Half Yearly Report

27th Aug 2009 10:54



NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED

(Registered Commercial Bank)

UNAUDITED HISTORICAL COST RESULTS 

FOR THE SIX MONTHS ENDED 30 JUNE 2009

HIGHLIGHTS

Historical

	2009	2008
Attributable profit(US$)	1 733 943	-
Basic earnings per share (US cents)	0.11	-
Shareholders' funds (US$)	8 192 159	6 592 632

Enquiries:

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

Benefit P Washaya, Chief Executive Officer [email protected]

Benson Ndachena, Chief Financial Officer [email protected] 

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

Email: [email protected]

  

NMBZ HOLDINGS LIMITED

CHAIRMAN'S STATEMENT

The six months period under review was characterized by:

Constrained liquidity

Short term deposits

Low capacity utilisation

High operating costs as pricing mechanisms are still adapting to the multi currency regime

GROUP RESULTS

Compliance with International Financial Reporting Standards

The Group changed its functional and presentation currency from Zimbabwean Dollars to United States Dollars (USD) with effect from the 1st of January 2009 as most operating costs were now denominated in United States Dollars. In order to report in the new functional currency in terms of International Financial Reporting Standards (IFRSs), inflation adjusted financial statements should be prepared and converted to the new currency. Inflation adjusted financial statements were not prepared as required by International Accounting Standard (IAS) 29 because inflation indices were not available. The inflation indices were last published in July 2008. Accordingly, the Group adopted the presentation of its financial statements in United States Dollars.

For the reasons stated above, the results of the Group do not include comparative information (except for the balance sheet and related notes). The comparative figures for the balance sheet and its accompanying notes were prepared by applying the RBZ regulatory exchange rate for financial institutions of ZWD35 000:USD1. This comparative information has been presented to make information in the Consolidated Statement of Cash Flows more useful to users. Comparatives for the income statement and the statement of cash flows would be misleading due to the multiplicity of exchange rates which were applicable in prior year.

The accounting procedures described above, which were necessitated by the absence of the required inflation indices, are not compliant with International Financial Reporting Standards. Consequently, the consolidated financial statements have not been prepared in accordance with International Financial Reporting Standards.

Commentary on results

The profit before taxation was US$2 276 271 during the period under review. A historical cost attributable profit of US$1 733 943 was recorded for the half year. Net interest income was US$165 416. Non-interest income amounted to US$ 4 107 047 and this was mainly as a result of fair value adjustments on investment properties, arrangement and drawdown fees, and a write back on a recovered amount in the form of an RBZ Forex Bond.

Operating expenses amounted to US$1 891 956 largely driven by staff costs,  IT maintenance costs and licence fees and property expenses.

A conservative approach continues to be taken with respect to provisions for bad and doubtful debts and the charge amounted to US$145 388 for the period. This is reflective of the increase in loans and advances, as well as a prudent lending policy in an uncertain environment.

Dividend

In light of the need to conserve cash in the business, the Board has proposed not to declare a dividend.

BALANCE SHEET

The Group's total asset base was US$24 917 710 and comprised mainly of advances and other accounts (US$8 724 783), cash and short term funds (US$2 600 469), investment properties (US$7 140 000) and property and equipment (US$3 498 499).

  

NMBZ HOLDINGS LIMITED

Capital 

The banking subsidiary's capital adequacy ratio at 30 June 2009 calculated on the historical cost basis in accordance with the guidelines of the Reserve Bank of Zimbabwe (RBZ) was 38% (31 December 2008 - 62%). The minimum required by the RBZ is 10%.

The Group will continue to monitor and manage its capital base in line with economic and statutory developments. The Bank is already in compliance with the minimum capital of US$6.25 million required by 30 September 2009 and will be recapitalizing to meet the required capital of US$12.5 million by 31 March 2010. 

OUTLOOK AND STRATEGY

The multi-currency exchange regime has largely been characterised by constrained liquidity, lack of a sustainable savings culture by depositors and high operating costs (compared to regional standards) of goods and services as volumes by manufacturing and service industries recover from prior year levels. As the business environment improves the Group will continue to take advantage of new opportunities to increase revenue streams and grow its deposit base.

DIRECTORATE

Mr Lionel Chinyamutangira was appointed Executive Director - Banking on 13 May 2009. I would like to welcome Mr Chinyamutangira to the Bank Board and wish him a fruitful tenure. There were no other changes to the Company's directorate during the period.

APPRECIATION

I would like to thank our clients for their continued support and understanding during the period under review. I would also like to register my profound gratitude to my colleagues on the Board, management and staff for their resilience and dedication during this transitional period of the operating environment.

GIBSON MANYOWA MANDISHONA 

CHAIRMAN

18 August 2009

  

NMBZ HOLDINGS LIMITED

HISTORICAL CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2009

	Note	2009
		US$
Interest income	4	178 816
Interest expense		(13 400)
		------------------
Net interest income		165 416
Net foreign exchange gains		41 152
Non-interest income	5	4 107 047
		-----------------
Net operating income		4 313 615
Operating expenditure	6	(1 891 956)
Impairment losses on loans and advances		(145 388)
		----------------
Profit before taxation		2 276 271
Taxation		(423 448)
Financial institutions levy		(118 880)
		----------------
Profit for the period		1 733 943
Other comprehensive income/(loss):
Losses on land, building, property and equipment revaluation	9	(168 020)
Tax relating to components of other comprehensive income	10	33 604
		------------------
Other comprehensive (loss)/income for the period, net of tax		(134 416)
		------------------
Total comprehensive income for the period		1 599 527
		===========
Earnings/(losses) per share (US cents):
- Basic	11.3	0.11
- Headline	11.3	(0.02)
- Diluted basic	11.3	0.10
- Diluted headline	11.3	(0.02)

Comparative figures are nil due to the change in functional and reporting currency on 1 January 2009.  

NMBZ HOLDINGS LIMITED

HISTORICAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2009

		2009	2008
SHAREHOLDERS' FUNDS	Note	US$	US$
Share capital	12	-	-
Capital reserves		2 873 584	3 008 000
Revenue reserves		5 318 575	3 584 632
		-----------------------	---------------------
Total shareholder's funds		8 192 159	6 592 632
LIABILITIES
Deposits and other accounts	13	13 821 366	3 940 687
Financial liabilities at fair value through profit and loss	14	939 167	810
Provision for current taxation		462 782	24 838
Deferred taxation		1 502 236	1 431 315
		-------------------	-----------------
		24 917 710	11 990 282
		============	==========
ASSETS
Cash and cash equivalents	15	2 600 469	1 348 204
Financial assets at fair value through profit and loss	14.2	2 389 144	3 429
Available-for-sale securities	14.3	-	7
Advances and other accounts	16	8 724 783	168 207
Quoted and other investments		564 815	570 435
Investment properties		7 140 000	6 140 000
Property and equipment	17	3 498 499	3 760 000
		----------------------	-------------------
		24 917 710	11 990 282
		=============	============

NMBZ HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2009

		Capital Reserve
	Share	Share	Revaluation	Accumulated
	Capital	Premium	Reserve	Profit	Total
	US$	US$	US$	US$	US$
Balances at 1 January 2008	-	-	-	-	-
Total comprehensive income for the year	-	-	3 008 000	3 584 632	6 592 632
Own equity instruments (note 12.3)	-	-	-	-	-
Dividends paid	-	-	-	-	-
	------------------	----------------	------------------	------------------	------------------
Balances at 31 December 2008	-	-	3 008 000	3 584 632	6 592 632
Total comprehensive income for the six months	-	-	(134 416)	1 733 943	1 599 527
Own equity instruments (note 12.3)	-	-	-	-	-
Dividends paid	-	-	-	-	-
	------------------	----------------	------------------	------------------	------------------
Balances at 30 June 2009	-	-	2 873 584	5 318 575	8 192 159
	===========	===========	===========	===========	===========

NMBZ HOLDINGS LIMITED

HISTORICAL CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 June 2009

	2009
	US$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation	2 276 271
Non-cash items
Depreciation	102 017
Impairment losses on loans and advances	145 388
Investment properties fair value adjustment	(1 000 000)
Quoted and other investments fair value adjustment	66 457
	-------------------
Operating cash flows before changes in operating assets and liabilities	1 590 133
	-------------------
Changes in operating assets and liabilities
Financial liabilities at fair value through profit and loss	938 357
Deposits and other accounts	9 880 679
Financial assets at fair value through profit and loss	(2 385 715)
Available-for-sale securities	7
Advances and other accounts	(8 701 965)
	-------------------
	1 321 496
	-------------------
Taxation
Corporate tax paid	-
	------------------
Net cash inflow from operating activities	1 321 496
	------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(8 536)
Purchase of quoted and other investments	(60 695)
	-----------------
Net cash outflow from investing activities	(69 231)
	-----------------
Net cash inflow before financing activities	1 252 265
	-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own equity instruments	-
Dividends paid	-
	------------------
Net cash (outflow)/inflow from financing activities	-
	-----------------
Net increase in cash and cash equivalents	1 252 265
Cash and cash equivalents at the beginning of the period	1 348 204
	-----------------
Cash and cash equivalents at the end of the period (note 15)	2 600 469
	==========

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

1. REPORTING ENTITY

The Company is incorporated and domiciled in Zimbabwe and is an investment holding company and its registered office is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in banking and other companies hold property. The details of the Bank's non-operating subsidiary are shown under note "f" to the Bank's accounts. The consolidated financial statements of the bank as at and for the six months ended 30 June 2009 comprise the bank and its subsidiaries.

 

2. BASIS OF PREPARATION

 

2.1 Statement of compliance

The consolidated financial statements have not been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board due to the accounting procedures adopted in the changing of functional and presentation currency from Zimbabwean Dollars to United States Dollars. The consolidated financial statements have been prepared in accordance with the requirements of the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20). In order to report in the new functional currency in terms of IFRSs, inflation adjusted financial statements should be prepared and converted to the new currency. Inflation adjusted financial statements were not prepared as required by IAS 29 because inflation indices were not available. The inflation indices were last published in July 2008. Due to the aforementioned, as well as the absence of appropriate exchange rates, comparative information has not been presented except for the balance sheet. Such comperatives, if presented, would be misleading due to the multiplicity of exchange rates applicable in prior year.  The accounting policies have been consistently applied by the Group and are consistent with those used in the previous year.

The financial statements were approved by the Board of Directors on 18 August 2009.

 

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

These consolidated financial statements are presented in United States dollars, which is the Group's functional and presentation currency.

In response to changes in economic fundamentals affecting the Group's capital and cost structures the functional and presentation currency of the Group was determined to be the United States dollar effective 1 January 2009. The National Budget presented in the same month and the revised National Budget presented in March 2009 were denominated in USD indicating further the change in the currency used by the economy as a whole.

No comparatives are shown in these financial statements (except for the balance sheet and related notes) for the reasons outlined in paragraph 2.1. The comparative figures for the balance sheet and its accompanying notes were prepared by applying the RBZ regulatory exchange rate for financial institutions of ZWD35 000: USD1. This comparative information has been presented to make information in the Consolidated Statement of Cash Flows more useful to users.

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 

2.4 Use of estimates and judgments

The preparation of financial statements requires management to make judgments, 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.

3. ACCOUNTING POLICIES

 

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.

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

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.

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 2009

 

4.  INTEREST INCOME

	2009
	US$
Cash and cash equivalents	8 248
Loans and advances to banks	16 158
Loans and advances to customers	106 191
Investment securities	48 219
	------------------
	178 816
	===========

 

5. non-interest income

 

	2009
	US$
Net losses from quoted and other  investments	(66 457)
Net commission and fee income	1 259 868
Fair value adjustment on investment properties	1 000 000
Debt recovery write back as RBZ Forex Bonds	1 789 836
Other net operating income	123 800
	---------------------
	4 107 047
	=============

6. Operating EXPENDITURE

	2009
	US$
The operating profit is after charging the following:-
Administration costs	1 286 263
Staff costs	605 693
	--------------------
	1 891 956
	============

 

7. taxation

	2009
7.1 Tax Charge	US$
Current taxation	309 771
Aids levy	9 293
Aids levy	104 384
	-------------------
	423 448
Financial institutions levy	118 880
	--------------------
Total taxation	542 238
	===========

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

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.

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.

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

9. COMPONENTS OF OTHER COMPREHENSIVE INCOME

	2009
	US$
Losses on land and buildings revaluation	(975 000)
Gains on property and equipment revaluation	806 980
	--------------
Other comprehensive (loss)/income	(168 020)
Income tax relating to components of other comprehensive(loss)/ income	33 604
	---------------
Other comprehensive loss for the period	(134 416)
	=========

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

		2009
	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
Losses on land and buildings revaluation	(975 000)	195 000	(780 000)
Gains on property and equipment revaluation	806 980	(161 396)	645 584
	----------------	------------------	------------------
Other comprehensive (loss)/income	(168 020)	33 604	(134 416)
	==========	==========	===========

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 

11. EARNINGS PER SHARE

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

11.1  Earnings/(losses)

	2009
	US$
Basic	1 733 943
Headline (note 11.4)	(249 668)

11.2 Number of shares (million)

	2009
Weighted average shares in issue*	1 641
Diluted number of shares*	1 661
* excludes own equity instruments amounting to 32 805 shares.

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

	2009
Basic	0.11
Headline	(0.02)
Diluted basic	0.10
Diluted headline	(0.02)

 

11.4 Headline earnings/(losses)

	2009
	US$
Profit attributable to shareholders	1 733 943
Add/(deduct) non-recurring items:
- Fair value loss on quoted and other investments	66 457
-Fair value gain adjustment on investment properties	(1 000 000)
-Debt recovery writeback as RBZ Forex Bonds	(1 789 836)
-Tax effect thereon	739 768
	-------------
	(249 668)
	========

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

12. SHARE CAPITAL

		GROUP AND COMPANY
	2009	2008	2009
	Shares	Shares	US$
	million	million
12.1 Authorised
Ordinary shares of US$ nil each	2 250	2 250	-
	=====	=====	====
12.2 Issued and fully paid
At 1 January	1 641	1 608	-
Shares issued - share options	1	33	-
	--------------	----------------	----------------
At 30 June	1 642	1 641	-
	========	========	========

Of the unissued ordinary shares of 608 741 771, 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 2009, 18 409 000 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 32 805 shares at a cost of US$nil were held by the Company's subsidiary, Stewart Holdings (Private) Limited.

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

13. DepositS and other accounts

	2009	2008
	US$	US$
13.1 Deposits and other accounts by type
Deposits from other banks	16	10 660
Current and deposit accounts	11 987 307	2 993 231
	-----------------	---------------
Total deposits	11 987 323	3 003 891
Less: Financial liabilities at fair value through profit and loss (note 14.1)	(939 167)	(810)
	-----------------	----------------
	11 048 156	3 003 081
Trade and other payables	2 773 210	937 606
	-----------------	----------------
	13 821 366	3 940 687
	==========	==========

 

13.2 Maturity analysis

	2009	2008
	US$	US$
Less than one month	11 987 314	3 003 847
1 to 3 months	9	44
3 to 6 months	-	-
6 months to 1 year	-	-
1 to 5 years	-	-
1 to 5 years	-	-
	---------------	---------------
	11 987 323	3 003 891
	==========	==========

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

	2009		2008
	US$	%	US$	%
13.3 Sectoral analysis of deposits
Banks and other financial institutions	16	-	10 660	-
Reserve Bank of Zimbabwe	-	-	-	-
Transport and telecommunications companies	1 344 012	11	339 977	12
Mining companies	331 578	3	5 107	-
Industrial companies	4 119 997	34	1 455 660	48
Municipalities and parastatals	-	-	-	-
Individuals	2 821 836	24	240 898	8
Agriculture	1 585 341	13	76 497	3
Other deposits	1 784 543	15	875 092	29
	---------------	----	---------------	---
	11 987 323	100	3 003 891	100
	=========	===	=========	===

14. FINANCIAL INSTRUMENTS

		Fair	Fair
	Cost	Value	Value	Cost
	2009	2009	2008	2008
14.1Financial liabilities at fair value through profit and loss	US$	US$	US$	US$
Fixed term deposits	12 009	12 009	764	764
Negotiable Certificates of Deposits	927 158	927 158	46	46
	-------------	-------------	------	----------
Total financial liabilities at fair value through profit and loss	939 167	939 167	810	810
	========	========	====	=====

		Fair	Fair
	Cost	Value	Value	Cost
	2009	2009	2008	2008
14.2 Financial assets at fair value through profit  and loss	US$	US$	US$	US$
Government and public sector securities	1 792 013	1 792 013	3 429	3 429
Treasury bills	-	-	3 429	3 429
RBZ Forex Bond	1 792 013	1 792 013	-	-
Bills-own acceptances	597 131	597 131	-	-
	---------------	-------------	--------------	----------
Total financial assets at fair value through profit and loss	2 389 144	2 389 144	3 429	3 429
	=========	========	=========	=====

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

14.3 Available-for-sale securities

	2009	2008
	US$	US$
Treasury bills (two-year bills)	-	-
Non-negotiable certificates of deposits	-	7
	-------------	----------
	-	7
	=======	======

14.4 Financial liabilities at fair value through

profit and loss 

	2009	2008
	US$	US$
Less than 1 month	939 158	766
1 to 3 months	9	44
3 to 6 months	-	-
6 months to 1 year	-	-
1 to 5 years	-	-
Over 5 years	-	-
	--------------	-------------
	939 167	810
	========	========

14.5 Financial assets at fair value through profit and loss

	2009	2008
	US$	US$
Less than 1 month	497 130	-
1 to 3 months	100 001	-
3 to 6 months	-	-
6 months to 1 year	1 792 013	3 429
1 to 5 years	-	-
Over 5 years	-	-
	--------------	-------------
	2 389 144	3 429
	========	========

 

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

14.7 Available-for-sale securities

	2009	2008
	US$	US$
Less than 1 month	-	7
1 to 3 months	-	-
3 to 6 months	-	-
6 months to 1 year	-	-
1 to 5 years	-	-
Over 5 years	-	-
	--------------	-------------
	-	7
	========	========

15. CASH AND CASH EQUIVALENTS

	2009	2008
	US$	US$
Statutory reserve	1 163 170	17 508
Current, nostro accounts and cash	1 437 299	1 330 69
	--------------	-------------
Total cash and cash equivalents	2 600 46	1 348 204
	========	========

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.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

16.  ADVANCES AND OTHER ACCOUNTS

	2009	2008
16.1.1 Advances	US$	US$
Fixed term loans	6 484 734	3 486
Local loans and overdrafts	1 436 650	52 274
Other accounts	803 399	112 447
	--------------	-------------
	8 724 783	168 207
	========	========

	2009	2008
16.1.2 Maturity analysis	US$	US$
Less than one month	7 814 358	68 667
1 to three months	241 092	-
3 to 6 months	-	-
6 months to 1 year	24 896	667
1 to 5 years	-	-
Over 5 years	-	-
	-------------	-------------
Total advances	8 080 346	69 334
Provision for impairment losses on  loans and advances	(158 962)	(13 574)
Suspended interest	-	-
	--------------	-------------
	7 921 384	55 760
Other accounts	803 399	112 447
	-------------	-------------
Total	8 724 783	168 207
	========	========

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 

16.2 Sectoral analysis of utilizations

	2009		2008
	US$	%	US$	%
Industrials	3 976 756	49	17 791	26
Agriculture and horticulture	1 445 432	18	205	-
Conglomerates	-	-	9 155	13
Services	2 384 352	30	30 499	44
Mining	109 289	1	10	-
Food & beverages	63 112	1	2 512	4
Other	101 405	1	9 162	13
	------------------	----	-------------------	-----
	8 080 346	100	69 334	100
	===========	===	============	====

The material concentration of loans and advances are in the industrials sector at 49% (2008 - 26%).

16.3 Provisions for losses on loans and advances

	2009			2008
	Specific	Portfolio	Total	Specific	Portfolio	Total
	US$	US$	US$	US$	US$	US$
At 1 January	13 218	356	13 574	-	-	-
Charge against profits	(4 798)	150 186	145 388	13 218	186	13 404
Charge against retained  earnings	-	-	-	-	170	170
	-------------	-------------	-----------	-----------	---------	---------
At 30 June	8 420	150 542	158 962	13 218	356	13 574
	========	========	========	=======	======	======

16.4 Non-performing loans and advances

	2009	2008
	US$	US$
Total non-performing loans and advances	8 420	13 218
Provision for impairment loss on loans and advances	(8 420)	(13 218
Interest in suspense	-	-
	--------------	-------------
	-	-
	========	========

 

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

  

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 

17. PROPERTY AND EQUIPMENT

	2009	2008
	US$	US$
Cost/Revalued amount	4 269 266	3 760 000
Accumulated depreciation	(770 767)	-
	--------------	-------------
Net book value	3 498 499	3 760 000
	========	========

18.  CAPITAL COMMITMENTS

	2009	2008
	US$	US$
Capital expenditure contracted for	-	-
Capital expenditure authorised but not yet contracted for	-	-
	--------------	-------------
	-	-
	========	========

19. CONTINGENT LIABILITIES

	2009	2008
	US$	US$
Guarantees	1 310 964	-
Commitments to lend	5 464 901	265 708
	--------------	-------------
	6 775 865	265 708
	========	========

 

 

20. EXCHANGE RATES

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

		Mid-rate
		30 June 2009
		US$
British Sterling	GBP1.00	1.64120
South African Rand	ZAR1.00	0.12869
Zimbabwe dollar	ZWD1.00	0.0000286

 

 

NMB BANK LIMITED 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2009

	Note	2009
		US$
Interest income		178 875
Interest expense		(13 459)
		------------------
Net interest income		165 416
Net foreign exchange gains		41 152
Non-interest income	a	4 223 380
		-----------------
Net operating income		4 429 948
Operating expenditure	b	(1 891 958)
Impairment losses on loans and advances		(145 388)
		----------------
Profit before taxation		2 392 602
Taxation		(445 086)
Financial institutions levy		(118 880)
		----------------
Profit for the period		1 828 636
Other comprehensive income/(loss):
Losses on land, building, property and equipment revaluation		(168 020)
Tax relating to components of other comprehensive income		33 604
		------------------
Other comprehensive (loss)/income for the period, net of tax		(134 416)
		------------------
Total comprehensive income for the period		1 694 220
		===========
Earnings/(losses) per share (US cents):
- Basic	e	11.08
- Headline	e	(1.58)

Comparative figures are nil due to the change in functional and reporting currency on 1 January 2009.

NMB BANK LIMITED 

HISTORICAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2009

		2009	2008
SHAREHOLDER'S FUNDS	Note	US$	US$
Share capital	f	-	-
Capital reserves		2 873 584	3 008 000
Revenue reserves		5 178 634	3 349 998
		-----------------------	---------------------
Total shareholder's funds		8 052 218	6 357 998
LIABILITIES
Deposits and other accounts		13 774 359	3 939 505
Financial liabilities at fair value through profit and loss		939 167	810
Provision for current taxation		458 106	24 764
Deferred taxation		1 469 361	1 372 342
		-------------------	-----------------
		24 693 211	11 695 419
		============	==========
ASSETS
Cash and cash equivalents	g	2 600 469	1 348 204
Financial assets at fair value through profit and loss		2 389 144	3 429
Available-for-sale securities		-	7
Advances and other accounts		8 724 783	168 207
Quoted and other investments		340 316	275 572
Investment properties	h	7 140 000	6 140 000
Property and equipment	i	3 498 499	3 760 000
		----------------------	-------------------
		24 693 211	11 695 419
		=============	============

NMB BANK LIMITED 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2009

		Capital Reserves
		Share	Revaluation	Retained
	Capital	Premium	Reserve	Profit	Total
	US$	US$	US$	US$	US$
Balances as at 1 January 2008	-	-	-	-	-
Total comprehensive income for the year	-	-	3 008 000	3 349 998	6 357 998
Dividend paid	-	-	-	-	-
	---------------	---------------	-----------------	----------------	------------
Balances as at 31 December 2008	-	-	3 008 000	3 349 998	6 357 998
Total comprehensive income for the six month	-	-	(134 416)	1 828 636	1 694 220
Dividend paid	-	-	-	-	-
	---------------	---------------	---------------	----------------	------------
Balances as at 30 June 2009	-	-	2 873 584	5 178 634	8 052 218
	=========	=========	=========	==========	========

 

NMB BANK LIMITED 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 June 2009

	2009
	US$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation	2 392 602
Non-cash items
Depreciation	102 017
Impairment losses on loans and advances	145 388
Investment properties fair value adjustment	(1 000 000)
Quoted and other investments fair value adjustment	(64 743)
	-------------------
Operating cash flows before changes in operating assets and liabilities	1 575 264
	-------------------
Changes in operating assets and liabilities
Financial liabilities at fair value through profit and loss	938 357
Deposits and other accounts	9 834 853
Financial assets at fair value through profit and loss	(2 385 715)
Available-for-sale securities	7
Advances and other accounts	(8 701 965)
	-------------------
	1 260 801
	-------------------
Taxation
Corporate tax paid	-
	------------------
Net cash inflow from operating activities	1 260 801
	------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(8 536)
	-----------------
Net cash outflow from investing activities	(8 536)
	-----------------
Net cash inflow before financing activities	1 252 265
	-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	-
	------------------
Net cash (outflow)/inflow from financing activities	-
	-----------------
Net increase in cash and cash equivalents	1 252 265
Cash and cash equivalents at the beginning of the period	1 348 204
	-----------------
Cash and cash equivalents at the end of the period (note g)	2 600 469
	==========

  

NMB BANK LIMITED 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 NOTES TO THE FINANCIAL STATEMENTS (NMB BANK LIMITED)

 

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

	2009
	US$
Net gains from quoted and other investments	64 743
Net commission and fee income	1 259 868
Fair value adjustment on investment properties	1 000 000
Debt recovery write back as RBZ Forex Bonds	1 789 836
Other net operating income	108 933
	---------------------
	4 223 380
	=============

b. Operating EXPENDITURE

	2009
	US$
The operating profit is after charging the following:-
Administration costs	1 286 265
Staff costs	605 693
	--------------------
	1 891 958
	============

c. COMPONENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)

	2009
	US$
Losses on land and buildings revaluation	(975 000)
Gains on property and equipment revaluation	806 980
	--------------
Other comprehensive (loss)/income	(168 020)
Income tax relating to components of other comprehensive(loss)/ income	33 604
	---------------
Other comprehensive loss for the period	(134 416)
	=========

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

		2009
	Before tax	Tax (expense)/	Net of
	amount	benefit	tax amount
	US$	US$	US$
Losses on land and buildings revaluation	(975 000)	195 000	(780 000)
Gains on property and equipment revaluation	806 980	(161 396)	645 584
	----------------	------------------	------------------
Other comprehensive (loss)/income	(168 020)	33 604	(134 416)
	==========	==========	===========

NMB BANK LIMITED 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

 

e. EARNINGS PER SHARE

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

 

e.1 Earnings/(losses)

	2009
	US$
Basic	1 828 636
Headline earnings/(losses) (note e.4)	(259 935)

 

e.2 Number of shares (million)

 

Weighted average shares in issue 16.5

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

Basic 11.08

Headline (1.58)  

e.4 Headline earnings/(losses)

The adjustments are as follows:

	2009
	US$
Profit attributable to shareholders	1 828 6363
Add/(deduct) non-recurring items:
- Fair value gain on quoted and other investments	(64 743)
-Fair value gain adjustment on investment properties	(1 000 000)
-Debt recovery writeback as RBZ Forex Bonds	(1 789 836)
-Tax effect thereon	766 008
	-------------
	(259 935)
	========

 

f. SHARE CAPITAL

 

f.1 Authorised

 

The authorised ordinary share capital at 30 June 2009 is at the historical cost figure of US$ nil (2008 - US$ nil) comprising 25 million ordinary shares.

f.2 Issued and fully paid

The issued share capital at 30 June 2009 is at the historical cost figure of US$ nil (2008 - US$ nil) comprising 16.5million ordinary shares.

 

g. CASH AND CASH EQUIVALENTS

	2009	2008
	US$	US$
Statutory reserve	1 163 170	17 508
Current, nostro accounts and cash	1 437 299	1 330 69
	--------------	-------------
Total cash and cash equivalents	2 600 469	1 348 204
	========	========

NMB BANK LIMITED 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2009

h. INVESTMENT PROPERTIES

	2009	2008
	US$	US$
Borrowdale Estate property	3 500 000	3 500 000
Borrowdale Road property	2 500 000	2 000 000
Other	1 140 000	640 000
	--------------	---------------
	7 140 000	6 140 000
	========	=========

 

Rental income amounting to US$15 000 was received and no operating expenses were incurred from investment properties in the current period.

 

The investment properties comprise three (3) sets of properties namely Borrowdale Road, Borrowdale Estate and various other properties. The Borrowdale Road property is also known as Stand Number 19207 Harare Township of Stand 19206 measures 4.4506 hectares in extent. The property was valued for half year end purposes by professional valuers and the open market value was US$2.5 million.

 

The remainder of Lot H of Borrowdale Estate is owned by Carey Farm (Pvt) Ltd, a wholly owned subsidiary of the Bank measures 89.2623 hectares (223.16 acres) in extent. The beneficial interest in Carey Farm (Private) Limited arose from shareholding acquired in settlement of a debt owed to the Bank amounting to US$ nil (2008 - US$ nil). The acquisition is in compliance with Section 34 of the Banking Act (Chapter 24.20). The land was valued by the professional valuers for half year end purposes and the open market value was US$6 million. The directors decided to use their 31 December 2008 valuation of US$3.5 million due to the current liquidity constraints in the market.

 

The other properties comprise residential stands and houses and these were valued by professional valuers for half year end purposes at US$1.14 million.

i. Property and equipment

	2009	2008
	US$	US$
Cost/Revalued amount	4 269 266	3 760 000
Accumulated depreciation	(770 767)	-
	--------------	-------------
Net book value	3 498 499	3 760 000
	========	========

 

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 (with the exception of International Accounting Standard 29).

 

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.

 

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 Chief Executive Officer and is responsible for the management of the overall risk profile.

The Bank's risk management policies are established to identify and analyses 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.

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.

NMB BANK LIMITED

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.

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.

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 excepted cashflows and the availability of collateral which could be used additional funding if required.

NMB BANK LIMITED

 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. As at 30 June 2009 these rates were 15% for ZWD time and demand liabilities and 10% for time and demand liabilities denominated in other 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 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.

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

4.7 Risk Ratings

4.7.1 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

4.7.2 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.

4.7.3 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

 

NMB BANK LIMITED

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.

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 months.

 

NMB BANK LIMITED

4.7.4 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 (refer to Note 5).

NR - not rated.

 

4.8 Regulatory Compliance 

The corrective order issued in 2007 relating to the matter covered in Note 5 was partially lifted in 2008 as the issue relating to the reimbursement of Foreign Currency Accounts funds is still outstanding. A corrective order issued in December 2008 relating to managerial restructuring was lifted in February 2009. The Group remains committed to complying with and adhering to all regulatory requirements.

 

4.9 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.

  

NMB BANK LIMITED

The Bank's regulatory capital position at 30 June 2009 was as follows: 

	2009	2008
	US$	US$
Share capital	-	-
Share premium	-	-
Retained earnings	5 178 634	3 349 998
	-------------	---------------
	5 178 634	3 349 998
Less: capital allocated for market and operational risk	(110 408)	(712)
Credit to insiders	-	-
	-------------	---------------
Tier 1 capital	5 068 226	3 349 286
Tier 2 capital (subject to limit as per Banking Regulations)	3 024 126	3 008 356
Revaluation reserves	2 873 584	3 008 000
Subordinated debt	-	-
Portfolio provisions (limited to 1.25% of risk weighted assets)	150 542	356
Total Tier 1 & 2 capital	8 092 352	6 357 642
Tier 3 capital (sum of market and   operational risk capital)	110 408	712
	-------------	----------------
Total capital base	8 202 760	6 358 354
	========	==========
Total risk weighted assets	21 909 360	10 283 834
	========	==========
Tier 1 ratio	23%	33%
Tier 3 ratio	14%	29%
Tier 3 ratio	1%	-
Total capital adequacy ratio	38%	62%

 

 

NMB BANK LIMITED

5. OUTSTANDING FOREIGN CURRENCY ACCOUNT BALANCES

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. It is intended that the US$2.6 million net liability will be met from a plan the Board has put in place, the details of which will be made available shortly.

 

ENDIR IIFVATIIDFIA

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