NMBZ : April 14, 20222021 FY Financial Results & Audit Report

INTRODUCTION

For the greater part of 2021, there was a growing sense of cautious optimism that finally the worst of the COVID-19 pandemic was behind us. However, towards the end of the year, our resilience was put to the test once more as the spread of new variants necessitated the reintroduction of various restrictions. That presented challenges to businesses emanating from a slowdown in the global economy and supply chain disruptions. Despite these factors, the Zimbabwean economy continued to show signs of resilience and recovery.

The various economic stabilization initiatives, including the foreign exchange auction system introduced in June 2020, resulted in a significant drop in inflation with , year-on-year inflation (Y.o.Y) dropping from a high of 837% recorded in July 2020, to 60.74% as of December 2021. Month-on-month inflation (M.o.M) averaged 4.05% during the year 2021.

During the period under review, the local currency depreciated by 32.9% from ZW$81.7866/US$ to ZW$108.666/US$. In 2021, total foreign currency receipts inflows into the economy increased by 53% to US$9.7 billion, a record high compared to US$6.3 billion in 2020. The performance was driven by increased commodity prices, increased capacity utilization across sectors, international remittances, and gold incentives put in place by the government.

Notwithstanding the economic headwinds, the economy achieved an economic growth rate of 7.8% on the back of the continuation of the tight monetary and fiscal consolidation, a good agricultural season and the stabilization effect brought by the auction system.

GROUP RESULTS

FINANCIAL PERFORMANCE

Operating income increased from ZW$3.4 billion to ZW$6.98 billion for the year ended 31 December 2021, largely driven by growth in transaction volumes and values during the period under review. Total comprehensive income for the period amounted to ZW$2.25 billion (Dec 2020 ZW$1.66 billion).The Group achieved a basic earnings per share of 463 cents (Dec 2020 - 338 cents)

Operating expenses at ZW$3.5 billion, were 72% above the 2020 levels, reflecting the effects of inflation and exchange rate depreciation. The Bank continues to pay special focus on its digitization strategy which is expected to increase efficiencies resulting in cost reduction.

FINANCIAL POSITION

Total assets closed the year at ZW$29.4 billion, up 67% from ZW$ 17.6 billion as at 31 December 2020, funded by strong growth in customer deposits as the banking subsidiary continues to grow its customer base. Customer deposits and other liabilities increased by 85% reflecting strong personal and commercial inflows following the easing of Covid-19 restrictions.

The Group's investment property portfolio was valued at ZW$3.5 billion as at 31 December 2021 while property and equipment stood at ZW$4.1 billion.The revaluation gains largely reflect the changes in the macro economic environment.

Loans and advances and other assets stood at ZW$12.4 billion as at 31 December 2021, increasing by 93% from prior period levels. The banking subsidiary maintained a high-quality loan book, closing the year with an NPL ratio of 1.33%

The Bank maintained a sound liquidity position with a liquidity ratio of 41% and this was above the statutory minimum of 30%.

CAPITAL

The capital adequacy ratio of the banking subsidiary remained strong at 57.48% compared to a regulatory minimum of 12%. The subsidiary maintained adequate capital levels to cover all risks and was compliant with the minimum capital of the equivalent of USD30 million.

DIVIDEND

The Board has resolved not to declare a dividend in order to fund the growth initiatives being pursued by the Group as well as buttress the regulatory capital position of the Group's banking subsidiary.

BLOCKED FUNDS

The banking subsidiary owed USD13.4 million to various line of credit providers as at 31 December 2021 which have been registered as Blocked Funds with the Reserve Bank of Zimbabwe (RBZ) in line with regulatory directives. In 2021, the Government of Zimbabwe assumed the obligation to settle these Blocked Funds in terms of section 52 of the Finance Act no 7 of 2021. The Blocked funds are listed under Annex 1 of the Finance Act no 7 of 2021. In terms of section 52 of the Finance Act no 7 of 2021, outstanding blocked funds may be liquidated through the issuance of Government-backed zero coupon or non-interest-bearing foreign exchange savings bonds or such other debt instruments denominated in foreign currency. The timing of issuance of the Government-backed instruments is yet to be advised.

LONDON STOCK EXCHANGE LISTING

At the 2021 Annual General Meeting, the Company sought and obtained shareholder approval to delist from the London Stock Exchange following a determination that the regulatory compliance and administrative costs that the Company was incurring annually were high and outweighed any benefits derived or to be derived from the dual listing. Having obtained shareholder approval, the Company applied and obtained approval to delist from the London Stock Exchange with effect from 8 July 2021. The delisting did not adversely affect any of our shareholders as the company's shares continue to be listed on the Zimbabwe Stock Exchange where the company has always maintained its primary listing. The number of shares held on the London Stock Exchange was 198 443 shares. The Company is in the process of winding up administrative processes related to the delisting.

DIRECTORATE

Mr. Benefit Washaya retired at the end of December 2021 after serving as the Bank's Chief Executive Officer for fourteen years. He was replaced by Mr. Gerald Gore, formerly the Deputy Chief Executive Officer, who was appointed Chief Executive Officer with effect from 1 January 2022. Mr. Benson Ndachena also resigned from his post as Chief Finance Officer with effect from 1 October 2021 to pursue other interests. He was replaced by Mrs. Margret Chipunza who assumed the role of Chief Financial Officer with effect from 30 September 2021. I thank Mr. Washaya and Mr. Ndachena for their sterling contribution to the Group and I wish them well in their future endeavors. I am confident in the ability of the incoming Executive team to take NMB into our next growth phase.

OUTLOOK AND STRATEGY

The Bank will continue to accelerate the digitization strategy with the main aim being to provide seamless digital financial solutions to both corporate and individual clients. The Group will continue to fund and support the productive sectors of the economy as part of our drive to support the growth of the Zimbabwean economy. I will be coming back to the market with further developments on this front.

CHAIRMAN'S STATEMENT (Continued)

APPRECIATION

I thank our valued clients, depositors, shareholders, regulatory authorities and other key stakeholders for their continued support. To my fellow board members, management and staff, I extend my heartfelt gratitude for their continued diligence, dedication and relentless efforts which have culminated in the achievement of these commendable results.

B. A. CHIKWANHA

CHAIRMAN

10 APRIL 2022

CHIEF EXECUTIVE OFFICER'S STATEMENT

INTRODUCTION

The Group and its clients showed great resilience and adaptability in the wake of the constant evolving challenges brought about by the Covid-19 pandemic. The operating environment maintained a relative stability in the first half although it became susceptible to deterioration in the base currency as the year progressed. Year-on-year inflation closed the year on 60.1%, while month-on-month inflation averaged 4.5%. The economy saw renewed inflationary pressures largely driven by exchange rate deterioration. This inevitably resulted in an increase in the cost of running the business. The Group continued on its digitization drive bringing efficiency and convenience to our customers.

PERFORMANCE REVIEW

The Group operated profitably for the period under review achieving profit before tax of ZW$2.8 billion (2020 ZW$1.1 billion). The Group's performance was largely driven by the success of our digital transformation strategy and support for key productive sectors of the economy.

The banking subsidiary's digitalisation strategy paid off leading to a 99% growth in fees and commission income and 103% growth in operating income as depicted below.

The banking subsidiary's innovative products and services led to growth in its corporate and institutional depositors culminating in an increase of 85% in deposits and other liabilities which closed the year at ZW$19.1 billion. Loans and other assets grew from ZWL6.4 billion to ZWL12.4 billion as at 31 December 2021 as the bank continues to partner our clients in their growth path.

BUSINESS REVIEW

The banking subsidiary continued to make inroads into new markets and cement relationships with existing clients through the following main business units:

Digital Banking

The Digital Banking department has been seized with automation and improvement of end-to-end customer journeys, including digitalising the customer account opening processes. We made it possible for customers to open accounts digitally and transact without the need to visit the branch or interact with any of our staff. The account opening solution rolled out during the year cover both low KYC account as well as full KYC account opening and gives low KYC account holders a platform to upgrade their accounts digitally. This has made our processes efficient and cost effective while delivering real convenience to our customers. Our digital banking platforms saw over ZWL170 billion worth of transactions in 2021, almost five times 2020 levels, as transaction activity recovered and customers favoured digital payment solutions and reduced their reliance on cash and branch. The division contributed gross income amounting to ZW$2.3 billion in 2021 up, 109% from ZW$0.65 billion in 2020.

AMemberoftheDepositProtectionScheme

CHIEF EXECUTIVE OFFICER'S STATEMENT (continued)

DIRECTORS' REPORT EXTRACT for the year ended 31 December 2021

BUSINESS REVIEW (Continued)

Consumer Banking

The Consumer Banking and Value-Added Services (CBVAS) unit has evolved from traditional retail banking and now comprises a suite of financial services that are largely delivered through digital channels. Our combination of physical (branches and agencies) and digital touch points (USSD (*241#) and NMBConnect platforms) have improved access to banking products for our existing and potential customers across the country particularly the previously non and underbanked. Demand for credit remained strong during the period driven by household needs and our digital platforms enabled the vast majority of individual clients, particularly civil servants, to apply for personal loans without the need to physically visit the bank, which was a first in the market. The absence of long term funding has curtailed long term mortgage lending. Funding for housing has largely been restricted to short term equity release facilities. We deepened our Bancassurance offerings as we onboarded five new insurance partners under our multi-agency license. We are well on course to be the insurance payment partner of choice in the market as we digitalise premium payments across all insurance types. The banking subsidiary setup a dedicated Money Transfer Agency (MTA) center to conveniently serve the general public receiving cash from the diaspora. The center has flexible trading hours and customer experience that is next to none as we have shorter queues. Apart from lending income, the division contributed gross fees and commissions of ZW$1.59 billion compared to ZW$450 million in the previous year.

Business banking

The Business Banking division continued to develop strong business relationships in the market across a diversified range of sectors including key areas supporting economic activity. We remained relevant to our Corporate and SME clients by providing customised lending products which meet their exact needs. The Agriculture sector was bolstered by the floating of a ZW$2 billion Agrobond whose proceeds are being deployed in various agricultural value chains. The Bank signed a USD15 million credit line with a developmental finance partner which is currently being disbursed in selected long-term projects. This is up and above another line of US$20 million from a regional funder which was fully utilized.

RISK MANAGEMENT

As a result of its strong balance sheet and prudent approach to risk management, the Group remains well placed to withstand these aftershocks of the Covid-19 pandemic as well as providing support to customers when they need it most. The Group, has the 3 lines of defense model in place with respect to Enterprise Risk Management (ERM). Firstly, the frontline and support functions have clearly defined roles and responsibilities in risk management. Secondly, the Risk Management and Compliance Divisions then independently review the first line activities and finally, the Internal Audit department which is also independent of first and second line of defense.

The Group has maintained a strong capital base to cover for Pillar 1 Risks (Credit, Market and Operational Risks) as well as the additional risks identified through the Internal Capital Adequacy Assessment Process (ICAAP). The Bank's core capital was above the set minimum regulatory requirement of USD 30 million equivalent for tier 1 banks with our capital adequacy ratio at 57.48% against a regulatory minimum of 12%.

CORPORATE SOCIAL INVESTMENTS AND SUSTAINABILITY

During the period under review, the Group channelled its Corporate Social Investments towards education and support to disadvantaged and vulnerable groups. The Group donated Covid-19 PPEs and foodstuffs to Emerald Hill Children's Home and Friends of Dzikwa Society which assist orphans and vulnerable children in providing for their education and well-being. The Group also participated in cancer awareness campaigns by donating a desktop computer to KidzCan Zimbabwe and sponsoring their fundraising initiatives, the KidzCan MudRun.

Pursuant to the banking subsidiary's digitization thrust, the Group sponsored the Global Renaissance Investments 13th Edition Online Digital Indaba and Awards. The Group is committed to providing sustainable solutions to its customers as well as to its own operations. The Bank continued to raise affordable long-term funding through lines of credit to support players in key economic sectors by financing their capital expenditure projects in manufacturing, agriculture and construction. On the green solutions side, the Group doubled its solar power output and the Head Office now 100% off-grid.

OUTLOOK AND STRATEGY

The Group is setting itself up to take advantage of the opportunities that are presenting themselves in the market. We are poised for growth and diversification which will see us launch a number of new business units in the very near future. I am excited about the prospects and am confident that these initiatives will be of great benefit to our customers and stakeholders.

APPRECIATION

I thank the Board and shareholders for entrusting me to lead the team and take the Group to the next growth phase. I would also want to appreciate our former CEO Mr Washaya for his immense contribution to the group. I am sincerely grateful to our valued clients, depositors, shareholders, stakeholders and regulatory authorities for their support.

CHIEF EXECUTIVE OFFICER

10 APRIL 2022

or visithttps://www.nmbconnectonline.co.zw

1.

RESPONSIBILITY

The Directors of the Group are mandated by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe to maintain adequate accounting records and to prepare consolidated and separate financial statements that present a true and fair view of the state of affairs of the Group and Company at the end of each financial year. The information contained in these consolidated and separate financial statements has been prepared on a going concern basis and is in accordance with the provisions of the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards (IFRSs).

2.

INTERNAL FINANCIAL CONTROLS

The board is responsible for ensuring that effective internal control systems are implemented within the Group. The Group maintains internal controls and systems designed to provide reasonable assurance of the integrity and reliability of its records, safeguard the assets of the Group and prevent and detect fraud and errors. The Audit Committee in conjunction with the external and internal auditors of the Group reviews and assesses the internal control systems of the Group in key risk areas.

3.

GOING CONCERN

The Directors have assessed the ability of the Group and its subsidiaries to continue operating as a going concern and believe that the preparation of these financial statements on a going concern is still appropriate.

4.

STATEMENT OF COMPLIANCE

The condensed consolidated financial statements are prepared with the aim of complying fully with International Financial Reporting Standards (IFRSs) and have been prepared in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe. The detailed impact of this adoption is disclosed in note 3.12 (Changes in accounting policy).

The Directors have been able to achieve full compliance with IFRSs in previous reporting periods up to 31 December 2017. However, the 31 December 2021 and the comparative periods dating back to the year ending 31 December 2018 financial reporting period could only achieve partial compliance to the IFRS reporting framework due to developments detailed below.

The IFRS Conceptual Framework states that to achieve fair presentation to the financial statements, companies should consider the underlying economic substance of the transaction over and above the legal form. International Accounting Standard (IAS 21) "The Effects of Changes in Foreign Exchange Rates" requires the Directors to determine the functional currency of the reporting entity in preparing the entity's financial statements. In arriving at this conclusion, the entity is required to apply certain parameters which the Directors duly applied in their judgement. Furthermore, IAS 21 also requires the reporting entity to make certain judgements in determining the appropriate exchange rates to apply for certain transactions conducted in currencies other than the functional currency of the reporting entity.

As explained in Note 2.4.5, "Determination of the functional currency", it is our opinion that following the Monetary Policy pronouncements of 1 October 2018 and 20 February 2019, as well as the issuance of Exchange Control Directive RU 28 of 2019 on 22 February 2019, the country's functional currency appeared to have changed from the United States Dollar in terms of the IAS 21 considerations. However, the Government of Zimbabwe issued Statutory Instrument (SI 33) of 2019 on 22 February 2019, which prescribes the rate of USD1:RTGS$1 in accounting for all transactions and events before the effective date of the statutory instrument.

Furthermore, it is our interpretation that the SI 33 of 2019 issued in terms of the Presidential Powers Temporary Measures Act [Chapter 10:20], ranks supreme to any contrary legislation including quasi-legislations, which therefore implies that in preparing the financial statements, we sought to comply with the provisions of SI 33 of 2019 ahead of the IAS 21 requirements; consequently, the Group could not fully apply the requirements of IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors".

This, in our opinion resulted in non-compliance with IAS 21 and IAS 8 and that non-compliance had a significant impact on the true and fair presentation of the Group's financial position and would therefore urge users of the financial statements to exercise due caution.

The consolidated and separate financial statements were approved by the Board of Directors on 10 April 2022.

10 APRIL 2022

AUDITOR'S STATEMENT

CHIEF EXECUTIVE OFFICER

10 APRIL 2022

The Group's consolidated inflation adjusted financial statements from which these abridged financial statements have been extracted, have been audited by the Group's external auditors Ernst & Young Chartered Accountants (Zimbabwe) ,who have issued a qualified au-dit opinion as a result of the following matters: non-compliance with International Accounting Standard (IAS) 21, "The Effects of Changes in Foreign Exchange Rates", International Accounting Standard (IAS) 8, "Accounting Policies, Changes in Accounting Estimates and Errors", the consequential impact of applying IAS29 "Financial Reporting in Hyperinflationary Economies" on an incorrect base in prior year, inappropriate valuation of investment properties, freehold land and buildings and inappropriate accounting of blocked funds .The audit report also includes key audit matters in respect of impairment of loans and advances, suspense accounts and presumed risk on revenue recognition. The auditor's opinion on the Group's consolidated inflation adjusted financial results is available for inspection at the Holding Company's registered office. The Audit Partner for this engagement is Mr Walter Mupanguri (PAAB Practicing Number 0367).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2021

Inflation Adjusted

31 Dec 2020

31 Dec 2021

31 Dec 2020

ZWL

ZWL Restated

ZWL

ZWL

1 223 052 222 ( 229 842 526)

-------------------

993 209 696

501 216 271 ( 90 638 279) ------------------

410 577 992

1 818 825 719

207 087 364 --------------------

815 541 357

217 274 144 ------------------

3 019 122 779

414 067 704 -------------------- 3 433 190 483 ( 2 048 189 724) --------------------

1 443 393 493

1 226 846 996 ------------------ 2 670 240 489 ( 814 190 000)

-------------------

1 385 000 759

1 856 050 489

( 205 702 991) ( 45 434 726) -------------------- 1 133 863 042 231 218 282 -------------------- 1 365 081 324

( 127 974 740)

- ----------------- 1 728 075 749 85 514 320 ----------------- 1 813 590 069

290 977 498 ------------------- 1 656 058 822 ===========

891 186 492 ------------------- 2 704 776 561 ===========

338 449

319 424

*The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The auditors have not expressed an opinion on the historical cost information.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2021

CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2021

AMemberoftheDepositProtectionScheme

NoteInflation Adjusted

Loans, advances and other assets Trade and other investments Investment properties Intangible assets Property and equipment

Total assets

Cash and cash equivalents Investment securities

ASSETS

Total shareholders' funds and liabilitiesTotal liabilities

Deposits and other liabilities Current tax liabilities Deferred tax liabilities

Redeemable ordinary shares Subordinated term loan

SHAREHOLDERS' FUNDS Share capital

Share premium Treasury shares reserve

Functional currency translation reserve Revaluation reserve

Share option reserve Retained earnings

Total equity

Total shareholders' funds and shareholders' liabilities

LIABILITIES

10.2.1

17

• 18 4 180 677 696

• 19 3 518 133 464

• 16 12 367 842 540 36 499 730

• 15 4 010 434 252

• 14 4 872 262 099

• 13 19 091 448 981 10 309 591 981

  11 12

  31 Dec

  2021

  ZWL

  5 745 840

  1 216 013 250

  ( 8 531)

  462 166 697

  1 451 092 241

  33 048 171

  5 620 018 688

  8 788 076 356

  14 335 253 223 114 790

  9 025 526 399 --------------------

• 236 048 645

• 1 000 737 483

  20 328 235 109

  29 353 761 508 ============

  367 911 726

• 31 Dec

  2020

  ZWL Restated

  5 745 840

  1 216 013 250 -

  462 166 697

  1 073 935 740 -

  3 748 787 835

  -------------------- ---------------------

  6 506 649 362

  23 042 082 213 189 970

  -------------------- ---------------------

  6 742 881 414 --------------------

  91 949 809 467 809 599

  -------------------- ---------------------

  10 869 351 389

  --------------------- ---------------------

  17 612 232 803 ============

  3 157 902 536

  1 738 887 717

  6 417 670 852

  17 484 463

  2 657 783 640

  57 077 174

  3 565 426 421

  --------------------- ---------------------

  29 353 761 508 ============

  Historical Cost*

  17 612 232 803 ============

  31 Dec 2021

  ZWL

  84 116

  19 121 607

  ( 7 168)

  11 619 648

  1 915 997 366

  27 768 409

  5 085 120 044 ------------------- 7 059 704 023

  14 335 253 223 114 790 -------------------

  7 297 154 066 --------------------

  19 091 448 981

  236 048 645

  741 543 501 -------------------

  20 069 041 127

  4 872 262 099

  4 010 434 252

  11 849 962 849

  36 499 730

  3 518 133 464

  13 407 688

  3 065 495 111

  31 Dec 2020

  ZWL

  84 116

  19 121 607 -

  11 619 648

  • 1 067 266 442 -

  • 2 143 095 638 ------------------- 3 241 187 451

  14 335 253 132 632 641 --------------------

  3 388 155 345 --------------------

  6 413 943 465

  57 205 065

  174 727 794 -------------------

  6 645 876 324

  --------------------- --------------------- 27 366 195 193 10 034 031 669 ============ ============

  1 964 637 240

  1 081 820 457

  3 730 886 733

  10 877 672

  1 653 496 476

  4 133 707

  1 588 179 384

  --------------------- --------------------- 27 366 195 193 10 034 031 669 ============ ============

  *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The auditors have not expressed an opinion on the historical cost information.

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

  for the year ended 31 December 2021

  Inflation AdjustedFunctionalShare CapitalShare PremiumTreasury shares

  Currency Translation

  ReserveShare Option Reserve

  Revaluation

  ReserveRetained Earnings

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  Total ZWLBalance as at

  1 January 2020

  5 745 840 1 216 013 250

  • - 462 166 697

  4 295 423 -782 958 243 -

  2 383 706 511 1 365 081 324

  4 854 885 964

  Profit for the year Revaluation of land and buildings, net of tax Unwinding of share option reserve

  -

  -

  -

  -

  1 365 081 324

  -

  -

  -

  -

  • - 290 977 498

  -

  290 977 498

  - -------

  - -------------------

  - -------------------

  • - ( 4 295 423)

  - -------------------

  • - ( 4 295 423)

  ------------------------------------

  -------------------------------------

  Balance at

  31 December 2020

  Profit for the year Revaluation of land and buildings,net of tax Acquisition of treasury share Employee share schemes

  5 745 840 -

  --value of employee services - --------------

  1 216 013 250 - - - - ------------------

  • - 462 166 697

  • - 1 073 935 740

    -

    -

    -

    -3 748 787 835 1 572 574 508

    6 506 649 362

    1 572 574 508

    -

    -

  • - 377 156 500

  ( 8 531)

  -

  - -----------------

  - ------------------ 33 048 171 ----------------

  -

  - -------------------

  - - - --------------------

  377 156 500

  ( 8 531)

  33 048 171 -------------------

  Balance at

  31 December 2021

  5 745 840 =========

  1 216 013 250 ===========

  ( 8 531) ==========

  462 166 697 ==========

  33 048 171 =========

  1 451 092 241 ===========

  5 321 362 343 ===========

  8 489 420 011 ===========

  Historical Cost*FunctionalShare CapitalShare PremiumTreasury shares

  Currency Translation

  ReserveShare Option Reserve

  Revaluation

  ReserveRetained Earnings

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  ZWL

  Total ZWL

  Balances at

  1 January 2020 Profit for the year Revaluation of land and buildings, net of tax Unwinding of share option reserve

  84 116 -

  19 121 607 - - - ------------------ - - - ----------------11 619 648 - - - ----------------62 563 -176 079 950 -

  329 505 569 1 813 590 069

  536 473 453

  1 813 590 069

  - - --------------

  • - 891 186 492

  -

  891 186 492

  ( 62 563) -------------------- ----------------

  - -----------------

  ( 62 563) -------------------

  Balances at

  31 December 2020

  Profit for the year Revaluation of land and buildings, net of tax Acquisition of treasury shares Employee share schemes value of employee services

  84 116 -

  - - ---------------19 121 607 - - - - ----------------

  - --( 7 168)

  - -----------------

  11 619 648 - - - - -----------------

  • - 1 067 266 442

    -

    -2 143 095 638 2 942 024 406

    3 241 187 451 2 942 024 406

  • - 848 730 924

  -

  -27 768 409 ----------------

  - -------------------

  - - - --------------------

  848 730 924

  ( 7 168)

  27 768 409 --------------------

  Balances at

  31 December 2021

  84 116 ========

  19 121 607 =========

  ( 7 168) =========

  11 619 648 =========

  27 768 409 =========

  1 915 997 366 ===========

  5 085 120 044 ===========

  7 059 704 023 ===========

  *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The auditors have not expressed an opinion on the historical cost information.

  CASH FLOWS FROM OPERATING ACTIVITIES

  Profit before taxation

  Non-cash items:

  - Net monetary (Loss)/Gain

  - Depreciation(excluding right of use assets) 6

  - Depreciation -Right of use assets 6

  - Amortisation of intangible assets 6

  - Impairment losses on financial assets

  measured at amortised costs 16

  - Investment properties fair value gains 19

  • - Trade and other investments fair value gains adjustment

  • - Profit on disposal of property and equipment

  • - Loss/(profit) on disposal of investment properties

  • - Dividend received

  • - Unrealised foreign exchange gain

  • - Non-cash employee benefits expense share-based payments

  Operating cash flows before changes in operating assets and liabilities

  Changes in operating assets and liabilities Increase in deposits and other liabilities Increase in loans, advances and other assets

  Net cash generated from operations

  TAXATION

  Corporate tax paid

  Net cash inflow from operations

  CASH FLOWS FROM INVESTING ACTIVITIES

  Acquisition of intangible assets 17 Acquisition of investment securities

  Proceeds on disposal of property and equipment Acquisition of trade and other investments

  Acquisition of property and equipment 18 Proceeds on disposal of investment properties

  Acquisition of investment properties 19

  Net cash used in investing activities

  CASH FLOWS FROM FINANCING ACTIVITIES

  Repayment of lease liabilities 16.4 Purchase of treasury shares

  Net cash outflow from financing activities

  Net increase/(decrease) in cash and cash equivalents Net foreign exchange and monetary adjustments on cash and cash equivalents

  Cash and cash equivalents at beginning of the year

  Cash and cash equivalents at the end of the year 14

  Additional information on operational cashflows on interest

  Interest received

  Interest paid (including interest on lease liability)

  Inflation Adjusted

  31 Dec 2021 ZWL

  2 765 630 608

  436 377 804

  84 468 840

  49 484 694

  3 697 644

  248 106 738 ( 833 158 854)

  ( 10 897 181)

  ( 582 361)

  ( 6 802 556)

  25 314 881

  ( 110 073 088)

  33 048 171 ---------------------2 684 615 340

  ( 537 351 953) ---------------------4 881 481 576 ---------------------

  ( 15 664 870)

  10 192 641 ( 25 314 881) ( 156 094 715)

  42 179 066

  ( 60 120 942)

  ( 8 531) ---------------------( 60 129 472) ---------------------

  874 342 145 3 157 902 536 ---------------------4 872 262 099 ============

  2 976 563 465 ( 762 185 009)

  Historical Cost*

  ( 57 522 943) ( 661 072 877)

  --------------------- --------------------

  ( 3 981 334 686) ( 2 609 129 484)

  --------------------- --------------------

  31 Dec
  2020
  ZWL
  3 854 621 781	1 728 075 749
  -	-
  65 921 613	22 310 284
  38 605 828	8 579 715
  2 865 483	915 580
  248 106 738	127 974 740
  ( 1 843 565 394)	( 1 182 737 157)
  ( 8 444 751)	( 9 265 541)
  ( 462 020)	( 7 091 399)
  ( 5 788 412)	( 10 867 431)
  17 177 307	-
  ( 110 073 088)	( 204 729 321)
  27 768 409	-
  --------------------	-------------------
  2 286 733 494	473 165 219
  8 781 857 000 4 679 232 358	12 677 505 516	2 911 107 622
  ( 6 047 638 810) ( 4 429 303 072)	( 8 123 746 315)	( 1 356 425 376)
  --------------------- -------------------	--------------------	--------------------
  5 531 665 706 1 091 621 807	6 866 396 552	2 027 847 465
  --------------------- -------------------	--------------------	--------------------
  ( 505 915 301)	( 73 473 484)
  --------------------	--------------------
  6 334 577 394	1 954 373 981
  --------------------	--------------------
  ( 12 139 463)	( 3 652 103)
  ( 2 928 613 795)	( 974 654 302)
  7 122 008
  ( 17 177 307)	-
  ( 123 319 135)	( 110 752 486)
  34 553 053	15 381 940
  ( 44 577 303)	( 245 405 846)
  --------------------	--------------------
  ( 3 090 691 589)	( 1 311 960 789)
  ---------------------	--------------------
  ( 46 590 617)	( 14 658 020)
  ( 7 168)	-
  --------------------	--------------------
  ( 46 597 785)	( 14 658 020)
  --------------------	--------------------
  3 197 288 021	627 755 172
  ( 289 663 162)	844 577 801
  1 964 637 240	492 304 267
  --------------------	-------------------
  4 872 262 099	1 964 637 240
  ===========	===========
  2 434 269 087	501 216 271
  ( 643 327 091)	( 90 638 279)

  31 Dec 2020

  ZWL Restated

  1 133 863 042

  45 434 726

  111 168 797

  17 868 262

  39 246 884

  205 702 991 ( 367 520 068)

  ( 5 860 291)

  ( 12 669 303)

  3 533 622 -

  ( 329 076 141)

  - -------------------

  841 692 521

  ( 136 721 493) ---------------------954 900 314 ---------------------

  ( 12 583 601)

  (3 779 108 984) ( 1 566 631 859)

  16 571 920 -

  ( 410 137 563)

  24 724 497

  ( 49 713 476)

  - -------------------( 49 713 476) -------------------

  840 017 418 ( 1 703 942 645)

  31 Dec 2021 ZWL

  582 361

  2 653 439 317 2 208 405 864 -------------------3 157 902 536 ===========

  1 171 971 825 ( 186 475 075)

  *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The auditors have not expressed an opinion on the historical cost information.

  NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021

  1.

  REPORTING ENTITY

  The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 19207 Liberation Legacy Way, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk.

  2.

  ACCOUNTING CONVENTION

  Statement of compliance

  The condensed consolidated financial statements are prepared and presented on the basis that they reflect the information necessary to be a fair summary of the annual financial statements from which they are derived. This includes financial results that agree with or can be recalculated from the related information in the audited consolidated financial statements and that contain the information necessary so as not to be misleading in the circumstances. The information contained in these consolidated financial results does not contain all the disclosures required by International Financial Reporting Standards, the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe, which are disclosed in the full consolidated annual financial statements from which this set of condensed financial statements were derived. For a better understanding of the Group`s financial position, its financial performance and cash flows for the year, these condensed financial statements should be read in conjunction with the audited consolidated annual financial statements.

  2.1

  Basis of preparation

  The condensed consolidated financial statements including comparatives, have been prepared under the inflation adjusted accounting basis to account for changes in the general purchasing power of the ZWL. The restatement is based on the Consumer Price Index at the statement of financial position date. The indices are derived from the monthly inflation rates which are issued by the Zimbabwe National Statistics Agency (ZIMSTAT). The indices used are shown below. These condensed consolidated financial statements are reported in Zimbabwean dollars and rounded to the nearest dollar.

  Dates	Indices	Conversion factor
  31-Dec-18	88.81	44.7862
  31-Dec-19	551.63	7.2104
  31-Dec-20	2474.52	1.6074
  31-Dec-21	3977.46	1.00000

  The indices have been applied to the historical costs of transactions and balances as follows:

  • • All comparative figures as of and for the periods ended 31 December 2018 31 December 2019, 31 December 2020 and 31 December 2021 have been restated by applying the change in the index to 31 December 2021;

  • • Income statement transactions have been restated by applying the change in the index from the approximate date of the transactions to 31 December 2021;

  • • Gains and losses arising from the monetary assets or liability positions have been included in the income statement;

  • • Non-monetary assets and liabilities have been restated by applying the change in the index from the date of the transaction to 31 December 2021;

  • • Property and equipment and accumulated depreciation have been restated by applying the change in the index from the date of their purchase or re-assessment to 31 December 2021;

  • • Equity has been restated by applying the change in index from the date of issue to 31 December 2021;

  The net impact of applying the procedures above is shown in the statement of comprehensive income as the gain or loss on net monetary position.

AMemberoftheDepositProtectionScheme

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021

2.1

Basis of preparation (Continued)

IAS 29 discourages the publication of historical results as a supplement to the inflation adjusted results. However, historical results have been published as additional information for the users of the Group's financial statements. The Auditors have not expressed an opinion on the historical results.

Functional and presentation currency

For the purposes of the consolidated financial statements, the results and financial position of the Group are expressed in Zimbabwe dollars which is the functional currency of the Group, and the presentation currency for the consolidated financial statements.

Comparative financial information

The Group financial statements comprise the consolidated and separate statements of financial position, comprehensive income, changes in equity and cash flows. The comparative information covers a period of twelve months. .

2.2

Basis of consolidation

The Group financial results incorporate the financial results of the Company and its subsidiaries. Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until date when control ceases. The financial results of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses; profits and losses resulting from intra-group transactions that are recognised in assets and liabilities are eliminated in full. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

2.3

Comparative financial information

The comparative information covers a period of the previous twelve months.

2.4

Use of estimates and judgements

In preparation of the Group financial statements, Directors have made 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. prospectively.

Revisions to estimates are recognisedInformation about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2021 is included in the following notes:

2.4.1

2.4.5

Determination of the functional currency

The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD), South African Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe (RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group.

Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD, bond notes and RTGS/ electronic transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments triggered a debate around the functional currency of Zimbabwe. It should be noted that the Group never participated in the three tier pricing and none of its products had multiple prices during the same period.

In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country's functional currency.

On 22 February 2020, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2020 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2020 were at USD1: RTGS$2.5.

On the same date, Statutory Instrument 33 of 2020 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2020 were deemed to have been valued in RTGS Dollars at a rate of 1:1 with the USD.

On 23 June 2020, the Reserve Bank of Zimbabwe introduced the Foreign Exchange Auction System, effectively abandoning the fixed foreign currency exchange rate regime which had been prevailing for the greater part of 2020. Significant trades have been recorded on the platform and significant movements in the exchange rate have been resultantly recorded.

In light of the developments summarised above, the Directors concluded that the Group's functional currency remains the Zimbabwe dollar (ZWL) following its change from US$ with effect from 22 February 2020.

Deferred tax

Deferred taxation is recognised 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 reporting 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 reporting date.

2.4.2

Valuation of properties

Significant judgements and estimates have been applied as detailed below for the valuation of Investment Properties and of Land and Buildings held under Property, Plant and Equipment:

Statutory Instrument 142 of 2020 introduced the Zimbabwe Dollar (ZWL) as the sole legal tender effective 24 June 2020. This appears to have been a follow up measure to the Monetary Policy Statement (MPS) of 22 February 2020 which added the RTGS$ to the then basket of currencies. The MPS established an Inter-Bank Foreign Exchange market which was subsequently replaced by the Foreign Exchange Auction System on 23 June 2020 which continued to function up to the reporting year end date. These events have created complex valuation challenges for the short term.

Valuations rely on historical market evidence for calculation inputs. This includes transaction prices for comparable properties, rents and capitalisation rates. Such market evidence does not exist at present to calculate ZWL values. Therefore, valuers have adopted the approach for the meanwhile of converting USD valuation inputs at the Foreign Exchange Auction Rate of the day to calculate ZWL property values.

This approach, however, presents a multitude of risks to the users of the valuation reports. These are detailed below:

Overstating the property values

The key inputs for the valuation of non-residential investment property are the rent income and the capitalisation rate. No trends for ZWL rents have yet been established neither is there easily verifiable market evidence of ZWL transactions to enable analysis of the yields. It is unlikely that ZWL rent movements will mirror the activity on the Foreign Exchange Auction System. In addition, the property market will price the risk associated with the ZWL which is not a fully convertible currency, and this will be reflected through the capitalisation rates.

Therefore, a direct conversion of USD valuation inputs likely results in overstated ZWL property values.

Property sub-sectors will respond differently to the new currency

To use a single conversion rate for different property sub-sectors does not recognise the fact that each will respond differently to the reintroduced ZWL. Non-residential property is likely to lag behind the economic cycle quite considerably. Whereas residential property which is more sentiment driven, is likely to respond positively quicker.

Ignoring market dynamics (supply and demand)

Applying a conversion rate to USD valuation inputs to calculate ZWL property values is not an accurate reflection of market dynamics. Risks associated with currency trading do not reflect the risks associated with property trading. The two markets perceive and price their respective risks quite differently.

It is, therefore, unlikely that property values will strictly track the movement in the Foreign Exchange Auction System rate.

2.4.3

Investment securities

The Group has Treasury Bills and Government Bonds for which there is currently no market information to facilitate the application of fair value principles in determining fair value disclosures. Directors have made a significant judgment in determining that the carrying amount approximates fair value. (refer to note 14.1).

2.4.4

Impairment losses on loans and advances

The Bank adopted IFRS 9 with effect from 1 January 2018.

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

•

•

•

•

•

•

loans and advances to banks; loans and advances to customers; debt investment securities; lease receivables; loan commitments issued; and financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of purchased or originated credit-impaired (POCI) financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

•

12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

•

Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

The impairment loss on loans and advances is disclosed in more detail under note 8 and note 16.3.

On 24 June 2020, the Monetary Authorities announced that the multi-currency regime, which the country was operating in since February 2009 had been discontinued and the country had adopted a mono-currency regime meaning that the sole legal tender would be the Zimbabwe Dollar (ZWL).

On 26 March 2021, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial vulnerabilities caused by the COVID-19 pandemic. One of the measures announced therein was the authorization of the use of free-funds in paying for goods and services, in terms of Statutory Instrument (SI) 85 of 2021. On 24 July 2021, the Government of Zimbabwe issued Statutory Instrument (SI) 185 of 2021, which granted permission to display, quote or offer prices for all goods and services in both Zimbabwe dollars and foreign currency at the interbank exchange rate.

2.4.6

Lease arrangements

The Directors have exercised significant judgement on determining whether the various contractual relationships which the Group is party to, contain lease arrangements which fall into the scope of IFRS 16. Significant judgement was also exercised in determining whether the Group is reasonably certain that it will exercise extension options present in lease contracts as well as the determination of incremental borrowing rates applied in determining the lease liability.

2.4.7

COVID-19

The Directors fully acknowledge the unprecedented challenges and uncertainties posed by the COVID-19 pandemic. In that regard, significant judgments have generally been applied in light of the likely impacts of COVID-19 on the Group's activities. The Directors fully acknowledge the challenges and uncertainties posed by the COVID-19 pandemic. As such, significant judgements have generally been applied in light of the potential impacts of COVID-19 on the Group's activities.

2.5

Going concern

The Directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these condensed consolidated financial statements on a going concern basis is still appropriate.

3.

ACCOUNTING POLICIES

The selected principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.

3.1

Fair value measurement principles

The fair value of financial instruments is based on their quoted market price at the reporting 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 reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date.

3.2

Investment properties

Investment properties are measured at fair value. Gains and losses arising from a change in fair value of investment properties are recognised in the statement of comprehensive income. The fair value is determined at the end of each reporting period, by a registered professional valuer.

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

The residual value and the useful life of property and equipment are 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.

3.5

Intangible assets

Intangible assets are initially recognised at cost. Subsequently, the assets are measured at cost less accumulated amortisation and any accumulated impairment losses.

3.6

Taxation

Income tax

Income tax expenses comprise current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

NOTES TO THE CONDENSED AUDITED FINANCIAL STATEMENTS for the year ended 31 December 2021

3.6

Taxation (Continued)

Current tax

Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where the Bank operates and generates taxable income and any adjustment to tax payable in respect of previous years.

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred taxation

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2021

3.13

FINANCIAL INSTRUMENTS (Continued)

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.

At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows:

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional taxes that arise from the distribution of dividends by the Group are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss.

3.7

Cash and cash equivalents

Cash and cash equivalents comprise cash and bank balances, and short term highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are measured at amortised cost in the statement of financial position.

3.8

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.

3.9

When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.

In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using market observable inputs, or realised through settlement.

3.13.1

Financial Assets

(i)Classification and subsequent measurement

From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the following measurement categories:

• • Fair value through profit or loss (FVPL);

• • Fair value through other comprehensive income (FVOCI); or

• • Amortised cost.

The classification requirements for debt and equity instruments are described below:

Debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.

Classification and subsequent measurement of debt instruments depend on:

• • the Bank's business model for managing the asset; and

• • the cash flow characteristics of the asset.

Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories:

Interest income

For all financial instruments measured amortised cost, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income includes income arising out of the banking activities of lending and investing.

3.10

• • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ('SPPI'), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method

  Interest expense

  Interest expense arises from deposit taking. The expense is recognised in profit or loss as it accrues, taking into account the effective interest cost of the liability.

  3.11

  Shareholders' funds and shareholders' liabilities

  Shareholders' funds and shareholders' liabilities refer to the investment made by the shareholders in the Group and it consists of share capital, share premium, share options reserve, retained earnings, revaluation reserve, functional currency translation reserve, redeemable ordinary shares and subordinated term loans.

  3.12

• • Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in "Other Income'. Interest income from these financial assets is included in 'Interest Income' using the effective interest rate method.

  Leases

  Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. The respective leased assets are included in the statement of financial position based on their nature.

  In terms of IFRS 16, the Group recognises lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, Leases. These liabilities are measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate.

  The Group has neither enjoyed nor extended any lease payment holidays in its capacity as either lessee or lessor respectively due to COVID-19. As such, there are no COVID-19 induced lease modifications applicable during the period under review.

  Measurement of right-of-use assets

  The associated right-of-use assets for property leases are measured on a prospective basis. The right-of-use assets are measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the consolidated statement of financial position.

  Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

  Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. In circumstances where the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. The Group revalues its land and buildings that are presented within property and equipment and it has elected not to do so for the right-of-use buildings held by the Group.

  Lessor accounting

  The Group did not need to make any adjustments to the accounting for lease contracts in which the Group is the lessor under operating leases as a result of the adoption of IFRS 16.

  Short-term leases

  The Group does not recognise lease liabilities or Right-of-Use Assets in respect of short-term leases which are accounted for on a straight-line basis.

  3.13

  FINANCIAL INSTRUMENTS

  Measurement methods

  Amortised cost and effective interest rates

  The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance.

  The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired ('POCI') financial assets - assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.

  When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.

  Interest Income

  Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:

  • a). Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is appled to the amortised cost of the financial asset.

  • b). Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision).

• • Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net Trading Income" in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in 'Other Income'. Interest income from these financial assets is included in "Interest income" using the effective interest rate method.

Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the 'other' business model and measured at FVPL.

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments' cash flows represent solely payments of principal and interest (the "SPPI" test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.

Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments include basic ordinary shares.

The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank's management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank's right to receive payments is established.

Gains and losses on equity investments at FVPL are included in the 'Other Income' line in the statement of profit or loss.

(ii) Impairment

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

• • cash and cash equivalents;

• • loans and advances to customers;

• • investment securities;

• • lease receivables;

• • facilities approved but not drawn down; and

• • financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

• • 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

• • Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

AMemberoftheDepositProtectionScheme

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