Half Yearly Report

RNS Number : 8412R

NMBZ Holdings Ld

31 August 2010

 

 

NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED (Registered Commercial Bank)

 

 

UNAUDITED RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

HIGHLIGHTS

 

	30 June	30 June
	2010	2009
(Loss)/profit for the period (US$)	(1 881 083)	1 607 928
Basic (losses)/ earnings per share (US cents)	(0.114)	0.098
Total deposits (US$)	55 436 308	11 987 323
Shareholders' funds (US$)	5 972 495	8 192 159

 

 

 

 

 

Enquiries:

 

NMBZ HOLDINGS LIMITED Tel: +263-4-759 651/9

 

James A Mushore, Group Chief Executive Officer, NMBZ Holdings Limited [email protected]

 

Benefit P Washaya, Managing Director, NMB Bank Limited [email protected]

 

Benson Ndachena, Chief Financial Officer [email protected]

 

Website: http://www.nmbz.co.zw

 

Email: [email protected]

 

 

 

NMBZ HOLDINGS LIMITED

 

CHAIRMAN'S STATEMENT

 

INTRODUCTION

 

The first half of the year was characterised by a relatively stable economic environment which was under - pinned by the more than a year old inclusive government. The political stability and the re-engagement of the international community resulted in some modest growth in business activity in the period under review.

 

GROUP RESULTS

 

Compliance with International Financial Reporting Standards

 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared in compliance with the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20).

 

Commentary on results

 

The loss before taxation was US$2 375 593 during the period under review. A historical cost attributable loss of US$1 881 083 was recorded for the period. Net interest income was US$2 312 402 for the period. Non-interest income amounted to US$3 725 296 and this was mainly a result of commissions and fee income and the fair value adjustments on investment properties.

 

Operating expenses amounted to US$8 425 514 largely driven by administration, staff related expenditure and the impairment loss on land and buildings. Staff related expenditure includes a provision of US$2.6 million for the retrenchment exercise. The retrenchment of staff is being undertaken in order to streamline operations in line with the prevailing business volumes.

 

While a conservative approach has been taken with respect to impairment losses on loans and advances, the total charge amounted to US$799 207 for the current period. This is reflective of the loans and advances which amounted to US$28 550 838 at 30 June 2010 as well as a prudent lending policy in a fairly uncertain environment.

 

Dividend

 

In light of the need to conserve cash in the business and the statutory capitalisation requirements for the Bank, the Board has proposed not to declare a dividend.

 

STATEMENT OF FINANCIAL POSITION

 

The Group's total asset base as at 30 June 2010 was US$68 867 599 and comprised mainly of financial assets at fair value through profit and loss (US$16 805 470), cash and short term funds (US$17 782 674), investment properties (US$2 695 000), property and equipment (US$3 111 746) and advances and other accounts (US$28 252 786).

 

Capital

 

The banking subsidiary's capital adequacy ratio at 30 June 2010 calculated in accordance with the guidelines of the Reserve Bank of Zimbabwe (RBZ) was 10.66% (31 December 2009 - 26.24%). The minimum required by the RBZ is 10%.

 

The Group undertook a rights issue exercise in order to meet the banking subsidiary's statutory minimum paid up capital of US$12.5 million. The rights issue exercise closed on 30 June 2010 and subsequent to this date the total capital raised amounted to US$10.28 million. The amount raised has been used to recapitalize the Banking subsidiary and the Holding company.

 

NMBZ HOLDINGS LIMITED

 

OUTLOOK AND STRATEGY

 

The recapitalization of the Group has buttressed the Company's strength to underwrite more business and explore other emerging opportunities in the financial services sector and these will be pursued in the future.

 

 

DIRECTORATE

 

Mr James Andrew Mushore was appointed the Group Chief Executive Officer on 23 April 2010. Messrs Jonathan Chenevix - Trench and James de la Fargue were appointed to the Board on 16 June 2010. I welcome Messrs Mushore, Chenevix - Trench and de la Fargue to the board and wish them a successful tenure in office.

 

Dr G M Mandishona and Mr C Chipato resigned from the board effective 17 August 2010. I would like to thank them for their invaluable contribution to the Board over the years. I was appointed Chairman of the Board on 17 August 2010.

 

APPRECIATION

 

I would like to thank our clients, shareholders and Monetary Authorities for their continued support. I would also like to thank my fellow Board members, management and staff for their unwavering commitment and dedication.

 

 

 

 

 

T N MUNDAWARARA

CHAIRMAN

 

 

17 August 2010

 

 

NMBZ HOLDINGS LIMITED

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2010

 

	Note	30 June	30 June
		2010	2009
		US$	US$
Interest income		3 671 727	187 415
Interest expense		(1 359 325)	(21 999)
		-------------------	----------------
Net interest income		2 312 402	165 416
Net foreign exchange gains		357 732	41 152
Non-interest income	5	3 725 296	4 107 047
		--------------------	---------------
Net operating income		6 395 430	4 313 615
Operating expenditure	6	(8 425 514)	(2 059 976)
Impairment losses on loans and advances		(345 509)	(145 388)
		-------------------	-----------------
(Loss)/ profit before taxation		(2 375 593)	2 108 251
Taxation	7	494 510	(389 844)
Financial institutions levy	7	-	(110 479)
		--------------------	----------------
(Loss)/ profit for the period		(1 881 083)	1 607 928
Other comprehensive income/(loss):
General provision for doubtful debts RBZ grading	9	(453 698)	-
Tax relating to components of other comprehensive income	10	116 827	-
		------------------	--------------------
Other comprehensive loss for the period, net of tax		(336 871)	-
		------------------	--------------------
Total comprehensive (loss)/ income for the period		(2 217 954)	1 607 928
		===========	============
Earnings per share (US cents)
- Basic	11.3	(0.114)	0.098
- Headline	11.3	(0.050)	(0.031)
- Diluted basic	11.3	(0.114)	0.098
- Diluted headline	11.3	(0.050)	(0.031)

 

 

 

NMBZ HOLDINGS LIMITED

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2010

		30 June	31 December
SHAREHOLDERS' FUNDS	Note	2010	2009
		US$	US$
Share capital	12	46 234	-
Capital reserves		6 070 044	6 289 718
Revenue reserves		(143 783)	2 074 171
		--------------------	---------------------
Total shareholders' funds		5 972 495	8 363 889
LIABILITIES
Deposits and other accounts	13	52 810 575	23 649 725
Financial liabilities at fair value through profit and loss	14	9 933 275	6 444 932
Provision for current taxation		87 272	299 162
Deferred taxation		63 982	675 319
		--------------------	---------------------
Total equity and liabilities		68 867 599	39 433 027
		============	=============
ASSETS
Cash and cash equivalents	15	17 782 674	12 203 181
Financial assets at fair value through profit and loss	14.2	16 805 470	7 135 023
Advances and other accounts	16	28 252 786	12 729 195
Quoted and other investments		219 923	563 641
Investment properties		2 695 000	3 219 600
Property and equipment	17	3 111 746	3 582 387
		-------------------	---------------------
Total assets		68 867 599	39 433 027
		============	=============

NMBZ HOLDINGS LIMITED

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

for the six months ended 30 June 2010

 

				Capital Reserve	-------------------------------->
				Share		Non-
	Share	Share	Treasury	Option	Revaluation	Distributable	Accumulated
	Capital	Premium	Shares	Reserve	Reserve	Reserve	Profit	Total
	US$	US$	US$	US$	US$	US$	US$	US$
Deemed balances at 1 January 2009	-	-	-	96 034	-	6 201 909	-	6 297 943
Total comprehensive income for the year	-	-	-	-	-	-	2 074 171	2 074 171
Shares issued - share options exercised	-	34 822	-	(34 822)	-	-	-	-
Own equity instruments (note 12.3)	-	-	(8 225)	-	-	-	-	(8 225)
	--------	------------	----------------	------------------	-----------------	----------------	---------------	----------------
Balances at 31 December 2009	-	34 822	(8 225)	61 212	-	6 201 909	2 074 171	8 363 889
Total comprehensive loss for the six months	-	-	-	-	-	-	(2 217 954)	(2 217 954)
Transfer from non - distributable reserve	46 148	6 155 761	-	-	-	(6 201 909)	-	-
Share issue expenses	-	(173 440)	-	-	-	-	-	(173 440)
Shares issued - share options exercised	86	15 294	-	(15 380)	-	-	-	-
	--------	------------	----------------	------------------	----------------	---------------	------------------	-----------------
Balances at 30 June 2010	46 234	6 032 437	(8 225)	45 832	-	-	(143 783)	5 972 495
	=====	=======	=========	===========	==========	=========	==========	==========

 

NMBZ HOLDINGS LIMITED

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 June 2010

	2010	2009
	US$	US$
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/ Profit before taxation	(2 375 593)	941 182
Non-cash items
-Depreciation	129 558	209 680
-Impairment losses on loans and advances	345 509	92 887
-Investment properties fair value adjustment	584 600	(579 600)
-Quoted and other investments fair value adjustment	22 064	(172 978)
-Profit on disposal of quoted and other investments	(13 232)	(45 256)
-Profit on disposal of property and equipment	(25 224)	(2 066)
-Loss on disposal of investment property	-	460 000
-Financial instruments fair value adjustments	-	(32 371)
-Impairment loss on land and buildings	585 000	1 050 000
-Loss on derecognition of investment	-	10 404
	----------------	-------------------
Operating cash flows before changes in operating assets and Liabilities	(747 318)	1 931 882
Changes in operating assets and liabilities
Financial liabilities at fair value through profit and loss	3 488 343	6 444 932
Deposits and other accounts	29 160 849	19 715 785
Advances and other accounts	(16 322 798)	(12 736 106)
Financial assets at fair value through profit and loss	(9 670 447)	(7 135 023)
	---------------	-------------------
	5 908 629	8 221 470
	---------------	-------------------
Taxation
Capital gains tax paid	-	(152 000)
Corporate tax paid	(211 890)	(10 520)
	----------------	------------------
Net cash inflow from operating activities	5 696 739	8 058 950
	----------------	------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(243 917)	(160 322)
Purchase of quoted and other investments	-	(134 676)
Improvement of investment property	(60 000)	-
Proceeds from disposal of property and equipment	25 224	-
Proceeds from disposal of investment property	-	3 040 000
Proceeds from disposal of quoted and other investments	334 253	109 788
	----------------	------------------
Net cash inflow from investing activities	55 560	2 854 790
	-----------------	-----------------
Net cash inflow before financing activities	5 752 299	10 913 740
	------------------	-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Share issue expenses	(173 440)	-
Dividends received	634	-
	------------------	------------------
Net cash outflow from financing activities	(172 806)	-
	-----------------	-----------------
Net increase in cash and cash equivalents	5 579 493	10 913 740
Cash and cash equivalents at the beginning of the period	12 203 181	1 289 441
	------------------	-----------------
Cash and cash equivalents at the end of the period (note 15)	17 782 674	12 203 181
	===========	==========

 

 

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

1. REPORTING ENTITY

 

The Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in banking and other companies hold investments. 

 

2. BASIS OF PREPARATION

 

2.1 Statement of compliance

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board.

 

The financial statements have been prepared in compliance with the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20).

 

The financial statements were approved by the Board of Directors on 17 August 2010.

 

2.2 Historical cost convention

The financial statements are prepared under the historical cost convention except for quoted and other investments, properties, investment properties and financial instruments which are carried at fair value.

 

2.3 Functional and presentational currency

 

The Group changed its functional and reporting currency from the Zimbabwe dollar to the United States of America dollar with effect from 1 January 2009. These financial statements are reported in United States of America dollars and rounded to the nearest dollar.

 

As a result of the change in functional and reporting currency on 1 January 2009, the opening balances for the Group were re-established as of this date. The balances which were in foreign currency were taken at the recorded amounts, with cross rates applied as appropriate. The other balance sheet items which were not recorded in US$ but had a US$ equivalent were re-established using the first available evidence in 2009 of its US$ value.

 

The net effect of the re-establishment of the Group's assets and liabilities as at 1 January 2009 gave rise to a change in functional currency balance denoted in these financial statements as a non-distributable reserve. The non-distributable reserve has been utilized for the re-denomination of the Company's share capital and share premium reserve following the requisite statutory and shareholder approvals.

 

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

2.4 Use of estimates and judgments

 

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

 

2.4.1 Deferred tax liability

 

Provision for deferred taxation is made using the balance sheet liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences arising out of the initial recognition of assets or liabilities and temporary differences on initial recognition of business combinations that affect neither accounting nor taxable profit are not recognised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

 

In determining the amounts used for taxation purposes the directors referred to applicable effective exchange rates at the date of acquisition of assets or incurring of liabilities. The Zimbabwe Revenue Authority (ZIMRA), announced provisional methods to account for the deferred tax arising on assets purchased in ZWD. These methods require the preparer to first estimate the equivalent USD value of those assets at the time of purchase. Since the measurement of transactions in Zimbabwe dollars in the prior periods is affected by several economic variables such as mode of payment and hyperinflation this is an area where the directors have had to apply their judgement and acknowledge there could be significant variations in the results achieved depending on assumptions made.

 

2.4.2 Land and buildings

 

The properties were valued by professional valuers. The valuer applied the rental yield method to assess fair value of land and buildings. The determined fair value of land and buildings is most sensitive to the estimated yield as well as the long term vacancy rate. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not stable.

 

2.4.3 Investment property and equipment

 

Investment property, motor vehicles, furniture and fittings were valued by the directors with assistance from professional valuers by reference to market values of similar assets.

 

The professional valuers considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but awaiting acceptance. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not stable

 

The directors adjusted market values for similar assets to take into account differences in ageing, size and location of the investment property, other property and equipment owned by the Group. The directors exercised their judgement in determining the residual values of the other property and equipment which have been determined as nil.

 

 

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

3. ACCOUNTING POLICIES

 

The principal accounting policies applied in the preparation of these abridged financial statements are set out in Note 2 and 3. These policies have been consistently applied unless otherwise stated.

 

3.1 Financial instruments

 

3.1.1 Classification

 

Financial assets and liabilities at fair value through profit and loss include financial assets and liabilities held for trading i.e. those that the Group principally holds for the purpose of short-term profit taking as well as those that were, upon initial recognition, are designated by the entity as financial assets or liabilities at fair value through profit and loss. There is no reclassification into or out of this category as per IAS 39.

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those classified as held-for-trading and the Group upon initial recognition designates as at fair value through profit or loss and those the Group upon initial recognition designates as available-for-sale.

 

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.

 

Financial assets available-for-sale are non-derivative financial assets that are designated as available-for- sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

 

3.1.2 Recognition

 

The Group recognises financial assets at fair value through profit and loss and available for sale assets on the date it commits to purchase the assets. From this date any gains and losses arising from changes in fair value of the assets are recognised in the income statement and other comprehensive income respectively.

 

Held-to-maturity investments and loans and receivables are recognised at cost which is the fair value of the consideration given on the day that they are transferred to the Group.

 

3.1.3 Measurement

 

Financial assets and liabilities are measured initially at fair value. Subsequent to initial recognition, financial assets and liabilities at fair value through profit and loss and available-for-sale financial assets are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, less impairment losses.

 

Held-to-maturity investments and loans and receivables are measured at amortised cost less impairment losses. Amortised cost is calculated using the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument.

 

 

NMBZ HOLDINGS LIMITED 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

 

3.1.4 Fair value measurement principles

 

The fair value of financial instruments is based on their quoted market price at the balance sheet date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

 

Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the balance sheet date.

 

3.2 Investment properties

 

Investment properties are stated at fair value. Gains and losses arising from a change in fair value of investment properties are recognized in the income statement.

 

3.3 Share - based payments

 

The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.

 

3.4 Property and equipment

International Accounting Standard 16 (IAS 16) stipulates that the residual value and the useful life of an asset must be reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.

 

 

NMBZ HOLDINGS LIMITED

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

 

4. INTEREST INCOME

 

	30 June	30 June
	2010	2009
	US$	US$
Cash and cash equivalents	1 661	-
Loans and advances to banks	34 306	16 158
Loans and advances to customers	2 496 319	123 038
Investment securities	1 139 441	48 219
	--------------	------------
	3 671 727	187 415
	========	=======

5. non-interest income

	30 June	30 June
	2010	2009
	US$	US$
Net losses from quoted and other investments	(22 064)	(66 457)
Net commission and fee income	4 207 003	1 259 868
Fair value adjustment on investment properties	(584 600)	1 000 000
Debt recovery write back as RBZ Forex Bonds	-	1 789 836
Profit on disposal of quoted and other investments	13 232	-
Fair value gain on financial instruments	(80 283)	-
Profit on disposal of property and equipment	25 224	-
Other net operating income	166 784	123 800
	--------------	-------------
	3 725 296	4 107 047
	========	========

6. Operating EXPENDITURE

	30 June	30 June
	2010	2009
	US$	US$
The operating profit is after charging the following:-
Administration costs	2 434 901	1 184 156
Staff costs - salaries, allowances and related costs	2 676 055	605 693
- retrenchment	2 600 000	-
Depreciation	129 558	102 107
Impairment loss on land, buildings and other property	585 000	168 020
	-------------	--------------
	8 425 514	2 059 976
	========	========

 

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

7. taxation

	30 June	30 June
7.1 Tax Charge	2010	2009
	US$	US$
Current taxation	-	309 771
Aids levy	-	9 293
Deferred tax origination and reversal of temporary differences	(494 510)	70 780
	--------------	-----------
	(494 510)	389 844
Financial institutions levy	-	110 479
	--------------	-----------
Total taxation	(494 510)	500 323
	========	======

8. IMPAIRMENT LOSSES ON LOANS AND ADVANCES

 

Impairment losses are applied to write off advances in part or in whole when they are considered partly or wholly irrecoverable. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

 

8.1 Specific provisions

 

Specific provisions are made where the repayment of identified advances is in doubt and reflect estimates of the loss. Advances are written off against specific provisions once the probability of recovering any significant amounts becomes remote.

 

8.2 Portfolio provisions

 

The portfolio provision relates to the inherent risk of losses which, although not separately identified, is known to be present in any loan portfolio.

 

8.3 Regulatory Guidelines and International Financial Reporting Standards Requirements

 

The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.

 

International Accounting Standard 39, Financial Instruments Recognition and Measurement (IAS 39), prescribes the provisioning for impairment losses based on the actual loan losses incurred in the past applied to the sectoral analysis of book debts and the discounting of expected cash flows on specific problem accounts.

 

The two prescriptions are likely to give different results. The Group has taken the view that where the IAS 39 charge is less than the amount provided for in the Banking Regulations, the difference is charged to other comprehensive income and where it is more, the full amount will be charged to the income statement.

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

8.4 Non-performing loans

 

Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts, but is not included in income. Such suspended interest is deducted from loans and advances in the balance sheet. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ.

 

9. COMPONENTS OF OTHER COMPREHENSIVE INCOME

 

	30 June	30 June
	2010	2009
	US$	US$
General additional provisions for doubtful debts RBZ grading	(453 698)	-
	--------------	--------------
Other comprehensive loss	(453 698)	-
Income tax relating to components of other comprehensive (loss)/income	116 827	-
Income tax relating to components of other comprehensive(loss)/ income	116 827	-
	-----------------	---------------
Other comprehensive loss for the period, net of tax	(336 871)	-
	==========	=========

 

10. TAX EFFECTS RELATING TO COMPONENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)

 

	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
General additional provisions for doubtful debts RBZ grading	(453 698)	116 827	(336 871
	----------------	------------------	------------------
Other comprehensive loss	(453 698)	116 827	(336 871)
	==========	==========	===========

	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
General additional provisions for doubtful debts RBZ grading	-	-	-
	----------------	------------------	------------------
Other comprehensive loss	-	-	-
	==========	==========	===========

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

11. EARNINGS PER SHARE

 

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilute potential ordinary shares; (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

 

Headline earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited (excluding separately identifiable re-measurements, relating to any change in the carrying amount of an asset or liability, net of related tax (both current and deferred), other than re-measurements specifically included in headline earnings) by the weighted average number of ordinary shares outstanding during the year.

11.1 Earnings/ (losses)

	30 June	30 June
	2010	2009
	US$	US$
Basic	(1 881 083)	1 607 928
Headline (note 11.4)	(891 351)	(515 715)

11.2 Number of shares

	30 June	30 June
	2010	2009
Weighted average number of ordinary shares for basic earnings per share*	1 648 156 224	1 641 447 757
Effect of dilution:
Shares options	10 774 869	20 079 869
	-----------------	----------------------------
Weighted average number of ordinary shares adjusted for the effect of dilution*	1 658 931 093	1 661 527 626
	===========	=================
* excludes own equity instruments amounting to 1 028 172 shares.

 

11.3 Earnings/ (losses) per share (US cents)

	30 June	30 June
	2010	2009
Basic	(0.114)	0.098
Headline	(0.050)	(0.031)
Diluted basic	(0.114)	0.098
Diluted headline	(0.050)	(0.031)

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

11.4 Headline earnings

 

	30 June	30 June
	2010	2009
	US$	US$
(Loss)/ profit attributable to shareholders	(1 881 083)	1 607 928
Add/(deduct) non-recurring items:
- Impairment loss on land and buildings	585 000	-
-Fair value loss on quoted and other investments	-	66 457
-Fair value loss/(gain) on investment properties	584 600	(1 000 000)
-Debt recovery writeback as RBZ Forex Bonds	-	(1 789 836)
-Tax effect thereon	(179 868)	599 736
	---------------	-------------
	(891 351)	(515 788)
	=========	========

12. SHARE CAPITAL

 

	GROUP AND COMPANY
	30 June	30 June	30 June	31December
	2010	2009	2010	2009
	Shares	Shares	US$	US$
	million	million
12.1 Authorised
Ordinary shares of US$0.000028 each	3 500	2 250	98 000	-
	=====	=====	======	=====
	30 June	31 December	30 June	31 December
	2010	2009	2010	2009
	Shares	Shares	US$	US$
	million	million
12.2 Issued and fully paid
At 1 January	1 648	1 641	46 148	-
Shares issued - rights issue	-	-	-
Shares issued - share options	3	7	86	-
	---------	--------	----------	--------
At 30 June	1 651	1 648	46 234	-
	======	=====	======	=====

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

Of the 1 848 769 771 unissued ordinary shares, options which may be granted in terms of the NMBZ 2005 Employee Share Option Scheme (ESOS) amount to 85 360 962 and out of these 1 670 869 had not been issued. As at 30 June 2010, 9 104 000 share options out of the issued had not been exercised.

 

Subject to the provisions of section 183 of the Companies Act (Chapter 24:03), the unissued shares are under the control of the directors.

 

12.3 Own equity instruments

 

Own equity instruments amounting to 1 028 172 shares at a cost of US$8 225 were held by the Company's subsidiary, Stewart Holdings (Private) Limited.

 

13. DepositS and other accounts

	30 June	31 December
	2010	2009
	US$	US$
13.1 Deposits and other accounts by type
Deposits from other banks and other financial institutions	14 494 697	3 009 704
Current and deposit accounts	40 941 611	25 710 416
	--------------	-----------------
Total deposits	55 436 308	28 720 120
Less: Financial liabilities at fair value through profit and loss (note 14.1)	(9 933 275)	(6 444 932)
	--------------	-----------------
	45 503 033	22 275 188
Trade and other payables	7 307 542	1 374 537
	--------------	-----------------
	52 810 575	23 649 725
	=========	==========

 

The above are all financial liabilities at fair value through profit and loss. They are payable on demand, have variable interest rates and varying security. The fair value of the above is the same as the cost.

13.2 Maturity analysis

	30 June	31 December
	2010	2009
	US$	US$
Less than one month	46 502 438	25 992 595
1 to 3 months	8 933 870	2 727 525
3 to 6 months	-	-
6 months to 1 year	-	-
1 to 5 years	-	-
Over 5 years	-	-
	-------------	---------------
	55 436 308	28 720 120
	========	=========

 

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

	30 June		31 December
	2009		2009
	US$	%	US$	%
13.3 Sectoral analysis of deposits
Banks and other financial institutions	14 494 697	26	3 009 704	10
Transport and telecommunications companies	13 015 893	23	4 561 928	16
Mining companies	1 214 299	2	2 044 130	7
Industrial companies	13 411 872	24	6 790 495	24
Municipalities and parastatals	582 294	1	3 154 762	11
Individuals	6 112 254	11	4 379 292	15
Agriculture	2 518 788	5	2 268 211	8
Other deposits	4 086 211	8	2 511 598	9
	---------------	----------	---------------	----
	55 436 308	100	28 720 120	100
	=========	======	=========	===

 

14. FINANCIAL INSTRUMENTS

		Fair	Fair
	Cost	Value	Value	Cost
	30 June	30 June	31 December	31 December
	2010	2010	2009	2009
14.1 Financial liabilities at fair value through profit and loss*	US$	US$	US$	US$
Fixed term deposits	1 043 624	1 043 624	88 481	88 481
Negotiable Certificates of Deposits	8 889 651	8 889 651	6 356 451	6 356 451
	-------------	------------	---------------	-------------
Total financial liabilities at fair value through profit and loss	9 933 275	9 933 275	6 444 932	6 444 932
	========	========	=========	========

 

All changes in the period to the fair value of the financial liabilities are attributable to changes in the related credit risk.

 

*All financial liabilities at fair value through profit and loss were designated as much upon initial recognition.

		Fair	Fair
	Cost	Value	Value	Cost
	30 June	30 June	31 December	31 December
	2010	2010	2009	2009
14.2 Financial assets at fair value through profit and loss	US$	US$	US$	US$
Government and public sector securities	1 931 457	1 931 457	1 789 836	1 789 836
Treasury bills	-	-	-	-
RBZ Forex Bond (1)	1 931 457	1 931 457	1 789 836	1 789 836
Bills-own acceptances (2)	14 874 013	14 874 013	5 345 187	5 234 839
	---------------	------------	--------------	-------------
Total financial assets at fair value through profit and loss	16 805 470	16 805 470	7 135 023	7 024 675
	=========	========	=========	========

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

 

All changes in the period to the fair value of the financial assets are attributable to changes in related credit risk.

 

(1) Financial assets at fair value through profit and loss were classified as held for trading in accordance with IAS 39.

(2) Financial assets at fair value through profit and loss were designated as such upon initial recognition.

 

The RBZ Forex Bond is valued at cost as there is currently no market information to facilitate application of fair value principles.

 

14.3 Financial liabilities at fair value through

profit and loss

	30 June	31 December
	2010	2009
	US$	US$
Less than 1 month	5 889 405	3 717 408
1 to 3 months	4 043 870	2 727 524
3 to 6 months		-
6 months to 1 year		-
1 to 5 years		-
Over 5 years		-
	--------------	--------------
	9 933 275	6 444 932
	=========	========

14.4 Financial assets at fair value through profit and loss

	30 June	31 December
	2010	2009
	US$	US$
Less than 1 month	6 028 564	4 659 689
1 to 3 months	8 772 532	590 860
3 to 6 months	1 931 457	1 884 474
6 months to 1 year	72 917	-
1 to 5 years	-	-
Over 5 years	-	-
	-------------	--------------
	16 805 470	7 135 023
	========	========

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

15. CASH AND CASH EQUIVALENTS

	30 June	31 December
	2010	2009
	US$	US$
Statutory reserve	3 780 586	2 746 957
Current, nostro accounts and cash	14 002 088	9 456 224
	--------------	--------------
Total cash and cash equivalents	17 782 674	12 203 181
	========	========

The statutory reserve balance with the Reserve Bank of Zimbabwe is non-interest bearing.

The balance is determined on the basis of deposits held and is not available to the Bank for daily use.

 

16. ADVANCES AND OTHER ACCOUNTS

	30 June	31 December
	2010	2009
16.1.1 Advances	US$	US$
Fixed term loans	11 198 766	8 596 463
Local loans and overdrafts	16 171 856	3 531 872
Other accounts	882 164	600 860
	-------------	--------------
	28 252 786	12 729 195
	=========	========

 

	30 June	31 December
	2010	2009
16.1.2 Maturity analysis	US$	US$
Less than one month	25 518 957	11 560 300
1 to three months	1 141 019	298 366
3 to 6 months	1 168 042	147 925
6 months to 1 year	123 373	120 665
1 to 5 years	599 447	382 088
Over 5 years	-	-
	-----------	-------------
Total advances	28 550 838	12 509 344
Provision for impairment losses on loans and advances (note 16.3)	(1 180 216)	(381 009)
	-------------	--------------
	27 370 622	12 128 335
Other accounts	882 164	600 860
	-------------	-------------
Total	28 252 786	12 729 195
	=========	========

 

 

 

NMBZ HOLDINGS LIMITED 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

16.2 Sectoral analysis of utilisations

 

	30 June		31 December
	2010		2009
	US$	%	US$	%
Industrials	16 539 733	58	8 068 093	64
Agriculture and horticulture	2 008 498	7	691 914	6
Conglomerates	2 386 241	8	273 288	2
Services	5 607 748	20	2 072 971	17
Mining	353 365	1	1 272 873	10
Food & beverages	-	-	-	-
Other	1 655 253	6	130 205	1
	----------------	---------	------------------	----
	28 550 838	100	12 509 344	100
	==========	======	===========	===

 

The material concentration of loans and advances are in the industrial sector at 58% (2009 - 64%).

 

16.3 Provisions for losses on loans and advances

 

 

	< ------------	30 June 2010	--------- >	< -------	31 December 2009	----------->
	Specific	Portfolio	Total	Specific	Portfolio	Total
	US$	US$	US$	US$	US$	US$
At 1 January	106 105	274 904	381 009	13 218	-	13 218
Charge against profits	345 509	-	345 509	92 887	-	92 887
Charge against other comprehensive income	(346 091)	799 789	453 698	-	274 904	274 904
	----------------	---------------	-----------	---------	------------	-------------
At 30 June	105 523	1 074 693	1 180 216	106 105	274 904	381 009
	==========	========	=======	======	=======	=========

 

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

16.4 Non-performing loans and advances

	30 June	31 December
	2010	2009
	US$	US$
Total non-performing loans and advances	105 523	106 105
Provision for impairment loss on loans and advances	(105 523)	(106 105)
	-------------	--------------
	-	-
	========	========

The residue on these accounts, where applicable, represents recoverable portions covered by realisable security.

 

17. PROPERTY AND EQUIPMENT

 

	Land		Furniture
	and	Computer	and	Motor
	buildings	equipment	fittings	vehicles	Total
	US$	US$	US$	US$	US$
Deemed cost at 1 January 2010	2 711 709	503 325	982 502	148 515	4 346 051
Additions	-	57 335	117 707	68 875	243 917
Revaluation loss/impairment	(585 000)	-	-	-	(585 000)
Disposals	-	-	-	-	-
	-------------	-----------	-------------	-----------	-------------
	2 126 709	560 660	1 100 209	217 390	4 004 968
	--------------	-----------	-------------	-----------	-------------
Deemed accumulated depreciation at 1 January 2010	11	204 192	509 556	49 905	763 664
Change for the year	17	50 889	57 947	20 705	129 558
Disposals	-	-	-	-	-
	-------------	-------------	-------------	------------	-----------
	28	255 081	567 503	70 610	893 222
	-------------	-------------	-------------	------------	-----------
At 30 June 2010 deemed cost/valuation	2 126 681	305 579	532 706	146 780	3 111 746
	========	=======	======	======	=======
At 1 January 2010 Deemed cost/valuation	2 711 698	299 133	472 946	98 610	3 582 387
	========	======	=======	=======	=======

 

The land and buildings were valued by professional valuers for half year purposes and the open market value was US$2.13 million. Other items of property and equipment were valued by the directors with assistance from a professional valuer by reference to market values of similar assets adjusted for ageing.

 

 

 

NMBZ HOLDINGS LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

18. CAPITAL COMMITMENTS

 

	30 June	31 December
	2010	2009
	US$	US$
Capital expenditure contracted for	-	-
Capital expenditure authorised but not yet contracted for	2 500 000	998 400
	---------------------	----------------
	2 500 000	998 400
	============	=========

19. CONTINGENT LIABILITIES

	30 June	31 December
	2010	2009
	US$	US$
Guarantees	2 039 165	3 150 324
Commitments to lend	12 977 566	6 638 259
	-------------------	-----------------
	15 016 731	9 788 583
	===========	==========

 

20. EXCHANGE RATES

 

The following exchange rates have been used to translate the foreign currency balances to United States dollars at period end:-

 

		Mid-rate	Mid-rate
		30 June 2010	31 December 2009
		US$	US$
British Pound Sterling	GBP	1.5035	1.6076
South African Rand	ZAR	7.6511	7.3975

 

 

 

NMB BANK LIMITED

 

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2010

 

		30 June	30 June
		2010	2009
		US$	US$
	Note
Interest income		3 671 727	187 474
Interest expense		(1 359 447)	(22 058)
		---------------------	-----------------------
Net interest income		2 312 280	165 416
Net foreign exchange gains		357 732	41 152
Non-interest income	a	3 747 385	4 223 380
		---------------------	-----------------------
Net operating income		6 417 397	4 429 948
Operating expenditure	b	(8 425 454)	(2 059 978)
Impairment losses on loans and advances		(345 509)	(145 388)
		---------------------	-----------------------
(Loss)/ profit before taxation		(2 353 566)	2 224 582
Taxation		493 406	(411 482)
Financial institutions levy		-	(110 479)
		---------------------	----------------------
(Loss)/profit for the period		(1 860 160)	1 702 621
Other comprehensive income/(loss):
General provision for doubtful debts RBZ Grading	c	(453 698)	-
Tax relating to components of other comprehensive income	d	116 827	-
		--------------------	----------------------
Other comprehensive loss for the period, net of tax		(336 871)	-
		-------------------	----------------------
Total comprehensive (loss)/ income for the Period		(2 197 031)	1 702 621
		============	=============
(Loss)/ earnings per share (US cents):
-Basic	e	(11.27)	10.32
-Headline	e	(5.28)	(2.60)

 

 

NMB BANK LIMITED

 

 

STATEMENT OF FINANCIAL POSITION

as at 30 June 2010

		30 June	31 December
		2010	2009
		US$	US$
SHAREHOLDERS' FUNDS	Note
Share capital	f	16 500	-
Non-distributable reserves		6 123 398	6 139 898
Revenue reserves		(157 406)	2 039 625
		-------------	--------------
Total shareholders' funds		5 982 492	8 179 523
LIABILITIES
Deposits and other accounts		52 765 447	23 683 605
Financial liabilities at fair value through profit and loss		9 933 275	6 444 932
Provision for current taxation		77 039	288 929
Deferred taxation		60 342	670 576
		---------------	---------------
		68 818 595	39 267 565
		=========	=========
ASSETS
Cash and cash equivalents	g	17 782 674	12 203 174
Financial assets at fair value through profit and loss		16 805 470	7 135 023
Advances and other accounts		28 347 197	12 729 195
Quoted and other investments		76 508	398 186
Investment properties	h	2 695 000	3 219 600
Property and equipment		3 111 746	3 582 387
		--------------	---------------
		68 818 595	39 267 565
		=========	=========

 

 

NMB BANK LIMITED

 

STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2010

 

 

		< ------------Capital Reserves------------ >
				Non
		Share	Revaluation	Distributable	Retained
	Capital	Premium	Reserve	Reserve	Profit	Total
	US$	US$	US$	US$	US$	US$
Deemed balances as at 1 January 2009	-	-	-	6 139 898	-	6 139 898
Total comprehensive income for the year	-	-	-	-	2 039 625	2 039 625
	-----------	-------------	------------	-----------------	----------------	-----------
Balances as at 31 December 2009	-	-	-	6 139 898	2 039 625	8 179 523
Total comprehensive loss for the six months	-	-	-	-	(2 197 031)	(2 197 031)
Transfer from non - distributable reserves	16 500	6 123 398	-	(6 139 898)	-	-
	----------	---------------	--------------	-----------------	----------------	------------
Balances as at 30 June 2010	16 500	6 123 398	-	-	(157 406)	5 982 492
	=======	=========	========	==========	=========	=======

 

 

 

NMB BANK LIMITED

 

STATEMENT OF CASH FLOWS

for the six months ended 30 June 2010

 

	2010	2009
	US$	US$
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/ profit before taxation	(2 353 566)	893 224
Non-cash items
-Depreciation	129 588	209 680
-Impairment losses on loans and advances	345 509	92 887
-Impairment loss on land and buildings	585 000	1 050 000
-Investment properties fair value adjustment	584 600	(579 600)
-Quoted and other investments fair value adjustment	-	(130 733)
-Profit on disposal of quoted and other investments	(13 232)	(27 126)
-Profit on disposal of property and equipment	(25 224)	(2 066)
-Loss on disposal of investment property	-	460 000
-Financial instruments fair value adjustment	-	(32 371)
	----------------	-------------------
Operating cash flows before changes in operating assets and liabilities	(747 355)	1 933 895
Changes in operating assets and liabilities
Financial liabilities at fair value through profit and loss	3 488 343	6 444 932
Deposits and other accounts	29 081 841	19 653 631
Financial assets at fair value through profit and loss	(16 417 209)	(7 135 023)
Advances and other accounts	(9 670 447)	(12 736 107)
	-----------------	-------------------
	5 735 173	8 161 328
	-----------------	-------------------
Taxation
Capital gains tax paid	-	(152 000)
Corporate tax paid	(211 890)	(10 520)
	-----------------	------------------
Net cash inflow from operating activities	5 523 283	7 998 808
	-----------------	------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of investment property	-	3 040 000
Proceeds on disposal of quoted and other investments	334 276	109 789
Proceeds on disposal of property and equipment	25 224	-
Purchase of unquoted investments	-	(74 542)
Improvement of investment property	(60 000)	-
Purchase of property and equipment	(243 917)	(160 322)
	----------------	-----------------
Net cash inflow from investing activities	55 583	2 914 925
	-----------------	-----------------
Net cash inflow before financing activities	5 578 866	10 913 733
	-----------------	-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	634	-
	-----------------	------------------
Net cash inflow from financing activities	634	-
	-----------------	-----------------
Net increase in cash and cash equivalents	5 579 500	10 913 733
Cash and cash equivalents at the beginning of the year	12 203 174	1 289 441
	------------------	-----------------
Cash and cash equivalents at the end of the year (note g)	17 782 674	12 203 174
	==========	==========

 

 

NMB BANK LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

NOTES TO THE FINANCIAL STATEMENTS

There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group. The notes to the financial statements under NMBZ Holdings Limited are therefore the same in every material respect.

 

a. NON-INTEREST income

	30 June	30 June
	2010	2009
	US$	US$
Net gains from quoted and other investments	-	64 743
Investment property fair value adjustment	(584 600)	1 000 000
Net commission and fee income	4 207 003	1 259 868
Debt recovery write back as RBZ Forex Bonds	-	1 789 836
Profit on disposal of quoted investments	13 232	-
Profit on disposal of property	25 224	-
Loss on disposal of investment property	(80 283)	-
Fair value loss on financial instruments	166 809	108 933
Other net operating income	----------------	-----------------
	3 747 385	4 223 380
	=========	=========

b. Operating EXPENDITURE

	30 June	30 June
	2010	2009
	US$	US$
The operating profit is after charging the following:-
Administration costs	2 434 841	1 184 248
Staff costs - salaries, allowances and related costs	2 676 055	605 693
- retrenchment	2 600 000	-
Depreciation	129 558	102 017
Impairment loss on land, buildings and other property	585 000	168 020
	---------------	--------------
Total	8 425 454	2 059 978
	========	========

c. COMPONENTS OF OTHER COMPREHENSIVE INCOME

	30 June	30 June
	2010	2010
	US$	US$
General additional provisions for doubtful debts RBZ grading	(453 698)	-
	---------------	--------------------
Other comprehensive loss	(453 698)	-
Net income tax relating to components of other comprehensive income	116 827	-
Income tax relating to components of other comprehensive income	116 827	-
	-------------------	--------------------
Other comprehensive loss for the period, net of tax	(336 871)	-
	===========	============

 

 

NMB BANK LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

d. TAX EFFECTS RELATING TO COMPONENTS OF OTHER COMPREHENSIVE INCOME

 

 

	< ------------------ 30 June 2010 ------------------- >
	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
General additional provisions for doubtful debts RBZ grading	(453 698)	116 827	(336 871)
	----------------	--------------	---------------
Other comprehensive loss	(453 698)	116 827	(336 871)
	=========	========	=========

 

	< ------------------ 30 June 2009 ------------------- >
	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
General additional provisions for doubtful debts RBZ grading	-	-	-
	----------------	------------------	------------------
Other comprehensive loss	-	-	-
	==========	==========	===========

 

NMB BANK LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

e. EARNINGS PER SHARE

 

The calculation of earnings per share is based on the following figures:

e.1 Earnings/ (losses)

 

	30 June	30 June
	2010	2010
	US$	US$
Basic	(1 860 160)	1 702 621
Headline (losses)/ earnings (note e.4)	(870 428)	(429 560)

e.2 Number of shares (million)

 

Weighted average shares in issue

16 500 000

16 500 000

 

e.3 Earnings/ (losses) per share (US cents)

 

Basic	(11.27)	10.32
Headline	(5.28)	(2.60)

 

e.4 Headline earnings/(losses)

The adjustments are as follows:

	30 June	30 June
	2010	2009
	US$	US$
(Loss)/ profit attributable to shareholders	(1 860 160)	1 702 621
Add/(deduct) non-recurring items:
-Fair value adjustment on quoted and other investments	-	(64 743)
-Impairment loss on land and buildings	585 000	168 020
-Fair value adjustment on investment property	584 600	(1 000 000)
-Debt recovery writeback as RBZ Forex Bonds	-	(1 789 836)
-Tax effect thereon	(179 868)	554 378
	---------------	---------------
	(870 428)	(429 560)
	========	========

 

 

 

NMB BANK LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2010

 

f. SHARE CAPITAL

 

f.1 Authorised

The authorised ordinary share capital at 30 June 2010 is at the historical cost figure of US$ 25 000 (2009 - US$ nil) comprising 25 million ordinary shares of US$0.001 each.

 

f.2 Issued and fully paid

The issued share capital at 30 June 2010 is at the historical cost figure of US$ 16 500 (2009 - US$ nil) comprising 16.5 million ordinary shares of US$0.001 each.

 

g. CASH AND CASH EQUIVALENTS

 

	30 June	31 December
	2010	2009
	US$	US$
Statutory reserve	3 780 586	2 746 957
Current, nostro accounts and cash	14 002 088	9 456 217
	---------------	--------------
Total cash and cash equivalents	17 782 674	12 203 174
	=========	========

 

 

h. INVESTMENT PROPERTIES

	30 June	31 December
	2010	2009
	US$	US$
At 1 January	3 219 600	6 140 000
Improvements	60 000	-
Disposal	-	(3 500 000)
Net (loss)/ gains from fair value adjustments	(584 600)	579 600
	---------------	--------------
	2 695 000	3 219 600
	=========	========

 

No rental income was received from and no operating expenses were incurred on the investment properties in the current period.

 

Investment properties were valued for half year purposes by professional valuers and the open market value was US$2 695 000.

 

i. EVENTS AFTER THE REPORTING PERIOD

 

Rights issue

 

During the period under review, the holding company initiated a rights issue with a view to raising the minimum statutory capital of US$12.5 million per the regulatory guidelines for its banking subsidiary and the capitalisation of the Holding company. This exercise was successfully completed in August 2010 with the Group raising US$10.28 million.

 

 

 

NMB BANK LIMITED

 

CORPORATE GOVERNANCE AND RISK MANAGEMENT

 

1. RESPONSIBILITY

 

These financial statements are the responsibility of the directors. This responsibility includes the setting up of internal control and risk management processes, which are monitored independently. The information contained in these financial statements has been prepared on the going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03), the Banking Act (Chapter 24:20) and International Financial Reporting Standards.

 

2. CORPORATE GOVERNANCE

 

The Group adheres to principles of corporate governance derived from the King II Report, the United Kingdom Combined Code and RBZ corporate governance guidelines. The Group is cognisant of its duty to conduct business with due care and in good faith in order to safeguard all stakeholders' interests.

 

3. BOARD OF DIRECTORS

 

Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to management on both operational and policy issues.

 

The Board conducts an annual peer based evaluation on the effectiveness of its activities. The process involves the members evaluating each other collectively as a board and individually as members. The evaluation, as prescribed by the RBZ, takes into account the structure of the board, effectiveness of committees, strategic leadership, corporate social responsibility, attendance and participation of members and weaknesses noted. Remedial plans are invoked to address identified weaknesses with a view to continually improve the performance and effectiveness of the Board and its members.

 

3.1 Directors' attendance at meetings - half year to 30 June 2010

 

3.1.1 Board of Directors

 

Name	Meetings	Attended
Dr G M Mandishona	2	1
A M T Mutsonziwa	2	2
B P Washaya	2	2
B Ndachena	2	2
J A Mushore	2	2
C Chipato	2	1
B W Madzivire	2	2
M Mudukuti	2	2
L Majonga (Ms)	2	2
Dr J T Makoni	2	1
T N Mundawarara	2	2
J Chigwedere	2	2

 

3.1.2 Audit Committee

 

Name	Meetings	Attended
Mr B W Madzivire	2	2
Ms L Majonga	2	1
Mr A M T Mutsonziwa	2	2

 

3.1.3 Risk Management Committee

 

Name	Meetings	Attended
Mr T N Mundawarara	2	2
Mr J Chigwedere	2	2
Ms L Majonga	2	1
Mr B P Washaya	2	2

 

3.1.4 Asset and Liability Management Committee (ALCO), Finance & Strategy Committe

 

Name	Meetings	Attended
Mr C Chipato	2	2
Mr T N Mundawara	2	2
Mr B P Washaya	2	2
Mr B Ndachena	2	1

 

3.1.5 Loans Review Committee

 

Name	Meetings	Attended
Mr A M T Mutsonziwa	2	2
Mr M Mudukuti	2	2
Mr C Chipato	2	2

 

3.1.6 Human Resources & Remuneration Committee

 

Name	Meetings	Attended
Mr M Mudukuti	2	2
Dr G M Mandishona	2	1
Mr B P Washaya	2	2
Mr B Ndachena	2	2
Mr B W Madzivire	2	2

 

4. RISK MANAGEMENT

 

In the ordinary course of business the Bank manages risks of all forms. The risks are identified and monitored through various channels and mechanisms.

 

The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework. The Board has established the Asset and Liability Management Committee (ALCO) and Risk Committee, which are responsible for developing and monitoring Bank risk management policies in their specified areas. The Bank has a Risk Management department, which reports to the Managing Director and is responsible for the management of the overall risk profile.

The Bank's risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered.

 

The Bank Risk Committee which is responsible for monitoring compliance with the Banks risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank, is assisted in these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee and the Risk Committee.

 

 

NMB BANK LIMITED

 

The Bank's main objective is to contain the risk inherent within the financial services sector and to ensure that the Bank's various risk profiles are understood and appropriately managed to the benefit of customers, shareholders and other stakeholders.

 

4.1 Credit risk

 

Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Board has put in place sanctioning committees which operate according to the amount requested by an applicant. The Credit Risk Management department reviews all applications. This initial review allows only those applications that do not unduly expose the Bank to credit risk to be considered by the sanctioning committees.

 

4.1.1 Management of credit risk

 

The Board has delegated responsibility for the management of credit risk to its Loans Review Committee. The Credit Risk Management department which also reports to the Loan Review Committee is responsible for oversight of the Bank's credit risk, including:

 

·; Formulating credit policies in consultation with business units, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements

·; Establishing the authorization structure for the approval and renewal of credit facilities. Facilities require authorization by Head of Credit Risk, Executive directors, Loans Review Committee or the Board of Directors depending on amount as per set limits.

·; The Credit Risk department assesses all Credit exposures in excess of designated limits, prior to facilities being committed to clients by the business unit concerned. Renewals and reviews of facilities are subject to the same review process.

·; Limiting concentrations of exposure to counter parties and industry for loans and advances.

·; Maintaining and monitoring the risk gradings as per the RBZ requirement in order to categorise exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The current risk grading framework consists of five grades reflecting varying degrees of risk of default and the availability of collateral or other credit risk mitigation.

·; Reviewing compliance of business units with agreed exposure limits, including those for selected industries.

·; Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in the management of credit risk.

 

4.2 Market risk

 

This arises from adverse movements in the market place, which occur in the money market (interest rate risk), foreign exchange and equity markets in which the Bank operates. The Bank is currently developing VaR (Value at Risk) model which will be used to manage and monitor the market risk for the trading portfolio.

 

The Bank has in place an Asset and Liability Management Committee (ALCO), which comprises the departmental heads of Risk, Treasury, Corporate and Retail banking and Finance, in addition to executive directors. The committee monitors these risks and recommends the appropriate levels to which the Bank should be exposed at any time. The approval of all dealing limits ultimately rests with this committee.

 

The market risk for the non - trading portfolio is managed by monitoring the sensitivity of Bank's financial assets and liabilities to various interest rate scenarios. The bank monitors its Net Interest Margin as a primary measure of interest rate conditions. On foreign exchange risk, the bank monitors currency mismatches and make adjustments depending on exchange rate movement forecast. The mismatches are also contained within 10% of the bank's capital position.

 

  

4.3 Liquidity risk

 

Liquidity risk is the risk that operations cannot be funded and financial commitments cannot be met timeously. The risk arises when there is a maturity mismatch between assets and liabilities. The Bank identifies this risk through maturity profiling of assets and liabilities and assessment of expected cashflows and the availability of collateral which could be used additional funding if required.

 

The Bank maintains a portfolio of marketable assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. The Bank maintains a statutory deposit with the Central Bank at stipulated rates. For the six months ended 30 June 2010 this rate was 5% for time and demand liabilities denominated in foreign currencies. The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by ALCO.

 

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Bank monitors its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 10% of the liabilities to the public. Liquid assets consist of cash and cash equivalents, short term bank deposits and liquid investment securities available for immediate sale.

 

4.4 Operational risk

 

This risk is inherent in all business activities and is the potential for loss arising from ineffective internal controls, poor operational procedures to support these controls, errors and deliberate acts of fraud. The mitigation of the risk and the cost incurred to reduce the risk is critical. The bank utilizes monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the bank has an elaborate Incident Reporting Policy in which all incidents with a material impact on the well being of the bank are reported to risk management. The Board has a Risk Committee whose function is to ensure that this risk is minimised. The Risk Committee through the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary recommendations to the Board.

 

4.5 Legal and compliance risk

 

Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with laws and regulations.

 

To manage this risk the Bank employs a legal practitioner who is responsible for the drafting, monitoring and executing all contracts. Permanent relationships are also maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The compliance function is responsible for identifying and monitoring legal and compliance risks and ensuring that the Bank remains in compliance with all regulatory requirements.

 

4.6 Reputational risk

 

Reputational risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the Bank conducts its business.

 

To manage this risk, the Bank strictly monitors customers' complaints, continuously train staff at all levels, conducts market surveys and periodic reviews of business practices through its internal audit department.

 

4.7 Strategic risk

This refers to current and prospective impact on the bank's earnings and capital arising from adverse business decisions or implementing strategies that are not consistent with the internal and external environment. To manage this risk, the bank is guided by a strategic plan that is set out by the board of directors. The attainment of strategic objectives by the various departments is monitored periodically at management level. There is an ALCO, Finance and Strategy Committee at board level responsible for monitoring overall progress towards attaining strategic objectives for the bank.

 

The directors are satisfied with the risk management processes in the Bank as these have contributed to the minimisation of losses arising from risky exposures.

 

 

 

 

NMB BANK LIMITED

 

4.8 Risk Ratings

 

4.8.1 Camels* Ratings

 

CAMELS Component	Latest RBS** Ratings 31/01/2008	Previous RBS Ratings 30/06/2007	Previous RBS Ratings 30/06/2006
Capital Adequacy	4	4	3
Asset Quality	2	3	4
Management	3	4	4
Earnings	3	3	4
Liquidity	3	3	4
Sensitivity to Market Risk	3	3	4
Composite Rating	3	4	4

 

*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where '1' is Strong, '2' is Satisfactory, '3' is Fair, '4' is Weak and '5' is Critical.

 

**RBS stands for Risk-Based Supervision

 

4.8.2 Summary RAS ratings

 

RAS Component	Latest RAS*** Ratings 31/01/2008	Previous RBS Ratings 30/06/2007	Previous RBS Ratings 30/06/2006
Overall Inherent Risk	Moderate	High	High
Overall Risk Management Systems	Acceptable	Weak	Weak
Overall Composite Risk	Moderate	High	High
Direction of Overall Composite Risk	Stable	Increasing	Increasing

 

*** RAS stands for Risk Assessment System.

 

4.8.3 Summary risk matrix -31 January 2008 on - site examination

 

Type of Risk	Level of Inherent Risk	Adequacy of Risk Management Systems	Overall Composite Risk	Direction of Overall Composite Risk
Credit	Moderate	Weak	Moderate	Increasing
Liquidity	Moderate	Acceptable	Moderate	Stable
Interest Rate	Moderate	Acceptable	Moderate	Increasing
Foreign Exchange	High	Weak	Moderate	Stable
Strategic Risk	Moderate	Acceptable	Moderate	Stable
Operational Risk	Moderate	Weak	High	Increasing
Legal & Compliance	High	Acceptable	Moderate	Stable
Reputation	Moderate	Acceptable	Moderate	Increasing
Overall	Moderate	Acceptable	Moderate	Stable

 

KEY

 

Level of Inherent Risk

 

Low - reflects a lower than average probability of an adverse impact on a banking institution's capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution's overall financial condition.

 

Moderate - could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.

 

 

NMB BANK LIMITED

 

High - reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution.

 

Adequacy of Risk Management Systems

 

Weak - risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution's risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures.

 

Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognized and are being addressed. Management information systems are generally adequate.

 

Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank's risk tolerance, responsibilities and accountabilities are effectively communicated.

 

Overall Composite Risk

 

Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk.

 

Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weakneses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organization.

 

High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank's overall condition.

 

Direction of Overall Composite Risk

 

Increasing - based on the current information, risk is expected to increase in the next 12 months.

Decreasing - based on current information, risk is expected to decrease in the next 12 months.

Stable - based on the current information, risk is expected to be stable in the next 12 month

 

4.8.4 External Credit Ratings

 

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.

 

Security class 2006 2007 2008

 

Short-term A3 NR NR

Long term BBB- BBB-* BB+

 

* the rating was withdrawn after the discovery of the US$6.4 million forex fraud as per Note 5.

 

NR - not rated.

 

4.9 Regulatory Compliance

 

The Corrective Order issued in 2007 relating to the matter covered in Note 5 has not been lifted as the issue relating to the recovery of the stolen money is still outstanding. The bank has engaged the Regulatory Authorities with a view to having the Corrective Order uplifted once the Regulatory Authorities are satisfied that all issues raised in the Corrective Order have been addressed.

 

The Group remains committed to complying with and adhering to all regulatory requirements. 

NMB BANK LIMITED

 

4.10 Capital Management

 

The primary objective of the Bank's capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Bank to maintain a prescribed ratio of total capital to total risk weighted assets.

 

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves.

 

The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.

 

Tier 3 capital relates to an allocation of capital to market and operational risk.

 

Various limits are applied to elements of the capital base. The core capital (Tier 1) shall compromise not less than 50% of the capital base and portfolio provisions are limited to 1.25% of total risk weighted assets.

 

5. 2007 FCA FRAUD

 

Subsequent to the balance sheet date for the year ended 31 December 2006, a fraud involving about US$6.4 million was uncovered wherein foreign currency was disposed of by a bank official for Zimbabwe dollars at the then ruling official exchange rate, without authority. This subsequently resulted in the revocation of the bank's foreign currency dealership licence by the Reserve Bank of Zimbabwe with effect from 15 May 2007. The revocation did not affect the local currency banking operations. The foreign currency dealership licence was restored with effect from 1 June 2008.

 

An amount of US$2.6 million of the total funds defrauded belonged to the bank's clients and the balance was the bank's own funds. The fraud had no accounting effect on the financial statements for the year ended 31 December 2006 as value was received at the official exchange rate, the amount at which the asset was carried in the financial statements.

 

The US$2.6 million net liability was settled in the fourth quarter of 2009. The group realized the funds applied in settling the net liability from the realignment of its assets during the year.

 

 

NMB BANK LIMITED

 

The Bank's regulatory capital position at 30 June 2010 was as follows:

 

	30 June	31 December
	2010	2009
	US$	US$
Share capital	16 500	-
Share premium	6 123 398	-
Non-distributable reserve	-	6 139 898
Retained earnings	(157 406)	2 039 625
	-----------------	-------------
	5 982 492	8 179 523
Less: capital allocated for market and operational risk	(902 453)	(1 096 405)
Credit to insiders	(42 048)	-
	-----------------	-------------
Tier 1 capital	5 037 991	7 083 118
Tier 2 capital (subject to limit as per Banking regulations)	629 225	274 904
Revaluation reserves	-	-
Subordinated debt	-	-
Portfolio provisions (limited to 1.25% of risk weighted assets)	629 225	274 904
Total Tier 1 & 2 capital	5 667 216	7 358 022
Tier 3 capital (sum of market and operational risk capital)	902 453	1 096 405
	-----------------	-------------
Total capital base	6 569 669	8 454 427
	===========	========
Total risk weighted assets	61 618 636	32 206 600
	===========	========
Tier 1 ratio	8.18%	21.99%
Tier 3 ratio	1.02%	0.85%
Tier 3 ratio	1.46%	3.40%
Total capital adequacy ratio	10.66%	26.24%

 

 

Registered Offices

 

1st Floor NMB Centre

Unity Court George Silundika Avenue/

Cnr 1st Street/Kwame Nkrumah Avenue Leopold Takawira Street

Harare Bulawayo

Zimbabwe Zimbabwe

 

Telephone +263 4 759651 +263 9 70169

Facsimile +263 4 759648 +263 9 68535

 

Website: http://www.nmbz.co.zw

 

Email: [email protected]

 

Transfer Secretaries

 

In Zimbabwe In UK

First Transfer Secretaries Computershare Services PLC

4th Floor, Gold Bridge North 36 St Andrew Square

Eastgate Building Edinburgh

Cnr. Robert Mugabe/Second Street EH2 2YB

P O Box 11 UK

Harare

Zimbabwe