Professional Documents
Culture Documents
Fidelity Bank 2017 Annual Report
Fidelity Bank 2017 Annual Report
NOTICE IS HEREBY GIVEN THAT the next Annual General Meeting of Fidelity
Bank Ghana Limited will be held at the KEMPINSKI HOTEL GOLD COAST CITY,
Accra, on Friday, 20th April, 2018 at 10.00 am to transact the following business:
1. To receive and adopt the Reports of the Directors, Auditors and the Financial
Statements for the year ended 31st December, 2017;
2. To declare a final dividend for the period ended 31st December, 2017;
3. To ratify the Appointment of Directors;
4. To re-elect a Director retiring by rotation;
5. To approve the change of Auditors and authorise the Directors to fix the
remuneration of Auditors;
6. By Special Resolution to authorise the Directors as part of the Bank’s
capitalisation process to:
a) Transfer GH¢ 20.0 million from Profit & Loss reserves to Stated Capital.
b) Issue non – redeemable preference shares up to a value of GH¢ 70.0
million through a private placement; notwithstanding Section 22
Subsection 1(b) of the Company’s Regulations.
Dated,
this 28th day of March, 2018
A member of the Company entitled to attend and vote is entitled to appoint a Proxy to attend and
vote instead of him. A Proxy need not be a member. A form of Proxy is attached and for it to be valid
for the purpose of the meeting it must be completed and deposited at the offices of the Company
Secretary, Fidelity Bank Ghana Limited, 2nd Floor, Ridge Tower, Accra not less than 48 hours before the
appointed time of the meeting.
Friday, 20th April, 2018, 10.00am at Kempinski Hotel Gold Coast City, Accra
AGENDA
2. Notice of Meeting;
3. To receive and adopt the Reports of the Directors, Auditors and the
Financial Statements for the year ended 31st December, 2017;
4. To declare a final dividend for the period ended 31st December, 2017;
6. To re-elect Directors:
i. Ambassador (Mrs.) Johanna Svanikier;
10. Closure.
01
Contents
03 Financial Highlights
06 Corporate Profile
07 Corporate Information
08 Board of Directors
12 Executive Committee
28 Chairman’s Statement
32 Directors’ Report
GROUP BANK
2017 2016 2017 2016
At year end
Number of branches 75 75 75 75
03
Corporate Profile
Convenience,
Speed & Security
are now a standard
requirement of the rapidly
changing customer-bank
relationship.
Edward Effah
Board Chairman
Fidelity Bank was issued with its universal par with the best in the world. Fidelity above all, a customer-centric culture,
banking license on June 28 2006, making Bank offers a comprehensive range Fidelity Bank is contributing its quota to
Fidelity Bank Ghana Limited, the 22nd of products and services to meet the the development of the banking industry
bank to be licensed by the Bank of Ghana banking and financial needs of existing and by extension, the Ghanaian economy.
under the new Banking Act, 2004 (Act and potential customers. To ensure the
673). The Bank is owned by Ghanaian relevance of our comprehensive range On October 1, 2014, the Bank acquired
individuals, other institutional investors of products and services, we continually Pro-Credit Savings and Loans Company
and its senior executives. review the demographics of our customer Limited (PCSL) from Pro-Credit Holding
segments to ensure that our offerings Germany (PCH) and the DOEN Foundation
The Bank was formerly Fidelity Discount meet the banking and financial needs of of the Netherlands. Pro-Credit Savings
House, the leading discount house in existing and potential customers. and Loans Limited (PCSL) was a non-
Ghana. After operating profitably for 8 bank financial institution that provided
years, the business environment in the savings and lending services to its clients.
country attracted investors to the idea of Fidelity Bank’s vision is to become
establishing a bank. a world-class financial institution Fidelity Bank has two subsidiaries:
that provides superior returns for all • Fidelity Asia Bank Limited
Fidelity Bank has a team of high calibre stakeholders. With people who are • Fidelity Securities Limited
professionals with diverse skills and professional and proactive, state of the
experience. The Bank has invested heavily art technology, exceptional corporate Fidelity Asia Bank Limited (FABL) was
in technology and continues to invest governance standards, good knowledge established in July 2012 as a wholly owned
heavily in training to ensure that it is at of the local market, financial capital and Asian subsidiary in Malaysia. FABL carries
on the business of offshore banking.
07
Meet the Board
Edward established the Fidelity Group in October 1998 after Jim Baiden is the Managing Director and Co-founder of Fidelity Bank
a successful career as a senior finance executive. Fidelity is a and a member of the Bank’s 3 member Executive Directors team on
financial services group comprising of Fidelity Bank Ghana the Board.
Limited, Fidelity Asia Bank Limited and Fidelity Securities
Limited. Fidelity Bank has assets of over US$ 1 Billion and In June 2016, Jim was appointed the Managing Director of Fidelity
was adjudged the best bank in Ghana in 2016 by Corporate Bank and succeeded Mr. Edward Effah who had run the Bank for 10
Initiative Ghana. Under Edward’s leadership Fidelity has years from 2006 when Fidelity was launched. Edward was, at the
been able to establish itself as a leader in its markets in same time, appointed as the Group CEO and Chairman of the Bank.
Ghana in terms of reputation, profitability and assets under Jim Baiden brings to his new role a wealth of experience and business
management. acumen having functioned as the Deputy Managing Director for 10
years during Edward Effah’s tenure as Managing Director.
Edward brought to Fidelity over fifteen years of experience
in senior executive positions in finance and treasury As a key member of the start-up team of Fidelity Discount House
management. Previous positions held include: Director in 1998, Jim served as General Manager, running the day-to-day
of Global Emerging Markets (GEM) Ghana Limited (1995- dealing room operations of the Company. In 2002 he was appointed
1998), Chief Finance Officer of Inter-Afrique Group (1994 - Executive Director to the Board of the Discount House and worked
1997), Risk Manager (1990 - 1994) of Rudolf Wolff, the City assiduously with the management team that crafted the transition
of London based derivatives and foreign exchange trader of this highly successful Money Market Intermediary to become a
and an auditor and management consultant with Coopers fully-fledged Bank in 2006. Fidelity Bank is a top 5 Bank in Ghana
and Lybrand, London (1987 - 1990). Edward is a Chartered today and is one of the top 7 banks that control 50% of banking
Accountant by profession and is a member of the Institute business in Ghana.
of Chartered Accountants in England and Wales.
Jim brings to Fidelity over 25 years of core banking experience and
Other directorships currently held by Edward are: Unilever is a specialist in Treasury and Commercial banking. He launched his
Ghana Limited (Board Chairman), Fidelity Equity Fund 1 banking career in the mid-80s at National Investment Bank where
Limited, Africa Capital LLC. he managed various portfolios at the Branch and Head-Office levels.
He subsequently joined the start-up team of the then Securities
Previous directorships held by Edward include: Board Discount House in 1990 and rose to become the Chief Dealer and
Chairman of Fidelity Capital Partners Limited, Board established a reputation as one of the best dealers on the Money
Chairman College of Health Sciences; Council Member Markets.
University of Ghana Council, Board Member of Takoradi
International Company Limited (2002 - 2009), Executive Jim has gained extensive international experience as an alumnus
Council Member of the Africa Venture Capital Association of Gerald & National a leading Money Market Intermediary in the
(2000 - 2005), Council Member of the Ghana Stock Exchange City of London in the 1990s and the Darden School of Management,
(2006 - 2007), Golden Beach Hotels Limited (2001 - 2004) University of Virginia, USA. Jim also holds a Master’s Degree in
and Ghana Agro Food Complex (2005 - 2006). Banking & Finance from Finafrica Foundation, Italy as well as a
Bachelor’s degree in Economics with Statistics from the University
of Ghana, Legon. Jim serves on a number of Boards including Stallion
Trust & Administration. He is the Chairman of the Action Chapel
Scholarship Foundation.
Julian Opuni has been in the financial services Ambassador Johanna Odonkor Svanikier is the Founder, President
sector for over 20 years. He initially joined and CEO of the Heritage and Cultural Society of Africa an NGO, non-
Fidelity Bank as the Head, Commercial Banking profit, social enterprise with the mission to preserve, advocate for
at the inception of that unit. He has extensive and promote the use of African heritage and culture for social and
economic progress and development. In 2017 she organised the hugely
experience in business development, credit
successful African Diaspora Homecoming Conference to celebrate
analysis, and sales management and has also Ghana’s 60th independence anniversary in a memorable and
been involved in various youth entrepreneurship meaningful way. She is Ghana’s recent past Ambassador to France &
& business mentoring projects. Portugal and Permanent Delegate to UNESCO and La Francophonie.
During her tour of duty in Paris, she initiated Ghana’s membership of
Prior to joining the bank, Julian had a successful the OECD Development Centre where she represented Ghana on the
career with Lloyds Bank in the UK where he Governing Board.
worked for over 18 years. He joined Lloyds on
their expedited management training program, Ambassador Svanikier chaired the ECOWAS group at UNESCO from
holding many roles in operations and retail 2014 to 2015 and successfully campaigned to win Ghana a seat on
banking which included branch management. the Executive Board. She has been a non-executive director of Fidelity
Bank Ghana and Fidelity Asia Bank from 2008 to the present. In
Additionally he held several senior positions
2012 she was appointed to serve as a Commissioner on the National
in both Business & Corporate Banking, finally
Development Planning Commission (NDPC). She has served on
leaving as a Senior Manager with responsibility the Advisory Board of the Ministry of Lands and Natural Resources
for various business centres to the west of London. under two different administrations as well as on the Petroleum
Revenue Advisory Commitee of the Ministry of Finance. She currently
He is an Associate of the Institute of Financial serves as co-chair of the Board of Trustees of the Duke of Edinburgh
Services (Aifs) and holds a Bsc in Banking International Award/ Head of State Award Scheme. She is also a
& Financial Services from the University of member of the Board of the Economic Club of Ghana.
Manchester Institute of Science & Technology.
Julian is also an accredited specialist in Ambassador Svanikier is a barrister by profession. She was called to
Manufacturing, Legal and Property lending. the Bar in England and Wales at the Inner Temple. She is also Solicitor
and Advocate of the Supreme Court of Ghana. She has previously
been a university lecturer and legal and development consultant. She
is the founder and first Director of the Human Rights Study Centre
at the University of Ghana, Legon. She holds Bachelors and Masters
Degrees in law from the London School of Economics, UK, a Masters
in Public Administration from Harvard Kennedy School, U.S.A. and a
Masters in Political Science from the University of Oxford, U.K. She was
a Fulbright Scholar at Harvard University. She is the author of several
publications including “Womens’ Rights and the Law in Ghana.”
09
Meet the Board
Emmanuel Barima Manu LLB, is a co-founding Mrs Adwoa Annan is the co-founder of Geothermal
member and the Managing Partner of Bari & Co. Management Services Ltd, a green technology company.
He has extensive experience in corporate and Prior to that, Mrs Annan had a successful 30 year career
commercial practice including negotiation of in the financial services sector having worked in both the
main stream banking and microfinance sector. She has
commercial and business contracts and other
extensive experience in banking operations, customer
varied agreements. Mr. Manu was called to the service, sales management and strategic management.
Ghana Bar in October 1989 and has worked with
other law firms like Naoferg Chambers and Law She started her career with Barclays as a management
Trust Company. trainee where she worked for 23 years, holding various
senior management roles in operations, internal audit,
Barry has advised many clients on commercial branch management and business development.
transactions, contracts, corporate business and Following a passion to empower women, she joined
oil and gas laws including African Gold Group Women’s World Banking in 2007 as the Chief Operations
Inc, Bulk Oil Storage and Transportation Company Officer overseeing all aspects of business strategy growth
Ltd, Elmina Beach Resort, Atholl Energy Limited, with specific concentration on the banking operations,
credits, IT, Human Resources and Administration units. In
Allterrain Services Ghana Limited, Coco Palm
2011, she became the CEO and voluntarily retired after 4
Limited and ALTROM Ltd, Switzerland. He has also
years of implementing a successful turnaround program.
represented Fidelity Bank on numerous occasions
as Lead legal adviser. She holds an International Baccalaureate diploma from
United World College of the Atlantic (U.K), a Bachelor’s
Degree in Economics from the University of Kent at
Canterbury (UK) and a professional graduate diploma
in management (International Professional Managers
Association). She is also a graduate member of the
Chartered Institute of Administration and Management
Consultancy.
11
Executive Committee [Includes Managing Director and Deputy Managing Director]
Sam has over 14 years’ experience in Financial Markets Angela became the first female director in charge of
and Treasury Management, with a strong focus and business and is currently the Divisional Director for
understanding of Sub-Saharan African markets. He Corporate and Investment Banking 2, which oversees the
has worked in Africa and the UK with structuring, Public Sector Group, Financial Institutions Group, Local
origination, trading and execution experience in several Corporate 2 and the Asian Desk.
African markets including but not limited to Nigeria,
Ghana, Kenya, Tanzania, Uganda, Egypt, Ethiopia and Before she took up this role, she was the Director in charge
Botswana. of the Local and Multinational Corporates within the then
Wholesale Banking Unit.
Prior to joining Fidelity Bank where Sam now manages
the Bank’s Financial Markets, Capital Markets and She was also Director of Public Sector and Institutional
Treasury businesses, he was the Director, Regional Banking. She has worked in many roles in the Bank,
Head, Global Markets- Distribution for Barclays based in including being the head of the Telecoms and Utilities
Nigeria covering West Africa. desk.
Sam was also the Director, Regional Head, Global Markets Angela worked as a licensed dealing broker/Investment
- Distribution, based in Nairobi covering East Africa. advisor, with Databank Financial Services and traded on
Over the years, Sam has also gained strong Treasury the Ghana Stock Market before joining the Fidelity Group.
Management skills and prior to Fidelity Bank, managed
the Treasuries for Barclays Bank Botswana and Ghana. She is currently a member of the University of Ghana
In 2010 and for three years, Sam was responsible for Business School Corporate Advisory Committee, a member
coordinating out of London, Barclays Capitals structured of the Executive Women’s Network in Ghana and a board
product offering (structured assets, Index products, member of the Ghana Railways Development Authority.
Access Trades etc) into and out of Sub-Saharan Africa.
She is a product of the University of Ghana, where she
Sam is devoted to the continuous growth of businesses acquired both her Executive MBA and Bachelor of Arts
and people, with a passion to leaving things better than degree.
he found them.
Kwabena joined Fidelity Bank in August 2017 as Divisional Edward is a Chartered Accountant with over 19 years
Director, Corporate & Investment Banking with 16 years experience in the Financial Services Sector.
experience in the Banking Industry.
As the COO of the Bank, he oversees the Finance,
Prior to joining Fidelity, he was Head, Commercial Banking Banking Operations, Business Optimization and
and member of the Executive Committee of Standard Corporate Services and Administration Departments,
Chartered Bank Ghana Ltd. He joined Standard Chartered Facilities and Properties management, Brand and
Bank in 2006 as Senior Relationship Manager, Corporate Corporate Communications, Internal Control and
Banking and rose through the ranks to become General Customer Experience. Until his appointment as the
Manager, SME Banking and Head, Local Corporate. Chief Operating Officer, he had served in various
capacities as Director of Banking Operations and
He has vast experience in the industry especially SME and Finance Director. Prior to joining Fidelity as Accounts
Corporate Banking. He made significant impact on Standard Officer, he worked at Enterprise Insurance Co. Ltd as a
Chartered Bank Ghana’s SME business by developing it to be Technical Trainee and at CDH Insurance Ltd as a Senior
a major part of the SME franchise in Africa. Accounts Officer.
Prior to joining Standard Chartered Bank, he was with The Edward holds an Executive MBA degree from the
Trust Bank (now Ecobank) and Amalgamated Bank (now University of Ghana Business School and a BA (Hons) in
Bank of Africa) where he was Senior Relationship Manager, Economics from the same University. He is a member
Corporate Banking. of the Institute of Chartered Accountants, Ghana and
has participated in various finance based workshops
Kwabena practiced Civil Engineering for 6 years before in both Ghana and overseas including workshops at
joining the banking industry. Harvard and Wharton.
13
Executive Committee [Includes Managing Director and Deputy Managing Director]
George has worked in the IT world for the past twenty Shirley-Ann Awuletey-Williams joined Fidelity Bank
five years in various capacities and management levels. in May 2008 as a Corporate Account Manager in the
He is an experienced IT professional who has worked Corporate Banking Department and was transferred
with Multinational companies like Deloitte and Touch to the Risk Management Department as the Acting
Consultants, Standard Chartered Bank Ghana Limited, Head in January 2009 and later confirmed as the
and Stanbic Bank Ghana (a member of the Standard Director of Credit Risk Management. She is currently
Bank Group) where he held various positions within the the Chief Risk Officer of the Bank.
Technology and Operation units.
With over twenty years’ experience in banking, Shirley-
He was the Regional Chief Information Officer (West Africa) Ann previously worked with Merchant Bank (Ghana)
for Standard Bank Group prior to joining Fidelity Bank. Limited (now UMB Bank) in several departments
including Banking Operations, SME Banking and
He holds a Bachelor of Science degree in Computer Science, Corporate & Institutional Banking. She also managed
an Executive Master of Business administration Degree the Credit Analysts & Corporate Support functions
(EMBA) in Entrepreneurial Management, a certificate and was a Team Leader responsible for the Light
in Corporate Governance and a member of the Ghana Manufacturing Sector. Her core competencies include
institute of Directors. He brings a wealth of experience Account Relationship Management, Credit Analysis/
to provide strategic vision, IT governance, Operational Monitoring and Risk Management.
leadership and Technology solutions for the Fidelity Bank Shirley-Ann holds a first degree in Agricultural
Group. Economics from the University of Ghana, Legon and
an MBA in Finance from the University of Leicester
School of Management, UK. She is also an Associate of
the Chartered Institute of Bankers, Ghana.
Atta Gyan has over thirteen years experience in banking Owusu Boahen is an HR professional with over 12
and comes to his current role with a strong background years HR experience in the Banking industry. He joined
in control, audit, finance, operations, compliance and Fidelity Bank in 2013 as a Human Resources Business
financial risk management. Atta joined Fidelity Bank in Partner for Retail Banking and later as a Business
September 2007 and has since held many senior roles in Partner for our Corporate and Investment Banking
Audit and Finance. department. Owusu was a vital player in the Human
Resources team that helped build the required HR
Prior to joining Fidelity Bank, he worked at Multimedia infrastructure to support the Bank’s growth agenda.
Group Ltd as the Finance Manager for Joy FM. In that role, Prior to joining Fidelity Bank, Owusu worked with
he set up the Finance function at the station, coordinated Barclays Bank Ghana in various capacities in the
the station’s strategy and budget, and had oversight Human Resources Department. He joined Barclays
responsibility for credit control and client service. Bank Ghana in 2005 and rose through the ranks to
later become an HR Business Partner to nine key
Atta began his banking career at SG-SSB Ltd (now Société departments. He is a Member of the Society for
Generale Ghana) as an Inspector after a stint at Ghana Human Resource Management (SHRM), USA, and an
Airways. At SG-SSB, he was a key member of the taskforce of associate member of the Institute of Human Resource
Operations and Control staff that led the bank’s transition Management Practitioners, Ghana. Owusu holds an
from a locally controlled bank to a foreign owned entity. MPhil in Industrial/Organizational Psychology from
the University of Ghana, Legon.
Atta is a certified Financial Risk Manager (FRM®) and a
member of the Global Association of Risk Professionals
(GARP), USA. He is a Chartered Accountant and a member
of the Institute of Chartered Accountants, Ghana. He
holds a Masters (Executive MBA) degree in Finance and
a Bachelors (Bsc. Admin) degree in Accounting from
the University of Ghana, Legon. Atta also holds a post-
chartered diploma certificate in International Financial
Reporting Standards (IFRS).
15
Executive Committee [Includes Managing Director and Deputy Managing Director]
Maataa Opare
Group Head of Legal & Company Secretary
Culture of
Excellence
amongst our staff is one of
our biggest objectives.
We encourage all to
maintain a well-rounded life
because happiness and
contentment play a
vital role in giving the
customer our best.
Jim Baiden
Managing Director
17
Our Journey
FROM
PROFESSIONAL
TRAINING
PROGRAMMES
FITNESS
AND FUN
GAMES
Fidelity Bank
is truly one of
the best places
to work.
19
Corporate
Being A beacon
Information
of Positive Change
Charity@Work
Fidelity Bank embraces the following five key CSR principles:
1. Simple and focused on solving social issues
2. Involve colleagues
3. Aligned to core business
4. Be differentiated from sponsorships
5. Innovative and involving partnerships
In 2015, our donation of a 12-seater toilet block for St. Maurice R/C
A&B JHS in La contributed to the high performance in their BECE
examination. This year, 2017, we built on this support and provided
100 mono desks for their pupils. The support allowed the pupils to
sit comfortably in class.. The Bank believed it would similarly have a
positive impact. The gesture was in alignment with the Bank’s strategic
focus area - education and child development.
Official presentation of 100 mono desks to St. Maurice R/C A&B JHS, LA in May 2017
Fidelity Bank, in association with JA (Junior Achievement) - an organization dedicated to youth entrepreneurship and
the Africa Internship Academy (AIA)- an enterprise that provides opportunity to gain practical work and professional
development in professional fields, hosted 20 students, aged 14 to 18 from the following schools: St. Thomas Aquinas
and Holy Trinity Cathedral Senior High School (HOTCAS) in Accra for job shadowing at Fidelity Bank.
The said program gave students “a-day-at-the-office” experience: a visit to a professional work environment to
gain insight into how to find and keep a fulfilling career. The senior high school students were paired with Bank
officials, with the goal of helping them acquire and apply the skills needed in demanding and ever-changing work
environments.
The Job Shadow initiative offered staff the opportunity to give their time and work spaces to build the futures of
students. This had a positive impact on the students. It helped the students have a more focused mind to envision
their career possibilities.
21
Strategic Partnerships - Driving Social Change through Partnerships
USAID Smart Agri Finance project activities • Introduction of Y’ello Save, an instant savings account,
to all MTN users in Northern Region. The high interest
Fidelity Bank partnered with SNV Netherlands earning of 12%p.a allows beneficiaries to cultivate
Development Organization with funding from USAID the habit of saving with a minimum of GHC5, no
under the Smart Agri-Finance Project to build a robust documentation required.
Smart Agent network and provide Smart Accounts to • Field visits to Upper East, Upper West and the Northern
farmers. This is intended to increase access to affordable Region to educate farmers on the benefits of banking
savings and promote mobile finance while increasing and work with local partners and beneficiaries in the
commercial opportunities for women in the SADA communities.
northern region.
• Launched the “Building Savings Culture Campaign” in
The following activities took place in 2017 to help achieve the three northern regions to encourage the farmers to
the objectives: save their earnings after their harvest.
23
Strategic Partnerships - Driving Social Change through Partnerships
Supporting the Cocoa Sector work in the cocoa value chain. Fidelity Bank is opening
accounts and providing financial literacy training to
Cocoa is the main stay of the Ghanaian economy, and over 200 youth being trained in the Ashanti and Central
Fidelity Bank has partnered with Solidaridad, GIZ, Regions.
Dizengoff and Cocobod to provide financial solutions to
farmers. With GIZ and Dizengoff, we are providing an incentive
programme for farmers to save through their smart
The partnership with Solidaridad aims to encourage account and receive discounts when they buy inputs
young people (18 yrs - 24yrs), to go into cocoa farming and from Dizengoff.
The resultant impact of these projects are in the improved socio – economic
standing of persons living in rural and often undeserved communities.
25
2017 Financial Statements
Distinguished Shareholders,
It is with great pleasure that I present to you, the performance
of your bank for the year ended 31st December, 2017. After a
rather challenging 2016, I can proudly report that your bank
bounced back quite significantly to record an end-of-year
profit before tax of GHS135 million representing a massive
growth from the GHS18.6 million recorded in 2016. Most
notably, your bank won the mandate as Joint Lead Manager
for the Government of Ghana on the issuance of the GHS 10
billion ESLA bond programme. The ESLA bond programme, the
largest local currency corporate bond issuance in Sub-Saharan
Africa, was successfully executed by raising GHS 4.7 billion for
the initial bond tranche issuance and has helped solidify our
position as a top Tier one (1) bank in Ghana.
Operating Environment Headline consumer price inflation to GH¢18.6 million in 2016. The 2017
also declined steadily from 15.4% in profit before tax represents 66% of
The global economy rebounded from
December 2016 to 11.8% in December the 2015 profit before tax.
a downward trend last year to end
2017 drawing inflation closer to the
2017 with an estimated growth rate
Government’s medium-term target Dividends
of 3.7% on the back of strong growth
band of 8±2%. On the currency front,
in the Eurozone, Japan and some The Board has proposed a dividend of
the cedi depreciated by 5%, 13% and
emerging markets such as Argentina, GH¢ 0.70 per share for this year. This
16% against the USD, GBP and EUR
Brazil and Russia. According to the represents a dividend growth of 100%
respectively in 2017. This compares
International Monetary Fund (IMF), from the 2016 dividend payment of
favourably to the cedi’s performance
the global economy is expected to GH¢ 0.35 per share.
in 2016 where it depreciated by 9.6%
continue its upward trajectory to end
to the USD.
2018 with a growth rate of 3.9%.
Staff Issues
In line with global economic trends, 2017 performance In pursuit of our strategic priority of
the Ghanaian economy grew strongly In keeping with our stated vision of increasing our market share in the
with real GDP growth for 2017 creating value for all our stakeholders, Corporate and Investment Banking
estimated at 7.9%. This compares the Bank recorded an impressive (CIB) business, the Bank made
favourably with the budgeted growth performance in 2017 relative to 2016 investments in recruiting highly
rate of 6.3% and the 3.7% growth on a number of key performance skilled senior management staff
rate for 2016. The strong growth indicators. The Bank recorded a and made critical appointments
performance is largely attributable growth in balance sheet size of within the CIB division. A number of
to larger than planned oil production. 29% to GH¢5.38 billion. Operating strategic hires were made in our key
The IMF projects Ghana’s real income increased by GH¢62 million business areas which have already
GDP growth rate for 2018 at 8.9% which represented a 13% growth started yielding results.
compared to 3.4% projected for the over last year’s to end the year at
Sub-Saharan Africa region. Interest GH¢523 million. Our deposit base also Julian K. Opuni, the Divisional
rates generally declined during the increased by 24% to GH¢3.8 billion. Director of Retail, was also promoted
year with the Bank of Ghana policy Having made extraordinary loan loss to become Deputy Managing Director
rate reducing from 25.5% in December provisions in 2016, loan loss provisions of the Bank and further empowered
2016 to 20% in December 2017. reduced significantly in 2017 by 58% to drive our Retail Banking strategy
Similarly, the 91-day treasury bill rate to GH¢ 71 million. As a result of the and lead the division to take a bigger
closed the year at 13.35% from 16.43% aforementioned, the Bank recorded stake in the retail markets.
in December 2016 whilst the 182- a 629% increase in profit before tax
day treasury bill rate declined by 376 of GH¢135 million in 2017 compared
basis points to end the year at 13.88%.
A financial crime unit was created to Given the positive outlook for both the global and
ensure that the Bank is well equipped in Ghanaian economic environment for 2018, we look
terms of systems and people to combat forward to continued growth in the ensuing year.
fraud both internally and externally and We count on the continued support of our Board,
to ensure that we proactively manage Management and staff to make 2018 another success
financial crime, income leakages, and story.
respond to the risks of digitization.
29
Managing Director’s Report
The year began with some uncertainties as the In 2017, the cedi was relatively stable and was buoyed by Bank of Ghana interventions
baton to steer the affairs of this country changed in the forex market, as well as rising investor confidence in the economy. In 2018, a
hands and a new government was formed. A strong supply of foreign currency inflows from the ongoing IMF programme, the
number of new appointments were made to usual cocoa syndicated loan, foreign direct investments and donor inflows will help
various public institutions, most of who do Ghana reduce its current account deficit. Furthermore, the tight monetary policy
business with the financial sector. The change will also help shore up the cedi.
environment thus slowed down banking business
considerably in our Bank and elsewhere. By the 2017 Performance
beginning of the second quarter, however, activity
levels had improved rapidly within the Bank and I am pleased to report that the Bank managed to deliver strong results on key
in the economy generally. performance indicators, generating additional value for stakeholders.
31
Report Of The Directors
Profit after tax (attributable to equity holders) 95,695 8,972 90,434 14,711
Income surplus account brought forward 14,659 47,428 20,718 47,748
110,354 56,400 111,152 62,459
Transfer to statutory reserve fund (22,608) (3,678) (22,608) (3,678)
Transfer from credit risk reserve 6,279 5,582 6,279 5,582
Ordinary share dividend declared and paid (8,818) (31,921) (8,818) (31,921)
Preference share dividend paid (46,661) (11,724) (46,661) (11,724)
The directors recommend the payment of a dividend of GH¢ 0.70 per share (2016: GH¢0.35).
Auditor
In accordance with Section 134(5) of the Companies Act, 1963 (Act 179), the auditors, Messrs.
PricewaterhouseCoopers (PwC), will continue as auditors of the Bank.
The financial statements of the Bank and the Group were approved by the Board of Directors on 22nd March, 2018
and signed on their behalf by:
Edward Effah Jim Baiden
Board Chairman Managing Director
33
Corporate Governance Report
Commitment to Corporate These principles have been articulated The Board has delegated various
in a number of corporate documents, aspects of its work to its Risk and Audit,
Governance including the company regulations, a Credit Risk Management, Technology,
Fidelity Bank Ghana Limited and its corporate governance charter, rules of and Remuneration and Staff Welfare
Subsidiaries operate in accordance procedures for Boards, a code of conduct Committees in order to strengthen its
with the Fidelity Group principles and for directors and rules of business ethics corporate governance and bring it in line
practices on corporate governance. These for staff. with international best practice with the
principles and practices are guided by the following membership and functions:
Basel Committee standards on corporate
governance which constitutes the best of
The Board of Directors
international practice in this area. The Board is responsible for setting the Risk and Audit Committee
institution’s strategic direction, leading
Emmanuel Barima Manu Chairman
The key guiding principles of the Group’s and controlling the institution and
Aliya Shariff Member
governance practices are: monitoring activities of the executive
Laureen Kouassi-Olsson Member
management.
i. good corporate governance
enhances shareholder value; The Risk and Audit Committee is made up
As of 31 December 2017, the Board of
of non-executive directors and performs
ii. the respective roles of shareholders, Directors of Fidelity Bank Ghana Limited
the following functions among others:
Boards of Directors and management consisted of two Executive Directors
in the governance architecture should with the remaining being Non-Executive
• nominates the auditors of the Bank for
be clearly defined; and Directors. The board members have wide
approval by shareholders;
iii. the Boards of Directors should have experience and in-depth knowledge in
• review of compliance with company
majority membership of independent management, industry and financial and
policies;
directors, defined broadly as directors capital markets which enables them to
• review of the external auditors report;
who are not employed by the Group or make informed decisions and valuable
and
Company, or who are not affiliated contributions to the Group’s progress. The
• review of internal controls and systems.
with organisations with significant Board met five times during the year.
financial dealings with the Group.
Credit Risk Management The Remuneration and Staff Welfare • and inform the Board of Directors on IT
Committee’s main responsibility includes related matters.
Committee proposing and making recommendations
on human resource issues and matters
Laureen Kouassi-Olsson
Ms. Aliya Shariff
Chairperson
Member relating to terms and appointment of
Code of Conduct
Adwoa Nyantakyiwa Annan Member senior management and staff of the Bank. As part of the Bank’s corporate governance
Jim Baiden Member practice, management has communicated
The Board has adopted standard the principles of the Bank’s code of conduct
The Credit Committee is mainly made up evaluation tools to help assess annually to all employees. The code of conduct
of non-executive directors and performs the performance of the Board, its provides a basic framework and guidance
the following functions among others: committees and individual members. for behaviours and business conduct. The
code of conduct also serves as a reference
point in all aspects of employee’s working
• considers and approves credit exposures
which exceed the approval limit of
Technology Committee relationships with other employees,
management’s credit committee; Adwoa Nyantakyiwa Annan Chairperson customers, suppliers, government
• sets and reviews lending limits for Amb. (Mrs.) Johanna Svanikier Member officials, regulators, joint venture partners,
various levels of authorisation; Edward Effah Member competitors and the broader community.
• considers and approves inter-bank Julian Kingsley Opuni Member
lending; and
The Technology Committee is mandated
Anti-Money Laundering
• considers and approves facilities
to: The Bank has established an anti-money
referred to it by the Management Credit
• To provide long term strategic guidance laundering system in compliance with
Committee.
on technology; the requirements of Ghana’s Anti-
• Oversee major information technology Money Laundering Act 2008, Act 749.
Remuneration and Staff (IT) related strategies, projects and These include due diligence for opening
Welfare Committee technology architecture decisions; new accounts, customer identification,
monitoring of high risk accounts, record
• Monitor whether the Bank’s IT programs
Amb. (Mrs.) Johanna Svanikier Chairperson keeping and training of staff on money
effectively support its business objectives
Emmanuel Barima Manu Member laundering which assist in reducing
and strategies;
Jim Baiden Member regulatory and reputational risk to its
• Confer with the Bank’s senior IT
Edward Effah Member business.
management team;
REPORT ON THE AUDIT The financial statements on pages 38 statements section of our report.
to 114 comprise: We believe that the audit evidence
OF THE FINANCIAL • the separate and consolidated we have obtained is sufficient and
STATEMENTS statement of financial position as at appropriate to provide a basis for our
31 December 2017; opinion.
• the separate and consolidated
Opinion statement of comprehensive Independence
In our opinion, the accompanying income for the year then ended; We are independent of the Group in
financial statements give a true and fair • the separate and consolidated accordance with the International Ethics
view of the financial position of Fidelity statement of changes in equity for the Standards Board for Accountants’ Code
Bank Ghana Limited (the Bank) and its year ended; of Ethics for Professional Accountants
subsidiaries (together the “Group”) as • the separate and consolidated (IESBA Code). We have fulfilled our other
at 31 December 2017, and of the financial statement of cash flows for the year ethical responsibilities in accordance
performance and cash flows of the then ended; and with the IESBA Code.
Bank standing alone and the Group • the notes to the separate and
for the year then ended in accordance consolidated financial statements,
with International Financial Reporting which include a summary of
Key Audit Matters
Standards and in the manner required significant accounting policies. Key audit matters are those matters
by the Companies Act, 1963 (Act 179) that, in our professional judgement,
and the Banks and Specialised Deposit- were of most significance in our audit of
Taking Institutions Act, 2016 (Act 930).
Basis for opinion the financial statements of the current
We conducted our audit in accordance period. These matters were addressed in
What we have audited with International Standards on the context of our audit of the financial
We have audited the financial Auditing (ISAs). Our responsibilities statements as a whole, and in forming
statements of Fidelity Bank Ghana under those standards are our opinion thereon, and we do not
Limited (the “Bank”) and its subsidiaries further described in the Auditor’s provide a separate opinion on these
(together the “Group”) for the year responsibilities for the audit of the matters.
ended 31 December 2017. separate and consolidated financial
Key audit matter How our audit addressed the key audit matter
Impairment provision on loans and advances to customers
– GHS 199 million
Impairment of loans and advances to customers is a highly We obtained an understanding of the key controls within the loan
subjective area due to the level of judgement and estimate applied origination, approval, monitoring and recovery processes.
by management in the identification and recognition of impairment
events and the measurement of impairment provisions.
The impairment calculations are made on individually identified We tested management’s process for identifying impaired loans and
loans (specific impairment) and on a portfolio of loans (collective selected a sample of loans that had not been identified as impaired
impairment). and formed an independent view about the appropriateness of the
conclusions reached by management.
Individually identified loans are assessed based on estimates and For the individually identified impaired loans, on a sample basis,
judgements made by management on the following: we considered the latest developments in relation to the borrower;
• the determination of an impaired loan; examined the future cash flows prepared by management and the
• the adequacy and recoverability of collateral; sources of repayment to support the calculation of the impairment.
• the expected cash flows to be collected; and
• the estimated timing of the future cash flows.
Impairment provisions for loans assessed on a portfolio basis are We also assessed the competence, independence and objectivity
determined using models that are based on inputs such as the of management’s valuation experts used for the valuation of
probability of default, the loss given default and the loss identification collaterals.
period.
Impairment provisions represent management’s best estimate of the For the collective impairment, we assessed the reasonableness
losses incurred within the loan portfolio at the reporting date. of the methodology applied in determining the inputs for the
probability of default, the loss given default and key assumptions
used in the loss identification period.
The accounting policies, critical estimates and judgements and We checked the accuracy of the inputs into the model and
impairment charge are set out in notes 2.5.7, 4b and 17 to the financial recalculated the collective impairment amount based on the
statements. incurred loss model.
35
Independent Auditor’s Report To The Members of Fidelity Bank
Ghana Limited
Other information inconsistent with the separate and give a true and fair view in accordance
consolidated financial statements or with International Financial Reporting
The directors are responsible for
our knowledge obtained in the audit, Standards and in the manner required
the other information. The other
or otherwise appears to be materially by the Companies Act, 1963 (Act 179)
information comprises the Report of
misstated. and the Banks and Specialised Deposit-
the directors, the Corporate governance
Taking Institutions Act, 2016 (Act 930),
report, the Value added statement
If, based on the work we have performed and for such internal control as the
and the Shareholder information but
on the other information, we conclude directors determine is necessary to
does not include the separate and
that there is a material misstatement of enable the preparation of financial
consolidated financial statements and
this other information, we are required statements that are free from material
our auditor’s report thereon, which
to report that fact. We have nothing to misstatement, whether due to fraud or
we obtained prior to the date of this
report in this regard. error.
auditor’s report, and the Chairman’s
statements, Managing Director’s report
When we read the Chairman’s In preparing the separate and
and the Corporate social responsibility
Statement, Managing Director’s report, consolidated financial statements, the
which are expected to be made available
and the Corporate social responsibility, directors are responsible for assessing
to us after that date.
and we conclude that there is a material the Bank and the Group’s ability to
misstatement therein, we are required continue as a going concern, disclosing,
Our opinion on the separate and
to communicate the matter to those as applicable, matters related to going
consolidated financial statements does
charged with governance. concern and using the going concern
not cover the other information and we
basis of accounting unless the directors
do not express any form of assurance
either intend to liquidate the Bank and/
conclusion thereon. Responsibilities of the or the Group or to cease operations, or
In connection with our audit of the directors for the financial have no realistic alternative but to do so.
separate and consolidated financial
statements, our responsibility is to read statements The directors are responsible for
overseeing the Group’s financial
the other information identified above The directors are responsible for reporting process.
and, in doing so, consider whether the preparation of separate and
the other information is materially consolidated financial statements that
Auditor’s responsibilities for the audit of the the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal
financial statements control;
Our objectives are to obtain reasonable assurance about whether
the separate and consolidated financial statements as a whole are • Evaluate the appropriateness of accounting policies
free from material misstatement, whether due to fraud or error, and used and the reasonableness of accounting estimates
to issue an auditor’s report that includes our opinion. Reasonable and related disclosures made by the directors;
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a • Conclude on the appropriateness of the directors’ use
material misstatement when it exists. Misstatements can arise of the going concern basis of accounting and, based
from fraud or error and are considered material if, individually or in on the audit evidence obtained, whether a material
the aggregate, they could reasonably be expected to influence the uncertainty exists related to events or conditions that
economic decisions of users taken on the basis of these separate may cast significant doubt on the ability to continue as a
and consolidated financial statements. going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
As part of an audit in accordance with ISAs, we exercise professional report to the related disclosures in the separate and
judgement and maintain professional scepticism throughout the consolidated financial statements or, if such disclosures
audit. We also: are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the
• Identify and assess the risks of material misstatement of the date of our auditor’s report. However, future events or
financial statements, whether due to fraud or error, design and conditions may cause the Group to cease to continue as
perform audit procedures responsive to those risks, and obtain a going concern;
audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement • Evaluate the overall presentation, structure and content
resulting from fraud is higher than for one resulting from error, of the financial statements, including the disclosures,
as fraud may involve collusion, forgery, intentional omissions, and whether the financial statements represent the
misrepresentations, or the override of internal control; underlying transactions and events in a manner that
achieves fair presentation; and
• Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
• Obtain sufficient 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 the directors 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 the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and have communicated 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 the directors, we determine those matters that were of most significance in the audit of the
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.
In accordance with section 85(2) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) we hereby confirm that:
i) in our opinion, the accounts give a true and fair view of the state of affairs of the Bank and the results of operations for the period
under review;
ii) we were able to obtain all the information and explanations required for the efficient performance of our duties as auditor;
iii) in our opinion, the Bank’s transactions were within its powers;
iv) in our opinion, the Bank has, in all material respect, complied with the provisions of this Act; and
v) in our opinion, the Bank has in all material respect complied with the provisions of the Anti-Money Laundering Act, 2008 (Act 749),
the Anti-Terrorism Act, 2008, (Act 762) and the Regulations made under these enactments.
The engagement partner on the audit resulting in this independent auditor’s report is Michael Asiedu-Antwi (ICAG/P/1138).
PricewaterhouseCoopers (ICAG/F/2018/028)
Chartered Accountants
Accra, Ghana
29 March 2018
37
Statement of Comprehensive Income
[All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP BANK
Notes 2017 2016 2017 2016
Items in the statement above are disclosed net of tax. The income tax relating to each component of other
comprehensive income is disclosed in note 14.
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
GROUP BANK
Notes 2017 2016 2017 2016
Assets
Cash and cash equivalents 15 1,540,126 976,971 1,548,520 961,024
Investment securities 16 2,533,899 1,654,207 2,527,479 1,650,277
Loans and advances to customers 17 1,066,535 1,352,595 1,026,794 1,314,793
Investments (other than securities) 18 - 27 12,471 8,291
Other assets 19 117,303 119,314 130,483 130,260
Deferred tax asset 14 2,629 7,357 2,610 7,359
Property plant and equipment 20 111,477 93,185 111,386 93,019
Intangible assets 21 18,870 8,793 17,294 7,568
Non current assets held for sale 22 1,011 1,011 1,011 1,011
Total assets 5,391,850 4,213,460 5,378,048 4,173,602
Liabilities
Deposits from customers 23 3,852,721 3,136,555 3,843,312 3,100,614
Deposits from banks and other financial institutions 24 111,769 120,377 113,159 120,377
Borrowings 25 683,797 346,849 683,797 346,849
Other liabilities 26 199,978 113,368 203,120 112,415
Current tax liability 13 575 - 451 -
Total liabilities 4,848,840 3,717,149 4,843,839 3,680,255
Equity
Stated capital 28 264,486 264,486 264,486 264,486
Statutory reserve 29 186,191 163,583 186,191 163,583
Other reserves 30 35,148 28,665 25,549 19,642
Credit risk reserve 31 18,639 24,918 18,639 24,918
Income surplus 32 38,546 14,659 39,344 20,718
Total equity attributable to equity holders 543,010 496,311 534,209 493,347
Total liabilities and equity 5,391,850 4,213,460 5,378,048 4,173,602
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
The financial statements on pages 38 to 114 were approved by the Board of Directors on 22 March 2018
and signed on its behalf by:
39
Statement of Changes In Equity
[All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP
Year ended 31
December, 2016 Stated Statutory Other Credit risk Income Total
capital reserves reserves reserve surplus equity
Balance at 1 January
2016 264,486 159,905 9,560 30,500 47,428 511,879
Foreign currency
translation differences
for foreign subsidiary - - 759 - - 759
Total comprehensive
income - - 19,105 - 8,972 28,077
Transfer to statutory
reserve - 3,678 - - (3,678) -
Dividend paid
(ordinary shares) - - - - (31,921) (31,921)
Dividend paid
(preference shares) - - - - (11,724) (11,724)
Balance at 31
December 2016 264,486 163,583 28,665 24,918 14,659 496,311
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
GROUP
Year ended 31
December, 2017 Stated Statutory Other Credit risk Income Total
capital reserves reserves reserve surplus equity
Balance at 1 January
2017 264,486 163,583 28,665 24,918 14,659 496,311
Foreign currency
translation differences
for foreign subsidiary - - 584 - - 584
Total comprehensive
income - - 6,483 - 95,695 102,178
Transfer to statutory
reserve - 22,608 - (22,608) -
Dividend paid
(ordinary shares) - - - - (8,818) (8,818)
Dividend paid
(preference shares) - - - - (46,661) (46,661)
Balance at 31
December 2017 264,486 186,191 35,148 18,639 38,546 543,010
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
41
Statement of Changes In Equity
[All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
BANK
Year ended
31 December, 2016 Stated Statutory Other Credit risk Income Total
capital reserves reserves reserve surplus equity
Balance at 1 January
2016 264,486 159,905 1,304 30,500 47,748 503,943
Total comprehensive
income - - 18,338 - 14,711 33,049
Transfer to statutory
reserve - 3,678 - - (3,678) -
Dividend paid
(ordinary shares) - - - - (31,921) (31,921)
Dividend paid
(preference shares) - - - - (11,724) (11,724)
Balance at 31
December 2016 264,486 163,583 19,642 24,918 20,718 493,347
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
BANK
Year ended
31 December, 2017 Stated Statutory Other Credit risk Income Total
capital reserves reserves reserve surplus equity
Balance at 1 January
2017 264,486 163,583 19,642 24,918 20,718 493,347
Total comprehensive
income - - 5,907 - 90,434 96,341
Transfer to statutory
reserve - 22,608 - - (22,608) -
Dividend paid
(ordinary shares) - - - - (8,818) (8,818)
Dividend paid
(preference shares) - - - - (46,661) (46,661)
Balance at 31
December 2017 264,486 186,191 25,549 18,639 39,344 534,209
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
43
Statement of Cash Flows
[All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP BANK
Note 2017 2016 2017 2016
Cash flows from operating activities
Profit before income tax 141,801 13,432 135,359 18,576
Adjustments:
Depreciation 20 9,485 9,081 9,409 9,007
Amortisation 21 1,144 1,729 522 1,229
Impairment on financial assets 12 84,931 179,083 84,931 179,083
Profit on disposal of property and equipment 20 (479) (2,486) (479) (2,486)
Exchange difference on borrowings 25 21,054 33,091 21,054 33,091
Operating cash flow before investment in working capital 257,936 233,930 250,796 238,500
Changes in loans and advances to customers 17 87,781 (41,836) 89,721 (4,034)
Changes in other assets 19 7,652 (47,517) 5,205 (47,878)
Changes in deposits from customers 23 716,166 127,870 742,698 97,585
Changes in deposits from banks and other financial institutions 24 (8,608) 63,621 (7,218) 33,655
Changes in other liabilities 26 140,310 (48,765) 144,406 (58,108)
Income tax paid 13 (28,454) (22,200) (27,167) (21,753)
Increase in operating assets and liabilities 914,847 31,173 947,645 (533)
Net cash flow generated from operating activities 1,172,783 265,103 1,198,441 237,967
The accompanying notes on pages 45 to 114 form an integral part of these consolidated financial statements.
45
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The IAS 39 measurement categories will be replaced by: fair value through profit or loss (FVPL), fair value through other
comprehensive income (FVOCI), and amortised cost. IFRS 9 will also allow entities to continue to irrevocably designate
instruments that qualify for amortised cost or fair value through OCI instruments as FVPL, if doing so eliminates or
significantly reduces a measurement or recognition inconsistency. Equity instruments that are not held for trading may
be irrevocably designated as FVOCI, with no subsequent reclassification of gains or losses to the income statement.
The accounting for financial liabilities will largely be the same as the requirements of IAS 39, except for the treatment of
gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVPL. Such movements will be
presented in OCI with no subsequent reclassification to the income statement, unless an accounting mismatch in profit
or loss would arise.
Having completed its initial assessment for classification and measurement under IFRS 9, the Bank has concluded that
except for the change in name of the classes of financial assets and liabilities, there were no changes in the measurement
basis of these financial assets and liabilities as indicated below.
Measurement
Financial assets and liabilities IAS 39 classification IFRS 9 classification under IAS 39 & IFRS 9
Cash and cash equivalents Loans and receivables Loans and receivables Amortised cost
Available for sale financial assets Fair value through other Fair value through other Fair value
comprehensive income comprehensive income
Held to maturity investments Held to maturity Held to maturity Amortised cost
Loans and advances Loans and receivables Loans and receivables Amortised cost
Other assets Loans and receivables Loans and receivables Amortised cost
Deposits from banks Financial liabilities - other Financial liabilities - other Amortised cost
Deposits from customers Financial liabilities - other Financial liabilities - other Amortised cost
Borrowings Financial liabilities - other Financial liabilities - other Amortised cost
Other liabilities Financial liabilities - other Financial liabilities - other Amortised cost
Impairment of Financial Assets has increased significantly since applied impairment methodology, as
initial recognition by considering described below:
IFRS 9 will also fundamentally the change in the risk of default
change the loan loss impairment occurring over the remaining life of Stage 1 – Performing loans
methodology. The standard will the financial instrument.
replace IAS 39’s incurred loss approach When loans are first recognised, the
with a forward-looking expected To calculate ECL, the Bank will Bank will recognise an allowance
loss (ECL) approach. The Bank will be estimate the risk of a default based on 12-month expected credit
required to record an allowance for occurring on the financial losses. This will also be applicable
expected losses for all loans and other instrument during its expected life. to financial assets that are not
debt financial assets not held at FVPL, ECLs are estimated based on the considered to have suffered a
together with loan commitments and present value of all cash shortfalls significant increase in their credit
financial guarantee contracts. The over the remaining expected life of risk since the end of the previous
allowance is based on the expected the financial asset, i.e., the difference reporting period.
credit losses associated with the between: the contractual cash flows
probability of default in the next that are due to the Bank under the Stage 2 – Underperforming loans
twelve months unless there has been contract, and the cash flows that the
a significant increase in credit risk Bank expects to receive, discounted When a loan shows a significant
since origination, in which case, the at the effective interest rate of the increase in credit risk, the Bank will
allowance is based on the probability loan. In comparison to IAS 39, the record an allowance for the lifetime
of default over the life of the asset. Bank expects the impairment charge expected credit loss. The Bank will
under IFRS 9 to be more volatile consider whether there has been a
In preparation for implementation than under IAS 39 and to result in an significant increase in credit risk of
of IFRS 9, the Bank has established increase in the total level of current an asset by comparing the lifetime
a policy to perform an assessment impairment allowances. The Bank probability of default upon initial
at the end of each reporting period will categorise its loans into Stage recognition of the asset against the
to determine whether credit risk 1, Stage 2 and Stage 3, based on the risk of a default occurring on the
asset as at the end of each reporting loans. Financial assets will be generally include traded, investment
period. In each case, this assessment included in Stage 3 when there is grade securities where the borrower
will be based on forward-looking objective evidence that the loan is has a strong capacity to meet its
assessment that takes into account credit impaired. The criteria of such contractual cash flow obligations in
a number of economic scenarios, in objective evidence are the same as the near term and adverse changes
order to recognise the probability under the current IAS 39 methodology. in economic and business conditions
of higher losses associated with Accordingly, the Bank expects the in the longer term may, but will not
more negative economic outlooks. population to be generally the necessarily, reduce the ability of the
In addition, a significant increase same under both standards. The borrower to fulfil its contractual cash
in credit risk will be assumed if the impairment calculation will be the flow obligations.
borrower falls more than 30 days same as for Stage 2 loans with the
past due in making its contractual probability of default set to 100%. The Bank will not consider
payments. When forbearance results in the instruments to have low credit
derecognition of the original loan, risk simply because of the value of
When estimating lifetime ECLs for the new loan will be classified as collateral. Financial instruments are
undrawn loan commitments, the originated credit-impaired. Other also not considered to have low credit
Bank will estimate the expected than originated credit-impaired risk simply because they have a lower
portion of the loan commitment that loans, loans will be transferred from risk of default than the Bank’s other
will be drawn down over the expected out of Stage 3 if they no longer meet financial instruments.
life of the loan commitment and the criteria of credit-impaired after
calculate the present value of cash a probation period of not more than Forward-looking information
shortfalls between the contractual two years. The Bank will incorporate forward-
cash flows that are due to the entity looking information in both the
if the holder of the loan commitment Other financial assets assessment of significant increase in
draws down that expected portion The Bank will record impairment for credit risk and the measurement of
of the loan and the cash flows that FVOCI debt securities, depending on ECLs. Forward-looking information
the entity expects to receive if that whether they are classified as Stage such as macroeconomic factors (e.g.,
expected portion of the loan is 1, 2, or 3, as explained above. However, unemployment, GDP growth and
drawn down. For financial guarantee the expected credit losses will not interest rates) and economic forecasts
contracts, the Bank will estimate the reduce the carrying amount of these will be considered. To evaluate a
lifetime ECLs based on the present financial assets in the statement of range of possible outcomes, the Bank
value of the expected payments to financial position, which will remain intends to formulate three scenarios:
reimburse the holder for a credit loss at fair value. Instead, an amount a base case, a worse case and a
that it incurs less any amounts that equal to the allowance that would better case. The base case scenario
the guarantor expects to receive from arise if the asset were measured at represents the more likely outcome
the holder, the debtor or any other amortised cost will be recognised in resulting from the Bank’s normal
party. If a loan is fully guaranteed, OCI as an accumulated impairment financial planning and budgeting
the ECL estimate for the financial amount, with a corresponding charge process, while the better and worse
guarantee contract would be the to profit or loss. case scenarios represent more
same as the estimated cash shortfall optimistic or pessimistic outcomes.
estimate for the loan subject to the For ‘low risk’ FVOCI debt securities, For each scenario, the Bank will
guarantee. the Bank will apply a policy which derive an ECL and apply a probability
assumes that the credit risk on weighted approach to determine the
Stage 3 – Impaired loans the instrument has not increased impairment allowance.
significantly since initial recognition
The Bank will recognise the lifetime and will calculate ECL as explained in
expected credit losses for these Stage 1 above. Such instruments will
The above impact assessment indicates that under IFRS 9 the Bank’s profit before tax would have reduced by GH¢ 7.3
million and the capital adequacy ratio would have reduced from 26.97% to 26.63%.
47
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
IFRS 15, Revenue from contracts with The Bank applies the acquisition (b) Changes in ownership interests
customers method to account for business in subsidiaries without change of
combinations. The consideration control
In May 2014, the IASB issued IFRS transferred for the acquisition of a
15 Revenue from Contracts with subsidiary is the fair values of the Transactions with non-controlling
Customers, effective for periods assets transferred, the liabilities interests that do not result in loss of
beginning on 1 January 2018 with incurred to the former owners of control are accounted for as equity
early adoption permitted. IFRS 15 the acquiree and the equity interests transactions – that is, as transactions
defines principles for recognising issued by the Bank. The consideration with owners in their capacity as
revenue and will be applicable to all transferred includes the fair value owners. The difference between
contracts with customers. However, of any asset or liability resulting fair value of any consideration paid
interest and fee income integral to from a contingent consideration and the relevant share acquired of
financial instruments and leases will arrangement. Identifiable assets the carrying value of net assets of
continue to fall outside the scope of acquired and liabilities and contingent the subsidiary is recorded in equity.
IFRS 15 and will be regulated by the liabilities assumed in a business Gains or losses on disposals to non-
other applicable standards (e.g., IFRS combination are measured initially controlling interests are also recorded
9, and IFRS 16 Leases). at their fair values at the acquisition in equity.
date. The Bank recognises any non-
Revenue under IFRS 15 will need to controlling interest in the acquiree (c) Disposal of subsidiaries
be recognised as goods and services on an acquisition-by-acquisition
are transferred, to the extent that the basis at fair value. However, non- When the Bank ceases to control, any
transferor anticipates entitlement controlling interests that are present retained interest in the entity is re-
to goods and services. The standard ownership interests and entitle their measured to its fair value at the date
also specifies a comprehensive set of holders to a proportionate share of when control is lost, with the change
disclosure requirements regarding the entity’s net assets in the event of in carrying amount recognised in
the nature, extent and timing as liquidation are recognised at either profit or loss. The fair value is the initial
well as any uncertainty of revenue fair value or proportionate share of carrying amount for the purposes
and the corresponding cash flows the recognised amounts of acquiree’s of subsequently accounting for the
with customers. Management identifiable net assets. retained interest as an associate,
assessed the impact of IFRS 15 and joint venture or financial asset. In
given the revenue streams and type Acquisition-related costs are expensed addition, any amounts previously
of operations of the Bank, concluded as incurred. recognised in other comprehensive
that IFRS 15 will not have any material income in respect of that entity
impact its results and financial The excess of the consideration are accounted for as if the Bank
position of the Bank. transferred, the amount of any non- had directly disposed of the related
controlling interest in the acquiree assets or liabilities. This may mean
2.2 Basis of consolidation and the acquisition-date fair value that amounts previously recognised
of any previous equity interest in in other comprehensive income are
The consolidated financial the acquiree over the fair value of reclassified to profit or loss.
statements comprise the financial the identifiable net assets acquired
statements of Fidelity Bank Ghana is recorded as goodwill. If the total (d) Investment in associate
Limited and its subsidiaries as at 31 of consideration transferred, non-
December 2017. controlling interest recognised and Associates are all entities over which
previously held interest measured the Bank has significant influence but
(a) Subsidiaries is less than the fair value of the net not control, generally accompanying
assets of the subsidiary acquired in a shareholding of between 20% and
Subsidiaries are all entities (including the case of a bargain purchase, the 50% of the voting rights. Investments
structured entities) over which the difference is recognised directly in in associates are accounted for using
Bank has control. The Bank controls profit or loss. the equity method of accounting.
an entity when the Bank is exposed to, Under the equity method, the
or has rights to, variable returns from Inter-company transactions, balances investment is initially recognised
its involvement with the entity and and unrealised gains on transactions at cost, and the carrying amount is
has the ability to affect those returns between group companies are increased or decreased to recognise
through its power over the entity. eliminated. Unrealised losses are the investor’s share of profit or loss
Subsidiaries are fully consolidated also eliminated. When necessary, of the investee after the date of
from the date on which control is amounts reported by subsidiaries acquisition. The Bank’s investment
transferred to the Bank. They are have been adjusted to conform with in associates includes goodwill
deconsolidated from the date that the Bank’s accounting policies. identified on acquisition.
control ceases.
If the ownership interest in an presented in ‘Ghana cedi’ (GH¢), from the presentation currency are
associate is reduced but significant rounded to the nearest thousand. translated into the presentation
influence is retained, only a currency as follows:
proportionate share of the amounts (b) Transactions and balances
previously recognised in other (i) assets and liabilities for each
comprehensive income is reclassified Foreign currency transactions statement of financial position
to profit or loss where appropriate. are translated into the functional presented are translated at the
currency using the exchange rates closing rate at the reporting date;
The Bank’s share of post-acquisition prevailing at the dates of the (ii) income and expenses are
profit or loss is recognised in transactions or valuation where items translated at average exchange
profit or loss, and its share of post- are re-measured. Foreign exchange rates (unless this average is not
acquisition movements in other gains and losses resulting from the a reasonable approximation of
comprehensive income is recognised settlement of such transactions the cumulative effect of the rates
in other comprehensive income with and from the translation at year- prevailing on the transaction dates,
a corresponding adjustment to the end exchange rates of monetary in which case income and expenses
carrying amount of the investment. assets and liabilities denominated in are translated at the rate on the dates
When the Bank’s share of losses in foreign currencies are recognised in of the transactions); and
an associate equals or exceeds its profit or loss, except when deferred in (iii) all resulting exchange
interest in the associate, including other comprehensive income. Foreign differences are recognised in other
any other unsecured receivables, exchange gains and losses that relate comprehensive income.
the Bank does not recognise further to borrowings and cash and cash
losses, unless it has incurred legal equivalents are presented in profit or 2.4 Revenue recognition
or constructive obligations or made loss within `finance income or costs’.
payments on behalf of the associate. All other foreign exchange gains and Revenue is derived substantially
losses are presented within `Other from banking business and related
The Bank determines at each (losses)/gains – net’. activities and comprises net interest
reporting date whether there is income and non-interest income.
any objective evidence that the Changes in the fair value of monetary Income is recognised on an accrual
investment in the associate is securities denominated in foreign basis in the period in which it accrues.
impaired. If this is the case, the Bank currency classified as available-for-
calculates the amount of impairment sale are analysed between translation 2.4.1 Interest and similar income and
as the difference between the differences resulting from changes expense
recoverable amount of the associate in the amortised cost of the security
and its carrying amount. and other changes in the carrying For all financial instruments
Profits and losses resulting from amount of the security. Translation measured at amortised cost
upstream and downstream differences related to changes in and interest bearing financial
transactions between the Bank and amortised cost are recognised in instruments classified as available-
the associates are recognised in the profit or loss, and other changes in for-sale financial investments,
Bank’s financial statements only to carrying amount are recognised in interest income or expense is
the extent of unrelated investor’s other comprehensive income. recorded on an accrual basis using
interests in the associates. Unrealised the effective interest method. The
losses are eliminated unless the Translation differences on non- effective interest rate is the rate that
transaction provides evidence of an monetary financial assets and exactly discounts estimated future
impairment of the asset transferred. liabilities such as equities held at cash payments or receipts through
fair value through profit or loss are the expected life of the financial
Dilution gains and losses arising recognised in profit or loss as part of instrument or a shorter period, where
on investments in associates are the fair value gain or loss. Translation appropriate, to the net carrying
recognised in profit or loss. differences on non-monetary amount of the financial asset or
financial assets, such as equities financial liability. The calculation
2.3 Foreign currency translation classified as available for sale, are takes into account all contractual
included in other comprehensive terms of the financial instrument
(a) Functional and presentation income. (for example, prepayment options)
currency and includes any fees or incremental
Items included in the financial (c) Group companies costs that are directly attributable to
statements of each of the Group’s the instrument and are an integral
entities are measured using the The results and financial position part of the effective interest rate, but
currency of the primary economic of all the Group entities (none of not future credit losses. The carrying
environment in which the entity which has the currency of a hyper- amount of the financial asset or
operates (`the functional currency’). inflationary economy) that have financial liability is adjusted if the
The financial statements are a functional currency different Bank revises its estimates of payment
or receipts. The adjusted carrying
49
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
amount is calculated on the original changes in fair value and related in debt securities which have been
effective interest rate and the change interest income or expense and acquired principally for the purpose
in the carrying amount is recorded as dividends for financial assets and of selling or repurchasing in the
interest income or expense. financial liabilities held for trading. future.
2.4.2 Fee and commission income 2.5 Financial assets and liabilities (ii) Held to maturity financial
instruments
The Bank earns fees and commission 2.5.1 Date of recognition
income from services it provides to its Held to maturity financial
customers. Fee income is divided into Purchases or sales of financial assets instruments are those which carry
the following two categories: that require delivery of assets within fixed determinable payments and
the time frame generally established have fixed maturities and which
(a) Fee income earned from services by regulation or convention in the the Bank has the intention and
provided over a certain period of marketplace are recognised on the ability to hold to maturity. After
time trade date i.e. the date that the Bank initial measurement, held-to-
commits to purchase or sell the asset. maturity financial investments
Fees earned for the provision of are subsequently measured at
services over a period of time are 2.5.2 Initial recognition of financial amortised cost using the effective
accrued over that period. These fees instruments interest rate method, less allowances
include commission income and for impairment. Amortised cost is
asset management, custody and The Bank classifies its financial calculated by taking into account
other management and advisory assets in the following categories: any discount or premium on
fees. Loan commitment fees for loans financial assets at fair value through acquisition and fees that are an
that are likely to be drawn down and profit or loss, loans and receivables, integral part of the effective interest
other credit related fees are deferred held-to-maturity and available-for- rate. The amortisation is included in
(together with any incremental costs) sale financial assets. The directors ‘interest income’ in the statement
and recognised as an adjustment to determine the classification of of comprehensive income. The losses
the effective interest rate on the loan. financial assets at initial recognition. arising from impairment of such
The Bank uses trade date accounting investments are recognised in the
(b) Fee income from providing for regular way contracts when statement of comprehensive income
transaction services recording financial asset transactions. line ‘Impairment losses on financial
investments’.
Fees arising from negotiating or The classification of financial
participating in the negotiation of a instruments at initial recognition (iii) Loans and advances
transaction for a third party – such as depends on the purpose for which
the arrangement of the acquisition the financial instruments were Loans and advances are financial
of shares or other securities or the acquired and their characteristics. All assets with fixed or determinable
purchase or sale of businesses – financial instruments are measured payments and fixed maturities
are recognised on completion of initially at their fair value plus, in the that are not quoted in an active
the underlying transaction. Fees or case of financial assets and financial market. These are not entered into
components of fees that are linked to liabilities not at fair value through with the intention of immediate
a certain performance are recognised profit or loss, any directly attributable or short-term resale and are not
after fulfilling the corresponding incremental costs of acquisition or classified as ‘Financial assets held
criteria. issue. for trading’, designated as ‘Financial
investments – available-for-sale’
Fee and commission expense relates (i) Financial assets and liabilities held or ‘Financial assets designated at
mainly to transaction and service fees for trading fair value through profit or loss’.
which are expensed as the services After initial measurement, loans
are rendered. Financial assets or financial and advances are subsequently
liabilities held for trading other measured at amortised cost using
2.4.3 Dividend income than derivatives are recorded in the the effective interest rate method,
consolidated statement of financial less allowance for impairment.
Dividend income is recognised position at fair value. Changes in fair The amortised cost is calculated by
when the Bank’s right to receive the value are recognised in ‘Net trading taking into account any discount
payment is established. income’ according to the terms of on acquisition and fees and costs
the contract or when the right to the that are integral part of the effective
2.4.4 Net trading income payment has been established. interest rate. The amortisation is
Included in this classification are debt included in ‘Interest income’ in
This comprises gains and losses from securities, equities and short position the statement of comprehensive
income. The losses arising from
impairment are recognised in the 2.5.3 Determination of fair value market, unlisted debt securities
statement of comprehensive income (including those with embedded
in ‘Impairment charge on loans and For financial instruments traded in derivatives) and other debt
advances’. active markets, the determination of instruments for which markets were
fair values of financial instruments or have become illiquid. Some of the
(iv) Available for sale financial is based on quoted market prices inputs to these models may not be
investments or dealer price quotations. This market observable and are therefore
includes listed equity securities and estimated based on assumptions.
Available-for-sale financial quoted debt instruments on major
investments are those which exchanges. The Bank uses its own credit risk
are designated as such or do spreads in determining the current
not qualify to be classified as A financial instrument is regarded as value for its derivative liabilities and
designated at fair value through quoted in an active market if quoted all other liabilities for which it has
profit or loss, held-to-maturity or prices are readily and regularly elected the fair value option. When
loans and advances. It includes available from an exchange, dealer, the Bank’s credit spreads widen,
equity investments, investments in broker, industry group, pricing service the Bank recognises a gain on these
mutual funds and money market or regulatory agency, and those liabilities because the value of the
and other debt instruments. After prices represent actual and regularly liabilities has decreased. When the
initial measurement, available- occurring market transactions on an Bank’s credit spreads narrow, the
for-sale financial instruments are arm’s length basis. If the above criteria Bank recognises a loss on these
subsequently measured at fair value. are not met, the market is regarded liabilities because the value of the
Unrealised gains and losses are as being inactive. Indicators that a liabilities has increased.
recognised directly in equity in the market is inactive are when there is
‘Available-for-sale reserve’. When the a wide bid-offer spread or significant The output of a model is always an
security is disposed of, the cumulative increase in the bid-offer spread or estimate or approximation of a value
gain or loss previously recognised in there are few recent transactions. that cannot be determined with
equity is recognised in the statement certainty, and valuation techniques
of comprehensive income in ‘Other For all other financial instruments, employed may not fully reflect all
operating income’ or ‘Other operating fair value is determined using factors relevant to the positions the
expenses’. valuation techniques. In these Bank holds. Valuations are therefore
techniques, fair values are estimated adjusted, where appropriate,
Where the Bank holds more than one from observable data in respect of to allow for additional factors
investment in the same security, it is similar financial instruments, using including model risks, liquidity
deemed to be disposed off on a first-in models to estimate the present value risk and counterparty credit risk.
first-out basis. Interest earned, whilst of expected future cash flows or other Based on the established fair value
holding available-for-sale financial valuation techniques, using inputs model governance policies, related
investments, is recognised in the (for example, LIBOR yield curve, FX controls and procedures applied, the
statement of comprehensive income rates, volatilities and counterparty directors believe that these valuation
as ‘Interest income’ when the right of spreads) existing at the reporting adjustments are necessary and
the payment has been established. dates. appropriate to fairly state the values
The losses arising from impairment of financial instruments carried at
of such investments are recognised The Bank uses widely recognised fair value. Price data and parameters
in the statement of comprehensive valuation models for determining fair used in the measurement procedures
income in ‘Impairment losses on values of non-standardised financial applied are generally reviewed
financial investments’ and removed instruments of lower complexity, carefully and adjusted, if necessary
from the available-for-sale reserve. such as options or interest rate and – particularly in view of the current
currency swaps. For these financial market developments.
(v) Financial liabilities instruments, inputs into models are
generally market-observable. In cases when the fair value of
The Bank’s holding in financial unlisted equity instruments
liabilities represents mainly deposits For more complex instruments, cannot be determined reliably, the
from banks and customers, and other the Bank uses internally developed instruments are carried at cost less
liabilities. Such financial liabilities are models, which are usually based on impairment.
initially recognised at fair value and valuation methods and techniques
subsequently measured at amortised generally recognised as standard The fair values of contingent liabilities
cost. within the industry. Valuation models and irrevocable loan commitments
such as present value techniques are correspond to their carrying amounts.
used primarily to value derivatives .
transacted in the over-the-counter
51
Notes To The Financial Statements for the year ended 31 December 2017
2.5.4 De-recognition of financial and the recognition of a new liability, but retained on the statement of
assets and financial liabilities and the difference in the respective financial position when substantially
carrying amounts is recognised in all the risks and rewards of ownership
(i) Financial assets profit or loss. remain with the Bank. Any cash
received, including accrued interest,
A financial asset (or, where applicable 2.5.5 Reclassification of financial is recognised on the statement
a part of a financial asset or part of assets of financial position reflecting its
a group of similar financial assets) is economic substance as a loan to the
derecognised where: The Bank may choose to reclassify a Bank.
non-derivative financial asset held
• the rights to receive cash for trading out of the held-for-trading Conversely, securities borrowed or
flows from the asset have expired; or category if the financial asset is no purchased securities subject to a
• the Bank has transferred its longer held for the purpose of selling commitment to resell at a specified
rights to receive cash flows from the it in the near-term. Financial assets date (a ‘reverse repo’) is not recognised
asset or has assumed an obligation other than loans and receivables are on the statement of financial position
to pay the received cash flows in permitted to be reclassified out of the as the transactions are treated as
full without material delay to a held for trading category only in rare collateralised loans. However where
third party under a ‘pass-through’ circumstances arising from a single the securities borrowed is sold
arrangement; and event that is unusual and highly to third parties, the obligation to
• either (a) the Bank has unlikely to recur in the near-term. repurchase the securities is recorded
transferred substantially all the risks In addition, the Bank may choose to as a trading liability at fair value and
and rewards of the asset, or (b) the reclassify financial assets that would any subsequent gain or loss included
Bank has neither transferred nor meet the definition of loans and in net trading income.
retained substantially all the risks receivables out of the held-for-trading
and rewards of the asset, but has or available-for-sale categories if the 2.5.7 Impairment of financial assets
transferred control of the asset. Bank has the intention and ability
to hold these financial assets for the The Bank assesses at each reporting
When the Bank has transferred its foreseeable future or until maturity date whether objective evidence of
right to receive cash flows from an at the date of reclassification. impairment exists for any financial
asset or has entered into a pass- asset. A financial assets is deemed
through arrangement, and has Reclassifications are made at fair to be impaired if there is objective
neither transferred nor retained value as of the reclassification date. evidence of impairment as a result of
substantially all the risks and rewards Fair value becomes the new cost or one or more events that has occurred
of the asset, nor transferred control of amortised cost as applicable, and no after the initial recognition of the
the asset, the asset is recognised to reversals of fair value gains or losses asset (loss event), and the loss event
the extent of the Bank’s continuing recorded before reclassification date has an impact on the estimated
involvement in the asset. Continuing are subsequently made. Effective future cash flows of the financial
involvement that takes the form of interest rates for financial assets asset that can be reliably estimated.
a guarantee over the transferred reclassified to loans and receivables Evidence of impairment may include
asset is measured at the lower of and held-to-maturity categories are indications that the borrower is
the original carrying amount of the determined at the reclassification experiencing significant difficulty,
asset and the maximum amount of date. Further increases in estimates default or delinquency in interest or
consideration that the Bank could be of cash flows adjust effective interest principal payments, the probability
required to repay. rates prospectively. that it will enter bankruptcy or other
financial reorganisation and where
(ii) Financial liabilities On reclassification of a financial observable data indicate that there
asset out of the ‘at fair value through is a measurable decrease in the
A financial liability is derecognised profit or loss’ category, all embedded estimated future cash flows, such
when the obligation under the derivatives are re-assessed, and if as changes in arrears or economic
liability is discharged or cancelled or necessary separately accounted for. conditions that correlate with
expires. Where an existing financial defaults.
liability is replaced by another from 2.5.6 Repurchase and reverse
the same lender on substantially repurchase agreements (i) Money market placements and
different terms, or the terms of an loans and advances to customers
existing liability are substantially Securities may be lent subject to
modified, such an exchange or a commitment to repurchase it For money market placements and
modification is treated as a de- at a specified date (‘a repo’). Such advances to customers carried
recognition of the original liability securities are not derecognised at amortised cost, the Bank first
assesses whether objective evidence
of impairment exists individually for according to the contractual terms of the amount of the loss is recognised
financial assets that are individually the assets being evaluated. in the statement of comprehensive
significant, and individually or income.
collectively for financial assets that Future cash flows in a group of
are not individually significant financial assets that are collectively If in a subsequent year the amount
(identified impairment). If the evaluated for impairment are of the estimated impairment loss
Bank determines that no objective estimated on the basis of the decreases because of an event
evidence of impairment exists for an contractual cash flows of the assets occurring after the impairment
individually assessed financial asset, in the group and historical loss was recognised, any amounts
whether significant or not, it includes experience for assets with credit risk formerly charged are credited to
the asset in a group of financial assets characteristics similar to those in the the ‘Impairment losses on financial
with similar credit risk characteristics group. Historical loss experience is investments’.
and collectively assesses them adjusted based on current observable
for impairment (unidentified data to reflect the effects of current (iii) Available-for-sale financial
impairment). Assets that are conditions that did not affect the instruments
individually assessed for impairment period on which the historical loss
and for which an impairment loss is experience is based and to remove the For available-for-sale financial
or continues to be recognised are not effects of conditions in the historical instruments, the Bank assesses
included in a collective assessment of period that do not currently exist. at each reporting date whether
impairment. The methodology and assumptions there is objective evidence that an
used for estimating future cash flows investment or a group of investments
Where there is objective evidence are reviewed regularly to reduce any is impaired.
of impairment, the amount of differences between loss estimates
impairment loss is measured as and actual loss experience. In the case of equity instruments
the difference between the asset’s classified as available-for-sale, a
carrying amount and the present Where possible, the Bank seeks to significant or prolonged decline in
value of estimated future cash flows restructure loans rather than to the fair value of the security below its
discounted at the asset’s original take possession of collateral. This cost is considered objective evidence
effective interest rate. The carrying may involve extending the payment in determining whether impairment
amount of the asset is reduced arrangements and the agreement exists. Where such evidence exists,
through the use of an allowance of new loan conditions. Once the the cumulative net loss that has
account and the amount of the loss terms have been renegotiated, the been previously recognised directly
is recognised in the statement of loan is no longer considered past due. in equity is removed from equity
comprehensive income. Management continuously reviews and recognised in the profit or loss.
such renegotiated loans to ensure Reversals of impairment of equity
If a loan has a variable interest rate, that all criteria are met and that shares are not recognised in profit
the discount rate for measuring future payments are likely to occur. or loss. Increases in the fair value of
impairment loss is the current The loans continue to be subject to an equity shares after impairment are
effective interest rate. The calculation individual or collective assessment, recognised directly in equity.
of the present value of the estimated calculated using the loan’s original
future cash flows of a collateralised effective interest rate. The Bank did In the case of debt instruments
financial asset reflect the cash flows not reclassify any renegotiated loan classified as available-for-sale,
that may result from foreclosure during the period. impairment is assessed based
costs for obtaining and selling the on the same criteria as all other
collateral, whether or not foreclosure (ii) Held-to-maturity financial financial assets. Interest continues
is probable. instruments to be accrued at the original effective
interest rate on the reduced carrying
For the purposes of a collective For held-to-maturity instruments amount of the asset and is recorded
evaluation of impairment, financial the Bank assesses individually as part of Interest Income. Reversals
assets are grouped on the basis of whether there is objective evidence of impairment of debt securities
similar risk characteristics, taking of impairment. If there is objective are recognised in the statement
into account asset type, industry, evidence that an impairment loss of comprehensive income if in a
geographical location, collateral type, has been incurred, the amount of the subsequent year, the fair value of the
past-due status and other relevant loss is measured as the difference debt instrument increases and the
factors. These characteristics are between the asset’s carrying amount increase can be objectively related
relevant to the estimation of future and the present value of estimated to an event occurring after the
cash flows for groups of such assets by future cash flows. The carrying impairment loss was recognised in
being indicative of the counterparty’s amount of the asset is reduced and profit or loss.
ability to pay all amounts due
53
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
2.5.8 Offsetting financial (i) The Bank as a lessor a constant rate of interest on the
instruments remaining balance of the liability.
Finance leases Finance charges are charged directly
Netting, where financial assets and against income in ‘Interest expense’.
liabilities are offset and the net Assets leased to customers under
amount reported in the statement of agreements, which transfer Capitalised leased assets are
financial position, occurs if, and only substantially all the risks, and rewards depreciated over the shorter of the
if, there is a legally enforceable right of ownership, with or without estimated useful life of the asset
to set off the recognised amounts ultimate legal title, are classified and the lease term, if there is no
and there is an intention to settle on as finance leases. When assets are reasonable certainty that the Bank
a net basis, or to realise an asset and held subject to a finance lease, the will obtain ownership by the end of
settle the liability simultaneously. present value of the lease payments, the lease term.
In many cases, even though master discounted at the rate of interest
netting agreements are in place, the implicit in the lease, is recognised as Operating lease payments are not
lack of an intention to settle on a net a receivable. The difference between recognised in the statement of
basis results in the related assets and the total payments receivable under financial position. Rentals payable
liabilities being presented gross in the lease and the present value of the are recognised as an expense in the
the statement of financial position. receivable is recognised as unearned statement of comprehensive income
finance income, which is allocated to on a straight-line basis over the lease
2.6 Collateral accounting periods under the pre-tax term unless another systematic basis
net investment method to reflect a is more appropriate, and included in
The Bank obtains collateral in constant periodic rate of return. ‘Other operating expenses’.
respect of customer liabilities where
this is considered appropriate. The Operating leases 2.8 Cash and cash equivalents
collateral normally takes the form of
cash or securities in respect of other Assets leased to customers under Cash and cash equivalents include
credit instruments or a lien over the agreements, which do not transfer cash in hand, deposits held at call
customer’s assets and gives the Bank a substantially all the risks and with banks and other short-term
claim on these assets for both existing rewards of ownership, are classified highly liquid investments with
and future liabilities. Collateral as operating leases. The leased assets original maturities of three months or
received in the form of securities is are included within property, plant less. For the purpose of the cash flow
not recorded on the statement of and equipment on the statement of statement, cash and cash equivalents
financial position. Collateral received financial position and depreciation is comprise balances with 91 days or
in the form of cash is recorded on the provided on the depreciable amount less from the date of acquisition
statement of financial position with of these assets on a systematic basis including cash and balances with
a corresponding liability. These items over their estimated useful lives. Bank of Ghana, other eligible bills,
are assigned to deposits received Lease income is recognised on a money market placements and
from banks or other counterparties. straight line basis over the period of dealing securities.
Any interest payable or receivable the lease unless another systematic
arising is recorded as interest payable basis is more appropriate. 2.9 Property and equipment
or interest income respectively except
for funding costs relating to trading (ii) The Bank as a Lessee Recognition and measurement
activities which are recorded in net
trading income. Finance leases which transfer to the Items of property and equipment are
Bank substantially all the risks and measured at cost less accumulated
2.7 Leases benefits incidental to ownership of depreciation and impairment
the leased item, are capitalised at the losses. Cost includes expenditures
The determination of whether inception of the lease at the fair value that are directly attributable to the
an arrangement is, or contains a of the leased property or, if lower, at acquisition of the asset. The cost of
lease is based on the substance of the present value of the minimum self-constructed assets includes the
the arrangement and requires an lease payments and included in cost of materials, direct labour and
assessment of whether the fulfilment ‘Property and equipment’ with any other costs directly attributable
of the arrangement is dependent on corresponding liability to the lessor to bringing the asset to a working
the use of a specific asset or assets included in ‘Other liability’. Lease condition for its intended use.
and the arrangement conveys a right payments are apportioned between Purchased software that is integral
to use the asset. the finance charges and reduction to the functionality of the related
on the lease liability so as to achieve equipment is capitalised as part of
Machinery 4 years
55
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
2.12 Financial guarantees with the contract. Before a provision iii. Short-term benefits
is established, the Bank recognises
In the ordinary course of business, any impairment loss on the assets Short-term employee benefit
the Bank gives financial guarantees associated with that contract. obligations are measured on an
consisting of letters of credit, undiscounted basis and are expensed
guarantees and acceptances. Such 2.14 Borrowings as the related service is provided.
financial guarantees are given to
banks, other financial institutions Borrowings are recognised initially A provision is recognised for the
and bodies on behalf of customers at fair value, net of transaction amount expected to be paid under
to secure loans, overdrafts and other costs incurred. Borrowings are short-term cash bonus or profit-
banking facilities, and to other parties subsequently carried at amortised sharing plans if the Bank has
in connection with the performance cost; any difference between the a present legal or constructive
of customers under obligations proceeds (net of transaction costs) and obligation to pay this amount as a
related to contracts, advance the redemption value is recognised result of past service provided by the
payments made by other parties, in profit or loss over the period of employee and the obligation can be
tenders, retentions and payment the borrowings using the effective estimated reliably.
of import duties. These financial interest method. Fees paid on the
guarantees are accounted for as establishment of loan facilities are 2.16 Income tax
off-balance sheet transactions and recognised as transaction costs of the
disclosed as contingent liabilities. loan to the extent that it is probable Current income tax
that some or all of the facility will be Income tax payable on taxable
The fee and commission income drawn down. In this case, the fee is profits is recognised as an expense
receivable on these financial deferred until the draw-down occurs. in the period in which the profits
guarantees are initially recognised To the extent there is no evidence arise. Income tax recoverable on tax
in the financial statements at fair that it is probable that some or all of allowable losses is recognised as
value on the date that the guarantee the facility will be drawn down, the an asset only to the extent that it
was given, in ‘Other liabilities’ and fee is capitalised as a pre-payment for is regarded as recoverable by offset
recognised in the statement of liquidity services and amortised over against current or future taxable
comprehensive income in ‘Fees and the period of the facility to which it profits.
commission income’ on a straight line relates.
basis over the life of the guarantee. Current tax assets and liabilities
2.15 Employee benefits for the current and prior years are
2.13 Provisions measured at the amount expected
i. Defined contribution plans to be recovered or paid to the Ghana
A provision is recognised if, as a result Revenue Authority. The tax rates
of a past event, the Bank has a present Obligations for contributions to and tax laws used to compute the
legal or constructive obligation that defined contribution plans are amount are those that are enacted
can be estimated reliably, and it is recognised as an expense in profit or or substantively enacted by the
probable that an outflow of economic loss when they are due. statement of financial position date.
benefits will be required to settle the
obligation. Provisions are determined ii. Termination benefits Deferred tax
by discounting the expected future Deferred tax is provided on temporary
cash flows at a pre-tax rate that Termination benefits are recognised differences at the reporting date
reflects current market assessments as an expense when the Bank is between the tax bases of assets and
of the time value of money and, demonstrably committed, without liabilities and their carrying amounts
where appropriate, the risks specific realistic possibility of withdrawal, to for financial reporting purposes.
to the liability. a formal detailed plan to terminate Deferred tax liabilities are recognised
employment before the normal for all taxable temporary differences,
A provision for onerous contracts retirement date. Termination except:
is recognised when the expected benefits for voluntary redundancies
benefits to be derived by the Bank are recognised if the Bank has made • where the deferred tax liability
from a contract are lower than the an offer encouraging voluntary arises from the initial recognition of
unavoidable cost of meeting its redundancy, it is probable that goodwill or of an asset or liability in
obligations under the contract. The the offer will be accepted, and the a transaction that is not a business
provision is measured at the present number of acceptances can be combination and, at the time of
value of the lower of the expected estimated reliably. the transaction, affects neither the
cost of terminating the contract and accounting profit nor taxable profit
the expected net cost of continuing or loss and
• in respect of taxable temporary settled, based on the tax rates (and management are to identify all key
differences associated with tax laws) that have been enacted risks for the Bank, measure these
investments in subsidiaries and or substantively enacted at the risks, manage the risk positions
associates, where the timing of the reporting date. and determine capital allocations.
reversal of the temporary differences The Bank regularly reviews its risk
can be controlled and it is probable Current tax and deferred tax relating management policies and systems to
that the differences will not reverse to items recognised directly in equity reflect changes in markets, products
in the foreseeable future. are also recognised in the statement and best market practice. The Bank’s
of changes in equity and not in the aim is to achieve an appropriate
Deferred tax assets are recognised for statement of comprehensive income. balance between risk and return and
all deductible temporary differences, minimise potential adverse effects on
carry forward of unused tax credits Deferred and current tax assets and the Bank’s financial performance. The
and unused tax losses to the extent liabilities are only offset when they Bank defines risk as the possibility
that it is probable that taxable profits arise in the same tax reporting entity of losses or profits foregone, which
will be available against which the and the same taxation authority, may be caused by internal or external
deductible temporary differences and where there is both the legal factors.
and the carry forward of unused tax right to set off current tax assets
credits and unused tax losses can be against current tax liabilities and (b) Risk management structure
utilised except; the intention to settle on a net basis
or to realise the asset and settle the The Board of Directors has overall
• where deferred tax asset relating to liability simultaneously. responsibility for the establishment
the deductible temporary differences and oversight of the Bank’s risk
arises from the initial recognition of 2.17 Stated capital management framework. Under this
an asset or liability in a transaction framework, the Board has established
that is not a business combination i. Ordinary shares a number of separate independent
and, at the time of the transaction, Ordinary shares are classified as bodies responsible for managing
affects neither the accounting profit ‘stated capital’ in equity. and monitoring risks. These include,
nor taxable profit or loss; and Board sub-committees, Credit
ii. Dividend on ordinary shares Committee of management (CC),
• in respect of taxable temporary Dividends on the Bank’s ordinary Management Risk and Control
differences associated with shares are recognised in equity in Committee (MRCC), Asset and
investments in subsidiaries and the period in which they are paid Liability Management Committee
associates, deferred tax assets are or, if earlier, approved by the Bank’s (ALCO) and Risk Management
recognised only to the extent that shareholders. Department, which are responsible
it is probable that the temporary for developing and monitoring the
differences will reverse in the 2.18 Preference shares Bank’s risk management policies
foreseeable future and taxable profit in their specified areas. All Board
will be available against which the i. Preference shares committees report regularly to the
temporary differences can be utilised. Preference shares are classified Board of Directors on their activities.
as equity. These are non-voting,
The carrying amount of deferred tax irredeemable and non-cumulative. The Bank’s risk management policies
assets is reviewed at each reporting The holders have the option of are established to identify and analyse
date and reduced to the extent that it converting into ordinary shares as the risks faced by the Bank, to set
is no longer probable that sufficient stated in the agreement. appropriate risk limits and controls,
taxable profit will be available to and to monitor risks and adherence
allow all or part of the deferred tax ii. Dividend on preference shares to limits. Risk management policies
asset to be utilised. Unrecognised Dividends on the Bank’s preference and systems are reviewed regularly
deferred tax assets are reassessed at shares are recognised in equity in the to reflect changes in market
each reporting date and recognised period in which they are paid. conditions, products and services
to the extent that it has become offered. The Bank, through its
probable that future taxable profit 3 FINANCIAL RISK MANAGEMENT training and management standards
will allow the deferred tax asset to be and procedures, aims to develop
recovered. (a) Introduction and overview a disciplined and constructive
control environment, in which all
Deferred tax assets and liabilities are The Bank’s business involves taking employees understand their roles
measured at the tax rates that are on risks in a targeted manner and and obligations.
expected to apply in the year when managing them professionally. The
the asset is realised or the liability is core functions of the Bank’s risk Through its risk management
57
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
structure, the Bank seeks to manage of ethical code of conduct for bank deals with counterparties of
efficiently the core risks to which it is all employees, operational risk good credit standing and for which in
exposed: credit, liquidity and market management policies, risk awareness its assessment the transactions are
risks, which arise directly through training and other deliberate appropriate and risks understood by
the Bank’s commercial activities; operational risk control activities have the counterparty.
and compliance, regulatory, and significantly reduced operational risk
operational risks, which are normal related incidents during the past 3.1.1 Risk limit control and mitigation
consequences of any business three years. policies
undertaking.
3.1 Credit risk management The Bank structures the levels of
(c) Operational risk management credit risk it undertakes by placing
Credit risk is the risk of suffering limits on the amount of risk accepted
Operational risk is the risk of loss financial loss, should any of the in relation to one borrower, or groups
resulting from inadequate or failed Bank’s customers, clients or market of borrowers, and to geographical
internal processes, people and counterparties fail to fulfil their and industry segments. Such risks
systems or from external events, contractual obligations to the are monitored on a revolving basis
including legal risk and any other Bank. Credit risk arises mainly from and subject to an annual or more
risks that is deemed fit on an ongoing commercial and consumer loans and frequent review, when considered
basis but excludes reputational & advances and loan commitments necessary. Limits on the level of credit
strategic risk. Operational risk exists arising from such lending activities, risk by product, industry sector and
in all products and business activities but can also arise from credit country are approved annually by the
and the effective management of enhancements, financial guarantees, Board of Directors.
operational risk has always been a letters of credit, endorsements and
fundamental element of the Bank’s acceptances. The exposure to any one borrower
risk management programme. The including banks and brokers is further
Bank has a broad operational risk The Bank is also exposed to other restricted by sub-limits covering on-
management framework which credit risks arising from investments and off-balance sheet exposures, and
defines the set of activities designed in debt securities and other exposures daily delivery risk limits in relation to
to proactively identify, assess and arising from its trading activities trading items such as forward foreign
manage all operational risks by (‘trading exposures’), including exchange contracts. Actual exposures
aligning the people, technology non-equity trading portfolio assets, against limits are monitored daily.
and processes with best risk derivatives and settlement balances
management practices towards with market counterparties and Lending limits are reviewed in
sustaining financial performance reverse repurchase loans. the light of changing market and
and enhancing stakeholder’s value. economic conditions and periodic
Credit risk is the single largest risk credit reviews and assessments of
The Operational Risk, Internal Control for the Bank’s business; the directors probability of default.
and Compliance units with oversight therefore carefully manage the
responsibility of the MRCC as well exposure to credit risk. The credit Some other specific control and
as the Audit Unit constantly carry risk management and control mitigation measures are outlined
out reviews to identify and assess are centralised in a credit risk below:
the operational risk inherent in all management team headed by the
products, activities, processes and Chief Risk Officer, which reports to (a) Collateral
sytems. These units also ensure the Board of Directors and head of
that all business units within the each business unit regularly. The Bank employs a range of policies
Bank monitor their operational risk and practices to mitigate credit
using set standards and indicators. The Bank has well documented risk. The most traditional of these
Significant issues and exceptions are policies and procedures for is the taking of security for funds
reported to the MRCC for discussion managing credit risk. The policies advanced, which is common practice.
and resolution. are based on the principle of: The Bank implements guidelines on
Management responsibility; Defined the acceptability of specific classes
Disaster recovery procedures, credit approval authorities; Set of collateral or credit risk mitigation.
business continuity planning, self standards for risk management; The principal collateral types for
compliance assurance and internal Consistent approach to origination loans and advances are:
audit also form an integral part of of credit, documentation and
our operational risk management problem recognition; and Portfolio • Mortgages over residential
process. There was no significant management strategies. properties.
financial loss resulting from
operational risk incidence during the The risk that counterparties might • Charges over business assets such
period across the Bank. default on their obligations is as premises, inventory and accounts
monitored on an ongoing basis. To receivable.
The Bank’s strict enforcement manage the level of credit risk, the
• Charges over financial instruments arrangements do not generally result generally have a greater degree
such as debt securities and equities. in an offset of assets and liabilities of of credit risk than shorter-term
the statement of financial position, commitments.
Collateral held as security for as transactions are either usually
financial assets other than loans and settled on a gross basis or under (e) Impairment and provisioning
advances depends on the nature of most netting agreements the right policies
the instrument. Longer-term finance of set off is triggered only on default.
and lending to corporate entities However, the credit risk associated Loans are designated as impaired
are generally secured; revolving with favourable contracts is reduced and considered non-performing
individual credit facilities are by a master netting arrangement to where recognised weakness indicates
generally unsecured. In addition, in the extent that if a default occurs, all that full payment of either interest
order to minimise the credit loss, the amounts with the counterparty are or principal becomes questionable
Bank will seek additional collateral terminated and settled on a net basis. or as soon as payment of interest
from the counterparty as soon as The Bank’s overall exposure to credit or principal is 90 days or more
impairment indicators are identified risk on derivative instruments subject overdue. Where any amount is
for the relevant individual loans and to master netting arrangements considered uncollectible, an individual
advances. can change substantially within impairment provision is raised, being
a short period, as it is affected by the difference between the loan
(b) Lending limits (for derivatives and each transaction subject to the carrying amount and the present
loan books) arrangement. value of estimated future cash flows.
In any decision relating to the raising
The Bank maintains strict control (d) Financial covenants (for credit of provisions, the bank attempts to
limits on net open derivative positions related commitments and loan balance economic conditions, local
(that is, the difference between books) knowledge and experience, and the
purchase and sale contracts) by results of independent asset reviews.
both amount and term. The amount The primary purpose of these Where it is considered that there is
subject to credit risk is limited to instruments is to ensure that funds no realistic prospect of recovering
expected future net cash inflows of are available to a customer as an element of an account against
instruments, which in relation to required. Guarantees and standby which an impairment provision has
derivatives are only a fraction of the letters of credit carry the same credit been raised, then that amount will be
contract, or notional values used to risk as loans. Documentary and written off.
express the volume of instruments commercial letters of credit – which
outstanding. This credit risk exposure are written undertakings by the Bank A portfolio impairment provision is
is managed as part of the overall on behalf of a customer authorising also held to cover the inherent risk of
lending limits with customers, a third party to draw drafts on the losses, which, although not identified,
together with potential exposures Bank up to a stipulated amount are known through experience to
from market movements. Collateral under specific terms and conditions be present in the loan portfolio. The
or other security is not always – are collateralised by the underlying provision is estimated by using the
obtained for credit risk exposures on shipments of goods to which they historical loss rate, the migration or
these instruments, except where the relate and therefore carry less risk incident rate and the balance of the
Bank requires margin deposits from than a direct loan. performing loan portfolio.The portfolio
counterparties. impairment provision is set with
Commitments to extend credit reference to past experience using loss
Settlement risk arises in any represent unused portions of rates, and judgmental factors such as
situation where a payment in cash, authorisations to extend credit in the the economic environment and the
securities or equities is made in form of loans, guarantees or letters trends in key portfolio indicators.
the expectation of a corresponding of credit. With respect to credit risk
receipt in cash, securities or on commitments to extend credit, (f) Write-off policy
equities. Daily settlement limits are the Bank is potentially exposed to
established for each counterparty to loss in an amount equal to the total The Bank writes off a loan balance (and
cover the aggregate of all settlement unused commitments. However, any related allowances for impairment
risk arising from the Bank’s market the likely amount of loss is less than losses) when the Bank determines
transactions on any single day. the total unused commitments, as that the loans are uncollectible.
most commitments to extend credit This determination is reached after
(c) Master netting arrangements are contingent upon customers considering information such as the
maintaining specific credit standards occurrence of significant changes in
The Bank further restricts its (often referred to as financial the borrower’s financial position such
exposure to credit losses by entering covenants). that the borrower can no longer pay
into master netting arrangements the obligation, or that proceeds from
with counterparties with which it The Bank monitors the term to collateral will not be sufficient to pay
undertakes a significant volume maturity of credit commitments back the entire exposure.
of transactions. Master netting because longer-term commitments
59
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The above table represents a worst case scenario of credit risk exposure to the Group and the Bank at 31 December 2017,
without taking account of any collateral held or other credit enhancements attached. For on-balance sheet assets, the
exposures set out above are based on net carrying amounts as reported in the statement of financial position.
As shown above for the Group, 20% (2016: 32%) of the total maximum exposure is derived from loans and advances and
investment securities represents 47% (2016: 39%).
2017 2016
GROUP Loans & Money Loans & Money
advances to market advances to market
customers placements customers placements
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
2017 2016
BANK Loans & Money Loans & Money
advances to market advances to market
customers placements customers placements
The quality of credit exposure to customers and banks and other financial institutions that were neither past due nor
impaired were assessed with reference to the Bank of Ghana prudential guidelines adopted by the Group for its internal
grading purposes.
GROUP
BANK
61
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP
BANK
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The breakdown of the gross amount of loans and advances individually impaired by class, along with the fair value of related
collateral held by the bank as security, are as follows:
GROUP
BANK
Loans and advances to customers in Ghana analysed by industry, as well as by customer type are shown in note 17(b) & (c).
63
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate,
currency and equity products, all of which are exposed to general and specific market movements and changes in the level
of volatility of market rates or prices such as interest rates, foreign exchange rates and equity prices. The Bank separates
exposures to market risk into either trading or non-trading portfolios.
The market risks arising from trading and non-trading activities are concentrated in Bank Treasury and monitored by
both Treasury and Risk Management departments separately. Regular reports are submitted to the Board of Directors
and heads of each business unit.
Trading portfolios include those positions arising from market-making transactions where the Bank acts as principal
with clients or with the market.
Non-trading portfolios primarily arise from the interest rate management of the Bank’s retail and wholesale banking
assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Bank’s
held-to-maturity and available-for-sale financial assets.
The objective of market risk measurement is to manage and control market risk exposures within acceptable limits
while optimising the return on risk. The Bank’s Chief Risk Officer is responsible for the development of detailed risk
management policies and for day-to-day implementation of those policies.
The Group identifies market risk through daily monitoring of levels and profit and loss balances of trading and non-
trading positions. The Risk Management department monitors daily trading activities to ensure that risk exposures taken
are within the approved price limits and the overall risk tolerance levels set by the Board. In addition, Assets and Liabilities
Committee (ALCO) members, the Treasurer and the Risk Manager monitor market risk factors that affect the value of
trading and non-trading positions as well as income streams on non-trading portfolios on a daily basis. They also track
the liquidity indicators to ensure that the Group meets its financial obligations at all times.
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The open positions of currencies held are monitored on a daily basis. The objective of monitoring the open position in
foreign currency is to manage foreign exchange risk due to movements in rates as well as changes in liquidity positions.
The Bank has adopted the Bank of Ghana requirement that banks maintain a total open position which is equal to 10%
of their net own funds. Within this limit, banks are also required to maintain single currency open positions equal to 5%
of net own funds.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Included in the table below are assets and liabilities at carrying amounts categorised by currency:
GROUP
Assets
Cash and cash equivalents 38,637 34,860 391,228 1,075,401 1,540,126
Investment securities 13,247 2,520,652 2,533,899
Loans and advances to customers 3,199 101 628,568 434,667 1,066,535
Non-current assets held for sale - - - 1,011 1,011
Other assets 14 31 4,283 112,975 117,303
Deferred tax asset - - - 2,629 2,629
Property plant and equipment - - - 111,477 111,477
Intangible assets - - - 18,870 18,870
Total assets 41,850 34,992 1,037,326 4,277,682 5,391,850
Liabilities
Deposits from customers 38,442 33,462 859,126 2,921,691 3,852,721
Deposits from banks and other financial institutions - - 110,393 1,376 111,769
Borrowings - - 683,073 724 683,797
Other liabilities 143 344 1,342 198,149 199,978
Total liabilities 38,585 33,806 1,653,934 3,121,940 4,848,265
65
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP
Assets
Cash and cash equivalents 34,604 26,935 384,359 531,073 976,971
Investment securities - - - 1,654,207 1,654,207
Loans and advances to customers 3,634 12 787,639 561,310 1,352,595
Investments (other than securities) - - - 27 27
Non-current assets held for sale - - - 1,011 1,011
Other assets 68 39 24,966 94,241 119,314
Deferred tax asset - - - 7,357 7,357
Property plant and equipment - - 137 93,048 93,185
Intangible assets - - 453 8,340 8,793
Total assets 38,306 26,986 1,197,554 2,950,614 4,213,460
Liabilities
Deposits from customers 27,410 26,024 707,502 2,375,619 3,136,555
Deposits from banks and other financial institutions 10,204 - 110,173 - 120,377
Borrowings - - 337,671 9,178 346,849
Other liabilities 88 253 12,353 100,674 113,368
Total liabilities 37,702 26,277 1,167,699 2,485,471 3,717,149
The Group’s principal foreign currency exposures are to the US Dollar, the Euro and the Pound Sterling. The table below
illustrates the hypothetical sensitivity of reported profit to a 15% (2016: 15%) decrease in the value of the Ghana Cedi
against these foreign currencies at the year end, assuming all other variables remain unchanged. The sensitivity rate of
15% represents the directors’ assessment of a reasonably possible change, based on historic volatility.
Year end exchange rates applied in the above analysis are GH¢4.4157 (2016: GH¢4.2002) to the US dollar, GH¢ 5.2964
(2016: GH¢4.4367) to the Euro, and GH¢5.9669 (2016: GH¢5.1965) to the Pound Sterling. The strengthening of the Ghana
Cedi will produce symmetrical results.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
BANK
Assets
Cash and cash equivalents 35,822 34,365 358,725 1,119,608 1,548,520
Investment securities - - 13,247 2,514,232 2,527,479
Loans and advances to customers 3,199 101 588,827 434,667 1,026,794
Investments (other than securities) - - 12,370 101 12,471
Non-current assets held for sale - - - 1,011 1,011
Other assets 18 50 8,628 121,787 130,483
Deferred tax asset - - - 2,610 2,610
Property plant and equipment - - - 111,386 111,386
Intangible assets - - - 17,294 17,294
Total assets 39,039 34,516 981,797 4,322,696 5,378,048
Liabilities
Deposits from customers 38,317 32,212 849,716 2,923,067 3,843,312
Deposits from banks and other financial institutions - - 111,783 1,376 113,159
Borrowings - - 683,073 724 683,797
Other liabilities 143 344 2,842 199,791 203,120
Total liabilities 38,460 32,556 1,647,414 3,124,958 4,843,388
* The Bank has entered into currency swap agreements that effectively hedge the on-balance sheet position for the US
dollar. Under the agreements, the potential impact on profit of a 15% decrease in the value of the Ghana Cedi against
the US Dollar on the Bank is capped at GH¢ 23,319 (Group: GH¢ 21,602).
67
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
BANK
Assets
Cash and cash equivalents 34,604 26,935 368,411 531,074 961,024
Investment securities - - - 1,650,277 1,650,277
Loans and advances to customers 3,634 12 749,837 561,310 1,314,793
Investments (other than securities) - - 8,163 128 8,291
Non-current assets held for sale - - - 1,011 1,011
Other assets 68 39 22,575 107,578 130,260
Deferred tax asset - - - 7,359 7,359
Property plant and equipment - - - 93,019 93,019
Intangible assets - - - 7,568 7,568
Total assets 38,306 26,986 1,148,986 2,959,324 4,173,602
Liabilities
Deposits from customers 27,410 26,024 671,561 2,375,619 3,100,614
Deposits from banks and other financial institutions 10,204 - 110,173 - 120,377
Borrowings - - 337,671 9,178 346,849
Other liabilities 88 253 12,326 99,748 112,415
Total liabilities 37,702 26,277 1,131,731 2,484,545 3,680,255
The Bank’s principal foreign currency exposures are to the US Dollar, the Euro and the Pound Sterling. The table below
illustrates the hypothetical sensitivity of reported profit to a 15% (2016: 15%) decrease in the value of the Ghana Cedi
against these foreign currencies at the year end, assuming all other variables remain unchanged. The sensitivity rate of
15% represents the directors’ assessment of a reasonably possible change, based on historic volatility.
Year end exchange rates applied in the above analysis are GH¢4.4157 (2016: GH¢4.2002) to the US dollar, GH¢ 5.2964
(2016: GH¢4.4367) to the Euro, and GH¢5.9669 (2016: GH¢5.1965) to the Pound Sterling. The strengthening of the Ghana
Cedi will produce symmetrical results.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Interest rate risk is the exposure of current and future earnings and capital to adverse changes in the level of interest rates.
Exposure to interest rate risk can result from a variety of factors, including:
• differences between the timing of market interest rate changes and the timing of cash flows (re-pricing risk)
• changes in the market interest rates producing different effects on yields on similar instruments with different maturities
(yield curve risk); and
• changes in the level of market interest rates producing different effects on rates received or paid on instruments with similar
re-pricing characteristics (basis risk).
The Group uses gap analysis to measure its exposure to interest rate risk. Through this analysis, it compares the values of
interest rate sensitive assets and interest rate sensitive liabilities that mature or re-price at various time periods in the future.
The Group may make judgemental assumptions about the behaviour of assets and liabilities which do not have specific
contractual maturity or re-pricing dates.
The table below summarises the re-pricing profiles of financial instruments and other assets and liabilities as at 31 December
2017 and 31 December 2016 respectively. Items are allocated to time periods with reference to the earlier of the next contractual
interest rate re-pricing date and the maturity date.
GROUP
Liabilities
Deposits from customers 144,472 393,642 713,609 1,185,364 1,415,634 3,852,721
Deposits from banks and other financial
institutions 24,403 87,366 - - - 111,769
Borrowings 1,140 12,306 45,382 624,969 - 683,797
Other liabilities - - - - 199,978 199,978
Financial liabilities 170,015 493,314 758,991 1,810,333 1,615,612 4,848,265
69
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
BANK
BANK
71
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The interest re-pricing gap analysis is supplemented by monitoring the sensitivity of the Bank’s financial assets and
liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a
monthly basis include a 100 basis points (bps) parallel shift in all yield curves. An analysis of the Bank’s sensitivity to
an increase or decrease in market interest rates (assuming no symmetrical movement in yield curves and a constant
balance sheet position) and its impact on the net interest margin is as follows:
Liquidity risk is the risk that the Bank is unable to meet its obligations when they fall due as a result of customer deposits
being withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities or
margin calls for derivatives. Such outflows would deplete available cash resources for client lending, trading activities and
investments. In extreme circumstances, lack of liquidity could result in reductions in the statement of financial position
and sales of assets, or potentially an inability to fulfil lending commitments. The risk that the Bank will be unable to do so is
inherent in all banking operations and can be affected by a range of institution-specific and market-wide events including,
but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.
The Bank’s liquidity management process, as carried out within the Bank and monitored by a separate team in Treasury
Department, includes:
• 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. The Bank maintains an active presence in the money
market to enable this to happen;
• maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen
interruption to cash flow;
• monitoring the liquidity ratios of the statement of financial position against internal and regulatory requirements and ;
• managing the concentration and profile of debt maturities.
Finally, the Bank is statutorily required to maintain a reserve of 10% of the local currency equivalent of foreign currency
customer deposits held as well as 10% of local currency customer deposits in one account with the Bank of Ghana. These
balances are used to support all inter-bank transactions.
The Bank prepares and uses liability mismatch reports to manage funding needs. The weekly liquidity mismatch report is
used to measure the ability of the Bank to meet maturing liability obligations. This is supplemented by weekly cash flow
reports produced to show the projected cash flow on a daily basis incorporating projected customer withdrawals, including
credit disbursements, as well as deposits.
The deposit concentration ratio is monitored monthly to ensure that decisions of individual and or groups of depositors do
not severely impact on liquidity. Particular attention is given to wholesale borrowing. Due to their size, withdrawals of such
funds tend to impact negatively on liquidity. As a rule, wholesale borrowing transactions are entered into as repurchase
contracts where each transaction is collateralised with a treasury bill or bond. Alternatively, such transactions are contracted
to support specific credits in a back-to-back transaction. The monthly deposit concentration report is examined as part of
the Assets and Liabilities Committee (ALCO) process and the necessary preventive/remedial action taken.
In addition to the above, the Bank observes an internally defined volatile liability dependency ratio which is measured as
(volatile funds – liquid assets) / long term investments. This measures the reliance on volatile funds to finance long term
investments as well as other non-liquid assets. (Volatile funds are short term wholesale funds e.g. call accounts).
73
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
Liquidity crisis is defined as a condition where the Bank is unable to meet maturing liabilities/or regulatory reserve
requirements due to inadequate liquid assets or a condition that arises from a sudden deterioration of the perceived
safety and credibility of the Bank resulting in substantial withdrawal of funds by depositors.
This is deemed to have occurred when any of the following conditions exist:
Management has put in place a Contingency Action Plan to manage liquidity crisis. The plan includes action points
together with responsibilities for ensuring that steps are taken to manage the crisis.
3.3.4 Non-derivative financial liabilities and assets held for managing liquidity risk
The table below presents the cash flows payable by the Bank under non-derivative financial liabilities and assets held
for managing liquidity risk by remaining contractual maturities at the reporting date. The amounts disclosed in the
table are the contractual undiscounted cash flows, whereas the Bank manages the liquidity risk based on a different
basis not resulting in a significantly different analysis.
GROUP
Assets
Cash and cash equivalents 950,004 115,236 161,899 312,987 1,540,126
Investment securities 790,365 219,022 410,938 1,079,428 2,499,753
Loans and advances to customers 212,214 133,954 307,651 412,716 1,066,535
Other assets - 117,303 - - 117,303
Total assets held for managing liquidity risk
(Contractual maturity date) 1,952,583 585,515 880,488 1,805,131 5,223,717
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
3.3.4 Non-derivative financial liabilities and assets held for managing liquidity risk (continued)
GROUP
Assets
Cash and cash equivalents 834,309 - 119,561 23,101 976,971
Investment securities 755,204 254,885 343,400 274,474 1,627,963
Loans and advances to customers 260,831 208,896 265,102 617,766 1,352,595
Other assets 655 118,659 - - 119,314
Total assets held for managing liquidity risk
(Contractual maturity date) 1,850,999 582,440 728,063 915,341 4,076,843
BANK
Assets
Cash and cash equivalents 950,004 123,630 161,899 312,987 1,548,520
Investment securities 787,155 216,112 410,938 1,079,128 2,493,333
Loans and advances to customers 212,214 133,954 267,910 412,716 1,026,794
Other assets - 130,483 - - 130,483
Total assets held for managing liquidity risk
(Contractual maturity date) 1,949,373 604,179 840,747 1,804,831 5,199,130
75
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
3.3.4 Non-derivative financial liabilities and assets held for managing liquidity risk (continued)
BANK
Assets
Cash and cash equivalents 828,360 - 109,205 23,459 961,024
Investment securities 751,274 254,885 343,400 274,484 1,624,043
Loans and advances to customers 260,831 208,896 246,201 598,865 1,314,793
Other assets - 130,260 - - 130,260
Total assets held for managing liquidity risk
(Contractual maturity date) 1,840,465 594,041 698,806 896,808 4,030,120
The Bank holds a diversified portfolio of cash and high-quality highly-liquid securities to support payment obligations
and contingent funding in a stressed market environment. The Bank’s assets held for managing liquidity risk comprise:
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Contractual amounts of the Bank’s off-balance sheet financial instruments that it commits to extend to customers at the
reporting date are summarised in the table below.
At 31 December 2017 No later than 1 year 1-5 years Over 5 years Total
Loan commitments -
Total 167,900 - 167,900
At 31 December 2016 No later than 1 year 1-5 years Over 5 years Total
-
Loan commitments 6,250 - - 6,250
Total 6,250 - 6,250
The Bank had outstanding guarantees, indemnities and endorsements at the year end of GH¢158.5m (2016: GH¢214.7m).
The Bank currently has no long term operating lease. All operating lease payments made during the year relate to lease
periods less than one year and are recorded in operating expenses.
77
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The assets and liabilities of the Bank held inside and outside Ghana are analysed below:
Liabilities
Deposits from customers 3,697,572 145,740 3,100,614 -
Deposits from banks and other financial institutions 89,690 23,469 43,558 76,819
Borrowings 724 683,073 - 346,849
Other liabilities 203,120 - 112,415 -
Current tax liability 451 - - -
3,991,557 852,282 3,256,587 423,668
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not
presented on the Bank’s statement of financial position at their fair value:
Financial liabilities
Desposits from customers 3,852,721 3,136,555 3,852,721 3,136,555
Financial liabilities
Desposits from customers 3,843,312 3,100,614 3,843,312 3,100,614
79
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs reflect market data obtained from
independent sources; unobservable inputs reflect the Bank’s market assumptions. These two types of
inputs have created the following fair value hierarchy:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level
includes listed equity securities and debt instruments on exchanges (for example, Ghana Stock
Exchange) and exchanges traded derivatives like futures (for example, Nasdaq).
• Level 2 – Inputs are quoted prices for the asset or liability, (other than those included in Level 1) that are
observable either directly (that is, as prices) or indirectly (that is, derived from prices).
• Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable
inputs). This level includes equity investments and debt instruments with significant unobservable
components.
This hierarchy requires the use of observable market data when available. The Bank considers relevant
and observable market prices in its valuations where possible.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
81
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
Compliance with capital adequacy ratios set by the Bank of Ghana is monitored monthly with reports outlining their
calculation reviewed and signed by the Bank’s Finance Director.
Under the current capital requirements set by the Bank of Ghana, banks have to maintain a ratio of regulatory capital to
risk weighted assets (“capital adequacy ratio”) above 10%.
Regulatory capital as defined by the Bank of Ghana has two (2) components:
For an instrument to qualify as subordinated loan capital, it should possess the following attributes:
• should be unsecured;
• repayment is subordinated to other debt instruments;
• should have a minimum original fixed term to maturity of over 5 years and;
• not available to absorb the losses of a bank which continues trading.
The permissible amount of total qualifying subordinated loan capital is limited to a maximum of 50% of Tier I capital.
The risk-weighted assets are measured in accordance with the guidelines as provided by the Bank of Ghana. It takes
into account the nature of, and reflecting an estimate of credit, market and other risks associated with each asset and
counterparty.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The table below summarises the composition of regulatory capital, total weighted risk assets and the capital adequacy
ratios of the Bank for the years ended 31 December 2017 and 2016.
2017 2016
The directors have recommended an ordinary dividend of GH¢0.70 per share. When approved, this will translate into
a total payout of GH¢17.68 million. This will reduce the Tier 1 and total capital adequacy ratios to 18.19% and 26.15%
respectively.
83
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various factors that are
believed to be reasonable under the circumstances, the results of which form the basis for making the judgement
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates. The estimates and judgements that have a significant risk of causing a material adjustment to
the carrying values of the assets and liabilities within the next financial year are discussed below.
In addition to specific allowances against individually significant loans and advances, the Bank also makes a collective
impairment allowance against exposures which, although not specifically identified as requiring a specific allowance,
have a greater risk of default than when originally granted. This take into consideration factors such as any deterioration
in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in
cash flows.
5. SEGMENT INFORMATION
For management purposes, the Group is organised into five operating segments as described below based on products
offered, market segment and customer turnover.
Corporate Banking: Principally responsible for providing banking services and products to multinationals, large regional
and domestic clients and other institutional clients.
Treasury: Undertakes the Bank’s funding, ALM and centralised risk management activities through borrowing and
investment in liquid assets such as short-term placements and government debt securities.
Retail Banking: Provides financial products and services to individuals (personal, private and inclusive segments)
and small and medium scale enterprises. The unit provides financial solutions across various channels (ATM, mobile
banking, agents etc.) and platforms.
Investment Banking: Investment banking services cover activities such as the provision of business advisory services,
issuance of securities and arranging financing for short, medium and long term funding needs of clients.
Offshore banking: Principally responsible for providing banking services to offshore customers in the Asia Pacific region.
Management monitors the operating results of these business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss
which in certain respects is measured differently from operating profit or loss in the financial statements. Transactions
between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. For the
purposes of segment reporting, interest is allocated to the business units based on a pool rate determined by Treasury
using the Bank’s cost of funds.
85
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The following shows an analysis of the performance of the various business units across the Group.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The Group operates in two geographic markets: Ghana (Fidelity Bank Ghana Limited & Fidelity Securities Limited) and
Malaysia (Fidelity Asia Bank Limited). The following tables show the distribution of operating profit and non-current
assets allocated based on the location of the customers and assets respectively for the years ended 31 December 2017 and
2016:
2017
Ghana Malaysia Total
2016
Ghana Malaysia Total
87
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP BANK
6. Interest income 2017 2016 2017 2016
7. Interest expense
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The number of persons employed by the Group and the Bank at the end of the year was 1,045 (2016: 1,060) and 1,027 (2016:
1,039) respectively.
89
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP BANK
The impairment losses on other assets relates to an asset under receivership against which the Bank has a specific
charge. The impairment charge is recognised for the difference between the recoverable amount and the carrying
amount of the asset at the end of the reporting period.
The tax on the Group and Bank’s profit before tax differs from the
theoretical amount that would arise using the basic tax rate as
follows:
Fidelity Asia Bank operates under a different tax regime and was not considered for the group corporate tax
computation.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Bank
Year of assessment
The National Fiscal Stabilisation Levy Act, 2013, (Act 785), became effective from 15 July 2013. Under the Act, a 5% levy is
charged on profit before tax and is payable on a quarterly basis.
91
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
2017 2016
GROUP Assets Liabilities Net Assets Liabilities Net
Property and equipment (19) 4,292 4,273 (1) 342 341
Impairment allowances for loan losses (15,438) - (15,438) (14,259) - (14,259)
Gains on available for sale investments - 8,536 8,536 - 6,561 6,561
Net tax (assets)/liabilities (15,457) 12,828 (2,629) (14,260) 6,903 (7,357)
BANK
Deferred tax is calculated using the enacted income tax rate of 25% (2016: 25%). Deferred tax liabilities and deferred tax
charges in the statement of comprehensive income are attributable to the following items:
GROUP
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
BANK
GROUP
2016
BANK
2016
93
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP BANK
2017 2016 2017 2016
GROUP BANK
16. Investment Securities 2017 2016 2017 2016
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP BANK
(a) Analysis by type: 2017 2016 2017 2016
95
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
The Bank holds an 18.67% stake in Mustard Capital Partners Limited and a 100% stake in both Fidelity Asia Bank and Fidelity
Securities Limited.
The Bank’s Board in 2017 passed a resolution to increase the share capital of Fidelity Asia Bank by USD 1 million. This
constitutes “Additional investments” as indicated in note 18.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP
At 1 Charge for At 31
Accumulated depreciation January the year Transfers Disposals December
Motor vehicles 6,121 1,111 - (1,777) 5,455
Computers – Hardware 15,904 2,769 - - 18,673
Equipment 10,424 2,352 - - 12,776
Furniture and fittings 4,505 654 - - 5,159
Leasehold improvement 6,138 2,599 - - 8,737
Building 16 - - - 16
97
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
BANK
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP
99
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
BANK
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
GROUP At 1 At 31
January Additions Transfers December
Cost
Computer software 22,392 2,022 12,805 37,219
Capital work in progress 5,182 9,199 (12,805) 1,576
Goodwill 2,338 - - 2,338
29,912 11,221 - 41,133
At 1 Charge for At 31
Accumulated amortisation January the year December
BANK
At 1 At 31
January Additions Transfers December
Cost
Computer software 20,240 1,055 12,805 34,100
Capital work in progress 5,184 9,193 (12,805) 1,572
Goodwill 2,338 - - 2,338
27,762 10,248 - 38,010
At 1 Charge for At 31
Accumulated amortisation January the year December
Computer software 20,194 522 20,716
Carrying value:
At 31 December 2017 17,294
101
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP At 1 At 31
January Additions Transfers December
Cost
Computer software 21,334 28 1,030 22,392
Capital work in progress 4,469 1,743 (1,030) 5,182
Goodwill 2,338 - - 2,338
28,141 1,771 - 29,912
At 1 Charge for At 31
Accumulated amortisation January the year December
Carrying value:
At 31 December 2016 8,793
BANK
At 1 At 31
January Additions Transfers December
Cost
Computer software 20,240 - - 20,240
Capital work in progress 3,656 1,528 - 5,184
Goodwill 2,338 - - 2,338
26,234 1,528 - 27,762
At 1 Charge for At 31
Accumulated amortisation January the year December
Computer software 18,965 1,229 20,194
Carrying value:
At 31 December 2016 7,568
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
The Bank reviews its business performance based on a number of indicators, a key measure being the increase in the
customer base and the growth in deposits. The Bank continues to recognise goodwill on the acquisition of ProCredit
Ghana and this is attributed to the business growth and synergies arising from the acquisition. Goodwill is monitored
by management at the retail segment level.
The following table outlines the growth registered for the business acquired from ProCredit Ghana for the year under
review:
This represents the carrying value of assets repossessed by the Bank due to loan default. The Bank is in the process of
selling these assets.
The major class of assets classified as held for sale are as follows:
Collateral repossessed
2017 2016
103
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP BANK
2017 2016 2017 2016
Current accounts 1,660,874 1,215,185 1,684,810 1,214,473
Call accounts 438,795 321,713 438,795 321,711
Savings accounts 746,569 658,596 746,569 658,596
Time deposits 1,006,483 941,061 973,138 905,834
Total 3,852,721 3,136,555 3,843,312 3,100,614
GROUP BANK
2017 2016 2017 2016
Other deposits from banks 111,769 120,377 113,159 120,377
Total 111,769 120,377 113,159 120,377
Deposits from banks and other financial institutions consist of short-term deposits from various banks with maturity
period of less than one year.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Current 58,829
Non -current 624,968
Total 683,797
2016
At 1 Exchange At 31
January Drawdown Repayments differences December
Current 15,185
Non -current 331,664
Total 346,849
105
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
(e) KfW
On 29 August 2013, ProCredit Ghana, obtained a six (6) year subordinated loan of GH¢ 8,225,090 from KfW at a rate
of 14% per annum to support its rural finance programme. Repayment of principal and interest will be in a bullet at
the end of the term. The Bank took over the principal and interest payment obligations on 11 April 2016 following the
merger of operations of both entities.
On 21 August 2016, KfW extended a 4 year credit facility of GH¢1,046,557 to the Bank to facilitate the purchase of POS
terminals in line with the Bank’s commitment to offer technology based solutions to drive the transaction banking
business. The facility runs for 4 years at an interest rate of 6%.
107
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
GROUP BANK
2017 2016 2017 2016
The calculation of basic earnings per share as at 31 December 2017 was based on the profit attributable to ordinary
shareholders of GH¢90.43 million (2016; GH¢14.71 million) and a weighted average number of ordinary shares
outstanding of 25.25 million (2016: 25.25 million), calculated as follows:
GROUP BANK
2017 2016 2017 2016
Profit attributable to ordinary shareholders
Net profit for the year 95,695 8,972 90,434 14,711
Weighted average number of ordinary shares (000’ of shares)
Issued ordinary shares at 1 January 25,250 25,250 25,250 25,250
Effect of additional issue of shares - - - -
Weighted average number of ordinary shares at 31 December 25,250 25,250 25,250 25,250
Basic earnings per share (GH¢) 3.79 0.36 3.58 0.58
Diluted earnings per share (GH¢) 3.79 0.36 3.58 0.58
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Ordinary shares
Preference shares
b. Ordinary shares
Authorised
Ordinary shares of no par value (‘000) 1,000,000 1,000,000
Issued and fully paid:
At 1 January 25,250 25,250
Issued during the year - -
At 31 December 25,250 25,250
c. Preference shares
Authorised
Preference shares (‘000) 50,000 50,000
Issued and fully paid:
At 1 January 10,400 10,400
Issued during the year - -
At 31 December 10,400 10,400
There was no movement in the outstanding number of preference shares during the year. The preference shares are perpetual
securities and have no maturity date. Holders have the option of converting into ordinary shares as stated in the agreement.
109
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
This is a non-distributable reserve representing transfer of 25% of profit after tax. It is an accumulation of amounts set
aside in accordance with Section 34 of the Banks and Specialised Deposit Taking Institutions Act, 2016 (Act 930). The
movement is included in the statement of changes in equity.
GROUP
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
BANK
This is an accumulation of transfers from the income surplus account to meet the minimum regulatory requirements
in respect of allowance for credit losses for non-performing loans and advances. The movement is included in the
statement of changes in equity.
2017 2016
111
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
This represents the accumulated profits over the years after appropriations. The balance is available for distribution to
shareholders.
All transactions with related partied with the exception of key management personnel and other employees are priced on an
arm’s length basis and have been entered into in the normal course of business.
(i) Transactions between Fidelity Bank Ghana Limited and its subsidiaries meet the definition of related party transactions.
[ All amounts are expressed in thousands of Ghana cedis unless otherwise stated ]
Key management personnel are defined as persons having authority and responsibility for planning, directing and
controlling the activities of Fidelity Bank Ghana Limited and comprise the Directors and officers of Fidelity Bank Ghana
Limited.
2017 2016
Executive directors 1,150 1,826
Non executive directors 1,011 1,553
Officers and other employees 38,077 21,317
Total 40,238 24,696
Interest rates charged on balances outstanding on staff loans are based on agreed terms and conditions. Secured
loans granted are secured over property of the respective borrowers. No impairment losses have been recorded against
balances outstanding during the period with key management and therefore no specific allowances have been made
for impairment losses on balances with key management.
2017 2016
Salaries and short-term employee benefits 4,652 4,312
Social security fund contribution 466 458
Provident fund contribution 362 356
5,480 5,126
113
Notes
Notes To The
To The Financial
Financial Statements
Statements for the year ended 31 December 2017
(c) Commitments
The Bank had loan commitments amounting to GH¢167.9 million at the end of the year (2016: GH¢ 6.3 million).
GROUP BANK
2017 2016 2017 2016
Interest earned and other operating income 535,559 464,627 522,064 458,723
Direct cost of services (193,999) (160,053) (190,997) (154,837)
Value added by banking services 341,560 304,574 331,067 303,886
Non-banking income 906 2,485 906 2,485
Impairment loss on financial assets (71,404) (170,744) (71,404) (170,744)
Value added 271,062 136,315 260,569 135,627
Distributed as follows :
To Employees
Directors (929) (1,565) (777) (994)
Executive Directors (5,480) (4,013) (3,031) (2,075)
Other employees (112,223) (106,495) (111,471) (103,748)
To Government
Income tax (46,106) (4,460) (44,925) (3,865)
115
Notes To TheInformation
Shareholder Financial Statements
[ Allof for theareyear
amounts ended
expressed 31 December 2016
Ghana cedis unless otherwise stated ]
in thousands [ Allof Ghana cedis unless otherwise stated ]
amounts are expressed in thousands
117
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