing out to tenants or for selling. Recognition of investment properties takes place only when it is probable that the future
160
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
economic benefits that are associated with the investment property will flow to the entity and the cost can be measured reliably. This
is usually the day when all risks are transferred.
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing
parts of an existing investment property at the time the cost was incurred if the recognition criteria are met; and excludes the costs
of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value.
The fair value reflects market conditions at the date of the statement of financial position and is obtained from professional third party
valuators contracted to perform valuations on behalf of the Group. The fair value does not reflect future capital expenditure that will
improve or enhance the property.
Subsequent expenditure is included in the asset’s carrying amount only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are
charged to the income statement during the financial period in which they are incurred.
Transfer to, or from, investment property is recognised only when there is a change in use, evidenced by one or more of the
following:
i. commencement of owner-occupation (transfer from investment property to owner-occupied property).
ii. commencement of development with the view to sale (transfer from investment property to inventories).
iii. end of owner-occupation (transfer from owner-occupied property to investment property).
iv. commencement of an operating lease to another party (transfer from inventories to investment property).
v. end of construction or development (transfer from property in the course of construction/development to investment
property)
Investment properties are derecognised on disposal or when the investment properties are permanently withdrawn from use and no
future economic benefits are expected from its disposal.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in other operating income
in the income statement.
2.16 Property and Equipment
All property and equipment used by the parent or its subsidiaries are stated at historical cost less depreciation less accumulated
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent expenditures are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance costs are charged to other
operating expenses during the financial period in which they are incurred.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
Asset class Depreciation rate
Improvement and building 2%
Motor vechicle 25%
Oce equipment 20%
Computer equipment 33
1
/
3
%
Furniture and fittings 20%
Machinery 20%
161
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property and equipment are
kept under review on an annual basis to take account of any change in circumstances.
When deciding on depreciation rates and methods, the principal factors the Group takes into account are the expected rate of
technological developments and expected market requirements for, and the expected pattern of usage of, the assets.
When reviewing residual values, the Group estimates the amount that it would currently obtain for the disposal of the asset after
deducting the estimated cost of disposal if the asset were already of the age and condition expected at the end of its useful economic
life.
No depreciation is provided on freehold land, although, in common with all long-lived assets, it is subject to impairment testing, if
deemed appropriate.
Work in Progress represents costs incured on the assets that are not available-for-use. On becoming available-for-use, the related
amounts are transferred to the appropriate category of property and equipment.
An item of property and equipment is derecognised on disposal or when no future economic benefits are expected from its use or
disposal. Any gain/loss arising on de-recognition of the asset (calculated as the dierence between the net disposal proceeds and the
carrying amount of the asset) is included in income statement in the year the asset is derecognised.
2.17 Intangible assets
a. Goodwill
Goodwill arises on the acquisition of subsidiary and associates, and represents the excess of the cost of acquisition, over the fair value
of the Group’s share of the assets acquired, and the liabilities and contingent liabilities assumed on the date of the acquisition. For the
purpose of calculating goodwill, fair values of acquired assets, liabilities and contingent liabilities are determined by reference to market
values or by discounting expected future cash flows to present value. This discounting is either performed using market rates or by
using risk-free rates and risk-adjusted expected future cash flows. Goodwill is initially recognised as an asset at cost and subsequently
measured at cost less accumulated impairment losses, if any. Goodwill which is recognised as an asset is reviewed at least annually for
impairment. Any impairment loss is immediately recognised in profit or loss.
For the purpose of impairment testing, goodwill is allocated to each cash-generating unit that is expected to derive benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than
the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment
loss recognised for goodwill is not reversed in a subsequent period.
Goodwill on acquisitions of associates is included in the amount of the investment.
Gains and losses on the disposal of an entity include the carrying amount of the goodwill relating to the entity sold.
b. Computer software
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that
are directly attributable to the design and testing of identifiable and unique software products controlled by the Group, are recognised
as intangible assets when the following criteria are met:
i. It is technically feasible to complete the software product so that it will be available-for-use;
ii. Management intends to complete the software product and use or sell it;
iii. There is an ability to use or sell the software product;
iv. It can be demonstrated how the software product will generate probable future economic benefits;
162
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
v. Adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
vi. The expenditure attributable to the software product during its development can be reliably measured.
Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates.
Direct computer software development costs recognised as intangible assets are amortised on the straight-line basis over 3 years and
are carried at cost less any accumulated amortisation and any accumulated impairment losses. The carrying amount of capitalised
computer software is reviewed annually and is written down when the carrying amount exceeds its recoverable amount.
c. Brand, customer deposits and customer relationships
Brand, customer deposits and customer relationships acquired in a business combination are recognised at fair value at the acquisition
date. They have finite useful lives and are subsequently carried at cost less accumulated amortisation and accumulated impairment
losses.These costs are amortised to profit or loss using straightline method over 3 years, 5 years and 2 years respectively.
2.18 Investment contracts
The Group oers wealth management, term assurance, annuity, property and payment protection insurance products to customers
that take the form of long-term insurance contracts. The Group classifies its wealth management and other products as insurance
contracts where these transfer significant insurance risk, generally where the benefits payable on the occurrence of an insured event are
more significant than the benefits that would be payable if the insured event does not occur. Contracts that do not contain significant
insurance risk or discretionary participation features are classified as investment contracts. Financial assets and liabilities relating to
investment contracts are measured at amortised cost.
2.19 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash in
hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents excludes restricted balances with Central Banks.
2.20 Employee benefits
(i) Post-employment benefits
The Group has both defined benefit and defined contribution plans.
a. Defined contribution plan
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has
no legal or constructive obligations to pay further contributions if the fund does not hold sucient assets to pay all employees the
benefits relating to employee service in the current and prior periods.
The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary
basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
The Company and all entities within the Group make contributions in line with relevant pension laws in their jurisdiction. In Nigeria,
the Company contributes 16.5% of each employee’s monthly emoluments (as defined by the Pension Act 2014) to the employee’s
Retirement Savings Account. The Act stipulates a minimum contribution of 10%.
163
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
b. Defined benefit plan
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors, such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the date of the statement of financial position less the fair value of plan assets.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
Federal Government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating the terms of the related pension liability.
Remeasurement gains and losses are charged or credited to equity in other comprehensive income in the period in which they arise.
Past service costs are recognised immediately in income.
(ii) Short-term benefits
Short-term benefits consists of salaries, accumulated leave allowances, bonuses and other non-monetary benefits. Short-term benefits
are measured on an undiscounted basis and are expensed as the related services provided.
A liability is recognised for the amount expected to be paid under short-term cash benefits such as accumulated leave and leave
allowances if the Group has a present legal or constructive obligation to pay this amount as a result of past services provided by the
employee and the obligation can be measured reliably.
2.21 Provisions
Provisions are recognised for present obligations arising as consequences of past events where it is probable that a transfer of economic
benefit will be necessary to settle the obligation, and it can be reliably estimated.
When a leasehold property ceases to be used in the business or a demonstrable commitment has been made to cease to use a property
where the costs exceed the benefits of the property, provision is made, where the unavoidable costs of the future obligations relating
to the lease are expected to exceed anticipated rental income and other benefits. The net costs are discounted using market rates of
interest to reflect the long-term nature of the cash flows.
Provision is made for the anticipated cost of restructuring, including redundancy costs when an obligation exists. An obligation exists
when the Group has a detailed formal plan for restructuring a business and has raised valid expectations in those aected by the
restructuring by starting to implement the plan or announcing its main features. The provision raised is normally utilised within nine
months.
Provision is made for undrawn loan commitments and similar facilities if it is probable that the facility will be drawn and result in the
recognition of an asset at an amount less than the amount advanced.
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations
where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are
disclosed unless they are remote.
2.22 Insurance contracts
The Group issues contracts that transfer insurance risk or financial risk or both. Insurance contracts are those contracts that transfer
significant insurance risk. Such contracts may also transfer financial risk.
164
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Investment contracts are those contracts that transfer financial risk with no significant insurance risk. The reserve has been calculated
as the amount standing to the credit of the policyholders (account balance) at the valuation date. The life cover element (and
corresponding premiums) have been reported as part of the insurance contract liabilities and valued similar to other risk business as
described above.
a. Classification of contracts
A contract is classified as an insurance contract where the Group accepts significant insurance risk by agreeing with the policyholder to
pay benefits if a specified uncertain future event (the insured event) adversely aects the policyholder or other beneficiary. Significant
insurance risk exists where it is expected that for the duration of the policy or part thereof, policy benefits payable on the occurrence
of the insured event will exceed the amount payable on early termination, before allowance for expense deductions at early termination.
Once a contract has been classified as an insurance contract, the classification remains unchanged for the remainder of its lifetime,
even if the insurance risk reduces significantly during this period.
b. Recognition and measurement
(i) Short-term insurance contracts
Short-duration life insurance contracts protect the Group’s customers from the consequences of events (such as death or disability)
that would aect the ability of the customer or his/her dependents to maintain their current level of income. They are usually short-
duration life insurance contracts ranging between 12 to 24 months period of coverage. Guaranteed benefits paid on occurrence of
the specified insurance event are either fixed or linked to the extent of the economic loss suered by the policyholder. There are no
maturity or surrender benefits.
For all these contracts, premiums are recognised as revenue (earned premiums) proportionally over the period of coverage. The portion
of premium received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as the unearned
premium liability. Premiums are shown before deduction of commission and are gross of any taxes or duties levied on premiums.
Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to
contract holders or third parties damaged by the contract holders. They include direct and indirect claims settlement costs and arise
from events that have occurred up to the end of the reporting period even if they have not yet been reported to the Group. The Group
does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of assessments for individual
cases reported to the Group and statistical analyses for the claims incurred but not reported (IBNR), and to estimate the expected
ultimate cost of more complex claims that may be aected by external factors.
The liability reserve on short term insurance contract is made up of an unexpired premium reserve (UPR) and reserve for ‘Incurred
but not reported’ claims (IBNR). The UPR represent premium received in advance on short-term contracts and is released through the
income statement over the life of the insurance contract period after adjusting for acquisition expenses. IBNR reserves are required to
take account of the delay in reporting claims. These are determined by considering ultimate claims ratios for the life schemes on the
Group’s books. The ratios dier by industry and have been determined following a historical analysis of portfolio claims experience.
The IBNR reserves are calculated by adjusting the ultimate claims amounts to allow for claims already paid and those outstanding for
payment, and again adjusted to allow for the holding of a separate UPR reserve. As the short term insurance contract experience of
FBN builds up we will be able to adjust for company-specific claims settlement patterns.
(ii) Long-term insurance contracts with fixed and guaranteed terms
These contracts insure events associated with human life (for example, death or survival) over a long duration. Premiums are recognised
as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission. Benefits are
recorded as an expense when they are incurred.
A liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognised. The
liability is determined as the sum of the expected discounted value of the benefit payments and the future administration expenses that
are directly related to the contract, less the expected discounted value of the theoretical premiums that would be required to meet
the benefits and administration expenses based on the valuation assumptions used (the valuation premiums). The liability is based on
165
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
assumptions as to mortality, persistency, maintenance expenses and investment income that are established at the time the contract
is issued. A margin for adverse deviations is included in the assumptions.
Where insurance contracts have a single premium or a limited number of premium payments due over a significantly shorter period
than the period during which benefits are provided, the excess of the premiums payable over the valuation premiums is deferred and
recognised as income in line with the decrease of unexpired insurance risk of the contracts in force or, for annuities in force, in line
with the decrease of the amount of future benefits expected to be paid. The liabilities are recalculated at each end of the reporting
period using the assumptions established at inception of the contracts.
The long-term insurance contracts insure events associated with human life. They include the following:
Individual insurance contracts
The reserve has been calculated using the gross premium valuation approach. This reserving methodology adopts a cash flow approach
taking into account all expected future cash flows including premiums, expenses and benefit payments to satisfy the liability adequacy
test. The test also considers current estimates of all contractual cash flows, and of related cash flows such as claims handling costs,
as well as cash flows resulting from embedded options and guarantees (where applicable).
Individual savings contracts
The reserve has been calculated as the amount standing to the credit of the policyholders (account balance) at the valuation date. The
life cover element (and corresponding premiums) have been reported as part of the insurance contract liabilities and valued similar to
other risk business as described above.
c. Insurance contract liabilities
Life insurance policy claims received up to the last day of each financial period and claims incurred but not reported (IBNR) are provided
for and included in the policy liabilities. Past claims experience is used as the basis for determining the extent of the IBNR claims.
Income from reinsurance policies is recognised concurrently with the recognition of the related policy benefit. Insurance liabilities are
presented without osetting them against related reinsurance assets.
Insurance liabilities are retained in the statement of financial position until they are discharged or cancelled and/or expire. The Company
performs a liability adequacy test to determine the recognised insurance liabilities and an impairment test for reinsurance assets held
at each reporting date.
2.23 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements,
as they are not assets of the Group.
2.24 Issued debt and equity securities
Issued financial instruments or their components are classified as liabilities where the contractual arrangement results in the Group
having a present obligation to either deliver cash or another financial asset to the holder, to exchange financial instruments on terms
that are potentially unfavourable or to satisfy the obligation otherwise than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of equity shares. Issued financial instruments, or their components, are classified as equity where
they meet the definition of equity and confer on the holder a residual interest in the assets of the Group. The components of issued
financial instruments that contain both liability and equity elements are accounted for separately with the equity component being
assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of
the liability component.
166
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
2.25 Share capital
a. Share issue costs
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as
a deduction, net of tax, from the proceeds.
b. Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the shareholders.
Dividends for the year that are declared after the reporting date are dealt with in the subsequent events note.
Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with
the requirements of the Company and Allied Matters Act.
c. Earnings per share
The Group presents basic and diluted earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit
and loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the
period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the eects of all dilutive potential ordinary shares.
d. Treasury shares
Where the Company or other members of the Group purchase the Company’s equity share capital, the consideration paid is deducted
from total shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any
consideration received is included in shareholders’ equity.
e. Statutory credit reserve
In compliance with the Prudential Guidelines for licensed Banks, the Group assesses qualifying financial assets using the guidance under
the Prudential Guidelines. The guidelines apply objective and subjective criteria towards providing for losses in risk assets. Assets are
classed as performing or non-performing. Non-performing assets are further classed as Substandard, Doubtful or Lost with attendants
provision as per the table below based on objective criteria.
Classification Percentage Basis
Substandard 10% Interest and/or principal overdue by 90 days but less than 180 days
Doubtful 50% Interest and/or principal overdue by 180 days but less than 365 days
Lost 100% Interest and/or principal overdue by more than 365 days
A more accelerated provision may be done using the subjective criteria. A 2% provision is taken on all risk assets that are not specifically
provisioned.
The results of the application of Prudential Guidelines and the impairment determined for these assets under IFRS 9 are compared. The
IFRS 9 determined impairment charge is always included in the income statement.
Where the Prudential Guidelines provision is greater, the dierence is appropriated from Retained Earnings and included in a non-
distributable reserve "Statutory credit reserve". Where the IFRS 9 impairment is greater, no appropriation is made and the amount of
the IFRS 9 impairment is recognised in income statement.
167
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Following an examination, the regulator may also require more amounts be set aside on risk and other assets. Such additional amounts
are recognised as an appropriation from retained earnings to statutory credit reserve.
2.26 Financial guarantees
Financial guarantees are contracts that require the Group to make specific payments to reimburse the holder of a loss it incurs because
a specific debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are
initially recognised at the fair value, and the initial fair value is amortised over the life of the financial guarantee. The guaranteee liability
is subsequently carried at the higher of this amortised amount and the present value of any expected payment (when a payment under
the guaranteee has become probable).
3. Financial risk management
3.1 Introduction and overview
Eective risk management is fundamental to the business activities of the Group. At FBNHoldings, we promote a culture where risk
management is everyone’s business from board level down to risk owners and units across the Group.
Our approach to risk is supported by a robust Enterprise Risk Management framework (ERM) and a strong risk culture to identify,
measure, monitor and control risks thereby promoting accountability at all levels across the Group. Objectives of the ERM framework
are communicated through risk policies and standards which are intended to provide consistent design and execution of strategies
across the organisation.
The risks arising from financial instruments to which the Group is exposed are financial risks, which include Credit risk, Liquidity risk
and Market risk. Other material risks impacting activities of the Group include, Operational, Legal, Compliance, Strategic, Reputational,
Information security, Environmental and Social risk.
3.1.1 Risk Management Philosophy
The key elements of the risk management philosophy are as follows:
The Group considers sound risk management to be the foundation of a long-lasting financial institution.
The Group continues to adopt a holistic and integrated approach to risk management and, therefore, brings all risks together
under one or a limited number of oversight functions.
Risk ocers are empowered to perform their duties professionally and independently without undue interference.
Risk management is governed by well-defined policies that are clearly communicated across the Group.
Risk management is a shared responsibility. Therefore, the Group aims to build a shared perspective on risks that is grounded
in consensus.
The Group’s risk management governance structure is clearly defined.
There is a clear segregation of duties between market-facing business units and risk management functions.
Risk-related issues are taken into consideration in all business decisions. The Group shall continue to strive to maintain a
conservative balance between risk and revenue considerations.
Risks are reported openly and fully to the appropriate levels once they are identified.
168
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Risk ocers work as allies and thought partners to other stakeholders within and outside the Group, and are guided in the
exercise of their powers by a deep sense of responsibility, professionalism and respect for other parties.
All subsidiaries are guided by the principles enshrined in the risk management policies of the Group.
3.1.2 Risk appetite
Risk appetite is the level and type of risk the Group is willing to assume in its exposures and business activities, given its business
objectives and obligations to stakeholders. Risk appetite is generally expressed through quantitative and qualitative means and considers
extreme conditions, events and outcomes. In addition, risk appetite reflects potential impact on earnings, capital and funding/liquidity.
The Group’s risk appetite is the amount of risk it is willing to accept to align with and support our financial and strategic objectives,
relative to our risk capacity to assume losses.
Risk Appetite Statement (RAS)
Our RAS is the expression of the maximum level of risk we would take across the major risks facing our business and accept in the
pursuit of our strategic objectives. The Group would accept moderate risk in every activity it undertakes to achieve these strategic
objectives by declaring its willingness to accept moderate risks related to each key value driver.
Risk tolerance
This refers to the quantitative thresholds that allocate the Group’s risk appetite to specific risk types, business units, products,
customer segments, and other levels. Certain risk tolerances are policy limits that shall not be exceeded except under extraordinary
circumstances (hard limits), while other risk tolerances are guideposts or trigger points for risk reviews and mitigation (soft limits).
Whereas risk appetite is a strategic determination based on long-term objectives, risk tolerance is a tactical readiness to bear a specific
risk within established parameters. Enterprise-wide strategic risk appetite is thus translated into specific tactical risk tolerances that
constrain risk-acceptance activities at the business level. Risk tolerances are the parameters within which a Group (or business unit or
function) must operate to achieve its risk appetite.
Once established, these parameters are communicated downward throughout the Group to give clear guidelines to every stakeholder
and to provide feedback when they are exceeded.
3.1.3 Risk management framework
The risk management framework of the Group consists of a comprehensive set of policies, standards, procedures and processes
designed to identify, measure, monitor, mitigate and report significant risk exposures in a consistent and eective manner across the
Group.
With an increasing focus on consistency and transparency, the Group regularly assesses and enhances its risk management framework
to ensure it is fit-for-purpose.
The Group’s framework for management of enterprise risk specifically covers:
Governance and oversight of the overall risk management framework.
Risk appetite statement and risk appetite measurements.
Policies, procedures, controls and systems through which risk is identified and managed.
Oversight, control, assurance and delegation of authorities for each type of risk.
Monitoring and reporting of the risk profile against risk appetite.
Control and correction of the risk profile should it deviate from risk appetite.
Reassessment of risk appetite and/or the Group’s strategy in the light of changes in the business.
169
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Board of Directors has overall responsibility for the establishment of the Group’s Risk Management framework and exercises its
oversight function through its various committees; Board Audit and Risk Assessment Committee. These committees are responsible for
developing and monitoring risk policies in their specific areas and report regularly to the Board of Directors. The Board Committees
are assisted by the various Management Committees in identifying and assessing risks arising from day-to-day activities of the Group.
These committees include Group Executive Committee.
3.1.4 Risk governance structure, roles and responsibilities
The Group addresses the challenge of risks by applying leading practices that are supported by a robust governance structure consisting
of board level and executive management committees.
The Group adopts the ‘three-pronged line of defence’ model to underpin its approach to strong risk management principles. Through
this model, the Group monitors, manages and mitigates its material risks on a Group-wide basis. Risk governance is maintained through
delegation of authority from the board, down to management hierarchy, supported by committee structure both at the Board level
and at Management level. The delegation of risk management responsibilities across the Group is structured to ensure that decisions
are enacted at the most appropriate level, in line with business objectives, subject to robust and eective review. Strategic business
decisions are taken within a Board-approved risk appetite with the executive and risk committees closely monitoring risk profiles against
this appetite.
RISK GOVERNANCE FRAMEWORK
FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE
Daily risk management, monitoring
and high level oversight
Risk oversight and challenges,
policies and methodologies.
Independent assurance of risk management
Business units and risk-takers
Risk Committees
Chief Risk Ocers, Heads of Risk
across the Group
Risk Management function
Audit Committee
Internal Audit
External Audit
Regulators
External Assessors
a. First line of defence - Risk management and ownership
The primary responsibilities and objectives of the first line of defence include:
Managing risks/implementing actions to manage and treat risks at transaction level;
Implementing risk management processes on an ongoing basis as changes occur with business mix, systems, or regulatory and
other requirements;
Executing risk assessments and identifying emerging risks at the transaction/business case level..
b. Second line of defence - Risk oversight
The main objective of the second line of defence is to provide oversight of the execution of the frontline controls. The second line of
defence is responsible for monitoring the internal controls that have been designed with the following main responsibilities:
Establishing risk management policies and processes;
Strategically linking the controls of risk enterprise-wide;
Providing guidance and coordination among all monitoring participants (risk management, compliance and legal divisions);
Initiating change, integrating and making new monitoring processes operational; and
Oversight over key risks.
170
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
c. Third line of defence - Risk assurance
The third line of defence is responsible for assessing and providing independent assurance on the adequacy, appropriateness and
eectiveness of Group’s overall risk management framework, policy and risk plan implementation. It provides independent perspectives
on the overall control framework and tests the adequacy of the controls design and eectiveness. The main duties of this line of
defence include:
Performing periodic reviews based on a rationalised and systematised approach that allows for risk assessment and governance
reporting;
Providing oversight on the risk management process;
Reporting to the Executive Management Ccommittee, the audit committee and the Board of Directors on the state of the
control environment and gaps in the controls or monitoring environment;
Board Audit and Risk Assessment Committee evaluates the processes for identifying, assessing, monitoring and managing key risk
areas; it also evaluates the adequacy of the Group’s risk management systems and control environment.
Management Committee is responsible for formulating policies; monitoring implementation of risk policies; reviewing risk reports for
presentation to the Board/Board committees; and Implementing Board decisions across the Group.
3.2 Credit risk
Credit risk is the single largest risk for the Group’s business therefore prominence is placed on eective management of credit risk.
Credit risk is defined as the potential that a borrower or counter party will fail to meet obligations in accordance with agreed terms. It
is also defined as the possibility of losses associated with diminution in the credit quality of borrowers or counter-parties.
Credit risk arises mainly from commercial and consumer loans and advances and loan commitments arising from such lending activities.
It can also arise from credit enhancement provided such as financial guarantees, letters of credit, endorsements and acceptances.
The Risk Management function of each subsidiary has specific and overall responsibility for facilitating risk asset creation and exposure
management processes across the Group.
3.2.1 Management of credit risk
The Credit Risk Policy Manual is the primary reference document for creating and managing credit risk exposures. The manual outlines
the general policies and procedures, framework for credit risk management across the subsidiaries and incorporates provisions for
marketing, risk analysis, approval, administration, monitoring and reporting of risk exposures.
The Credit Risk Management Policy Manual is designed to:
Standardise credit policies, give employees clear and consistent direction for the creation of risk exposures across all asset
creating business units;
Provide a comprehensive guide and framework in creating and managing risk assets;
Ensure prompt identification of problem credits and prudent management of decline in credit quality;
Outline the requirements for administration and reporting of individual exposures and the overall risk asset portfolio; and
Provide a framework for the on-going maintenance of the risk management policies and processes.
171
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Credit risk management policies and procedures are articulated by the Risk Management function of each subsidiary.
3.2.2 Risk limit control and mitigation policies
The Group manages, limits and controls concentrations of credit risk wherever they are identified − in particular, to individual
counterparties and groups, and to industries and countries.
The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower,
or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to
an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and
counterparty are set by the Board of Directors on the recommendation of the Chief Risk Ocer.
(a) Portfolio limits
In line with the Group's credit policy, a detailed portfolio plan is prepared annually and provides a framework for creation of credits
and risk appetite development. In drawing up the plan, the Group reviews macroeconomic, regulatory and political factors, identifies
sectors/industries with opportunity as well as the Group's business targets to determine appropriate portfolio and sub-portfolio limits.
The Group's Portfolio limit includes:
Maintain aggregate large exposure of not more than 400% of shareholders’ funds.
Maintain minimum weighted average obligor risk rating (obligor-WARR) of ‘Ba2’.
Maintain minimum weighted average facility risk rating (facility-WARR) of ‘Ba2’.
The Group adopts industry/economic sector limits on its loan portfolio, in line with the following policies:
– The Group would strive to limit its exposure to any single industry to not more than 20% of its loan portfolio and such
industry must be rated ‘Baa3’ or better.
– No more than 15% of the Group’s portfolio would be in any industry rated ‘Ba3’ or worse.
– No more than 10% of the Group's portfolio in any single industry rated ‘B3’ or worse.
(b) Geographical limits
Presently, the Group's exposures outside Nigeria are taken by its subsidiaries in the United Kingdom and other African countries, which
operate within country limits defined by their Boards of Directors. In addition, the Group has a fully developed country risk rating system
that could be employed, should the need arise. In such eventuality, limits will be graduated on country risk rating.
(c) Single obligor limits
The Group as a matter of policy does not lend above the regulatory lending limit in each of the jurisdiction in which it operates. Internal
guidance limits are also set to create a prudent buer.
For all retail borrowers, limits are kept low and graduated with credit scoring, forecast cash flow and realisable value of collateral. The
Group shall apply the granularity criterion on its retail credit portfolio:
– No single retail loan should amount to more than 0.2% of total retail portfolio.
The Group also sets internal credit approval limits for various levels in the credit process and these are shown in the table below.
Approval limits are set by the Board of Directors and reviewed from time to time as the circumstances of the Group demand. Exposure
to credit risk is also managed through regular analysis of borrowers and potential borrowers to meet interest and capital repayment
obligations and by changing these lending limits where appropriate.
172
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.3 Collateral held as security to mitigate credit risk
The Group employs a range of policies and practices to mitigate credit risk. The most common of these is accepting collateral for funds
advanced. The Group has internal policies on the acceptability of specific classes of collateral or credit risk mitigation.
Collateral values are assessed by a professional at the time of loan origination and are thereafter monitored in accordance with the
provisions of the credit policy. The principal collateral types for loans and advances are:
Cash/Treasury bill/Government securities
Legal Mortgage over residential properties, business real estates in prime locations
Charge over business fixed and floating assets as well as inventory
Guarantee from acceptable corporates
Equitable Mortgage on real estates in prime locations
Negative Pledge
Domiciliation of receivables from acceptable corporates.
Debt securities, treasury and other eligible bills are generally unsecured, except for asset-backed securities and similar instruments,
which are secured by portfolios of financial instruments. For exposures to corporate and large institutions, the Group will often require
the collateral to include a first charge over land and buildings owned and occupied by the business, a mortgage debenture over the
Company's undertaking on one or more of its assets and keyman insurance.
No loan allowance is recognized for the portion of the Group's financial assets which are fully collateralised by cash in the same
currency in accordance with the Group’s expected credit loss model. The carrying amount of such financial assets is N8.08billion as
at 31 December 2018.
The Group’s policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no
significant change in the overall quality of the collateral held by the Group since the prior period.
The Group takes physical possession of properties or other assets held as collateral and uses external agents to realise the value as
soon as practicable to settle indebtedness. Any surplus funds realised from such disposal are returned to the borrower or are otherwise
dealt with in accordance with appropriate regulations. The assets in such cases are not carried on the Group's balance sheet.
The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that the
Group will take possession of collateral to mitigate potential credit losses. The repossessed assets are sold as soon as practicable, with
proceeds realised from the sale used to reduce the outstanding indebtedness of the customers. Financial assets that are credit-impaired
and related collateral held in order to mitigate potential losses are shown below:
GROUP Gross
exposure
N'million
Impairment
allowance
N'million
Carrying
amount
N'million
Fair value of
collateral held
N'million
Credit-impaired assets
Retail portfolio
- Overdrafts 10,690 7,837 2,860 26,336
- Credit cards 272 82 191 -
- Term loans 42,555 23,833 18,716 6,515
- Mortgages 1,840 902 937 80
Corporate portfolio
- Overdrafts 120,932 74,966 45,967 20,245
- Term loans 342,392 264,081 78,311 50,551
- Project Finance 15,766 2,659 13,106 26,974
- Advances under finance lease 559 320 239 -
Total credit impaired assets 535,007 374,680 160,328 130,702
173
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.4 Exposure management
To minimise the risk and occurrence of loss as a result of decline in quality and non-performance of risk assets, clear requirements and
guidelines for ongoing management of the risk asset portfolio and individual risk exposures are defined. Ongoing exposure management
entails collateral management, facility performance monitoring, exposure quality reviews, prompt and timely identification of decline in
quality and risk portfolio reporting.
3.2.5 Delinquency management/loan workout
The Group's delinquency management process involves eective and timely management of accounts showing signs of delinquency to
reduce the crystallisation of impairment loss. In line with the Group's delinquency management process, all activities are geared towards
resuscitating delinquent loans and includes restructuring and loan work-out arrangements.
3.2.6 Credit recovery
In the event of continued delinquency and failure of remediation, full credit recovery action is initiated to recover on such exposures
and minimise the overall credit loss to the Group. Recovery action may include appointment of a receiver manager, external recovery
agent and/or sale of pledged assets.
3.2.7 Write-O
The Group writes o financial assets, in whole or in part, when it has exhausted all practical recovery eorts 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 Group's 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 Group may write-o financial assets that are still subject to enforcement activity. The outstanding contractual amounts of such
assets written-o during the year ended 31 December 2018 was N97.97bn. The Group still seeks to recover amounts it is legally owed
in full, but which have been partially written-o due to no reasonable expectation of full recovery.
3.2.8 Governance structure around the ECL model
The governance around ECL model centers on oversight functions of primary stakeholders. Oversight function is provided over the
following:
i. Obligor ratings
ii. Loss Given Default
iii. Governance also covers derivation of Credit Conversion Factor (CCF), Exposure at Default (EAD), scenarios and the use of
forward looking estimates. Data utilised in deriving these estimates are sourced from credible sources. However, a team of IT
experts still carry out periodic checks for system vulnerability, performance and deficiency.
Overall, review of completeness and accuracy is jointly carried out by credit risk team, internal control on regular basis and by internal
audit periodically.
3.2.9 Grouping of instruments for losses measured on collective basis
To estimate credit losses for retail portfolio, the Group adopts a model which groups loans with similar or homogeneous characteristics
together and this mainly based on the product types. Products are segmented in to four broad categories namely Credit Cards,
Mortgages, Term loans and Overdrafts.
174
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Models for Probability of default and loss given default are built in line with the segmentation and the output provide PD and LGD for
each of the product category while EAD is applied at individual level.
PD for each product category is calculated as the ratio of the loans which have defaulted to the total count of the loans in the product
group while LGD is estimated based on account balances, recoveries and collateral cover.
The appropriateness of groupings is monitored and reviewed on a periodic basis by the Credit Risk team.
3.2.10 Credit risk measurement
In measuring credit risk of financial assets (loans and advances to customers and to banks, Investment securities and loan commitments)
at a counterparty level, the Group reflects the following components:
The character and capacity to pay of the client or counterparty to meet its contractual obligations;
Current exposures to the counterparty and its likely future development;
Credit history of the counterparty; and
The likely recovery ratio in case of default obligations – value of collateral and other ways out.
Obligor risk rating
The Group has a robust internal rating system it leverages on to determine credit worthiness of its borrowers and likelihood of default.
The obligor risk rating grids is based on a 21-master rating scale mapped in to 9 buckets to provide a pre-set objective basis for making
credit decisions and estimating expected credit loss (ECL) in line with IFRS 9 requirements. The rating adopted depends on outcome
of quantitative and qualitative factors considered on the customer and reflects the inherent risks associated with each customer.
The rating tools are reviewed and upgraded when necessary. The Group regularly validates the performance of the rating tools and their
predictive powers regarding default events.
175
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Each risk bucket may be denoted alphabetically and by range of scores as follows:
Description Scale rating Grade
Highest quality, with minimal credit risk Aaa Aaa 1
Investment Grade
High quality, subject to very low credit risk Aa1 Aa 2
Aa2 3
Aa3 4
Considered upper-medium and may possess certain
speculative characteristics
A1 A 5
6
A2
7
A3
Considered medium-grade and may possess certain
speculative characteristics
Baa1 Baa 8
9
Baa2
10
Baa3
Considered to have speculative elements and are
subject to substantial credit risk
Ba1 Ba 11
Non Investment Grade
12
Ba2
13
Ba3
Considered speculative and are subject to high
credit risk
B1 B 14
15
B2
16
B3
Considered to be of poor standing and are subject
to very high credit risk
Caa1 Caa 17
18
Caa2
19
Caa3
In or near default, with possibility of recovery Ca Ca 20
In default with little chance of recovery C C 21
176
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.11 Expected Credit loss measurement
IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial recognition as summarised below:
A financial instrument that is not credit-impaired on intial recognition is classified in 'Stage 1' and has the credit risk
continously monitored by the Group.
If a significant increase in credit risk (SICR) since initial recognition is identified, the financial instrument is moved to 'Stage
2' but is not yet deemed to be credit-impaired. Please refer to Note 3.2.11(a) for a description of how the Group determines
when a significant increase in credit risk has occurred.
If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'. Refer to Note 3.2.11(b) for
a description of credit-impaired and default.
Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses
that result from default events possible within the next 12 months. Instruments in Stages 2 or 3 have their ECL measured
based on expected credit losses on a lifetime basis. Refer to Note 3.2.11(c) for a description of inputs, assumptions and
estimation techniques used in measuring the ECL.
A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking information. Note
3.2.11(d) includes an explanation of how the Group has incorporated this in its ECL models.
Purchased or originated credit-impaired financial assets are those financial assets that are credit-impaired on inital recognition.
Their ECL is always measured on a lifetime basis (Stage 3).
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are discussed below:
However, the simplified approach has been adopted for trade receivables and other assets.
a Assessment of significant increase in credit risk
The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following
quantitative, qualitative or backstop criteria have been met:
Corporate portfolio, Investment Securities and Placements with financial institutions
Quantitative Criteria:
Downward rating migration as at reporting date compared to initial rating at origination that exceeds specified threshold.
177
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Qualitative Criteria:
If the borrower is on the watchlist and/or the instrument meets one or more of the following criteria:
i Significant increase in credit spread
ii Significant adverse changes in business, financial and/or economic conditions in which the borrower operates
iii Actual or expected forberance or restructuring
iv Actual or expected significant adverse change in operating results of the borrower
v Significant change in collateral value (secured facilities only) which is expected to increase risk of dafault.
vi Early signs of cashflow/liquidity problems such as delay in servicing of trade creditors/loans
Retail portfolio
Quantitative criteria:
This is based on the backstop policy disclosed in the next section
Qualitative Criteria:
If the borrower meets one or more of the following criteria:
i In short-term forbearance
ii Significant modification to contractual terms
iii Previous arrears within the last 3 months
iv Negative credit bureau reports
The assessment of SICR incorporates forward-looking information (refer to Note 3.2.11(d) for further information) and is performed
on a periodic basis at a counterparty level for all financial instruments held by the Group.
Backstop
A backstop is applied and the financial instrument considered to have experienced a significant increase in credit risk if the borrower is
more than 30 days past due on its contractual payments, however specialised facilities are considered to have experienced significant
increase in credit risk if the borrower is more than 90 days past due on its contractual repayment. Specialised facilities include lending
for Project/Object finance and Commercial Real Estate.
Backstop criteria for non-specialised facilities
Stage Days in Delinquency
Stage 1 < 30days
Stage 2 >= 30 and <90 days
Stage 3 >= 90 days
178
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Backstop criteria for specialised facilities
Stage Days in Delinquency
Stage 1 < 90days
Stage 2 >= 90 and <180days
Stage 3 >= 180days
The Group has not used the low credit risk exemption for any financial instruments in the year ended 31 December 2018.
b Definition of default and credit-impaired assets
The Group defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it meets one or more
of the following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments (with the sole exception of specialised lending for project, object
and commercial real estate where a borrower is required to be more than 180 days past due to be considered in default).
Qualitative criteria
The following qualitative criteria indicates that a borrower is in significant financial diculty:
Long-term forbearance
Deceased borrower
Insolvency or Bankruptcy
Breach of financial covenant(s)
Disappearance of an active market for a financial asset due to financial diculties
Concessions made by the lender in relation to the borrower’s financial diculty
The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition of default used
for internal credit risk management purposes. The default definition has been applied consistently to model the Probability of Default (PD),
Exposure at Default (EAD) and Loss given Default (LGD) throughout the Group's expected loss calculations.
The 180 days past due default definition used for specialised facilities has been aligned with the definition used for regulatory capital
purposes. Therefore the Group considers 180 days past due to be a more appropriate default definition and has rebutted the 90 days past
due presumption under IFRS 9 for the specialised facilities. This rebuttal will be monitored and reviewed by the Credit Risk department on an
annual basis to ensure it remains appropriate.
Cure Criteria
An exposure will move from Stage 2 to 1 where probationary period of 90 days is met subject to all payments being up-to-date
with the customer demonstrating ability to maintain future repayments.
An Exposure will move from Stage 3 to 2 where probationary period of 180 days is met and there is consistency in repayment of
obligations as and when due.
c Measuring ECL — Explanation of inputs, assumptions and estimation techniques
The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a significant increase
in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected credit losses are the
discounted product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as follows:
179
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-impaired”
above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or over
the remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the Group includes the current drawn balance plus
any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.
Loss Given Default (LGD) represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD varies by type of
counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss
per unit of exposure at the time of default (EAD). LGD is calculated on a 12-month or lifetime basis, where 12-month LGD is the
percentage of loss expected to be made if the default occurs in the next 12 months and Lifetime LGD is the percentage of loss
expected to be made if the default occurs over the remaining expected lifetime of the loan.
The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure or collective segment.
These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in
an earlier month). This eectively calculates an ECL for each future month, which is then discounted back to the reporting date and summed.
The discount rate used in the ECL calculation is the original eective interest rate or an approximation thereof.
The 12M PD associated with a given rating is calibrated to a 12M Point in Time PD (PiT PD) using regression analysis while the lifetime PD
is developed by applying a cross section regression model which extends the 12-month PiT PD over a long-time horizon. The cross-sectional
analysis incorporates time-variant factors, time-invariant factors and idiosyncratic factors.
The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by facility type.
For amortising products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over a
12-month or lifetime basis. This will also be adjusted for any expected overpayments made by a borrower.
For revolving products, the exposure at default is predicted by taking current drawn balance and adding a “credit conversion factor”
which allows for the expected drawdown of the remaining limit by the time of default. These assumptions vary by product type and
current limit utilisation band, based on analysis of the Group’s recent default data.
The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries made post default. These vary by product
type.
For secured products, this is primarily based on collateral type and projected collateral values, historical discounts to market/book
values due to forced sales which have embedded cost of recovery, recovery period and haircuts.
For unsecured products, the Group leverages on a statistical model which estimates recovery rate based on analysis of default data.
The model takes in to consideration the credit worthiness and borrowers industry in arriving at the recovery rate.
LGD’s are typically set at product level for retail portfolio and counterparty level for the corporate portfolio, investment securities
and placements with financial institutions.
Forward-looking economic information is also included in determining the 12-month and lifetime PD, EAD and LGD. These assumptions vary
by portfolio/product type. Refer to Note 3.2.11(d) for an explanation of forward-looking information and its inclusion in ECL calculations.
The assumptions underlying the ECL calculation such as rating migration for determination of PDs and change in collateral values etc. are
monitored and reviewed on a quarterly basis. There have been no significant changes in estimation techniques or significant assumptions
made during the reporting period.
d Forward-looking information incorporated in the ECL models
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Group has performed historical analysis
and identified the key macro-economic variables impacting credit risk and expected credit losses for its portfolio.
180
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
These variables and their associated impact on the PD, EAD and LGD vary by portfolio type; in addition, expert judgement has also been
applied in this process.
Forecasts of these macroeconomic variables for each of the possible scenarios (upturn, baseline and downturn) are provided by Moody’s
Analytics economic’s team (Groups Vendor) via its platform known as Data Buet on a quarterly basis. The platform can provide an economic
forecast up to 30 years. The impact of these economic variables on the PD, EAD and LGD has been determined by performing statistical
cross sectional regression analysis to understand the impact changes in these variables have had historically on default rates and on the
components of LGD and EAD.
Weights are assigned to the possible outcome of each scenario based on statistical regression analysis and expert judgement taking account
of the range of possible outcomes each chosen scenario is representative of.
The assessment of SICR is determined using rating migration which are linked to the PDs of each scenarios multiplied by the associated
scenario weighting, along with qualitative and backstop indicators (see Note 3.2.10). This determines whether the whole financial instrument
is in Stage 1, Stage 2, or Stage 3 and hence whether 12-month or lifetime ECL should be recorded. Following this assessment, the Group
measures ECL as either a probability weighted 12 month ECL (Stage 1), or a probability weighted lifetime ECL (Stages 2 and 3). These
probability-weighted ECLs are determined by running each scenario through the relevant ECL model and multiplying it by the appropriate
scenario weighting.
Generally, in economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty, hence
the actual outcomes may be significantly dierent to those projected. Therefore, the Group considers these forecasts to represent its best
estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Group’s dierent portfolios to establish
that the chosen scenarios are appropriately representative of the range of possible scenarios.
e Simplified approach
In determining the ECL for other assets, the Group applies the simplified approach to estimate ECLs, adopting a provision matrix, where the
receivables are grouped based on the nature of the transactions, aging of the balances and dierent historical loss patterns, to determine the
lifetime ECLs. The provision matrix estimates ECLs on the basis of historical default rates, adjusted for forward looking estimates e.g. inflation,
exchange rates etc. eort.
3.2.12 Economic variable assumptions
The most significant period-end assumptions used for the ECL estimate as at 31 December 2018 are set out below.
Corporate portfolio, investment securities and placements with financial institutions
2019 2020 2021 2022 2023
Gross Domestic Product
(NGN'billions) Base 73,928 77,023 80,096 83,076 86,073
Upturn 74,759 80,026 84,150 87,743 91,149
Downturn 70,782 71,436 74,380 77,942 81,548
Stock Index Price
(NGN per share) Base 160 175 183 189 197
Upturn 183 199 205 210 216
Downturn 128 139 154 168 179
Oil price (USD per barrel) Base 73 68 67 68 69
Upturn 92 88 86 85 85
Downturn 51 47 51 56 58
181
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.12 Economic variable assumptions continued
The weightings assigned to each economic scenario at 31 December 2018 were as follows:
Base Upturn Downturn
Corporate portfolio, investment securities and
placement with financial institutions 40% 30% 30%
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative
or political changes, have also been considered, but are not deemed to have a material impact and therefore no adjustment has been made
to the ECL for such factors. This is reviewed and monitored for appropriateness on a quarterly basis.
3.2.13 Sensitivity analysis on ECL model
The most significant assumptions aecting the ECL allowance are as follows:
Corporate portfolios
(i) GDP, given the significant impact on companies’ performance and collateral valuations
(ii) Oil price, given its significant impact on Nigerian economy and industry players
(iii) Stock Price Index, given its relevance for evaluating market performance of firms.
Set out below are the changes to the ECL as at 31 December 2018 that would result from reasonably possible changes in these parameters
from the actual assumptions used in the Group’s economic variable assumptions:
Corporate portfolios
Oil Price
N'm N'm N'm
(-5%) No change +5%
GDP +5% 252,721 252,721 252,721
No Change 252,721 252,176 252,721
(-5%) 252,721 252,721 252,721
182
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.14 Measurement basis of financial assets and liabilities
GROUP
Fair value through
profit/loss
N'million
Fair value
through OCI
N'million
Amortised cost
N'million
Total
N'million
31 December 2018
Financial assets
Cash and balances with Central Banks - - 653,335 653,335
Loans and advances to banks - - 863,435 863,435
Loans and advances to customers - Corporate portfolio:
- Overdrafts - - 176,685 176,685
- Term loans - - 867,283 867,283
- Project finance - - 471,078 471,078
- Advances under finance lease - - 417 417
Loans and advances to customers - Retail portfolio:
- Overdrafts - - 13,775 13,775
- Term loans - - 98,410 98,410
- Credit cards - - 1,916 1,916
- Mortgage - - 54,249 54,249
Financial assets at fair value through profit or loss 109,162 - - 109,162
Investment securities:
- Investments at FVOCI - 874,119 - 874,119
- Investments at amortised cost - - 789,702 789,702
Asset pledged as collateral - 215,753 93,298 309,051
Other assets - - 36,270 36,270
Total financial assets 109,162 1,089,871 4,119,854 5,318,887
Fair value
through
profit/loss
N'million
Amortised cost
N'million
Total
N'million
Financial liabilities
Deposits from banks - 749,315 749,315
Deposits from customers - 3,486,691 3,486,691
Financial liabilities at fair value through profit or loss 15,791 - 15,791
Other liabilities - 346,627 346,627
Liability on investment contracts - 19,766 19,766
Borrowings - 338,214 338,214
Total financial liabilities 15,791 4,940,614 4,956,405
183
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.14 Measurement basis of financial assets and liabilities continued
GROUP
Fair value
through
profit/loss
Fair value
through OCI
Amortised
cost
Amortised
cost
Held-for-
trading
N'million
Available-
for-sale
N'million
Loans and
receivables
N'million
Held-to-
maturity
N'million
Total
N'million
31 December 2017
Financial assets
Cash and balances with Central Banks - - 641,881 - 641,881
Loans and advances to banks - - 742,929 - 742,929
Loans and advances to customers: -
- Overdrafts - - 296,135 - 296,135
- Term loans - - 1,670,334 - 1,670,334
- Sta loans - - 7,947 - 7,947
- Project finance - - 26,296 - 26,296
- Advances under finance lease - - 511 - 511
Financial assets at fair value through profit or loss 83,713 - - - 83,713
Investment securities: -
- Available-for-sale investments - 1,122,757 - - 1,122,757
- Held-to-maturity investments - - - 108,283 108,283
- Loans and receivables - - 17,568 - 17,568
Asset pledged as collateral - 134,513 - 74,412 208,924
Other assets - - 63,462 - 63,462
Total financial assets 83,713 1,257,270 3,467,064 182,695 4,990,743
Fair value
through
profit/loss
N'million
Amortised
cost
N'million
Total
N'million
Financial liabilities
Deposits from banks - 665,366 665,366
Deposits from customers - 3,143,338 3,143,338
Financial liabilities at fair value through profit or loss 9,404 - 9,404
Other liabilities - 226,410 226,410
Liability on investment contracts - 13,399 13,399
Borrowings - 420,919 420,919
Total financial liabilities 9,404 4,469,432 4,478,837
184
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.14 Measurement basis of financial assets and liabilities continued
COMPANY
Fair value through
Profit/Loss
N'million
Fair value
through OCI
N'million
Amortised cost
N'million
Total
N'million
31 December 2018
Financial assets
Loans and advances to banks - - 16,639 16,639
Loans and advances to customers - Retail portfolio
- Sta loans - - 110 110
Financial assets at FVTPL 3,427 3,427
Investment securities: -
- Investment securities at FVOCI - 7,078 - 7,078
Other assets - - 87 87
Total financial assets 3,427 7,078 16,836 27,341
Amortised cost
N'million
Total
N'million
Financial liabilities
Other liabilities 8,034 8,034
Total Financial Liabilities 8,034 8,034
COMPANY
Fair value
through OCI
Amotised
cost
Available-for-
sale
N'million
Loans and
receivables
N'million
Total
N'million
31 December 2017
Financial assets
Loans and advances to banks - 7,585 7,585
Loans and advances to customers
- Sta loans - 108 108
Investment securities: -
- Available-for-sale investments 9,842 - 9,842
Other assets - 8,832 8,832
Total financial assets 9,842 16,524 26,367
Amortised cost
N'million
Total
N'million
Financial liabilities
Other liabilities 7,553 7,553
Total financial liabilities 7,553 7,553
185
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.15 Maximum exposure to credit risk before collateral held or credit enhancements
(a) Financial instruments subject to impairment
The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross
carrying amount of financial assets below also represents the Group's maximum exposure to credit risk on these assets.
GROUP
Balances with Central Banks
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 542,098 - - - 542,098
Non-investment grade 531 - - - 531
Gross carrying amount 542,629 - - - 542,629
Loss allowance - - - - -
Carrying amount 542,629 - - - 542,629
Loans and Advances to Banks
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 463,241 - - - 463,241
Non-investment grade 366,091 34,998 - - 401,090
Gross carrying amount 829,332 34,998 - - 864,330
Loss allowance (895) - - - (895)
Carrying amount 828,437 34,998 - - 863,435
186
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Loans and Advances to Customers - Retail Portfolio
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 345 - - - 345
Non-investment grade 143,351 3,433 19 - 146,803
Default - - 55,339 - 55,339
Gross carrying amount 143,696 3,433 55,357 - 202,487
Loss allowance (1,451) (33) (32,653) - (34,137)
Carrying amount 142,245 3,401 22,704 - 168,350
Loans and Advances to Customers - Corporate Portfolio
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 407,977 30,329 - - 438,307
Non-investment grade 450,199 498,642 20,262 - 969,103
Default - - 459,389 - 459,389
Gross carrying amount 858,176 528,972 479,651 - 1,866,798
Loss allowance (4,157) (5,151) (342,028) - (351,336)
Carrying amount 854,019 523,820 137,623 - 1,515,462
Debt Investment Securities - at FVOCI
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 719,347 - - - 719,347
Non-investment Grade 46,423 - - - 46,423
Carrying Amount 765,770 - - - 765,770
Loss allowance (1,134) - - - (1,134)
187
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Investment Securities - at Amortised Cost
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 738,120 - - - 738,120
Non-investment grade 52,410 - - - 52,410
Default 7 - - - 7
Gross carrying amount 790,537 - - - 790,537
Loss allowance (835) - - - (835)
Carrying amount 789,702 - - - 789,702
Assets pledged as collateral
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 309,051 - - - 309,051
Non-investment grade - - - - -
Gross carrying amount 309,051 - - - 309,051
Loss allowance - - - - -
Carrying amount 309,051 - - - 309,051
31 Dec 2018
Total
N'millions
Other assets 36,736
188
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
COMPANY
Loans and Advances to Banks
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 16,639 - - - 16,639
Non-investment grade - - - - -
Default - - - - -
Gross carrying amount 16,639 - - - 16,639
Loss allowance - - - - -
Carrying amount 16,639 - - - 16,639
Loans and Advances to Customers - Retail Portfolio
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade - - - - -
Non-investment grade 110 - - - 110
Default - - - - -
Gross carrying amount 110 - - - 110
Loss allowance - - - - -
Carrying amount 110 - - - 110
Debt Investment Securities - at FVOCI
31 Dec 2018
Stage 1
12-month
ECL
N'millions
Stage 2
Lifetime
ECL
N'millions
Stage 3
Lifetime
ECL
N'millions
Purchased
Credit-
Impaired
N'millions
Total
N'millions
Credit grade
Investment grade 7,079 - - - 7,079
Non-investment grade - - - - -
Default - - - - -
Gross carrying amount 7,079 - - - 7,079
Loss allowance - - - - -
Carrying amount 7,079 - - - 7,079
31 Dec 2018
Total
N'millions
Other assets 87
189
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Maximum exposure to credit risk
Financial instruments subject to impairment
2017 GROUP
31 Dec 2017
N'millions
COMPANY
31 Dec 2017
N'millions
Balances with Central Banks 472,848 -
Loans and advances to banks 742,929 7,585
Loans and advances to customers
- Overdrafts 296,135 -
- Term loans 1,670,334 -
- Sta loans 7,947 108
- Project finance 26,296 -
- Advances under finance lease 511 -
Financial assets at FVTPL 75,157 -
Investment securities - Debt
- Available-for-sale investments 1,026,739 6,989
- Held-to-maturity investments 108,283 -
- Loans and receivables 17,568 -
Asset pledged as collateral 208,925 -
Other assets 63,462 8,832
4,717,137 23,513
Credit risk exposures relating to o balance sheet assets are as follows:
Loan commitments 8,263 -
Letter of credit and other credit related obligations 530,969 -
539,232 -
TOTAL MAXIMUM EXPOSURE 5,256,369 23,513
(b) Financial instruments not subject to impairment
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment.
GROUP COMPANY
Maximum exposure to credit risk Maximum exposure to credit risk
31 Dec 2018
N'm
31 Dec 2017
N'm
31 Dec 2018
N'm
31 Dec 2017
N'm
Financial Assets at FVPTL
- Debt securities 55,042 52,164 - -
- Derivatives 17,786 22,993 - -
190
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.16 Concentration of risks of financial assets with credit risk exposure
(a) Geographical sectors
The following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any collateral held
or other credit support), as categorised by geographical region as of 31 December 2018 and 31 December 2017. For this table, the
Group has allocated exposures to regions based on the country of domicile of its counterparties. Investment securities and financial
assetsat fair value through profit or loss analysed below excludes investments in equity instruments.
GROUP
Lagos
N'million
Southern
Nigeria
N'million
Northern
Nigeria
N'million
Africa
N'million
Europe
N'million
America
N'million
Total
N'million
Balances with Central Banks
526,268 - - 16,158 203 - 542,629
Loans and advances to banks
393,238 - - 63,687 281,443 125,068 863,435
Loans and advances to customers:
Retail portfolio:
- Overdrafts
4,254 2,335 556 6,630 0 - 13,775
- Term loans
19,549 42,501 18,256 18,069 36 - 98,410
- Credit cards
770 774 372 - - - 1,916
- Mortgage
33,948 1,578 593 2,885 9,216 6,030 54,249
Corporate portfolio:
- Overdrafts
111,902 20,976 6,576 16,202 21,016 13 176,685
- Term loans
637,295 124,312 15,089 52,578 37,454 554 867,283
- Project finance
425,725 7,159 38,194 - - - 471,078
- Advances under finance lease
69 348 - - - - 417
Financial assets at FVTPL
60,996 - - 11,778 54 - 72,828
Investment securities
- FVOCI Investments
761,943 2,176 1,651 - - - 765,770
- Amortised cost investments
39,299 654 - 173,136 70,965 505,648 789,702
Asset pledged as collateral
294,908 - - 14,143 - - 309,051
Other assets
20,029 8,995 1,291 5,265 649 41 36,270
31 December 2018
3,330,192 211,808 82,579 380,531 421,035 637,354 5,063,500
Credit risk exposure relating to o balance sheet items are as follows:
Loan commitments
21,341 19,044 1,289 1,228 - - 42,902
Letters of credit and other credit related
obligations
705,983 52,613 40,271 14,461 26,677 2,184 842,189
31 December 2018
727,323 71,657 41,560 15,690 26,677 2,184 885,091
191
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Lagos
N'million
Southern
Nigeria
N'million
Northern
Nigeria
N'million
Africa
N'million
Europe
N'million
America
N'million
Total
N'million
Balances with Central Banks 458,273 - - 14,377 198 - 472,848
Loans and advances to banks 236,597 - - 48,582 308,276 149,474 742,929
Loans and advances to customers
- Overdrafts 159,842 44,437 12,936 43,495 28,154 7,271 296,135
- Term loans 1,220,248 201,162 54,942 83,451 47,813 62,718 1,670,334
- Sta loans 6,049 - 20 1,837 41 - 7,947
- Project finance 6,092 5,503 14,700 - - - 26,296
- Advances under finance lease 233 275 3 - - - 511
Financial assets at fair value through profit
or loss
68,753 - - 2,238 4,166 - 75,157
Investment securities
- Available-for-sale investments 593,590 3,233 1,933 17,131 56,263 354,589 1,026,739
- Held-to-maturity investments 65,661 2,016 - 40,606 - - 108,283
- Loans and receivables 17,568 - - - - - 17,568
Asset pledged as collateral 203,825 - - 5,100 - - 208,925
Other assets 49,757 6,693 318 5,961 732 - 63,462
31 December 2017 3,086,492 263,319 84,852 262,778 445,643 574,052 4,717,137
Credit risk exposure relating to o balance sheet items are as follows:
Loan commitments 4,962 1,073 - 2,228 - - 8,263
Letters of credit and other credit related
obligations 303,807 45,271 32,858 2,354 143,417 3,262 530,969
31 December 2017 308,769 46,344 32,858 4,582 143,417 3,262 539,232
COMPANY
Lagos
N'million
Southern
Nigeria
N'million
Northern
Nigeria
N'million
Africa
N'million
Europe
N'million
America
N'million
Total
N'million
Loans and advances to banks 16,639 - - - - - 16,639
Loans and advances to customers
- Sta loans 110 - - - - - 110
Financial assets at FVTPL - - - - - - -
Investment securities
- FVOCI Investments 7,079 - - - - - 7,079
Other assets 87 - - - - - 87
31 December 2018 23,916 - - - - - 23,916
Loans and advances to banks 7,585 - - - - - 7,585
Loans and advances to customers
- Sta loans 108 - - - - - 108
Investment securities
- Available-for-sale investments 6,989 - - - - - 6,989
Other assets 8,832 - - - - - 8,832
31 December 2017 23,513 - - - - - 23,513
192
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.16 Concentration of risks of financial assets with credit risk exposure continued
b) Industry sectors
The following table breaks down the Group’s credit exposure at carrying amounts (without taking into account any collateral held or
other credit support), as categorised by the industry sectors of the Group’s counterparties. Investment securities and financial assets
at fair value through profit or loss analysed below excludes investments in equity instruments.
GROUP
Balances with
Central Banks
N'million
Loans and
advances to
banks
N'million
Financial
assets at fair
value through
profit or loss
N'million
Investment
Securities
-FVOCI
N'million
Investment
Securities -
Amortised cost
N'million
Asset
pledged as
collateral
N'million
Other assets
N'million
Oil and gas - - 2,957 9,092 13,447 - -
Consumer credit - - - - - - -
Manufacturing - - 121 3,064 - - 2,017
Finance and insurance 542,629 863,435 61,818 50,429 206,675 14,143 27,849
General commerce - - - - - - 5,500
Utilities - - - - - - 63
Public sector - - 7,933 703,185 569,633 294,909 841
Total at 31 December 2018 542,629 863,435 72,828 765,770 789,702 309,051 36,270
Loans and advances to customers - Retail Portfolio
Overdraft
N'millions
Term loans
N'millions
Credit cards
N'millions
Mortgage
N'millions
Total
N'millions
Agriculture 93 299 - - 392
Oil and gas 250 782 - 205 1,237
Consumer credit 3,351 83,623 1,914 364 89,252
Manufacturing 783 584 - 267 1,634
Real estate 24 41 - 25,767 25,832
Construction 371 87 - - 458
Finance and insurance 250 1,623 - 184 2,057
Transportation 35 206 - 175 416
Communication 92 105 - 452 648
General commerce 3,559 6,770 - 651 10,980
Utilities 343 82 - - 425
Retail services 4,532 2,710 2 26,185 33,428
Public sector 93 1,499 - - 1,592
Total at 31 December 2018 13,775 98,410 1,916 54,249 168,350
193
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.16 Concentration of risks of financial assets with credit risk exposure continued
Loans and advances to customers - Corporate Portfolio
Overdraft
N'million
Term loans
N'million
Project finance
N'million
Advances under
finance lease
N'million
Total
N'million
Agriculture 8,117 37,361 - - 45,478
Oil and gas 58,815 202,664 313,870 361 575,710
Consumer credit - 305 - - 305
Manufacturing 36,309 239,904 - - 276,213
Real estate 13,168 13,319 35,612 - 62,099
Construction 18,293 54,966 17,930 5 91,194
Finance and insurance 1,202 15,745 - - 16,947
Transportation 524 7,795 4,273 - 12,592
Communication 13,108 22,955 - - 36,063
General commerce 20,108 45,020 - - 65,129
Utilities 3,404 13,492 99,392 - 116,287
Retail services 3,637 32,615 - 51 36,303
Public sector - 181,143 - - 181,143
Total at 31 December 2018 176,685 867,283 471,078 417 1,515,463
Balances with
Central Banks
N'million
Loans and
advances
to banks
N'million
Financial
assets at fair
value through
profit or loss
N'million
Investment
Securities-
Available-for-
sale
N'million
Investment
Securities -
Held-to-
maturity
N'million
Investment
Securities -
Loans and
receivables
N'million
Asset pledged
as collateral
N'million
Oil and gas - - 10,266 - - - -
Manufacturing - - 981 4,859 3,903 - -
Finance and insurance 472,848 742,903 11,772 435,659 16,718 - 12,250
Public sector - 26 52,137 586,221 87,662 17,568 196,675
Total at 31 December 2017 472,848 742,929 75,157 1,026,739 108,283 17,568 208,925
194
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.16 Concentration of risks of financial assets with credit risk exposure continued
Loans to customers
Other assets
N'million
Overdraft
N'million
Term loans
N'million
Sta loans
N'million
Project
finance
N'million
Advances
under finance
lease
N'million
Total
N'million
Agriculture - 5,264 49,932 1 - - 55,196
Oil and gas - 58,959 672,194 - 8,369 - 739,522
Consumer credit - 6,361 92,875 5,704 - 2 104,942
Manufacturing - 78,163 250,611 - - - 328,774
Real estate - 59,576 56,025 1,815 - - 117,416
Construction - 13,012 49,807 - 14,700 8 77,527
Finance and insurance 57,635 340 43,697 39 - - 44,076
Transportation - 358 12,442 - - - 12,800
Communication - 16,457 39,202 - 3,227 - 58,886
General commerce 5 29,947 35,958 - - - 65,905
Utilities 5,512 3,617 123,696 - - - 127,313
Retail services - 23,910 51,649 388 - 501 76,448
Public sector 310 171 192,246 - - - 192,417
Total at 31 December 2017 63,462 296,135 1,670,334 7,947 26,296 511 2,001,222
195
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.16 Concentration of risks of financial assets with credit risk exposure continued
COMPANY
Loans and
advances to
banks
N'million
Financial assets
at fair value
through profit
or loss
N'million
Investment
Securities -
FVOCI
N'million
Investment
Securities -
Amortised cost
N'million
Other assets
N'million
Loans to customers
Retail portfolio
N'million
Finance and insurance 16,639 - - - 87 -
Retail services - - - - - 110
Public sector - - 7,079 - - -
Total at 31 December 2018 16,639 - 7,079 - 87 110
Loans and
advances to
banks
N'million
Investment
Securities -
Available-for-
sale
N'million
Investment
Securities -
Held-to-
maturity
N'million
Investment
Securities -
Loans and
receivables
N'million
Other assets
N'million
Loans to customers
Sta Loan
N'million
Finance and insurance 7,585 - - - 8,832
Consumer credit 108
Public sector - 6,989 - - - -
Total at 31 December 2017 7,585 6,989 - - 8,832 108
Credit risk exposure relating to o balance sheet items are as follows:
Loan
commitments
31 Dec 2018
N'million
Letter of credit
and other related
obligations
31 Dec 2018
N'million
Loan
commitments
31 Dec 2017
N'million
Letter of credit
and other related
obligations
31 Dec 2017
N'million
Agriculture 758 17,318 - 5,169
Oil and gas 29,520 75,301 1,080 57,869
Consumer credit 2,768 - 79 -
Manufacturing 3,396 175,158 18 131,730
Real estate 17 - - 167
Construction 186 58,193 12 54,140
Finance and insurance 250 359,394 35 168,407
Transportation - 1,500 - 2,752
Communication 1,672 3,862 76 2,006
General commerce 2,646 92,014 1,949 48,570
Utilities - 17,750 4,897 21,582
Retail services 1,689 26,081 113 11,581
Public sector - 15,619 4 26,996
Total 42,902 842,189 8,263 530,969
196
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.17 Loans and advances to customers
Credit quality of Loans and advances to customers is summarised as follows:
GROUP Loans to customers
December 2018
Overdraft
N'million
Term loans
N'million
Credit
cards
N'million
Mortgage
N'million
Total
N'million
Retail
Stage 1 loans 9,479 79,510 1,723 53,267 143,979
Stage 2 loans 1,685 1,341 7 118 3,151
Stage 3 loans 10,690 42,555 272 1,840 55,357
Gross 21,855 123,406 2,003 55,224 202,488
Less: allowance for impairment (Note 23) (8,080) (24,996) (87) (975) (34,138)
Net 13,775 98,410 1,916 54,249 168,350
Lifetime ECL (see Note 23) 7,842 23,859 82 905 32,688
12-months' ECL (see Note 23) 238 1,137 5 70 1,450
Total 8,080 24,996 87 975 34,138
GROUP Loans to customers
December 2018
Overdraft
N'million
Term loans
N'million
Project
finance
N'million
Advances
under
finance lease
N'million
Total
N'million
Corporate
Stage 1 loans 113,386 591,491 153,130 178 858,185
Stage 2 loans 17,651 203,682 307,629 - 528,962
Stage 3 loans 120,932 342,394 15,766 559 479,651
Gross 251,969 1,137,567 476,524 737 1,866,798
Less: allowance for impairment (Note 23) (75,284) (270,284) (5,447) (320) (351,335)
Net 176,685 867,283 471,078 417 1,515,463
Lifetime ECL (see Note 23) 75,048 266,861 4,949 320 347,178
12-months' ECL (see Note 23) 236 3,423 498 - 4,157
Total 75,284 270,284 5,447 320 351,335
GROUP Loans to customers
December 2017
Overdraft
N'millions
Term loans
N'millions
Sta loans
N'millions
Project
finance
N'millions
Advances
under
finance lease
N'millions
Total
N'millions
Neither past due nor impaired 241,404 1,340,167 8,223 26,775 375 1,616,944
Past due but not impaired 34,281 109,016 14 - 110 143,421
Individually impaired 67,565 422,698 6 - 533 490,802
Collectively impaired 2,378 26,794 - - 54 29,226
Gross 345,628 1,898,675 8,243 26,775 1,072 2,280,393
Less: allowance for impairment (Note 23) (49,493) (228,341) (296) (479) (561) (279,170)
Net 296,135 1,670,334 7,947 26,296 511 2,001,223
Individually impaired 44,205 185,326 4 - 533 230,068
Portfolio allowance 5,288 43,015 292 479 28 49,102
Total 49,493 228,341 296 479 561 279,170
197
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.17 Loans and advances to customers continued
COMPANY
Term loans
N'million
Total
N'million
Retail
December 2018
Stage 1 loans 110 110
Gross 110 110
Less: allowance for impairment - -
Net 110 110
December 2017
Neither past due nor impaired 108 108
Gross 108 108
Less: allowance for impairment - -
Net 108 108
GROUP
December 2018
Retail
(a) Loans and advances to customers - Stage 1
The credit quality of the portfolio of loans and advances to customers that are categorised in Stage 1 can be assessed by reference to
the internal rating system adopted by the Group (See Section 3.2.2 for an explanation of the internal rating system).
Overdraft
N'million
Term loans
N'million
Credit
cards
N'million
Mortgage
N'million
Total
N'million
Grades:
Ba 4,686 63,547 1,723 7,150 77,106
B 3,469 5,212 - 46,108 54,789
Caa 1,063 8,627 - 9 9,699
Ca 262 2,124 - - 2,385
9,479 79,510 1,723 53,267 143,979
198
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.17 Loans and advances to customers continued
(b) Loans and advances - Stage 2
Overdraft
N'million
Term loans
N'million
Credit
cards
N'million
Mortgage
N'million
Total
N'million
Past due up to 30 days 1,425 247 - 2 1,674
Past due by 30 - 60 days 170 749 4 91 1,014
Past due 60-90 days 90 346 3 24 463
Gross amount 1,685 1,341 7 118 3,151
(c) Loans and advances - Stage 3
Gross amount 10,690 42,555 272 1,840 55,357
Life time ECL- credit impaired (7,837) (23,833) (82) (902) (32,654)
Net amount 2,854 18,722 191 937 22,703
December 2018
Corporate
(a) Loans and advances to customers - Stage 1
The credit quality of the portfolio of loans and advances to customers that are categorised in Stage 1 can be assessed by reference to
the internal rating system adopted by the Group (See Section 3.2.2 for an explanation of the internal rating system).
Overdraft
N'million
Term loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
Grades:
Aaa 5 11,605 - - 11,611
Aa 10,988 254,371 5,050 - 270,409
A 2,110 62,195 - - 64,306
Baa 8,107 53,829 - - 61,937
Ba 57,468 41,378 131,880 178 230,904
B 34,707 168,112 16,200 - 219,019
113,386 591,491 153,130 178 858,185
199
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.17 Loans and advances to customers continued
(b) Loans and advances - Stage 2
Overdraft
N'million
Term loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
Past due up to 30 days 5,727 99,831 99,374 - 204,931
Past due by 30 - 60 days 11,907 25,990 9,095 - 46,992
Past due 60-90 days 14 3,470 905 - 4,390
Above 90 days 3 74,392 198,255 - 272,649
Gross amount 17,651 203,682 307,629 - 528,962
(c) Loans and advances - Stage 3
Gross amount 120,932 342,392 15,766 559 479,649
Life time ECL- credit impaired (74,966) (264,081) (2,659) (320) (342,026)
Net amount 45,967 78,311 13,106 239 137,623
December 2017
(a) Loans and advances to customers - neither past due nor impaired
Overdraft
N'million
Term loans
N'million
Sta loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
Grades:
Aaa 257 10,888 482 1 1 11,629
Aaa 994 51,303 - - - 52,297
A 16,174 57,603 3 - - 73,780
Baa 39,264 249,526 1,615 - - 290,405
Baa 68,379 329,896 1,865 18,109 203 418,452
B 55,972 426,890 4,060 8,665 171 495,758
Caa 29 387 - - - 416
Caa 56 1,424 138 - - 1,618
C 60,279 212,249 59 - - 272,587
241,404 1,340,167 8,223 26,775 375 1,616,946
200
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.17 Loans and advances to customers continued
(b) Loans and advances past due but not impaired
Overdraft
N'million
Term loans
N'million
Sta loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
Past due up to 30 days 21,881 61,599 9 - 110 83,599
Past due by 30 - 60 days 11,313 20,852 5 - - 32,170
Past due 60-90 days 1,087 26,565 - - - 27,652
Gross amount 34,281 109,016 14 - 110 143,421
(c) Collectively impaired loans
These represent insignificant impaired loans which are assessed on a collective basis.
Overdraft
N'million
Term loans
N'million
Sta loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
2,378 26,794 - - 54 29,226
(d) Loans and advances individually impaired
Overdraft
N'million
Term loans
N'million
Sta loans
N'million
Project
finance
N'million
Advances under
finance lease
N'million
Total
N'million
Gross amount 67,565 422,698 6 - 533 490,802
Specific impairment (44,205) (185,326) (4) - (533) (230,068)
Net amount 23,360 237,372 2 - - 260,734
201
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.2.18 Collaterized assets
The financial eect of collateral is presented by disclosing collateral values separately for (i) those assets where collateral and other
credit enhancements are equal to or exceed carrying value of the asset ("over-collateralised assets") and (ii) those assets where
collateral and other credit enhancements are less than the carrying value of the asset. The eect of collateral at 31 December 2018
and 31 December 2017 are as shown below:
GROUP Over-collaterised assets Under-collaterised assets
Carrying value of
the assets
Fair value of
collateral held
Carrying value
of the assets
Fair value of
collateral held
31 December 2018
Financial assets
Loans and advances to banks - - 863,435 316,931
Financial assets at fair value through profit or loss - - 72,828 11,492
Total financial assets - - 936,264 328,423
31 December 2017
Financial assets
Loans and advances to banks - - 742,929 5,426
Financial assets at fair value through profit or loss - - 83,713 2,452
Total financial assets - - 826,642 7,878
COMPANY Over-collaterised assets Under-collaterised assets
Carrying value of
the assets
Fair value of
collateral held
Carrying value
of the assets
Fair value of
collateral held
31 December 2018
Financial assets
Loans and advances to banks - - 16,639 -
Financial assets at fair value through profit or loss - - 3,427 -
Total financial assets - - 20,067 -
31 December 2017
Financial assets
Loans and advances to banks - - 7,585 -
Financial assets at fair value through profit or loss - - - -
Total financial assets - - 7,585 -
The underlisted financial assets are not collaterised:
Cash and balances with Central Banks
Investment securities:
- Available-for-sale investments/FVOCI Investments
- Amortised cost investments
Asset pledged as collateral
Other assets
The Group's investment in risk-free government securities and its cash and balances with Central Banks are not considered to require
collaterals given their sovereign nature.
202
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3 Liquidity risk
Liquidity risk is the risk that the Group does not have sucient financial resources to meet its obligation as they fall due or will have
to meet the obligations at excessive costs. This risk could arise from mismatches in the timing of cash flows.
Funding risk is a form of liquidity risk that arises when the liquidity needed to fund illiquid asset positions cannot be obtained at the
expected terms and when required.
The objective of the Group’s liquidity risk management is to ensure that all anticipated funding commitments can be met when due
and that access to funding sources is coordinated and cost eective.
3.3.1 Management of liquidity risk
The Group’s liquidity management process includes:
Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen
interruption to cash flow;
Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This includes
replenishment of funds as they mature or are borrowed by customers.
Active monitoring of the timing of cashflows and maturity profiles of assets and liabilities to ensure mismatches are within
stipulated limits;
Monitoring the liquidity ratios against internal and regulatory requirements; and
Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as
these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of
the financial liabilities and the expected collection date of the financial assets
Particular attention is also paid to the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact
of contingent liabilities such as standby letters of credit and guarantees.
Liquidity risk on derivatives is managed using the same source of funding as for the non-derivative liabilities.
3.3.2 Funding approach
The Group is funded primarily by a well-diversified mix of retail, corporate and public sector deposits. This funding base ensures stability
and low funding cost with minimal reliance on more expensive tenured deposit and interbank takings as significant sources of funding.
3.3.3 Non-derivative financial liabilities and assets held for managing liquidity risk
The table below presents the cash flows payable by the Group under non-derivative financial liabilities and assets held for managing
liquidity risk by remaining contractual maturities at the date of the consolidated statement of financial position. The amounts disclosed
in table A below are the contractual undiscounted cash flow, whereas the Group manages the liquidity risk on a behavioural basis which
is shown in table B below.
203
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3.3 Non-derivative financial liabilities and assets held for managing liquidity risk continued
GROUP
(a) TABLE A - LIQUIDITY ANALYSIS ON A CONTRACTUAL BASIS
0 - 30
days
N'million
31 - 90
days
N'million
91 - 180
days
N'million
181 - 365
days
N'million
Over 1 year
but less
than 5 years
N'million
Over 5 years
N'million
Total
N'million
31 December 2018
Financial liabilities
Deposits from banks 580,209 70,291 8,016 61,989 37,156 - 757,661
Deposits from customers 2,487,177 426,509 273,375 191,148 113,499 8,400 3,500,108
Financial liabilities at fair value
through profit or loss
902 1,497 401 10,916 2,075 - 15,791
Borrowings 20,475 10,210 9,313 28,607 306,793 10,833 386,231
Other liabilities 277,380 27,924 16,618 4,252 20,453 - 346,627
Investment contracts
- 2,420 1,609 2,694 11,929 1,114 19,766
Total financial liabilities 3,366,143 538,851 309,332 299,606 491,905 20,347 5,026,185
Loan commitments 18,348 973 2,699 18,201 2,586 95 42,902
Letters of credit and other credit
related obligations 6,461 29,324 264,866 135,886 168,231 237,423 842,190
Total commitments 24,809 30,297 267,564 154,087 170,817 237,518 885,092
Assets held for managing liquidity risk 1,065,208 510,818 120,200 800,269 313,749 212,633 3,022,877
31 December 2017
Financial liabilities
Deposits from banks 605,683 11,798 2,414 45,471 - - 665,366
Deposits from customers 2,299,832 322,019 175,699 156,664 173,416 15,709 3,143,338
Financial liabilities at fair value
through profit or loss 9,372 - 33 - - - 9,404
Borrowings 18,050 20,431 10,262 21,466 337,195 13,515 420,919
Other liabilities 108,611 54,190 62,529 999 81 - 226,410
Investment contracts - 1,483 963 1,638 8,470 846 13,399
Total financial liabilities 3,041,548 409,921 251,900 226,237 519,162 30,070 4,478,837
Loan commitments 915 130 675 531 1,114 4,898 8,263
Letters of credit and other credit
related obligations 27,537 31,147 98,625 307,773 65,887 - 530,969
Total commitments 28,452 31,277 99,300 308,304 67,001 4,898 539,232
Assets held for managing liquidity risk 1,109,694 323,009 256,554 364,534 218,164 82,643 2,354,599
204
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3.3 Non-derivative financial liabilities and assets held for managing liquidity risk continued
COMPANY
0 - 30
days
N'million
31 - 90
days
N'million
91 - 180
days
N'million
181 - 365
days
N'million
Over 1 year
but less
than 5 years
N'million
Over 5 years
N'million
Total
N'million
31 December 2018
Financial liabilities
Other liabilities 7,055 980 - - - - 8,035
Total financial liabilities 7,055 980 - - - - 8,035
Assets held for managing liquidity risk 17,515 1,136 932 3,902 868 673 25,025
31 December 2017
Financial liabilities
Other liabilities - - - 7,553 - - 7,553
Total financial liabilities - - - 7,553 - - 7,553
Assets held for managing liquidity risk 7,585 - - 8,832 - - 16,417
(b) Table B below presents the undiscounted cashflows payable by the Group based on their behavioral patterns. In managing
its liquidity risk, the Group profiles its cashflows statistically using historical observations, to ensure that projections are in tune with
demonstrated behavioral trends. The Group adopts a Behavioral run-o model in estimating Core and Volatile components of its
non-maturing liabilities, complemented by qualitative factors e.g. changes in collection sweep cycles, eect of new fiscal or monetary
policies etc. The objective is to determine the proportion of the non-contractual balances to be spread across the Group’s maturity
bands.
TABLE B - LIQUIDITY ANALYSIS ON A BEHAVIOURAL BASIS
0 - 30
days
N'million
31 - 90
days
N'million
91 - 180
days
N'million
181 - 365
days
N'million
Over 1 year
but less
than 5 years
N'million
Over 5 years
N'million
Total
N'million
31 December 2018
Financial liabilities
Deposits from banks 580,209 70,291 8,016 61,989 37,156 - 757,661
Deposits from customers 180,159 480,115 402,203 346,875 465,479 1,625,144 3,499,975
Borrowings 20,475 10,210 9,313 28,607 306,793 10,833 386,231
Other liabilities 277,380 27,924 16,618 4,252 20,453 - 346,627
Investment contracts - 2,420 1,609 2,694 11,929 1,114 19,766
Total financial liabilities 1,058,224 590,960 437,759 444,417 841,810 1,637,091 5,010,261
Loan commitments 18,348 973 2,699 18,201 2,586 95 42,902
Letters of credit and other credit related obligations 17,222 29,324 264,866 134,479 168,231 234,834 848,956
Total commitments 35,570 30,297 267,564 152,680 170,817 234,929 891,857
Assets held for managing liquidity risk 1,065,208 510,818 120,200 800,269 313,749 212,633 3,022,877
31 December 2017
Financial liabilities
Deposits from banks 608,497 11,798 2,414 45,471 - - 668,180
Deposits from customers 359,473 340,645 303,117 323,176 500,877 1,324,790 3,152,077
Borrowings 18,050 20,431 10,262 21,466 418,819 13,515 502,543
Other liabilities 98,850 54,190 62,529 999 81 - 216,649
Investment contracts - 1,483 963 1,638 8,470 846 13,399
Total financial liabilities 1,084,870 428,547 379,284 392,749 928,247 1,339,151 4,552,847
Loan commitments 915 130 675 531 1,114 4,897 8,262
Letters of credit and other credit related obligations 27,539 31,147 98,625 307,773 65,888 - 530,972
Total commitments 28,454 31,277 99,300 308,304 67,002 4,897 539,234
Assets held for managing liquidity risk 1,109,694 323,009 256,554 364,534 218,164 82,643 2,354,599
205
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3.4 Assets held for managing liquidity risk
The Group holds a diversified portfolio of liquid assets-largely cash and government securities to support payment and funding
obligations in normal and stressed market conditions across foreign and local currencies. The Group’s liquid assets comprise:
Cash and balances with the Central Banks comprising reverse repos and Overnight deposits.
Short-term and overnight placements in the interbank market.
Government bonds and T-bills that are readily accepted in repurchase agreements with the Central Banks and other market
participants.
Secondary sources of liquidity in the form of highly liquid instruments in the Group’s trading portfolios.
The ability to access incremental short-term funding by interbank borrowing from the interbank market
First Bank of Nigeria Limited, the commercial banking segment of the Group, is most exposed to liquidity risk. The Bank is largely
deposit funded and thus, as is typical amongst Nigerian banks, has significant funding mismatches on a contractual basis, given that
the deposits are largely demand and short-tenured, whilst lending is longer-term. On an actuarial basis, the Bank's demand deposits
exhibit much longer duration, with 75.53% of the Bank's current account balances and 67.48% of savings account balances being
deemed core.
To manage liquidity shocks in either foreign or local currency, largely as a result of episodic movements, the Bank typically holds
significant short-term liquidity in currency placements or taps the repo markets to raise short-term funding as is required. To grow
local currency liquidity, the Bank has also systematically worked towards reducing the duration of our securities portfolio in the last year,
shifting the emphasis to holding more liquid shorter dated treasury bills over longer term bonds, to allow more flexibility in managing
liquidity. Whilst on the foreign currency side, the Bank has built up placement balances with our oshore correspondents.
3.3.5 Derivative liabilities
(a) Derivatives settled on a net basis
The put options and the accumulator forex contract will be settled on a net basis.
The table below analyses the Group’s derivative financial liabilities that will be settled on a net basis into relevant maturity groupings
based on the remaining period at the date of the consolidated statement of financial position to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.
206
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3.5 Derivative liabilities continued
(a) Derivatives settled on a net basis continued
GROUP
Up to 1
month
N'million
1-3
months
N'million
3-6
months
N'million
6 - 12
months
N'million
1-5
years
N'million
Total
N'million
At 31 December 2018
FX futures 10 12 7 24 - 53
Put options 1,167 905 3,614 6,733 3,213 15,632
1,177 917 3,621 6,757 3,213 15,685
Derivative assets
FX futures 10 12 6 23 - 51
Put options 1,254 1,132 3,980 7,331 3,434 17,131
1,264 1,144 3,986 7,354 3,434 17,182
2,441 2,061 7,607 14,111 6,647 32,867
At 31 December 2017
Derivative liabilities
Cross-currency swap 32 20 - - - 52
Accumulator-forward FX contract - 139 4 19 - 162
Put options (346) 2,275 3,244 5,680 6,932 17,785
(314) 2,434 3,248 5,699 6,932 17,998
Derivative assets
Cross-currency swap 32 - - - - 32
Put options - 146 4 19 - 169
Forward contract 371 2,320 3,939 7,087 7,848 21,565
403 2,466 3,943 7,106 7,848 21,765
89 4,900 7,190 12,805 14,780 39,763
207
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.3.5 Derivative liabilities continued
(b) Derivatives settled on a gross basis.
The Group’s derivatives that will be settled on a gross basis are foreign exchange derivatives. The table below analyses the Group’s
derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at
the date of the consolidated statement of financial position to the contractual maturity date. Contractual maturities are assessed to
be essential for an understanding of the timing of the cashflows on all derivatives including derivatives classified as ‘liabilities held-for-
trading’. The amounts disclosed in the table are the contractual undiscounted cash flows.
GROUP
Up to 1
month
N'million
1-3
months
N'million
3-6
months
N'million
6 - 12
months
N'million
1-5
years
N'million
Over 5 years
N'million
Total
N'million
At 31 December 2018
Assets held-for-trading
FX Swap - Payable - (11,281) (7,836) - - - (19,117)
FX Swap - Receivable - 11,525 7,900 - - - 19,425
Forward Contract - Payment (118,478) (63,387) (8,727) - - - (190,592)
Forward Contract - Receipt 51,436 38,127 3,912 213 - - 93,688
(67,042) (25,016) (4,751) 213 - - (96,596)
Liabilities held-for-trading
Forward Contract - Payment (31,035) (28,830) (3,664) (213) - - (63,742)
Forward Contract - Receipt 5,113 - - - - - 5,113
(25,922) (28,830) (3,664) (213) - - (58,629)
At 31 December 2017
Assets held-for-trading
FX Swap - Payable (28,353) (14,672) (12,265) - - - (55,290)
FX Swap - Receivable 33,102 16,501 13,480 - - - 63,083
Forward Contract - Payment (369) - - - - - (369)
Forward Contract - Receipt 92,212 42,600 40,312 8,062 - - 183,186
96,592 44,429 41,527 8,062 - - 190,610
Liabilities held-for-trading
FX Swap - Payable 28,353 14,672 12,265 - - - 55,290
FX Swap - Receivable 33,102 16,501 13,480 - - - 63,083
Forward Contract - Payment 369 - - - - - 369
Forward Contract - Receipt 92,212 42,600 40,312 8,062 - - 183,186
154,036 73,773 66,057 8,062 - - 301,928
208
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4 Market risk
Market risk is the potential for adverse changes in the value of a trading or an investment portfolio due to changes in market risk
variables such as equity and commodity prices, interest rates, and foreign exchange rates.
Market risk arises from positions in currencies, interest rate and securities held in our trading portfolio and from our retail banking
business, investment portfolio, and other non-trading activities. The movement in market risk variables may have a negative impact on
the balance sheet and or income statement.
Through the financial year, the Group was exposed to market risk in its trading, and non-trading activities mainly as a result of:
interest rate movements in reaction to monetary policy changes by the Central Banks in each jurisdiction, fiscal policies
changes, and market forces;
foreign exchange fluctuations arising from demand and supply as well as government policies; and
equity price movements in response to market forces and changing market dynamics, such as market making on the Stock
Exchange.
3.4.1 Management of market risk
The Group's market risk management process applies disciplined risk-taking within a framework of well-defined risk appetite that
enables the Group to boost shareholders value while maintaining competitive advantage through eective utilisation of risk capital.
Thus, the Group market risk management policy ensures:
formal definition of market risk management governance – recognised individual roles and committees, segregation of duties,
avoidance of conflicts, etc.;
management is responsible for the establishment of appropriate procedures and processes in implementing the Board-
approved market risk policy and strategy. The procedures are documented in a periodically reviewed market risk procedural
manual that spells out the procedures for executing relevant market risk controls.;
an independent market risk management function;
a Group-wide market risk management process to which all risk-taking units are subjected;
alignment of market risk management standards with international best practice. Risk measurements are progressively based
on modern techniques such as sensitivity, value-at-risk methodology (VaR), stress testing and scenario analysis;
a robust market risk management infrastructure reinforced by a strong management information system (MIS) for controlling,
monitoring and reporting market risk;
continual evaluation of risk appetite, communicated through risk limits and overall eectiveness of the market risk management
process;
the Group does not undertake any risk that cannot be managed, or risks that are not fully understood especially in new
products and;
where the Group takes on any risk, full consideration is given to product maturity, financial market sophistication and
regulatory pronouncement, guidelines or policies. The risk taken must be adequately compensated by the anticipated reward.
209
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.2 Market risk measurement techniques
The major measurement techniques used to measure and control market risk are outlined below:
(a) Value at risk (VAR)
VaR measures potential loss in fair value of financial instruments due to adverse market movements over a defined time horizon at a
specified confidence level.
VaR is calculated for expected movements over a minimum of one business day and to a confidence level of 99% and a 10-day holding
period. The confidence level suggests that potential daily losses, in excess of the VaR measure, are likely to be experienced three times
per year in every 250 days. Only First Bank of Nigeria (the bank) is subject to the VaR methodology. The Group measures interest rate
risk and foreign exchange risk using sensitivity analysis, see Notes 3.4.6 and 3.4.3 respectively.
The Bank continues to use VaR to estimate the potential losses that could occur on its positions as a result of movements in market
factors.
The Bank uses the parametric method as its VaR methodology with an observation period of two years obtained from published data
from pre-approved sources. VaR is calculated on the Bank’s positions at close of business daily.
The table below shows the trading VaR of the Bank. The major contributors to the trading VaR are Treasury Bills and Foreign Exchange
due to volatility in those instruments impacting positions held by the Bank during the period.
The assets included in the VAR analysis are the held-for-trading assets.
The Fixed Income portfolio (Interest Rate Risk) trading VaR is N401million as at 31 December 2018 and reflects the potential loss
given assumptions of a 1-day holding period, volatility computed using 500-day return data, and a 99% statistical confidence level.
The foreign exchange trading VaR was N6million as at 31st December 2018, reflecting the regulatory Trading Open Position of 0.5%
of Shareholder's Fund stipulated by the CBN.
VAR summary GROUP
12 months to 31 December 2018
Average High Low
Foreign exchange risk 40 132 -
Interest rate risk 1,133 4,948 401
Total VAR 1,173 5,080 401
VAR summary GROUP
12 months to 31 December 2017
Average High Low
Foreign exchange risk 58 280 4
Interest rate risk 1,493 5,870 34
Total VAR 1,551 6,150 38
210
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.2 Market risk measurement techniques continued
(b) Stress tests
Based on the reality of unpredictable market environment and the frequency of regulations that have had significant eect on market
rates and prices, the Group augments other risk measures with stress testing to evaluate the potential impact of possible extreme
movements in financial variables on portfolio values.
Stress testing is an integral part of the market risk management framework and considers both historical market events and forward-
looking scenarios. A consistent stress-testing methodology is applied to trading and non-trading books. Stress scenarios are regularly
updated to reflect changes in risk profile and economic events.
The Asset and Liability Committee (ALCO) of each subsidiary is responsible for reviewing stress exposures and where necessary,
enforcing reductions in overall market risk exposure. The stress-testing methodology assumes that scope for Management action would
be limited during a stress event, reflecting the decrease in market liquidity that often occurs. Regular stress-test scenarios are applied
to interest rates, exchange rates and equity prices. This covers all asset classes in the financial markets banking and trading books.
Ad hoc scenarios are also prepared reflecting specific market conditions and for particular concentrations of risk that arise within the
businesses.
Non-trading portfolio
The principal objective of market risk management of non-trading portfolios is to optimise net interest income. Due to the size of the
Group’s holdings in rate-sensitive assets and liabilities the Group is exposed to interest rate risk.
Non-trading interest rate risk results mainly from dierences in the mismatches or re-pricing dates of assets and liabilities, both on-
and o-balance sheet as interest rate changes.
The Group uses a variety of tools to measure non-tradable interest rate risk such as:
interest rate gap analysis (which allows the Group to maintain a positive or negative gap depending on the perceived interest
rate direction). The size of the gap is then adjusted to either hedge net interest income against changing interest rates or to
speculatively increase net interest income;
forecasting and simulating interest rate margins;
market value sensitivity;
calculating earnings at risk (EaR) using various interest rate forecasts; and
re-pricing risk in various portfolios and yield curve analysis.
See Note 3.4.5 for interest rate sensitivity disclosures.
Hedged non-trading market risk exposures
The Group’s books have some key market risk exposures, which have been identified and are being managed using swaps and
options.
3.4.3 Foreign exchange risk
The Group is exposed to foreign exchange risks due to fluctuations in foreign currency exchange rates on its financial position and cash
flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are
monitored daily. The table below summarises the Group’s exposure to foreign currency exchange rate risk at 31 December 2018 and
31 December 2017. Included in the table are the Group’s financial instruments at carrying amounts, categorised by currency.
211
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.3 Foreign exchange risk continued
GROUP Naira
N'million
USD
N'million
GBP
N'million
Euro
N'million
Others
N'million
Total
N'million
At 31 December 2018
Financial assets
Cash and balances with Central Banks 588,135 26,934 2,633 14,377 21,256 653,335
Loans and advances to banks 306,586 313,197 206,384 25,743 11,525 863,435
Loans and advances to customers: Retail portfolio
- Overdrafts 5,394 4,407 - 1,588 2,387 13,775
- Term loans 79,751 11,833 35 12 6,779 98,410
- Credit cards 1,455 461 - - - 1,916
- Mortgage 8,046 45,840 - - 363 54,249
Loans and advances to customers: Corporate portfolio
- Overdrafts 96,111 57,516 - 21,043 2,015 176,685
- Term loans 419,281 392,144 28,903 22,173 4,781 867,283
- Project finance 86,040 385,038 - - - 471,078
- Advances under finance lease 417 - - - - 417
Investment securities - - - -
- FVOCI investments 792,452 81,667 - - - 874,119
- Amortised cost investments 33,335 687,566 - 7 68,795 789,702
Asset pledged as collateral 294,120 788 - - 14,143 309,051
Financial assets at fair value through profit or loss 86,930 22,232 - - - 109,162
Other assets 26,449 7,623 662 54 1,482 36,720
2,824,501 2,037,246 238,618 84,997 133,525 5,318,887
Financial liabilities
Customer deposits 2,437,277 633,675 318,406 33,361 63,973 3,486,691
Deposits from banks 36,855 673,438 22,930 8,000 8,092 749,315
Financial liabilities at FVTPL 15,510 - 281 - 15,791
Borrowings 61,992 272,110 517 108 3,487 338,214
Other liabilities 119,624 194,807 3,107 18,847 10,242 346,627
Investment contracts 19,766 - - - - 19,766
2,675,514 1,789,540 344,960 60,597 85,794 4,956,405
212
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.3 Foreign exchange risk continued
GROUP Naira
N'million
USD
N'million
GBP
N'million
Euro
N'million
Others
N'million
Total
N'million
31 December 2017
Financial assets
Cash and balances with Central Banks 514,992 99,284 1,759 7,565 18,281 641,881
Loans and advances to banks 186,112 260,089 268,516 19,729 8,483 742,929
Loans and advances
- Overdrafts 154,324 96,780 12,932 27,799 4,300 296,135
- Term loans 576,675 1,017,184 48,950 16,771 10,755 1,670,334
- Sta loans 6,069 1,416 41 1 420 7,947
- Project finance 17,566 8,730 - - - 26,296
- Advances under finance lease 511 - - - - 511
Investment securities
- Available-for-sale investments 646,143 476,614 - - - 1,122,757
- Held-to-maturity investments 67,688 - - - 40,595 108,283
- Loans and receivables - 17,568 - - - 17,568
Asset pledged as collateral 203,825 - - - 5,100 208,925
Financial assets at fair value through profit or loss 60,570 23,143 - - - 83,713
Other assets 55,143 4,843 356 336 2,784 63,462
2,489,620 2,005,651 332,554 72,201 90,718 4,990,743
Financial liabilities
Customer deposits 2,193,814 473,512 384,477 26,510 65,025 3,143,338
Deposits from banks 6,140 623,893 19,031 9,843 6,459 665,366
Financial liabilities at fair value through profit or loss 20 9,375 - 10 - 9,404
Borrowings 58,324 359,541 6 386 2,662 420,919
Other liabilities 100,752 109,276 946 14,095 1,341 226,410
Investment contracts 13,399 - - - - 13,399
2,372,449 1,575,596 404,460 50,844 75,487 4,478,837
213
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.3 Foreign exchange risk continued
COMPANY Naira
N'million
USD
N'million
Total
N'million
At 31 December 2018
Financial assets
Loans and advances to banks 16,312 327 16,639
Loans and advances to customers: Retail portfolio
- Term loans 110 - 110
Investment securities
- FVOCI Investments 7,079 - 7,079
Financial assets at fair value through profit or loss 3,427 - 3,427
Other assets 87 - 87
27,016 327 27,343
Financial liabilities
Other liabilities 8,034 8,034
8,034 - 8,034
31 December 2017
Financial assets
Loans and advances to banks 7,585 303 7,888
Loans and advances to customers
- Sta loans 108 - 108
Investment securities
- FVOCI Investments 9,842 - 9,842
Other assets 8,832 - 8,832
26,367 303 26,670
Financial liabilities
Other liabilities 7,553 7,553
7,553 - 7,553
The Company and Group's exposure to foreign currency risk is largely concentrated in the US Dollar. Movement in exchange rate
between the US Dollar and the Nigerian Naira aects reported earnings through revaluation gain or loss and balance sheet size through
increase or decrease in the revalue amounts of assets of assets and liabilities denominated in US Dollars.
The Group is exposed to the US dollar, EURO and GBP currencies.
The following table details the Group's sensitivity to a 10% increase and decrease in Naira against the US dollar, EURO and GBP.
Management believe that a 10% movement in either direction is reasonably possible at the balance sheet date. The sensitivity analyses
below include outstanding US dollar, EURO and GBP denominated financial assets and liabilities. A positive number indicates an increase
in profit where Naira weakens by 10% against the US dollar, EURO and GBP. For a 10% strengthening of Naira against the US dollar,
EURO and GBP, there would be an equal and opposite impact on profit.
GROUP
31 Dec 2018 31 Dec 2017
Naira strengthens by 10% against the US dollar (2017:25%) (24,771) (107,628)
Profit/(loss)
Naira weakens by 10% against the US dollar (2017:25%) 24,771 107,628
Profit/(loss)
Naira strengthens by 10% against the EURO (2017:25%) (2,440) (5,339)
Profit/(loss)
Naira weakens by 10% against the EURO (2017:25%) 2,440 5,339
Profit/(loss)
Naira strengthens by 10% against the GBP (2017:25%) (10,634) (17,976)
Profit/(loss)
Naira weakens by 10% against the GBP (2017:25%) 10,634 17,976
Profit/(loss)
214
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.4 Interest rate risk
Interest rate risk is the risk of loss in income or portfolio value as a result of changes in market interest rates. The Group is exposed to
interest rate risk in its fixed income securities portfolio, as well as on the interest sensitive assets and liabilities in the course of banking
and or trading. The Board sets limits on the level of mismatch of interest rate repricing and value at risk that may be undertaken, which
is monitored daily by the Asset and Liability Committee.
The table below summarises the Group's interest rate gap position showing its exposure to interest rate risks. Value at risk exposure
is disclosed in Note 3.4.2.
Carrying
amount
N'million
Variable
interest
N'million
Fixed
interest
N'million
Non interest-
bearing
N'million
GROUP
31 December 2018
Financial assets
Cash and balances with Central Banks 653,335 - - 653,335
Loans and advances to banks 863,435 450,355 231,827 181,253
Loans and advances to customers: Retail portfolio
- Overdrafts 13,775 13,775 - -
- Term loans 98,410 90,670 7,740 -
- Credit cards 1,916 1,916 - -
- Mortgage 54,249 54,228 21 -
Loans and advances to customers: Corporate portfolio
- Overdrafts 176,685 176,685 - -
- Term loans 867,283 861,184 4,836 1,263
- Project finance 471,078 471,078 - -
- Advances under finance lease 417 417 - -
Financial assets at fair value through profit or loss 109,162 - 55,041 54,123
Investment securities:
- FVOCI investments 874,119 18,836 747,333 107,950
- Amortised cost investments 789,702 1,870 787,832 -
Assets pledged as collateral 309,051 - 309,051 -
Other assets 36,270 - - 36,270
5,318,887 2,141,013 2,143,681 1,034,195
Financial liabilities
Deposits from customers 3,486,691 1,566,210 1,124,949 795,532
Deposits from banks 749,315 634,602 114,128 586
Financial liabilities at fair value through profit or loss 15,791 - - 15,791
Other liabilities 346,627 - - 346,627
Liability on investment contracts 19,766 - - 19,766
Borrowings 338,214 72,948 265,266 -
4,956,405 2,273,760 1,504,342 1,178,302
Interest rate mismatch (132,747) 639,339 (144,106)
215
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.4 Interest rate risk continued
Carrying
amount
N'million
Variable
interest
N'million
Fixed
interest
N'million
Non interest-
bearing
N'million
GROUP
31 December 2017
Financial assets
Cash and balances with Central Banks 641,881 79,084 500 562,297
Loans and advances to banks 742,929 316,533 288,563 137,833
Loans and advances
- Overdrafts
- Term loans 296,135 296,135 - -
- Sta loans 1,670,334 1,649,377 20,957 -
- Project finance 7,947 - 7,947 -
- Advances under finance lease 26,296 26,296 - -
Financial assets at fair value through profit or loss 511 511 - -
Investment securities: 83,713 - 52,413 31,300
- Available-for-sale investments 1,122,757 - 1,029,274 93,483
- Held-to-maturity investments 108,283 - 108,283 -
- Loans and receivables 17,568 - 17,568 -
Assets pledged as collateral 208,925 11,865 197,060 -
Other assets 63,462 - - 63,462
4,990,742 2,379,800 1,722,564 888,374
Financial liabilities
Customer deposits
Deposits from banks 3,143,338 1,419,166 1,146,392 577,780
Financial liabilities at fair value through profit or loss 665,366 547,665 117,701 -
Other liabilities 9,404 - 33 9,352
Liability on investment contracts 226,410 - - 226,410
Borrowings 13,399 13,399 - -
420,919 77,707 343,212 -
4,478,837 2,057,936 1,607,337 813,542
Interest rate mismatch 321,864 115,227 74,833
216
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.4 Interest rate risk continued
Carrying
amount
N'million
Variable
interest
N'million
Fixed
interest
N'million
Non interest-
bearing
N'million
COMPANY
31 December 2018
Financial assets
Loans and advances to banks 16,639 - 16,639 -
Loans and advances to customers: Retail portfolio
- Term loans 110 - 110 -
Financial assets at fair value through profit or loss 3,427 - - 3,427
Investment securities:
- FVOCI Investments 7,079 - 7,079 -
Other assets 87 - 87
27,343 - 23,829 3,514
Financial liabilities
Other liabilities 8,034 - 8,034
8,034 - - 8,034
Interest rate mismatch - 23,829 (4,518)
31 December 2017
Financial assets
Loans and advances to banks 7,585 - 7,585 -
Loans and advances to customers
- Sta loans 108 - 108 -
Financial assets at fair value through profit or loss - - - -
Investment securities:
- FVOCI Investments 9,842 - 6,990 2,852
Other assets 9,011 - 9,011
26,545 - 14,682 11,864
Financial liabilities
Other liabilities 7,553 - - 7,553
7,553 - - 7,553
Interest rate mismatch - 14,682 4,312
217
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.4.5 Interest rate sensitivity gap analysis
The aggregate figures presented above are further segregated into their various components as shown below:
GROUP COMPANY
31 Dec 2018
N'millions
31 Dec 2017
N'millions
31 Dec 2018
N'millions
31 Dec 2017
N'millions
Financial assets at fair value through profit or loss
Treasury bills 22,424 29,328 - -
Government bonds 32,618 22,836 - -
Total 55,042 52,164 - -
Impact on income statement:
Unfavourable change @ 2% reduction in interest rates (1,101) (1,043) - -
Favourable change @ 2% increase in interest rates 1,101 1,043 - -
Investment securities - FVOCI
Treasury bills 604,247 706,836 6,080 6,297
Government bonds 161,523 319,903 999 693
Total 765,770 1,026,739 7,078 6,990
Impact on other comprehensive income statement:
Unfavourable change @ 2% reduction in interest rates (15,315) (20,535) (142) (140)
Favourable change @ 2% increase in interest rates 15,315 20,535 142 140
218
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5 Management of insurance risk
The Group, through its primary insurance business - FBN Insurance Limited, issues contracts that transfer insurance risk. This section
summarises the nature and management of these risks.
The risk under any insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting
claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.
For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the
Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance
liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events
are random, and the actual number and amount of claims and benefits will vary from year-to-year from the level established using
statistical techniques.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected
outcome will be. In addition, a more diversified portfolio is less likely to be aected by a change in any subset of the portfolio. The
Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these
categories to achieve a suciently large population of risks to reduce the variability of the expected outcome.
Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk. The Group issues contracts
that transfer insurance and/or financial risk. This section summarises the nature and management of these risks.
3.5.1 Underwriting risk
Underwriting risk relates mainly to the uncertainty that the insured event will occur. The nature of an insurance contract is that the
timing and size of claims are uncertain and therefore unpredictable. The principal underwriting risk is the risk that the actual outcome
of mortality, morbidity and medical claims will result in volatile profits from one year to the next. Such volatility may result from large
concentrations of risk or from charging inadequate premiums relative to the severity or incidence of the risk accepted. Inadequate
policy wording may fail to protect the insurer from claims that were not envisaged when the product was priced.
Insurance events are random and the actual number and amount of underwriting benefits will vary from the best estimates established
from statistical techniques and taking cognisance of past experience. The Group manages these risks through its underwriting strategy,
reinsurance arrangements and claims handling processes.
The following policies and practices are used by the Group as part of its underwriting strategy to mitigate underwriting risk:
All long-term insurance product additions and alterations, both within and outside of agreed business definitions, are required
to pass through the approvals framework that forms part of the governance process. The contracted actuary approves the
financial soundness of new and revised products.
The Group's underwriting strategy aims to ensure that the underwriting risks are well-diversified in terms of type (medical,
occupational, financial) and amount of risk covered. Whilst this is dicult to measure at underwriting stage, the success or
failure of the strategy may be measured by the historical stability of profits emerging from the book of business.
Product pricing and reserving policies also include specific allowance for the risk of HIV/AIDS.
The contracted actuary reports annually on the profitability of the business taking into consideration the reasonable benefit
expectation of policyholders. All new rate tables are approved and authorised by the statutory actuary prior to being issued.
The right to re-rate premiums is retained as far as possible, although this is limited by competitive pressure.
Investigations into mortality and morbidity experience are conducted at least half yearly to ensure that corrective action is
taken where necessary.
219
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group’s core funeral product oering is characterised by low sums assured which negates the need for underwriting at policy
inception. The policy conditions enable the Group to repudiate death claims arising from non-accidental causes during an initial waiting
period after policy inception.
The Group's reinsurance arrangements include risk premium treaties for a high life cover, hospital cover product and critical illness
products. The decision on the proportion of risk to be ceded follows mainly from the Group’s desire to maintain its relationship with
the reinsurers and is based on the level of assistance received from the reinsurers. Exceptions to this are reinsurance cessions that are
intended to limit the Group’s exposure to large sums assured.
Claims risk is represented by the fact that the Group may incur unexpectedly high mortality and morbidity losses on any group of
policies. Client service sta are trained to identify and investigate fraudulent claims timeously. The legitimacy of claims is verified by
internal, financial and operating controls that are designed to contain and monitor claims risks. The forensic investigation team also
investigates and advises on improvements to internal control systems.
3.5.2 Frequency and severity of claims
The frequency and severity of claims can be aected by several factors. The most significant are the increasing level of death, job loss
and level of awards for the damages suered as a result of road accidents. Estimated inflation is also a significant factor due to the
long period typically required to settle cases where information are not readily available.
The Group manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling.
The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk.
Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew policies
and it has the right to reject the payment of a fraudulent claim.
The reinsurance arrangements include surplus and quota - share. The eect of such reinsurance arrangements is that the Group should
not suer total net insurance losses of more than N20million on any policy. In addition to the overall Group reinsurance programme,
individual business units are permitted to purchase additional reinsurance protection.
The Group has specialised claims units dealing with the mitigation of risks surrounding claims. This unit investigates and adjusts all
claims. The claims are reviewed individually on a quarterly basis and adjusted to reflect the latest information on the underlying facts,
contractual terms and conditions, and other factors. The Group actively manages and pursues early settlements of claims to reduce
its exposure to unpredictable developments.
The concentration of insurance risk before and after reinsurance by class of business in relation to the type of insurance risk accepted is
summarised in the next table, with reference to the carrying amount of the estimated insurance liabilities (gross and net of reinsurance)
arising from all life and non-life insurance contracts:
220
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.2 Frequency and severity of claims continued
December 2018 December 2017
Gross liability
N'million
Reinsurance
N'million
Net Liability
N'million
Gross liability
N'million
Reinsurance
N'million
Net Liability
N'million
Individual traditional 13,799 - 13,799 8,677 - 8,677
Investment linked contracts 19,766 - 19,766 13,399 - 13,399
Group credit life 585 - 585 219 - 219
Group Life – UPR incl AURR 455 (63) 392 356 (146) 210
General business – UPR incl AURR 1,153 - 1,153 906 - 906
Group Life - IBNR 1,138 (150) 989 1,670 (326) 1,344
Annuity 14,194 - 14,194 7,432 - 7,432
Additional reserves 212 - 212 221 - 221
Claims reserve - Life business 318 (30) 289 375 - 375
General business - IBNR 591 (256) 335 211 89 300
Claims reserve - General business 1,745 (1,283) 462 863 349 1,212
Total 53,958 (1,782) 52,176 34,329 (33) 34,296
Claims paid by class of business during the period under review are shown below
Group life 952 (243) 709 748 (808) (60)
Group credit life 180 - 180 230 - 230
Annuity 1,691 1,691 557 557
Individual life 2,019 - 2,019 1,369 - 1,369
General business 1,734 (1,539) 195 1,210 (454) 756
Total 6,576 (1,782) 4,795 4,114 (1,262) 2,852
221
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.3 Sources of uncertainty in the estimation of future claim payments
Claims on contracts are payable on a claims-occurrence basis. The Group is liable for all insured events that occurred during the term
of the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long
period of time, and a larger element of the claims provision relates to incurred but not reported claims (IBNR).
Uncertainty in the estimation of future benefits payments and premium receipts for insurance contracts arises from the unpredictability
of long-term changes in variables such as the overall levels of mortality, accident level and the variability in policyholder behavior.
The insurance business oers varying products, from which the Group is exposed. The main products on oer and the associated risks
are:
Product Types of insurance risk Product Features Risk
Flexi Education Plan (FlexiEdu) Individual savings 1. Pays the maturity benefit in 4 equal annual instalments to fund
the education of the ward.
Death only
2. In case of death before maturity, it pays a death benefit of
10% of the Sum Assured (agreed benefit amount at inception)
annually subject to a maximum payout of the sum assured.
Flexi Save (FlexiSave) Individual savings 1. Pays the account balance (contribution plus accrued interest)
at maturity to the policyholders.
Death only
2. In case of death during the policy, 10% of the total
contribution payable (subject to a minimum of N100,000) will
be paid in addition to the account balance at the point of death
to the beneficiary.
3. Should death arise as a result of accident, the plan will pay
an accidental death benefit of 200% of the total contribution
payable (subject to a max. of N5million) in addition to the
amount paid in (2) to the beneficiary.
Family Support Plan (FSP) Individual traditional Pays a lumpsum in case of death of any of the covered members.
Also gives back one full year premium for every five years that
there have been no claim on the policy.
Death only
Family Income Protection Plan Individual traditional Pays a lumpsum to the beneficiary should any of the covered
events happens to the policyholder, dependiong on the option
chosen at inception.
Death with either
Permanent Disability
and Critical Illness
options
Group Life Assurance Group Life 1. The scheme will pay a benefit of N500,000.00 (subjected
to N1million for a maximum of 2 lines) for registered Airtel
subscribers.
Death only
2. Maximum age to enjoy total permanent disability is 70 years
thereafter a member shall only be insured for death benefit up to
the age of 80 years.
Group School Fees Group school fees Pays out tuition fees of student till completion of education in the
applicable institution from on death of parent.
Death of parent
Group Credit Life Assurance Group credit life 1. The scheme pays the outstanding loan balance at the time of
death of the borrower to the bank.
Death and loss of
job.
2. The scheme pays a maximum of 6 months instalment after loss
of job by the borrower to the bank.
General Business-Short-term
Insurance
Individual and
corporate risk
The scheme pays benefit equivalent to the loss suered by the
insured
Accident-motor and
general accident, fire
outbreak, burglary
and other hazards
222
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.3 Sources of uncertainty in the estimation of future claim payments continued
The insurance liabilities have been made on the following principles:
Type of business Valuation method
Individual Risk Business Gross premium valuation approach
Individual deposit based business (Flexi save) Deposit reserve: Account balance at valuation date
Group Life and Group School Fees Risk reserve: Gross premium
Group Credit Life UPR + IBNR
Daily Term Assurance UPR + IBNR + Expense reserve
Non-Life Business Loss ratio estimation
Basic Chain Ladder + Loss ratio estimation + Bornheutter-Fergusion method
Individual business
A gross premium method was used for individual risk business. This is a monthly cashflow projection approach taking into account the
incidence of all expected future cashflows including oce premiums, expenses and benefit payments satisfying the Liability Adequacy
Test.
For the endowment plans, the portfolio reserves were tested to ensure they were at least as high as the surrender values at the
valuation date. The Flexi save Plan oers an accidental death and funeral benefit, which are payable in addition to the sum insured
on the occurrence of an accidental death. Flexi save is an embedded product having components of insurance and financial risk. The
product has not been unbundled due to the fact that the components could not be measured separately. This reserve calculation also
considers the expected future cashflows including expenses.
Interest is allocated to policyholder Flexisave accounts at a rate of 2% below the Monetary Policy Rate (MPR). In order to accurately
consider the potential cost of the life cover to the Group from this product (and hence the reserves that should be held) the policyholder
funds was projected; this enabled a comparison of the expected future income to the Group from the policy (the investment return
not allocated to policyholder accounts and risk premiums) to the expected future outgo (death benefits and expenses). A reserve is
then set up to meet any shortfalls.
Life cover is only available for "active" policies, being those that paid a premium in the year. The risk reserves will allow for future life
cover on policies that are active at the valuation date. Policyholders are able to reinstate their life cover by paying any outstanding
premiums. Allowance for reinstated policies are made within the additional reserves.
Group business
Reserves for Group Life business comprise an unexpired premium reserve (UPR) and where necessary, a reserve for Incurred But Not
Reported Claims (IBNR) to make an allowance for the delay in reporting of claims.
The UPR represents the unexpired portion of the premium for each scheme, net of an expense margin reflecting the acquisition cost
loadings. The adequacy of the UPR has been tested by comparing against an Additional Unexpired Risk Reserve (AURR), which has been
calculated using pooled industry claims data for the underlying assumptions. An AURR will be held in cases where the UPR is deemed
insucient to meet claims in respect of the unexpired period.
A loss ratio approach has been used for IBNR reserving, which considers the pattern of claims emerging.
No separate reserve is proposed for claims handling costs for Group Life business as these are typically insignificant in size. Costs
incurred are absorbed as part of the general business management costs.
223
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Due to the limited nature of data captured for credit life business, the cashflow projection approach could not be used for reserving.
Instead reserves have been estimated via an unexpired premium reserve plus an allowance for IBNR where necessary, and unexpired
future operating expenses.
Non-life business
Depending on the volume of data in the reserving classes, the appropriate methodologies were used. Three methods were used for the
projection of claims. The Basic Chain Ladder Method (BCL), a Loss ratio method adjusted for assumed experience to date and in more
recent years and where the claim development seems dierent than in the past a Bornheutter – Ferguson Method was used based on
loss ratios that have been experienced in past accident years.
Claims data was grouped into triangles by accident year or quarter and payment year or quarter. The choice between quarters or years
was based on the volume of data in each segment. Payment development patterns were used instead of the reporting years’ patterns
to allow for the longer tail development that would be seen in reporting and payment delays as well as to allow for the movement of
partial payments in the data.
There was insucient data to sub-divide claims between large and small claims. Sub–dividing the data would reduce the volume of
the data in the triangles and compromise the credibility. Extreme large claims however were removed from the triangulations to avoid
distorting development patterns.
3.5.4 Process used to decide on assumptions
Valuation interest rates
The valuation interest rate is based on current market risk-free yields with adjustments. The use of a risk-free rate also implies that
future investment margins (in excess of the risk-free return) will not be capitalised upon, which satisfies paragraph 27 of IFRS 4.
Further the result is a "fair value" liability calculation which aids the comparability of accounts between insurers.
Net valuation interest rate of 14.6% and 14.00% pa were adopted for annuity and other long-term businesses, which has been applied
as a single long-term rate of return. As at 31 December 2018, FGN bond yields of duration between 5 and 20 years were round 15%.
By comparison long-term bonds were yielding 14% at December 2017.
For the purpose of determining the valuation interest rate, we have considered a 0.25% prudent margin against the long-term yield to
arrive at a gross valuation interest rate of 14.85%. This makes some allowance for the volatility and liquidity of the "risk free" yields.
Rate
Risk Annuity
Average yield on a long-term FGN bond 15.37% 15.37%
Less prudent margin -0.25% -0.25%
Less reinvestment risk margin 0.00% -0.25%
Gross valuation interest rate 15.12% 14.87%
Less 6% tax -0.91% 0.00%
Net valuation interest rate 14.21% 14.87%
Rates adopted 14.21% 14.87%
224
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.4 Process used to decide on assumptions continued
The valuation interest rates for the individual risk products are as follows:
Type of business
Current
valuation
Previous
valuation
Risk products 14.21% 13.00%
Risk reserves for deposit-based policies 14.21% 13.00%
Pension annuity 14.87% 13.00%
Expenses
The Group makes provisions for expenses in its mathematical reserves of an amount which is not less than the amount expected to be
incurred in fulfilling its long-term insurance contracts. IFRS 4 explicitly requires the consideration of claims handling expenses.
Future maintenance expenses
The regulatory maintenance expenses are derived from the best estimate maintenance expenses plus a prudence margin for adverse
deviations. The best estimate maintenance expenses are calculated as the sum of the following:
(1) Per policy maintenance charges
2) Allocated operating expenses
The regulatory maintenance expense assumptions (per policy) are derived by adding a 10% additional prudent margin to the best
estimate maintenance expenses to give the required assumption. This has consistently been adopted for IFRS purposes.
The Group performed an expense analysis in during the year, which suggests actual expense experience over the year of:
(1) Individual life: N4,000 per policy
(2) Credit life: N2,200 per policy
(3) Family shield: N525 per policy
(4) Group life: 42% of premium
The Group adopted a valuation expense assumption of N4,000 per policy on risk policies excluding family shield and N2,200 per
policy for credit life while expense per policy for family shield is set at N525. The analysis is based on the number of active policies
at the valuation date.
Type of business
Current
valuation
N'per policy
Previous
valuation
N'per policy
Individual life N4,000 N5,000
Credit life N2,200 N1,540
Family shield N525 N620
225
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.4 Process used to decide on assumptions continued
Expense Inflation
The above expenses are subject to inflation at 11% pa. Consumer Price Inflation at 31 December 2018 was 11.28%. Both the expense
inflation and expense assumption will be actively reviewed in subsequent valuations once more experience data and an expense analysis
is made available.
Mortality
An appropriate base table of standard mortality is chosen depending on the type of contract. An investigation into Group's experience
over the most recent three years is performed, and statistical methods are used to adjust the rates reflected in the table to a best
estimate of mortality for that year.
The A67/70 (Assured Lives 1967-70) mortality table without adjustment was adopted in the valuation. A mortality study was
conducted in 2011 using industry mortality experience data which demonstrated a good fit to the A67/70 table.
Annuity valuation and Future mortality improvements
For annuity, we have adopted the UK Pensioner table PA (90) with age rating of -1.
Withdrawals
Withdrawals comprise both surrenders (voluntary) and lapses (involuntary). Surrenders are acceptable under the Cashflow and Flexisave
Plans, after policies have been in force for a pre-defined length of time (at which policies become eligible to receive a surrender value
payout). Where eligible the Flexisave surrender values are apportioned on the basis of sum insured.
Lapses
We have made an allowance for future lapses (being an exit without payment, before a surrender value becomes payable) and
surrenders under the endowment plans at the rates:
Education and cashflow Lapse rate p.a Surrender rate p.a
Year 1 25.0% -
Year 2 - 17.5%
Year 3 - 3.5%
Year 4 - 3.5%
Year 5+ - 3.5%
i. For individual policies the valuation age has been taken as Age Last Birthday at the valuation date. The period to maturity
has been taken as the full term of the policy less the expired term. Full credit has been taken for premiums due between the
valuation date and the end of the premium paying term.
ii. The valuation of the liabilities was made on the assumption that premiums have been credited to the accounts as they fall
due, according to the frequency of the particular payment.
iii. No specific adjustment has been made for immediate payment of claims.
iv. No specific adjustment has been made for expenses after premiums have ceased in the case of limited payment policies i.e.
they have been allocated the same level of expenses as premium paying policies.
vi. For all protection business any negative reserves were set to zero to prevent policies being treated as assets. Negatives
reserves were permitted for endowment plans for policies with no surrender value at the valuation date.
vii. Any policies subject to substandard terms were valued using the same basis as standard policies.
226
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.4 Process used to decide on assumptions continued
Bonuses
We have made full allowance for the accrual of future bonuses at the guaranteed (simple) bonus rate of 2% pa for the Cashflow
Endowment.
Group and Credit life businesses
Unexpired premium reserves (UPR) are reduced by a margin representing acquisition expenses, as these have been loaded into rates
yet they have already been incurred.
Acquisition expense ratio of 20% of gross premium was adopted. Group Life commission was paid at 9% of premium and a NAICOM
(regulatory) fee is payable at 1% of premium, stamp duty of 0.15% and management expenses.
The following assumptions were adopted for the credit life valuation:
(i) Where no eective (start) date has been provided, we assumed the credit date.
(ii) Where no end date or tenor has been provided we assumed a tenor of 30 months; this is in line with the average policy term
where data has been provided.
(iii) The UPR was based on the net premiums, where net premiums are reported after the deduction of commission. Commission
is currently payable at 15% of premium.
(iv) The IBNR was estimated based on an average claims notification delay period of 3 months, which was derived from the claims
experience data.
No additional contingency reserves was made in addition to those provided for long-term business to be held. Other liabilities such as
expense and data contingencies reserves have been estimated as necessary using the information available and reported in the main
valuation. Assumptions used for these estimates are summarised in the table below:
All Business Group 2018 2017
Expense overrun 0% 10%
Worsening of mortality experience 0% 10%
Reinsurance agreements
Reinsurance is allowed for in the valuation by having gross and reinsurance ceded records in the policy files. All reserves have been
reported gross of reinsurance, with the value of the reinsurance asset reported separately.
Changes in assumptions
The Company did not change its assumptions for the insurance contracts.
227
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.5 Insurance and market risk sensitivities
The sensitivity analysis of insurance and market risk is used as it provides a detailed understanding of the risks inherent in the business
and to help develop a risk monitoring and management framework to ensure the risks remain within limits, taking into account the
available capital and shareholder risk tolerance levels.
The "Assumption Changes" component of the analysis of change in the table below shows the impact on liabilities of the actual
assumption changes made over the year.
The sensitivity analysis was performed using the under-listed variables:
a) Valuation interest (discount) rate +/-1%
b) Expenses +/- 10%
c) Expense inflation +/-2%
d) Mortality +/-5% (including Group Life)
Base VIR Expenses Expense inflation
2018
N'million
1% -1% 10% -10% 2% -2%
Individual risk reserves 13,799 11,417 16,699 14,194 13,420 14,074 13,578
PRA regulated annuities 14,194 13,558 14,896 14,212 14,176 14,232 14,165
Investment linked contracts 19,766 19,766 19,766 19,766 19,766 19,766 19,766
General business – UPR incl AURR 1,744 1,744 1,744 1,744 1,744 1,744 1,744
Group credit life 585 585 585 585 585 585 585
Group life – UPR incl AURR 455 455 455 455 455 455 455
Group life - IBNR 1,138 1,138 1,138 1,138 1,138 1,138 1,138
Additional reserves 212 212 212 212 212 212 212
Reinsurance (213) (213) (213) (213) (213) (213) (213)
Net liability 51,682 48,664 55,284 52,095 51,285 51,994 51,432
% change in net liability -5.8% 7.0% 0.8% -0.8% 0.6% -0.5%
Assets 66,635 66,635 66,635 66,635 66,635 66,635 66,635
Surplus 14,953 17,971 11,351 14,540 15,350 14,640 15,203
228
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.5 Insurance and market risk sensitivities continued
2018
N'million Base Mortality
5% -5%
Individual risk reserves 13,799 13,903 13,695
PRA regulated annuities 14,194 14,248 14,141
Investment linked contracts 19,766 19,766 19,766
General business – UPR incl AURR 1,744 1,744 1,744
Group credit Life 585 585 585
Group life – UPR incl AURR 455 455 455
Group life - IBNR 1,138 1,138 1,138
Additional reserves 212 212 212
Reinsurance (213) (213) (213)
Net liability 51,682 51,840 51,526
% change in net liability 0.3% -0.3%
Assets 66,635 66,635 66,635
Surplus 14,952 14,794 15,109
Base VIR Expenses Expense inflation
2017
N'million
1% -1% 10% -10% 2% -2%
Individual risk reserves 9,341 7,526 11,617 9,736 8,953 9,706 9,058
PRA regulated annuities 7,431 7,028 7,885 7,446 7,418 7,469 7,405
Investment linked contracts 13,399 13,399 13,399 13,399 13,399 13,399 13,399
General business – UPR incl AURR 1,182 1,182 1,182 1,182 1,182 1,182 1,182
Group life – UPR incl AURR 554 554 554 554 554 554 554
Group life - IBNR 21 21 21 21 21 21 21
Additional reserves 1,670 1,670 1,670 1,670 1,670 1,670 1,670
Reinsurance 222 222 222 222 222 222 222
Net liability 33,820 31,602 36,550 34,230 33,419 34,223 33,511
% change in net liability -6.6% 8.1% 1.2% -1.2% 1.2% -0.9%
Assets 7,620 7,620 7,620 7,620 7,620 7,620 7,620
Surplus (26,200) (23,982) (28,930) (26,609) (25,798) (26,602) (25,891)
229
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.5.5 Insurance and market risk sensitivities continued
2017
N'million Base Mortality
5% -5%
Individual Risk Reserves 9,341 9,420 9,262
PRA Regulated Annuities 7,431 7,457 7,408
Investment linked contracts 13,399 13,399 13,399
General business – UPR incl AURR 1,182 1,182 1,182
Group life – UPR incl AURR 554 554 554
Group Life - IBNR 21 21 21
Additional reserves 1,670 1,670 1,670
Reinsurance 222 222 222
Net Liability 33,819 33,925 33,719
% change in Net Liability 0.3% -0.3%
Assets 7,620 7,620 7,620
Surplus (26,200) (26,305) (26,098)
The expense sensitivity result shows the impact of reducing and increasing maintenance and acquisition expenses rates to 90% and
110% respectively of the base rates. Valuation interest rate sensitivity result shows the impact of reducing and increasing valuation
interest rate to 99% and 101% respectively of the base rates.
3.5.6 Solvency
The solvency level at the valuation date was 252% (2017: 247%). That is, assets representing life and non-life fund on the Group’s
balance sheet (N76.0bn) were 140% of the value of the actuarially calculated net liabilities (N54.2bn).
The assets backing the life and non-life fund are as follows:
2018
N'million
2017
N'million
Government bonds 43,096 21,364
Treasury bills 19,798 21,075
Cash and bank balances 798 1,403
Reinsurance assets 2,703 1,652
Trade receivables 19 42.62
Due from policyholders 16 10.62
Investment in quoted equity - 5
Total 66,430 45,552
The assets adequately match the liabilities. In particular asset admissibility requirements and localisation rules in Section 25 of 2003
Insurance Act were met. The life fund shows a surplus of N9.2billion (2017: N5.7billion), while life and non-life show a surplus of
N517.1million (2017: N807million).
230
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.6 Equity risk
The Group is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (NSE) and other non-quoted
investments. Equity securities quoted on the NSE is exposed to movement based on the general movement of the all share index and
movement in prices of specific securities held by the Group.
As at 31 December 2018, the market value of quoted securities held by the Group is N1.22billion (2017: N2.49billion). If the all share index of
the NSE moves by 6,813 basis points from the 31,431 position at 31 December 2018, the eect on the fair value of these quoted securities
and the other comprehensive income statement would have been N264million.
The Group holds a number of investments in unquoted securities with a market value of N107.13billion (2017: N94.28billion) of which
investments in Airtel Nigeria Ltd and African Finance Corporation (AFC) are the significant holdings. AFC is a private sector led investment
bank and development finance institution which has the Central Bank of Nigeria as a single major shareholder (42.5%) with other African
financial institutions and investors holding the remaining shares. Airtel Nigeria is a private limited liability company whose principal activity is
the provision of mobile telecommunications service using the Global System for Mobile Communications (GSM) platform. These investments
are level 3 instruments, see sensitivity analysis in Note 3.7.
The Group does not deal in commodities and is therefore not exposed to any commodity price risk.
3.7 Fair value of financial assets and liabilities
3.7.1 Financial instruments measured at fair value
The following table presents the Group’s assets and liabilities that are measured at fair value at reporting date.
GROUP Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
31 December 2018
Financial assets
Financial assets at fair value through profit or loss
Debt securities 55,042 - - 55,042
Equity 270 304 35,759 36,333
Derivatives - 17,786 - 17,786
FVOCI investments
Investment securities - debt 719,934 16,658 28,848 765,440
Investment securities - unlisted debt - - 329 329
Investment securities - unlisted equity - 579 106,552 107,131
Investment securities - listed equity 1,218 - - 1,218
Assets pledged as collateral 215,914 - - 215,914
Financial liabilities at fair value through profit or loss
Derivatives - 15,791 - 15,791
31 December 2017
Financial assets at fair value through profit or loss
Debt securities 50,529 1,634 - 52,163
Equity 5 1,979 5,538 7,522
Derivatives 203 22,791 - 22,993
Available-for-sale financial assets
Investment securities - debt 1,940,230 112,810 440 2,053,480
Investment securities - unlisted debt - - - -
Investment securities - unlisted equity - 2,960 91,324 94,284
Investment securities - listed equity 1,580 - - 1,580
Assets pledged as collateral 132,258 954 - 133,212
Financial liabilities at fair value through profit or loss
Derivatives 181 9,223 - 9,404
231
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.1 Financial instruments measured at fair value continued
COMPANY Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
31 December 2018
Financial assets
Financial assets at FVTPL
Investment securities - unlisted equity - - 3,427 3,427
FVOCI Investments
Investment securities - debt 7,078 - - 7,078
31 December 2017
Financial assets
Available-for-sale financial assets
Investment securities - debt 6,990 - - 6,990
Investment securities - unlisted equity - 2,852 - 2,852
(a) Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market
is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service,
or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The
quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Instruments included in level 1 comprise primarily bonds and equity investments classified as trading securities or fair value through
other comprehensive income.
(b) Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable,
the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
a) Quoted market prices or dealer quotes for similar instruments;
b) The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date,
with the resulting value discounted back to present value;
c) Other techniques, such as discounted cash flow analysis, sales prices of comparable properties in close proximity , are used
to determine fair value for the remaining financial instruments.
Note that all of the resulting fair value estimates are included in level 2 except for certain unquoted equities and equity derivatives
explained below.
(c) Financial instruments in level 3
Inputs for the asset or liability in this fair value hierarchy are not based on observable market data (unobservable inputs). This level
includes equity investments with significant unobservable components.
232
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.1 Financial instruments measured at fair value continued
Transfers in and out of level 3 instruments are recognised on the date of the event or change in circumstances that caused the transfer.
The following table presents changes in level 3 instruments
GROUP
At 1 January 2017 59,128
Acquisitions 2,118
Total losses recognised through profit/loss (94)
Total gains recognised through OCI 33,648
Transfer into Level 3 due to change in observability of market data 2,502
At 31 December 2017 97,302
Acquisitions 58,648
Matured/redeemed (879)
Total gains recognised through profit/loss 988
Total gains recognised through OCI 12,577
Transfer into Level 3 due to change in observability of market data 2,852
At 31 December 2018 171,488
During the year ended 31 December 2018, there were no transfers between level 1 and 2 fair value measurements.
Total gains or losses for the period included in profit or loss are presented in 'Net gains/(losses) from investment securities'.
233
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.1 Fair value of financial assets and liabilities continued
Information about the fair value measurements using significant unobservable Inputs (Level 3)
The equity sensitivity measures the impact of a +/- 250bps movements in the comparative companies. The sensitivity of the fair values
of investment in unlisted equites to changes in the P/E multiples and/or EBITDA of the comparative companies as at 31 December
2018 is as shown in the below table:
Description Valuation technique Assumption Fair values
AIRTEL NIGERIA EV/EBITDA Base 41,353
Sensitivity of +2.5% 42,772
Sensitivity of -2.5% 39,932
NIBSS PLC P/E multiples Base 2,156
Sensitivity of +2.5% 2,207
Sensitivity of -2.5% 2,101
AFREXIM BANK LTD P/B multiples Base 428
Sensitivity of +2.5% 439
Sensitivity of -2.5% 415
AFRICA FINANCE CORPORATION P/E multiples Base 53,067
Sensitivity of +2.5% 54,394
Sensitivity of -2.5% 51,740
CAPITAL ALLIANCE PROPERTY INVESTMENT COMPANY (CAPIC) Net Asset Valuation Base 3,427
Sensitivity of +2.5% 3,513
Sensitivity of -2.5% 3,339
UNIFIED PAYMENT SYSTEMS Base 903
Sensitivity of +2.5% 925
Sensitivity of -2.5% 880
ANCHORAGE LEISURES (RADISSON BLU) EV/EBITDA Base 1,291
Sensitivity of +2.5% 1,323
Sensitivity of -2.5% 1,258
RESOURCERY PLC (Ordinary shares) Market Approach Base 374
Sensitivity of +2.5% 383
Sensitivity of -2.5% 364
CAPE II & CAPE III EV/EBITDA, DCF Base 2,561
Sensitivity of +2.5% 2,625
Sensitivity of -2.5% 2,495
AVERY ROW CAPITAL GP Net Asset Valuation Base 1,802
Sensitivity of +2.5% 1,847
Sensitivity of -2.5% 1,756
ECHO VC PAN AFRICA Net Asset Valuation Base 1,231
Sensitivity of +2.5% 1,262
Sensitivity of -2.5% 1,199
ARCFIN LP Net Asset Valuation Base 18,049
Sensitivity of +2.5% 18,500
Sensitivity of -2.5% 17,586
FIRST REAL ESTATE DEVELOPMENT FUND Net Asset Valuation Base 3,213
Sensitivity of +2.5% 3,293
Sensitivity of -2.5% 3,131
IDF FUND Net Asset Valuation Base 6,187
Sensitivity of +2.5% 6,342
Sensitivity of -2.5% 6,028
234
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.1 Fair value of financial assets and liabilities continued
EV/EBITDA, P/B valuation or P/E valuation multiple - the Group determines appropriate comparable public company/ies based on
industry, size, developmental stage, revenue generation and strategy. The Group then calculates a trading multiple for each comparable
company identified. The multiple is calculated by either dividing the enterprise value of the comparable company by its earning before
interest, tax, depreciation and amortisation (EBITDA), or dividing the quoted price of the comparable company by its net income (P/E).
The trading multiple is then adjusted for discounts/premiums with regards to such consideration as illiquidity and other dierences,
advantages and disadvantages between the group's investee company and the comparable public companies based on company-
specific facts and circumstances.
Income approach (discounted cashflow) - the Group determines the free cash flow of the investee company, and discounts these
cashflows using the relevant cost of equity. The cost of equity is derived by adjusting the yield on the risk free securites (FGN Bonds)
with the equity risk premium and company/sector specific premium. The present value derived from the calculation represents the
investee company's enterprise value.
A sensitivity of +/-2.5% results in changes in fair value of unlisted equities and this will impact on other comprehensive income.
A sensitivity of +/-2.5% results in a fair value gain/(loss) of N3.6bn and N3.6bn respectively which will impact on other comprehensive
income.
3.7.2 Group's valuation process
The Group's asset liability management (ALM) unit performs the valuation of financial assets required for financial reporting purposes.
This team also engages external specialist valuers when the need arises, and reports directly to the Chief Risk Ocer. Discussions
on the valuation process and results are held between the ALM team and the Chief Risk Ocer on a monthly basis in line with the
Group's management reporting dates.
3.7.3 Financial instruments not measured at fair value
(a) Table below shows the carrying value of financial assets not measured at fair value.
GROUP Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
31 December 2018
Financial assets
Cash and balances with Central Banks - - 653,335 653,335
Loans and advances to banks - - 863,435 863,435
Loans and advances to customers: Retail Portfolio
- Overdrafts - - 13,775 13,775
- Term loans - - 98,410 98,410
- Credit cards - - 1,916 1,916
- Mortgage - - 54,249 54,249
Loans and advances to customers: Corporate portfolio
- Overdrafts - - 176,685 176,685
- Term loans - - 867,283 867,283
- Project finance - - 471,077 471,077
- Advances under finance lease - - 417 417
Amortised cost investments 779,638 654 6,108 786,400
Asset pledged as collateral 67,790 - - 67,790
Other assets - - 36,270 36,270
235
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.3 Financial instruments not measured at fair value continued
GROUP Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
31 December 2018
Financial liabilities
Deposit from customers - - 3,490,423 3,490,423
Deposit from bank - - 749,315 749,315
Borrowing 165,906 - 172,308 338,214
Other liabilities - - 346,627 346,627
Investment contracts - - 19,766 19,766
31 December 2017
Financial assets
Cash and balances with Central Banks - 641,381 641,881
Loans and advances to banks - 742,929 742,929
Loans and advances to customers: - - -
- Overdrafts - - 296,135 296,135
- Term loans - - 1,670,334 1,670,334
- Sta loans - - 7,947 7,947
- Project finance - - 26,296 26,296
- Advances under finance lease - - 511 511
Held-to-maturity investments 58,879 49,404 - 108,283
Asset pledged as collateral 69,311 5,100 - 74,411
Other assets - - 63,462 63,462
Financial liabilities
Deposit from customers - - 3,143,338 3,143,338
Deposit from bank - - 665,366 665,366
Borrowing 254,623 - 166,296 420,919
Other liabilities - - 226,410 226,410
Investment contracts - - 13,399 13,399
236
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.3 Financial instruments not measured at fair value continued
COMPANY Level 1
N'million
Level 2
N'million
Level 3
N'million
Total
N'million
31 December 2018
Financial assets
Loans and advances to banks - - 16,639 16,639
Loans and advances to customers:
- Sta loans - - 110 110
Held-to-maturity investments -
Other assets - - 87 87
Financial liabilities
Other liabilities - - 8,034 8,0354
31 December 2017
Financial assets
Loans and advances to banks - - 7,585 7,585
Loans and advances to Customers:
- Sta loans - - 108 108
Investment securities:
Held-to-maturity investments - - - -
Other assets - 8,832 8,832
Financial liabilities
Other liabilities - 7,553 7,553
237
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3.7.3 Financial instruments not measured at fair value continued
(b) The fair value of loans and advances to customers (including loan commitments) and investment securities are as follows:
GROUP At 31st December 2018 At 31st December 2017
Carrying
value
N'million
Fair
value
N'million
Carrying
value
N'million
Fair
value
N'million
Financial assets
Loans and advances to customers - -
Fixed rate loans 42,530 42,530 46,668 44,833
Variable rate loans 1,701,644 1,701,644 1,954,555 2,018,818
Investment securities (Amortised cost/held-to-maturity) 789,750 786,399 108,284 96,875
Asset pledged as collateral 114,399 88,890 74,411 53,036
Loan commitments 42,902 42,902 8,262 8,262
Financial liability
Borrowings 338,214 332,698 420,919 418,062
Investment securities have been fair valued using the market prices and is within level 1 of the fair value hierarchy.
Loans and advances to customers have been fair valued using average benchmarked lending rates which are adjusted to specific entity
risks based on history of losses.
Borrowings which are listed on stock exchange are fair valued using market prices and are within level 1 of the fair value hierarchy while
other borrowings are fair valued using valuation techniques and are within level 3 of the fair value hierarchy.
The carrying value of the following financial assets and liabilities for both the Company and Group approximate their fair values:
Cash and balances with Central Banks
Loans and advances to banks
Other assets (excluding prepayments)
Deposits from banks
Deposits from customers
Liability on investment contracts
Other liabilities (excluding provisions and accruals)
238
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
4. Capital management
The Group’s objectives when managing capital are (i) to comply with the capital requirements set by the regulators (Central Bank of
Nigeria, Securities and Exchange Commission, National Insurance Commission etc), (ii) to safeguard the Group’s ability to continue as
a going concern and (iii) to maintain a sucient capital base to achieve the current regulatory capital requirement of FBN Holdings
Plc and its subsidiaries. The regulatory capital requirement for entities within the Group, as well as the internal target for capital
management are as follows:
Name of Entity Primary Regulator Regulatory Requirement
FBN Holdings Plc Central Bank of Nigeria Paid-up Capital in excess of aggregated
capital of subsidiaries
First Bank of Nigeria Limited Central Bank of Nigeria N100billion Capital; and
15% Capital Adequacy Ratio
FBNQuest Merchant Bank Limited Central Bank of Nigeria N15billion Capital; and
10% Capital Adequacy Ratio
FBNQuest Capital Limited Securities and Exchange Commission Issuing House: N150million;
Trustee: N300million;
Broker-Dealer: N300million;
Underwriter: N200million; and
Fund Manager: N150million
FBN Insurance Limited National Insurance Commission Life Business: N2billion;
General Business: N3billion
FBN Insurance Brokers Limited National Insurance Commission N5million Capital
The Group’s capital management approach is driven by its strategy and organisational requirements, taking into account the regulatory
and commercial environment in which it operates. It is the Group’s policy to maintain a strong capital base to support the development
of its business and to meet regulatory capital requirements at all times.
Through its corporate governance processes, the Group maintains discipline over its investment decisions and where it allocates its
capital, seeking to ensure that returns on investment are appropriate after taking account of capital costs.
The Group’s strategy is to allocate capital to businesses based on their economic profit generation and, within this process, regulatory
and economic capital requirements and the cost of capital are key factors. The Group has an Internal Capital Adequacy Assessment
Process which proactively evaluates capital needs vis-a-vis business growth and the operating environment. It also guides the capital
allocation among the subsidiaries and the business units. The Group's internal capital adequacy assessment entails periodic review of
risk management processes, monitoring of levels of risk and strategic business focus through a system of internal controls that provides
assurance to those charged with governance on risk management models and processes.
The Group considers both equity and debt, subject to regulatory limits, as capital.
During 2018, the Group's strategy, which remains significantly unchanged, was as contained in the table above. The test of capital
adequacy for FBN Holdings Plc and its subsidiaries, in accordance with the requirements of paragraph 7.3 of the Guidelines for Licensing
and Regulation of Financial Holding Companies in Nigeria, as at 31 December 2018 and 2017 are as follows:
239
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
4. Capital management continued
i. FBN Holdings Plc Proportion
of shares
held (%)
31 December
2018
N'million
31 December
2017
N'million
Subsidiary Paid-up Capital (FBNHoldings' proportion)
First Bank of Nigeria Limited 100 205,557 205,557
FBNQuest Merchant Bank Limited 100 8,206 8,206
FBNQuest Capital Limited 100 4,300 4,300
FBN Insurance Limited 65 4,724 4,724
FBN Insurance Brokers Limited 100 25 25
Rainbow Town Development Limited 55 5,000 5,000
Aggregated Capital of Subcos 227,812 227,812
FBN Holdings Plc's Paid-up Capital 251,340 251,340
Excess of FBNHoldings capital over aggregated capital of Subcos 23,528 23,528
ii. First Bank of Nigeria Limited and FBNQuest Merchant Bank Limited
The Banks' capital is divided into two tiers:
Tier 1 capital: core equity tier one capital including ordinary shares, statutory reserve, share premium and general reserve.
Non-controlling interests arising on consolidation from interests in permanent shareholders’ equity. The book value of goodwill,
unpublished losses and under provisions are deducted in arriving at qualifying Tier 1 capital; and
Tier 2 capital: qualifying subordinated loan capital and unrealised gains arising from the fair valuation of financial instruments
held as available-for-sale. Under the Basel II requirements as implemented in Nigeria, Tier 2 capital is restricted to 33 1/3%
of Tier 1 capital.
The Central Bank of Nigeria prescribed the minimum limit of total qualifying capital/total risk weighted assets as a measure of capital
adequacy of banks in Nigeria. Total qualifying capital consists of Tier 1 and 2 capital less investments in subsidiaries and other regulatory
adjustments.
The table below summarises the Basel II capital adequacy ratio for 2018 and 2017. It shows the composition of regulatory capital and
ratios for the years. During those years, the Banks complied with all the regulatory capital requirements to which it was subjected.
240
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
4. Capital management continued
FBNQUEST MERCHANT BANK
LIMITED
FIRST BANK OF NIGERIA LIMITED
Adjusted
impact Full impact
31 December
2018
N'million
31 December
2017
N'million
31 December
2018
N'million
31 December
2018
N'million
31 December
2017
N'million
Tier 1 capital
Share capital 4,302 4,302 16,316 16,316 16,316
Share premium 3,905 3,905 189,241 189,241 189,241
Statutory reserve 7,483 7,174 86,327 86,327 77,786
SMEEIS reserves - - 6,076 6,076 6,076
Retained earnings 9,516 9,570 33,986 33,986 173,487
IFRS 9 transitional adjustment - - 89,599 - -
RRR applied for IFRS 9 Impact - (40,830)
Less: Goodwill/Deferred Tax (10,797) (12,431) (9,270) (9,270) (7,207)
Less: Investment in subsidiaries (1,382) (1,737) (53,227) (53,227) (35,954)
Total qualifying for tier 1 capital 13,027 10,782 359,048 228,619 419,746
Tier 2 capital
Fair value reserve (2,086) (421) 77,978 77,978 76,107
Other borrowings - - 64,582 64,582 129,152
Total tier 2 capital (2,086) (421) 142,560 142,560 205,259
Tier 2 Capital Restriction (2,086) (421) 137,425 93,949 151,900
Less: Investment in subsidiaries - - (53,227) (53,227) (35,954)
Total qualifying for tier 2 capital (2,086) (421) 84,198 40,722 115,946
Total regulatory capital 10,940 10,361 443,246 269,341 535,692
Risk-weighted assets
Credit risk 69,603 54,708 1,898,330 1,857,500 2,135,064
Operational risk 17,563 11,725 655,770 655,770 651,154
Market risk 2,648 10,496 43,938 43,938 233,662
Total risk-weighted assets 89,814 76,929 2,568,038 2,527,720 3,019,880
Risk-weighted Capital Adequacy Ratio (CAR) 12.18% 13.47% 17.26% 10.66% 17.74%
Tier 1 CAR 14.50% 14.02% 13.98% 9.05% 13.90%
The Central Bank of Nigeria in its circular on transitional arrangements on treatment of IFRS 9 expected credit loss for regulatory purposes by banks
in Nigeria dated 18 October 2018, has recommended transitional arrangements to cushion the impact of IFRS 9 implementation on tier 1 regulatory
capital. The regulator advised that the balance in regulatory risk reserve should be applied to retained earnings to reduce the additional ECL provisions
on opening retained earnings. Where the additional ECL provision is higher than the regulatory risk reserve transfer, the excess shall be amortised in
line with the transitional arrangements. The regulatory arrangement for amortisation of the impact is as shown below:
Period Provisions to be written back
Year 0 (January 1, 2018) 4/5 of Adjusted Day One Impact
Year 1 (December 31, 2018) 3/5 of Adjusted Day One Impact
Year 2 (December 31, 2019) 2/5 of Adjusted Day One Impact
Year 3 (December 31, 2020) 1/5 of Adjusted Day One Impact
Year 4 9December 31, 2021) NIL
iii. Other Regulated Subsidiaries
Regulatory
Requirement
N'million
31 December
2018
N'million
Excess/
(Shortfall)
N'million
31 December
2017
N'million
Excess/
(Shortfall)
N'million
FBNQuest Capital Limited 1,100 16,216 15,116 16,802 15,702
FBN Insurance Limited:
Life business 2,000 11,957 9,957 10,556 8,556
General business 3,000 5,163 2,163 4,109 1,109
FBN Insurance Brokers Limited 5 247 242 356 351
All the regulated entities within the Group complied with all the regulatory capital requirements to which they were subjected.
241
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
5 Significant accounting judgements, estimates and assumptions
The Group’s financial statements and its financial result are influenced by accounting policies, assumptions, estimates and management
judgement, which necessarily have to be made in the course of preparation of the consolidated financial statements. The Group makes
estimates and assumptions that aect the reported amounts of assets and liabilities within the next financial year. All estimates and
assumptions required in conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and
judgements are evaluated on a continuous basis, and are based on past experience and other factors, including expectations with regard
to future events. Accounting policies and management’s judgements for certain items are especially critical for the Group’s results and
financial situation due to their materiality.
a Impairment of financial assets
The measurement of the expected credit loss allowance for financial assets measured at amortised cost and debt instruments measured
at FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit
behaviour (e.g. the likelihood of customers defaulting and the resulting losses).
A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:
Determining criteria for significant increase in credit risk;
Methodology used to determine 12 month and lifetime probability of default;
Estimation of loss given default;
Determining definition of default; and
Incorporation of forward-looking information.
The detailed methodologies, areas of estimation and judgement applied in the calculation of the Group’s impairment charge on financial
assets are set out in the Financial risk management section.
b Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability at the measurement date in an
orderly arm's length transaction between market participants in the principal market under current market conditions (i.e., the exit
price). Fair value measurements are categorised into levels within a fair value hierarchy based on the nature of the valuation inputs
(Level 1, 2 or 3). Fair value is based on unadjusted quoted prices in an active market for the same instrument, where available (Level
1). If active market prices or quotes are not available for an instrument, fair value is then based on valuation models in which the
significant inputs are observable (Level 2) or in which one or more of the significant inputs are non-observable (Level 3). Estimating
fair value requires the application of judgement. The type and level of judgement required is largely dependent on the amount of
observable market information available. For instruments valued using internally developed models that use significant non-observable
market inputs and are therefore classified within Level 3 of the hierarchy, the judgement used to estimate fair value is more significant
than when estimating the fair value of instruments classified within Levels 1 and 2. To ensure that valuations are appropriate, a number
of policies and controls are in place. Valuation inputs are verified to external sources such as exchange quotes, broker quotes or other
management-approved independent pricing sources.
Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by
qualified personnel independent of those that sourced them. All models are certified before they are used, and models are calibrated
to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data;
however, areas such as credit risk (both own credit risk and counterparty risk), volatilities and correlations require Management to
make estimates.
Changes in assumptions about these factors could aect the reported fair value of financial instruments. All fair values are on a
recurring basis. Refer to Note 3.7 for additional sensitivity information for financial instruments.
242
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
5 Significant accounting judgements, estimates and assumptions continued
c Retirement benefit obligation
The Group recognises its obligations to its employees on the gratuity scheme at the period end, less the fair value of the plan assets
after performing actuarial valuation of the obligation. The scheme’s obligations are calculated using the projected unit credit method.
Plan assets are stated at fair value as at the period end. Changes in pension scheme liabilities or assets (remeasurements) that do not
arise from regular pension cost, net interest on net defined benefit liabilities or assets, past service costs, settlements or contributions
to the scheme, are recognised in other comprehensive income. Remeasurements comprise experience adjustments (dierences between
previous actuarial assumptions and what has actually occurred), the eects of changes in actuarial assumptions, return on scheme
assets (excluding amounts included in the interest on the assets) and any changes in the eect of the asset ceiling restriction
(excluding amounts included in the interest on the restriction).
The measurement of the Group’s benefit obligation and net periodic pension cost/(income) requires the use of certain assumptions,
including, among others, estimates of discount rates and expected return on plan assets. See Note 41, “Retirement benefits obligation,”
for a description of the defined benefit pension plans. An actuarial valuation is performed by actuarial valuation experts on an annual
basis to determine the retirement benefit obligation of the Group.
d Impairment of goodwill
The Group tests annually whether goodwill has suered any impairment, in accordance with the accounting policy. The recoverable
amounts of cash-generating units (CGU) have been determined based on value-in-use calculations. These calculations require the
use of significant amount of judgement and estimates of future cash flows. A number of factors aect the value of such cash flows,
including discount rates, changes in the economic outlook, customer behavior and competition See Note 33 for detailed information
on impairment assessment performed on the CGU. There was no impairment charge during the year (2017: Nil).
f Valuation of insurance contract liabilities
The determination of the liabilities under long-term insurance contracts is dependent on estimates made by the Group. Estimates are
made as to the expected number of deaths for each of the years in which the Group is exposed to risk.
The Group bases these estimates on standard industry and national mortality tables that reflect recent historical mortality experience,
adjusted where appropriate to reflect the Group’s own experience. For contracts that insure the risk of longevity, appropriate allowance
is made for expected mortality improvements.
The estimated number of deaths determines the value of the benefit payments and the value of the valuation premiums. The main
source of uncertainty is that epidemics such as AIDS, and wide-ranging lifestyle changes, such as in eating, smoking and exercise
habits, could result in future mortality being significantly worse than in the past for the age groups in which the Group has significant
exposure to mortality risk.
However, continuing improvements in medical care and social conditions could result in improvements in longevity in excess of those
allowed for in the estimates used to determine the liability for contracts where the Group and Company are exposed to longevity risk.
Were the numbers of deaths in future years to dier by +/- 5% from management’s estimate, the liability would increase by N50.8
million or decrease by N49.2million (2017: N32.1million and N31.9million respectively). For contracts without fixed terms, it is assumed
that the Company will be able to increase mortality risk charges in future years in line with emerging mortality experience.
Estimates are also made as to future investment income arising from the assets backing long-term insurance contracts. These
estimates are based on current market returns, as well as expectations about future economic and financial developments. The average
estimated rate of investment return is 14%. If the average future investment returns diered by -/+ 1% from Management’s estimates,
the contract liability would increase by N53.5million or decrease by N46.9million (2017: N34.7million and N29.8million respectively).
243
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
6 Segment information
Following the Management approach of IFRS 8, operating segments are reported in accordance with the internal reports provided to
the Group's Executive Committee (the chief operating decision maker), which is responsible for allocating resources to the operating
segments and assessing its performance.
The Group is divided into the following business units:
Commercial Banking Business Group
This is the Group's core business, which provides both individual and corporate clients/customers with financial intermediation services.
This business segment includes the Group's local, international and representative oces oering commercial banking services.
Merchant Banking and Asset Management Business Group (MBAM)
This is the investment-banking arm of the Group, providing advisory, asset management, markets and private equity services to a large
institutional (corporations and governments) clientele, as well as merchant banking services.
Insurance Business Group
This includes the Group's legacy insurance brokerage business and the more recent full underwriting business (both life and general).
The underwriting business is performed by FBN Insurance Limited, a partnership with South African based Sanlam Group.
Others
Others comprises of FBN Holdings Plc, the parent company, and Rainbow Town Development Limited.
The Group's management reporting is based on a measure of operating profit comprising net interest income, loan impairment charges,
net fee and commission income, other income and non-interest expenses. This measurement basis excludes the eect of non-recurring
expenditure from the operating segments such as restructuring costs, legal expenses and goodwill impairments when the impairment
is the result of an isolated, non-recurring events.
As the Group Executive Committee reviews operating profit, the results of discontinued operations are not included in the measure of
operating profit. The transactions between segments are carried out at arm's length, which is consistent with the basis of transacting
with external parties.
The information provided about each segment is based on the internal reports about segment profit or loss, assets and other
information, which are regularly reviewed by the Group Executive Committee.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the consolidated statement of financial
position.
244
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
6 Segment information continued
Segment result of operations
The segment information provided to the Group Executive Committee for the reportable segments for the period ended 31 December
2018 is as follows:
Commercial
Banking Group
N'million
MBAM Group
N'million
Insurance
Group
N'million
Other
N'million
Total
N'million
At 31 December 2018
Total segment revenue 514,793 45,259 22,663 13,651 596,366
Inter-segment revenue (258) (109) (765) (11,757) (12,889)
Revenue from external customers 514,535 45,150 21,898 1,894 583,477
Interest income 402,379 22,436 8,312 1,283 434,410
Interest expense (134,488) (15,754) - - (150,242)
Profit/(loss) before tax 44,475 17,197 6,140 (2,524) 65,288
Income tax expense 201 (4,819) (828) (98) (5,544)
Profit/(loss) for the year from continuing operations 44,677 12,378 5,312 (2,622) 59,744
Impairment charge for losses (87,871) 1,099 (138) - (86,911)
Loss for the year from discontinued operations - - - (77) (77)
Depreciation (10,880) (674) (332) (397) (12,282)
At 31 December 2018
Total assets 5,242,372 198,145 76,425 51,374 5,568,316
Other measures of assets:
Loans and advances to customers 1,647,858 35,557 287 110 1,683,813
Expenditure on non-current assets 86,311 1,951 2,520 733 91,515
Investment securities 1,571,723 63,591 21,428 7,078 1,663,821
Total liabilities 4,805,064 159,034 63,160 10,411 5,037,669
At 31 December 2017
Total segment revenue 541,597 39,028 18,728 13,716 613,069
Inter-segment revenue (5,043) (172) (560) (11,851) (17,625)
Revenue from external customers 536,554 38,857 18,168 1,866 595,445
Interest income 436,392 25,260 6,090 1,843 469,586
Interest expense (121,454) (15,828) (782) - (138,064)
Profit/(loss) before tax 41,820 10,923 4,441 (2,662) 54,522
Income tax expense (5,633) (2,347) (953) (107) (9,040)
Profit/(loss) for the year from continuing operations 36,187 8,576 3,488 (2,769) 45,482
Impairment charge on credit losses (148,579) 88 - - (148,491)
Impairment charge on doubtful receivables (1,104) (686) (142) - (1,932)
Loss for the year from discontinued operations (1,521) - - (6,254) (7,775)
Depreciation (10,422) (537) (242) (398) (11,600)
245
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
6 Segment information continued
Segment result of operations continued
Commercial
Banking Group
N'million
MBAM Group
N'million
Insurance
Group
N'million
Other
N'million
Total
N'million
At 31 December 2017
Total assets 4,949,985 183,933 50,692 51,927 5,236,537
Other measures of assets:
Loans and advances to customers 1,961,776 39,243 96 108 2,001,223
Expenditure on non-current assets 82,794 2,258 2,180 1,031 88,263
Investment securities 1,153,363 80,713 4,690 9,842 1,248,608
Total liabilities 4,360,008 153,096 40,054 9,660 4,562,818
Geographical information
Revenues 31 Dec 2018
N'million
31 Dec 2017
N'million
Nigeria 496,658 508,195
Outside Nigeria 86,819 87,250
Total 583,477 595,445
Non-current asset 31 Dec 2018
N'million
31 Dec 2017
N'million
Nigeria
82,627 79,710
Outside Nigeria 8,888 8,553
Total 91,515 88,263
246
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
7 Interest income
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Investment securities at FVOCI/Available-for-sale 121,948 152,894 909 1,598
Investment securities at amortised cost/Held-to-maturity 28,884 20,394 - -
Loans and advances to banks 21,153 7,708 1,236 607
Loans and advances to customer 262,425 288,590 18 10
434,410 469,586 2,163 2,215
8 Interest expense
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Deposit from customers 109,112 101,441
Deposit from banks 12,631 12,179
Borrowings 28,499 24,444
150,242 138,064
247
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
9 Impairment charge for credit losses
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Loans and advances to banks (refer Note 23)
12- month ECL 425 -
425 -
Investment securities (refer to Note 25)
Stage 1 - 12- month ECL (16) -
(16) -
Loans and advances to customers (refer to Note 23)
Stage 1 - 12- month ECL 828 -
Stage 2 - Lifetime ECL (10,901) -
Stage 3 - Lifetime ECL 95,943 -
Increase in collective impairment - 13,526
Increase in specific impairment - 141,581
85,870 155,107
Net recoveries on loans previously written-o (9,137) (6,615)
Other assets (refer to Note 27)
Other assets ECL 7,524 -
Increase in impairment - 1,932
7,524 1,932
O balance sheet
Increase in impairment 2,245 -
Net impairment charge 86,911 150,424
248
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
10 Insurance premium revenue
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Gross premium written 29,957 22,751
Unearned premium (228) (351)
29,729 22,400
Change in insurance contract liabilities (11,694) (9,427)
18,035 12,973
11 Fee and commission income
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Credit related fees 2,393 7,356
Letters of credit commissions and fees 4,284 6,029
Electronic banking fees 34,029 24,989
Money transfer commission 2,370 3,601
Commission on bonds and guarantees 880 773
Funds transfer and intermediation fees 6,974 6,697
Account maintenance 12,329 6,686
Brokerage and intermediations 11,901 1,554
Custodian fees 6,410 5,960
Financial advisory fees 3,210 5,180
Fund management fees 2,955 1,952
Trust fee income 1,119 1,075
Other fees and commissions 3,870 2,601
92,724 74,453
Timing of revenue recognition
At a point in time 79,513 60,618
Over time 13,211 13,835
11b Fee and commission income
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
17,330 12,117
Fee and commission expense primarily relates to charges raised by switching platforms on holders of First Bank Limited ATM cards,
who make use of the other banks machines while transacting business,and SMS alert related expenses.
249
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
12 Net gains on foreign exchange
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Revaluation gain (unrealised) on foreign currency balances 19,115 13,515 52 8
Foreign exchange trading income (realised) 13,521 7,547 - -
32,636 21,062 52 8
13 Net gains/(losses) on investment securities
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Gain on sale of investment securities 5,733 2,610 (21) 16
5,733 2,610 (21) 16
14 Net (losses)/gains from financial instruments at FVTPL
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Fair value (loss)/gain on derivatives (6,482) 7,997 - -
Trading income on debt securities 3,432 3,152 - -
Fair value gain on equities 1,400 - 575 -
Fair value loss on debt securities (1,485) (32) - -
(3,135) 11,117 575 -
15 Dividend income
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
FBNQuest Capital Limited - - 8,380 1,486
FBNQuest Merchant Bank Limited - - 707 8,700
FBN Insurance Limited - - 1,908 1,412
FBN Insurance Brokers Limited - - 100 91
Entities outside the Group 2,312 2,053 - -
Withholding tax on dividend - - (255) (252)
2,312 2,053 10,840 11,437
250
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
16 Other operating income
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
WHT recovered 619 340 - -
Net gain/(loss) from fair value adjustment on investment
properties (refer Note 28) 20
(2) - -
Profit on sale of property, plant and equipment 23 84 1 -
Other income 2,571 3,479 39 38
3,233 3,901 40 38
Other income for the Group largely comprises of income made from private banking services and VAT recovered.
17 Personnel expenses
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Wages and salaries 81,875 74,072 888 966
Pension costs:
- Defined contribution plans 4,545 3,603 16 16
- Defined benefit cost (refer Note 41) 155 200 - -
Termination benefits 6,820 7,803 - -
93,395 85,678 904 982
Sta received some loans at below the market interest rate. These loans are measured at fair value at initial recognition. The dierence
between the PV of cash flows discounted at the contractual rate and PV of cash flows discounted at market rate has been recognised
as prepaid employee benefit (in prepayments) which is amortised to personnel expenses over the life of the loan.
251
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
17 Personnel expenses continued
The average number of persons employed by the Group during the period was as follows:
GROUP COMPANY
31 Dec 2018 31 Dec 2017 31 Dec 2018 31 Dec 2017
Executive Director 1 1 1 1
Management 484 408 6 5
Non-management 8,674 8,337 29 26
9,159 8,746 36 32
The number of employees of the Group, other than Directors, who received emoluments in the following ranges (excluding pension
contributions and certain benefits) were:
Below N2,000,000 379 404 2 5
N2,000,001 - N2,800,000 1,072 714 - 1
N2,800,001 - N3,500,000 609 214 2 4
N3,500,001 - N4,000,000 60 171 - -
N4,000,001 - N5,500,000 895 2,757 3 3
N5,500,001 - N6,500,000 2,033 607 4 2
N6,500,001 - N7,800,000 930 1,577 3 -
N7,800,001 - N9,000,000 828 659 - 3
N9,000,001 and above 2,352 1,642 21 13
9,158 8,745 35 31
252
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
18 Operating expenses
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'millions
31 Dec 2017
N'million
Auditors' remuneration* 910 856 25 25
Directors' emoluments 4,077 5,081 1,017 989
Loss on sale of property, plant and equipment - - - 2
Regulatory cost 35,103 33,801 - -
Maintenance 23,134 21,776 143 163
Insurance premium 1,688 1,164 59 72
Rent and rates 5,260 4,522 81 82
Advert and corporate promotions 7,770 6,431 181 250
Legal and other professional fees 8,921 7,015 541 541
Donations and subscriptions 831 1,261 12 10
Stationery and printing 1,590 1,654 40 45
Communication, light and power 7,576 7,925 12 9
Cash handling charges 2,247 2,476 - -
Operational and other losses 6,910 7,425 - -
Passages and travels 7,559 6,217 463 399
Outsourced cost 18,871 16,529 25 30
Statutory fees 510 222 39 18
Underwriting expenses 4,433 3,841 - -
WHT on retained dividend 255 252 - -
Fines and penalties 33 17 4 2
Other operating expenses 10,299 6,334 266 315
147,976 134,799 2,908 2,952
*Auditors' remuneration for the Group represents the fees paid by the various entities in the Group to their respective auditors.
The regulatory cost for 2017 has been restated due to retrospective application of the requirement that contingent assets should be
included in the basis for calculation of AMCON charges.
253
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
19 Taxation - Income tax expense and liability
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
a Income tax expense
Corporate tax 10,644 10,154 101 104
Education tax 442 262 - -
Technology tax 774 692 - -
Capital gains tax - - - -
Over/under provision in prior years (79) 198 (3) 3
Current income tax - current period 11,781 11,306 98 107
Origination and reversal of temporary deferred tax dierences (6,237) (2,266) - -
Income tax expense 5,544 9,040 98 107
GROUP 2018 2017
Profit before income tax 65,288 54,522
Tax calculated using the domestic corporation tax rate of 30%
(2017: 30%) 19,587 30% 16,357 30%
Eect of tax rates in foreign jurisdictions (3,251) -5% 114 0%
Non-deductible expenses 21,789 33% 30,895 54%
Eect of education tax levy 367 1% 261 0%
Eect of information technology 864 1% 628 1%
Eect of minimum tax 3,315 5% 4,919 7%
Eect of excess dividend tax 1,266 2% 2,181 4%
Eect of National fiscal levy - 0% 348 1%
Tax exempt income (44,756) (69%) (47,212) -83%
Origination and reversal of temporary deferred tax dierences (6,237) (10%) - 0%
Tax incentives 2,527 4% 83 0%
Tax loss eect 10,152 16% 269 0%
Under provision in prior years (79) 0% 198 0%
Total income tax expense in income statement 5,544 8% 9,040 16%
5,544 8% 9,040 16%
254
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
19 Taxation - Income tax expense and liability continued
COMPANY 2018 2017
Profit before income tax 9,440 9,382
Tax calculated using the domestic corporation tax rate of 30%
(2017: 30%) 2,832 30% 2,815 30%
Non-deductible expenses 152 2% 184 2%
Eect of minimum tax 102 1% 104 1%
Tax exempt income (3,532) (37%) (3,917) (42%)
(Over)/Under provided in prior years (3) 0% 3 0%
Tax loss eect 547 6% 918 10%
Total income tax expense in income statement 98 1% 107 1%
Income tax expense 98 1% 107 1%
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
b Current income tax liability
The movement in the current income tax liability is as follows:
At start of the period 10,194 8,897 104 84
Tax paid (6,026) (6,761) (63) (87)
Withholding tax credit utilised (303) (2,032) (37) -
Prior period under provision - 198 - -
Income tax charge 11,781 11,306 98 107
Eect of changes in exchange rate 10 (1,414) - -
At 31 December 15,656 10,194 102 104
Current 15,656 10,194 102 104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
255
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
20 Cash and balances with Central Banks
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Cash 110,706 169,033
Balances with Central Banks excluding mandatory reserve deposits 17,738 15,192
128,444 184,225
Mandatory reserve deposits with Central Banks 524,891 457,656
653,335 641,881
Restricted deposits with Central Banks are not available-for-use in Group’s day-to-day operations. FBN Limited and FBNQuest
Merchant Bank Limited had restricted balances of N515.49billion and N3.88billion respectively with Central Bank of Nigeria (CBN) as
at 31 December 2018 (December 2017: N449.99billion and N2.173billion). This balance includes CBN cash reserve requirement and
Special Intervention Reserve. The cash reserve ratio represents a mandatory 22.5% of qualifying deposits (December 2017: 22.5%)
which should be held with the Central Bank of Nigeria as a regulatory requirement. FBNBank Ghana and FBNBank Guinea had restricted
balances of N2.45billion and N1.75billion (December 2017: N2.278billion and N1.96billion) respectively with their respective Central
Banks.
21 Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise balances with less than three months' maturity
from the date of acquisition, including cash in hand, deposits held-at-call with other banks and other short-term highly liquid
investments with original maturities less than three months.
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Cash (Note 20) 110,706 169,033 - -
Balances with Central Banks other than mandatory reserve
deposits (Note 20) 17,738 15,192 - -
Loans and advances to banks excluding long-term placements
(Note 22)
753,471 701,504 16,639 7,585
Treasury bills included in financial assets at FVTPL (Note 24) 13,025 8,491 - -
Treasury bills and eligible bills excluding pledged treasury bills
(Notes 25.1&25.2) 524,950 272,227 - -
1,419,889 1,166,447 16,639 7,585
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
256
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
22 Loans and advances to banks
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Current balances with banks within Nigeria 357,628 214,240 82 1,636
Current balances with banks outside Nigeria 266,920 380,675 - -
Placements with banks and discount houses (short-term) 128,922 106,589 16,557 5,949
753,471 701,503 16,639 7,585
Long-term placement/Cash collateral balance 110,950 41,425 - -
Stage 1:12 month ECL on placements (985) - - -
Carrying amount 863,435 742,929 16,639 7,585
Included in loans to banks are long term placement/cash collateral balance of N110.95billion balance for Group (31 December 2017:
N41.43billion) which does not qualify as cash and cash equivalent. All other loans to banks are due within 3 months.
Reconciliation of impairment account
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
At start of period - - - -
Transition adjustment (560) - - -
Increase in impairment (425) - - -
At end of period (985) - - -
257
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Loans and advances to customers
GROUP
Gross
amount
N'million
Stage 1
12 months
ECL
N'million
Stage 2
lifetime
ECL
N'million
Stage 3
lifetime
ECL
N'million
Total
impairment
N'million
Carrying
amount
N'million
Corporate
31 December 2018
Overdrafts 251,969 (236) (83) (74,965) (75,284) 176,685
Term loans 1,137,567 (3,423) (2,779) (264,082) (270,284) 867,283
Project finance 476,525 (498) (2,290) (2,659) (5,447) 471,078
1,866,061 (4,157) (5,152) (341,706) (351,015) 1,515,046
Advances under finance lease 737 - - (320) (320) 417
1,866,798 (4,157) (5,152) (342,026) (351,335) 1,515,463
Retail
31 December 2018
Overdrafts 21,855 (238) (5) (7,837) (8,080) 13,775
Term loans 123,406 (1,137) (26) (23,833) (24,996) 98,410
Credit cards 2,003 (5) - (82) (87) 1,916
Mortgage 55,224 (70) (2) (903) (975) 54,249
202,488 (1,450) (33) (32,655) (34,138) 168,350
Total Loans and advances to customers 2,069,286 (5,607) (5,185) (374,681) (385,473) 1,683,813
GROUP Gross
amount
N'million
Specific
impairment
N'million
Collective
impairment
N'million
Total
impairment
N'million
Carrying
amount
N'million
31 December 2017
Overdrafts 345,628 (44,205) (5,288) (49,493) 296,135
Term loans 1,898,675 (185,326) (43,015) (228,341) 1,670,334
Sta loans 8,243 (4) (292) (296) 7,947
Project finance 26,775 - (479) (479) 26,296
2,279,322 (229,535) (49,074) (278,609) 2,000,712
Advances under finance lease 1,072 (533) (28) (561) 511
2,280,395 (230,068) (49,102) (279,170) 2,001,223
258
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Loans and advances to customers continued
COMPANY
Gross
amount
N'million
Stage 1
12 months
ECL
N'million
Stage 2
lifetime
ECL
N'million
Stage 3
lifetime
ECL
N'million
Total
impairment
N'million
Carrying
amount
N'million
31 December 2018
Term loans 110 - - - - 110
110 - - - - 110
COMPANY Gross
amount
N'million
Specific
impairment
N'million
Collective
impairment
N'million
Total
impairment
N'million
Carrying
amount
N'million
31 December 2017
Term loans 108 - - - 108
108 - - - 108
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Current 854,068 957,930 14 14
Non-current 829,745 1,043,293 96 94
1,683,813 2,001,223 110 108
Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were as follows:
Migration of some assets from Stage 1 and 2 to Stage 3 within the financial year 2018 contributed to increase in total ECL.
A total of N20.7billion migrated from Stage 1 and 2 to 3 with corresponding increase in ECL by a total of N7.2billion.
Write-o of significant loans with a total gross carrying amount of N149.5billion resulted in the reduction of the Stage 3 loss
allowance by the same amount.
Movement in exchange rate on major foreign currency denominated facility in Stage 3 contributed to an increase in ECL
on Stage 3 loans. A total of N14.2billion increase was caused by foregin exchange impact with corresponding increase of
N14.1billion in ECL.
Newly created facilities totaling N55.4billion with a corresponding N0.5billion increase in loss allowance measured on a
12-month basis.
259
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Loans and advances to customers continued
Reconciliation of impairment allowance on loans and advances to customers:
GROUP Corporate
N'million
Retail
N'million
Total
N'million
At 31 December 2017 per IAS 39
Specific impairment 221,617 8,451 230,068
Collective impairment 37,243 11,859 49,102
258,860 20,310 279,170
IFRS 9 adjustment 195,210 8,691 203,901
454,070 29,001 483,071
At 1 January 2018 per IFRS 9
12 months ECL- Stage 1 2,103 1,773 3,875
Life time ECL not credit impaired - Stage 2 18,840 37 18,877
Life time ECL credit impaired - Stage 3 433,127 27,191 460,318
454,070 29,001 483,071
Additional allowance
12 months ECL- Stage 1 1,165 (338) 827
Life time ECL not credit impaired - Stage 2 (10,900) (1) (10,901)
Life time ECL credit impaired - Stage 3 89,498 6,445 95,943
79,763 6,106 85,869
Exchange dierence
12 months ECL- Stage 1 889 15 904
Life time ECL not credit impaired - Stage 2 (2,788) (3) (2,791)
Life time ECL credit impaired - Stage 3 4,478 387 4,865
Loan write-o
Life time ECL credit impaired - Stage 3 (185,077) (1,368) (186,445)
At 31 December 2018 351,335 34,138 385,473
12 months ECL- Stage 1 4,157 1,450 5,607
Life time ECL not credit impaired - Stage 2 5,152 33 5,185
Life time ECL credit impaired - Stage 3 342,026 32,655 374,681
At 31 December 2018 351,335 34,138 385,473
260
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Loans and advances to customers continued
Reconciliation of impairment allowance on loans and advances to customers:
GROUP
Overdrafts
N'million
Term loans
N'million
Finance
lease
N'million
Other
N'million
Total
N'million
At 1 January 2017
Specific impairment 106,323 156,757 497 10,839 274,416
Collective impairment 4,860 31,184 38 386 36,468
111,183 187,941 535 11,225 310,884
Additional provision:
Specific impairment 10,742 132,155 36 (1,352) 141,581
Collective impairment (936) 14,117 (10) 355 13,526
Loan write-o:
Specific impairment (71,043) (128,046) - (15) (199,104)
Collective impairment (148) (93) - - (241)
Exchange dierence:
Specific impairment (1,817) 24,460 - (9,468) 13,175
Collective impairment 1,512 (2,193) - 30 (651)
49,493 228,341 561 775 279,170
Specific impairment 44,205 185,326 533 4 230,068
Collective impairment 5,288 43,015 28 771 49,102
At 31 December 2017 49,493 228,341 561 775 279,170
Loans and advances to customers include finance lease receivables as follows:
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Gross investment in finance lease, receivable
- No later than 1 year 474 -
- Later than 1 year and no later than 5 years 263 1,072
737 1,072
Unearned future finance income on finance leases (35) -
Impairment allowance on leases (320) (561)
Net investment in finance lease, receivable 382 511
Net investment in finance lease, receivable is analysed as follows:
- No later than 1 year 226 -
- Later than 1 year and no later than 5 years 156 511
382 511
261
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23 Loans and advances to customers continued
Nature of security in respect of loans and advances:
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Legal mortage/debenture on business premises, factory assets
or real estates 1,231,073 1,069,361
Guarantees/receivables of investment grade banks and State Govt. 285,828 647,616 - -
Domiciliation of receivables 358,707 407,244 - -
Clean/negative pledge 136,394 91,908 - -
Marketable securities/shares 608 29,393 - -
Otherwise secured 32,709 15,739 110 108
Cash/government securities 17,834 19,132 - -
Unsecured 6,133 - - -
2,069,286 2,280,393 110 108
The Group is not permitted to sell or repledge the collateral in the absence of default by the owner of the collateral.
24 Financial assets and liabilities at fair value through profit or loss
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Treasury bills with maturity of less than 90 days 13,025 8,491 - -
Treasury bills with maturity over 90 days 9,398 20,837 - -
Bonds 32,618 22,836 - -
Total debt securities 55,042 52,164 - -
Listed equity securities 271 755 - -
Unlisted equity securities 36,063 7,801 3,427 -
Total equity securities 36,334 8,556 3,427 -
Derivative assets (refer Note 24a) 17,786 22,993 - -
Total assets at fair value through profit or loss 109,162 83,713 3,427 -
Current 55,042 67,462 - -
Non-current 54,120 16,251 3,427 -
109,162 83,713 3,427 -
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet
the hedge accounting criteria, they are classified as ‘held-for-trading’ for accounting purposes and are accounted for at fair value
through profit or loss.
262
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
24 Financial assets and liabilities at fair value through profit or loss continued
a Derivatives
GROUP
31 Dec 2018
Fair values
Notional contract
amount
N'million
Asset
N'million
Liability
N'million
Foreign exchange derivatives
Forward FX contract 351,767 2,777 (2,537)
FX futures 99,178 271 (272)
Currency swap 18,905 296 (14)
Put options 430,971 14,442 (12,967)
900,822 17,786 (15,791)
Current 844,997 14,452 (12,671)
Non-current 55,825 3,334 (3,120)
900,822 17,786 (15,791)
GROUP
31 Dec 2017
Fair values
Notional contract
amount
N'million
Asset
N'million
Liability
N'million
Foreign exchange derivatives
Forward FX contract 205,319 5,040 (798)
FX accumulator contract - -
Currency swap 55,049 7,680 (19)
Put options 279,638 10,273 (8,587)
540,006 22,993 (9,404)
Current 411,195 15,299 (3,184)
Non-current 128,811 7,694 (6,220)
540,006 22,993 (9,404)
263
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
25 Investment securities
25.1 Investment securities at FVOCI
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Debt securities – at fair value:
– Treasury bills with maturity of less than 90 days 38,247 - - -
– Treasury bills with maturity of more than 90 days 566,001 - 6,080 -
– Government bonds 118,188 - 999 -
– Other bonds 43,335 - - -
Equity securities – at fair value:
– Listed 1,217 - - -
– Unlisted 107,131 - - -
Total securities classified as FVOCI 874,119 - 7,079 -
Available-for-sale investment securities
Debt securities – at fair value:
– Treasury bills with maturity of less than 90 days - 256,886 - -
– Treasury bills with maturity of more than 90 days - 449,950 - 6,297
– Government bonds - 319,903 - 693
Equity securities – at fair value:
– Listed - 1,734 - -
– Unlisted - 94,284 - 2,852
Total available-for-sale investment securities - 1,122,757 - 9,842
Current 649,984 737,999 6,080 6,297
Non-current 224,135 384,758 999 3,545
874,119 1,122,757 7,079 9,842
Reconciliation of impairment on investment seurities at FVOCI
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Transition adjustment 414 -
Increase in impairment 760 -
At end of year 1,174 -
264
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
25.2 Investment securities at amortised cost
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Debt securities – at amortised cost:
– Treasury bills with maturity of less than 90 days 486,703 - - -
– Treasury bills with maturity of more than 90 days 59,051 - - -
– Bonds 230,714 - - -
– Unlisted debt 14,069 - - -
Impairment on Amortised Cost securities - - -
- Stage 1: 12- month ECL (835) - - -
Total securities at amortised cost 789,702 - - -
Held-to-maturity investment securities
Debt securities – at amortised cost:
– Treasury bills with maturity of less than 90 days - 15,341 - -
– Treasury bills with maturity of more then 90 days - 32,948 - -
– Bonds - 59,994 - -
Total held-to-maturity securities - 108,283 - -
Current 556,351 62,150 - -
Non-current 233,351 46,133 - -
789,702 108,283 - -
Loans and receivables
Investment in commercial papers - 13,365 - -
Investment in promissory notes - 4,203 - -
- 17,568 - -
Current - 7,252 - -
Non-current - 10,316 - -
- 17,568 - -
Total investment securities 1,663,821 1,248,608 7,079 9,842
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
265
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
25.2 Investment securities at amortised cost continued
Reconciliation of impairment on investment securities
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
At start of period 3,230 967 - -
Transition adjustment 1,184 - - -
(Writeback)/increase in impairment (776) 2,263 - -
Amount written-o (1,111) - - -
Reclassification (1,692) - - -
At end of period 835 3,230 - -
26 Asset pledged as collateral
The assets pledged by the Group are strictly for the purpose of providing collateral to the counterparty. To the extent that the
counterparty is not permitted to sell and/or repledge the assets in the absence of default, they are classified in the statement of
financial position as pledged assets. These transactions are conducted under terms that are usual and customary to standard securities
borrowing and lending activities.
The nature and carrying amounts of the assets pledged as collaterals are as follows:
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Debt securities at FVOCI (Note 26.1) 215,753 -
Available-for-sale debt securities (Note 26.1) - 134,513
Debt securities at amortised cost (Note 26.2) 93,298 -
Held-to-maturity debt securities (Note 26.2) - 74,412
309,051 208,925
26.1 Debt securities at FVOCI
– Treasury bills 149,829 -
– Bonds 65,924 -
Available-for-sale debt securities
– Treasury bills - 80,542
– Bonds - 53,972
215,753 134,514
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
266
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
26.2 Debt securities at amortized cost
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
– Treasury bills 14,032 -
– Bonds 79,266 -
93,298 -
Held-to-maturity debt securities
– Treasury bills - 5,100
– Bonds - 69,312
- 74,412
The related liability for assets held-as-collateral include:
Bank of Industry 29,532 35,863
Central Bank of Nigeria/Commercial Agriculture Credit Scheme Intervention fund 27,049 22,277
Due to other banks 116,189 50,046
Borrowings from Deustche Bank - 4,011
The assets pledged as collateral include assets pledged to third parties under secured borrowing with the related liability disclosed
above.
Also included in pledged assets are assets pledged as collateral or security deposits to clearing house and payment agencies of N33.3bn
for the Group in December 2018 (2017: N33.8bn) for which there is no related liability.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Current 175,756 77,517
Non-current 133,295 131,408
309,051 208,925
All assets pledged as collateral are Stage 1 assets.
267
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
27 Other assets
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Financial assets:
Premium debtors 87 43 - -
Accounts receivable 52,428 70,740 87 8,832
Reinsurance assets 2,703 1,652 - -
55,218 72,435 87 8,832
Impairment on other assets - Simplified approach
- Stage 1: 12- month ECL (18,948) (8,136) - -
36,270 64,299 87 8,832
Non financial assets:
Stock of consumables 2,038 2,021 - -
Inventory- repossessed collateral 60,104 54,904 - -
Prepayments 12,545 10,979 139 179
WHT receivable 1,879 1,212 66 -
Deferred acquisition costs 223 153 - -
Impairment on non financial other assets (697) (837) - -
76,092 68,431 205 179
Net other assets balance 112,362 132,730 292 9,011
Inventory (repossessed collateral) of N60.10bn (2017: N54.9bn) comprises of assets recovered from default loan customers.
Reconciliation of reinsurance assets and deferred insurance acquisition costs
31 December 2018
GROUP
Reinsurance share of:
Claims
recoverable
N'million
IBNR claims
N'million
Unearned
premium
reserve
N'million
Outstanding
claims
N'million
Prepaid
Reinsurance
N'million
Total
N'million
At 1 January 2018 60 642 147 392 411 1,652
Addition - - - - 2,731 2,731
Receipt from reinsurers (719) - - - - (719)
Amortisation for the year - - - - (2,495) (2,495)
Changes during the year 933 (234) (85) 920 - 1,534
At 31 December 2018 274 408 62 1,312 647 2,703
31 December 2017
At 1 January 2017 62 21 13 381 413 890
Addition 616 - - - 2,952 3,568
Receipt from reinsurers (618) - - - - (618)
Amortisation for the year - - - - (2,954) (2,954)
Changes during the year - 621 134 11 - 766
At 31 December 2017 60 642 147 392 411 1,652
268
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
27 Other assets continued
Deferred insurance acquisition costs
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
At start of year 153 132
Addition 3,311 3,732
Amortisation for the year (3,241) (3,711)
At end of year 223 153
Reconciliation of impairment account
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
At start of period 8,973 7,910 - -
Transition impact 6,021 - - -
Write-o (2,873) (869) - -
Increase in impairment 7,524 1,932 - -
At end of period 19,645 8,973 - -
All other assets on the statement of financial position of the Group had a remaining period to contractual maturity of less than 12
months.
269
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
28 Investment properties
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
At start of period 1,993 3,003
Derecognition (1,498) -
Net gain/(loss) from fair value adjustment 20 (2)
Reclassification - (1,008)
515 1,993
Included in investment properties are mainly land acquired by the Group for capital appreciation. At the reporting period, the properties
were valued by registered valuer. The open market values of the properties were determined using recent comparable market prices.
The investment properties fall into level 2 fair value hierarchy and the fair value is recurring.
No rental income (2017: Nil) arose from the investment properties during the year. Fair value gain, is included in other income while fair
value loss is included in other operating expense in the income statement. No direct operating expense was incurred on the investment
properties.
The information of the professionals engaged by the various entities within the Group for valuation of their respective investment
properties are as follows:
Entity: FBN Insurance Limited FBNQuest Capital Limited
Location: Abuja Lagos
Name of the professional: Lawal Abdulfatai Muritala Animasaun
Name of the professional firm/entity: Jide Taiwo & Co Ubosi Eleh & Co
FRC registration number of the professional: FRC/2015/NIESV/00000011465 FRC/2014/NIESV/00000003997
29 Investment in associates (equity method)
i. Seawolf Oilfield Services Limited (SOSL)
FBN Holdings Plc holds 42% shareholding in Seawolf Oilfields Services Limited (SOSL). In 2014, Asset Mananagement Corporation of
Nigeria (AMCON), a major creditor of SOSL, appointed a receiver manager to take over the business. The investment has been fully
impaired.
SOSL is a company incorporated in Nigeria and is involved in the oil and gas sector. SOSL has share capital consisting only of ordinary
share capital which are held directly by the Group; the country of incorporation or registration is also their principal place of business.
SOSL is not publicly traded and there is no published price information.
ii. FBN Heritage Fund
FBN Heritage Fund is an open-ended Securities and Exchange Commission (SEC) registered mutual fund that invests in stocks, bonds,
money market instruments, real estate and other securities in the Nigerian Capital Markets. The fund manager publishes daily unit
price of the fund on the memorandum listing section of the Nigerian Stock Exchange. The unit price of the fund as at reporting date
was N144.63 (Cost: N100).
270
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
29 Investment in associates (equity method) continued
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
FBN Heritage Fund
Balance at beginning of year 1,357 1,114
Share of profit 23 430
Share of other comprehensive income (5) (65)
Dividend received - (122)
Disposal of investment (750) -
At end of year 625 1,357
30 Investment in subsidiaries
30.1 Principal subsidiary undertakings
COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
DIRECT SUBSIDIAIRES OF FBN HOLDINGS PLC
First Bank of Nigeria Limited (Note 30 (i)) 205,557 205,557
FBNQuest Capital Limited (Note 30 (ii)) 4,300 4,300
FBN Insurance Limited (Note 30 (iii)) 4,724 4,724
FBN Insurance Brokers Limited (Note 30 (iv)) 25 25
New Villa Limited (Rainbow Town Development Limited) (Note 30 (v)) - -
FBNQuest Merchant Bank Limited (Note 30 (vi)) 17,206 17,206
231,812 231,812
INDIRECT SUBSIDIAIRES OF FBN HOLDINGS PLC
FBNQuest Trustees Limited (Note 30 (vii)) 6,033 6,033
FBNQuest Funds Limited (Note 30 (viii)) 4,550 4,550
10,583 10,583
242,395 242,395
As at 31 December 2018, the recoverable amount of investment in Rainbow Town Development Limited was lower than the carrying
amount. (Cost: N5billion; Total Impairment: N5billion).
271
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.1 Principal subsidiary undertakings continued
All shares in subsidiary undertakings are ordinary shares. For all periods shown, the Group owned the total issued shares in all its
subsidiary undertakings except FBN Insurance Limited and New Villa Limited (Rainbow Town Development Limited) in which it owned
65% and 55% respectively. There are no significant restrictions on any of the subsidiaries. All subsidiary undertakings are included in
the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company and the Group
do not dier from the proportion of ordinary shares held. The total non-controlling interest as at the end of the year N12.418billion
(2017: N(5.494) billion).
Subsidiary
Principal activity
Country of
incorporation
Proportion of shares
held directly by the
parent/Group (%)
Statutory year end
First Bank of Nigeria Limited (Note 30
(i))
Banking Nigeria 100 31 December
FBNQuest Capital Limited (Note 30 (ii)) Investment Banking &
Asset Management
Nigeria 100 31 December
FBN Insurance Limited (Note 30 (iii)) Insurance Nigeria 65 31 December
FBN Insurance Brokers Limited (Note 30
(iv))
Insurance Brokerage Nigeria 100 31 December
New Villa Limited (Rainbow Town
Development Limited) (Note 30 (v))
Investment and General
Trading
Nigeria 55 31 December
FBNQuest Merchant Bank Limited (Note
30 (vi)
Merchant Banking Nigeria 100 31 December
FBNQuest Trustees Limited (Note 30
(vii))
Trusteeship Nigeria 100 31 December
FBNQuest Funds Limited (Note 30 (viii)) Investment Banking &
Asset Management
Nigeria 100 31 December
ii. First Bank of Nigeria Limited
The Bank commenced operations in Nigeria in 1894 as a branch of Bank of British West Africa (BBWA), and was incorporated as a
private limited liability company in Nigeria in 1969. The Bank was the parent company of the Group until 30 November 2012, when
a business restructuring was eected in accordance with the directives of the Central Bank of Nigeria and FBN Holdings Plc became
the parent company of the Group.
iii FBNQuest Capital Limited
FBNQuest Capital Limited (formerly FBN Capital Limited) is a private limited liability company incorporated in Nigeria and commenced
operations on 1 April 2005. It is registered with the Securities and Exchange Commission (SEC) to undertake issuing house business.
It is also involved in the business of financial advisory.
iii FBN Insurance Limited
In February 2010, NAICOM granted an operating licence to First Bank of Nigeria Plc. (First Bank) to establish a life assurance business
in partnership with Sanlam Group of South Africa. Consequently, First Bank incorporated a subsidiary, FBN Life Assurance Limited. First
Bank has a holding of 65% in the equity of FBN Life Assurance Limited. Consequent upon the restructuring of 2012, the investment
is transferred to FBN Holdings Plc and the name of the company was changed to FBN Insurance Limited in 2014.
272
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.1 Principal subsidiary undertakings continued
iiv FBN Insurance Brokers Limited
The Company was incorporated under the Companies and Allied Matters Act, as a limited liability company on 31 March 1994 with the
name 'Trust Link Insurance Brokers Limited'. The Company prepared financial statements up to 31 March 1998 after which it became
dormant. The Company was resuscitated on 1 April 2000 as FBN Insurance Brokers Limited. The principal activity of the Company is
insurance brokerage business.
v New Villa Limited (Rainbow Town Development Limited)
This is a special purpose vehicle incorporated on 28 November 2008. Its principal activities include real estate investments and general
trading.
vi FBNQuest Merchant Bank Limited
FBNQuest Merchant Bank Limited (formerly FBN Merchant Bank Limited) was incorporated in Nigeria as a limited liability company on
14 February 1995 originally known as Kakawa Discount House Limited.
The Company was granted a licensed to carry on the business of a discount house and commenced operations on 16 November 1995.
FBN Holdings Plc acquired the shares of the Company and converted the business to a merchant bank having obtained the Central
Bank of Nigeria for merchant banking operations in May 2015.
vii FBNQuest Trustees Limited
FBNQuest Trustees Limited (formerly FBN Trustees Limited) was incorporated in Nigeria as a limited liability company on 8 August
1979 and commenced business on 3 September 1979. The Company was established to engage in the business of trusteeship as well
as portfolio management, and financial/investment advisory services.
viii FBNQuest Funds Limited
FBNQuest Funds Limited (formerly FBN Funds Limited) was incorporated on 14 November 2002. It commenced operations on 1 April
2003. Its principal activities are to carry on venture capital and private equity business.
273
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.2 Condensed results of consolidated entities from continuing operations
31 December 2018
FBN
Holdings Plc
N'million
FBN Limited
N'million
FBNQuest
Capital
Limited
N'million
FBNQuest
Merchant
Bank Limited
N'million
FBN
Insurance
Limited
N'million
FBN
Insurance
Brokers
Limited
N'million
Rainbow Town
Development
Limited
N'million
Total
N'million
Adjustments
N'million
Group
N'million
Summarised Income Statement
Operating income 13,651 363,680 15,555 13,100 21,311 485 - 427,781 (11,899) 415,881
Operating expenses (4,210) (231,361) (3,227) (10,183) (14,444) (426) - (263,851) 145 (263,706)
Impairment charge for losses - (92,242) 1,215 (116) (119) (19) - (91,281) 4,370 (86,911)
Operating profit 9,441 40,077 13,542 2,801 6,749 40 - 72,649 (7,385) 65,264
Associate - - 23 - - - - 23 - 23
Profit before tax 9,441 40,077 13,566 2,801 6,749 40 - 72,672 (7,385) 65,288
Tax (98) 201 (4,336) (483) (807) (21) - (5,544) - (5,544)
Profit/(Loss) for the year from continuing operations 9,343 40,278 9,230 2,318 5,941 19 - 67,129 (7,385) 59,744
Loss for the year from discontinued operations - (330) (330) 254 (77)
Other comprehensive income (144) 1,398 (583) (1,664) (502) (28) - (1,521) - (1,521)
Total comprehensive income 9,199 41,677 8,647 654 5,439 (9) (330) 65,277 (7,131) 58,146
Profit for the year allocated to non-controlling
interest - (1,264) - - 2,081 - (149) 668 - 668
Total comprehensive income allocated to non
controlling interest - (1,264) - - 1,906 - (149) 492 - 492
Dividends paid to non controlling interest - - - - 1,027 - - 1,027 - 1,027
Summarised Financial Position
Assets
Cash and balances with Central Banks - 648,181 - 4,653 500 - - 653,335 - 653,335
Loans and advances to banks 16,639 842,494 18,582 17,338 1,125 350 - 896,528 (33,092) 863,435
Loans and advances to customers 110 1,708,220 144 35,414 286 1 - 1,744,174 (60,362) 1,683,813
Financial assets at fair value through profit or loss 3,427 24,674 32,368 2,096 46,596 - - 109,162 - 109,162
Investment securities 7,078 1,571,723 28,251 35,394 21,301 127 - 1,663,874 (53) 1,663,821
Assets pledged as collateral - 287,791 161 21,100 - - - 309,051 - 309,051
Other assets 291 103,835 1,348 5,529 3,243 55 - 114,301 (1,939) 112,362
Inventory - - - - - - - - - -
Investment properties - - 415 - 100 - - 515 - 515
Investment in associates accounted for using
the equity method - - 769 - - - - 769 (144) 625
Investment in subsidiaries 242,395 - - - - - - 242,395 (242,395) -
Property, plant and equipment 383 86,311 192 1,759 2,468 52 - 91,166 349 91,515
Intangible assets - 13,590 308 1,900 334 1 - 16,134 - 16,134
Deferred tax assets - 15,706 506 9,322 - 24 - 25,558 - 25,558
Assets held-for-sale - 208 1,021 - - - 45,681 46,910 (7,920) 38,990
270,325 5,302,733 84,064 134,505 75,953 611 45,681 5,913,872 (345,556) 5,568,316
274
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.2 Condensed results of consolidated entities from continuing operations continued
31 December 2018
FBN
Holdings Plc
N'million
FBN Limited
N'million
FBNQuest
Capital
Limited
N'million
FBNQuest
Merchant
Bank Limited
N'million
FBN
Insurance
Limited
N'million
FBN
Insurance
Brokers
Limited
N'million
Rainbow Town
Development
Limited
N'million
Total
N'million
Adjustments
N'million
Group
N'million
Financed by
Deposits from banks - 741,311 - 8,004 - - - 749,315 - 749,315
Deposits from customers - 3,392,577 36,402 90,858 - - - 3,519,837 (33,146) 3,486,691
Financial liabilities at fair value through profit or loss - 15,557 - 220 14 - - 15,791 - 15,791
Current income tax liability 102 7,844 4,895 716 2,024 75 - 15,656 - 15,656
Other liabilities 8,035 327,120 22,953 10,074 6,661 290 - 375,132 (1,787) 373,345
Liability on investment contracts - - - - 19,766 - - 19,766 - 19,766
Liability on insurance contracts - - - - 34,192 - - 34,192 - 34,192
Borrowings - 338,214 - - - - - 338,214 - 338,214
Retirement benefit obligations - 1,941 - - - (1) - 1,940 - 1,940
Deferred tax liabilities - - 53 - 213 - - 266 - 266
Liabilities held-for-sale - - 372 - - - 66,768 67,140 (64,646) 2,493
8,137 4,824,563 64,675 109,872 62,870 363 66,768 5,137,249 (99,580) 5,037,669
Equity and reserves 262,188 478,171 19,389 24,633 13,082 247 (21,087) 776,624 (245,977) 530,647
Accumulated non-controlling interest - 17,109 187 - 4,611 - (9,489) 12,418 - 12,418
Summarised Cash Flows
Operating activities
Interest received 2,410 405,472 4,673 16,630 8,159 48 - 437,392 - 437,392
Interest paid - (110,062) (4,138) (12,272) - - - (126,472) - (126,472)
Income tax paid (63) (2,903) (597) (2,184) (244) (35) - (6,026) - (6,026)
Cash flow (used in)/generated from operations (3,590) 198,083 (1,200) 19,847 24,102 57 (53) 237,246 (3,684) 233,563
Net cash (used in)/generated from operating activities (1,243) 490,590 (1,261) 22,021 32,016 71 (53) 542,142 (3,684) 538,458
Net cash generated from/(used in) investing activities 19,219 (174,922) 1,993 (531) (24,310) (2) - (178,554) (19,823) (198,377)
Net cash (used in) financing activities (8,974) (116,581) (8,381) (9,407) (2,657) (130) - (146,129) 15,536 (130,594)
Increase/(decrease) in cash and cash equivalents 9,002 199,087 (7,649) 12,082 5,049 (61) (53) 217,459 7,971 209,487
Cash and cash equivalents at start of year 7,585 1,129,302 27,018 20,461 7,712 392 337 1,192,808 (26,360) 1,166,447
Eect of exchange rate fluctuations on cash held 52 43,074 165 668 - (5) - 43,955 - 43,955
Cash and cash equivalents at end of year 16,639 1,371,464 19,535 33,211 12,760 327 285 1,454,221 (34,332) 1,419,889
275
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.2 Condensed results of consolidated entities from continuing operations continued
31 December 2017
FBN
Holdings Plc
N'million
FBN Limited
N'million
FBNQuest
Capital
Limited
N'million
FBNQuest
Merchant
Bank Limited
N'million
FBN
Insurance
Limited
N'million
FBN
Insurance
Brokers
Limited
N'million
Rainbow Town
Development
Limited
N'million
Total
N'million
Adjustments
N'million
Group
N'million
Summarised Income Statement
Operating income 13,714 407,863 8,314 13,868 17,353 593 - 461,706 (16,871) 444,835
Operating expenses (4,332) (211,783) (4,344) (7,130) (12,641) (465) - (240,695) 376 (240,319)
Impairment charge for credit losses - (141,275) (53) (545) (127) (15) - (142,014) (8,410) (150,424)
Operating profit 9,382 54,805 3,918 6,194 4,585 114 - 78,997 (24,905) 54,092
Associate - - 430 - - - - 430 - 430
Profit before tax 9,382 54,805 4,348 6,194 4,585 114 - 79,428 (24,905) 54,522
Tax (107) (5,633) (1,063) (1,283) (913) (40) - (9,040) - (9,040)
Profit/(Loss) for the year from continuing operations 9,275 49,172 3,285 4,910 3,672 73 - 70,387 (24,905) 45,482
Loss for the year from discontinued operations (1,520) (11,060) (12,580) 4,806 (7,774)
Other comprehensive income 163 60,306 612 2,002 1,030 43 - 64,156 - 64,156
Total comprehensive income 9,438 107,958 3,897 6,912 4,702 116 (11,060) 121,963 (20,100) 101,864
Total comprehensive income allocated to non controlling interest - (40) 112 - 1,646 - (4,977) (3,259) - (3,259)
Dividends paid to non controlling interest - - - - 760 - - 760 - 760
Summarised Financial Position
Assets
Cash and balances with Central Banks - 638,308 - 3,073 500 - - 641,881 - 641,881
Loans and advances to banks 7,585 729,603 26,066 14,953 1,567 414 - 780,188 (37,259) 742,929
Loans and advances to customers 108 2,026,038 79 39,164 94 2 - 2,065,484 (64,262) 2,001,223
Financial assets at fair value through profit or loss - 33,011 7,644 4,385 38,673 - - 83,712 - 83,713
Investment securities 9,842 1,153,365 27,783 52,930 4,536 155 - 1,248,610 (2) 1,248,608
Assets pledged as collateral - 194,951 7,150 6,823 - - - 208,925 - 208,925
Other assets 9,008 123,961 1,600 5,142 2,355 88 - 142,154 (9,423) 132,731
Inventory - - - - - - - - - -
Investment properties - - 1,893 - 100 - - 1,993 - 1,993
Investment in associates accounted for using the equity
method
- -
1,501 - - - - 1,501 (144) 1,357
Investment in subsidiaries 242,395 - - - - - - 242,395 (242,395) -
Property, plant and equipment 682 82,793 383 1,876 2,108 72 - 87,913 349 88,263
Intangible assets - 12,107 563 3,121 418 1 - 16,211 - 16,211
Deferred tax assets - 8,768 535 9,234 - 17 - 18,554 - 18,554
Assets held-for-sale - 11,343 1,021 - - - 45,678 58,042 (7,893) 50,149
269,620 5,014,248 76,219 140,701 50,350 750 45,678 5,597,562 (361,025) 5,236,537
276
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
31 December 2017
FBN
Holdings Plc
N'million
FBN Limited
N'million
FBNQuest
Capital
Limited
N'million
FBNQuest
Merchant
Bank Limited
N'million
FBN
Insurance
Limited
N'million
FBN
Insurance
Brokers
Limited
N'million
Rainbow Town
Development
Limited
N'million
Total
N'million
Adjustments
N'million
Group
N'million
Financed by
Deposits from banks - 655,042 - 10,324 - - - 665,366 - 665,366
Deposits from customers - 3,065,732 26,888 87,952 - - - 3,180,572 (37,234) 3,143,338
Financial liabilities at fair value through profit or loss - 9,352 - 33 20 - - 9,404 - 9,404
Current income tax liability 104 5,088 1,362 2,249 1,309 81 - 10,194 - 10,194
Other liabilities 7,553 229,380 22,369 12,890 2,944 332 - 275,468 (9,271) 266,198
Liability on investment contracts - - - - 13,399 - - 13,399 - 13,399
Liability on insurance contracts - - - - 21,734 - - 21,734 - 21,734
Borrowings - 416,908 4,011 - - - - 420,919 - 420,919
Retirement benefit obligations - 2,220 3 - - (20) - 2,203 - 2,203
Deferred tax liabilities - - 159 82 365 - - 606 - 606
Liabilities held-for-sale - 7,409 198 - - - 66,434 74,040 (64,583) 9,457
7,657 4,391,131 54,989 113,530 39,771 393 66,434 4,673,904 (111,088) 4,562,816
Equity and reserves 261,963 627,589 21,230 27,172 10,579 356 (20,756) 928,133 (249,941) 678,192
Summarised Cash Flows
Operating activities
Interest received 2,110 424,580 4,741 21,963 5,947 59 - 459,401 - 459,401
Interest paid - (123,001) (3,866) (12,072) - - - (138,939) - (138,939)
Income tax paid (87) (4,236) (1,694) (364) (323) (58) - (6,761) - (6,761)
Cash flow (used in)/generated from operations (3,609) 57,499 21,333 25,666 13,366 128 (111) 114,271 2,030 116,302
Net cash (used in)/generated from operating activities (1,587) 354,842 20,514 35,193 18,991 129 (111) 427,971 2,030 430,003
Net cash generated from/(used in) investing activities 15,697 (119,489) (5,270) (23,949) (11,307) (2) - (144,319) (13,625) (157,945)
Net cash (used in)/generated from financing activities (7,179) 70,733 2,524 (1,048) (3,334) - - 61,696 (18,458) 43,238
Increase/(decrease) in cash and cash equivalents 6,932 306,086 17,769 10,197 4,349 127 (111) 345,349 (30,053) 315,296
Cash and cash equivalents at start of year 645 719,168 8,579 10,077 3,363 259 449 742,540 3,691 746,231
Eect of exchange rate fluctuations on cash held 8 104,048 671 187 - 6 - 104,920 - 104,920
Cash and cash equivalents at end of year 7,585 1,129,302 27,018 20,461 7,712 392 337 1,192,807 (26,361) 1,166,447
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30.2 Condensed results of consolidated entities from continuing operations continued
277
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
30.3 Non-controlling interests
During the year, FBNBank UK (a subsidiary of First Bank of Nigeria Limited) and an indirect subsidiary of FBNHoldings issued additional shares
which resulted in a reduction in the Group's holding from 100% to 91%. The Group recognised non-controlling interests of N18.4bn and a
decrease in equity attributable to owners of the parent of 9%. The eect on the equity attributable to the owners of FBN Holdings Plc during
the year is summarised as follows:
31 December
2018
N'million
Consideration paid by non-controlling interests 18,373
Share of loss (1,264)
17,109
The summarised financial information for subsidiaries with material Non-controlling interest is shown in Note 30.2.
31 Asset held-for-sale
(a) Discontinued operations:
The assets classified as held-for-sale in 2018 included Rainbow Town Development Limited and Twin Peaks Nigeria Limited.
(i) New Villa Limited (Rainbow Town Development Limited)
The assets and liabilities of Rainbow Town Development Limited (RTDL) were classified as held for sale following the decision and resolution
of the Board of Directors of FBN Holdings Plc on October 21, 2016 to dispose the Group's interest in RTDL. The carrying amount of the
investment is expected to the recovered principally by a sale rather than through continuing use. The sale is expected to be completed before
the end of the next financial year. The amount has been presented in Note 6 as part of Others.
(ii) FBN Mortgages Limited
The assets and liabilities of FBN Mortgages Limited were classified as held-for-sale in 2016 following the decision and resolution of the Board
of Directors of First Bank Limited, the immediate parent company, to divest from FBN Mortgages Limited. The amount has been presented in
Note 6 as part of the Commercial Banking Group. The Group completed the sale of FBN Mortgages Limited in February 2018 and the results
of the subsidiary were deconsolidated with eect from that date.
(iii) Twin Peaks Nigeria Limited
The assets and liabilities of Twin Peaks Nigeria Limited (""Twin Peaks"") are classified as held-for-sale in 2017 following the decision and
resolution of FBNQuest Capital Partners Limited (""FBNQ CP""), the Fund Manager of FRED, to dispose the Group's interest in TwinPeaks.
FBNQ CP has executed a Sales and Purchase Agreement to sell all interest in the Twin Peaks in stages (cummulative of 31.27%, 52.16% and
100% by December 2017, November 2018 and March 2020).
The buyer has fulfilled its obligation as stipulated in the SPA and has acquired 52.16% as at November 2018.
The operating results and net cash flows are separately presented in the income statement and statement of cash flows respectively because
the disposal group represents a separate line of buisness within the Group, and as such meets the definition of discontinued operation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
278
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
31 Asset held-for-sale continued
The carrying amount of the assets and liabilities of the disposal group classified as held-for-sale are as listed below.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Assets classified as held-for-sale
Cash and balances with Central Banks - 203
Loans and advances to banks - 102
Loans and advances to customers - 2,176
Investment securities - 140
Other assets 1,427 2,007
Inventory 36,337 44,047
Investment property 1,008 1,008
Deferred tax assets - 256
Property, plant and equipment 5 44
Intangible assets 5 6
38,782 49,989
Liabilities classified as held-for-sale
Deposit from customers - 6,988
Company income tax liability 6 6
Other liabilities 2,487 2,458
Borrowings - 5
2,493 9,457
Net asset 36,288 40,532
279
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
31 Asset held-for-sale continued
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Interest income - 941
Interest expense - (7,435)
Net interest income - (6,494)
Impairment charge - (247)
Net interest income after impairment charge - (6,741)
Net fee and commission income - 94
Other income - 38
Operating expense (77) (960)
Loss before tax (77) (7,569)
Taxation - (205)
Loss after tax (77) (7,774)
Loss from discontinued operations is attributable to:
Owners of the parent (42) (4,960)
Non-controlling interests (34) (2,814)
(77) (7,774)
The cash flows of the discontinued operations are as follows.
Net cash flow used in operating activities (54) (5,001)
Net cash flow from financing activities - 215
Net cash flow from investing activities - 3,241
Net cash outflow (54) (1,545)
(b) Non-current asset held-for-sale
FBNBank Senegal, a subsidiary of First Bank of Nigeria Limited, has classified a building from its Property, Plant and Equipment as Asset held-for-sale,
following Management's decision to dispose the asset within 12 months in line with IFRS 5.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Property, plant and equipment 208 160
Total assets classified as held-for-sale 38,990 50,149
280
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
32 Property and equipment
GROUP Improvement
and buildings
N'million
Land
N'million
Motor
vehicles
N'million
Oce
equipment
N'million
Computer
equipment
N'million
Furniture
and fittings
N'million
Machinery
N'million
Work in
progress*
N'million
Total
N'million
Cost
At 1 January 2017 47,395 21,131 12,380 44,817 15,025 10,448 189 5,046 156,430
Additions 842 59 2,099 2,291 1,892 427 37 5,169 12,816
Reclassifications 922 - 14 630 264 (577) - (1,253) -
Disposals (1) (11) (1,714) (533) (52) (134) - - (2,445)
Discontinued Operations (12) - - - - - - - (12)
Exchange dierence (683) 3 (133) (255) (331) (7) 17 (55) (1,444)
At 31 December 2017 48,463 21,182 12,646 46,950 16,797 10,157 243 8,907 165,346
Accumulated depreciation
At 1 January 2017 9,179 - 7,764 31,928 12,021 7,094 128 - 68,114
Charge for the year 1,569 2,109 4,788 1,873 1,234 27 - 11,600
Reclassifications 239 - - 77 12 (328) - - -
Disposals (1) - (1,254) (512) (50) (132) - - (1,948)
Discontinued Operations - - - - - - - - -
Exchange dierences (123) (118) (171) (276) (8) 12 - (684)
At 31 December 2017 10,863 - 8,502 36,110 13,580 7,860 167 (0) 77,083
Net book amount at 31 December 2017 37,600 21,182 4,145 10,840 3,217 2,297 76 8,907 88,263
Cost
At 1 January 2018 48,463 21,182 12,646 46,950 16,797 10,157 243 8,907 165,346
Additions 890 113 1,696 2,777 2,157 556 41 7,385 15,615
Disposals (29) - (1,778) (90) (100) (42) (29) - (2,068)
Write-os - - - (627) - - - - (627)
Transfers 287 - 404 1,598 6,880 63 - (9,284) (52)
Exchange dierence 347 (1) 70 122 150 44 (2) 15 744
At 31 December 2018 49,958 21,294 13,038 50,731 25,884 10,778 253 7,023 178,958
Accumulated depreciation
At 1 January 2018 10,863 - 8,502 36,110 13,580 7,860 167 - 77,083
Charge for the year 1,388 - 2,135 4,606 3,138 969 46 - 12,282
Disposals (30) - (1,404) (87) (99) (40) (30) - (1,690)
Write-os - - - (625) - - - - (625)
Exchange dierences 109 - 54 71 128 32 (1) - 393
At 31 December 2018 12,330 - 9,286 40,075 16,748 8,821 182 - 87,443
Net book amount at 31 December 2018 37,628 21,294 3,752 10,657 9,136 1,958 71 7,023 91,515
* Work in progress refers to capital expenditures incurred on items of property and equipment which are however not ready for use and as such are not being depreciated.
No capitalised borrowing cost relates to the acquisition of property and equipment during the year.
Exchange dierence on property and equipment
These exchange dierence on property and equipment occurs as a result of translation of balances relating to the foreign entities of the group as at reporting date.
281
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
32 Property and equipment continued
COMPANY
Improvement
and buildings
N'million
Motor
vehicles
N'million
Machinery
N'million
Oce
equipment
N'million
Computer
equipment
N'million
Furniture
and fittings
N'million
Total
N'million
Cost
At 1 January 2017 615 303 42 447 8 418 1,832
Additions - 228 - 2 4 1 235
Disposal - (55) - - - - (56)
At 31 December 2017 615 475 42 448 12 419 2,011
Accumulated depreciation
At 1 January 2017 307 173 26 227 4 247 983
Charge for the year 123 96 8 89 3 80 399
Disposal - (51) - - - - (51)
At 31 December 2017 430 218 34 316 6 327 1,330
Net book amount at 31 December 2017 185 257 8 132 5 92 680
Cost
At 1 January 2018 615 475 42 448 12 419 2,011
Additions - 97 2 6 - 105
Disposal - (39) - - - (39)
At 31 December 2018 615 533 42 450 18 419 2,077
Accumulated depreciation
At 1 January 2018 430 218 34 316 6 327 1,330
Charge for the year 123 108 5 87 4 70 397
Disposal - (32) - - - - (32)
At 31 December 2018 553 294 39 403 10 397 1,695
Net book amount at 31 December 2018 62 239 3 47 8 22 382
282
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
33 Intangible assets
GROUP Goodwill
N'million
Customer
relationship
N'million
Brand
N'million
Core
deposits
N'million
Computer
software
N'million
Total
N'million
Cost
At 1 January 2017 6,502 52 326 905 18,820 26,605
Additions - - - - 6,114 6,114
Reclassification - - - - (1,087) (1,087)
Disposals -
Exchange dierence 146 - - 49 389 584
At 31 December 2017 6,648 52 326 954 24,236 32,216
Additions - - - - 5,542 5,542
Reclassification - - - - (321) (321)
Write-o - (52) (326) - (159) (537)
Other changes - - - - (100) (100)
Exchange dierence (15) - - 14 161 160
At 31 December 2018 6,633 - - 969 29,359 36,960
Amortisation and impairment
At 1 January 2017 1,925 52 326 573 8,401 11,277
Amortisation charge - - - 177 4,024 4,201
Exchange dierence - - - 31 496 527
At 31 December 2017 1,925 52 326 781 12,921 16,005
Amortisation charge - - - 176 5,160 5,336
Write-o - (52) (326) - (159) (537)
Other changes - - - - (100) (100)
Exchange dierence - - - 11 111 122
At 31 December 2018 1,925 - - 968 17,933 20,826
Net book value
At 31 December 2018 4,708 - - - 11,426 16,134
At 31 December 2017 4,723 - - 173 11,314 16,211
283
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
33 Intangible assets continued
The amortisation charge for the year is included in the income statement.
Customer deposits acquired in a business combination are recognised at fair value at the acquisition date. They have finite useful lives
and are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to
profit or loss using straight line method over 5 years.
The software is not internally generated.
Impairment tests for goodwill
Goodwill is monitored at the level of the individual cash generating unit. The entity to which the goodwill relates is recognized as a cash
generating unit (CGU) and segmented as part of the Commercial Banking Business and Insurance Business Groups.
Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. The
test involves comparing the carrying value of goodwill with the recoverable amount, which is the present value of the pre-tax cash
flows, discounted at a rate of interest that reflects the inherent risks of the cash-generating unit to which the goodwill relates or the
CGU's fair value if this is higher.
There was no impairment identified in the year ended 31 December 2018.
The recoverable amount of each CGU has been based on value in use and the weighted average cost of capital (WACC). These
calculations use pre-tax cash flow projection covering five years. The cash flow projections for each CGU are based on forecasts
approved by Senior Management. The nominal growth rate reflects GDP and inflation for the countries within which the CGU operates
or derives revenue from. The rates are based on IMF forecast growth rates as they represent an objective estimate of likely future
trends.
The discount rate used to discount the cash flows is based on the cost of capital assigned to each CGU, which is derived using a
Capital Asset Pricing Model (CAPM). The CAPM depends on inputs reflecting a number of financial and economic variables including
the risk free rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s
assessment of the economic variables and Management’s judgement. The discount rates for each CGU are refined to reflect the rates
of inflation for the countries within which the CGU operates.
Impairment testing on cash generating units containing goodwill
31 Dec 2018
N'millions
31 Dec 2017
N'millions
Analysis of goodwill balances
FBNBank Ghana 3,325 3,349
FBNBank DRC 552 552
FBNBank Sierra-Leone 351 200
FBN General Insurance 262 262
FBNBank Guinea 218 359
4,708 4,722
284
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
33 Intangible assets continued
The cash generating unit (CGUs) with material goodwill balances relates to FBNBank DRC and FBNBank Ghana and the key assumptions
used in the value-in-use calculation are as follows:
2018 2017
FBNBank
DRC
FBNBank
Ghana
FBNBank
DRC
FBNBank
Ghana
Terminal growth rate: % 4.68% 5% 4% 5%
Discount rate: % 28% 27% 29% 32%
Deposit growth rate: % 6% 12% 12% 7%
Recoverable amount of the CGU: (N'million) 14,268 40,063 13,384 12,303
The discount rate has been determined based on the Capital Asset Pricing Model and comprise a risk-free interest rate, the market risk
premium and a factor covering the systematic market risk (beta factor). The values for the risk-free interest rate, the market risk premium
and the beta factor are determined using external sources of information.
Terminal growth rates reflect the expected long-term gross domestic product growth and inflation for the countries within which the CGU
operates. Cash flows in the terminal period reflect net earnings (dividend) in the preceding year growing at a constant rate.
Management determined deposits to be the key value driver in each of the entities. Deposits are considered by Management as the most
important source of funds for the Banks’ subsidiaries to finance their assets. Projected deposits growth is based on past performance of the
CGUs as well as Management's plan to expand the businesses and deepen customer base.
Sensitivity analysis was performed by flexing two key inputs (WACC and Terminal Growth Rate) in the DCF valuation models.
For the two material CGUs, FBNBank Ghana and FBNBank Congo, if the weighted average cost of capital (WACC) rate had been higher by
0.5%, the recoverable amount (VIU) would have been higher than the carrying amount by N2.38bn and N2.67bn respectively, while if it had
been lower by 0.5% the recoverable amount (VIU) would have been higher than the carrying amount by N4.63bn and N3.24bn respectively.
If the terminal growth rate had been higher by 0.5% the recoverable amount would have been higher than the carrying amount by N4.09bn
and N3.08bn respectively, while if lower by 0.5% the recoverable amount would have been higher by N2.89bn and N2.83bn rexpectively.
For the above scenarios, at no point was the recoverable amount (VIU) lower than the carrying amount to result in impairment of Goodwill.
Goodwill sensitivity analysis
% Change Recoverable amount
Excess of recoverable amount
over carrying amount
FBNBank DRC
Terminal growth rate: +0.5% 14,398 3,080
-0.5% 14,144 2,825
WACC +0.5% 13,992 2,673
-0.5% 14,557 3,238
FBNBank Ghana
Terminal growth rate: +0.5% 40,680 4,099
-0.5% 39,473 2,892
WACC +0.5% 38,962 2,381
-0.5% 41,219 4,638
285
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
33 Intangible assets continued
Management have considered and assessed reasonably possible changes for other key assumptions and have not identified any
instances that could cause the carrying amount of the respective CGUs to exceed their recoverable amounts.
2018 2017
FBN Bank
DRC
FBN Bank
Ghana
FBN Bank
DRC
FBN Bank
Ghana
Goodwill (N'million) 552 3,325 552 3,349
Net Asset (N'million) 10,766 33,256 3,256 8,437
Total carrying amount (N'million) 11,318 36,581 3,808 11,762
Excess of recoverable amount over carrying amount 2,950 3,482 2,011 517
34 Deferred tax assets and liabilities
Deferred income taxes are calculated on all temporary dierences under the liability method using an eective tax rate of 30% (2017: 30%).
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Deferred income tax assets and liabilities are attributable to the following items:
Deferred tax assets
Property and equipment (79) (4,564)
Allowance for loan losses 5,902 7,398
Tax losses carried forward 24,305 16,272
Other assets 525 568
Other liabilities 115 70
Defined benefit obligation 488 2,476
Eect of changes in exchange rate (5,698) (3,666)
25,558 18,554
Deferred tax liabilities
Property and equipment 227 459
Other assets 39 147
266 606
Deferred tax assets
- Deferred tax asset to be recovered after more than 12 months 25,324 18,470
- Deferred tax asset to be recovered within 12 months 234 84
25,558 18,554
Deferred tax liabilities
- Deferred tax liability to be recovered after more than 12 months (88) 606
- Deferred tax liability to be recovered within 12 months 354 -
266 606
286
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
34 Deferred tax assets and liabilities continued
GROUP
1 Jan 2018
N'million
Recognised
in profit
and loss
N'million
Recognised
in equity
N'million
Recognised
in OCI
N'million
31 Dec 2018
N'million
Movements in deferred tax assets during the year:
Property and equipment (4,564) 4,485 - - (79)
Allowance for loan losses 7,398 (4,238) 2,742 - 5,902
Tax losses carried forward 16,272 (8,033) - - 24,305
Other assets 568 (44) - - 525
Other liabilities 70 45 - - 115
Defined benefit obligation 2,476 (54) - (1,934) 488
Eect of changes in exchange rate (3,666) (2,329) 297 - (5,698)
18,554 5,897 3,039 (1,934) 25,558
GROUP
1 Jan 2017
N'million
Recognised
in profit
and loss
N'million
Assets classified
as held-for-sale
N'million
31 Dec 2017
N'million
Movements in deferred tax assets during the year:
Property and equipment (7,512) 2,948 - (4,564)
Allowance for loan losses 9,063 (1,667) - 7,398
Tax losses carried forward 17,429 (1,157) - 16,272
Other assets 1,497 (929) - 568
Other liabilities (7,494) 7,564 - 70
Defined benefit obligation 3,251 9 (784) 2,476
Prior year adjustment 987 (987) - -
Eect of changes in exchange rate 17 (3,683) - (3,666)
Borrowings 40 (40) - -
17,278 2,058 (784) 18,554
287
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
34 Deferred tax assets and liabilities continued
GROUP 1 Jan 2018
N'million
Recognised in
profit and loss
N'million
31 Dec 2018
N'million
Movements in deferred tax liabilities during the year:
Property and equipment 459 (232) 227
Other assets 147 (108) 39
606 (340) 266
GROUP 1 Jan 2017
N'million
Recognised in
profit and loss
N'million
31 Dec 2017
N'million
Movements in deferred tax liabilities during the year:
Property and equipment (13) 472 459
Tax losses carried forward (7) 7 -
Other assets 197 (50) 147
Other liabilities 22 (22) -
Excess dividend tax 614 (614) -
813 (207) 606
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future
taxable profit is probable. The Group and Company did not recognise deferred income tax assets of N52.1billion (2017: N36.7billion).
Temporary dierence relating to the Group's investment in subsidiaries is N91.1billion (2017: N70.3billion). As the Group exercises
control over the subsidiaries, it has power to control the timing of the reversals of the temporary dierence arising from its investments
in them. The Group has determined that the subsidiaries will not be disposed of. Hence, the deferred tax arising from temporary
dierences above will not be recognised.
The Group has assessed that based on the Group's profit forecast, it is probable that there will be future taxable profits against which
the tax losses, from which deferred tax asset has been recognised, can be utilised.
35 Deposits from banks
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Due to banks within Nigeria 620,294 573,402
Due to banks outside Nigeria 129,021 91,964
749,315 665,366
Current 676,921 665,366
Non-current 72,394 -
749,315 665,366
Deposits from banks only include financial instruments classified as liabilities at amortised cost.
288
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
36 Deposits from customers
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Current 915,299 751,250
Savings 1,175,321 1,014,433
Term 801,419 881,196
Domiciliary 583,549 483,996
Electronic purse 11,104 12,463
3,486,691 3,143,338
Current 3,171,084 2,924,964
Non-current 315,607 218,374
3,486,691 3,143,338
Deposits from customers only include financial instruments classified as liabilities at amortised cost.
37 Other liabilities
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Financial liabilities:
Customer deposits for letters of credit 196,595 81,083 - -
Accounts payable 77,018 97,446 - -
Creditors 18,839 6,769 119 206
Bank cheques 14,975 22,827 - -
Collection on behalf of third parties 26,465 11,156 - -
Unclaimed dividend 7,056 6,342 7,056 6,342
Accruals 5,679 5,260 859 1,005
346,627 230,883 8,034 7,553
Non financial liabilities:
Allowance for credit losses on o-balance sheet items 3,084 688 - -
Provisions for litigations 410 409 - -
Other credit balances 23,225 34,218 - -
26,719 35,315 - -
Other liabilities balance 373,345 266,198 8,034 7,553
Other credit balances include transactional taxes and unearned income
Current 352,892 266,117 8,034 7,553
Non-current 20,453 81 - -
373,345 266,198 8,034 7,553
289
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
37 Other liabilities continued
The provision for litigations is recognised in income statement within ‘other operating expenses’. In the Directors’ opinion, after taking
appropriate legal advice, the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided at 31
December 2018. The expected timing of the cashflows arising from the legal claim provision is within 1 year.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Provisions
Opening balance at 1 January 409 409
Additional provisions 1 -
Closing balance at 31 December 410 409
Analysis of total provisions:
Current 410 409
Non-current - -
410 409
38 Liability on investment contracts
The Liability on investment contracts comprise interest-linked guaranteed investment funds. The movement in the investment contract
liabilities is shown below:
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Balance at beginning of period 13,399 9,440
Additions during the period 13,781 9,709
Withdrawals during the period (8,280) (6,533)
Guaranteed interest 867 782
Balance at end of period 19,766 13,399
Current
Non-current 19,766 13,399
19,766 13,399
290
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
39 Liability on insurance contracts
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Outstanding claims 2,063 1,288
Unearned premium 1,470 1,242
Short-term insurance contract - Claims incurred but not reported (IBNR) 1,729 1,970
Liability on annuity fund 13,486 7,432
Liability on long-term insurance contract - Life fund 15,443 9,802
34,192 21,735
Current 5,263 4,499
Non-current 28,929 17,235
34,192 21,734
Reconciliation of changes in liability on insurance contracts
Outstanding
claims
N'million
Unearned
premium
N'million
IBNR claims
on short-term
insurance
N'million
Annuity
fund
N'million
Life fund
N'million
Total
N'million
At 1 January 2018 1,288 1,242 1,970 7,432 9,802 21,735
Claims incurred 6,576 - - - - 6,576
Claims paid (5,801) - - - - (5,801)
Change in the year - 228 (241) 6,054 5,641 11,682
As at 31 December 2018 2,063 1,470 1,729 13,486 15,443 34,192
At 1 January 2017 975 891 614 1,519 6,288 10,287
Claims incurred 4,112 - - - - 4,112
Claims paid (3,799) - - - - (3,799)
Change in the year - 351 1,356 5,913 3,514 11,134
As at 31 December 2017 1,288 1,242 1,970 7,432 9,802 21,734
291
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
40 Borrowings
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Long-term borrowing comprise:
FBN EuroBond (i) 165,907 254,623
Deutsche Bank - 4,011
Proparco (ii) 19,875 21,681
Due to Africa Development Bank (iii) 72,948 67,368
On-lending facilities from financial institutions (iv) 61,993 58,324
Borrowing from correspondence banks (v) 17,491 14,912
338,214 420,919
Current 41,116 52,448
Non-current 297,098 368,471
338,214 420,919
At start of the year 420,919 316,792
Proceeds of new borrowings 41,706 92,800
Finance cost 28,499 24,444
Foreign exchange losses 27,765 27,895
Repayment of borrowings (148,749) (17,596)
Interest paid (31,926) (23,416)
At end of year 338,214 420,919
The Group has not had any defaults of principal, interest or other breaches with respect to their liabilities during the year (2017: Nil).
292
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
40 Borrowings continued
(i) FBN Eurobond:
Facilities represent dollar Notes I and II issued by FBN Finance Company B.V, Netherlands on 7 August 2013 and on 18 July 2014 for a
period of 7 years. The Notes I bear interest at 8.25% per annum up to the bank call date of 7 August 2018, while Notes II bear interest at
8.00% per annum to the bank call date of 23 July 2019. From the call date up to the maturity date, the Notes I and II bear interest at a
fixed rate of 6.875% and 6.488% per annum respectively plus the prevailing mid swap rate for United States Dollar swap transactions with
a maturity of 2 years. The loans are redeemable, subject to having obtained the prior approval of the CBN, on the Bank call date of 7 August
2018 and of 23 July 2019, and not in part at the option of the issuer, at the liquidation preference amount plus any additional amounts and
outstanding payments due.
Note I was redeemed on 7 August 2018.
(ii) Due to Proparco:
Facility represents the outstanding balance of the credit facility of USD65million granted by Promotion et Participation pour la Coopération
économique (PROPARCO) in February 2016. The facility is priced at 5.78% (Fixed) per annum and will mature in May 2024. Interest on this
facility is payable semi-annually and there is 2 year moratorium on principal repayment.
(iii) Due to Africa Development Bank:
Facility represents the outstanding balance of the credit facility of USD200million granted by African Development Bank (AfDB) in January
2017. Interest is payable half-yearly at the rate of LIBOR + 3.5% per annum and will mature December 2020. This borrowing facility is for
USD300million however, USD100million was undrawn as at end of December 2018.
(iv) On-lending Facilities:
Included in on-lending facilities from financial institutions are disbursements from other banks and Financial Institutions which are guaranteed
by FBN for specific customers. These facilities include the BOI funds and CACS intervention funds. See further Notes below.
a. CBN/BOI facilities
The Central Bank of Nigeria (CBN), in a bid to unlock the credit market, approved the investment of N200billion
debenture stock to be issued by the Bank of Industry (BOI), which would be applied to the re-financing/restructuring
of Bank's loans to the manufacturing sector. During the year, there was no additional disbursement (2017: Nil) to
First Bank of Nigeria Limited. The fund disbursed is for a period of fifteen years eective from the disbursement
date at an interest rate is 7% per annum.
b. CBN/CACS Intervention funds
The Central Bank of Nigeria (CBN) in collaboration with the Federal Government of Nigeria (FGN) represented by the
Federal Ministry of Agriculture and Water Resources (FMA & WR) established the Commercial Agricultural Credit
Scheme (CACS). During the year, additional disbursement to First Bank Nigeria Limited was N19.6billion (2017:
N12.9 billion). Loans granted under the scheme are for a seven year period at an interest rate of 9% p.a.
(v) Borrowings from correspondence banks:
Borrowings from correspondence banks include loans from foreign banks utilised in funding letters of credits for international trade.
293
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41 Retirement benefit obligations
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Defined contribution plan - 3
Defined benefits plan
Gratuity scheme (i) (1) (20)
Defined benefits - Pension (ii) 997 1,457
Gratuity scheme (iii) 944 763
1,940 2,203
Plan liabilities are based upon independent actuarial valuation performed by Ernst & Young using the projected unit credit basis. This valuation
was carried out as at 31 December 2018 and 31 December 2017.
Gratuity scheme (i)
This relates to the schemes operated by FBN Insurance Brokers as a non-contributory defined gratuity scheme whereby on separation, sta
who have spent a minimum number of 3 years are paid a sum based on their qualifying emoluments and the number of periods spent in
service of the entity. The balance on this scheme is deemed immaterial.
Defined benefit - Pension (ii)
First Bank of Nigeria Limited has an old Defined Benefit scheme, discontinued in March 2001. The funds are placed with fund managers and
the Bank is under obligation to fund the deficit.
In addition, First Pensions Custodian Nigeria Limited (FPCNL), a direct subsidiary of First Bank of Nigeria Limited, has a non-contributory
defined gratuity scheme for Directors. Directors are paid a sum based on an approved scale and the number of years of service subject to a
maximum of 9 years. In 2018, the plan assets exceeded the defined benefit obligation by N18million resulting in a net defined benefit asset.
294
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41 Retirement benefit obligations continued
The movement in the defined benefit pension (ii) over the year is as follows:
GROUP
Present value of
the obligation
N'million
Fair value of
plan assets
N'million
Net
N'million
Defined benefit pension obligations at 1 January 2017
Transfer from gratuity scheme (1) 9,011 (7,077) 1,934
Interest expense/(income)
Service cost 1,303 (1,153) 150
Remeasurement: 19 - 19
- Return on plan asset not included in net interest cost on pension scheme
Net actuarial gain or loss - (882) (882)
Contributions: 236 - 236
- Employer - - -
Payments:
- Benefit payment (1,504) 1,504 -
Defined benefit pension obligations at 31 December 2017 9,065 (7,608) 1,457
Interest expense/(income) 1,168 (1,068) 100
Service cost (5) - (5)
Curtailment losses - - -
Remeasurement:
- Return on plan asset not included in net interest cost on pension scheme - (264) (264)
Net actuarial gain or loss (292) - (292)
Contributions:
- Employer - - -
Payments:
- Benefit payment (1,365) 1,365 -
Defined benefit pension obligations at 31 December 2018 8,571 (7,575) 997
The actual return on plan assets was N1.33billion (2017: N2.04billion).
Composition of plan assets
GROUP
2018 2017
N'million
Quoted
N'million
Unquoted
N'million
Total
N'million
Quoted
N'million
Unquoted
N'million
Total
Equity instruments 844 1,014
Banking 668 - 779 -
Real estate 7 - 9 -
Manufacturing 169 - 226 -
Debt instruments 6,543 6.538
Government 5,134 - - -
Corporate bond 790 22 4,936 -
Money market investments - 597 979 623
Money call - 187 187 - 56 56
Total 6,768 806 7,574 6,929 679 7,608
The fair value of plan assets is calculated with reference to quoted prices and are within level 1 and 2 of the fair value hierachy.
295
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41 Retirement benefit obligations continued
Gratuity scheme (iii)
This relates to the schemes operated by the subsidiaries of First Bank of Nigeria Limited as follows:
FBNBank Congo (DRC) has a scheme whereby on separation, sta who have spent a minimum of 3 years are paid a sum based on their
qualifying emoluments and the number of periods spent in service of the Bank. FBNBank Guinea and FBNBank Sierra Leone each have a
graduated gratuity scheme for sta on separation where sta receives a lump sum based on their qualifying basic salaries on the number
of year spent.
The movement in the defined benefit Gratuity Scheme (iii) over the year is as follows:
GROUP
Present value of
the obligation
N'million
Fair value of
plan assets
N'million
Net
N'million
Defined benefit pension obligations at 1 January 2017 775 (21) 754
Interest expense/(income) 78 78
Service cost 114 114
Remeasurement:
- Return on plan asset not included in net interest cost on pension scheme (3) (3)
Net actuarial gain or loss (180) 2 (178)
Contributions:
- Employer - (1) (1)
Payments:
- Benefit payment (3) 3 -
Defined benefit pension obligations at 31 December 2017 784 (20) 764
Foreign exchange dierence 60 - 60
Interest expense/(income) 88 - 88
Service cost 113 - 113
Remeasurement:
- Return on plan asset not included in net interest cost on pension scheme - (4) (4)
Net actuarial gain or loss (5) (10) (15)
Contributions:
- Employer - (61) (61)
Payments:
- Benefit payment (67) 67 -
Defined benefit pension obligations at 31 December 2018 973 (28) 944
296
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41 Retirement benefit obligations continued
Arising from the defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility: The plan liabilities are calculated using a discount rate set with reference to Federal Government Bond yields. If the plan assets
underperform this yield, this will create a deficit. As the plans mature, the Group intends to reduce the level of investment risk by investing
more in asset such that changes in the value of the assets closely match the movement in the fund's liabilities. There remains the residual risk
that the selected portfolio does not match the liabilities closely enough or that as it matures there is a risk of not being able to reinvest the
assets at the assumed rates. The scheme's trustees review the structure of the portfolio on a regular basis to minimise these risks.
Changes In Bond Yields: A decrease in Federal bond yields will increase plan liabilities, although this will be partially oset by an increase in
the value of the plans' bond holdings. The rate used to discount post-employment benefit obligations is determined with reference to market
yields at the balance sheet date on high quality corporate bonds. In countries where there is no deep market in such bonds, the market
yields on government bonds are used. The Group is of the opinion that there is no deep market in Corporate Bonds in Nigeria and as such
assumptions underlying the determination of discount rate are referenced to the yield on Nigerian Government bonds of medium duration, as
compiled by the Debt Management Organisation.
Life Expectancy: The majority of the plans' obligations are to provide benefits for the members, so increases in the life expectancy will result
in an increase in the plan's liabilities. This risk is significantly curtailed by the weighted average liability duration of the plan which is currently
6 years and retirement age of 60 years.
Under the funded plan, the Legacy scheme, the groups ensures that the investment positions are managed within the Asset-liability matching
(ALM) framework that has been developed to achieve long-term investment that are in line with the obligations under the pension schemes.
Within this ALM framework, the objective is to match assets to the pension obligation by investing in long-term fixed interest securities
with maturities that match the benefit payments as they fall due. The Group actively monitors how the duration and the expected yield of
the investment are matching the expected cash outflows arising from the pension obligation. There is no regulatory framework guiding the
operation of the plan assets.
31 Dec 2018
N'million
31 Dec 2017
N'million
The principal actuarial assumptions were as follows:
Discount rate on gratuity scheme 16% 14%
Discount rate on pension plan 16% 14%
Inflation rate 12% 12%
Life expectancy 19yrs 19yrs
Future pension increases 0% 0%
The sensitivity of the pension liability to changes in the weighted principal assumptions is shown in table below:
Assumption Defined benefit
obligation N'm
Impact on
liability
Discount rate 16% 8,374 0.0%
17% 8,001 (4.5%)
15% 8,784 4.9%
Inflation rate 12% 8,374
13% 8,374
11% 8,374
Mortality experience Base 8,374 0.0%
Improved by 1 year 8,257 (1.4%)
Decreased by 1 year 8,487 1.3%
297
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41 Retirement benefit obligations continued
The above sensitivity analyses is for First Bank of Nigeria Limited and deemed to be representative of the Group. It is based on a change in an
assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may
be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present
value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied
as when calculating the pension liability recognised within the statement of financial position. The methods and types of assumptions used in
preparing the sensitivity analysis did not change compared to the previous period.
The below table shows the maturity profile of the defined obligation.
Maturity profile of Defined Benefit Obligation
Years Amount
N'000
2018 1,453,929
2019 1,415,649
2020 1,380,984
2021 1,346,990
2022 1,312,383
2023 - 2027 6,000,319
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Defined benefit cost, charged to income statement (refer Note 17)
Gratuity Scheme (i) 61 31
Defined Benefits - Pension (ii) 94 169
155 200
Defined benefit cost, charged to other comprehensive income
Gratuity Scheme (i) - (10)
Defined Benefits - Pension (ii) (556) (646)
Gratuity Scheme (iii) (41) (88)
(597) (744)
The information of the professional engaged by the entities within the Group for valuation of their respective Retirement Benefit Obligations
are as follows:
Entity: FBN Limited
Name of the professional: O. O. Okpaise
Name of the professional firm/entity: Ernst & Young
FRC registration number of the professional: FRC/2012/NAS/00000000738
298
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
42 Share capital
31 Dec 2018
N'million
31 Dec 2017
N'million
Authorised
50 billion ordinary shares of 50k each (2017: 50billion) 25,000 25,000
Issued and fully paid
Movements during the period: Number of
shares
In millions
Ordinary
shares
N'millions
At 31 December 2017 35,895 17,948
At 31 December 2018 35,895 17,948
43 Share premium and reserves
The nature and purpose of the reserves in equity are as follows:
Share premium: Premiums (i.e. excess over nominal value) from the issue of shares are reported in share premium.
Retained earnings: Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to the other
reserves noted below.
Statutory reserve: Nigerian banking regulations require banks to make an annual appropriation to a statutory reserve. As stipulated by Section
16(1) of the Bank and Other Financial Institutions Act of 1991(amended), an appropriation of 30% of profit after tax is made if the statutory
reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the paid-up share capital.
Capital reserve: Reserve arising from business restructuring
Fair value reserve: The fair value reserve shows the eects from the fair value measurement of financial instruments elected to be presented
in other comprehensive income on initial recognition after deduction of deferred taxes. No gains or losses are recognised in the consolidated
income statement.
Small scale investment reserve: This reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed
banks set aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium-scale
enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of profit after tax
and shall continue after the first five years but banks’ contributions shall thereafter reduce to 5% of profit after tax. However, this is no longer
mandatory. The small and medium-scale industries equity investment scheme reserves are non-distributable.
Contingency reserve: As required by insurance regulations, a contingency reserve is maintained for both the non-life insurance and life
assurance contracts underwritten by the Group. The appropriation to contingency reserve for non-life underwriting contracts is calculated in
accordance with Section 21(2) and 22(1)(b) of the Insurance Act 2003. The reserve is calculated at the higher of 3% of gross premiums
and 20% of net profits of the business for the year. The appropriation to contingency reserve for life underwriting contracts is calculated at
the higher of 1% of the gross premium and 10% of net profits of the business for the year. The appropriations are charged to the Life Fund.
Statutory credit reserve: The Group determines its loan loss provisions based on the requirements of IFRS. The dierence between the loan
loss provision as determined under IFRS and the provision as determined under Nigerian Prudential guideline (as prescribed by the Central
Bank of Nigeria) is recorded in this reserve. This reserve is non distributable.
Foreign currency translation reserve (FCTR): Records exchange movements on the Group's net investment in foreign subsidiaries.
299
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
44 Reconciliation of profit before tax to cash generated from operations
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Profit before tax from continuing operations 65,265 54,092 9,440 9,382
Profit before tax from discontinued operations (77) (7,569) - -
Profit before tax including discontinued operations 65,188 48,523 9,440 9,382
Adjustments for:
– Depreciation and amortisation 17,618 15,801 397 398
– (Profit)/loss from disposal of property and equipment (23) (84) (2) 2
– Foreign exchange gains (19,114) (13,256) (52) -
– Profit from disposal of associate - - -
– (Profit)/loss from investment securities (5,505) (2,610) 21 (16)
– Net losses/(gains) from financial assets at fair value through
profit or loss 5,713 (11,117) (575) -
– Fair value gain/(loss) on investment properties (20) 2 - -
– Impairment on loans and advances 85,870 148,492 - -
– Change in provision in other assets 11,681 1,932 - -
– Change in provision for impairment of investments (1,096) - - -
– Change in retirement benefit obligations 157 483 - -
– Share of profit from associates 23 430 - -
– Dividend income (2,312) (2,054) (10,840) (11,437)
– Interest income (434,410) (469,585) (2,163) (2,215)
– Interest expense 150,242 138,065 - -
(Increase)/decrease in operating assets:
– Cash and balances with the Central Banks (restricted cash) (67,236) 84,856 - -
– Loans and advances to banks (56,919) 30,117 - -
– Loans and advances to customers 126,159 77,592 8 (42)
– Financial assets at fair value through profit or loss (14,074) (34,243) - -
– Other assets 10,007 (22,827) (306) 43
– Pledged assets (78,600) (4,025) - -
– Assets held-for-sale (24) 183 - -
Increase/(decrease) in operating liabilities:
– Deposits from banks 64,585 171,743 - -
– Deposits from customers 278,973 (50,634) - -
– Financial liabilities - (10,040) - -
– Liability on investment contracts 6,368 3,958 - -
– Liability on insurance contracts 12,457 11,447 - -
– Liability held-for-sale (96) (3,058) - -
– Other liabilities 77,952 8,213 482 276
Cash flow generated from/(used in) operations 233,563 116,302 (3,590) (3,609)
300
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
45 Commitments and contingencies
45.1 Capital commitments
At the balance sheet date, the Company had nil capital commitments (2017: Nil) in respect of authorised and contracted capital
projects.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Authorised and contracted
Property and equipment 621 1,122
Intangible assets 6,068 -
6,689 1,122
45.2 Operating lease rentals
At 31 December 2018, the Group was committed to making the following future payments in respect of operating leases for land and
buildings.
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Within one year 695 667
Between two and five years 2,724 3,063
More than five years 4,725 6,102
8,144 9,832
45.3 Legal proceedings
The Group is a party to a number of legal actions arising out of its normal business operations.
The Directors having sought the advice of the professional legal counsel are of the opinion that no significant liability will crystalise
from these cases beyond the provision made in the financial statements.
45.4 Other contingent commitments
In the normal course of business, the Group is a party to financial instruments which carry o-balance sheet risk. These instruments
are issued to meet the credit and other financial requirements of customers. The contractual amounts of the o-balance sheet financial
instruments are:
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Performance bonds and guarantees 355,435 312,722
Letters of credit 486,755 218,247
842,189 530,969
301
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
45.5 Loan commitments
GROUP
31 Dec 2018
N'million
31 Dec 2017
N'million
Undrawn irrevocable loan commitments 42,902 8,263
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees do not necessarily represent future cash
requirements, as these financial instruments may expire or terminate without being funded. The fair value of credit related commitments is
disclosed in Note 3.7.
45.6 Compliance with covenants
The Group is subject to certain covenants primarily relating to its borrowings. Non-compliance with such covenants may result in negative
consequences for the Group including growth in the cost of borrowings and declaration of default. In the event of default, the lenders are
entitled to take various actions, including the acceleration of amounts due under the loan agreements and all actions permitted to be taken
by a secured creditor which would have a material adverse eect on the Group's business, results of operations, financial condition, cash
flows, liquidity and/or prospects.
First Bank of Nigeria Limited, a subsidiary of FBN Holdings Plc, is subject to minimum capital requirements established by covenants stated
in loan agreements, including capital adequacy levels calculated in accordance with the requirements of the Basel Accord, as defined in the
International Convergence of Capital Measurement and Capital Standards (updated April 1998) and the Amendment to the Capital Accord
to incorporate market risks (updated November 2005), commonly known as Basel II. The Bank complied with this loan covenant. See Note
4 for the calculation of the composition of the Bank’s capital in accordance with the Basel Accord. Management believes that First Bank of
Nigeria Limited is in compliance with these covenants at 31 December 2018.
302
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
46 Osetting financial assets and financial liabilities
The information shown below relates to First Bank of Nigeria Limited and FBN Insurance Limited, as no other entity within the Group has an
osetting arrangement.
Financial instruments subject to osetting, enforceable master netting and similar arrangement are as follows:
Amounts subject to master netting
and similar arrangements not set o
in the statement of financial position
Gross amount
before osetting in
the statement of
financial position
(a)
N'million
Gross amounts
set o in the
statement of
financial position
(b)
N'million
Net amounts
after osetting
in the statement
of financial
position
(c) = (a) - (b)
N'million
Financial
instruments
(d)
N'million
Cash collaterals
received
(e)
N'million
Net amounts of
exposure
(f) = (c)-(d)-(e)
N'million
31 December 2018
Assets
Financial assets at fair value through profit
or loss
24,261 - 24,261 - 11,492 12,769
Reinsurance receivables 2,703 - 2,703 167 - 2,536
Total assets subject to osetting,
master netting and similar arrangements 26,964 -
26,964 167 11,492 15,305
Liabilities
Financial derivatives (15,275) - (15,275) - (1,873) (13,402)
Trade payables (167) - (167) (167) - -
Total liabilities subject to osetting,
master netting and similar arrangements (15,442) -
(15,442) (167) (1,873) (13,402)
Amounts subject to master netting
and similar arrangements not set o
in the statement of financial position
Gross amount
before osetting in
the statement of
financial position
(a)
N'million
Gross amounts
set o in the
statement of
financial position
(b)
N'million
Net amounts
after osetting
in the statement
of financial
position
(c) = (a) - (b)
N'million
Financial
instruments
(d)
N'million
Cash collaterals
received
(e)
N'million
Net amounts of
exposure
(f) = (c)-(d)-(e)
N'million
31 December 2017
Assets
Financial assets at fair value through profit
or loss
24,852 - 18,768 - 2,452 22,400
Reinsurance receivables 1,652 - 1,652 399 - 1,253
Total assets subject to osetting,
master netting and similar arrangements 26,504 - 20,420 399
2,452 23,653
Liabilities
Financial derivatives (9,342) - (9,342) - (8,067) (1,275)
Trade payables (399) - (399) (399) - -
Total Liabilities subject to osetting,
master netting and similar arrangements (9,741) - (9,741) (399) (8,067) (1,275)
303
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
46 Osetting financial assets and financial liabilities continued
The amount set o in the statement of financial position reported in column (b) is the lower of (i) the gross amount before osetting
reported in column (a) and (ii) the amount of the related instrument that is eligible for osetting. Similarly, the amounts in columns (d) and
(e) are limited to the exposure reported in column (c) for each individual instrument in order not to understate the ultimate net exposure.
The Group has master netting arrangements with counterparty banks, which are enforceable in case of default. In addition, applicable
legislation allows an entity to unilaterally set o trade receivables and payables that are due for payment, denominated in the same currency
and outstanding with the same counterparty. These fall in the scope of the disclosure. The Group received and provided margin deposits
as collateral for outstanding derivative positions. The Group or the counterparty may set o the Group's asset or liabilities with the margin
deposit in case of default.
In the Insurance business, reinsurance payable and receivables create for the parties to the agreement, a right of set-o on recognised
amounts that is enforceable only following a predetermined events as stipulated within the treaty agreements. Each party to the agreement
will have the option to settle all such amounts on a net basis in the event of default of the other party. An event of default includes a failure
by a party to make payment when due.
The disclosure does not apply to loans and advances to customers and related customer deposits unless they are set o in the statement
of financial position.
47 Related party transactions
The Group is controlled by FBN Holdings Plc which is the parent company, whose shares are widely held. FBN Holdings Plc, is a non-operating
financial holding company licensed by the Central Bank of Nigeria. (See Note 30 for the list of all subsidiaries of the Group).
A number of transactions are entered into with related parties in the normal course of business. The volumes of related-party transactions,
outstanding balances at the year-end, and related expense and income for the year are as follows:
47.1 Transactions with related parties
Name of entity Nature of relationship Nature of transactions
31 December
2018
N'million
31 December
2017
N'million
First Bank of Nigeria Limited Subsidiary Placement 11,489 328
First Bank of Nigeria Limited Subsidiary Current account balance 74 1,636
First Bank of Nigeria Limited Subsidiary Bank charges 4 6
First Bank of Nigeria Limited Subsidiary Interest income 145 47
FBNQuest Merchant Bank Limited Subsidiary Placement 3,041 2,677
FBNQuest Merchant Bank Limited Subsidiary Interest income 735 324
FBN Insurance Limited Subsidiary Premium 59 45
Placements with related parties have maturities ranging from 30 days to 90 days and interest rates from 2.5% to 12.75%. Current account
balances are balances in transactional operating accounts with related parties as at December 31 2018.
304
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
47.2 Key management compensation
Key management includes Executive Directors and members of the Management Committee. The compensation paid or payable to key
management for employee services is shown below:
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'million
31 Dec 2018
N'million
31 Dec 2017
N'million
Salaries and other short-term employee benefits 1,613 1,541 376 376
Post-employment benefits 8 317 8 7
1,621 1,858 384 383
47.3 Insider related credits
In compliance with the Central Bank of Nigeria Circular BSD/1/2004 on insider related credits, the Company had no insider related
credits during the year.
Insider related credits relating to the banking subsidiaries have been appropriately disclosed in the component financial statements.
48 Directors' emoluments
Remuneration paid to the Directors was:
31 Dec 2018
N'million
31 Dec 2017
N'million
Fees 464 468
Sitting allowances 18 18
Executive compensation 121 118
Other Directors' costs and expenses 415 385
1,017 989
Included in the fees above are amounts paid to:
Chairman 64 64
Highest paid Director 121 118
The number of Directors who received fees and other emoluments in the following ranges was:
Number
31 Dec 2018 31 Dec 2017
N3,000,001 and above 10 10
10 10
305
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
49 Compliance with regulations
During the year, the entities within the Group were penalised by their respective regulators as follows:
(a) FBN Holdings Plc
N1.65million to the Securities and Exchange Commission for late submission of 2017 Annual Accounts.
N2million to the Nigeria Stock Exchange for late submission of 2017 Annual Accounts.
(b) First Bank of Nigeria Limited
N8 million to CBN for failure to implement full reversal of excess charges on customer accounts.
N2 million to CBN for exceeding regulatory single obligor limit as contained in the June 2017 RBS report.
N2 million to CBN for delay in payment of fine in respect of excess over single obligor limit exception as contained in the June
2017 RBS report.
N4 million to CBN for the non-restructuring of credits to Bank customer in line with CBN's mandate.
N2 million to CBN for failure to provide KYC documents of customers involved in Fraud Case (TradeFair Branch and Awka
Branch).
N2 million was imposed on the bank by CBN for failure to implement external auditor's recommendation as per December
2016 Management Letter.
(c) FBNQuest Merchant Bank Limited
N2,000,000 to CBN for late submission of FINA returns
N2,000,000 to CBN for late submission of PEP returns to CBN and NFIU.
(d) FBN Insurance Limited
N5,000,000 to Financial Reporting Council (FRC) for contraventions of certain Sections of FRC Act.
50 Events after statement of financial position date
The Group has no events after the financial position date that will materially aect the financial position shown in these financial
statements.
51 Dividends per share
A cash dividend of N8.97billion at N0.25 per share (2017: N7.18billion) that relates to the period to 31 December 2017 was paid in
May 2018.
306
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
52 Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the members of
the Group and held as treasury shares.
The Company does not have potential ordinary shares with convertible options and therefore there is no dilutive impact on the profit
attributable to the equity holders of the parent.
GROUP COMPANY
31 Dec 2018
N'million
31 Dec 2017
N'millions
31 Dec 2018
N'million
31 Dec 2017
N'million
Profit from continuing operations attributable to owners of the
parent (N'million) 59,076 49,102 9,342 9,275
Loss from discontinued operations attributable to owners of the
parent (N'million) (77) (7,774) - -
Weighted average number of ordinary shares in issue (in million) 35,895 35,895 35,895 35,895
Basic/diluted earnings per share (expressed in Naira per share)
- from continuing operations 1.65 1.37 0.26 0.26
- from discontinued operations (0.00) (0.22) - -
1.65 1.15 0.26 0.26
The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the number of basic
weighted average number of shares.
307
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53 Classification and measurement of financial instruments
The adoption of IFRS 9 resulted in changes in our accounting policies for recognition, classifications and measurement of financials
assets and financial liabilties.
Set out below are the disclosures relating to the impact of the adoption of IFRS 9 on the Group.
(a) The measurement category and the carrying amount of financial assets in accordance with IAS 39 and IFRS 9 at 1 January
2018 are compared as follows:
GROUP IAS 39 IFRS 9
Measurement catergory Carrying
amount
Measurement
catergory
Carrying
amount
Financial assets
Cash and balances with Central Banks Amortised cost (Loans and receivables) 641,881 Amortised cost 641,881
Loans and advances to banks Amortised cost (Loans and receivables) 742,929 Amortised cost 742,369
Loans and advances to customers Amortised cost (Loans and receivables) 2,001,223 Amortised cost 1,797,322
Financial assets at fair value through profit or loss FVPL (Held-for-trading) 83,713 FVPL 86,565
Investment securities: FVOCI (Available-for-sale) 1,122,757 FVOCI 691,922
Amortised cost (Held-to-maturity) 108,283 Amortised cost 552,818
Amortised cost (Loans and receivables) 17,568
Asset pledged as collateral: FVOCI (Available-for-sale) 134,513 FVOCI 134,513
Amortised cost (Held-to-maturity) 74,412 Amortised cost 74,412
Amortised cost (Loans and receivables) 64,299 Amortised cost 58,278
Other assets
COMPANY
Financial assets
Loans and advances to banks Amortised cost (Loans and receivables) 7,585 Amortised cost 7,585
Loans and advances to customers Amortised cost (Loans and receivables) 108 Amortised cost 108
Financial assets at fair value through profit or loss FVPL (Held-for-trading) - FVPL 2,852
Investment securities:
FVOCI (Available-for-sale) 9,842 FVOCI 6,990
Other assets Amortised cost (Loans and receivables) 8,832 Amortised cost 8,832
There were no changes to the classification and measurement of financial liabilities.
308
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53 Impact of adoption of IFRS 9 continued
(b) Reconciliation of statement of financial position balances from IAS 39 to IFRS 9.
The Group performed a detailed analysis of its business models for managing financial assets and analysis of the cash flow characteristics.
Please refer to Note 2.9 for more detailed information regarding the new classification requirements of IFRS 9.
The following table reconciles the carrying amount of financial assets, from their previous measurement category in accordance with
IAS 39 to their new measurement categories upon transition to IFRS 9 on 1 January 2018:
GROUP IAS 39 Carrying
amount Reclassifications Remeasurements
IFRS 9 Carrying
amount
31 Dec 2017 1 Jan 2018
Amortised cost
Cash and balances with Central Banks
Opening balance under IAS 39 641,881
Remeasurement: ECL allowance -
Closing balance under IFRS 9 - 641,881
Loans and advances to banks
Opening balance under IAS 39 742,929
Remeasurement: ECL allowance (560)
Closing balance under IFRS 9 742,369
Loans and advances to customers
Opening balance under IAS 39 2,001,223
Remeasurement: ECL allowance (203,901)
Closing balance under IFRS 9 1,797,322
Investment securities (ii)
Opening balance under IAS 39 125,851
Reclassification 428,565
Remeasurement: ECL allowance (1,598)
Closing balance under IFRS 9 552,818
Asset pledged as collateral (ii)
Opening balance under IAS 39 208,725
Remeasurement: ECL allowance -
Closing balance under IFRS 9 208,925
Other assets
Opening balance under IAS 39 64,299
Remeasurement: ECL allowance (6,021)
Closing balance under IFRS 9 58,278
309
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53 Impact of adoption of IFRS 9 continued
GROUP IAS 39 Carrying
amount Reclassifications Remeasurements
IFRS 9 Carrying
amount
31 Dec 2017 1 Jan 2018
Fair value through profit or loss (ii)
Financial assets at FVPL
Opening balance under IAS 39 83,713
Reclassification 2,852
Remeasurement: fair value -
Closing balance under IFRS 9 86,565
Fair value through other comprehensive income
Investment securities- Debt (ii)
Opening balance under IAS 39 1,026,739
Reclassification (427,984)
Remeasurement: ECL allowance -
Closing balance under IFRS 9 598,755
Investment securities- Equity instruments (i)
Opening balance under IAS 39 96,019
Reclassification (2,852)
Closing balance under IFRS 9 93,167
310
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53 Impact of adoption of IFRS 9 continued
COMPANY IAS 39 Carrying
amount Reclassifications Remeasurements
IFRS 9 Carrying
amount
31 Dec 2017 31 Dec 2018
Amortised cost
Loans and advances to banks
Opening balance under IAS 39 7,585
Remeasurement: ECL allowance - -
Closing balance under IFRS 9 7,585
Loans and advances to customers
Opening balance under IAS 39 108
Remeasurement: ECL allowance - -
Closing balance under IFRS 9 108
Other assets
Opening balance under IAS 39 8,832
Remeasurement: ECL allowance - -
Closing balance under IFRS 9 8,832
Fair value through profit or loss (i)
Financial assets at FVPL
Opening balance under IAS 39 -
Reclassification 2,852 -
Closing balance under IFRS 9 2,852
Fair value through other comprehensive income
Investment securities - Debt (i)
Opening balance under IAS 39 6,990
Remeasurement: ECL allowance - -
Closing balance under IFRS 9 6,990
Investment securities - Equity instruments (i)
Opening balance under IAS 39 2,852
Reclassification (2,852)
Closing balance under IFRS 9 -
(i) Reclassification from retired categories with no change in measurement
In addition to the above, the following debt instruments have been reclassified to new categories under IFRS 9, as their previous
categories under IAS 39 were 'retired', with no changes to their measurement basis:
(i) Those previously classified as available-for-sale are now classified as measured at FVOCI; and
(ii) Those previously classified as 'held-to-maturity' and ""Loans and receivables"" are now classified as measured at amortised
cost.
311
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53 Impact of adoption of IFRS 9 continued
( c ) IFRS 9 Impact on Changes in Equity and Allowances for Financial Instruments on Initial Application of IFRS 9 on January 1 2018.
The following table provides information on IFRS 9 impact on changes in Equity, i.e. retained earnings, and reconciles the closing
impairment allowance as at 31 December 2017 for both the financial assets in accordance with IAS 39 and provisions for loan
commitments and financial guarantee contracts in accordance with IAS 37 to the opening ECL allowance determined in accordance
with IFRS 9 as at 1 January 2018.
GROUP Loan loss
allowance under
IAS 39 /IAS 37
Reclassifications
from AFS reserve
Reclassification
into retained
earnings Remeasurements
Loan loss
allowance under
IFRS 9
Loans and receivables (IAS 39)/financial assets at
amortised cost (IFRS 9)
Loans and advances to banks - - - 560 560
Other assets 8,973 - - 6,021 14,994
Loans and advances to customers 279,170 - - 210,901 483,071
Total 284,177 - - 210,482 491,279
Held-to-maturity (IAS 39)/Financial assets measured at amortised
cost (IFRS 9)
Investment securities 3,230 (581) - 1,598 4,230
Total 3,230 (581) - 1,598 4,230
Available-for-sale (IAS 39)/Financial assets measured at FVOCI
(IFRS 9)
Investment securities - 377 (377) - -
Total - 377 (377) - -
Loan commitments and financial guarantee contracts
Provisions (Loan commitments) - - - 76 76
Provisions (Financial guarantees) - - - 759 759
Total - - - 835 835
287,407 (204) (377) 212,915 496,299
312
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
54 Restatement
During the year, the Central Bank of Nigeria (CBN) advised First Bank of Nigeria Limited ("Bank") of shortfall in the Bank's contribution to the
Banking sector resolution cost sinking fund for the years 2016 and 2017. The shortfall arose as a result of the erroneous application of the
Resolution Cost Trust Deed's definition of "Total Assets". The definition of "Total Assets" was amended in 2015 to include o balance sheet
items. However, the contributions made by the bank for these two years (2016 and 2017) were based on the Bank's total assets excluding
o balance sheet items.
The actual payments for the shortfalls will be spread over a five year period commencing in 2019 as specified by the CBN. The full shortfall
of N4.47billion (2017:N2.30billion, 2016:N2.17billion) which is material to the Group has been adjusted for in these financial statements.
(i) Impact of restatement on statement of financial position.
As at 31 December
2017
Restatement
adjustment
As at 31 December
2017
Previously reported
N'million N'million
Restated
N'million
(a) liabilities
Other Liabilities 261,725 4,472 266,198
Equity
Retained earnings 170,775 (4,472) 166,303
As at 31 December
2016
Restatement
adjustment
As at 31 December
2016
Previously reported Restated
(b) Liabilities
Other liabilities 235,388 2,169 237,557
Equity
Retained earnings 161,631 (2,169) 159,462
As at 31 December
2017
Restatement
adjustment
As at 31 December
2017
Previously reported
N'million N'million
Restated
N'million
(ii) Impact of restatement on income statement
Other operating expenses 145,673 2,303 147,976
(iii) Impact of restatement on statement of changes in equity
Retained Earnings as at 1 January 2017 161,631 2,169 159,462
Profit for the year 47,785 2,303 45,482
313
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
31 December
2018
N'million %
31 December
2017
N'million %
Gross income 583,477 595,445
Interest and fee expense (167,572) (150,182)
415,905 445,263
Administrative overheads (152,693) (136,533)
Value added 263,213 100 308,730 100
Distribution
Employees
- Salaries and benefits 93,395 35 85,678 28
Government
- Taxation 5,544 2 9,040 3
The future
- Asset replacement (depreciation) 12,282 5 11,600 4
- Asset replacement (amortisation) 5,336 2 4,201 1
- Asset replacement (provision for losses) 86,911 33 150,424 49
- Expansion (transfers to reserves) 59,744 23 47,787 15
263,213 100 308,730 100
OTHER NATIONAL DISCLOSURES
STATEMENT OF VALUE ADDED  GROUP
314
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
OTHER NATIONAL DISCLOSURES
STATEMENT OF VALUE ADDED  COMPANY
31 December
2018
N'million %
31 December
2017
N'million %
Gross income 13,649 13,715
Interest and fee expense - -
13,649 13,715
Administrative overheads (2,908) (2,952)
Value added 10,741 100 10,763 100
Distribution
Employees
- Salaries and benefits 904 8 982 9
Government
- Company income tax 98 1 107 1
The future
- Asset replacement (depreciation) 397 4 398 4
- Expansion (transfers to reserves) 9,342 87 9,276 86
10,741 100 10,763 100
315
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
OTHER NATIONAL DISCLOSURES
FIVEYEAR FINANCIAL SUMMARY  GROUP
Statement of financial position
31 December
2018
N'million
31 December
2017
N'million
31 December
2016
N'million
31 December
2015
N'million
31 December
2014
N'million
Assets:
Cash and balances with Central Banks 653,335 641,881 690,165 715,871 698,104
Loans and advances to banks 863,435 742,929 444,871 385,769 460,911
Loans and advances to customers 1,683,813 2,001,223 2,083,894 1,817,271 2,178,986
Financial assets at fair value through profit or loss 109,162 83,713 46,711 26,426 27,601
Investment securities 1,663,821 1,248,608 1,050,588 913,779 711,639
Assets pledged as collateral 309,051 208,925 197,420 105,646 68,483
Other assets 112,362 132,731 47,786 35,483 40,640
Inventory - - - 49,649 37,805
Investment in associates 625 1,357 1,114 - -
Investment properties 515 1,993 3,003 3,025 2,826
Property, plant and equipment 91,515 88,263 88,315 88,398 88,557
Intangible assets 16,134 16,211 15,328 9,687 8,569
Deferred tax 25,558 18,554 17,278 14,615 11,285
Assets held-for-sale 38,990 50,149 50,332 570 8,331
5,568,316 5,236,537 4,736,805 4,166,189 4,343,737
Financed by:
Share capital 17,948 17,948 17,948 17,948 16,316
Share premium 233,392 233,392 233,392 252,892 254,524
Reserves 266,889 427,874 331,783 304,284 249,190
Non-controlling interest 12,418 (5,494) (548) 3,675 4,033
Deposits from banks 749,315 665,366 416,078 144,652 171,151
Deposits from customers 3,486,691 3,143,338 3,104,221 2,970,922 3,050,853
Financial liabilities at fair value through profit or loss 15,791 9,404 37,137 12,488 10,917
Liabilities on investment contracts 19,766 13,399 9,440 10,157 60,617
Liabilities on insurance contracts 34,192 21,734 10,287 11,837 8,260
Borrowings 338,214 420,919 316,792 256,116 369,707
Retirement benefit obligations 1,940 2,203 2,662 3,764 2,029
Current income tax 15,656 10,194 8,897 8,773 11,829
Other liabilities 373,345 266,198 235,388 168,441 132,633
Deferred income tax liabilities 266 606 813 239 87
Liabilities held-for-sale 2,493 9,457 12,515 - 1,592
5,568,316 5,236,537 4,736,805 4,166,189 4,343,737
316
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
OTHER NATIONAL DISCLOSURES
FIVEYEAR FINANCIAL SUMMARY  GROUP
Income statement
12 months
ended
31 December
2018
N'million
12 months
ended
31 December
2017
N'million
12 months
ended
31 December
2016
N'million
12 months
ended
31 December
2015
N'million
12 months
ended
31 December
2014
N'million
Gross earnings 583,477 595,445 581,831 502,691 481,774
Net operating income 415,881 444,835 469,926 361,537 356,243
(Loss)/Gain from disposal of subsidiary - - (8) 1,572 -
Insurance claims (4,717) (4,041) (2,190) (3,306) (1,043)
Operating expenses (258,989) (236,278) (218,744) (219,429) (235,801)
Group's share of associate's results 23 430 - - 599
Impairment charge for losses (86,911) (150,424) (226,037) (118,794) (25,942)
Profit before taxation 65,288 54,522 22,948 21,581 94,056
Taxation (5,544) (9,040) (5,807) (6,042) (10,045)
Profit from continuing operations 59,744 45,482 17,141 15,539 84,011
Loss from discontinuing operations (77) (7,774) (4,898) (391) -
Profit for the year 59,667 37,708 12,243 15,148 84,011
Profit attributable to:
Owners of the parent 58,999 41,328 14,122 15,406 84,231
Non-controlling interest 668 (3,620) (1,879) (258) (220)
59,667 37,708 12,243 15,148 84,011
Earnings per share in kobo (basic/diluted) 165 115 39 43 235
317
FBN HOLDINGS PLC Annual Report and Accounts 2018
FINANCIAL STATEMENTS
N
GOVERNANCE
SHAREHOLDER INFORMATION
GROUP OVERVIEW STRATEGIC REPORT FINANCIAL REVIEW
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
OTHER NATIONAL DISCLOSURES
FINANCIAL SUMMARY  COMPANY
Statement of financial position
31 December
2018
N'million
31 December
2017
N'million
31 December
2016
N'million
31 December
2015
N'million
31 December
2014
N'million
Assets:
Loans and advances to banks 16,639 7,585 4792 3,261 1,477
Loans and advances to customers 110 108 63 80 72
Financial assets at fair value through profit or loss 3,427 - - - -
Investment securities 7,079 9,842 7019 4,272 9,847
Investment in associates - - 1500 1,500 9,281
Investment in subsidiaries 242,395 242,395 263,595 260,777 246,777
Other assets 292 9,011 4,670 14,361 43,285
Property, plant and equipment 382 680 1,192 1,519 1,072
Assets held-for-sale - - - 2,000 -
270,324 269,621 282,831 287,770 311,811
Financed by:
Share capital 17,948 17,948 17,948 16,316 16,316
Share premium 233,392 233,392 252,892 254,524 254,524
Reserves 10,847 10,624 6,242 7,340 37,261
Current income tax 102 104 - - -
Other liabilities 8,034 7,553 5,751 9,590 3,710
270,324 269,621 282,831 287,770 311,811
Income statement
12 months
ended
31 December
2018
N'million
12 months
ended
31 December
2017
N'million
12 months
ended
31 December
2016
N'million
12 months
ended
31 December
2015
N'million
12 months
ended
31 December
2014
N'million
Gross Earnings 13,649 13,715 12,715 6,794 16,969
Net operating income 13,649 13,715 12,571 5,195 7,800
Gain from disposal of subsidiary/associate - - 144 1,600 -
Operating expenses (4,209) (4,333) (5,104) (4,615) (2,117)
Profit before taxation 9,440 9,382 7,611 2,180 5,683
Taxation (98) (107) (104) - -
Profit after taxation 9,342 9,275 7,507 2,180 5,683
Earnings per share in kobo (basic) 26 26 21 6 16
318
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Shareholder Resources >> 319 Complaints Management Policy >> 338 Contact Information >> 343
SHAREHOLDER INFORMATION
Resources for shareholders include a shareholder data update form, a glossary
of ratios, a summary of abbreviations and Group contact details.
319
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
SHAREHOLDER RESOURCES
DIVIDEND HISTORY AS AT 31 DECEMBER 2018
FIRST BANK OF NIGERIA PLC
FBN HOLDINGS PLC
CREDIT RATINGS SUMMARY*
Net DIV. Amount % Net DIV.
Payment Dividend Date Total Net DIV. Dividend Unclaimed As At Amount
No. Year End Type Payable Amount (N) Per Share 31 December 2018 Unclaimed
49 31-Mar-06 FINAL 28-Aug-06 4,714,802,449.20 1.00 78,359,288.75 1.66
50 31-Mar-07 FINAL 03-Sep-07 10,477,338,776.00 1.00 279,477,845.08 2.67
51 31-Mar-08 FINAL 25-Aug-08 21,481,234,960.68 1.20 245,680,813.17 1.14
52 31-Mar-09 FINAL 24-Aug-09 30,207,986,658.90 1.35 243,691,514.28 0.81
53 31-Dec-09 FINAL 31-May-10 2,610,566,748.54 0.10 272,180,842.04 10.43
54 31-Dec-10 FINAL 06-Jun-11 17,621,325,552.24 0.60 643,547,787.99 3.65
55 31-Dec-11 FINAL 04-Jun-12 23,495,100,736.32 0.80 635,867,839.24 2.71
TOTAL 110,608,355,881.88 2,398,805,930.55 2.17
Net DIV. Amount
Payment Dividend Date Total Net DIV. Dividend Unclaimed As At
No. Year End Type Payable Amount (N) Per Share 31 December 2018
1 31-Dec-12 INTERIM 03-Jun-13 29,434,858,173.90 1.00 1,218,102,373.65 4.14
2 27-May-13 FINAL 26-May-14 32,408,788,807.89 1.10 1,670,621,287.50 5.15
3 31-Dec-14 FINAL 25-May-15 2,963,937,941.77 0.10 304,061,453.24 10.26
4 31-Dec-15 FINAL 30-May-16 4,889,733,076.23 0.15 582,144,689.42 11.91
5 31-Dec-16 FINAL 22-May-17 6,512,770,910.98 0.20 780,003,388.03 11.98
6 31-Dec-17 FINAL 16-May-18 8,141,810,416.31 0.25 2,511,830,806.94 30.85
TOTAL 84,351,899,327.08 7,066,763,998.78 8.38
Standard & Poor’s
Fitch
Global Credit Rating
Rated Entity
FBNHoldings
FirstBank
FBNHoldings
FirstBank
FirstBank
Report Date
December 2018
December 2018
November 2018
November 2018
November 2018
Outlook
Stable
Stable
Positive
Positive
-
National
Short-term Long-term
ngBBB NgA-3
ngBBB NgA-2
BBB(nga) F2(nga)
BBB(nga) F2(nga)
A1-(NG) A-(NG)
International
Long-term Short-term
B- B
B- B
B- B
B- B
– –
*Credit ratings summary as at 31 December 2018.
320
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
SHAREHOLDER RESOURCES
FBN HOLDINGS PLC - RANGE ANALYSIS AS AT 31 DECEMBER 2018
% Units
0.59
3.31
3.29
11.78
4.14
9.65
4.03
8.79
3.88
9.69
5.55
35.30
100.00
% Holders
24.06
40.91
14.23
17.24
1.77
1.45
0.17
0.14
0.02
0.01
0.00
0.00
100.00
Units
212,330,313
1,188,571,073
1,181,566,058
4,229,261,089
1,486,200,326
3,464,795,921
1,444,799,335
3,154,847,892
1,392,579,662
3,478,532,596
1,991,286,018
12,670,522,508
35,895,292,791
No. of Holders
290,486
493,961
171,852
208,129
21,349
17,486
2,058
1,668
199
168
28
39
1,207,423
RANGE
1 - 1000
1001 - 5000
5001 - 10000
10001 - 50000
50001 - 100000
100001 - 500000
500001 - 1000000
1000001 - 5000000
5000001 - 10000000
10000001 - 50000000
50000001 - 100000000
100000001 - 35895292791
FBNHOLDINGS AND EQUITY MARKET STATISTICS AS
AT 31 DECEMBER 2018
2018 FBNHOLDINGS FINANCIAL REPORTING CALENDAR*
EVENT
FY 2018 & Q1 2019 Results Conference Call
FBNHoldings Annual General Meeting
H1 2019 Results Conference Call
9M 2019 Results Conference Call
DATE
Friday, April 26, 2019
Friday, May 3, 2019
Tuesday, July 30, 2019
Friday, October 25, 2019
These dates are subject to change. For information, please refer
to the FBNHoldings Investor Relations website for updates.
2017
9.29
2.96
8.80
6,515.42
37,380.84
315,878.57
38,243.19
100.52
1,272.16
13.61
2018
14.75
6.80
7.95
5,536.19
14,047.81
285,367.57
31,430.50
101.42
1,202.22
11.73
FBNH Share Price
High for the year (N)
Low for the year (N)
Closing (N)
FBNH Share Statistics
Total volume of shares traded (million)
Total value of shares traded (N’million)
Market capitalisation (million)
Market Indicators
NSE all share index
Total equities volume traded (billion)
Total equities value traded (N’billion)
Equities market cap (N’trillion)
GOVERNMENT-RELATED
HOLDINGS
RETAIL
DOMESTIC
INSTITUTIONAL
FOREIGN
INSTITUTIONAL
SHAREHOLDING STRUCTURE AS AT 31 DECEMBER 2018
BREAKDOWN OF SHAREHOLDER BY TYPE
32.97%
14.68%
0.43%
51.92%
NIGERIA
REST OF AFRICA
UNITED KINGDOM/IRELAND
NORTH AMERICA
CONTINENTAL EUROPE
REST OF THE WORLD
0% 20% 40% 60% 80% 100%
GEOGRAPHICAL BREAKDOWN OF SHAREHOLDERS
85.32%
5.71%
4.76%
3.01%
0.40%
0.8%
321
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
SHAREHOLDER RESOURCES
SHARE CAPITALISATION HISTORY
Authorised Paid Up Cumulative
Year Increase (N) Cumulative (N) Increase (N) Cumulative (N) No of Shares Consideration
31 Dec 1973 - 10,000,000 - 9,700,000 9,700,000 Cash
10 Jun 1975 5,000,000 15,000,000 1,940,000 11,640,000 11,640,000 Bonus
27 July 1976 - 5,000,000 2,328,000 13,968,000 13,968,000 Bonus
28 July 1977 10,000,000 25,000,000 6,984,000 20,952,000 20,952,000 Bonus
27 July 1978 5,000,000 30,000,000 8,381,000 29,333,000 29,333,000 Bonus
28 Dec 1978 10,000,000 40,000,000 - 29,333,000 29,333,000 -
26 July 1979 10,000,000 50,000,000 14,666,200 43,999,200 43,999,200 Bonus
24 July 1980 - 70,000,000 9,262,990 55,577,937 55,577,937 Bonus
26 July 1980 20,000,000 70,000,000 2,315,747 46,314,947 46,314,947 -
29 Apr 1981 - 70,000,000 5,557,792 61,135,729 61,135,729 Bonus
29 Apr 1982 50,000,000 150,000,000 - 61,135,729 61,135,729 -
16 Apr 1986 - 150,000,000 6,113,574 67,249,303 67,249,303 Bonus
9 Apr 1987 - 150,000,000 13,449,862 80,699,165 80,699,165 Bonus
8 Apr 1988 - 150,000,000 - 80,699,165 80,699,165 -
27 Apr 1989 - 150,000,000 - 80,699,165 161,398,330 Stock split from N1.00 to 50 kobo
26 Apr 1990 - 150,000,000 - 80,699,165 161,398,330 -
26 Apr 1991 - 150,000,000 - 80,699,165 161,398,330 -
27 Apr 1992 - 150,000,000 - 80,699,165 161,398,330 -
29 Apr 1993 - 150,000,000 26,899,721 107,598,886 215,197,772 Bonus
28 Apr 1994 150,000,000 300,000,000 107,598,882 215,197,768 430,395,536 Bonus
25 Apr 1995 - 300,000,000 53,799,441 268,997,209 537,994,418 Bonus
25 Apr 1996 - 300,000,000 67,249,301 336,246,510 672,493,020 Bonus
22 May 1997 700,000,000 1,000,000,000 1,000,000,000 436,246,510 872,493,020 Cash
22 May 1997 - 1,000,000,000 84,061,627 520,308,137 1,040,616,274 Bonus
23 July 1998 - 1,000,000,000 130,077,034 650,385,171 1,300,770,342 Bonus
27 July 2000 - 1,000,000,000 162,596,292 812,981,463 1,625,962,926 Bonus
26 July 2001 2,000,000,000 3,000,000,000 203,245,365 1,016,226,828 2,032,453,656 Bonus
31 July 2002 - 3,000,000,000 254,056,705 1,270,283,533 2,540,567,066 Bonus
31 July 2003 - 3,000,000,000 254,056,705 1,524,340,238 3,048,680,476 Bonus
19 Nov 2003 - 3,000,000,000 254,056,705 1,778,396,943 3,556,793,886 Cash
19 Aug 2004 - 3,000,000,000 222,299,589 2,000,696,532 4,001,393,063 Bonus
20 Jun 2005 - 3,000,000,000 500,174,160 2,500,870,692 5,001,741,383 Bonus
3 Jan 2006 - - 20,009,495 2,520,880,187 5,041,760,373 FBN Holdings Plc. shares issued in
exchange for minority shares in
FBNQuest Merchant Bank
3 Jan 2006 - - 64,196,005 2,585,076,192 5,170,152,383 FBN Holdings Plc. shares issued in
exchange for MBC shares
3 Jan 2006 - - 34,258,503 2,619,334,694 5,238,669,388 FBN Holdings Plc. shares issued to majority
shareholders in FBNQuest Merchant
Bank arising from the consolidation
24 Aug 2006 7,000,000,000 10,000,000,000 2,619,334,694 5,238,669,388 10,477,338,776 Increase/Bonus
22 Aug 2007 - - 873,111,565 6,111,780,953 12,223,561,906 Bonus
01 July 2007 - - 3,833,235,233 9,945,016,186 19,890,032,371 2007 hybrid oer
22 Aug 2008 5,000,000,000 15,000,000,000 2,486,254,046 12,431,270,232 24,862,540,463 Bonus
20 Aug 2009 - 15,000,000,000 2,487,000,000 4,143,756,743 29,006,297,206 Bonus (1 for 6)
27 Aug 2010 - 3,625,787,150 32,632,084,356 Bonus (1 for 8)
21 May 2015 - 3,263,208,435 35,895,292,792 Bonus (1 for 10)
322
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
NOTICE OF
7TH ANNUAL
GENERAL MEETING
RC 916455
NOTICE IS HEREBY GIVEN that the 7th Annual General Meeting (AGM) of members of FBN HOLDINGS PLC
will be held at the Grand Ball Room, Oriental Hotel, 3 Lekki - Epe Expressway, Victoria Island, Lagos on
Friday, 3 May 2019 at 10a.m. or so soon thereafter to transact the following:
Ordinary Business:
1. To receive the Audited Accounts for the financial year
ended 31 December 2018 together with the reports
of the Directors, Auditors, Board Appraisers and Audit
Committee thereon.
2. To declare a dividend.
3. To re-elect retiring Directors:
a. Dr Oba Otudeko,
CFR as Director
Pursuant to Section 256 of the Companies and
Allied Matters Act, special notice is hereby given
that Dr Oba Otudeko,
CFR who is eligible for re-election
is over 70 years.
b. Chidi Anya as Director
c. Dr Hamza Wuro Bokki as Director
4. To authorise the Directors to fix the remuneration of
the Auditors.
5. To appoint members of the Audit Committee.
Notes
1. PROXY
A member entitled to attend and vote at the AGM
is entitled to appoint a proxy to attend and vote in
his stead. A proxy need not also be a member. A
proxy form is attached to the Annual Report. All
instruments of proxy must be duly stamped at the
Stamp Duties Oce and deposited at the registered
Oce of the Company or the Oce of the Registrars,
First Registrars & Investor Services Limited, Plot 2,
Abebe Village Road, Iganmu, Lagos not later than 48
hours before the time for holding the meeting.
2. DIVIDEND
If the proposed dividend recommended by the
Directors is approved by members at the AGM, the
Dividend will be payable on Monday, 6 May 2019
to members whose names appear in the Register of
Members at the close of business on 23 April 2019.
Shareholders who have completed the e-Dividend
Mandate forms will receive a direct credit of the
dividend into their bank accounts.
3. CLOSURE OF REGISTER OF MEMBERS
In accordance with Section 89 of Companies and Allied
Matters Act (CAMA), please note that the Register of
members and transfer books of the Company will be
closed from 24-29 April 2019 (both dates inclusive)
to enable the Registrars update records in preparation
for the payment of dividend.
4. E-DIVIDEND MANDATE
Shareholders are kindly requested to update their
records and advise First Registrars & Investor Services
Limited of their updated records and relevant bank
accounts for payment of their dividends. Detachable
forms in respect of mandate for e-dividend payment and
shareholder data update are attached to the Annual Report
for convenience. The forms can also be downloaded from
the Company’s website at www.fbnholdings.com or from
First Registrars & Investor Services Limited’s website at
www.firstregistrarsnigeria.com.
323
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
NOTICE OF 7TH ANNUAL GENERAL MEETING
The duly completed form should be delivered to
First Registrars & Investor Services Limited, Plot 2,
Abebe Village Road, Iganmu, Lagos.
5. UNCLAIMED DIVIDEND WARRANTS
Shareholders are hereby informed that some dividend
warrants have been returned to the Registrars as
unclaimed. Some dividend warrants have neither
been presented for payment nor to the Registrars for
revalidation.
Aected members are by this Notice advised to contact
the Registrars; First Registrars & Investor Services Limited,
Plot 2, Abebe Village Road, Iganmu, Lagos for resolution.
6. STATUTORY AUDIT COMMITTEE
In accordance with Section 359 (5) of CAMA, a
shareholder may nominate another shareholder for
appointment to the Audit Committee. Such nomination
should be in writing and must reach the Company
Secretary not less than 21 days before the AGM. The
Code of Corporate Governance of the Securities and
Exchange Commission (SEC) and Central Bank of
Nigeria (CBN) indicate that some of the members
of the Audit Committee should have basic financial
literacy and be knowledgeable in internal control
processes.
In view of the above, we therefore request that
nominations be accompanied by a copy of the
nominee’s curriculum vitae. The curriculum vitae of
eligible candidates will be posted on the Company’s
website before the date of the meeting.
7. RETIREMENT/RE-ELECTION OF DIRECTORS
Dr Oba Otudeko, CFR, Chidi Anya and Dr Hamza Wuro Bokki
are retiring by rotation at the current meeting in line
with Section 259 of CAMA. The retiring Directors,
being eligible, are oering themselves for re-election
as Directors at the AGM.
The profiles of the Directors are available in the
Annual Report and on the Company’s website.
8. RIGHT OF SHAREHOLDERS TO ASK QUESTIONS
Pursuant to Rule 19.12 (c) of the Nigerian Stock
Exchange’s Rulebook 2015, please note that it is the
right of every shareholder to ask questions not only at
the meeting but also in writing prior to the meeting.
We urge that such questions be submitted to the
Company Secretariat not later than two weeks before
the date of the meeting.
BY ORDER OF THE BOARD
Seye Kosoko
Company Secretary
FRC/2013/NBA/00000002006
35 Marina, Lagos
Dated 13th March 2019
324
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
325
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Admission Form
FBN Holdings Plc. (RC 916455)
Annual General Meeting to be held at the Grand Ball Room, Oriental Hotel, Victoria Island, Lagos on Friday, 3 May 2019 at 10 a.m.
*Name of Shareholder
......................................................................................................................................................................................................................................................
*Name of Proxy....................................................................................................................................................................... (IF YOU ARE UNABLE TO ATTEND THE MEETING)
A member (shareholder) entitled to attend and vote is entitled to appoint one or more Proxies to attend and vote instead of him/her.
A Proxy need not be a member. The above proxy form has been prepared to enable you exercise your right to vote.
IMPORTANT
Please insert your name in BLOCK CAPITALS on both proxy and admission forms where asterisked. Insert the name of any person whether a member of
the Company or not, except for the Chairman of the Company, who will attend the meeting and vote on your behalf.
7th Annual General Meeting to be held at the Grand Ball
Room, Oriental Hotel, 3 Lekki-Epe Expressway, Victoria Island,
Lagos on Friday, 3 May 2019 at 10 a.m.
*We................................................................................................................................
The undersigned, being a member of the above named Company
hereby appoint .........................................................................................................
or failing him/her the Chairman of the meeting as my/our proxy to
vote for me/us and on my/our behalf at the Annual General Meeting
of the Company to be held on 3 May 2019 and at any adjournment
thereof.
Unless otherwise instructed, the proxy will vote or abstain from
voting as he/she thinks fit.
Dated this......................................................day of.....................................2019
Signature.....................................................................................................................
Notes:
1. This form of proxy together with the Power of Attorney or
other authority, if any, under which it is signed, or a notarial
certified copy thereof must reach the Oce of the Company
Secretary at 11th Floor, 35 Marina, Lagos or the Oce of the
Registrars, First Registrars & Investor Services Limited, 2,
Abebe Village Road, Iganmu, Lagos not later than 48 hours
before the time for holding the meeting.
2. Where the appointer is a corporation, this form may be under
seal or under the hand of any ocer or attorney duly
authorised.
3. In the case of joint holders, the signature of anyone of them
will suce, but the names of all joint holders should be shown.
4. It is a legal requirement that all instruments of proxy must bear
appropriate stamp duty (currently N500.00) from the Stamp
Duties Oce.
We desire
this proxy to
be used in
favor of/or
against the
resolution
as indicated
alongside.
For Against
Please indicate with “X” in the appropriate box how
you wish your vote to be cast on the resolutions
set out above. Unless otherwise instructed, the
Proxy will vote or abstain from voting at his/her
discretion.
(Name of shareholder in block letters)
Before posting the above form, please tear o this part and retain it for admission to the meeting.
Resolution
1) To receive the consolidated
Annual Report and Accounts
5) To appoint members of the
Audit Committee
4) To fix the remuneration and
expenses of the Company’s
auditor
3b) To re-elect Chidi Anya as
Director
3a) To re-elect Dr Oba Otudeko,
CFR
as Director
3c) To re-elect Dr Hamza Wuro
Bokki as Director
2) To declare a dividend
PROXY FORM
FBN Holdings Plc. (RC 916455)
326
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
327
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
EPRODUCTS
ACTIVATION FORM
First Registrars & Investor Services Ltd
...connecting you to your wealth
Website: www.firstregistrarsnigeria.com Email: ebusiness@firstregistrarsnigeria.com
1. Complete, sign and date the form
2. Fill out all compulsory( * ) fields
3. Fill out in CAPITAL LETTERS
You need not worry about the safety of your shares anymore. Simply stay aboard with our e-products and services.
E-share Notifier SMS alert on transactions that occur on your share account (AGM and EGM, dividend payments, bonuses,
debits/credits etc.)
M-access The smart way to access your stock balances, dividend amount etc. via SMS on your mobile phone. Simply send
your assigned PIN to 6591. The service is available only in Nigeria and attracts N20/SMS by network operator.
Online Access Online access to your share account statements. You can view and print your account statement, make a change
of address and access dividend information etc.
INSTRUCTION
Please fill in the form and return to the address below:
THE REGISTRARS
First Registrars & Investor Services Ltd,
Plot 2 Abebe Village Road, Iganmu,
PMB 12692, Lagos, Nigeria.
SHAREHOLDER ACCOUNT INFORMATION
Surname* First name* Other names
Address line 1 *
Address line 2
City State* Country
GSM no (Mobile) * GSM no (Telephone) *
Email address *
Signature(s)* Corporate stamp/seal *
CHARGES:
Individual: N1,000 per annum/product
Corporate bodies: N2,000 per annum/product
Please tick (√) the product(s) you are activating.
All payments should be made into each product’s account number respectively:
E-share notifier activation - Account No. 2013302579
M-access activation - Account No. 2011760908
Online access activation - Account No. 2013798370
In any FirstBank branch nationwide and a copy of the payment slip attached to this form upon submission.
stF r
328
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
329
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
EDIVIDEND MANDATE
MANAGEMENT SYSTEM EDMMS
DEAR SHAREHOLDER,
Introducing the E-Dividend Mandate Management System (E-DMMS)
We are pleased to inform you that dividends on your shareholdings can now be paid directly into your preferred bank account.
This is made possible with the E-Dividend Mandate Platform, which allows you to register/validate your e-dividend mandate
at any branch of a bank nearest to you nationwide or at First Registrars oces.
The platform also provides you with a quick and convenient way to enjoy the benefits of the direct cash settlement (DCS) from
your registrar, while minimising the incidents of unclaimed dividends.
To register and be mandated for your e-dividend, please visit any of the First Registrars oces listed below or a bank branch
nearest to you.
It is easy and it is a one-o exercise!
FIRST REGISTRARS & INVESTOR SERVICES LTD
Plot 2, Abebe Village Road,
Iganmu, PMB 12692,
Lagos
Tel: +234 (1) 2799880, +234 (1) 2701078
Email: info@firstregistrarsnigeria.com
ABUJA
First Bank of Nigeria Limited
Jos Street Branch
Plot 451, Opposite Sharon Hotel
Area 3, Garki, Abuja
Tel: +234 802 315 4938
ENUGU
First Bank of Nigeria Limited (Main Branch)
21, Okpara Avenue
Enugu,
Enugu State
Tel: +234 805 459 0483
Please fill the E–DMMS form overleaf.
Thank you.
IBADAN
First Bank of Nigeria Limited (2nd Floor)
48 Molete/Challenge Road,
Opposite Texaco,
Ibadan, Oyo State
Tel: +234 802 571 4780
KADUNA
First Bank of Nigeria Limited (Area Oce)
14 Bank Road, Kaduna,
Kaduna State
Tel: +234 802 396 4430
PORT HARCOURT
First Bank of Nigeria Limited (2nd Floor)
22/24 Aba Road
Port Harcourt,
Rivers State
Tel: +234 805 565 6430
First Registrars & Investor Services Ltd
...connecting you to your wealth
Website: www.firstregistrarsnigeria.com Email: ebusiness@firstregistrarsnigeria.com
stF r
330
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
EDIVIDEND MANDATE
MANAGEMENT SYSTEM EDMMS
First Registrars & Investor Services Ltd
...connecting you to your wealth
Website: www.firstregistrarsnigeria.com Email: ebusiness@firstregistrarsnigeria.com
INSTRUCTION
Please complete all sections of this form to make it eligible for processing and return to the address below:
THE REGISTRARS,
First Registrars & Investor Services Ltd.
2 Abebe Village Road, Iganmu,
PMB 12692 Lagos, Nigeria.
I/We hereby request that henceforth, all my/our dividend payment(s) due to me/us from my/our
holdings in FBN Holdings Plc be credited directly to my/our bank detailed below:
Bank verification number
Bank name
Bank branch
Bank address
Bank account number
Account opening date
Account type (Tick) Current Savings
SHAREHOLDER ACCOUNT INFORMATION
Surname* First name* Other names
Address:
City State Country
Previous address (If any)
CHN (If any) Email address
Mobile telephone 1 Mobile telephone 2
Signature(s) Joint\Company’s signatories Company’s seal
Authorised signature of banker Authorised stamp of banker
Ax Current
Passport Here
(To be stamped by Bankers)
Write your name at the back
of your passport photograph
stF r
331
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
EBONUS FORM
First Registrars & Investor Services Ltd
...connecting you to your wealth
Website: www.firstregistrarsnigeria.com Email: ebusiness@firstregistrarsnigeria.com
INSTRUCTION
Please complete all sections of this form to make it eligible for processing and return to the address below:
Please credit my account at Central Securities Clearing Systems Limited (CSCS) with all subsequent allotments and
bonuses due to me from FBN Holdings Plc.
THE REGISTRARS,
First Registrars & Investor Services Ltd.
2, Abebe Village Road, Iganmu,
PMB 12692 Marina,
Lagos, Nigeria.
SHAREHOLDER ACCOUNT INFORMATION
Surname* First name* Other names
Address line 1*
Address line 2*
City
Mobile telephone*
Email address*
Stockbroker
Clearinghouse number
C
Signature(s)*
Authorised signature and stamp of stockbroker
Please attach a copy of your CSCS Statement to this form as
evidence that you maintain a valid account with the CSCS
Joint/Company’s signatures*
CSCS Details
Company seal
State Country
stF r
332
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
333
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
FBN HOLDINGS PLC
SHAREHOLDERS DATA UPDATE FORM
In our commitment to having up-to-date records of our shareholders, please complete this form below.
Surname
First name
Other names
Email address
Primary GSM number
Clearinghouse number (CHN)
Bank verification number (BVN)
Preferred stockbroker
Date of birth
Name of Bank
Bank account number
Old address
New addresses (to be used for address update)
Next of kin
Next of kin’s phone number
I/We hereby authorise FBN Holdings Plc to update my/our shareholding accounts with the above information.
Individual shareholder signature Joint shareholder signature
Corporate shareholder Company seal
Kindly download the update form from our websites:
www.fbnholdings.com
334
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
335
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GLOSSARY OF RATIOS
RATIO BASIS OF COMPUTATION
Average cost of deposits
=
Interest expense (on deposits)
Average deposit (i.e. opening + closing balance)/2
Basic earnings per share =
Profit attributable to ordinary shareholders (after deduction of debenture interest and tax)
Weighted average number of shares in issue
Book value per share (BVPS) =
Total equity
Number of outstanding shares (35, 895, 292, 792 units)
Cost of borrowed funds =
Expense on borrowed funds
Average borrowed funds (opening + closing)/2
Cost of funds =
Interest expense
Average interest-bearing liabilities (opening + closing)/2
Cost of interbank takings =
Interest expense on interbank takings
Average interbank takings (opening + closing)/2
Cost of managed funds =
Expense on managed funds
Liabilities on investment contracts
Cost of risk =
Loan loss expense
Average loans
Cost to income ratio =
Operating expenses (operating cost before loan loss expense)
Operating income
Debt to capital =
Long-term debt
Long-term debt + equity
Dividend per share =
Dividend
Number of shares in issue
Debt to EBITDA =
Long-term debt
Operating income
Gearing ratio =
Long-term debt
Total shareholders’ funds
Interest earning assets =
Due from other banks + treasury bills + Securities (bonds) + loans and advances
Leverage =
Total assets
Total shareholders’ funds
Liquidity ratio =
Liquid assets
Deposit liabilities (as prescribed by the CBN)
Loan to deposit ratio =
Total loans
Total deposit
Marginal cost of fund =
Increase in interest expense during the month
Increase in average deposits during the same month (annualised)
Net interest margin (1) =
Net interest income
Average interest-earning assets (i.e. opening + closing )
Net interest margin (2) =
Net interest income
Total interest income
Net loans =
Gross loans – loan loss provision
Net revenue =
Net interest income + net fee and commission income + other income
Net revenue from funds =
Interest income – (interest expense + loan expense)
NPL coverage
=
Loan loss provision (including interest in suspense) + Statutory credit reserve
Gross NPLs
NPL ratio
=
Non-performing loans
Gross loans
Operating profit margin =
Operating profit
Gross earnings
Pre-provision operating profit =
Operating profit + impairment charge on credit losses
Provision on non-performing loans
336
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
GLOSSARY OF RATIOS
*Risk asset is computed using risk weights supplied by CBN/Basel.
Interest income
Average interest earning assets
PAT
Average total equity
Market value per share
Earnings per share
Total provision
Total NPL
Total tier 2 capital
Risk-weighted assets
Assets x weight of risks
Total qualifying capital
Risk-weighted assets
PAT
Average total asset
x 100
x 100
Share price
Total assets – intangible assets and liabilities
Total tier 1 capital
Risk-weighted assets
Total loans
Total assets
Provisioning level
(non-performing loans cover)
Price to book
Price earnings
Return on average assets
Return on average equity
Risk asset ratio
Risk-weighted assets*
Tier 1 ratio
Tier 2 ratio
Total capital adequacy ratio
Yield on interest earning assets
=
=
=
=
=
=
=
=
=
=
=
RATIO BASIS OF COMPUTATION
337
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
AGM Annual General Meeting
AGM Assistant General Manager
ALCO Assets and Liabilities Management Committee
AMCON Asset Management Corporation of Nigeria
AOM Area Operations Manager
ATM Automated Teller Machine
AUM Assets Under Management
AURR Additional Unexpired Risk Reserve
BARAC Board Audit and Risk Assessment Committee
BCL Basic Chain Ladder Method
BFIC Board Finance and Investment Committee
BGNC Board Governance and Nominations Committee
BU Business Units
BRCC Business Risk and Compliance Committee
BRMC Board Risk Management Committee
CAAP Control Administrative and Accounting Procedure
CAE Chief Audit Executive
CAMA Companies and Allied Matters Act
CAR Capital Adequacy Ratio
CASA Current and Savings Accounts
CBN Central Bank of Nigeria
CCO Chief Compliance Ocer
CEO Chief Executive Ocer
CEP Continuous Education Programme
CFP Contingency Funding Plan
CFR Commander of the Order of the Federal Republic
CGU Cash Generating Unit
CIPM Chartered Institute of Personnel Management
COSO Committee of Sponsoring Organisation
COT Commission on Turnover
CPC Centralised Processing Centre
CPI Consumer Price Index
CPFA Closed Pension Fund Administrator
CRM Credit Risk Management
CRO Chief Risk Ocer
CRR Collateral Risk Rating
CSCS Central Securities Clearing System
CSR Corporate Social Responsibility
DCS Direct Cash Settlement
DMD Deputy Managing Director
DPM Deposit Money Banks
DPS Dividend Per Share
DRC Democratic Republic of Congo
DVM Doctor of Veterinary Medicine
EAR Earnings at Risk
ECA Export Credit Agencies
ECM Equity Capital Markets
EPS Earnings per Share
ERM Enterprise Risk Management
ESGMS Environmental, Social and Governance Management
System
ETFs Exchange Traded Funds
FCA Fellow, Institute of Chartered Accountants of
Nigeria
FCCA Fellow of the Association of Chartered Certified
Accountants
FCIB Fellow of the Chartered Institute of Bankers of
Nigeria
FCT Federal Capital Territory
FGN Federal Government of Nigeria
FMAP FirstBank Management Associate Programme
FMCG Fast-Moving Consumer Goods
FPCNL First Pension Custodian Nigeria Limited
FRR Facility Risk Rating
FSA Financial Services Authority
FSS First Share Services
FMDA Financial Market Dealers Association
FUTA Federal University of Technology
FX Foreign Exchange
GDP Gross Domestic Product
GDR Global Depositary Receipt
GEC Group Executive Committee
GMD Group Managing Director
GMC Group Management Committee
GRSC Group Risk Stakeholder Committee
GPI Gross Premium Income
GITSC Group IT Steering Committee
GITOC Group IT Operations Committee
GRC Governance Risk Management and Compliance
HCMD Human Capital Management and Development
HNI High Networth Individual
HR Human Resources
IBNR Incurred But Not Reported
ICAFAS Internal Control and Anti-Fraud Automated Solution
ICAN Institute of Chartered Accountants of Nigeria
ICEG Internal Control and Enhancement Group
ICTSC ICT Steering Committee
IFC International Finance Corporation
IFRS International Financial Reporting Standards
IGR Internally Generated Revenue
IMF International Monetary Fund
IMTOs International Money Transfer Organisations
IOD Institute of Directors
IOCs International Oil Companies
IRS Internal Revenue Service
ISO International Organisation for Standardisation
ABBREVIATIONS
338
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
ABBREVIATIONS
ISMS Information Security Management System
IT Information Technology
ITF Industrial Training Fund
JAN Junior Achievement Nigeria
KPI Key Performance Indicator
KRI Key Risk Indicator
KYB Know Your Customer’s Business
KYC Know Your Customer
LEAP Leadership Eectiveness Accountability and
Professionalism
LGD Loss Given Default
M&A Mergers and Acquisitions
MANCO Management Committee
MCC Management Credit Committee
MBAM Merchant Banking and Asset Management
MB/D Million Barrels a Day
MDAs Ministries, Departments and Agencies
MDSA My Daily Savings Account
MFBs Microfinance Banks
MIS Management Information System
MOOCs Massive Open Online Course
MoU Memorandum of Understanding
MPC Monetary Policy Committee
MPR Monetary Policy Rate
MRPC Market Risk Policy Committee
MSMEs Micro, Small and Medium-size Enterprises
NAICOM National Insurance Commission
NASB Nigerian Accounting Standards Board
NBA Nigerian Bar Association
NBS National Bureau of Statistics
NDIC Nigeria Deposit Insurance Corporation
NERC Nigerian Electricity Regulatory Commission
NGN Nigerian Naira
NGO Non-Governmental Organisation
NIM Net Interest Margins
NIM Nigerian Institute of Management
NPL Non-performing loan
NSE Nigerian Stock Exchange
NVMA Nigerian Veterinary Medical Association
OOF Oba Otudeko Foundation
OCI Other Comprehensive Income
OECD Organisation for Economic Co-operation and
Development
OFR Ocer of the Order of the Federal Republic
OPEX Operating Expenditure
OPL Open Position Limit
ORM Operational Risk Management
ORR Obligor Risk Rating
OTC Over the Counter
P&L Profit and Loss Account
PAT Profit after Tax
P/B Price to Book
PBOC People’s Bank of China
PBT Profit Before Tax
PCI DSS Payment Card Industry Data Security Standard
PCS People Connect System
PD Probability of Default
P/E Price Earnings
PE Private Equity
PFA Pension Fund Administrator
PFP Pay for Performance
PFR Pay for Role
P/L Profit and Loss
POS Point of Sale
PSQA Process and Service Quality Assurance
RCSA Risk and Control Self-Assessment
RIMAN Risk Managers Association of Nigeria
RM Relationship Manager
RMD Risk Management Directorate
ROE Return on Equity
ROM Regional Operations Manager
SAC Statutory Audit Committee
SAS Statistical Analysis Software
SBU Strategic Business Unit
SDGs Sustainable Development Goals
SEC Securities and Exchange Commission
SLA Service Level Agreement
SMCAA Small and Middle Capitalisation Companies
Association
SME Small and Medium Enterprise
SMDP Senior Management Development Programme
SMS Short Message Service
SRF Strategic Resource Function
TAT Turnaround Time
TOM Target Operating Model
UAT User Acceptance Testing
USSD Unstructured Supplementary Service Data
UPR Unexpired Premium Reserve
VaR Value at Risk
WACC Weighted Average Cost of Capital
WODAC Women Development and Child Protection Centre
339
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
APPENDIX  COMPLAINTS MANAGEMENT POLICY
1. Introduction
FBN Holdings Plc (‘Group’) is committed to delivering high
standard of service to all stakeholders across the Group.
Occasionally, the Group may not live up to stakeholders’
expectations and promises. Without an appropriate feedback
mechanism to manage stakeholders’ complaints and
expectations, this commitment could be undermined, resulting
in loss of customers, erosion of public confidence, and damage
to the Group’s reputation.
Based on this, it becomes necessary to establish a policy
for managing stakeholder’s complaint. Complaint for this
policy is defined as “an expression of dissatisfaction made to
an organisation, relating to its products and or services, or
the complaints-handling process itself, where a response or
resolution is explicitly or implicitly expected”.
In developing this Policy, we have endeavoured to align the
policy to relevant regulatory requirements as well as leading
practices in complaints management. This Policy is designed to
meet the requirements of the following regulations;
Securities and Exchange Commission (SEC) – Rules
Relating to Complaints Management Framework of the
Nigerian Capital Market.
The Nigerian Stock Exchange (NSE) – Complaint
Management Requirements for all Listed Companies.
Where necessary, the principles contained in this policy shall
guide the Group’s subsidiaries in developing their respective
sector specific Complaints Management Policy and Guidelines.
2. Objective of the Policy
This Policy is aimed at ensuring prompt and ecient
management of complaints brought to the attention of
the Group. It is also intended to help improve the services
oered by enabling the Group detect its weaknesses, remedy
problematic or unfair situations, and enhance operating
methods while ensuring ecient, fair and prompt treatment
of all complaints received.
Specific objectives of this policy are to ensure:
Complainant is provided with access to an open and
responsive Complaints-Management Policy;
Complaints are resolved in a consistent, systematic and
responsive manner, to the satisfaction of the complainant
and the Group;
Causes of complaints are identified and resolved/
eliminated, trends are monitored, ultimately to improve
the Group's operations; and
Comply with sector specific regulations on complaints
management, as it relates to SEC and NSE regulations on
complaints management within the Capital Market and
other relevant regulations on complaints management to
be issued from time to time.
3. Scope of the Policy
This policy shall apply to:
FBN Holdings Plc, Subsidiary companies and Sta within
the Group;
All customers/clients both internal and external;
Third parties working in association, partnership or in
contractual arrangements with entities within the Group;
Third-party auditors and service providers;
External organisations providing customer representation
such as advocacy and complaints services; and
Other stakeholders not listed above.
3.1 Complaints to be handled by this policy.
The under listed are the various forms of complaints this
policy is designed to manage:
Customers/clients complaints which may include:
complaints which may require formal or informal
feedback, concerns, statements of issues/omissions and
points of disagreement or dispute;
Complaints by competitors in any of the business groups;
Complaints by or through regulators, such as Central
Bank of Nigeria (CBN), Securities and Exchange
Commission (SEC), Nigeria Stock Exchange (NSE) and
or self-regulatory organisations like Financial Market
Dealers Quotation (FMDQ); and
Other Complaints which could be in form of: Trade
manipulations, accounting frauds, Ponzi schemes etc.
All complaints to relevant entities in the Group shall be sent
to the address contained on page 343 of this policy, while
340
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
complaints relating to the Group oce (FBN Holdings Plc)
shall be sent to the address/media contained on page 342
of this report.
All complaints shall contain, at the minimum, the following:
a. Name of complainant
b. Full address
c. GSM number
d. E-mail address
e. Signature of the complainants
f. Date
APPENDIX  COMPLAINTS MANAGEMENT POLICY
Table 1- Guiding Principles of Complaints Handling
g. Nature/Description of complaints
h. Other supporting documents.
3.2 Complaints not covered by this Policy
The under listed complaints are not covered by this policy:
Complaints on matters that are sub-judice or in
arbitration, including employee related dispute.
Complaints falling outside the purview of the Group’s
business.
Complaints which may not require a resolution or formal
follow-up. While this type of feedback is valuable, the
Policy does not apply to feedback of this nature.
4. Complaints Management Principles
In line with leading practices, the under listed principles shall guide FBN Holdings complaints management process:
Application
The Complaints Management Policy is well publicized to customers, clients, sta and other
stakeholders on FBN Holdings website, with extracts of the policy in the Annual Reports and
Accounts.
The Complaints Management Policy is available to all customers/clients and other
stakeholders, and user-friendly. Complaints are welcome from customers/clients who are
dissatisfied with the Group member decisions, actions or services.
Complaints will be acknowledged and resolved promptly.
Complaints will be handled in an ecient and eective manner, and accorded the
urgency they deserves.
Complainants will be treated courteously and kept informed of the progress of their
complaints throughout the complaint-handling process.
Each complaint is addressed in an equitable, objective and unbiased manner through the
complaints-management process.
Access to the Group’s complaints management process is free of any charge to the
complainant.
Complaints are handled confidentially to avoid any form of embarrassment to innocent
people. Personally identifiable information concerning the complainant is actively protected
from disclosure and only made available for the purposes of addressing the complaint.
Group members are committed to ecient, prompt and fair resolution of complaints. The
Group is open to feedback and constantly reminds customers/clients of their right to make
complaints.
The Group accepts responsibility for eective complaints handling, and units responsible for
complaints management will ensure that, where appropriate, issues raised because of failure
in the complaints handling process are adequately addressed.
The complaints management policy and process will be reviewed as at when required, to
enhance its overall eciency and delivery of eective outcomes.
Principle
Visibility
Accessibility
Responsiveness
Objectivity
Charges
Confidentiality
Customer/Client-focused
approach
Accountability
Continual Improvement
341
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
APPENDIX  COMPLAINTS MANAGEMENT POLICY
5. Board and Management Commitment to the
Policy
The Board and Management are highly committed to
promoting eective and ecient complaints handling
across the Group, and adequate resources shall be deployed
towards ensuring the achievement of this objective.
Regular Complaints Management training across the group
to ensure best in class complaints handling technique and
strict adherence to the complaints handling policy and
guide shall be encouraged.
Finally, all complaints received shall be acknowledged and
analysed towards aiding and ensuring informed continuous
quality improvement initiatives, corrective and preventative
management strategies.
6. Policy Statement
This policy is designed to provide guidance on how the
Group manages complaints. FBN Holdings is committed
to achieving service excellence and will strive to deliver
services in a professional, consistent, coordinated and
timely manner.
The Group encourages all complainants to lodge their
complaints, so as to help the Group improve its products
and services. Also, the Group encourages sta to respect
customers/clients and endeavour to anticipate customer/
clients’ needs and expectations.
The Group is committed to ensuring the following:
a. Informing stakeholders of the Group’s complaint
management process;
b. That customers/clients and sta understand our
complaints handling process;
c. Complaints are investigated impartially with a
balanced view of available information or evidence;
d. Complaints are considered on their merits considering
individual circumstances; and
e. Recognition of customer/clients’ right to provide
feedback and complain about product or services
rendered.
Finally, the policy shall be made available to all stakeholders
on the website of FBNHoldings, and an extract of the
policy shall also be made available to shareholders in the
Annual Report and Accounts of FBN Holdings Plc.
7. Time Limit for Investigation of Complaints,
Regulatory Reporting Responsibility and
Complaints Register
It shall be the policy of the Group to handle all complaints
promptly. While it might not be possible to set a specified
time limit for the resolution of complaints in view of the
diverse nature of complaints, subsidiaries shall endeavour
to resolve all complaints within the time limits specified by
the respective sector specific regulator.
Where regulators require the Group oce (FBN Holdings Plc) or
entities within the Group to render regular reports on complaints,
entities aected by such regulation shall be responsible for such
regulatory returns. The Compliance function of both the Group
oce (FBN Holdings Plc) and aected entities shall monitor
compliance with such regulatory reporting requirements, and
ensure implementation of this policy.
In line with SEC and NSE requirements, entities within the
Group operating in the Capital Market (Capital Market
Operators-CMO) shall be required to maintain an electronic
complaint register which will be updated monthly with the
under listed information:
a. Name of the complainant
b. Date of the complaints
c. Nature of complaints
d. Complaints details in brief
e. Status of resolution
f. Remark/comments
342
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
Finally, all complaints from shareholders and other stakeholders relating to FBN Holdings Plc shall be directed to:
Company Secretariat or Investors Relations Department
FBN Holdings Plc
Samuel Asabia House
35 Marina, P O Box 5216
Lagos, Nigeria
E-mails & Phone numbers:
companysecr[email protected]
Phone: +234(1)9052222 and +234(1)9052223
or
investor[email protected]
Phone: +234(1)9052720 and +234(1)9051086
Dr Oba Otudeko,
CFR Oluseye Kosoko
Group Chairman Company Secretary
FBN Holdings Plc FBN Holdings Plc
APPENDIX  COMPLAINTS MANAGEMENT POLICY
343
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
CONTACT INFORMATION
Commercial Banking
First Bank of Nigeria Limited
FBNBank (UK) Limited
FBNBank DRC S.A. Limited
FBNBank Ghana Limited
FBNBank Gambia Limited
FBNBank Guinea Limited
FBNBank Sierra Leone Limited
FBNBank Senegal Limited
First Pension Custodian Nigeria Limited
FirstBank Representative Oce
Beijing Rep. Oce
Merchant Banking and Asset Management
FBNQuest Merchant Bank Limited
FBNQuest Capital Limited
FBNQuest Assets Management Limited
FBNQuest Trustees Limited
FBNQuest Funds Limited
FBNQuest Securities Limited
Insurance
FBN Insurance Limited
FBN General Insurance Limited
FBN Insurance Brokers Limited
35 Samuel Asabia House, Marina, Lagos, Nigeria
28 Finsbury Circus, London, EC2M 7DT, UK
191 Avenue de L’Equateur, Kinshasa/Gombe, DRC
Boakye Mattress Building, Liberation Road near the Golden Tulip
Hotel, Accra Ghana
GIEPA House, 48, Kairaba Avenue, Serrekunda, KSMD, P.O. Box
1600, Banjul, The Gambia
Immeuble Kalinko Dye, Boulevard Telli Diallo, Koulewondy
Commune, Kaloum, Conakry, Guinea
22 Rawdon Street, Freetown, Sierra Leone
Immeuble NIANGADO, Rond-Point Ngor Almadies à côté de la
Station Shell. Dakar, Senegal
6 Maduike Street, O Raymond Njoku Street, S.W. Ikoyi, Lagos,
Nigeria.
Unit 1431, Tower B COFCO Plaza, No 8 Jianguomennei, Street,
Dong Cheng District, Beijing, China
10 Ke Street, O Awolowo Road, S.W. Ikoyi, Lagos, Nigeria.
FirstBank Building (2nd Floor), 22/24, Aba Road, Port Harcourt.
18, Mediterranean Street, Imani Estate, Maitama. Abuja.
16-18 Ke Street, O Awolowo Road, S.W. Ikoyi, Lagos, Nigeria
FirstBank Building (2nd Floor), 22/24, Aba Road, Port Harcourt.
18, Mediterranean Street, Imani Estate, Maitama. Abuja.
16-18 Ke Street, O Awolowo Road, S.W. Ikoyi, Lagos, Nigeria
FirstBank Building (2nd Floor), 22/24, Aba Road, Port Harcourt.
18, Mediterranean Street, Imani Estate, Maitama. Abuja.
16-18 Ke Street, O Awolowo Road, S.W. Ikoyi, Lagos, Nigeria
FirstBank Building (2nd Floor), 22/24, Aba Road, Port Harcourt.
18, Mediterranean Street, Imani Estate, Maitama. Abuja.
16 Ke Street, O Awolowo Road, South/West, Ikoyi, Lagos
16 Ke Street, O Awolowo Road, South/West, Ikoyi, Lagos
34 Marina Old Nipost Building, Marina, Lagos
298, Ikorodu Road, Anthony, Lagos
9/11 Macarthy Street, Onikan, Lagos
0700 FIRSTCONTACT, +234 1 448 5500
+44 207 920 4920
+243 82000 0107
+233 302 23 6133, +233 302 23 5611
+220 799 3502, +220 437 7889,
+220 914 7426
+224 664 53 53 53
+232 76 741 737, +232 99305600
+221 33 869 7935, +221 77 657 8736
+234 1 2777800-1
+861 3911 187318, +861 3343 267635
+234 1-2702290; +234 1-2702291;
+234 1-2702292; +234 1-2702293;
+234 1 2702294; +234 1 2798300
+234 84 802 745
+234 9 291 6757
+ 234 1 2798300; +234 708 065 3100
+243 84 802 745
+234 9 291 6757
+ 234 1 2798300; +234 708 065 3100
+234 7 033 230 533
+234 9 291 6757
+234 1 279 8300; +234 708 065 3100
+234 802 059 6019
+234 701 045 5883
+234 1 279 8300
+234 1 2798300; +234 708 065 3100
+234 1 905 4810, +2341 905 4444
+234 1 905 4810
+234 1 4622185
BUSINESS ADDRESS TELEPHONE NUMBER
344
FBN HOLDINGS PLC Annual Report and Accounts 2018
GOVERNANCE
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTSGROUP OVERVIEW STRATEGIC REPORT
N
CORPORATE RESPONSIBILITY
AND SUSTAINABILITY
FINANCIAL REVIEW
N
www.fbnholdings.com www.fbnholdings.com/annualreport/2018
Head, Investor Relations
Tolulope Oluwole
investor[email protected]
+234 1 9052720
Registered Address
Samuel Asabia House
35 Marina, Lagos
PO Box 5216, Nigeria
Registration No. RC916455
Shareholder Enquiries
info@firstregistrarsnigeria.com
+234 1 2799880
firstregistrarsnigeria.com
Customer Enquiries
firstcontact@firstbanknigeria.com
0700 FIRSTCONTACT
+234 1 4485500
+234 708 0625000