Get documents about "Consolidat Branches Financial Statement
Description
Consolidat Branches Financial Statement document sample
Document Sample
FBN Bank (UK) Limited
Report and Financial
Statements
Period ended 31 December 2009
Our Vision
To be the first choice UK
and European Bank for Africa
Our Mission
To provide world class international
banking and trade services in support
of commercial relations between
Africa and the European Union
Report and Financial Statement
Contents
Profile 04
Officers and professional advisers 05
Chairman’s statement 06
Managing Director/Chief Executive’s Review 08
Directors' report 13
Statement of directors’ responsibilities 15
Independent auditors' report 16
Consolidated and bank statement
of comprehensive income 17
Consolidated and bank balance sheet 18
Consolidated and bank statement of changes in equity 19
Consolidated cash flow statement 20
Bank cash flow statement 21
Notes to the consolidated accounts 22
3
FBN Bank (UK) Limited
Profile
FBN Bank (UK) Ltd commenced trading on 1 November 2002 Over the years, the Bank has experienced phenomenal growth.
following receipt of the relevant authorisation from the Financial With a share Capital of N55.6 million in 1980, the Group’s
Services Authority and the approval of the courts under the Capital was N309 billion as at 31 December 2009. The
Financial Services and Markets Act 2000. The assets and liabilities Group’s total asset base was N2,172 billion while its deposit
of the former London branch of First Bank of Nigeria PLC base stood at N1.3 trillion as at 31 December 2009.
were absorbed by FBN Bank (UK) Ltd.
Market capitalization stood at N407 billion ie N14.05
It is a wholly-owned subsidiary of First Bank of Nigeria Plc share as at 31 December 2009.
and the office is based in the heart of the city of London,
at 28 Finsbury Circus EC2M 7DT. To reposition and to take advantage of opportunities in
the changing environment, the Bank embarked on several
First Bank of Nigeria Plc for over a century has distinguished restructuring initiatives. In 1957, it changed its name from
itself as a leading banking institution and a major contributor Bank of British West Africa to Bank of West Africa. In 1969,
to the economic advancement and development of Nigeria. the Bank was incorporated locally as the Standard Bank of
Nigeria Limited in line with the Companies’ Decree of 1968.
Founded in 1894 by a shipping magnate from Liverpool,
Sir Alfred Jones, the Bank commenced as a small operation Changes to the name of the Bank also occurred in 1979
in the office of Elder Dempster & Company in Lagos. and 1991, to First Bank of Nigeria Limited and First Bank
of Nigeria Plc, respectively. In 1985, the Bank introduced
It was incorporated as a Limited Liability Company on 31 a decentralized structure with five regional administrations.
March, 1894, with the Head Office in Liverpool. It started This was reconfigured in 1992 to enhance the Bank’s
business under the corporate name of the Bank for British operational efficiency. In 1996, the Bank introduced the
West Africa (BBWA) with a paid up capital of £12,000, after FBN Century – II project to revolutionise its operations
absorbing its predecessor, the African Banking Corporation, in line with the dynamics of the environment.
which was established earlier in 1892. This signalled the
pre-eminent position which the Bank was to establish in the FBN obtained a listing on the Nigerian Stock Exchange (NSE)
banking industry in West Africa. In the early years of in March 1971 and has won the NSE President’s merit award
operations, the Bank recorded impressive growth and worked nine times for the best financial report in the banking sector.
closely with the Colonial Government in performing the
traditional functions of a Central Bank. The Bank has continued to be a leader in financing long-term
development of the economy, which was demonstrated in
To justify its West Africa coverage, a branch was opened 1947 when the first long-term loan was advanced to the then
in Accra, Gold Coast (now Ghana) in 1896 and another in colonial government. To demonstrate its commitment to its
Freetown, Sierra Leone in 1898. These marked the creation customers and the development of the Nigerian economy,
of the Bank’s international banking operations. The second the Bank has since broadened its loan and credit portfolios
branch of the Bank in Nigeria was in the old Calabar in to various sectors of the economy.
1900 and two years later, services were extended to
Northern Nigeria. The Bank has developed tremendously judging from a number
of parameters including number of branches, growth in deposit
Currently with 610 branches, agencies and subsidiaries spread base, asset size and size of loans and advances. Furthermore,
throughout Nigeria, the Bank maintains one of the largest its track record of profitability and reliability in sound banking
branch networks in the industry. has continually placed the Bank in its leadership position.
To satisfy the needs of its customers, the First Bank Group has In line with its mission statement “remain true to our name
diversified into a wide range of banking and non-banking by providing the best financial services possible” the Bank will
activities and services. These include Corporate and Retail consistently transform itself as it forges ahead in its second
Banking, Registrarship, Pension Fund Custodianship, century of quality banking to the nation.
Trusteeship, Insurance Brokerage, Private Equity, Venture
Capital and Microfinance.
4
Report and Financial Statement
Officers and professional advisers
Report and Financial Statements
Directors
Ayoola Oba Otudeko, OFR Chairman (Resigned 1 February 2010)
Peter Stuart Hinson Managing Director/Chief Executive
Michael John Bamber Executive Director, Operations
Christiana Etukudo Fashogbon Executive Director, Business Development
Peter Arnhem Grafham
Abdullahi Sarki Mahmoud Resigned 29 January 2010
Remilekun Adetola Odunlami Appointed 21 August 2009
Stephen Olabisi Onasanya Appointed 23 April 2009
Sanusi Lamido Sanusi Resigned 4 June 2009
Anthony Robert Paget Williams
Company Secretary
Venetia Carpenter, FCIS
Registered office
28 Finsbury Circus
London
EC2M 7DT
Bankers
HSBC Bank plc, London
Standard Chartered Bank PLC, New York
WestLB AG, Dusseldorf
The Bank of Tokyo – Mitsubishi UFJ, Ltd, Tokyo
Credit Suisse, Zurich
Solicitors
DLA Piper UK LLP, London
Auditors
Deloitte LLP
Chartered Accountants and Registered Auditors
London
5
FBN Bank (UK) Limited
Chairman’s statement
Fellow shareholders, invited guests, distinguished
ladies and gentlemen,
It is with great pleasure that I welcome you to the 8th Annual
General Meeting of FBN Bank (UK) Limited. The period to 31
December 2009 saw us squarely facing the challenges of the
global downturn, and we are thankful that despite all, our
bank still maintained the profitable standard it has kept since
inception. The bank prioritised providing high quality service
to customers, expansion of our product base and adherence
to regulation. These combined with remarkable management
of capital to comply with Basel II and prudent risk management
have resulted in our profitable position.
FBN UK showed tenacity in keeping its market leading position
as the premier bank for African trade-related and personal
banking. Major events of the past year in our home market as
well as the global economy are worth highlighting as a build-
up to our expectations for the forthcoming year.
China emerged from the economic crisis as the world’s
fastest-growing major economy. However, there are concerns
that China may rein in its rapid growth, by tightening its
monetary policy, which could dampen a global economic
recovery. The country took steps to control bank lending and
absorb money from the market in order to cool credit growth.
In the US, worries about the effect of regulatory reforms
have led to depreciation in stock values.
Overall, there is uncertainty about the trajectory of the global
Our bank’s determination economy, reflected in highly volatile exchange rates, and
to continually deliver indications by central banks to keep rates low for an extended
period. The European Central Bank kept its main refinancing
excellent service to customers rate at a historic low of 1% for the eighth month running in
January, as the Bank of England (BOE) also left interest rates
is only surpassed by the at a record low of 0.5% and announced no change in its
sheer drive and commitment £200 billion ($320 billion) monetary stimulus program as it
looks for clearer signs on the health of the economy.
to maintain profitable
financial performance In our economy, the outcome of 2009 for several financial
institutions was a mixed bag as the worst of the global credit
Stephen O Onasanya crunch had passed and performance was determined by how
Acting Chairman management could handle the after-effects of the crisis.
Banks that received government bail-outs underwent drastic
changes in structure and operations, resulting in declining risk
appetites and increased regulatory scrutiny. This tightening had
a positive effect as financial institutions in the City of London
have begun to post profit figures for the half-year and year-
ended 2009 and confidence is gradually returning to the market.
Despite the shrinkage of the UK economy in early 2009, by the
end of the year, equities rose by 50% and house prices by 7%.
Quantitative Easing was introduced by the BOE in March 2009
to help boost growth in the economy. It is encouraging to note
that the economic contraction ended in the last three months
of 2009, suggesting the recession has come to an end and
a recovery may soon be underway.
The Nigerian market, which is our core business feeder, also
experienced a tumultuous year amidst a sharp drop in oil prices
from second half 2008 into the first quarter of 2009, a continued
fall in the stock market, a currency crisis triggered by the fall
in oil prices, a banking crisis triggered by the banks’ exposure
6 to a falling stock market and corporate governance issues.
Report and Financial Statement
Higher oil prices and production should improve Nigeria’s public operating income fell to £15.5m, a 45% decline from last
finances and balance of payments in 2010. The key reforms year’s figures. Commendably, the bank reduced administrative
for strengthening the banking system are currently underway, expenses by 29% as a result of prudent cost control by
the oil price fiscal benchmark and the monetary and exchange management. Like other financial institutions caught up in the
rate reform. The actions to restore confidence in banks as economic crisis, we made cautious provisions for bad and
well as the oil price recovery have eased liquidity conditions, doubtful debts of GBP6.8m, improving our loan loss coverage
with interbank rate falling from 20% to 5% in recent months; from 4.6% to 42.8%. Despite this, the Bank still recorded a
however, credit availability is being constrained by higher profitable pre-tax figure of £0.76m.
provisioning, the need to recapitalize and the inevitable tightening
Our bank’s determination to continually deliver excellent
of credit criteria following the Central Bank audit exercise.
service to customers is only surpassed by the sheer drive and
commitment to maintain profitable financial performance.
However, the President’s prolonged absence from the country
due to ill health threatened political stability, reducing the Outlook
government’s effectiveness and undermining the efforts that The bank is looking forward to 2010 from a confident position as
had already been put in place to curb the Niger-Delta crisis exciting developments in operations are implemented. The bank
and other social disturbances. In the interim, the Vice-President is expanding its product offerings to include investment
has been granted acting powers while the President remains ill. advice and other services expected of private banking providers.
In order to facilitate this expansion, a new range of debit
Operating Environment cards are being launched for our clients.
The Nigerian banking industry was severely affected in the
These innovative developments continue to ensure that we
aftermath of the financial crisis as oil prices fell, as well as access
remain at the top of the scale of London-based African banks,
to foreign funding, resulting in constrained liquidity. Furthermore,
especially given the challenging nature of the current climate.
banks were exposed to a falling stock market and the troubled
The determination and commitment of the management and
downstream oil sector.
staff is to be thanked for these progressive initiatives which
After the appointment of the new Central Bank of Nigeria (CBN) are setting us in good stead for the year ahead.
governor in June 2009, measures to reduce systemic risk in the
Our commitment to investing in innovative products and
banking industry were introduced. Markedly, CBN guaranteed
services, our people and exploring new markets across Africa
interbank lending until March 2010. Reforms were introduced
will see us strengthening our position as the premier UK bank
to facilitate the recovery and improvement of the industry, which
for the region.
include enhancing transparency with regards to non-performing
loans, requirement for adequate provisioning, replacement Appreciation
of the management of failing banks, making additional capital On behalf of the Board, I wish to extend our sincere gratitude
available to under-capitalized banks and creating an asset to our loyal customers for their patronage and continued
management vehicle to purchase the banks’ bad debts. These support. I must also thank the Board of Directors for their
measures introduced to strengthen the Nigerian banking sector faithful leadership, the strong Management team and the Staff
and monetary and exchange rate policy have started to of FBN Bank (UK) Ltd for their unrelenting commitment and
restore confidence. unwavering focus on the vision.
By mid-year, the exchange rate had depreciated by 20% in Furthermore, I wish to extend our heartfelt gratitude to our
response to the fall in oil prices, despite substantial intervention. former chairman, Dr Oba Otudeko, OFR as he takes up the
Oil revenues have since been in recovery, largely with the support mantle of leadership as the Chairman of the Board of our
of an amnesty to militants in the Niger Delta although this is parent, First Bank of Nigeria Plc. His insightful and shrewd
currently facing threats as the President remains indisposed. contributions at FBN Bank (UK) Ltd will be sorely missed.
Also departing from our Board at this time is Alhaji Abdullahi
The UK operating environment is marked by increased regulations
Mahmoud, who has been diligently committed to upholding
and tighter credit and risk management measures, aimed at
the bank’s core values. The Board wishes to extend their
promoting more responsible lending. Regulatory pressures on
heartfelt gratitude to Dr Oba Otudeko and Alhaji Abdullahi
all banks will continue to increase the cost of doing business
Mahmoud as they depart.
and require higher margins and more capital than previously.
I am truly appreciative of the opportunity to take the helm
The economy is expected to further slow down with GDP
of this world class institution, especially at such a time as this
forecast of 1.3% in 2010, falling from 4.8% in 2009. Inflation
when the economic prospects for the UK and indeed the
is forecast to remain unchanged at 2009 rate of 2.1%.
entire globe remain uncertain. However, I am confident that
Financial Results with the hands of the capable Board and Management on
Our staff continued to develop business in this challenging deck, we would be able to continue with the outstanding
market which translated into an average business performance. standards set by my predecessor in order to steer the bank
As a result of the CBN mandate for uniform year end for all through these tough times.
Nigerian financial institutions, our report covers the nine-month
I believe that the future is bright for this institution and it will
period ending December 2009. The comparisons made below
continue to remain the premier bank of choice among
have therefore been quantified on an annualized basis.
London-based African banks.
The net interest income fell by 55% compared to last year as
Stephen O Onasanya
a consequence of the tougher market conditions and higher
Acting Chairman
cost of funding experienced by the Bank. Furthermore, total 7
FBN Bank (UK) Limited
Managing Director/Chief Executive’s Review
Distinguished shareholders, ladies and gentlemen,
I am delighted to present my report to the eighth Annual
General Meeting of FBN Bank (UK) Ltd.
The Industry
The financial services industry continues to address many varied
challenges as governments, regulators and world economies deal
with the aftermath of the financial meltdown. The developing
emerging model will undoubtedly be significantly different to
what we were previously accustomed to and will most likely
eventually include requirements for higher levels of liquidity,
lower returns on capital and, in some cases, a change of
focus on business segments. Whether this can be achieved
unilaterally across the globe, thus maintaining a level playing
field, remains to be seen.
The downturn in global trade volumes has not yet been reversed
and with the syndicated loans market still in the doldrums,
there is a shortage of quality assets. The return of growth and
stability has not yet occurred and in our two key markets is
also hampered by political elections both here in the UK and
in Nigeria. This has the effect of Financial Institutions,
particularly those in Nigeria, remaining liquid and no upward
pressure on interest rates.
Regulatory Framework
The Financial Services Authority (‘FSA’) is continuing to drive
forward numerous major changes in regulation across the
industry and this in itself presents challenges for banks. The
Our FirstSave internet changes directly affect our strategic approach to the future,
with more immediate effect on reporting, systems and the
savings brand which offers skills of our staff, all of which incur greater cost and demands
UK residents the opportunity on resources. As usual we will vigorously address the changes,
ensuring equally that the FSA is kept closely informed of our
of achieving attractive interest future direction and strategy and that we continue to apply
good market practice, particularly in respect of the financial
rates on savings through our soundness of the bank, its operations, good governance and
internet portal continues to the fair treatment of our customers.
be successful, playing an Our Business
In accordance with the move by our parent and the Central Bank
increasingly important part in of Nigeria, (‘CBN’) instructions to change to a 31 December
our overall business and year end, FBN Bank (UK) Ltd shortened its accounting period
during 2009 to nine months for last year.
broadening the bank’s
Our main office remains in Finsbury Circus, London where we
liquidity profile welcome our growing customer base in pleasant surroundings
and, at the same time, provide our international back office
Peter S Hinson
services on site. This continues to be a competitive advantage
Managing Director & Chief Executive
with a growing list of compliments for the consistently high
standard of service we manage to achieve.
The visibility of the services offered by our Paris Branch is growing
as they deepen the relationships across Francophone Africa.
Our largest market remains in Nigeria where we are supported
on the ground by our Representative Office based in the
Osborne Estate, Lagos. Staffed with experienced local Managers,
it allows us to offer daily face to face contact in our most
important market.
Our Banking Division serves seven main markets: Correspondent
Banking, Government and Parastatal Banking, Commercial and
Corporate Banking (Trade Finance), Structured Trade Commodity
Finance, Private Banking, UK Property and UK Savers.
8
Report and Financial Statement
Correspondent Banking – working closely with international an increasingly important part in our overall business and
banks, we offer a professional service to most of the upper broadening the bank’s liquidity profile.
quartile banks and their customers in West Africa, both English
We have also further developed our Private Banking business
and French speaking, largely through the facilitation of Trade
to concentrate on the provision of advice on Wealth
Finance, Foreign Exchange and Payment transactions.
Management by separating our mortgage ‘buy to let’ business
Government and Parastatal Banking – the banking needs of into a separate unit. A friendly efficient service and offering
Government and parastatal or state industries are immense face to face meetings either in London or Nigeria is generally
and whilst the main Nigerian Government relationships are seen as attractive by customers.
managed through our parent bank we provide the essential
Financial Performance
international leg of the services.
For the first time in the history of FBNUK we did not achieve
Commercial and Corporate Banking, (Trade Finance) – according an increase in pre tax profits as prudent provisioning, historically
to available statistics Nigeria continues to be the world’s leading low interest rates, the fall off in global trade and a shorter
issuer of Letters of Credit and whilst we serve many customers accounting period all impacted on the bank’s results. For the
in a number of countries the majority are in Nigeria. 9 months to 31 December 2009, pre tax profits fell to £0.76m
(12 months to 31 March 2009 - £16.3m). Whilst this was
Structured Trade Commodity Finance – this relatively new
particularly disappointing, it was not surprising against the
business line took advantage of other banks withdrawing from
turmoil seen in the financial markets and I would like to
this segment and has quickly established itself as a serious and
thank the Board, management and staff for their combined
professional player. It has an excellent strategic fit alongside
efforts over this challenging period.
our existing business units and our success was recognized
with a recent industry award for the ‘Best Trade Bank in West Against this background, early in the period under review we
Africa’. Offering structured secured facilities financing trade rigorously assessed our business model and appointed a Head
commodity flows, mostly but not exclusively into Africa, we of Risk to oversee the entire risk of our business. We also
believe we can further consolidate our position in the market took positive action to correct the trading position which had,
in the years ahead. by the end of the period, returned to more normal and
acceptable levels.
Private Banking – London has traditionally been a destination
for ‘High Net Worth’ visitors from West Africa and this continues. Our Customers
We provide a highly professional and personal service to this I have again had the pleasure of meeting many of our
niche market sector, offering international debit cards and customers, both in the UK and West Africa - the most important
advice on investment products to improve yield allied to asset a bank can have. The continuing support received is
wealth protection. immense and we are very grateful for their business. It has also
been exciting to listen to our customers’ plans for the future,
UK Property – We provide finance for property investment
plans in which we will assist to ensure their visions translate
within the M25 area of London meeting the needs of African
into reality.
and UK property investors.
Corporate Governance
UK savers – Our ‘FirstSave’ brand is now an established and
The Board of Directors is currently composed of seven
recognized player in this market offering demand, notice and
members, four Non Executives and three Executives.
fixed term accounts.
Our previous Chairman, Dr. Otudeko OFR resigned following
Business Development
his appointment as the Group Managing Director of the First
Our business development teams operate out of London,
Bank of Nigeria Plc. Whilst this adheres to good governance,
Paris and Nigeria providing a unique face to face service across
we were sorry to see him leave. Under his careful guidance
West Africa. In addition we continually have senior employees
the Bank has prospered and risen to the position of the most
travelling in Europe, the Middle East and Central & Southern
respected subsidiary of a West African Bank in London. We
Africa, meeting customers and structuring transactions.
wish him every success in his new role.
We continue to be conservative in our approach to risk but
at the same time take advantage of market opportunities. Mr. Sanusi, the previous Group Managing Director also
resigned following his appointment as the Governor of the
Continuing to fully embrace the principle of ‘Treating Customers
Central Bank of Nigeria. His incisive views on risk matters
Fairly’, we strive to offer a superior level of customer service
were significant and we wish him every success.
which, when added to the ability for customers to access their
bank accounts from anywhere in the world through debit cards We have also said goodbye to Abdullahi Mahmoud and I would
and our internet banking module, we believe is a unique offering like to record our thanks for his wisdom as a Non Executive
among peer banks. Director and wish him future success.
Our core business however remains that of Trade Finance and The Board, in summary, agrees the strategic direction,
our highly experienced teams have a well deserved excellent business plan and annual budget which are then implemented
reputation in the market. Quality of service and timely delivery are by the Executive. The Board is currently supported by the
the bedrock which continues to attract high quality new business. following Committees which meet at least quarterly.
Our FirstSave internet savings brand which offers UK residents
the opportunity of achieving attractive interest rates on savings
Continued overleaf...
through our internet portal continues to be successful, playing
9
FBN Bank (UK) Limited
Report and Financial Statements
Board Governance Committee Anti Money Laundering Committee
Members S O Onasanya Non Executive Director Chairman P S Hinson Managing Director
A R P Williams Non Executive Director Members M J Bamber Executive Director,
Operations
Board Audit and Risk Assessment Committee C E Fashogbon Executive Director,
Chairman P A Grafham Non Executive Director Business Development
Members R A Odunlami Non Executive Director S O Aiyere Head of Finance
A R P Williams Non Executive Director M J Barrett Head of Risk
M C Connell Head of Compliance
Board Credit Committee & MLRO
Chairman R A Odunlami Non Executive Director T Fall Head of Customer Services
Members P S Hinson Managing Director R Harris Compliance Manager
C E Fashogbon Executive Director, & Deputy MLRO
Business Development
A R P Williams Non Executive Director Asset & Liability Committee
Chairman P S Hinson Managing Director
Board Establishment Committee Members M J Bamber Executive Director,
Chairman S O Onasanya Non Executive Director Operations
Members P S Hinson Managing Director C E Fashogbon Executive Director,
P A Grafham Non Executive Director Business Development
A R P Williams Non Executive Director S O Aiyere Head of Finance
M J Barrett Head of Risk
Board Strategy Review Committee M C Connell Head of Compliance
Chairman A R P Williams Non Executive Director & MLRO
Members P S Hinson Managing Director M J Newcomb Treasurer
M J Bamber Executive Director,
Operations Risk Management Committee
C E Fashogbon Executive Director, Chairman P S Hinson Managing Director
Business Development Members M J Bamber Executive Director,
P A Grafham Non Executive Director Operations
R A Odunlami Non Executive Director C E Fashogbon Executive Director,
Business Development
Executive Committees S O Aiyere Head of Finance
The Executives operate through the following Committees M J Barrett Head of Risk
to implement the business plan. M C Connell Head of Compliance
& MLRO
Executive Management Committee V Murataj Head of Human Resources
Chairman P S Hinson Managing Director M J Newcomb Treasurer
Members M J Bamber Executive Director,
Operations
C E Fashogbon Executive Director,
Business Development
S O Aiyere Head of Finance
M J Barrett Head of Risk
M C Connell Head of Compliance
Executive Credit Committee
Chairman P S Hinson Managing Director
Members M J Bamber Executive Director,
Operations
C E Fashogbon Executive Director,
Business Development
S O Aiyere Head of Finance
M J Barrett Head of Risk
M C Connell Head of Compliance
& MLRO
10
Report and Financial Statement
Report and Financial Statements
Corporate Responsibility Conclusion
Working with our parent bank we have undertaken to be I am grateful for the continuing support of the Group’s Lagos
a good corporate citizen by supporting worthy causes in based Executives and the way in which they have helped with
various ways. Donations are approved by the Executive our establishment and growth as well as the guidance from
Management Committee and take into account the benefit the learned Non-Executive Directors. We have a sound business
to society and the support of our staff who may be either model which has proved resilient in difficult times and we will
directly or indirectly involved in the good cause. take advantage of the challenges as they arrive.
We are proud to have specifically supported the following In closing I would especially thank our customers,
during the year:- our employees and our Board alike.
The Nigeria High Commission Nigeria Day celebrations Peter S Hinson
Managing Director/Chief Executive
The London Business School
The Anthony Nolan Trust
The Future
A cautious approach will be applied to ensure the good
name of the Bank is not put at risk at a time when there will
undoubtedly be many changes to the industry. Growth
aspirations may therefore have to be tempered, building to
growth over the longer term.
11
FBN Bank (UK) Limited
FBN Bank (UK) Limited
Executive Directors
Peter Stuart Hinson Michael John Bamber Christi Etukudo Fashogbon
Managing Director/ Executive Director, Executive Director,
Chief Executive Operations Business Development
Non Executive Directors
Stephen Olabisi
Onasanya
Acting Chairman
Peter Arnhem Anthony Robert Remilekun Adetola
Grafham Paget Williams Odunlami
Senior staff
Frederic Le Bourgeois Christopher Brown
Samuel Aiyere Michael Barrett General Manager, FBN
Michael Connell
Head of Finance Head of Risk Head of Administration Head of Compliance
Bank (UK) Ltd, Paris Branch
Trevor Fall Martin Newcomb Graham Thorpe John Vowell
Director, Structured
Head of Customer Services Treasurer Head of Trade Finance
Trade Finance
12
Report and Financial Statement
Report and Financial Statements
Directors’ Report
The directors have pleasure in presenting their annual report Business review
and the audited financial statements for the nine months The Group is an authorised banking institution and provides
from 1 April to 31 December 2009. a range of banking and financial services. There have not
been any significant changes in the Group’s principal activities
During the financial period, the Bank established a subsidiary in the period under review. The directors are not aware, at the
in Nigeria to carry out its representative office operations. date of this report, of any likely changes in the Group’s
The Group changed its accounting period year end to activities in the forthcoming period.
31 December. The comparative period ended 31 March 2009
The Group continues to invest in human capital and technology
is for 12 months.
which has resulted in improved productivity. The directors
regard such investment as necessary for the continued success
In accordance with accounting policy, the first reporting
in the medium to long-term future of the business.
period after a change of reporting period, cannot be longer
than 15 months and therefore the Group has elected to As shown in the Group’s income statement, the net interest
present its financial statements for the first 9 months and income and fee income decreased by 55% and 24% respectively
then annually thereafter. over the prior full year (31 March 2009 – 39% and 25%
increase). Overall, operating income decreased by 45%
Principal activities (31 March 2009 – 26% increase), a direct reflection of reduced
FBN Bank (UK) Ltd (“The Bank”) is an authorised banking business volume, resulting from the global economic crisis.
institution regulated by the Financial Services Authority and
One of the Group’s key measurements of the effectiveness of
provides a range of domestic and international banking
its operations is calculating operating margin after direct costs.
and financial services.
The Group achieved an operating margin after direct costs
The Group consists of the following: of 4.9% (31 March 2009 – 58.4%). The large decrease in
operating margin is attributable to the continued squeeze on
• FBN Bank (UK) Ltd; and
interest margin and loan impairment provision made during
• FBN UK (Representative office in Nigeria) Limited. the period.
In June 2009, FBN UK (Representative office in Nigeria) Limited The balance sheet shows that the Group’s financial position
was incorporated and hence became a subsidiary of the Bank. at the period end has relatively reduced, in net assets terms,
compared to the prior year end. The Group’s asset level has
The principal activities are the provision of Correspondent Banking,
decreased by 16.3%, from £1,368m as at 31 March 2009 to
Corporate Banking, Structured Trade Finance, Trade Finance,
£1,145m as at 31 December 2009. The reduction in the
Private Banking and Treasury services to our clients.
balance sheet size reflects the general global economic
The Group concentrates on the provision of services to existing downturn which affected volume of business conducted.
and new customers with business interests spanning Europe and
Africa. We work very closely with our colleagues in First Bank of Directors
Nigeria Plc in Nigeria to provide structured trade finance products The directors, who all served throughout the period unless
and target a large volume of corporate lending facilities. We also otherwise shown, are as listed on page 5 of the report.
focus on banks in Africa for their correspondent banking needs,
by providing trade links to Europe and the rest of the world. Results and dividend
The Group’s profit for the period after taxation amounted to
Private Banking has a client base largely resident in the West
£522,662 (31 March 2009 – £11,695,614).
Africa region and the United Kingdom. We are continuing to
focus on a deposit driven customer proposition which is No dividend was paid by the Bank in respect of the period
outsourced in the United Kingdom. ended 31 December 2009 (31 March 2009 – £5,000,000).
No final dividend is proposed (31 March 2009 – £nil).
Treasury acts as the funding and liquidity management hub
for FBN Bank (UK) Ltd. Its focus is primarily on foreign exchange,
Future prospects and going concern
money markets and other investment activities.
The Group’s capacity to identify, generate and deliver new
While we continue to improve existing products and services, business remains satisfactory despite the prevailing economic
it is the intention of the Group to launch new products in the climate and increased market competition. The focus is
coming period for the benefit of its customers. These initiatives principally on profitable business and sustainable balance
will continue to be driven by the Business Development team sheet growth with a well diversified risk asset portfolio.
through our offices in London, Paris and Lagos. The initiatives
will ultimately assist in expanding the Group’s customer base.
13
FBN Bank (UK) Limited
Report and Financial Statements
Directors’ Report continued
A high capital adequacy ratio was recorded at the period end Capital structure
and it will be maintained at a satisfactory level in future. Liquidity FBN Bank (UK) Ltd has two key components to its capital
is key to the business and as a policy due consideration is given structure, being £82m share capital and subordinated debt
to ensure the Group maintains a strong liquidity position at all amounting to £16.5m. Whilst the subordinated debt is correctly
times in order to meet its financial obligations. The directors shown as a liability it counts as upper tier 2 capital for the
believe that the Group is well placed to manage its business regulated capital base.
risk successfully; hence they continued to adopt the going
No new ordinary shares were issued during the period
concern basis in preparing the annual report and accounts.
(31 March 2009 - £none).
FBN Bank (UK) Limited looks forward with confidence to a future
No additional subordinated debt was issued by the Group
of continued prudent business growth and outstanding financial
during the period (31 March 2009 – £5m).
performance for the benefit of its customers and shareholders.
Further information regarding the Group’s approach to risk
Charitable contributions management and its capital adequacy are contained in the
During the period the Group made charitable contributions unaudited disclosures made under the requirements of Basel II
totalling £21,500 (31 March 2009 - £15,985). Pillar 3 (the Pillar 3 disclosures). These disclosures are published
on the Bank’s website shortly after the approval of these
Financial Risk Management Objectives and Policies financial statements at http://www.fbnbank.co.uk
The principal risks associated with the business of FBN Bank
(UK) Ltd are credit risk, market risk, liquidity risk and Auditors
operational risk. Each of the directors as at the date of approval of this report
confirms that:
FBN Bank (UK) Ltd has established a comprehensive risk
management framework to manage these risks as it complies • so far as the director is aware, there is no relevant audit
with Basel II requirements. Hence the risk management information of which the Group’s auditors are unaware; and
framework is constantly evolving as business activities change
• the director has taken all steps that he/she ought to have
and expand in response to credit, market, product and
taken as a director to make himself/herself aware of any
other developments.
relevant audit information and to establish that the Group’s
The risk management framework is guided by a number of auditors are aware of that information.
principles as outlined in Basel II including the formal definition
This confirmation is given and should be interpreted in
of risk management governance, an evaluation of risk
accordance with the provisions of S418 of the Companies
appetite expressed in terms of formal risk limits, risk oversight
Act 2006.
independent of business units, disciplined risk assessment and
measurement including portfolio stress testing and various In accordance with Sections 485 and 487 of the Companies
risk monitoring and mitigation techniques. Act 2006, Deloitte LLP are deemed to have been re-appointed
as auditors of the Group.
The Board of Directors sets FBN Bank (UK) Ltd overall risk
parameters, gives risk tolerances and sets the significant risk By Order of the Board
management policies.
The FBN Bank (UK) Ltd Executive Credit Committee and Risk
Management Committee, chaired by the Managing Director,
have the primary responsibilities for sanctioning risk taking
activities and risk management policies respectively, within the
overall risk parameters and tolerances defined by the Board
of Directors. Venetia Carpenter, FCIS
For and on behalf of
The risk management control process is based on a detailed
structure of policies, procedures and limits and comprehensive FBN Bank (UK) Ltd
risk measurement and management information systems for 15 April 2010
the control, monitoring and reporting of risks.
Registered Office Address:
Periodic reviews by both the Internal Auditor and regulatory
28 Finsbury Circus, London EC2M 7DT
authorities subject the risk management processes to
additional scrutiny which helps to further strengthen the risk
management environment.
The financial risk management and objectives are disclosed
in note 27.
14
Report and Financial Statement
Report and Financial Statements
Statement of directors’ responsibilities
The Directors are responsible for preparing the report and Directors are also required to:
the financial statements in accordance with applicable laws
1. properly select and apply accounting policies;
and regulations.
2. present information, including accounting policies,
Company law requires the Directors to prepare financial
in a manner that provides relevant, reliable, comparable
statements for each financial year. Under that law, the Directors
and understandable information;
have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (IFRSs) as 3. provide additional disclosures when compliance with
adopted by the European Union. The financial statements are the specific requirements in IFRSs are insufficient to enable
required by law to be properly prepared in accordance with users to understand the impact of particular transactions,
IFRSs as adopted by the European Union and the Companies other events and conditions on the entity’s financial position
Act 2006. and financial performance; and
International Accounting Standard 1 requires that financial 4. make an assessment of the Group’s ability to continue
statements present fairly for each financial year the Group’s as a going concern.
financial position, financial performance and cash flows. This
The Directors are responsible for keeping proper accounting
requires the faithful representation of the effects of transactions,
records which disclose with reasonable accuracy at any time
other events and conditions in accordance with the definitions
the financial position of the Group and to enable them to
and recognition criteria for assets, liabilities, income and expenses
ensure that the financial statements comply with the Companies
set out in the International Accounting Standards Board’s
Act 2006. They are also responsible for safeguarding the
‘Framework for the Preparation and Presentation of Financial
assets of the Group, and hence for taking reasonable steps for
Statements’. In virtually all circumstances, a fair presentation
the prevention and detection of fraud and other irregularities.
will be achieved by compliance with all applicable IFRSs.
15
FBN Bank (UK) Limited
Report and Financial Statements
Independent auditors’ report to the members of FBN Bank (UK) Limited
We have audited the financial statements of FBN Bank (UK) Opinion on financial statements
Limited, for the nine months from 1 April to 31 December In our opinion:
2009 which comprise the Consolidated and Bank Statements
• the financial statements give a true and fair view
of comprehensive income, the Consolidated and Bank Balance
of the state of the Group and the Banks’ affairs as at
Sheets, the Consolidated and Bank Statements of Changes in
31 December 2009 and of the Group and the Banks’
Equity, the Consolidated and Bank Cash Flow Statements, and
profit for the period then ended;
the related notes to the consolidated accounts 1 to 32. The
financial reporting framework that has been applied in their • the financial statements have been properly prepared
preparation is applicable law and International Financial in accordance with IFRSs as adopted by the European
Reporting Standards (IFRSs) as adopted by the European Union. Union; and
• the financial statements have been prepared in accordance
This report is made solely to the Group’s members, as a body,
with the requirements of the Companies Act 2006.
in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we Separate opinion in relation to IFRSs as issued by the IASB
might state to the Group’s members those matters we are As explained in Note 1 to the financial statements, the Group
required to state to them in an auditors’ report and for no in addition to applying IFRSs as adopted by the European
other purpose. To the fullest extent permitted by law, we do Union, has also applied IFRSs as issued by the International
not accept or assume responsibility to anyone other than Accounting Standards Board (IASB).
the Group and the Group’s members as a body, for our audit
In our opinion the Group financial statements comply with
work, for this report, or for the opinions we have formed.
IFRSs as issued by the IASB.
Respective responsibilities of directors and auditors Opinion on other matter prescribed by the Companies
As explained more fully in the Directors’ Responsibilities Act 2006
Statement, the directors are responsible for the preparation of In our opinion the information given in the Directors’ Report
the financial statements and for being satisfied that they give for the financial period for which the financial statements are
a true and fair view. Our responsibility is to audit the financial prepared is consistent with the financial statements.
statements in accordance with applicable law and International
Matters on which we are required to report by exception
Standards on Auditing (UK and Ireland). Those standards
We have nothing to report in respect of the following matters
require us to comply with the Auditing Practices Board’s
where the Companies Act 2006 requires us to report to you if,
(APB’s) Ethical Standards for Auditors.
in our opinion:
Scope of the audit of the financial statements
• adequate accounting records have not been kept by the Bank,
An audit involves obtaining evidence about the amounts
or returns adequate for our audit have not been received
and disclosures in the financial statements sufficient to give
from branches not visited by us; or
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. • the Bank’s financial statements are not in agreement with
This includes an assessment of: whether the accounting the accounting records and returns; or
policies are appropriate to the Group and the Banks’
• certain disclosures of directors’ remuneration specified by
circumstances and have been consistently applied and
law are not made; or
adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall • we have not received all the information and explanations
presentation of the financial statements. we require for our audit.
Simon Hardy (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants
and Statutory Auditors
London, United Kingdom
15 April 2010
16
Report and Financial Statement
Report and Financial Statements
Statement of comprehensive income
For the nine months from 1 April to 31 December 2009
09
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
tes
ri
o
o
a
No
Gr
Gr
£
Continuing activities
Interest receivable 4 27,956,128 59,630,224
Interest payable 4 (17,705,772) (36,902,715)
Net interest income 10,250,356 22,727,509
Fees and commissions income 5 3,438,924 4,515,221
Dealing and exchange profits 1,560,101 419,872
Other operating income 242,000 295,678
Operating income 15,491,381 27,958,280
Administrative expenses 6 (7,928,254) (11,214,713)
Impairment charge 24 (6,802,735) (408,377)
Loan recovery – 1,560
Profit on ordinary activities before taxation 9 760,392 16,336,750
Tax expense 9 (237,730) (4,641,136)
Profit on ordinary activities after taxation 522,662 11,695,614
17
FBN Bank (UK) Limited
Report and Financial Statements
Consolidated and Bank
Balance sheet
For the nine months from 1 April to 31 December 2009
09
09
20
20
09
31 r end Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od e
31 d e
Pe up
tes
rio
Pe k
ri
n
o
o
a
No
Ba
Gr
Gr
Assets
£
Cash at bank and in hand 11 7,136,337 7,136,337 35,004,076
Loans and advances to banks 12 849,553,076 849,553,076 1,087,050,405
Loans and advances to customers 13 270,978,606 270,978,606 243,864,461
Investments 14 – 10,373 –
Securities-held-to-maturity 15 14,233,782 14,233,782 –
Property and equipment 16 524,529 369,860 564,039
Intangible assets 17 682,688 681,262 544,999
Other assets 18 1,220,738 1,134,384 856,077
Deferred tax asset 10 92,284 92,284 103,409
Financial assets – derivatives 549,063 549,063 –
Total assets 1,144,971,103 1,144,739,027 1,367,987,466
Liabilities
Deposits by banks 19 456,807,863 455,975,834 581,960,332
Customer accounts 20 500,227,751 500,227,751 590,749,699
Other liabilities 21 69,573,251 70,173,204 77,307,672
Financial liabilities – derivatives 16,069 16,069 322,297
Subordinated liabilities 22 16,676,041 16,676,041 16,500,000
Total liabilities 1,043,300,975 1,043,068,899 1,266,840,000
Called up share capital 23 82,000,000 82,000,000 82,000,000
Retained earnings 19,670,128 19,670,128 19,147,466
Equity shareholder’s funds 101,670,128 101,670,128 101,147,466
Total liabilities & shareholder’s funds 1,144,971,103 1,144,739,027 1,367,987,466
These financial statements were approved by the Board of Directors and authorised for issue on 15 April 2010.
Signed on behalf of the Board of Directors
Stephen Olabisi Onasanya Peter Stuart Hinson
18 Acting Chairman Managing Director/Chief Executive
Report and Financial Statement
Report and Financial Statements
Consolidated and Bank
Statement of changes in equity
For the nine months from 1 April to 31 December 2009
l
ita
y
uit
cap
Ea ined
s
Eq
ng
Sh up
Re up
To up
are
rni
tal
ta
o
o
o
Gr
Gr
Gr
£
£
£
Group
Balance attributable as at 1 April 2008 82,000,000 12,451,852 94,451,852
Profit for the year – 11,695,614 11,695,614
Dividends paid – (5,000,000) (5,000,000)
Balance attributable to equity as at 31 March 2009 82,000,000 19,147,466 101,147,466
Profit for the period – 522,662 522,662
Balance attributable to equity shareholders
as at 31 December 2009 82,000,000 19,670,128 101,670,128
l
ita
y
uit
cap
Ea ned
£ ings
Eq
are
tai
Sh k
Re k
To k
tal
rn
n
n
n
Ba
Ba
Ba
£
£
Bank
Balance attributable as at 1 April 2008 82,000,000 12,451,852 94,451,852
Profit for the year – 11,695,614 11,695,614
Dividends paid – (5,000,000) (5,000,000)
Balance attributable to equity as at 31 March 2009 82,000,000 19,147,466 101,147,466
Profit for the period – 522,662 522,662
Balance attributable to equity
shareholders as at 31 December 2009 82,000,000 19,670,128 101,670,128
19
FBN Bank (UK) Limited
Report and Financial Statements
Consolidated
Cash flow statement
For the nine months from 1 April to 31 December 2009
09
20
31 r end Bank
09
£ ece ded
er
20
Ma ed
mb
Group
D n
rch
Ye up &
31 od e
Pe up
tes
ri
o
o
a
No
Gr
Gr
Cash flow from operating activities
£
Profit before tax 760,392 16,336,750
Adjustment to reconcile net profit to cash flow
from (used in) operating activities:
Depreciation of property and equipment 192,329 198,547
Depreciation of intangible assets 162,684 264,065
1,115,405 16,799,362
Net (increase)/decrease in assets
relating to operating activities
Loans and advances to banks 237,497,329 (211,848,001)
Loans and advances to customers (27,114,145) (149,762,018)
Held-to-maturity investment (14,263,264) –
Other assets (990,763) 450,615
196,244,562 (344,360,042)
Net increase/(decrease) in liabilities
relating to operating activities - 55,100,000
Due to banks (124,976,428) 5,363,622
Due to customers (90,521,948) 425,243,953
Other liabilities (5,951,518) (62,848,390)
(221,449,894) 367,759,185
Income tax paid (2,183,543) (4,974,219)
Net cash (used in)/from operating activities (27,388,875) 18,424,924
Cash flow from investing activities
Acquisition of fixed assets (478,864) (652,586)
Net cash used in investing activities (478,864) (652,586)
Cash flow from financing activities
Proceed from borrowed funds – 5,000,000
Dividend paid – (5,000,000)
Net (decrease)/increase in cash and cash equivalents (27,867,739) 17,772,338
Cash and cash equivalents at 1 April 2009 11 35,004,076 17,231,738
Cash and cash equivalents at 31 December 2009 11 7,136,337 35,004,076
20
Report and Financial Statement
Report and Financial Statements
Bank
Cash flow statement
For the nine months from 1 April to 31 December 2009
09
20
31 r end Bank
09
£ ece ded
er
20
Ma ed
mb
Bank
D n
rch
Ye up &
31 d e
tes
rio
Pe k
n
o
a
No
Ba
Gr
Cash flow from operating activities
£
Profit before tax 760,392 16,336,750
Adjustment to reconcile net profit to cash flow
from (used in) operating activities:
Depreciation of property and equipment 117,863 198,547
Depreciation of intangible assets 162,417 264,065
1,040,672 16,799,362
Net (increase)/decrease in assets
relating to operating activities
Loans and advances to banks 237,497,329 (211,848,001)
Loans and advances to customers (27,114,145) (149,762,018)
Held-to-maturity investment (14,263,264) –
Other assets (658,525) (450,615)
196,502,067 (344,360,042)
Net increase/(decrease) in liabilities
relating to operating activities
Due to banks (125,819,269) 5,363,622
Due to customers (90,521,948) 425,243,953
Other liabilities (5,370,706) (62,848,390)
(221,711,923) 367,759,185
Income tax paid (2,183,543) (4,974,219)
Net cash (used in)/from operating activities (27,393,399) 18,424,924
Cash flow from investing activities
Acquisition of fixed assets (474,340) (652,586)
Net cash used in investing activities (474,340) (652,586)
Cash flow from financing activities
Proceed from borrowed funds – 5,000,000
Dividend paid – (5,000,000)
Net (decrease)/increase in cash and cash equivalents (27,867,739) 17,772,338
Cash and cash equivalents at 1 April 2009 11 35,004,076 17,231,738
Cash and cash equivalents at 31 December 2009 11 7,136,337 35,004,076
21
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
1. Accounting policies
General Information After making enquiries, the directors have a reasonable
FBN Bank (UK) Ltd (‘’the Bank’’) is a company incorporated expectation that the Group has adequate resources to continue
in the United Kingdom under the Companies Act 2006. The in operational existence for the foreseeable future.
address of the registered office is given on page 5. FBN UK Accordingly, they continued to adopt the going concern
(Representative office in Nigeria) Limited became a subsidiary basis in preparing the annual report and accounts
during the reporting period, and is registered in Nigeria.
Accounting convention
The nature of the Group’s operations and its principal activities
The financial statements have been prepared on the historical
are set out in the Directors’ Report and in the notes.
cost basis, except for the revaluation of certain financial
instruments. The principal accounting policies adopted are
Basis of Preparation
described below:
FBN Bank (UK) Ltd has prepared these financial statements
using International Financial Reporting Standards (IFRS) Income recognition
as adopted in the EU.
a) Interest income and expense
The financial statements are expressed in Pounds Sterling (£), Interest income on financial assets that are classified as
which is the functional currency of the Group as this is the loans and receivables and interest expense on financial
currency of the primary economic environment in which the liabilities are recognised in ‘Interest income’ and ‘Interest
Group operates. expense’ in the income statement using the “effective
interest rate’’ method.
Basis of consolidation
The consolidated financial statements incorporate the financial The effective interest rate is the rate that exactly discounts
statements of the Bank and entities controlled by the Bank the expected future cash payments or receipts through
(its subsidiaries) made up to 31 December each year. Control the expected life of the financial instrument, or when
is achieved where the Bank has the power to govern the appropriate, a shorter period, to the net carrying amount
financial and operating policies of an investee entity so as of the financial instrument. The effective interest rate
to obtain benefits from its activities. incorporates fees receivable that are an integral part of
the “effective interest rate’’ of a financial instrument.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from All income derives from banking business carried out
the effective date of acquisition or up to the effective date of in the United Kingdom and France.
disposal, as appropriate. Where necessary, adjustments are
b) Non-interest income
made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by the Fees and commissions
group. All intra-group transactions, balances, income and Fees and commissions are accounted for depending on
expensees are eliminated on consolidation. the services to which the income relates as follows:
Going concern • fees earned on the execution of a significant act are
The Group’s business activities, together with the factors likely recognised in ‘fee income’ when the act is completed;
to affect its future development, performance and position are
• fees earned in respect of services are recognised in
set out in the Directors’ Reports on pages 13 to 15. The financial
‘fee income’ as the services are provided; and
position of the Group, its cash flow and capital position are as
described on pages 17 to 21. In addition, the Group’s business • fees which form an integral part of the “effective
objectives, capital structure policies and financial risk management interest rate’’ of a financial instrument are recognised
objectives are as stated in the Directors’ Report. Details of its as an adjustment to the effective interest rate and
financial instruments and hedging activities, and its exposures recorded in ‘interest income’.
to credit and liquidity risks are in notes 27 and 28 of the
Foreign currency
financial statements.
Transactions in foreign currencies are recorded using the rate
The Group has considerable financial resources as evidenced of exchange ruling at the date of the transaction. Monetary
by its high capital adequacy ratio, together with long-term assets and liabilities denominated in foreign currencies are
deposit and loan contracts with a number of customers across translated into sterling using the rate of exchange as at the
different geographic areas and strong support from the balance sheet date and resulting gains and losses on
shareholders. Also, the Group has developed a broader customer translation are included in the income statement.
base thereby ensuring stable and long tenured deposits to
Exchange profits on foreign exchange transactions with
support profitable business growth. The financial forecasts
customers are recognised as income during the period.
indicate that the Group will continue to operate profitably in
the future. As a consequence, the directors believe that the
Group is well placed to manage its business risks successfully
despite the current uncertain economic outlook.
22
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
Financial instruments Impairment of financial assets
Financial assets and liabilities are recognised in the Group’s The Group assesses at each balance sheet date whether
balance sheet when the Group becomes a party to the there is objective evidence that a financial asset or a group of
contractual provisions of the instrument. financial assets not carried at fair value through profit or loss
is impaired.
The Group classifies its financial assets into the
following categories: A financial asset or portfolio of financial assets is impaired and
impairment losses are incurred if, and only if, there is objective
• held-to-maturity investments;
evidence of impairment as a result of one or more events
• financial assets at fair value through profit or loss; and since initial recognition of the assets that have adversely affected
the amount or timing of future cash flows from the assets.
• loans and receivables.
Impairment losses are assessed individually for financial assets
Management determines the classification of financial assets
whether they are individually significant or not individually
at the time of initial recognition.
significant.
Financial assets held-to-maturity Losses expected from future events, no matter how likely,
Held-to-maturity investments are financial instruments with are not recognised.
fixed or determinable payments and fixed maturity that the
Impairment of financial assets held at amortised cost
Group has the positive intention and ability to hold to maturity,
If there is objective evidence that an impairment loss on
other than those that the Group, upon initial recognition,
a financial asset or group of financial assets classified as held-to-
elects to designate as fair value through profit and loss or
maturity or loans and receivables has been incurred, the amount
available for sale or that meet the definition of loans
of impairment loss is measured as the difference between
and receivables.
the assets or group of assets carrying amount and the present
Held-to-maturity investments are measured at amortised cost value of estimated future cash flows from the assets or group
using the effective interest rate method less any impairment, of assets discounted at the effective interest rate determined
with revenue recognised on an effective yield basis. on initial recognition.
Financial assets at fair value through profit and loss Impairment losses are recognised in the income statement
Financial assets at fair value through profit or loss comprise and the carrying amount of the financial assets or group of
financial assets that are held for trading, and those designated financial assets are reduced by establishing an allowance
by management as being at fair value through profit or loss for impairment losses.
on initial recognition.
If, in a subsequent period, the amount of the impairment loss
Financial assets may be designated at fair value through profit reduces and the reduction can be related objectively to an event
or loss only if such a designation (a) eliminates or significantly occurring after the impairment was recognised, the previously
reduces a measurement or recognition inconsistency; (b) applies recognised impairment loss is reversed by adjusting the
to a group of financial assets, financial liabilities, or both that allowance account. The amount of the reversal is recognised
the Group manages and evaluates on a fair value basis; or in the income statement.
takeover (c) relates to an instrument that contains an embedded
Financial liabilities
derivative which is not closely related to the host contract.
The Group classifies its financial liabilities in the following
Financial assets at fair value through profit or loss are recognised categories:
initially at fair value, with transaction costs recognised in the
• financial liabilities designated at fair value through profit
income statement. Subsequently, gains and losses arising
or loss; and
from changes in fair value are recognised as they arise.
• other financial liabilities.
Loans and receivables
Loans and receivables are non-derivative financial assets with Management determines the classification of financial
fixed or determinable payments that are not quoted in an active liabilities at initial recognition.
market and which are not classified upon initial recognition
as available-for-sale or at fair value through profit and loss.
Loans and receivables are initially recognised at fair value,
including directly attributable transaction costs and are
subsequently measured at amortised cost, using the effective
interest rate method, less any impairment losses.
23
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
1. Accounting policies (continued)
Financial liabilities at fair value through profit or loss Property and equipment
Financial liabilities at fair value through profit or loss comprise Property and equipment are stated at cost less accumulated
financial liabilities that are held for trading and those designated depreciation and any accumulated impairment losses.
by management as being at fair value through profit or loss
Depreciation is provided on a straight-line basis at the following
on initial recognition.
rates to write off the cost of the fixed assets over their estimated
Financial liabilities are classified as held for trading if they are useful life as follows:
acquired principally for the purposes of generating a profit
Leasehold improvement 10 years (lease period)
from short-term fluctuations in price or dealer’s margin, or form
part of a portfolio of similar liabilities for which there is evidence Office equipment/furniture 5 years
of a recent actual pattern of short-term profit-taking, or are
Computer hardware 3 years
derivatives (not designated into a qualifying hedge relationship).
Motor vehicles 4 years
Financial liabilities may be designated at fair value through profit
or loss only if such a designation: (a) eliminates or significantly At each balance sheet date, property and equipment are
reduces a measurement or recognition inconsistency; (b) applies assessed for indications of impairment. If indications are
to a group of financial assets, financial liabilities, or both that present, these assets are subject to an impairment review.
the Group manages and evaluates on a fair value basis; or (c) The impairment review comprises a comparison of the
relates to an instrument that contains an embedded derivative carrying amount of the asset with its recoverable amount:
which is not evidently closely related to the host contract. the higher of the asset’s net selling price and its value in use.
Financial liabilities at fair value through profit or loss are Net selling price is calculated by reference to the amount
recognised initially at fair value, with transaction costs at which the asset could be disposed of in a binding sale
recognised in the income statement. Subsequently, gains and agreement in an arms-length transaction evidenced by an
losses arising from changes in fair value are recognised as active market or recent transactions for similar assets. Value in
they arise. use is calculated by discounting the expected future cash
flows obtainable as a result of the asset’s continued use,
Other financial liabilities including those resulting from its ultimate disposal, at a
Other financial liabilities are initially recognised at fair value market based discount rate on a pre-tax basis.
including directly attributable transaction costs and are
subsequently measured at amortised cost, using the effective The carrying values of fixed assets are written down by the
interest rate method. amount of any impairment and this loss is recognised in the
income statement in the period in which it occurs. A previously
Determining fair value recognised impairment loss relating to a fixed asset may be
All financial instruments are recognised initially at fair value. reversed in part or in full when a change in circumstances leads
The fair value of a financial instrument on initial recognition to a change in the estimates used to determine the fixed
is normally the transaction price. asset’s recoverable amount. The carrying amount of the fixed
Subsequently, the fair values of financial instruments that are asset will only be increased up to the amount that it would
quoted in an active market are based on bid price (for assets) have been had the original impairment not been recognised.
and offer price (for liabilities). Where there is no quoted
market price in an active market, fair values are determined Intangible assets
using valuation techniques including discounting future cash Intangible assets are stated at cost less amortisation and
flows, option pricing models and other methods used by provisions for impairment. The assets are primarily computer
market participants. software and are amortised over their useful life, generally five
years, in a manner that reflects the pattern to which they
Where the fair value cannot be reliably determined for an contribute to future cash flows.
investment in an equity instrument, the instrument is measured
at cost. Leases
Derivative financial instruments A lease is classified as a finance lease when the risks and
Derivatives are classified as assets when their fair value is rewards of ownership are substantially transferred to the
positive or as liabilities when their fair value is negative. lessee. All other leases are classified as operating leases
Derivative assets and liabilities arising from different transactions (operating lease rentals payable are recognised as an expense
are only offset where there is a legal right of offset of the in the income statement on a straight-line basis over the
recognised amounts and the parties intend to settle the cash lease term).
flows on a net basis, or realise the asset and settle the The Group’s leases are all classified as operating leases.
liability simultaneously. Operating lease rentals are recognised on a straight-line basis
over the life of the lease.
24
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
Provisions Use of estimates
Provisions are recognised when it is probable that an outflow The preparation of financial statements in accordance with
of economic benefits will be required to settle a current legal IFRS requires the use of certain critical accounting estimates.
or constructive obligation as a result of past events and a It also requires management to exercise judgement in the
reliable estimate can be made of the amount of the obligation. process of applying the accounting policies. The notes to the
financial statements set out areas involving a higher degree
Taxation of judgement or complexity, or areas where assumptions are
The tax expense represents the sum of the tax currently significant to the financial statements such as fair value of
payable and deferred tax. financial instruments and loan loss impairment.
The tax currently payable is based on taxable profit for the
Capital instruments
period. Taxable profit differs from net profit as reported in
The Group classifies a financial instrument that it issues as
the income statement because it excludes items of income or
a financial liability or an equity instrument in accordance with
expense that are taxable or deductible in other years and it
the substance of the contractual arrangement. An instrument
further excludes items that are never taxable or deductible.
is classified as a liability if it is a contractual obligation to
The Group liability for current tax is calculated using tax rates
deliver cash or another financial asset, or to exchange
that have been enacted or substantively enacted by the
financial assets or financial liabilities on potentially unfavourable
balance sheet date.
terms. An instrument is classified as equity if it evidences a
Deferred tax is the tax expected to be payable or recoverable residual interest in the assets of the Group after the deduction
on differences between the carrying amounts of the assets of liabilities. The components of a compound financial
and liabilities in the financial statements and the corresponding instrument issued by the Group are classified and accounted
tax bases used in the computation of taxable profit and is for separately as financial liabilities or equity as appropriate.
accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable Adoption of new and revised standards
temporary differences and deferred tax assets are recognised At the date of authorisation of these financial statements,
to the extent that it is probable that taxable profits will be the following Standards and Interpretations have been
available against which deductible temporary differences adopted in the current period:
can be utilised.
IAS 1 (revised 2007) Presentation of Financial Statements
The carrying amount of deferred tax assets is reviewed at
IRFS 7 (amended) Improving Financial Instruments
each balance sheet date and reduced to the extent that it is
Disclosures
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered. IAS 27 (amended) Consolidated and Separate Financial
Statements
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset At the date of authorisation of these financial statements,
is realised. Deferred tax is charged or credited in the income the following Standards and Interpretations which have not
statement, except when it relates to items charged or credited been applied in these financial statements were in issue
directly to equity, in which case the deferred tax is also dealt but not yet effective:
with in equity.
IFRS 3 Business Combinations (revised 2008)
Pension costs (effective 1 July 2009)
The Group operates a defined contribution pension scheme
IFRS 9 Financial Instruments
and the amount charged to the income statement in respect
of pension costs and other post-retirement benefits is the IAS 24 (revised) Related Party Disclosures
contributions payable in the period. Differences between
The directors anticipate that the adoption of these Standards
contributions payable in the period and contributions actually
and Interpretations in future periods will have no material
paid are shown as either accruals or prepayments in the
impact on the financial statements of the Group.
balance sheet.
Cash and cash equivalents
Cash and cash equivalents comprises cash and demand
deposits with banks together with short-term highly liquid
investments that are readily convertible to known amounts
of cash and subject to insignificant risk of change in value.
25
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
1. Accounting policies (continued)
Critical accounting judgements and key sources Fair value of derivatives and other financial instruments
of estimation uncertainty As described in note 29, the directors use their judgement
In the application of the Group’s accounting policies, the in selecting an appropriate valuation technique for financial
directors are required to make judgements, estimates and instruments not quoted in an active market. Valuation
assumptions about the carrying amounts of assets and liabilities techniques commonly used by market practitioners are applied.
that are not readily apparent from other sources and may For derivative financial instruments, assumptions are made
make necessary provisions in accordance with their assumptions. based on quoted market rates adjusted for specific features
The estimates and associated assumptions are based on of the instrument.
historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates.
2. Dealing and exchange profits
The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
Dealing and exchange profits relate to foreign exchange
recognised in the period in which the estimate is revised if
income derived from customer foreign exchange transactions
the revision affects only that period or in the period of the
and the revaluation of foreign currency assets and liabilities.
revision and future periods if the revision affects both current
and future periods.
3. Segmental information
Loan impairment provisions
The Group’s loan impairment provisions are established to
The Group has one main activity, commercial banking, which is
recognise incurred impairment losses in its portfolio of loans
carried out in the United Kingdom and France. The Group also
classified as loans and receivables and carried at amortised
has a subsidiary in Nigeria whose sole purpose is to support
cost. A loan is impaired when there is objective evidence that
the banking operations in the London and Paris offices.
events since the loan was granted have affected expected
cash flows from the loan. The impairment loss is the difference
between the carrying value of the loan and the present value
of the estimated future cash flows at the loan’s original
effective interest rate.
The impairment losses are recognised as the difference between
the carrying value of the loan and the discounted value of
management’s best estimate of future cash repayments and
proceeds from any security held. The actual amount of the
future cash flows and the date they are received may differ from
these estimates and consequently actual losses incurred may
differ from those recognised in these financial statements.
26
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
4. Net Interest income
09
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
Interest and similar income
Due to banks 22,861,444 52,976,287
Held-to-maturity investments 404,026 –
Loans and advances to customers 4,690,658 6,653,937
27,956,128 59,630,224
09
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
Interest expense and similar charges
Due to banks 2,098,857 17,054,017
Due to customers 15,295,243 19,259,131
Debt issued and other borrowed funds 311,672 589,567
17,705,772 36,902,715
09
31 od E Bank
31 r End Bank
20 ece ded
er
20
Ma ed
09 mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
£
5. Fees and commissions income is derived from:
Loans 497,123 282,372
Letters of credit 2,218,187 3,673,349
Funds transfer 287,157 490,111
Others 436,457 69,389
3,438,924 4,515,221
27
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
6. Administrative expenses
09
09
20
20
er 009
31 r End Bank
Nu ece ded
Nu ece ded
er er
er er
Nu arc d
mb h 2
mb mb
mb mb
e
D n
D n
Ye up &
31 od E
31 d E
Pe up
rio
M
Pe k
Average number of employees
ri
n
o
o
a
Ba
Gr
Gr
(including three (March 2009 – three) executive directors)
Banking Division 35 28 38
Operations 29 24 26
Administration 12 12 11
76 64 75
09
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
Wages and salaries (including directors) 2,607,777 4,576,177
Social security costs 450,359 435,681
Other pension costs 241,617 194,492
Total staff costs 3,299,753 5,206,350
Other administrative expenses 4,628,501 6,008,363
7,928,254 11,214,713
28
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
7. Directors’ emoluments
09
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
Directors’ fees 284,000 341,732
Other emoluments 947,458 1,005,722
Contribution to a money purchase pension scheme 49,530 44,750
1,280,988 1,392,204
The highest paid director received emoluments, excluding Mortgages were approved and advanced on a commercial
pension contributions, totalling £348,396 (31 March 2009 – arm’s length basis, to three group directors during the period
£400,700) and pension contributions of £12,360 (Note 26).
(31 March 2009 – £16,000).
8. Profit on ordinary activities before taxation
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Operating profit is stated after charging:
Depreciation – property and equipment 192,329 117,863 198,547
Amortisation 162,684 162,417 264,065
Auditors’ remuneration:
– audit of annual accounts 115,326 95,000 95,333
– tax services (audit related) – – 1,300
– consultancy (non-audit related) 15,750 15,750 75,000
Rental of premises held under operating leases 470,407 470,407 463,399
29
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
9. Taxation
09
20
09
Tax on profit on ordinary activities charged in the income statement
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
(i) Analysis of tax charge on ordinary activities
£
United Kingdom corporation tax based on the profit for the period 237,962 4,653,760
Prior year current tax adjustment (11,356) 52,320
Total current tax 226,606 4,706,080
Deferred tax:
Timing differences, origination and reversal 212 (26,604)
Prior year deferred tax adjustment 10,912 (38,340)
Tax expense 237,730 4,641,136
09
20
(ii) Reconciliation of the total tax charge
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
The tax assessed for the period is higher than that resulting
from applying the standard rate of corporation tax in the UK.
ri
o
o
a
Gr
Gr
£
The differences are explained below:
Profit on ordinary activities before tax 760,392 16,336,750
Tax at 28% (31 March 2009: 28%) thereon 212,911 4,574,290
Effects of:
Expenses not deductible for tax purposes 28,452 52,866
Prior year adjustment (3,633) 13,980
Tax expense 237,730 4,641,136
30
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
10. Deferred tax
t al
The following are the deferred tax liabilities and assets
tio x
£ recia ed ta
tm ion
n
recognised by the Group and movements thereon during
jus sit
en
t
ad tran
de elera
the current and prior reporting period:
£ l
ta
S
p
c
IFR
Ac
To
£
Group and Bank
At 1 April 2008 38,464 – 38,464
(Charge)/credit to income 30,109 (3,505) 26,604
Effect of change in tax rate 6,796 31,544 38,340
At 1 April 2009 75,369 28,039 103,408
(Charge)/credit to income 2,417 (2,629) (212)
Prior year adjustment (10,912) – (10,912)
At 31 December 2009 66,874 25,410 92,284
11. Cash and cash equivalents
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Cash 111,151 111,151 66,241
Short-term placement with other banks 7,025,186 7,025,186 34,937,835
7,136,337 7,136,337 35,004,076
31
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
12. Loans and advances to banks
09
09
20
20
09
09
er
er
20
20
an ing
an ing
mb
mb
£ ece t
£ ece t
Ma at
Ma at
a
a
rch
rch
Lo ired
Lo aired
31 s as
31 ns as
31 s as
31 s as
Lo orm
Lo orm
pa
£ l
£ l
an
Group & Bank
D
D
ta
ta
rf
rf
p
a
Im
Im
Pe
Pe
To
To
£
£
Repayable on demand
or at short notice 67,472,541 67,472,541 62,304,527 7,339 62,311,866
Remaining maturity:
– 3 months or less
excluding on demand
or at short notice 642,636,747 14,915,775 657,552,522 847,494,679 3,318,314 850,812,993
– 1 years or less
but over 3 months 66,671,084 – 66,671,084 130,528,865 3,492,962 134,021,827
– 5 years or less
but over 1 year 64,192,410 – 64,192,410 40,308,257 – 40,308,257
Less allowances
for impairment (note 24) – (6,335,481) (6,335,481) – (404,538) (404,538)
840,972,782 8,580,294 849,553,076 1,080,636,328 6,414,077 1,087,050,405
Total loans advanced to First Bank of Nigeria Plc (Parent Bank)
at 31 December 2009 were £119,359,706 (31 March 2009 –
£11,246,484).
Loans and advances to banks are categorised as loans and
receivables in accordance with IAS 39.
The Group did not hold collateral in respect of impaired loans
and advances to banks (2008 – £nil).
32
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
13. Loans and advances
09
09
to customers
20
20
09
09
er
er
20
20
an ing
an ing
mb
mb
£ ece t
£ ece t
Ma at
Ma at
a
a
rch
rch
Lo aired
Lo aired
31 s as
31 s as
31 s as
31 s as
Lo orm
Lo orm
£ l
£ l
an
an
D
D
Group & Bank
ta
ta
rf
rf
p
p
Im
Im
Pe
Pe
To
To
£
£
Repayable on demand
or at short notice 23,171,803 825,242 23,997,045 15,644,784 – 15,644,784
Remaining maturity:
– 3 months or less
excluding on demand
or at short notice 53,236,908 – 53,236,908 84,213,312 – 84,213,312
– 1 years or less
but over 3 months 69,333,276 – 69,333,276 16,004,141 497,401 16,501,542
– 5 years or less
but over 1 year 80,506,959 500,000 81,006,959 104,054,564 1,177,312 105,231,876
– Over 5 years 43,889,742 232,800 44,122,542 21,954,915 318,032 22,272,947
Less:
Allowances for impairment
(note 24) – (718,124) (718,124) – – –
270,138,688 839,918 270,978,606 241,871,716 1,992,745 243,864,461
As at 31 December 2009, the Group had advanced
£23,997,045 overdrafts (31 March 2009 – £15,644,784)
and £246,953,355 fixed term loans (31 March 2009 –
£228,165,242) to customers. £28,206 was granted as staff
loans (31 March 2009 – £54,435).
Loans and advances to customers are categorised as loans
and receivables in accordance with IAS 39.
The Group held collateral (£743,000) in respect of the
impaired loans (31 March 2009: £2,172,440).
33
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
14. Investments
Details of the Companys’ Subsidiaries are as follows
n
% nersh n of
% ng p n of
er
tio
ow
ip
ora
o
o
Ow orti
vo orti
Inc e of
orp
p
p
c
ti
Pro
Pro
Pla
Name
FBN UK (Representative office in Nigeria) Limited Nigeria 100 100
During the period the Bank purchased an investment in FBN UK
(Representative office in Nigeria) Limited.
The Bank paid N2,500,000.00 (GBP £10,372.80) for the
consideration of 2,500,000.00 ordinary shares at N1 each
on 22 June 2009.
FBN UK (Representative office in Nigeria) Limited is incorporated
09
20
in Nigeria.
09
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Ye up &
31 d E
rio
Pe k
n
o
a
Ba
Gr
Subsidiaries
£
At 1 April 2009 – –
Additions during the year – –
FBN UK (Representative office in Nigeria) Limited 10,373 –
At 31 December 2009 10,373 –
15. Securities held-to-maturity
09
09
20
20
09
31 r End Bank
£ ece ded
er
£ ece ded
er
20
Ma ed
mb
mb
D n
rch
D n
Ye up &
31 d E
31 od E
Pe up
rio
Pe k
n
o
a
ri
o
Ba
Gr
Held-to-maturity securities carried at amortised cost
Gr
£
Bank bonds 14,233,782 14,233,782 –
14,233,782 14,233,782 –
Maturity
Between one year and five years 14,233,782 14,233,782 –
34
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
16. Property and equipment
s
nts
icle
£ ipme and
me
nt
eh
Group
£ dwa r
ld
re
e
e
£ or V
£ rove
Im seho
Eq itur
Ha put
£ l
m
rn
ta
t
p
u
r
a
Mo
Co
Fu
To
Le
Cost
at 31 March 2009 337,185 580,852 397,957 97,819 1,413,813
Additions 107,487 9,367 49,693 – 166,547
Exchange differences 178 (4,494) (4,573) – (8,889)
at 31 December 2009 444,850 585,725 443,077 97,819 1,571,471
Accumulated Depreciation
at 31 March 2009 293,349 311,336 216,158 28,931 849,774
Charge year to date 54,805 78,506 40,115 18,903 192,329
Exchange differences (3,377) 8,785 (569) – 4,839
at 31 December 2009 344,777 398,627 255,704 47,834 1,046,942
Net Book Value
at 31 December 2009 100,073 187,098 187,373 49,985 524,529
at 31 March 2009 43,836 269,516 181,799 68,888 564,039
35
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
16. Property and equipment (continued)
s
nts
icle
£ ipme and
Bank
me
nt
eh
£ dwa r
ld
re
e
e
£ or V
£ rove
Im seho
Eq itur
Ha put
£ l
m
rn
ta
t
p
u
Cost
r
a
Mo
Co
Fu
To
Le
at 31 March 2009 337,185 580,852 397,957 97,819 1,413,813
Additions 104,623 9,367 48,033 – 162,023
Exchange differences 178 (4,494) (4,573) – (8,889)
Transfer to subsidiary (5,345) (76,493) (118,115) (97,819) (297,772)
at 31 December 2009 436,641 509,232 323,302 – 1,269,175
Accumulated Depreciation
at 31 March 2009 293,349 311,336 216,158 28,931 849,774
Charge year to date 53,245 42,507 22,111 – 117,863
Exchange differences (3,377) 8,785 (569) – 4,839
Transfer to subsidiary (1,253) (28,334) (14,643) (28,931) (73,161)
at 31 December 2009 341,964 334,294 223,057 – 899,315
Net Book Value
at 31 December 2009 94,677 174,938 100,245 – 369,860
at 31 March 2009 43,836 269,516 181,799 68,888 564,039
36
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
17. Intangible fixed assets
Group
ftw er
are
So put
Cost
m
Co
£
At 31 March 2009 1,590,230
Additions 312,317
Exchange differences (10,691)
At 31 December 2009 1,891,856
Accumulated depreciation
At 31 March 2009 1,045,231
Charge year to date 162,684
Exchange differences 1,253
At 31 December 2009 1,209,168
Net book value
At 31 December 2009 682,688
At 31 March 2009 544,999
37
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
17. Intangible fixed assets (continued)
Bank
ftw er
are
So put
m
Cost
Co
£
At 31 March 2009 1,590,230
Additions 312,317
Exchange differences (10,691)
Transfer to subsidiary (1,782)
At 31 December 2009 1,890,074
Accumulated depreciation
At 31 March 2009 1,045,231
Charge year to date 162,417
Exchange differences 1,253
Transfer to subsidiary (89)
At 31 December 2009 1,208,812
Net book value
At 31 December 2009 681,262
At 31 March 2009 544,999
18. Other assets
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Prepayments 1,220,738 1,134,384 856,077
1,220,738 1,134,384 856,077
38
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
19. Deposits by banks
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Repayable on demand 154,759,306 153,927,277 200,785,142
With agreed maturity dates
or periods of notice by remaining maturity:
Three months or less 302,048,557 302,048,557 381,175,190
456,807,863 455,975,834 581,960,332
20. Customer accounts
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Repayable on demand 105,547,018 105,547,018 76,294,415
With agreed maturity dates
or periods of notice by remaining maturity:
Three months or less but not repayable on demand 252,268,841 252,268,841 168,147,384
One year or less, but over three months 108,286,112 108,286,112 287,622,900
More than one year but less than five years 34,125,780 34,125,780 58,685,000
500,227,751 500,227,751 590,749,699
Deposits by customers are categorised as other liabilities
in accordance with IAS 39.
39
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
21. Other liabilities
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Taxation 237,962 237,962 2,188,582
Social contribution 595,675 585,925 702,607
Trade creditors 62,046,483 62,046,483 67,021,174
Customers unclaimed balances 566,324 566,325 581,675
Others payable 6,126,807 6,736,509 6,813,634
69,573,251 70,173,204 77,307,672
22. Subordinated liabilities
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
Subordinated debt
£
Principal 16,500,000 16,500,000 16,500,000
Accrued Interest 176,041 176,041 –
16,676,041 16,676,041 16,500,000
Subordinated liabilities represent subordinated loans of £11,500,000
and £5,000,000 granted by the parent company, First Bank of
Nigeria Plc, on 6 December 2005 and 31 March 2009 respectively.
The loans are repayable on 7 December 2015, respectively at
interest rates of 0.25% and 3%, margins over period LIBOR.
First Bank of Nigeria Plc has the right to determine the interest
period at each reprice date.
40
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
23. Called up share capital
res 09
09
res 09
09
ha 20
20
ha 20
20
ha 9
9
No arc Bank
Am arc Bank
f S 00
£ ount 200
res
f S er
£ ount ber
f S er
£ ount ber
.o h2
. o mb
. o mb
m
m
h
31 up &
31 p &
No ece
Am ece
No ece
Am ece
31 up
31 up
M
M
31 k
31 k
ou
D
D
D
D
n
n
o
o
o
Ba
Ba
Gr
Gr
Gr
Gr
Authorised
Ordinary shares of £1 each 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000
Issued, allotted and fully paid
Ordinary shares of £1 each 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000
Ordinary Shares:
First Bank of Nigeria Plc holds 82,000,000 (31 March 2009 –
82,000,000) or 100% (31 March 2009 –100%) of the ordinary
shares. No new shares (31 March 2009 – none) were authorised
and issued during the current period.
24. Allowances for impairment
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Opening balance 404,538 404,538 123,186
Charge to income statement 6,802,735 6,802,735 408,377
Loan recovery – – (1,560)
Exchange difference (147,085) (147,085) (3,839)
Amount written off (6,583) (6,583) (121,626)
Closing balance 7,053,605 7,053,605 404,538
Loans and advances to banks (Note 12) 6,335,481 6,335,481 404,538
Loans and advances to customers (Note 13) 718,124 718,124 –
7,053,605 7,053,605 404,538
41
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
25. Contingent liabilities and commitments
a) Legal issues
At 31 December 2009, there were no pending legal cases
or issues in progress which may have a material impact on the
financial statements of the Group (31 March 2009 – none).
b) Operating lease commitments
At 31 December 2009 the Group was committed to making
the following future payments in respect of operating leases
for land and buildings. The lease is expected to expire
in June 2016.
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Within one year 671,840 671,840 734,727
Between one and five years 2,603,510 2,603,510 2,603,510
More than five years 650,877 650,877 650,877
3,926,227 3,926,227 3,989,114
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
c) Off-balance sheet liabilities
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
Contingent liabilities
£
Letters of credit 123,361,696 123,361,696 187,084,874
Guarantees given to third parties 81,104,159 81,104,159 3,609,025
204,465,855 204,465,855 190,693,899
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
£
Loan Commitments
Undrawn irrevocable loan commitments 55,450,026 55,450,026 6,985,923
42
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
26. Related party transactions
A number of banking transactions were entered into with
related parties in the normal course of business. These include
loans and deposits and foreign currency transactions.
Outstanding balances at the end of the period, and related
income and expense for the period are as follows:
09
09
20
20
09
31 r End Bank
£ ece ded
£ ece ded
er
er
20
Ma ed
mb
mb
D n
D n
rch
Ye up &
31 od E
31 d E
Pe up
rio
Pe k
ri
n
o
o
a
Ba
Gr
Gr
Assets
£
Amounts due from parent bank 119,359,706 119,359,706 11,246,484
119,359,706 119,359,706 11,246,484
Liabilities
Amounts due to parent bank 88,932,589 88,932,589 113,359,270
Amount due to fellow subsidiaries 3,771,281 3,771,281 2,525,428
92,703,870 92,703,870 115,884,698
Letters of guarantee
Parent bank 31,034,322 31,034,322 47,154,983
Income
From parent bank 3,608,057 3,608,057 4,370,335
Expenses
To parent bank 544,034 544,034 1,172,343
To fellow subsidiaries 9,417 9,417 25,801
553,451 553,451 1,198,144
Mortgages were approved and advanced on a commercial arm’s directors has significant holding. £5,613,424 (31 March 2009 –
length basis, to three (31 March 2009 – two) group directors £9,610,593) was outstanding as at 31 December 2009.
during the period. As at 31 December 2009, a total mortgage
Subordinated loans of £11.5m and £5m were granted by First Bank
amount of £1,465,532 (31 March 2009 – £1,789,068) was
of Nigeria Plc in December 2005 and March 2009 respectively
outstanding in respect of these directors. No loans (31 March
and were outstanding as at 31 December 2009 (note 22).
2009 – £20,000) were advanced to key management personnel
of the Group as at 31 December 2009. There were no other related party transactions or balances
requiring disclosure.
Short-term trade related finance was approved on a commercial
arm’s length basis for a company in which one of the Group’s
43
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial risk management
Derivatives and other financial instruments Credit risk and asset/liability concentration
The Group’s financial instruments, other than derivatives and The Group’s Credit Committee is responsible for approving
bonds, principally comprise loans and deposits that arise from credit recommendations and making other credit decisions as
its operations as a lending and deposit-taking institution. per its delegated authority within the Group’s Lending
Authority Policy. This includes decisions on individual credits,
The Group also enters into a small number of derivative
reviewing and recommending credits, large exposures and/or
transactions (principally forward foreign currency contracts).
concentration limits to the Board of Directors for their
The purpose of the transactions is to manage the currency
approval. The Credit Committee is also responsible for
risks arising from the Group’s operations.
monitoring the credit approval delegated to the Credit Risk
The Group has entered into a small number of bond Management Department by the Board of Directors.
transactions. The purpose of the transactions is to improve
The limits established are constantly monitored and are subject
profitability and to better manage the Group’s liquidity.
to a regular review by an approval body (based on the amount
The Group holds and issues financial instruments for three of the limit). Limits relating to specific sectors and countries
main purposes: are examined and approved by the Board of Directors.
• to earn an interest margin or a fee; The Group’s credit policy documents include details on lending
authorities, large exposures, concentration risk, transactions
• to finance its operations; and
with parent and affiliates, country risk exposure, industry
• to manage the interest rate and currency risks arising lending, use of external credit assessments, credit risk
from its operations and from its sources of finance. collateral and provisioning.
The Group does not have a trading book. The Group finances The exposure to credit risk is managed by an analysis of the
its operations by a mixture of shareholders’ funds and customer ability of the borrowers to meet their obligations using
and bank deposits. The deposits raised may be in a range of internal credit rating systems and methodologies.
currencies at variable or fixed rates of interest. The Group’s
In the instances of borrowers who have obtained facilities in
lending is in USD, GBP, EUR, JPY and CHF. The Group deals
other group companies, the total exposure on a group basis
in spot and forward foreign exchange transactions.
is taken into account in determining credit risk.
The main risks arising from the Group’s financial instruments
As a result, the credit limits are adjusted if considered
are credit risk, market risk and liquidity risk. Market risk includes
necessary. In addition the above analysis takes into account
interest rate, foreign currency risk and other price risk. The
the interest rate spread and collaterals held.
management reviews and agrees policies for managing each
of these risks and they are summarised below. These policies The Group’s exposure to credit risk is determined by the
were reviewed within the period being reported. counterparties with whom the Group conducts business, as well
as the markets and countries in which those counterparties
Credit risk conduct their business. Counterparty and country limits are
Credit risk is the risk that financial loss arises from the failure in place and the Group performs credit appraisal procedures
of a customer or counterparty to meet its obligation under prior to the advancing of any facilities. The Group also has
a contract. It arises principally from lending, trade finance policies on the levels of collateral that are required to
and treasury activities. Internal controls are in place within the secure facilities.
Group’s credit function which are designed to ensure that
loans are made in accordance with the Group’s credit policy
and that once made such facilities are monitored on a regular
basis by the appropriate level of management.
Moreover, significant changes in the economy, or state of
a particular industry could result in risks that are different from
those provided for at the balance sheet date. To manage
these risks, management has established limits in relation to
individual borrowers or group of borrowers.
44
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
The tables below show the maturity of the Group’s financial
assets and the Group’s exposure to credit risk based on residual
maturity, markets and countries in which the Group’s customers
conduct their business.
Maturity Analysis based on the earlier of the periods
to the next interest rate pricing date or the maturity dates
e
ore
rs
tha r
nth or
ea ore yea
yea
n
00 mo ot m
yea t m
n s ut ee
s
o
e
£’0 mo han
ive
£’0 ne no
tha ths b n thr
£’0 it ris sed t
Group
fiv not mn on
tha ths b n six
r
n
hs
nf
n o ut
ee e t
00 nt
a
a
a
o
00 k
00 rs
£’0 e tha
thr mor
mo re th
mo th
bu re th
cre xp
£’0 ix
As at 31 Dec 2009
te
re
ey
00
00
00
£’0 l
n
n
ta
d
t
r
Mo
Mo
Mo
t
No
No
Mo
£’0
To
Assets
Cash at bank and in hand 7,136 – – – – – 7,136
Loans and advances to banks 718,760 26,678 39,958 64,157 – – 849,553
Loans and advances to customers 76,602 37,057 32,245 80,972 44,103 – 270,979
Investment – – – – – – –
Held-to-maturity securities – – – 14,234 – – 14,234
Tangible fixed assets – – – – – 525 525
Intangible fixed assets – – – – – 682 682
Other assets – – – – – 1,221 1,221
Deferred tax – – – – – 92 92
Financial assets – derivatives 549 – – – – – 549
Total assets 803,047 63,735 72,203 159,363 44,103 2,520 1,144,971
45
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
e
ore
rs
tha r
nth or
ea ore yea
yea
n
00 mo ot m
yea t m
n s ut ee
s
o
e
£’0 mo han
ive
£’0 ne no
tha ths b n thr
£’0 ris d t
fiv not mn on
Bank
tha ths b n six
r
n
hs
nf
dit ose
n o ut
ee e t
00 nt
a
a
a
00 k
00 rs
£’0 e tha
thr mor
mo re th
mo re th
bu re th
cre exp
£’0 ix
As at 31 Dec 2009
ey
00
00
00
£’0 l
n
n
ta
t
t
r
Mo
Mo
Mo
t
No
No
Mo
£’0
To
Assets
Cash at bank and in hand 7,136 – – – – – 7,136
Loans and advances to banks 718,760 26,678 39,958 64,157 – – 849,553
Loans and advances to customers 76,602 37,057 32,245 80,972 44,103 – 270,979
Investment – – – – 10 – 10
Held-to-maturity securities – – – 14,234 – – 14,234
Tangible fixed assets – – – – – 370 370
Intangible fixed assets – – – – – 681 681
Other assets – – – – – 1,135 1,135
Deferred tax – – – – – 92 92
Financial assets – derivatives 549 – – – – – 549
Total assets 803,047 63,735 72,203 159,363 44,113 2,278 1,144,739
e
ore
rs
£’0 ear ore t year
nth or
yea
n
00 mo ot m
yea t m
ha
n s ut ee
s
o
e
£’0 mo han
Group & Bank
ive
£’0 ne no
tha ths b n thr
£’0 it ris sed t
fiv not mn on
tha ths b n six
r
n
hs
nf
n o ut
ee e t
00 nt
a
a
t tha
o
00 k
00 s
£’0 e tha
thr mor
mo re th
mo th
cre xp
As at 31 Dec 2009
£’0 ix
te
re
re
ey
00
00
00
£’0 l
n
n
ta
d
t
r
Mo
Mo
Mo
No
No
Mo
bu
To
Assets
Cash at bank and in hand 35,004 – – – – – 35,004
Loans and advances to banks 912,942 61,670 72,130 40,308 – – 1,087,050
Loans and advances to customers 99,858 15,475 1,026 105,232 22,274 – 243,865
Tangible fixed assets – – – – – 564 564
Intangible fixed assets – – – – – 545 545
Other assets – – – – – 856 856
Deferred tax – – – – – 103 103
Financial assets – derivatives – – – – – – –
Total assets 1,047,804 77,145 73,156 145,540 22,274 2,068 1,367,987
46
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
Age analysis of past due but not impaired assets
The table below shows the age analysis of past due but not
impaired assets. The Group held collateral of £4,162,601
(31 March 2009 – £nil) against these assets.
Am ank 09
£ ater Bank 009
£ ount Bank 009
B 20
2
2
B 9
9
ou Ba 9
nt
nt
Am ank
al k
nt nk
Gr up & 200
Co up & 200
Am up & 200
Gr up & ber
Co p & er
Am p & er
ter Ban
ou
ou
ou mb
ou mb
m
al
h
h
h
Gr arc
Gr arc
Gr arc
Gr ece
Gr ece
Gr ece
oss
oss
M
M
M
lla
D
D
D
ll
o
o
o
o
31
31
31
31
31
31
£
£
£
£
Within three months 4,162,601 4,162,601 – 2,495,937 – 2,495,937
Between three to six months – – – – – –
Over six months but less
than one year – – – – – –
Over one year – – – – – –
4,162,601 4,162,601 – 2,495,937 – 2,495,937
Analysis of impaired financial assets
09
09
The following table shows analysis of impaired financial assets.
09
20
20
20
mb e
mb t
£ ece Valu
31 Boo Bank
£ ece cos
er
er
er
£ ece on
mb
D ed
D k
31 ision
Ne up &
31 ortis
Am up
Pro up
D
v
o
o
t
o
Gr
Gr
Gr
Loans and advances to banks (Note 12) 14,915,775 6,335,481 8,580,294
Loans and advances to customers (Note 13) 1,558,042 718,124 839,918
16,473,817 7,053,605 9,420,212
47
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
The Group holds collateral in respect of certain loans and
advances to banks and customers that are impaired.
The following table shows financial and non-financial assets,
09
recognised on the Group’s balance sheet.
20
£ ece Bank
er
mb
31 up &
D
o
Gr
Group & Bank
Residential property 443,000
Commercial property 300,000
743,000
In general, the Group will seek to dispose of property and other
assets obtained by taking possession of collateral and convert into
cash as rapidly as the market for the individual asset permits.
09
Credit exposure by sector
20
09
31 od E Bank
31 r End Bank
£ ece ded
er
20
Ma ed
mb
D n
rch
Pe up &
Ye up &
ri
o
o
a
Gr
Gr
£
Group & Bank
Banks 870,706 1,122,054
Corporates 221,205 200,643
Individuals 49,990 43,222
1,141,901 1,365,919
09
Credit exposure by location
20
09
£ ece ded
er
20
Ma ed
mb
D n
rch
31 r End
31 od E
ri
a
Ye
Pe
Group & Bank
£
Western Europe 479,550 730,379
Eastern Europe 109,175 168,407
Africa 432,520 207,821
Others 120,656 259,312
1,141,901 1,365,919
The above sector and geographical analyses only include cash
at bank and in hand, loans and advances to banks and to
customers and held-to-maturity securities.
48
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
The Group extends credit facilities to quality rated and unrated In the ordinary course of business, the Group also pledged
counterparties. All rated counterparties must have a Fitch assets as collateral to secure trade related liabilities.
(or equivalent) rating of no less than B. A large percentage The aggregate amount of assets pledged was £67.4m
(55%) (31 March 2009 – 82%) of the Group’s total financial (31 March 2009 – £61.5m).
assets was to high quality financial institutions, the majority
of which had ratings of between A and AAA. Market risk
Market risk is the risk that the fair value or future cash flows
As at 31 December 2009, the Group’s maximum exposure to
of a financial instrument will fluctuate because of changes in
credit was £1,247m (31 March 2009 – £1,477m), of which
market prices. Market risk comprises three types of risk: foreign
£9.4m (31 March 2009 – £8.4m) was deemed to be impaired
currency risk, interest rate risk and price risk. The objective of
or doubtful. These amounts include all financial assets and
market risk management is to maintain market risk exposures
undrawn irrevocable loan and trade commitments.
within acceptable parameters, whilst optimising the return
Total trade related exposure was £204m (31 March 2009 – on risk.
£191m) against which the Group held cash collateral of £74m
(31 March 2009 - £87m). In addition, the Group had Interest rate risk
collateral of £149m Interest rate risk originating from banking activities arises
due to the Group holding a combination of fixed and variable
(31 March 2009 – £102m) in respect of other credit exposures.
rate assets and liabilities that arise during the normal course
Generally, the Group reduces its credit risk exposure by entering of business. The tables summarise the variable rate assets and
into collateral arrangements with certain counterparties with liabilities as at 31 December 2009 as a basis of disclosing the
whom it undertakes a significant volume of transactions Group’s interest rate sensitivity analysis.
including its ultimate parent, First Bank of Nigeria Plc. Under the
collateral agreements, cash deposits are charged to the Group
as collateral for counterparty exposures. These arrangements
do not result in an offset of balance sheet assets and liabilities.
However, for regulatory reporting purposes the risk weighted
assets are reduced by the amount of collateral held.
49
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
Interest rate sensitivity analysis dates. A range of possible upward/downward movements
The Group holds a combination of fixed and variable rate in Libor/Euribor of 100 – 150bps has been assumed for the
assets and liabilities. As a consequence of holding variable different currencies.
rate financial instruments, the Group is exposed to cash
If all other variables are held constant, the tables below
flow interest rate risk.
present the likely impact on the Group’s profit or loss.
Interest rate sensitivity analysis has been performed on the
net cash flow interest rate risk exposures as at the reporting
y
nc
00 rre
Group & Bank
£’0 er cu
00
00
00
00
£’0 l
ta
D
P
R
h
£’0
£’0
£’0
GB
EU
US
Ot
To
As at 31 December 2009
Total financial assets 415,955 677,573 40,792 7,581 1,141,901
Less: Fixed Rate assets (15,000) (86,419) (10,441) – (111,860)
Total Variable Rate Assets 400,955 591,154 30,351 7,581 1,030,041
Total Financial Liabilities 475,571 458,451 22,619 381 957,022
Less: Fixed Rate Liabilities (291,546) – – – (291,546)
Total Variable Rate Liabilities 184,025 458,451 22,619 381 665,476
Net Cash Flow Interest Rate Risk exposures 216,930 132,703 7,732 7,200 364,565
Possible movement in Libor/Euribor (bps) 100 150 100 100 –
Possible impact of increase in Libor/Euribor
on profit/loss 2,169 1,991 77 72 4,309
Possible impact of decrease in Libor/Euribor
on profit/loss (2,169) (1,991) (77) (72) (4,309)
50
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
y
nc
00 rre
Group & Bank
£’0 er cu
00
00
00
00
£’0 l
ta
D
P
R
h
£’0
£’0
£’0
GB
EU
US
Ot
To
As at 31 March 2009
Total financial assets 655,159 679,276 27,687 3,797 1,365,919
Less: Fixed Rate assets – (71,221) (1,186) – (72,407)
Total Variable Rate Assets 655,159 608,055 26,501 3,797 1,293,512
Total Financial Liabilities 564,002 578,341 20,340 10,027 1,172,710
Less: Fixed Rate Liabilities (393,976) – – – (393,976)
Total Variable Rate Liabilities 170,026 578,341 20,340 10,027 778,734
Net Cash Flow Interest Rate Risk exposures 485,133 29,714 6,161 (6,230) 514,778
Possible movement in Libor/Euribor (bps) 100 150 100 100 –
Possible impact of increase in Libor/Euribor
on profit/loss 4,851 446 62 (62) 5,297
Possible impact of decrease in Libor/Euribor
on profit/loss (4,851) (446) (62) 62 (5,297)
Foreign Currency risk Foreign Currency Sensitivity
Foreign exchange exposure arises from normal banking Foreign currency sensitivity analysis has been performed on the
activities, particularly from the receipt of deposits and the foreign currency exposures inherent in the Group’s financial assets
placement of funds denominated in foreign currencies. It is and financial liabilities at the reporting dates presented, net of
the policy of the Group to match the currencies and its assets FX derivatives. The sensitivity analysis provides an indication
and liabilities as far as practicable. It is also the policy of the of the impact on the Group’s profit or loss of reasonably
Group to adhere to the limits laid down by the Board in possible changes in the currency exposures embedded within
respect of the “overall net open position”. The tables below the functional currency environment that the Group operates
give details of the Group’s net foreign currency exposures as in. Reasonably possible changes are based on an analysis of
at 31 December 2009 as a basis of disclosing the Group’s historic currency volatility, together with any relevant
foreign currency sensitivity analysis. assumptions regarding near-term future volatility.
The Group believes that for each foreign currency net exposure
it is reasonable to assume a 5% appreciation/depreciation
against the Group’s functional currency. If all other variables are
held constant, the tables below present the impacts on the
Group profit or loss if these currency movements had occurred.
51
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
27. Financial Risk Management (continued)
ies
nc
rre
00 r
£’0 er Cu
£’0 olla
Group & Bank
00
00
D
R
h
£’0
EU
US
Ot
As at 31 December 2009
Net foreign currency exposures (397) (303) 451
Impact of 5% increase in FC: GBP rate 20 15 (23)
Impact of 5% decrease in FC: GBP rate (20) (15) 23
ies
nc
rre
00 r
£’0 er Cu
£’0 olla
Group & Bank
00
00
D
R
h
£’0
EU
US
Ot
As at 31 March 2009
Net foreign currency exposures 10,208 7,120 (1,230)
Impact of 5% increase in FC: GBP rate (510) (356) 62
Impact of 5% decrease in FC: GBP rate 510 356 (62)
52
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
28. Liquidity risk
The Group is regulated in the United Kingdom by the Financial are met when due and the required mismatch parameters
Services Authority (FSA) who set the required liquidity mismatch by the FSA are not breached. The policy of the Group is to
parameters. The Group manages the liquidity structure of its match the maturities and currencies as far as practicable for
assets, liabilities and commitments so that cash flows are all (and particularly large) exposures or placements.
appropriately balanced to ensure that all funding obligations
Maturity Analysis of Liabilities based on the earlier of the periods
to the next interest rate pricing date or the maturity dates
e
rs
nth or
£’0 ear ore t ear
r
yea
yea
n
00 mo t m
ha
y
e
s
00 n o t
tha s b hre
fiv not m one
ne
ive
£’0 e mo than
£’0 six t no
£’0 tha t no
Group
mo ths b six
hs
nth n t
nf
00 nt
u
u
n
n
e
00 s
mo e tha
mo e tha
bu tha
£’0 e tha
thr mor
As at 31 December 2009
re
ey
00
00
re
£’0 l
n
n
ta
r
r
r
e
t
t
Mo
Mo
Mo
Mo
No
To
Liabilities
Deposits by banks 456,808 – – – – 456,808
Customer accounts 357,817 47,581 60,705 34,125 – 500,228
Other financial liabilities 69,574 – – – – 69,574
Financial liabilities –
derivatives 16 – – – – 16
Subordinated liabilities 255 81 163 1,290 16,802 18,591
Off B/S items:
Undrawn Loan Commitments 55,045 – – – – 55,045
Total Liabilities 939,515 47,662 60,868 35,415 16,802 1,100,262
53
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
28. Liquidity risk (continued)
e
rs
nth or
£’0 ear ore t ear
r
yea
yea
n
00 mo t m
ha
y
e
s
00 n o t
tha s b hre
fiv not m one
ne
ive
£’0 e mo than
£’0 six t no
£’0 tha t no
mo ths b six
hs
nth n t
nf
00 nt
u
u
n
n
e
00 s
mo e tha
mo e tha
bu tha
£’0 e tha
thr mor
Bank
re
ey
00
00
re
£’0 l
n
n
ta
r
r
r
e
t
t
Mo
Mo
Mo
Mo
No
To
As at 31 December 2009
Liabilities
Deposits by banks 455,976 – – – – 455,976
Customer accounts 357,817 47,581 60,705 34,125 – 500,228
Other financial liabilities 70,173 – – – – 70,173
Financial liabilities –
derivatives 16 – – – – 16
Subordinated liabilities 255 81 163 1,290 16,802 18,591
Off B/S items:
Undrawn Loan Commitments 55,045 – – – – 55,045
Total Liabilities 939,282 47,662 60,868 35,415 16,802 1,100,029
e
rs
nth or
£’0 ear ore t ear
r
yea
yea
n
00 mo t m
ha
y
e
s
00 n o t
tha s b hre
fiv not m one
ne
ive
£’0 e mo than
£’0 six t no
£’0 tha t no
mo ths b six
hs
nth n t
nf
00 nt
u
u
n
n
e
00 s
mo e tha
mo e tha
bu tha
£’0 e tha
thr mor
Group & Bank
re
ey
00
00
re
£’0 l
n
n
ta
r
r
r
e
t
t
Mo
Mo
Mo
Mo
No
To
As at 31 March 2009
Liabilities
Deposits by banks 581,960 – – – – 581,960
Customer accounts 244,443 105,539 182,083 58,685 – 590,750
Other financial liabilities 77,308 – – – – 77,308
Financial liabilities –
derivatives 322 – – – – 322
Subordinated liabilities – – – – 16,500 16,500
Off B/S items:
Undrawn Loan Commitments 6,986 – – – – 6,986
Total Liabilities 911,019 105,539 182,083 58,685 16,500 1,273,826
54
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
29. Fair values of financial instruments
Categories of financial instruments
The table below represents the Group’s assets and liabilities carrying amounts,
classified by the categories as defined in IAS 39.
09
20
09
£ ece ded
er
20
Ma ed
mb
e
e
D n
rch
31 r End
Pe Valu
Ye Valu
31 od E
ri
ir
ir
a
Fa
Fa
£
Group & Bank
Financial assets
Cash at bank and in hand 7,136 35,004
Fair value through profit and loss (FVTPL)
Designated as FVTPL 549 –
Held-to-maturity securities 14,234 –
Loans and receivables 1,120,532 1,330,915
1,142,451 1,365,919
Financial liabilities
Fair value through profit and loss (FVTPL)
Designated as FVTPL 16 322
Amortised cost 973,712 1,189,210
973,728 1,189,532
55
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
29. Fair values of financial instruments (continued)
Set out below is a year-end comparison of current and book
values of all the Group’s financial instruments by category.
Market values are used to determine fair values. In the absence
of readily ascertainable market values, directors’ estimation
is used to determine fair values.
09
09
20
20
9
9
00
00
£’0 ece ded
£’0 ce ed
er
er
31 d E e
£’0 arc e
00 h 2
00 h 2
00 mb
00 mb
De nd
rio lu
M lu
e
e
D n
Pe Valu
31 Valu
Pe k Va
31 k Va
31 od E
£’0 arc
Group
M
o
o
ri
ir
ir
Bo
Bo
Fa
Fa
Financial assets
Cash at bank and in hand 7,136 35,004 7,136 35,004
Loans and advances to banks 849,553 1,087,050 849,553 1,087,050
Loans and advances to customers 270,979 243,865 270,979 243,865
Investment in subsidiaries – – – –
Held-to-maturity securities 14,263 – 14,234 –
Financial asset – derivatives 554 – 549 –
1,142,485 1,365,919 1,142,451 1,365,919
Financial liabilities
Deposits by banks 456,808 581,960 456,808 581,960
Customer accounts 500,228 590,750 500,228 590,750
Financial liabilities – derivatives 17 322 16 322
Subordinated liabilities 16,676 16,500 16,676 16,500
973,729 1,189,532 973,728 1,189,532
56
Report and Financial Statement
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
29. Fair values of financial instruments (continued)
09
09
20
20
9
9
00
00
£’0 ece ded
£’0 ce ed
er
er
31 d E e
£’0 arc e
00 h 2
00 h 2
00 mb
00 mb
De nd
rio lu
M lu
e
e
D n
Pe Valu
31 Valu
Pe k Va
31 k Va
31 od E
£’0 arc
Bank
M
o
o
ri
ir
ir
Bo
Bo
Fa
Fa
Financial assets
Cash at bank and in hand 7,136 35,004 7,136 35,004
Loans and advances to banks 849,553 1,087,050 849,553 1,087,050
Loans and advances to customers 270,979 243,865 270,979 243,865
Investment in subsidiaries 10 – 10 –
Held-to-maturity securities 14,263 – 14,234 –
Financial asset – derivatives 554 – 549 –
1,142,495 1,365,919 1,142,461 1,365,919
Financial liabilities
Deposits by banks 455,976 581,960 455,976 581,960
Customer accounts 500,228 590,750 500,228 590,750
Financial liabilities – derivatives 17 322 16 322
Subordinated liabilities 16,676 16,500 16,676 16,500
972,897 1,189,532 972,896 1,189,532
57
FBN Bank (UK) Limited
Report and Financial Statements
Notes to the consolidated accounts
For the nine months from 1 April to 31 December 2009
29 Fair values of financial instruments (continued)
Fair value measurement recognised in the statement • Level 2 – fair value measurements are those derived from
of financial position inputs other than quoted prices included within level 1 that
The following tables provide an analysis of financial are observable for the asset or liability, either directly
instruments for the Group that are measured subsequent to (i.e. as prices) or indirectly (i.e. derived from prices); and
initial recognition at fair value, grouped into Levels 1 to 3
• Level 3 – fair value measurements are those derived from
based on the degree to which the fair value is observable:
valuation techniques that include inputs for the asset or
• Level 1 – fair value measurements are those derived from liability that are not based on observable market data
quoted prices (unadjusted) in active markets for identical (unobservable inputs).
assets or liabilities;
09
09
09
20
20
20
Le ece ded
Le ece ded
Le ece ded
er
er
er
ve mb
ve mb
ve mb
D n
D n
D n
31 od E
31 od E
31 od E
Group
£’0 l 1
£’0 l 2
£’0 l 3
00
00
00
00
£’0 l
ta
ri
ri
ri
Pe
Pe
Pe
To
Financial assets at FVTPL
Financial asset – derivatives 549 – – 549
549 – – 549
Financial liabilities at FVTPL
Financial liabilities – derivatives 16 – – 16
16 – – 16
Bank
Financial assets at FVTPL
Financial asset – derivatives 549 – – 549
549 – – 549
Financial liabilities at FVTPL
Financial liabilities – derivatives 16 – – 16
16 – – 16
30 Pension costs 31. Ultimate parent company and controlling party
The Group operates a defined contribution pension scheme The ultimate parent company and controlling party is First Bank
for staff and contributions were made during the year totalling of Nigeria Plc “FBN”, a company incorporated in Nigeria and
£241,617 (31 March – £194,492). This amount forms part which prepares group accounts including all companies within
of total staff costs recorded under administrative expenses. the FBN group. The parent of the smallest and largest group
for which group accounts are prepared and of which the Bank
There were no outstanding or prepaid contributions at the
is a member is First Bank of Nigeria Plc. Copies of such accounts
balance sheet date.
may be obtained from the Company Secretary, First Bank of
Nigeria Plc, Lagos, Nigeria.
32. Dividend paid
No dividend payment was made in respect of the period
ended 31 December 2009 (31 March 2009 – £5,000,000).
58
59
Company Registration No. 4459383
