African Phoenix Investments : Bank Holdings and Bank Limited - FY 2016 Basel Pillar 3 Disclosures

1

Executive Summary

1. Executive summary
2. Overview

   African Bank Holdings Limited ("ABH" or "the ABH Group") and its 100% held banking subsidiary, African Bank Limited ("ABL" or "the Bank") commenced business on 4 April 2016. ABH was capitalised with a cash subscription for ordinary shares of R 10 billion and, in turn, ABH elected to capitalise ABL with the same amount, also in return for ordinary shares. ABL acquired a portfolio of assets and liabilities from the old African Bank that was placed under curatorship on 10 August 2014 and subsequently renamed Residual Debt Services Limited (in curatorship) ("RDS") ("the Restructuring"). This included the more credit-worthy retail advances book. Under the Restructuring, a liability structure was established for ABL whereby the maturities of the funding liabilities acquired from RDS were extended by three years and eight months.

   Significant improvements in the credit underwriting and provisioning methodologies were applied and continue to be applied in ABL, based on the changing dynamics of the market, the customer profile and the risk experience in respect of the retail advances on book.

   The overall balance sheet of ABL therefore remains strong, with advances well provided for, high capital adequacy and cash holdings of R 12.9 billion. Liquidity risk, interest rate risk and foreign exchange risk is also conservatively managed.

   The overall impact of the strong balance sheet structure, as expressed in the conservative risk appetite, is evidenced in the various sections of this report which, at the African Bank Limited level as at 30 September 2016, include a CET1 ratio of 31.5%, a leverage ratio of 20.6%, a liquidity coverage ratio of 198% and a net stable funding ratio of 192%.

3. Capital Adequacy Ratios

The capital adequacy ratios and qualifying regulatory capital for African Bank Holdings Limited and African Bank Limited as at 30 September 2016 are set out in the graph and table below. The Group remains well capitalised with CET1 and Tier 1 ratios of 30.5% and 31.5% at a consolidated group and Bank level respectively. The corresponding total capital adequacy ratios are 36.2% and 38.3% respectively.

CAPITAL ADEQUACY BY TIER (%)

CET1 AT1 T2

Total 36.23 Total 38.27

5.696.77

30.5431.51

Total 10.375 Total 11.500

2.25002.2500

1.25001.7500

6.87507.5000

AFRICAN BANK

HOLDINGS L IMITED

AFRICAN BANK L IMITED

2016 BASEL 3 - SA MINIMUM

2019 BASEL 3 - SA

MINIMUM 2

1. Capital Adequacy Ratios (continued)

   The following table sets out the composition of the qualifying regulatory capital.

   R'm	African Bank Holdings Limited	African Bank Limited
   	30 Sep 2016	30 Sep 2016
   Composition of qualifying regulatory capital
   Ordinary share capital	10,000	10,000
   Regulatory adjustments	(1,802)	(1,789)
   Common Equity Tier 1 capital (CET1)	8,198	8,211
   Total subordinated debt	1,248	1,485
   Portfolio Impairments	278	278
   Tier 2 capital (T2)	1,526	1,763
   Qualifying regulatory capital	9,724	9,974

   Refer to 4.2 of the detailed disclosure for a detailed breakdown of the above table

2. Leverage Ratio

   The Basel 3 leverage ratio is defined as the capital measure (Tier 1 capital) divided by the exposure measure (total exposures) and is expressed as a percentage. This measure acts as a backstop to the risk based leverage capital adequacy ratio, by acting as a floor to restrict the build-up of excessive leverage by banks.

   African Bank Holdings Limited	African Bank Limited
   R'm	30 Sep 2016	30 Sep 2016
   Capital and total exposures
   Tier 1 capital	8,198	8,211
   Total exposures	39,829	39,810
   Basel III leverage ratio	20.6%	20.6%
   Basel III leverage ratio regulatory minimum requirement	4.0%	4.0%

   Refer to 5.2 of the detailed disclosure for a detailed breakdown of the above table

3. Liquidity Coverage Ratio

The LCR is a 30-day stress test, which requires the bank to hold sufficient high-quality liquidity assets to cover envisaged net outflows. These outflows are calibrated using prescribed Basel factors applied to assets and liabilities in a static run-off model. Basel definitions are used to identify high-quality liquid assets.

African Bank Limited	Total
R'm	Weighted Value (Average)
	30 Sep 2016
Total high-quality liquid assets	1,312
Total Net Cash Outflows	664
Liquidity Coverage Ratio (%)	198%
Regulatory minimum requirement	70%

Refer to 8.4 of the detailed disclosure for a detailed breakdown of the above table