ABBEY MORTGAGE BANK PLC
Head Office: 23, Karimu Kotun Street,
Victoria Island, Lagos.
Tel: +234-1-9035700; +234 -1-9057325
eMail: enquiries@abbeymortgagebank.com
Website: www.abbeymortgagebank.com
ABBEY MORTGAGE BANK PLC
LAGOS, NIGERIA
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
#
ABBEY MORTGAGE BANK PLC
REPORT OF DIRECTORS AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTENTS Page
Corporate Information 3
Report of the Directors 4
Statement of Directors’ Responsibilities in Relation to the Preparation of the Financial
Statements
10
Certification Pursuant to Section 60(2) of the Investments and Securities
Act No. 29 of 2007 11
Statement of Corporate Responsibility for the Financial Statements 12
Corporate Governance Report 13
Enterprise Risk Management Policy 21
Report of the Audit Committee 27
Independent Auditor's Report 28
Financial Statements
Statement of Profit or Loss and Other Comprehensive Income 33
Statement of Financial Position 34
Statement of Changes in Equity 35
Statement of Cash Flows 36
Notes to the Financial Statements 37
Other National Disclosures
Value Added Statement 98
Five-Year Financial Summary 99
2
Chairman (Appointed Effective from 28
February 2020)
Managing Director/CEO (Appointed
Effective from 03 June 2020)
* The former chairman (Chief Ifeanyichukwu Boniface Ochonogor) retired effective February 28, 2020
and the new chairman (Mazi Emmanuel Kanu O.Ivi) replaced him on the same date.
** Mr Madu Hamman became the Managing Director on June 3, 2020 and was approved by CBN on
November 19, 2020
3
ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2020
1) RESULT
2020 2019
₦’000 ₦’000
Loss before income tax (4,297,872) (51,943)
Income tax expense
(3,747) (10,693)
Loss after income tax
(4,301,619) (62,636)
Other comprehensive income - -
Loss for the year
(4,301,619) (62,636)
Less: appropriations:
Transfer to/ (from) regulatory risk reserve
1,365,226 (702,675)
Net effect of operations on accomulated losses
(2,936,393) (765,311)
2) PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
3) LEGAL FORM
The Bank, which was incorporated in Nigeria as a private limited liability company on 26 August
1991, obtained its license to operate as a Mortgage Bank on 20 January 1992, commenced
business on 11 March 1992 and later converted to a public limited liability company in September
2007. On 21 October 2008, the Bank became officially listed on the Nigerian Stock Exchange.
Following the approval of the Central Bank of Nigeria, the Bank changed its name from Abbey
Building Society Plc to Abbey Mortgage Bank Plc on 16 January 2014.
The principal activity of the Bank continues to be the provision of mortgage and banking services to the
general public.
The Directors present their report together with the audited financial statements of Abbey Mortgage
Bank (“the Bank”) for the year ended 31 December 2020.
The Bank applied the International Financial Reporting Standards (“IFRS”) issued by the International
Accounting Standards Board in preparing these Financial Statements and the comparative financial
information.
Highlights of the Bank’s operating results for the year under review are as follows:
4
ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
4)
S/N
As at 31
December
2020 (Shares)
Percentage
Holding [%]
As at 31
December
2019 (Shares)
Percentage
Holding [%]
1 Mazi Emmanuel Kanu O. Ivi 86,442,341 1.33 86,442,341 2.06
2 Mr. Madu Hamman 839,170 0.01 839,170 0.02
3 Mr. Mobolaji Adewumi NIL NIL
4 Mr. Oladipupo Adeoye NIL NIL
5 Air Vice Marshal Olufemi Soewu (Retired) 50,717,076 0.78 50,717,076 1.21
6
Prof. Marius Umego
NIL NIL
7 Brig-Gen. John Obasa NIL NIL
8 Mr. Nonso Okpala NIL NIL
9 High Chief Samuel Oni NIL NIL
INDIRECT HOLDING
5
(a) Ms. Jewel Okwechime
(b) Mrs. Christabel Onyejekwe
6)
ELECTION/RE-ELECTION OF DIRECTORS
In accordance with Article 106 of the Bank’s Articles of Association, High Chief Samuel Oni - one of the
directors, retired by rotation and being eligible, offer himself for re-election while the below listed directors
are new appointees subject to CBN approval.
RECORD OF DIRECTORS’ ATTENDANCE
In accordance with Section 284 (2) of the Companies and Allied Matters Act 2020, the Record of Directors’
attendance at Directors’ meetings during the financial year under review is available for inspection at the
Annual General Meeting. It is also disclosed in the Corporate Governance Section of the Annual Report.
DIRECTORS’ INTERESTS IN SHARES AND CONTRACTS
The interests of the Directors in the issued share capital of the Bank as recorded in the Register of
Directors’ Shareholding as at 31 December 2020 are as follows:
Name of Directors
None of the Directors notified the Bank of any disclosable interest in contracts with which the Bank was
involved as at 31 December 2020 (2019: None)
Mobolaji Adewumi, Dipo Adeoye and Nonso Okpala have indirect holding through VFD Group.
5
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ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
7)
SUBSTANTIAL INTEREST IN SHARES
As at 31 December 2020
Shareholder
No. of shares held
2,275,538,462 35.22
1,068,622,674 16.54
Forte Properties & Investment Ltd
1,021,611,013 15.81
As at 31 December 2019
Shareholder
No. of shares held
Madonna Ashib Comm. Enterprise Ltd 1,068,622,674 25.44
Forte Properties & Investment Ltd
1,021,611,013 24.32
Abbey Staff Share Trust Scheme
308,200,087 7.34
Chief Ifeanyichukwu Boniface Ochonogor
275,198,488 6.55
8)
HISTORY OF CAPITALIZATION
The authorised, issued and fully paid up share capital are as follows:
DATE
AUTHORISED
ISSUED AND
FULLY PAID
CONSIDERATION
INCREASE (₦)
CUMMULATIVE
(₦)
INCREASE (₦)
CUMMULATIVE
(₦)
1991 5,000,000 5,000,000 CASH
1992 10,000,000 15,000,000 10,000,000 15,000,000 CASH
1992 15,000,000 30,000,000 NIL 15,000,000
1994 20,000,000 50,000,000 15,000,000 30,000,000 CASH
1996 NIL 50,000,000 20,000,000 50,000,000 CASH
1997 50,000,000 100,000,000 NIL 50,000,000
1999 NIL 100,000,000 20,000,000 70,000,000 CASH
1999 NIL 100,000,000 8,000,000 78,000,000 BONUS
2000 100,000,000 200,000,000 22,000,000 100,000,000 BONUS
2001 NIL 200,000,000 85,000,000 185,000,000 CASH
2001 NIL 200,000,000 15,000,000 200,000,000 BONUS
2002 300,000,000 500,000,000 40,000,000 240,000,000 BONUS
2003 NIL 500,000,000 25,000,000 265,000,000 BONUS
2004 300,000,000 800,000,000 50,000,000 315,000,000 CASH
2004 NIL 800,000,000 20,000,000 335,000,000 BONUS
2005 200,000,000 1,000,000,000 25,000,000 360,000,000 BONUS
2006 500,000,000 1,500,000,000 140,000,000 500,000,000 CASH
2006 NIL 1,500,000,000 18,000,000 518,000,000 BONUS
2007 NIL 1,500,000,000 501,935,000 1,019,935,000 CASH
2008 2,000,000,000 3,500,000,000 1,080,065,000 2,100,000,000 CASH
2020 2,500,000,000 6,000,000,000 1,130,769,231 3,230,769,231 CASH
Nigerian citizens and associations held all the ordinary shares of the Bank as at 31 December 2020. No individual
shareholder held more than 5% of the issued and paid up share capital of the Bank as at 31 December 2020 except
the following:
Percentage of shareholding %
Percentage of shareholding %
VFD Group Plc
Madonna Ashib Comm. Enterprise Ltd
6
#
ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
9 ANALYSIS OF SHAREHOLDERS
9.1 ANALYSIS OF SHAREHOLDERS AS AT 31 DECEMBER 2020
1 - 100,000 842 23,264,506 0.36%
100,001 - 500,000 125 30,962,487 0.48%
500,001 - 1,000,000 19 17,257,148 0.27%
1,000,001 - 50,000,000 32 256,812,900 3.97%
50,000,001 - 500,000,000 14 1,767,469,272 27.35%
500,000,001 - Above 3 4,365,772,149 67.57%
1,035 6,461,538,462 100
9.2 ANALYSIS OF SHAREHOLDERS AS AT 31 DECEMBER 2019
1 - 100,000 618 23,133,249 0.55
100,001 - 500,000 123 30,366,465 0.72
500,001 - 1,000,000 20 18,257,148 0.44
1,000,001 - 50,000,000 33 270,540,179 6.44
50,000,001 - 500,000,000 14 1,767,469,272 42.08
500,000,001 - 2,000,000,000
2 2,090,233,687 49.77
810 4,200,000,000 100
Range
Shares Held
Percentage of
shareholding
%
Range
Shares Held
Percentage of
shareholding
%
Number of
Shareholders
Number of
Shareholders
7
#
ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
10)
2020 2019
₦’000 ₦’000
Cedec International School
27 60
Gestor Nursery and Primary School
- 20
Bishop Alfred Adewale Martins
- 400
Sacred Heart School, Lagos 350
-
Gwell Schools 20
-
Total 397 480
11)
PROPERTY AND EQUIPMENT
12)
DIVIDEND
No dividends were declared and paid in 2020 (2019: nil).
13)
EMPLOYMENT AND EMPLOYEES
14)
ACQUISITION OF OWN SHARES
15) EVENTS AFTER REPORTING DATE
DONATIONS
Donations made during the year amounted to N397,400 (2019: N480,000). No donation was made
to any political organization. The beneficiaries are:
Employment of disabled persons
It is the policy of the Bank that there should be no discrimination in considering applications for
employment including those from physically challenged persons. All employees, whether or not
disabled, are given equal opportunities to develop. As at 31 December 2020 no physically
challenged person was employed by the Bank (2019: Nil).
Employee’s involvement and training
The Bank is committed to keeping employees as fully informed as possible regarding its performance
and progress and seeking their views whenever practicable on matters which particularly affect them
as employees.
The Bank places high premium on the development of its manpower. The Bank’s expanding skill base
has been extended by a range of training programmes provided for its employees whose
opportunities for career development with the Bank have been enhanced.
Health, safety at work and welfare of employees
Health and safety regulations are in force within the Bank’s premises and employees are aware of
the existing regulations. The Bank provides subsidy to all levels of employees for medical treatment,
transportation, housing, etc.
In addition to the private placement of N2.37 billion whose full proceeds the Bank received after CBN
verification in January 2020, a rights issue of 4 for 7 amounting to 3.69 billion units of ordinary
shares of 50k at 82 kobo per share is in progress and had reached an advance stage as at 31
December 2020. The Acceptance List for the rights issue opened on 4 January 2021 and closed on
11 February 2021.
Movements in property and equipment during the year are shown in Note 22 to the financial
statements.
The Bank did not purchase its own shares during the year (2019: Nil).
See note 37 for other disclosures relating to events after reporting date.
8
ABBEY MORTGAGE BANK PLC
REPORT OF THE DIRECTORS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
16) AUDIT COMMITTEE
1.
Mr. Adekunle Alli - Chairman
Shareholders
representative
2.
- Member
Shareholders
representative
3.
Mr. Gbadebo Ajeigbe - Member
Shareholders
representative
4 AVM Olufemi Soewu (Rtd) - Member
5 Nonso Okpala - Member
6 High Chief Samuel Oni - Member
17)
AUDITOR
GEOFF O. AMAGHEREONU ESQ
FRC/2013/NBA/00000002815
Company Secretary/Legal Adviser
23 Karimu Kotun Street,
Victoria Island, Lagos.
Date: 2 March 2021
The functions of the Audit Committee are as laid down in Section 404 (7) of the Companies and
Allied Matters Act 2020.
Prince (Engr.) MOT. O. Tobun
Pursuant to Section 404 (3) of the Companies and Allied Matters Act 2020, the Bank has an Audit
Committee comprising of three Directors and three Shareholders as follows:
In accordance with Section 401(2) of the Companies and Allied Matters Act 2020 and in compliance
with the FRC code of corporate governance for public interest entities which stipulate a maximum
term of 10 years for external auditors, Messrs. Ernst & Young have expressed their willingness to
resign as Auditors of the Bank as we have approached the 10th year of auditing. A resolution will be
proposed at the Annual General Meeting to appoint another auditor.
BY ORDER OF THE BOARD OF DIRECTORS
9
ABBEY MORTGAGE BANK PLC
FOR THE YEAR ENDED 31 DECEMBER 2020
The responsibilities include ensuring that:
i
ii
iii
iv It is appropriate for the financial statements to be prepared on a going concern basis.
---------------------------------------- ---------------------------------------
MAZI EMMANUEL KANU O. IVI MADU HAMMAN
FRC/2014/ICAN/00000008160 FRC/2013/CIBN/000000011355
Chairman Managing Director/CEO
Date: 02 March 2021 Date: 02 March 2021
In accordance with the provisions of the Companies and Allied Matters Act 2020, the Banks and Other
Financial Institutions Act 2020 and the Financial Reporting Council of Nigeria Act No. 6, 2011, the
Directors are responsible for the preparation of annual financial statements, which give a true and fair
view of the financial position of the Bank at the end of the financial year and of the financial results for
the year then ended.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE PREPARATION OF THE
FINANCIAL STATEMENTS
The Bank keeps proper accounting records that disclose, with reasonable accuracy, the financial
position of the Bank and comply with the the International Financial Reporting Standards, the
requirements of the provisions of the Companies and Allied Matters Act 2020, the Banks and Other
Financial Institution Act 2020, the Financial Reporting Council of Nigeria Act No. 6, 2011 and
relevent Central Bank of Nigeria Circulars & Guidelines for the Operations of Primary Mortgage Banks
in Nigeria;
Appropriate and adequate internal controls are established to safeguard its assets and to prevent and
detect fraud and other irregularities;
BY ORDER OF THE BOARD OF DIRECTORS
The Bank prepares its financial statements using suitable accounting policies supported by reasonable
and prudent judgments and estimates that are consistently applied; and
The Directors accept responsibility for the annual financial statements, which have been prepared using
appropriate accounting policies supported by reasonable and prudent judgments and estimates in
conformity with the International Financial Reporting Standards, the requirements of the provisions of
the Companies and Allied Matters Act 2020, the Banks and Other Financial Institution Act 2020, the
Financial Reporting Council of Nigeria Act No. 6, 2011, and relevent Central Bank of Nigeria Circulars &
Guidelines for the Operations of Primary Mortgage Banks in Nigeria.
The Directors are of the opinion that the financial statements give a true and fair view of the state of the
financial position of the Bank and of its financial results.
The Directors further accept responsibility for the maintenance of accounting records that may be relied
upon in the preparation of financial statements, as well as adequate systems of internal control.
Nothing has come to the attention of the Directors to indicate that the Bank will not remain as a going
concern for at least twelve months from the date of this statement.
10
ABBEY MORTGAGE BANK PLC
FOR THE YEAR ENDED 31 DECEMBER 2020
a. We have reviewed the report;
b.
To the best of our knowledge, the report does not contain:
i.
Any untrue statement of a material fact, or
ii. Omit to state a material fact, which would make the statements,
misleading in the light of the circumstances under which such
financial statements were made;
c.
d. We:
i. Are responsible for establishing and maintaining internal controls.
ii.
iii.
iv.
e. We have disclosed to the auditors of the Bank and Audit Committee:
i.
ii.
f.
------------------------------ ------------------------------
MADU HAMMAN
IDOWU O. SANNI
FRC/2013/CIBN/000000011355
FRC/2018/ICAN/00000017717
Managing Director/CEO Financial Controller
Date: 02 March 2021
Date: 02 March 2021
Any fraud, whether or not material, that involves management or other employees who have
significant role in the Bank’s internal controls;
We have identified in the report whether or not there were significant changes in internal controls
or other factors that could significantly affect internal controls subsequent to the date of our
evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.
CERTIFICATION PURSUANT
TO SECTION 60(2) OF THE INVESMENTS AND SECURITIES ACT No. 29 OF 2007
We the undersigned hereby certify the following with regard to the audited financial statements for
the year ended 31 December 2020:
To the best of our knowledge, the financial statements and other financial information included in
the report fairly present in all material respects the financial condition and results of operation of
the Bank as of, and for the years presented in the report.
Have designed such internal controls to ensure that material information relating to the Bank
is made known to officers within the Bank particularly during the period in which the periodic
reports are being prepared;
Have evaluated the effectiveness of the Bank’s internal controls as of date within 90 days
prior to the report;
Have presented in the report of the Audit Committee our conclusions about the effectiveness
of the Bank’s internal controls based on our evaluation as of that date;
All significant deficiencies in the design or operation of internal controls which would adversely
affect the Bank’s ability to record, process, summarise and report financial data and have
identified for the Bank’s auditors any material weakness in internal controls, and
11
ABBEY MORTGAGE BANK PLC
FOR THE YEAR ENDED 31 DECEMBER 2020
a.
b.
c.
d.
e. That we have disclosed to the bank’s Auditors and the Audit Committee the following information:
(i)
(ii)
f.
------------------------------ ------------------------------
MADU HAMMAN
IDOWU O. SANNI
FRC/2013/CIBN/000000011355
FRC/2018/ICAN/00000017717
Managing Director/CEO Financial Controller
Date: 02 March 2021
Date: 02 March 2021
There are no significant deficiencies in the design and operation of the bank’s internal controls
which could adversely affect the bank’s ability to record, process, summarize and report
financial data and have discussed with the auditors any weaknesses in internal controls
observed in the cause of the Audit.
There is no fraud involving management or other employees which could have any significant
role in the bank’s internal control.
There are no significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of this audit, including any corrective actions with
regard to any observed deficiencies and material weaknesses.
STATEMENT OF CORPORATE RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
In line with the provision of S. 405 of CAMA 2020, we have reviewed the audited financial statements
of the Bank for the year ended 31 December 2020 and based on our knowledge confirm as follows:
The audited financial statements do not contain any untrue statement of material fact or omit to
state a material fact which would make the statements misleading
The audited financial statements and all other financial information included in the statements
fairly present, in all material respects, the financial condition and results of operation of the bank
as of and for the period ended 31 December 2020.
The bank’s internal controls have been designed to ensure that all material information relating to
the bank is received and provided to the Auditors in the course of the audit.
The banks internal controls were evaluated within 90 days of the financial reporting date and are
effective as of 31 December 2020.
12
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
Introduction
Meetings of Shareholders
Audit Committee
Shareholders representatives Directors
Mr. Adekunle Alli High Chief Samuel Oni
Prince (Engr.) MOT O. Tobun AVM Olufemi Soewu (Rtd)
Mr. Gbadebo Ajeigbe Mr. Nonso Okpala
The governance structure of the Bank is driven principally by the Board of Directors, whose members are equipped
with the requisite academic qualifications and relevant industry experience and tools to discharge their roles in the
Bank. The governance policies adopted by the Board are designed to ensure long-term shareholder value. It is the
primary responsibility of the Board to deliver sustainable shareholders’ wealth through its oversight functions.
The general meeting of the Bank remains the highest decision-making organ and the primary avenue for interaction
between the shareholders, Management and the Board. Annual General Meetings are conducted in an open manner
allowing for free discussions on all issues on the agenda and in accordance with the provisions of the Companies and
Allied Matters Act 2020, and the Articles of Association of the Bank. Venues for such meetings are always easily
accessible.
The Statutory Audit Committee is established in line with Section 404 (5) of the Companies and Allied Matters Act
2020. The Committee during the year comprised six members – Three members representing the shareholders and
elected at the Annual General Meeting and three Non-Executive Directors. The Committee meets at least four times
a year but could also meet at any other time should the need arise to enable it discharge its statutory duties as
provided under the Act. The membership of the Committee is as follows:
Abbey Mortgage Bank Plc recognizes the fact that effective governance system is essential to retaining public trust
and confidence in the way and manner we do our business. Our governance policies are structured to ensure
maximum compliance with the provisions of the various laws and codes on the subject.
These include the Central Bank of Nigeria Code of Corporate Governance of May 2014, the SEC Code of Corporate
Governance dated 1 April, 2011, the Financial Reporting Council of Nigeria Code of Corporate Governance of Public
Interest Entities, 2018, the Post Listing requirements of Nigerian Stock Exchange together with the amendments
thereto, our internal Code of Corporate Governance and international best practices.
Abbey’s Code of Corporate Governance is targeted at achieving the highest standards of transparency,
accountability and good corporate behaviour in line with international best practices. The governance structures and
processes are primed for the satisfaction of the various stakeholders including employees, shareholders, creditors,
host communities and regulatory authorities.
Abbey’s corporate ethos include accountability, transparency, integrity, fairness, discipline, communication, social
and environmental responsibility, service excellence, responsible lending and stakeholder-rights’ recognition.
Directors and employees are expected to act honestly, in good faith and in the best interest of the Bank in all
transactions.
13
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ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Board of Directors
- Board Credit & Risk Management Committee
- Board Audit & Compliance Committee
- Board Strategy & Financial Analysis Committee
- Board Governance & Remuneration Committee
Board Credit & Risk Management Committee
High Chief Samuel Oni Chairman
AVM Olufemi Soewu (Rtd) Member
Mr. Madu Hamman
Mr. Mobolaji Adewumi Member
Member
Member
Board Strategy & Financial Analysis Committee
Nonso Okpala Chairman
Air Vice Marshal Olufemi Soewu (Retired)
Member
High Chief Samuel Oni Member
Member
Member
Member
Board Governance & Remuneration Committee
AVM Olufemi Soewu (Rtd) Chairman
Member
Member
Board Audit & Compliance Committee
High Chief Samuel Oni
Member
Member
Member
Member
Mobolaji Adewumi
Prof. Marius Umego
Brig-Gen John Obasa (rtd.)
Prof. Marius Umego
Brig-Gen John Obasa
AVM. Olufemi Soewu
Mr. Nonso Okpala
Mr. Oladipupo Adeoye
Mr. Madu Hamman
Mr. Oladipupo Adeoye
The Committees of the Board are constituted as follows:
Member
The Board is made up of a Non-Executive Chairman, five (5) Non-Executive Directors including one (1) independent
Director and three (3) Executive Directors. Appointment to the Board is made by the shareholders at the Annual
General Meeting upon recommendation by the Board of Directors.
The Board is accountable and responsible for the affairs of the Bank by ensuring that its operations at all times are
carried out within the legal and regulatory framework. The Board’s responsibilities and duties include, but are not
limited to, defining the Bank’s business strategic goals, formulating effective risk management policies, leadership,
enterprise, integrity and judgment in directing the Bank so as to achieve continuing prosperity and to act in its best
interest in a manner based on transparency, accountability, good corporate governance and equity. The Board meets
at least once every quarter but may hold other sessions to address urgent matters requiring its attention. Its
oversight functions are performed through the following Committees:
14
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FREQUENCY OF BOARD AND BOARD COMMITTEE MEETINGS
KEY:
P = Present X = Absent
BOARD MEETINGS
S/N MEMBERS 3/2/'20
24/2/'20
28/3/'20
3/6/'20
26/6/'20
20/7/'20
24/8/'20
2/11/'20
17/12/'20
1 Mazi Emmanuel Kanu Ivi P P P P P P P P P
2 Mr. Madu Hamman P P P P P P P P P
3 Mr. Mobolaji Adewumi X P P P P P P P P
4 Mr, Oladipo Adeoye X P P P P P P P P
5 AVM Olufemi Soewu (rtd) P P P P P P P P P
6 High Chief Samuel Oni P P P P P P P P P
7 Mr. Nonso Okpala X P P P P P P P P
8 Prof. Marius Umego X P P P P P P P P
9 Brig-Gen. John Obasa X P P P P P P P P
STRATEGY & FINANCIAL ANALYSIS COMMITTEE
S/N MEMBERS 12/2/'20
28/8/'2
0
19/10/'
20
12/11/2020
1 High Chief Samuel Oni P P P P
2 AVM Olufemi Soewu (rtd) P P P P
3 Mr. Madu Hamman
P P P P
4 Mr. Nonso Okpala
X P P P
5 Mr. Mobolaji Adewumi
X P P P
6 Mr. Oladipupo Adeoye
X P P P
GOVERNANCE & REMUNERATION COMMITTEE
S/N MEMBERS
13/02/'2
0
2/7/'20 6/8/'20 4/12/'20
1
AVM Olufemi Soewu
(Retired)
P P P P
Brig-Gen John Obasa P P P P
3 Prof. Marius Umego P P P P
CREDIT & RISK MANAGEMENT COMMITTEE
S/N MEMBERS 12/2/'20
12/9/'2
0
6/10/'2
0
12/7/2020
1 High Chief Samuel Oni P P P P
3 Mr. Madu Hamman
P P P P
4 AVM Olufemi Soewu (rtd)
X P P P
5 Mr Nonso Okpala
X P P P
6 Mr. Mobolaji Adewumi
X P P P
7 Mr. Oladipupo Adeoye
X P P P
AUDIT & COMPLIANCE COMMITTEE
S/N MEMBERS 13/2/'20
19/5/'2
0
20/10/'
20
9/12/'20
1 High Chief Samuel Oni
P
P P P
2 Prof. Marius Umego P P P P
3 Brig-Gen John Obasa P P P P
STATUTORY AUDIT COMMITTEE
S/N MEMBERS 27/2/'20
25/8/'2
0
12/11/'
20
4/12/'20
1 Mr. Adekunle Alli P P P P
2 Eng. M.O.T. Tobun P P P P
3 Mr. Gbadebo Ajeigbe P P P P
4 AVM Olufemi Soewu (rtd) P P P P
5 High Chief Samuel Oni P P P P
*6 Mr. Nonso Okpala X X P P
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
Provided below are details of Board and Board Committee meetings held in 2020 showing the
frequency of the meetings and attendance of members.
AWA = Absent with apology
*He became a member on 31 August 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
15
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Election/Re-election of Directors
High Chief Samuel Oni
Ms. Jewel Okwechime
Mrs. Christabel Onyejekwe
High Chief Samuel Oni shall retire by rotation at this Annual General Meeting. Being eligible he has offered himelf for
re-election. Ms. Jewel Okwechime & Mrs. Christabel Onyejekwe are being presented for election as Directors.
Biographical Notes on Persons for Re-election as Directors
High Chief Samuel Oni is a Fellow of both the Association of Chartered Certified Accountants London [1980] and the
Institute of Chartered Accountants of Nigeria. He holds an MBA degree from the University of Ilorin. [1990] He
started his professional career as Principal Accountant at Defense Industries of Nigeria in 1979. In 1982, he joined
Kwara Breweries as Chief Accountant, from where he joined a World Bank Project, Kwara State Agricultural Program
as Financial Controller. He transferred his Services to the Central Bank of Nigeria in 1993 as Assistant Director.
Upon the completion of several on-the-job training sessions in and outside Nigeria, he was given the role of Team
Leader for on-site examination of both commercial and merchant banks. He successfully led many teams to various
banks for routine, maiden and special examinations. His reports received several commendations from the
management of CBN. In recognition of his hard work and diligence, he was promoted to Deputy Director in 1998. In
April 2004, he was appointed Director of Bank Examination, a position he held till 2009 when he was appointed
Director of Banking Supervision. He was also Chairman of the Committee set up by the CBN to midwife the
establishment of Asset Management Corporation of Nigeria (AMCON). High Chief Oni retired from CBN in 2011. Since
then he has been in private business and consultancy services. He also sits on the Board of United Bank for Africa
Plc. His core competences include risk management, audit, regulatory compliance and corporate governance.
Ms. Jewel Okwechime holds a B.Tech degree from Halton College, Cheshire England and M.Eng in Chemical and Bio-
Process Engineering from the University of Surrey, Guildford England. Her core competences include Environmental
Engineering, Project Management, Risk Management, Sustainability, Training and Development, Business
Development and Performance Optimization.
Ms. Okwechime was Senior Environmental Consultant at Atkins Global, Warrington UK, Corporate Senior
Environmental Adviser, Wordside Energy Western Australia, Director, J&R Environmental Services, London UK,
Senior Executive Assistant Heirs Holdings and Head of Administration and Business Development, Transnational
Corporation Plc. She is the Managing Director/CEO of Deltic Africa.
Mrs. Christabel Onyejekwe is a seasoned Banker with over 3 decades of experience garnered from various Banks and
financial institutions such as United Bank for Africa Plc, First Bank Plc, Magnum Trust Bank among others and
presently works as Executive Director with NIBSS (Nigeria Inter-Bank Settlement Systems Plc). She holds an MBA,
Banking & Finance (ESUT Business School)1998, B.L (Hons), Nigerian Law School -1986, and LL.B (Hons), University
of Lagos,1985 and equally has Certificate in Corporate Level Strategy (Harvard Business School) 2016 and
Certificate in Global Management (INSEAD Business School) 2014 – 2015 to mention but a few.
16
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Executive Management Committee
Its membership comprises the following:
1 Mr. Madu Hamman Managing Director/CEO
2 Mr. Mobolaji Adewunmi Executive Director, Finance and Administration
3 Mr. Oladipupo Adeoye Executive Director, Operations
4 Mrs. Lolita Ejiofor Head of Compliance & Business Review
5 Geoff O. Amaghereonu Company secretary/Legal adviser
6 Mr. Princewill Amadi
Group Head, Sales
7 Mr. Abiodun Lasisi Head, Debt Recovery
Human Resources
The Executive Management Committee comprises all senior executives from the rank of Assistant General Manager
and above and is chaired by the MD/CEO. The Committee meets every two weeks or such other times as the business
exigencies of the Bank may require. It has the primary responsibility of implementing the strategies approved by the
Board, providing leadership to the Management Team and ensuring efficient deployment and management of the
Bank’s resources.
Abbey strives to be an employer of choice. The bank operates the “equal opportunity” principle. There is no gender
or religious bias. There is no discrimination against physically-challenged persons or persons living with HIV/AIDS.
Staff training and development have been our watchword and a number of senior staff have participated in
international and national workshops and seminars, whilst there are regular in-house training sessions tailored to our
specific needs covering all levels of staff.
The bank strives hard to provide a safe and secure atmosphere for all its stakeholders. Various measures are in place
to ensure a peaceful, friendly and conducive environment for all to transact business. All employees are adequately
insured against health and occupational hazards, whilst medical facilities or alternatives are offered to all staff.
17
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Corporate Social Responsibility
Sustainable and Environmental Issues
We are committed to:
•
• Managing operations to meet all applicable OH&S laws and regulations and Bank policies;
•
•
•
• Measuring our health and safety performance in accordance with established standards;
• Ensure that all our financed projects meet legal and group environmental, health and safety requirements;
•
•
•
•
Provide financial and human resources to allow EHS to be given an appropriate level of priority in our financed
projects;
Ensure that all our financed projects incorporate best practice and promote innovation through the operation of
our financed customers to eliminate or minimize risks to health, safety and the environment;
Our employees share in this responsibility and are accountable for the successful implementation of this policy.
Management is empowered to curtail operations, as necessary, to prevent serious adverse impacts on health,
safety and environmental issues.
Promoting and developing safe behaviours, awareness, leadership and accountability of our employees in health
and safety through their involvement in continual improvement processes;
Ensure that management systems are effective in maintaining standards and fulfilling the challenge of securing
continuous improvements in environmental, health and safety performance;
Ensure accountability by holding corporate management and senior executives responsible for Environmental,
Health and Safety (EHS) performance;
Incorporating Organizational Health and Safety (OH&S) considerations into all aspects of our management
practices;
Identifying and assessing potential injury risks and implementing appropriate measures to eliminate or control
those risks if any;
Establishing, communicating and enforcing, through employee involvement, work site-specific rules and safe work
methods;
We will always strive to ensure safe working conditions, equipment and work sites where applicable. We will continue
to promote employee involvement and accountability in identifying, preventing and eliminating hazards and risks of
injury.
Abbey has always maintained a high level of social responsibility, with a strong desire to positively impact the host
community. Our mission to provide affordable housing finance to enable people own their own homes stems from our
dream to fulfill this social responsibility. We continuously engage in charitable acts to help the less privileged, such as
sponsoring events for sick and physically handicapped children admitted into orthopaedic wards or those afflicted
with Down syndrome.
Abbey conducts its business in a manner that protects the health and safety of all stakeholders. The Board and
Management pay particular attention to ensuring that we continually strive to improve occupational health and
safety performance, through close cooperation between management, employees and developers/customers, where
applicable. We are therefore very delighted to report that last year there were no recorded cases of incidents in our
operations.
18
ABBEY MORTGAGE BANK PLC
CORPORATE GOVERNANCE REPORT- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Employment and Labour Relations
Human Rights
Forced or Compulsory Labour
Whistle Blowing Policy
Disclosure may be made through:
Email: whistleblowing@abbeymortgagebank.com
Dedicated telephone line: 019035717
Bribery and Corruption Policy
Security Trading Policy
Free Float Declaration
Complaints Management Policy
Board Evaluation
Abbey is committed to conducting her business fairly, honestly and lawfully. The Bank has a zero tolerance approach
to bribery and corruption and insists on the same standard for those with whom it does business. The anti-corruption
procedures are encapsulated in the Bribery and Corruption policy. The whistle blowing mechanisms are available for
any person who wishes to lodge a report on bribery and corruption.
In compliance with Rule 17-15 on Disclosure of Dealings on Issuer’s Shares, Rulebook of the Nigerian Stock
Exchange, the Bank has a Security Trading Policy (STP) which governs the trading of the Bank’s securities by related
parties. This policy is being adhered to.
In compliance with the requirement of the Securities and Exchange Commission Rule circulated, the Bank has in place
Complaints Management Framework. This policy has been put in place and is being adhered to.
During the year under review, a Board Performance Evaluation was carried out. The performance of the Board and
individual members was adjudged satisfactory.
In its engagement with developers, contractors and service providers, the Bank ensures that there is no forced
labour or compulsory labour in any form. Child labour is not tolerated.
An important aspect of accountability and transparency is a mechanism to enable individuals to voice concerns in a
responsible and effective manner. In furtherance of this Abbey has a policy detailing the mechanisms for whistle
blowing.
Abbey continues to strive to entrench fair labour practices. Workers are given adequate training to assist them in the
performance of their duties. Abbey complies with extant labour laws. There is no discrimination against women in any
form. Men and women on the same level enjoy equal remuneration. The Bank applies the acceptable rules governing
the treatment of female workers during pregnancy and maternity leave.
In consonance with the provision of the Nigerian Constitution and the Universal Declaration of Human Rights, Abbey
respects the fundamental human rights of its workers. Fair work practices and policies have been entrenched.
Abbey Mortgage Bank Plc with a free float percentage of 11.13% (and a free float value of ₦755,399,163.75) as at
31 December 2020, is not compliant with The Nigerian Stock Exchange's free float requirements for companies listed
on the Main Board. However, the Bank is already making efforts to address the issue.
19
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY
FOR THE YEAR ENDED 31 DECEMBER 2020
Enterprise Risk Review
i.
The Bank believes that risk management is the basis of a long lasting financial institution.
ii.
The Bank’s approach is to provide direction on:
• Understanding the principal risks to achieving organisation strategy;
• Establishing risk appetite; and
• Establishing and communicating the risk management framework.
2 Risk Appetite
The Board of Directors (the “Board”) determine the Bank’s set objectives in terms of risk by issuing risk policies
which guides the Bank’s daily operation in terms of assuming risks against expected rewards. These risk policies
are detailed in the Enterprise Risk Management Framework. This framework is a structured approach to
identifying opportunities, assessing the risk inherent in these opportunities and actively managing these risks in
a cost-effective and efficient manner.
The Bank will continue to adopt an enterprise-wide and integrated approach to risk management The Bank’s
risk profile will be managed to ensure that specific financial deliverables remain possible under a range of
adverse business conditions. Risk management is governed by well-defined policies and shared
responsibilities which are clearly communicated across the Bank. There is clear segregation of duties
between market facing business units and risk management functions. The Bank will optimise risk/return
decisions by taking them as closely as possible to the business, while establishing strong and independent
review and challenge structures;
Risk appetite is defined as the level of risk that the Bank is prepared to sustain whilst pursuing its business
strategy, recognising a range of possible outcomes as business plans are implemented. It sets the quantum and
types of risk that the Bank is prepared to take on the basis of its risk management competencies, strategy and
core values by relating the level of risk the Bank decides to take to the level of capital required to support it. The
risk appetite of the Bank is ultimately approved by the Board.
In addition to supporting transaction decisions, the measurement and control of credit, market, operational and
other risks have considerable influence on the Bank’s strategy.
Abbey Mortgage Bank Plc (the “Bank”) has clear risk management objectives and a well-established strategy to
deliver them, through core risk management processes and procedures. The evolving nature of risk
management practices and the dynamic character of the mortgage banking industry necessitate regular review
of the effectiveness of each enterprise risk management component.
The Bank operates an “Enterprise-wide” Risk Management Framework with the objective of managing all
aspects of risk within the organisation. The Bank’s operations require identification, measurement, aggregation
and effective management of risks and efficient utilisation of capital to derive an optimal risk and return ratio.
Risk management is at the core of the operating structure of the Bank.
The most important risk categories the Bank is exposed to are credit, liquidity, operational, regulatory,
reputational, legal and strategic risks. The Bank has developed an effective enterprise risk management
framework that allows us to balance the level of risk taken with our business objectives to achieve sustainable
and consistent performance over the long term.
The process is then broken down into five steps: identify, assess/measure, control, report and
manage/challenge.
21
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3 The Bank Risks Scope
• Credit Risk
• Capital Risk
• Operational Risk
• Liquidity and Funding Risk
• Regulatory & Compliance Risk
• Legal Risk
• Reputational Risk
• Strategic Risk
4
Risk Management Approach
Risk Management Control Structure
Taken as a whole, risk appetite provides a basis for the allocation of risk capacity across the Bank’s
business lines.
The Bank addresses the challenges and opportunities of risk through an enterprise-wide risk
management framework by applying practices that is supported by a governance structure
consisting of the Board and executive management committees. The Board drives the risk
governance and compliance process through its committees. The Audit and Risk committee
provides oversight on the systems of internal control, financial reporting, risk management and
compliance. The Credit Committee reviews the credit policies and approves all loans above the
defined limits for executive Management.
BUSINESS UNITS
BOARD OF
DIRECTORS
MANAGING
DIRECTOR/ CHIEF
EXECUTIVE
OFFICER
BOARD CREDIT & RISK MANAGEMENT
COMMITTEE AND BOARD AUDIT &
COMPLIANCE COMMITTEE
INTERNAL
AUDIT
DEPARTMENT
ENTERPRISE RISK
MANAGEMENT COMMITTEE
ASSET & LIABILITY
MANAGEMENT
DEPARTMENT
COMPLIANCE
DEPARTMENT
ENTERPRISE
RISK
MANAGEMENT
DEPARTMENT
22
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
i.
ii.
iii.
iv
Ensure that governance principles are well communicated and internalised by all in the Bank.
Responsibility for risk management resides at all levels within the Bank, from the Board of Directors
and the Executive Management Committee down through the Bank to each business manager.
The Bank distributes these responsibilities so that risk/return decisions are taken at the most
appropriate level; as close as possible to the business, and subject to robust and effective review and
challenge. The responsibilities for effective review and challenges reside with senior managers, risk
oversight committees, internal audit, the independent risk function, the Board Audit & Risk
Committee and, ultimately, the Board of Directors.
The Board is responsible for approving risk appetite, which is the level of risk it has chosen to take in
pursuit of its business objectives. The Head of Risk regularly presents a report to the Board Audit &
Risk Committee summarising developments in the risk environment and performance trends in the key
portfolios. The Board is also responsible for the Internal Control and Assurance Framework (Control
Framework). It oversees the management of the most significant risks through the regular review of
risk exposures and related key controls. Executive management responsibilities relating to this are set
via the Risk Policy.
Monitor the organisation’s risk profile against the agreed appetite. Where actual performance
differs from expectations. The actions being taken by the management are reviewed.
Develop specific strategies that will help the Bank achieve its vision of being the number one
Primary Mortgage Bank in Nigeria.
Review the system in place for monitoring risk, internal controls and compliance with applicable
regulations and also review the integrity, reliability and accuracy of accounting and financial
reporting systems in the Bank.
A number of the Board committees have delegated specific responsibilities to management
committees.
Responsibilities of Board Committees involved with risk governance include:
23
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
•
•
•
•
•
•
•
1
2
3
4
5
6
•
•
•
•
Review risk limits, policies and management framework and recommend amendments (where
appropriate) to the Board Risk Management Committee.
Recommend that the Board approve the methodology of calculating the level of risk and allocation
of limits based on recommendations of Risk Management.
To review and approve the Risk Framework on an annual basis.
Receive and review monthly reports on the Bank‘s Risk Profile, including the Top 20 Inherent Risks,
the Top 20 Residual Risk after Controls, and the associated management actions resulting from the
review.
Recommend to the Board, policies and guidelines under which the Bank will manage
matters listed below, and in so doing protect the Bank’s capital base and reputation:
Balance Sheet growth:
Deposits, Advances and Investments;
Non-earning assets
Market and Liquidity Management.
Capital Management Compliance
Asset and Liability Management Committee (ALCO)
Responsibilities:
Act as a coordinating body for capturing and controlling organisational risks and making
recommendations to the Board Risk Committee for the allocation of resources (financial or
otherwise).
The Risk Management Committee (RMC) has oversight responsibility for all risk categories in the
Bank.
Receive and review monthly Risk Reports covering losses, near misses, abnormal gains/profits,
reputation risk, quantification of operational risk and capital.
Receive and review half yearly reports on Business Continuity Management and Disaster Recovery
Planning, including internal and external benchmarking, and test preparation results,
Monitor and control all market, liquidity risk and interest rate risk across the Bank in
accordance with the risk appetite set by the Board of Directors;
Review limit, guideline or trigger breaches and agree remedial actions in order to align
exposures with agreed appetite;
Approve Market Risk, Liquidity Risk and Interest Rate Risk Policies for the Bank;
Review and note the impact of internal and external factors on the net interest
margin; and
Responsibilities:
Risk Management Committee (RMC)
24
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Compliance Department
Responsibilities:
1
2
3
4
5
6
7
8
Business Units
Responsibilities
•
Implementing the Bank’s risk management strategies;
•
•
Identifying risk issues and implementing remedial action to address these issues; and
•
Reporting and escalating material risks and associated issues to appropriate authorities.
Monthly rendition of customers’ complaints report to Central Bank of Nigeria.
Ensuring that the Bank’s regulatory returns are sent promptly to CBN, NDIC, CAC, SEC, NSE and
other relevant regulatory bodies.
Coordinating the training of staff in AML/Counter Terrorism Financing awareness, detection method
and reporting requirements
Managing day-to-day risk exposures by using appropriate procedures and controls in line with the
Bank’s risk management framework;
Business Units and their staff, as primary risk owners/managers, are responsible for the day-to-day
identification, mitigation, management and monitoring of risks within their respective functions.
Business Units and their staff are also responsible for the following:
Monitoring of regulations, laws, circulars and policies issued by regulators for banks and other
financial institutions to ensure compliance.
Rendition of money laundering reports such as Currency Transaction Report (CTR), Suspicious
Transaction Report (STR) and Politically Exposed Persons Transaction Report (PEP) to Central Bank
of Nigeria (CBN) and Nigerian Financial Intelligence Unit (“NFIU”) monitoring the Bank’s activities to
ensure compliance to prudential requirements stipulated in CBN prudential guidelines.
Conducting investigation into customer complaints on service issues, transaction errors and other
irregularities and prompt resolution of these complaints.
Develop and review anti-money laundering (“AML”) compliance policy/manual
Regular review and approval of customers’ accounts opening/reactivation to ensure it meets Know
Your Client (“KYC”) requirements.
25
ABBEY MORTGAGE BANK PLC
ENTERPRISE RISK MANAGEMENT POLICY- Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
The Bank approaches and views risk not only as an uncertainty, but also as a potential opportunity to
develop new frontiers in the Mortgage Banking Industry.
Internal Audit
Internal Audit is responsible for the independent review of risk management and the control
environment. Its objective is to provide reliable, valued and timely assurance to the Board of Directors
and Executive Management over the effectiveness of controls, mitigating current and evolving high
risks and in so doing enhancing the controls culture within the Bank. The Board Audit Committee
reviews and approves Internal Audit’s plans and resources, and evaluates the effectiveness of Internal
Audit. An assessment by external advisers is also carried out periodically.
Responsibilities
26
ABBEY MORTGAGE BANK PLC
REPORT OF THE AUDIT COMMITTEE
FOR THE YEAR ENDED 31 DECEMBER 2020
•
•
•
•
Mr Adekunle Alli
Chairman, Audit Committee
Members of the Audit Committee
Mr Adekunle Alli
Prince (Engr.) Olayiwola Tobun
Mr. Gbadebo Ajeigbe
AVM Olufemi Soewu (Rtd)
High Chief Samuel Oni
Mr. Nonso Okpala
26 February 2021
In accordance with the provisions of Section 404(4) of the Companies and Allied Matters Act 2020, we
have reviewed the financial statements for the year ended 31 December 2020 as follows:
We have exercised our statutory functions and powers as provided by the Articles of Association
of the Bank and the Companies and Allied Matters Act 2020 and acknowledge the co-operation of
management staff in the conduct of our responsibilities.
We are of the opinion that the accounting and reporting policies of the Bank are in accordance
with legal requirements and agreed ethical practices and that the scope of planning of both the
external and internal audits for the year ended 31 December 2020 were satisfactory and
complied with the Bank’s system and internal control.
We have reviewed the findings on management matters in conjunction with the external auditors
and departmental responses thereon;
As required by the provisions of the Central Bank of Nigeria Circular BSD/1/2004 dated 18
February 2004 on “Disclosures of Insider-Related Credits in Financial Statements” we reviewed
the insider-related credits of the Bank and found them to be as analysed on in the financial
statements as at 31 December 2020.
27
28
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UBA House 19
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Floor Fax: +234 (01) 463 0481
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P.O. Box 2442
Lagos, Nigeria
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ABBEY MORTGAGE BANK PLC
Report on the Audited Financial Statements
Opinion
We have audited the financial statements of Abbey Mortgage Bank Plc ("the Bank") set out on pages 33 to
100, which comprise the statement of financial position as at 31 December 2020, and the statement of profit
or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of
Abbey Mortgage Bank Plc as at 31 December 2020, and its financial performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards, the provisions of the
Companies and Allied Matters Act, 2020, the Banks and Other Financial Institutions Act 2020, the Financial
Reporting Council of Nigeria Act No. 6, 2011 and relevant Central Bank of Nigeria Guidance and Circulars.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the financial
statements section of our report. We are independent of the Bank in accordance with the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and other
independence requirements applicable to performing the audit of the Bank. We have fulfilled our other
ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical
requirements applicable to performing the audit of the Bank. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of our
audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how our audit addressed the
matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the accompanying financial statements.
29
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th
Floor Fax: +234 (01) 463 0481
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ABBEY MORTGAGE BANK PLC - Continued
Key Audit Matter
How the matter was addressed in the audit
Impairment of loans and advances to
customers
As at 31 December 2020, Loans and advances to
customers amounted to N5.6billion representing
30% of total assets and the impairment
allowance amounted to N837million .The
assessment of impairment for loans and advances
is significant as it involves judgment due to
the level of subjectivity inherent in estimating the
impact of key assumptions on the recoverable
amount of the loan balances.
The use of the Expected Credit Loss model for
the computation of impairment allowance
requires the application of certain indices which
are estimated from historical financial data within
and outside the Bank, which includes;
- the determination of criteria for
significant increase in credit risk (SICR) for
staging purpose.
- assessing the relationship between the
quantitative and qualitative factors incorporated
in determining the Probability of Default (PD),
the Loss Given Default (LGD), and the Exposure
at Default (EAD).
-forward looking information and the probability
weighting used in the ECL Model
- factors considered in cash flow
estimation including timing and amount.
- factors considered in collateral
valuation including hair-cut and time to
realization.
Given the level of complexity and judgment
involved in the determination of the ECL, and the
material balance of the provision, we considered
the impairment of loan and advances as a key
audit matter in the financial statements.
The Bank’s accounting policy on impairment and
related disclosures on credit risk are shown in
notes 3.2, 3.3 and 18.
Our audit approach with respect to the audit of impairment
on loans and advances to customers for the year ended 31
December 2020:
We obtained an understanding of the Bank’s credit policy,
we then tested and evaluated the design and operating
effectiveness of the controls around the processes of credit
assessment, loan classification and loan impairment
assessment.
We checked and understood the key data sources and
assumptions used in the Expected Credit Loss model used
by the Bank to determine impairment provisions.
(i) We checked the reasonableness of the Bank’s
ECL methodology by considering whether it reflects
unbiased and probability-weighted amounts that is
determined by evaluating a range of possible outcomes, the
time value of money and reasonable and supportable
information at the reporting date about past events, current
conditions and forecasts of the future economic condition,
information considered include: industry historical default
rates, foreign exchange rate and Gross Domestic Product
(GDP) growth rates;
(ii) For forward looking assumptions used by the
Bank in its ECL calculations, we held meetings with
management and corroborated the assumptions using
public available information comprising foreign exchange
rate and Gross Domestic Product (GDP) growth rate.
(iii) We evaluated the appropriateness of the basis of
determining Exposure at Default, including the contractual
cash flows, outstanding loan balance, loan repayment type,
loan tenor and effective interest rate;
(iv) For Probability of Default (PD) used in the ECL
calculations, we checked the historical movement in the
balances of facilities between default and non-default
categories for each other;
(v) We checked the calculation of the Loss Given
Default (LGD) used by the Bank in the ECL calculations,
including the appropriateness of the use of collateral and
the resultant arithmetical calculations;
(vi) We re-performed the calculations of impairment
allowance for loans and advances using the Bank’s
impairment model and validated key inputs. For loans and
advances which have shown a significant increase in credit
risk, the recalculation was based on the amount which the
Bank may not recover throughout the life of the loans while
for loans and advances that have not shown significant
increase in credit risk, the recalculation was based on the
losses expected to result from default events within a year.
30
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UBA House 19
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Floor Fax: +234 (01) 463 0481
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ABBEY MORTGAGE BANK PLC – Continued
Other Information
The Directors are responsible for the other information. The other information comprises the Report of the
Directors, Corporate Governance Report, Enterprise Risk Management Policy, Statement of Directors
Responsibility in Relation to the Financial Statements, Report of the Audit Committee, the Investment and
Securities Act Certificate, Value Added Statement and Five-Year Financial Summary which we obtained
prior to the date of this report. Other information does not include the financial statements and our auditor’s
report thereon.
Our opinion on the financial statements does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
Auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to those charged with governance.
Responsibilities of the Directors for the Financial Statements
The Directors are responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, the provisions of the Companies and Allied
Matters Act, 2020, the Banks and Other Financial Institutions Act 2020, the Financial Reporting Council of
Nigeria Act No. 6, 2011 and relevant Central Bank of Nigeria (CBN) Circulars and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Bank’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Bank or to cease operations,
or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
31
Ernst & Young Tel: +234 (01) 463 1 4500
UBA House 19
th
Floor Fax: +234 (01) 463 0481
57 Marina ey.com
P.O. Box 2442
Lagos, Nigeria
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ABBEY MORTGAGE BANK PLC – Continued
accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
Auditor’s Responsibilities for the Audit of the Financial Statements – Continued
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a
going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
32
Ernst & Young Tel: +234 (01) 463 1 4500
UBA House 19
th
Floor Fax: +234 (01) 463 0481
57 Marina ey.com
P.O. Box 2442
Lagos, Nigeria
From the matters communicated with the Directors, we determine those matters that were of most
significance in the audit of the consolidated and separate financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
In compliance with the Banks and Other Financial Institutions Act 2020 and circulars issued by Central Bank
of Nigeria, we confirm that:
Related party transactions and balances are disclosed in Note 36 to the financial statements in compliance
with Central Bank of Nigeria circular BSD/1/2004.
As disclosed in Note 39 to the financial statements, no contravention of the provisions of the Bank and Other
Financial Institutions Act 2020 and CBN circulars was brought to our attention during the audit of the
financial statements for the year ended 31 December 2020.
In accordance with the requirement of the Fifth Schedule of the Companies and Allied Matters Act, 2020,
we confirm that:
i. We have obtained all the information and explanations which to the best of our knowledge and
belief were necessary for the purpose of our audit;
ii. In our opinion proper books of account have been kept by the Bank, in so far as it appears from our
examination of those books;
iii. The Bank's statement of financial position and statement of profit or loss and other comprehensive
income are in agreement with the books of account.
Signed:
Oluwasayo Elumaro, FCA
FRC/2012/ICAN/00000000139
For: Ernst & Young
Lagos, Nigeria
Date: 16 March 2021
ABBEY MORTGAGE BANK PLC
FALSE FALSE
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
Notes
₦’000 ₦’000
Interest income calculated using the effective interest rate method 5
1,399,438 1,124,745
Interest expense calculated using the effective interest rate method 6
(539,378) (487,657)
Net interest income
860,060 637,088
Fees and commission income 7
601 235,986
Loss on disposal of non-current assets held for sale
(860) (13,796)
Other operating income 8
120,266 27,444
Total operating income
980,067 886,722
Credit loss expense 9
(3,887,927) (79,558)
Net operating income
(2,907,860) 807,164
Personnel expenses 10
(414,441) (333,092)
Depreciation 11
(57,678) (39,253)
Amortisation 23
(6,502) (13,151)
Other operating expenses 12
(911,391) (473,611)
Total operating expenses
(1,390,012) (859,107)
Loss before income tax expense
(4,297,872) (51,943)
Income tax expense 13
(3,747) (10,693)
Loss for the year
(4,301,619) (62,636)
Other comprehensive Income
- -
Total comprehensive Income for the year net of tax
(4,301,619) (62,636)
Loss per share attributable to ordinary equity holders (Kobo) - Basic
and Diluted
14 (67.87) (1.49)
The accompanying notes to the financial statements form part of these financial statements.
33
ABBEY MORTGAGE BANK PLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
31 December 31 December
2020 2019
Notes ₦’000 ₦’000
Assets
Cash on hand 15 2,020 785
Cash balances with central bank 16 289,774 128,463
Due from banks 17 8,793,209 1,831,405
Loans and advances 18 4,788,092 7,738,141
Financial investments - securities at FVTPL 19 329,334 258,778
Financial Investments- securities at amortised cost 20 2,826,364 648,316
Other assets 21 117,742 213,188
Property and equipment 22 1,092,515 1,094,520
Intangible assets 23 16,619 11,515
18,255,669
11,925,111
Non-current assets held for sale 24
264,681
334,681
Total Assets
18,520,350
12,259,792
Liabilities
Deposits from customers 25 14,629,440 6,340,597
Current income tax payable 13.3 21,606 27,982
Other liabilities 26 244,963 170,638
Due to National Housing Fund 27 269,300 325,835
Total Liabilities
15,165,309
6,865,052
Equity
Share capital 29 3,230,769 2,100,000
Share premium 30 4,008,277 2,877,126
Accumulated losses 31 (5,029,743) (2,093,350)
Statutory reserve 32 298,440 298,440
Regulatory risk reserve 40 847,298 2,212,524
Total Equity 3,355,041 5,394,740
Total liabilities and equity
18,520,350 12,259,792
Mazi Emmanuel Kanu O.Ivi
Chairman -------------------------------------------------------
FRC/2014/ICAN/00000008160
Madu Hamman
Managing Director/Chief Executive Officer -------------------------------------------------------
FRC/2013/CIBN/000000011355
Idowu O. Sanni
Financial Controller -------------------------------------------------------
FRC/2018/ICAN/00000017717
The financial statements were approved by the Board of Directors on 02 March 2021 and signed on its behalf
by:
The accompanying notes to the financial statements form part of these financial statements.
34
ABBEY MORTGAGE BANK PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share Share Statutory Regulatory Accumulated Total
capital premium reserve risk reserve losses Equity
₦’000 ₦’000 ₦’000 ₦’000 ₦’000 ₦’000
Opening balance as at 1 January 2019
2,100,000 2,877,126 298,440 1,509,849 (1,328,039) 5,457,376
Loss for the year
- - - - (62,636) (62,636)
Other comprehensive income for the year
- - - - - -
Transactions directly affecting equity holders
Transfer to regulatory risk reserve
- - - 702,675 (702,675) -
Balance as at 31 December 2019
2,100,000 2,877,126 298,440 2,212,524 (2,093,350) 5,394,740
Loss for the year
- - - - (4,301,619) (4,301,619)
Other comprehensive income for the year
- - - - - -
Transactions directly affecting equity holders
Issuance of shares
1,130,769 1,243,846 - - - 2,374,615
Transaction cost on share issuance
- (112,695) - - - (112,695)
Transfer from regulatory risk reserve
- - - (1,365,226) 1,365,226 -
Balance as at 31 December 2020
3,230,769 4,008,277 298,440 847,298 (5,029,743) 3,355,041
35
ABBEY MORTGAGE BANK PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
Notes ₦’000 ₦’000
Cash flows from operating activities:
Loss before income tax
(4,297,872) (51,943)
Adjustment for non-cash items 33.3
3,834,019 132,058
Net cash flows (used)/from operating activities before
changes in working capital
(463,853) 80,115
Change in operating assets 33.1
(3,102,558) (1,304,328)
Change in operating liabilities 33.2
8,306,633 368,904
Income tax paid 13.3
(10,123) (15,000)
Net cash flows from/(used in) operating activities
4,730,099 (870,309)
Cash flows from investing activities:
Purchase of intangible assets 23
(11,606) (3,200)
Proceeds on disposal of non-current asset held for sale
69,140 2,065,400
Refund to customer for returning non-current asset formerly
sold
- (45,251)
Proceeds on disposal of property and equipment
2,005 3,192
Purchase of property and equipment 22
(55,673) (73,495)
Payment for short term lease
- (6,269)
Dividend received
21,500 -
Net cash flows (used in)/ from investing activities
25,366 1,940,377
Cash flows from financing activities:
Repayments of borrowings
- (5,712)
Proceeds from issue of share 31.2
2,374,615 -
Transaction cost on share issue 31.2
(112,695) -
Net cash flows from/(used in) financing activities
2,261,920 (5,712)
Net increase in cash and cash equivalents
7,017,385 1,064,356
Cash and cash equivalents at beginning of year
1,835,152 770,796
Cash and cash equivalents at end of year 33
8,852,537 1,835,152
The accompanying notes to the financial statements form part of these financial statements.
36
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
1 General information
2.1
Basis of preparation
a
Statement of Compliance
b
Basis of Measurement
c
Use of Estimates and Judgments
2.2
Changes in accounting policies and disclosures
2.2.1
i
ii
iii
iv
v Amendment from IFRS 16 Covid 19 Related Rent Concessions:
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Bank’s annual
financial statements for the year ended 31 December 2019. The Bank has not early adopted any other standard, interpretation or amendment that has been
issued but is not yet effective.
Several other amendments and interpretations are applied for the first time in 2020, but do not have an impact on the financial statements of the Bank.
These financial statements of the Bank are general purpose financial statements which have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). Additional information required by the provisions of the Companies and
Allied Matters Act 2020, the Banks and Other Financial Institutions Act 2020, the Financial Reporting Council of Nigeria (“FRCN”) Act No. 6, 2011 and relevant
Central Bank of Nigeria circulars, is included where appropriate.
The financial statements have been prepared on the historical cost basis except for equity instruments which are carried at fair value.
The preparation of the financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is
revised and in any future periods affected.
The principal activities of the Bank are the provision of mortgage services, financial advisory, and real estate construction finance.
For the earlier years of its operations, the Bank specialized in funding small and medium size businesses. In the last few years, the Bank has started to implement
a mortgage financing strategy in line with its strategic vision to become “the number one mortgage service provider in Nigeria”. The Bank currently has 113
(2019: 109) staff in ten (10) branches and the Head Office.
The financial statements for the year ended 31 December 2020 were authorised for issue in accordance with a resolution of the Board of Directors on 02 March
2021.
These financial statements are the financial statements of Abbey Mortgage Bank Plc. (the “Bank”), a public limited liability Bank incorporated and domiciled in
Nigeria on 26 August 1991. The Bank obtained its licence to operate as a mortgage bank on 20 January 1992 and commenced business on 11 March 1992. It was
later converted to a public limited liability Bank in September 2007. On 21 October 2008, the Bank became officially listed on the Nigerian Stock Exchange.
Below is a list of other interpretations and amendment that were effective for the first time in 2020 but do not have a significant impact on the Bank:
Interest rate benchmark Reform- Amendment to IFRS 9, IAS 39 and IFRS 7
Definition of Business- Amendment to IFRS 3
Definition of Material- Amendment to IAS 1 and IAS 8
The Conceptual Framework for Financial Reporting
37
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2.3
Standards issued but not yet effective
a
IFRS 17 Insurance Contracts
Amendments to IFRS 17
b
The amendment will have no significant impact on the Bank.
c
The amendment is not expected to have significant impact on the Bank.
*A simplified approach (the premium allocation approach) mainly for short-duration contracts
On 27 August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. With publication of
the phase two amendments, the IASB has completed its work in response to IBOR reform.
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative
nearly risk-free interest rate (RFR)
The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as
changes to a floating interest rate, equivalent to a movement in a market rate of interest. It also permit changes required by IBOR reform to be made to hedge
designations and hedge documentation without the hedging relationship being discontinued. The ammendments also provide temporary relief to entities from
having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component.
The amendment is effective for annual periods beginning on or after 1 January 2021. While application is retrospective, the entity is not required to restate prior
periods.
Reference to the Conceptual Framework- Amendment to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace
a reference to a previous version of the IASB’s Conceptual Framework (the 1989 Framework) with a reference to the current version issued in March 2018 (the
Conceptual Framework) without significantly changing its requirements.
The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent
liabilities that would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The
exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present
obligation exists at the acquisition date. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for
recognition at the acquisition date.
The amendment is effective for annual periods beginning on or after 1 January 2022 and must be applied prospectively.
* A specific adaptation for contracts with direct participation features (the variable fee approach)
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures required. Early application is permitted, provided the
entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17.
In June 2020, the IASB issued amendments to IFRS 17. These amendments follow from the Exposure Draft (ED) on proposed Amendments to IFRS 17 Insurance
Contracts.
Deferral of the effective date of IFRS 17 and IFRS 9 for qualifying insurance entities by two years to annual reporting periods beginning on or after 1 January
2023)
• Scope of the standard
• Expected recovery of insurance acquisition cash flows from insurance contract renewals
• CSM relating to investment activities
• Applicability of the risk mitigation option for contracts with direct participation features
• Reinsurance contracts held - expected recovery of losses on underlying onerous contracts
• Simplified presentation of insurance contracts in the statement of financial position
• Additional transition reliefs
IFRS 17 will not be applicable to the Bank, as it does not issue insurance contract.
As a result of its re-deliberations, the IASB has made changes to the following main areas of IFRS 17
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and
measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all
types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain
guarantees and financial instruments with discretionary participation features.
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Bank’s financial statements are disclosed below. The
Bank intends to adopt these standards and interpretations, if applicable, when they become effective.
A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent
for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by:
Interest rate Benchmark Reform-Phase 2- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
38
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2.3 Standards issued but not yet effective
d
The amendment is not expected to have significant impact on the Bank.
e
The amendment is not expected to have significant impact on the Bank.
f
g
IFRS 1- First time Adoption of International Financial Reporting Standards
The amendment is not expected to have an impact on the Bank.
h
The amendment is not expected to have a significant impact on the Bank.
i
The amendment is not expected to have an impact on the Bank.
J
Lease Incentives
The amendment removes the illustration of payments from the lessor relating to leasehold improvements in Illustrative Example 13 accompanying IFRS 16. This
removes potential confusion regarding the treatment of lease incentives when applying IFRS 16.
The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported
by the parent, based on the parent’s date of transition to IFRS.
An entity applies the amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted.
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different
from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or
received by either the borrower or lender on the other’s behalf. There is no similar amendment proposed for IAS 39. An entity applies the amendment to
financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment.
This amendment is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.
An entity applies the amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted
IFRS 9-Financial Instrument: Fees in the 10% test for derecognition of financial liabilities
IAS 41- Agriculature: Taxation in Fair value measurementa
Property, plants and machinery - Proceeds before intended use-Amendment to IAS 16
The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced
while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity
recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss.
The amendment is effective for annual periods beginning on or after 1 January 2022 and must be applied reprospectively only to items of PP&E made available
for use on or after the beginning of the earliest period presented when the entity first applies the amendment.
Onerous Contracts- Cost of fulfilling a contract- Amendments to IAS 37
The amendments apply a ‘directly related cost approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs
(e.g., the costs of direct labour and materials) and an allocation of costs directly related to contract activities (e.g., depreciation of equipment used to fulfil the
contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless
they are explicitly chargeable to the counterparty under the contract.
The amendment is effective for annual periods beginning on or after 1 January 2022 and must be applied prospectively to contracts for which an entity has not
yet fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments
In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to specify which costs an entity needs to include
when assessing whether a contract is onerous or loss-making.
The Bank currently presents its statement of financial position based on liquidity. However, the Bank will consider whether some of the amendments may impact
its current practice.
This amendment is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1. A
Classification of Liabilities as Current and Non-current - Amendments to IAS 1
In January 2020, the Board issued amendments to paragraphs 69 to 76 of IAS 1 Presentation of Financial Statements to specify the requirements for classifying
liabilities as current or non-current.
The amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of the reporting period
• That classification is unaffected by the likelihood that an entity will exercise its deferral right
• That only if an embedded derivative in a convertible liability is itself an equity instrument, would the terms of a liability not impact its classification
The amendment is effective for annual periods beginning on or after 1 June 2023 and must be applied reprospectively if the entity carefully consider that there
are aspects of the amendments that suggest that terms of their existing loan agreements should be renegotiated.
The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude cash flows for taxation when measuring the fair value of assets within
the scope of IAS 41.
An entity applies the amendment to fair value measurements on or after the beginning of the first annual reporting period beginning on or after 1 January 2022.
Earlier application is permitted.
39
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2.4 Significant accounting judgements, estimates and assumptions
Critical judgments in applying the Bank’s accounting policies
Going Concern
Estimates and assumptions
(i)
Determination of collateral Value
(ii)
Useful lives and carrying value of property and equipment and intangible assets
(iii)
Determination of impairment of property and equipment, and intangible assets
(iv)
Fair value measurement of financial instruments
The financial statements have been prepared on the going concern basis and there is no intention to curtail business operations. The Directors have made
assessment of the Bank's ability to continue as a going concern and have no reason to believe that the Bank will not remain a going concern in the next 12
months ahead.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Bank based its assumptions and
estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however,
may change due to market changes or circumstances arising beyond the control of the Bank. Such changes are reflected in the assumptions when they occur.
Management monitors market value of collateral on a regular basis. Management uses experienced judgement to adjust the fair value to reflect the current
circumstances. The amount and collateral required depend on the assessment of credit risk of the counterpart.
The Management believes that the underlying assumptions are appropriate and that the Bank’s financial statements therefore present the financial position and
results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in the Note 3.3.4
The estimation of the useful lives of assets is based on management’s judgment. Any material adjustment to the estimated useful lives of items of property and
equipment and intangibles will have an impact on the carrying value of these items. Areas where significant estimate are significant are disclosed in Note 22 and
23.
· Level 2: Valuation techniques based on observable inputs either directly- i.e. as prices or indirectly- i.e. derived from prices. This category includes
instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered
less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
· Level 3: This includes financial instruments, the valuation of which incorporate significant inputs for the asset or liability that is not based on observable
market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product.
These inputs are generally determined based on inputs of a similar nature, historic observations on the level of the input or analytical techniques. This category
includes other financial assets per Note 3.6.
Management is required to make judgments concerning the cause, timing and amount of impairment. In the identification of impairment indicators,
management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence,
discontinuance of services and other circumstances that could indicate that impairment exists. The Bank applies the impairment assessment to its separate cash
generating units. This requires management to make significant judgments and estimates concerning the existence of impairment indicators, separate cash
generating units, remaining useful lives of assets, projected cash flows and net realisable values. Management’s judgment is also required when assessing
whether a previously recognised impairment loss should be reversed. No property and equipment, and intangible asset was impaired at the year end- See Note
22 and 23.
For disclosure purpose, the determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of
valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees
of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
The Bank’s accounting policy on fair value measurements is discussed under note Note 3.6
The Bank measures fair values using the following hierarchy of methods.
· Level 1: Quoted market price in an active market for an identical instrument.
In the application of the Bank’s accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the
process of applying the Bank’s accounting policies and that have the most significant effect on the amounts recognised in financial statements
40
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2.4 Significant accounting judgements, estimates and assumptions
(v) Deferred tax assets
(vi)
Owner-occupied properties
(vii)
Impairment under IFRS 9
Summary of significant accounting policies
2.5
Foreign currency transactions
(a) Functional and presentation currency
The financial statements are presented in Naira, which is the Bank’s presentation currency.
(b) Transactions and balances
Foreign currency transactions (i.e. transactions denominated, or that require settlement, in a currency other than the functional currency) are translated into the
functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured.
Monetary items denominated in foreign currency are translated with the closing rate as at the reporting date. Non-monetary items measured at historical cost
denominated in a foreign currency are translated with the exchange rate as at the date of initial recognition; non-monetary items in a foreign currency that are
measured at fair value are translated using the exchange rates at the date when the fair value was determined.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at period-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss.
Forecast of future economic conditions when calculating ECLs are considered. The lifetime expected losses are estimated based on the probability – weighted
present value of the difference between:
1) The contractual cash flows that are due to the Bank under the contract; and
2) The cash flows that the Bank expects to receive.
Elements of ECL models that are considered accounting judgements and estimates include:
• The Bank’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a LTECL basis
and the qualitative assessment
• The development of ECL models, including the various formulas and the choice of inputs. Determination of associations between macroeconomic scenarios
and, economic inputs, such as unemployment levels and collateral values, and the effect on PDs, EADs and LGDs.
• Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models.
Expected lifetime:
The expected life time of a financial asset is a key factor in determine the life time expected credit losses. Lifetime expected credit losses represents default
events over the expected life of a financial asset. The Bank measures expected credit losses considering the risk of default over the maximum contractual period
(including any borrower’s extension option) over which it is exposed to credit risk.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied by the
Bank and to all periods presented in the financial report.
Items included in the financial statements of the Bank are measured using the currency of the primary economic environment in which the entity operates ("the
functional currency").
The impairment requirements of IFRS 9 apply to all debt instruments that are measured at amortised cost. Expected credit losses are recognised upon initial
recognition of the financial asset based on expectation of potential credit losses at the time of initial recognition.
The Bank does not originate or purchase credit impaired loans or receivables.
The determination of whether a financial asset is credit impaired focuses exclusively on default risk, without taking into consideration the effect of credit risk
mitigants such as collateral or guarantees. Specifically, the financial asset is credit impaired and in stage 3 when: the Bank considers the obligor is unlikely to pay
its credit obligations to the Bank. The termination may include forbearance actions, where a concession has been granted to the borrower or economic or legal
reasons that a qualitative indicators of credit impairment; or contractual payments of either principal or interest by the obligor are pass due by more than 90
days.
For financial assets considered to be credit impaired, the ECL allowance covers the amount of loss the Bank is expected to suffer. The estimation of ECLs is done
on a case by case basis for non-homogenous portfolios, or by applying portfolio based parameters to individual financial assets in this portfolios by the Bank’s
ECL model for homogenous portfolios.
Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profit will be available against which the losses can
be utilised. Judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable
profits, together with future tax-planning strategies (See Note 13). Unrelieved tax losses can be used indefinitely.
The Bank classifies owner-occupied properties as property and equipment when the Bank evaluate the terms and conditions of the arrangements, such as lease
term not constituting a major part of the economic life of the property, the present value of the minimum lease payments not amounting to substantially all of
the carrying value of the property and that it retains all the significant risks and rewards of ownership of the property. (See Note 22)
41
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.6 Financial assets and liabilities
2.6.1 Initial recognition
Day 1 profit or loss
Amortised cost and gross carrying amount
Effective interest method
Interest income and expenses
All financial assets and liabilities are initially recognized on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the
instrument. The Bank uses trade date accounting for regular way contracts when recording financial assets transactions.
A financial asset or financial liability is measured initially at fair value plus or minus, for an item not at fair value through profit or loss, direct and incremental
transaction costs that are directly attributable to its acquisition or issue. Transaction costs of financial assets and liabilities carried at fair value through profit or
loss are expensed in profit or loss at initial recognition.
When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation technique using only inputs
observable in market transactions, the Bank recognises the difference between the transaction price and fair value in Net gains on financial assets at fair value
through profit or loss. In those cases where fair value is based on models for which some of the inputs are not observable, the difference between the
transaction price and the fair value is deferred and is only recognised in profit or loss when the inputs become observable, or when the instrument is
derecognised.
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus
the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the
maturity amount and, for financial assets, adjusted for any expected credit loss allowance.
The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any expected credit loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or
financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial
liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that
are integral to the effective interest rate, such as origination fees.
For purchased or originated credit-impaired (`POCI') financial assets — assets that are credit-impaired at initial recognition — the Bank calculates the credit-
adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the
impact of expected credit losses in estimated future cash flows.
When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new
estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.
Interest income and expenses are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument to:
• the gross carrying amount of the financial asset; or
• the amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than credit-impaired financial assets, the Bank estimates future cash flows
considering all contractual terms of the financial instrument, but not expected credit losses. For credit-impaired financial assets, a credit-adjusted effective
interest rate is calculated using estimated future cash flows including expected credit losses. Further policy on interest income is covered in Note 2.7.1
The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate.
Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability. Recoveries of interest
that was previously not recognized needs to be recognized as a gain in the credit loss expense.
42
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.6.2 Financial assets - Classification of financial instruments
2.6.3 Financial assets - Subsequent measurement
a) Debt instruments
Business Model assessment
Solely payments of principal and interest (SPPI) assessment
b) Equity instruments
Principal is defined as the fair value of the financial asset on initial recognition. Interest is defined as consideration for the time value of money and for the credit
risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual terms of the instrument. This
includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would
not meet this condition. In making the assessment, the Bank considers:
• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Bank's claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and
• features that modify consideration of the time value of money - e.g. periodical rate of interest
The Bank subsequently measures all its equity investments at fair value through profit or loss (FVTPL). Changes in the fair value of financial assets at fair value
through profit or loss are recognised in profit or loss. Dividends from such investments continue to be recognised in profit or loss as other income when the right
to receive payments is established. Included in this classification are quoted financial investments.
The Bank classifies its financial assets under IFRS 9, into the following measurement categories:
• those to be measured at fair value through profit or loss (FVTPL) (equity instrument); and
• those to be measured at amortised cost (debt instrument).
The classification depends on the Bank’s business model (i.e. business model test) for managing financial assets and the contractual terms of the financial assets
cash flows (i.e. solely payments of principal and interest – SPPI test). The Bank also classifies its financial liabilities at amortized cost. Management determines
the classification of the financial instruments at initial recognition.
The classification and subsequent measurement of debt instruments depend on the Bank’s business model for managing the financial assets and the contractual
terms of the cash flows. Based on these factors, the Bank classifies its debt instruments into one of the following measurement categories:
Amortised cost: Financial assets such as loans and advances that are held within a business model whose objective is collection of contractual cash flows and
where such cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss due to impairment or upon
derecognition of a debt investment that is subsequently measured at amortised cost is recognised in profit or loss. Interest income from these financial assets is
included in "Interest income calculated using the effective interest rate method"
The Bank makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is
managed and information is provided to management. The information considered includes:
• the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management's strategy focuses on
earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities
that are funding those assets or realising cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and reported to the Bank's management;
• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
• how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows
collected.
• the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information
about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank's stated objective for managing financial assets is
achieved and how cash flows are realized.
43
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.6.4 Reclassifications
2.6.5 Modifications
2.6.6 Impairment of financial assets
Overview of the ECL principles
The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased
significantly since initial recognition, by considering if it is 30 days past due. Based on the above process, the Bank groups its loans into Stage 1, Stage 2 and Stage
3, as described below:
• Stage 1: When loans are first recognised, the Bank recognises an allowance based on 12 months expected credit losses (12mECLs). Stage 1 loans also include
facilities where the credit risk has improved and the loan has been reclassified from Stage 2.
• Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the lifetime expected credit losses
(LTECLs). Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.
• Stage 3: These are loans considered as credit-impaired.The Bank records an allowance for the LTECLs.
POCI: The Bank does not have purchased or originated credit impaired (POCI) assets in its portfolio.
The following are not considered to be changes in the business model:
• A change in intention related to particular financial assets (even in circumstances of significant changes in market conditions)
• A temporary disappearance of a particular market for financial assets
• A transfer of financial assets between parts of the entity with different business models
If the terms of a financial asset are modified, the Bank evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are
substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial
asset is derecognised and a new financial asset is recognised at fair value. Any difference between the amortized cost and the present value of the estimated
future cash flows of the modified asset or consideration received on derecognition is recorded as a separate line item in profit or loss.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the
financial asset. In this case, the Bank recalculates the gross carrying amount of the financial asset as the present value of the renegotiated or modified
contractual cash flows that are discounted at the financial asset’s original effective interest rate (or credit-adjusted effective interest rate for purchased or
originated credit-impaired financial assets). The amount arising from adjusting the gross carrying amount is recognised in profit or loss.
The Bank assesses on a forward looking basis the expected credit losses (ECL) associated with its loans and other debt financial assets not held at FVPL. In this
section all referred to as 'financial instruments'. The impairment methodology applied depends on whether there has been a significant increase in credit risk
since initial recognition.
The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, time value of
money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions
and forecasts of future economic conditions. Equity instruments are not subject to impairment under IFRS 9.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no
significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss (12mECL). The 12mECL is the
portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting
date.
Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial
instruments.
The Bank reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place from the start of
the first reporting period following the change. Such changes are expected to be very infrequent and must be significant to the Bank’s operations.
When reclassification occurs, the Bank reclassifies all affected financial assets in accordance with the new business model. Reclassification is applied
prospectively from the ‘reclassification date’. Reclassification date is ‘the first day of the first reporting period following the change in business model. Gains,
losses or interest previously recognised are not restated when reclassification occurs.
Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Bank changes its business model for managing financial
assets that are debt instruments. A change in the objective of the Bank’s business occurs only when the Bank either begins or ceases to perform an activity that is
significant to its operations (e.g., via acquisition or disposal of a business line).
44
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
The calculation of ECLs
The mechanics of the ECL calculations are outlined below and the key elements are, as
follows:
Collateral valuation
Stage 2
• When a financial instruments has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECLs. The mechanics are
similar to those explained above but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an
approximation to the original EIR.
Stage 3
• For financial instruments considered credit-impaired (as defined in Note 3), the Bank recognises the lifetime expected credit losses for these loans. The method
is similar to that for Stage 2 assets, with the PD set at 100%.
POCI
• POCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the cumulative changes in lifetime ECLs since initial
recognition, discounted by the credit-adjusted EIR.
To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in various forms, such as cash, securities,
letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. Collateral,
unless repossessed, is not recorded on the Bank’s statement of financial position. However, the fair value of collateral affects the calculation of ECLs. It is
generally assessed, at a minimum, at inception and re-assessed on a quarterly basis. However, some collateral, for example, cash or securities relating to
margining requirements, is valued daily. Details of the impact of the Bank’s various credit enhancements are disclosed in Note 3.
To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which do not have readily
determinable market values are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as
mortgage brokers, or based on housing price indices.
LGD: The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the
contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a
percentage of the EAD. The LGD is further explained in Note 3.3.3.
When estimating the ECLs, the Bank considers three economic scenario which are considered to be the upturn economic scenario, downturn economic scenario
and base case economic scenario. The assessment also incorporates how defaulted loans are expected to be recovered, including the probability that the loans
will cure and the value of collateral or the amount that might be received for selling the asset.
The maximum period for which the credit losses are determined is the contractual life of a financial instrument unless the Bank has the legal right to call it
earlier, with the exception of revolving facilities which could extend beyond the contractual life.
The mechanics of the ECL method are summarised below:
Stage 1
• The 12mECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the
12 months after the reporting date. The Bank calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the
reporting date.
• These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the
original EIR.
The Bank calculates ECLs based on three economic scenario (base case, best case and worst case) to measure the expected cash shortfalls, discounted at an
approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows
that the entity expects to receive.
PD: The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed
period, if the facility has not been previously derecognised and is still in the portfolio. The concept of PDs is further explained in Note 3.3.3.
EAD: The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting
date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued
interest from missed payments. The EAD is further explained in Note 3.3.3.
45
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
Collateral repossessed
Write-off
Forward looking information
Derecognition of financial assets
Offsetting financial instruments
The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this,
qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material.
The Bank derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or
in which the Bank neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any
interest in such derecognised financial asset that is created or retained by the Bank is recognised as a separate asset or liability. Impaired debts are derecognised
when they are assessed as uncollectible.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset
transferred), and consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.
Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The Bank’s policy is to determine whether a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for
the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset.
Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets) and fair value less cost to
sell for non-financial assets at the repossession date in, line with the Bank’s policy.
After a full evaluation of a non-performing exposure, in the event that either one or all of the following conditions apply, such exposure is recommended for
write-off (either partially or in full):
• continued contact with the customer is impossible;
• recovery cost is expected to be higher than the outstanding debt;
• amount obtained from realization of credit collateral security leaves a balance of the debt; or
• it is reasonably determined that no further recovery on the facility is possible.
All credit facility write-offs require endorsement by the Board Credit and Risk Committee, as defined by the Bank. Credit write-off approval is documented in
writing and properly initialed by the Board Credit and Risk Committee. The gross carrying amount of an asset is written off (either fully or partially) to the extent
that there is no realistic prospect of recovery. This is generally the case when the Bank determines that the counterparty does not have assets or sources of
income that could generate sufficient cashflows to repay the amount subject to write off. However, the financial assets that are subjected to write off could still
be subject to enforcement activities in other to comply with the Bank's procedures for recovery of amount due.
A write-off constitutes a derecognition event. The write-off amount is used to reduce the carrying amount of the financial asset. However, financial assets that
are written off could still be subject to enforcement activities in order to comply with the Bank's procedures for recovery of amount due. Whenever amounts are
recovered on previously written-off credit exposures, such amount recovered is recognised as income on a cash basis only.
In its ECL models, the Bank relies on a broad range of forward looking information as economic inputs, such as:
• GDP growth
• Unemployment rates
• Inflation rates
• Foreign exchange rates
• Market growth rates
46
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.6.7 Financial liabilities
Initial and subsequent measurement
Modifications
Derecognition
Reclassification
Financial liabilities are not reclassified after initial classification.
2.7.1
Income and expenses
If expectations regarding the cash flows on the financial asset are revised for reasons other than credit risk. The adjustment is booked as a positive or negative
adjustment to the carrying amount of the asset in the statement of financial position with an increase or reduction in interest income. The adjustment is
subsequently amortised through interest income in profit or loss.
a. Amortised cost and gross carrying amount
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus
the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the
maturity amount and, for financial assets, adjusted for any expected credit loss allowance (or impairment allowance before 1 January 2018). The gross carrying
amount of a financial asset is the amortised cost of a financial asset before adjusting for any expected credit loss allowance.
b. Calculation of interest income and expenses
The Bank calculates interest income and expense by applying the effective interest rate to the gross carrying amount of the asset (when the asset is not credit-
impaired) or to the amortised cost of the liability.
However, for financial asset that have become credit-impaired subsequent to initial recognition and is, therefore, regarded as ‘Stage 3’, the Bank calculates
interest income by applying the effective interest rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-
impaired, then the Bank reverts to calculating interest income on a gross basis.
In both the current and prior period, all financial liabilities are classified and subsequently measured at amortised cost.
The Bank derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. This occurs when
the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective
interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. In this case, a new
financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and
the new financial liability with modified terms is recognised in profit or loss.
If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain
or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment (i.e. the modified liability is not substantially different),
any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms
of existing financial liabilities, is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are
substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted
using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.
In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features
attached to the instrument and change in covenants are also taken into consideration.
If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain
or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount
of the liability and are amortised over the remaining term of the modified liability.
Interest income and expenses are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument to:
• The gross carrying amount of the financial asset; or
• The amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than credit-impaired assets, the Bank estimates future cash flows considering all
contractual terms of the financial instrument, but not expected credit losses. For credit-impaired financial assets, a credit-adjusted effective interest rate is
calculated using estimated future cash flows including expected credit losses. The EIR (and therefore, the amortised cost of the asset) is calculated by taking into
account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Bank recognizes interest income using a rate of return
that represents the best estimate of a constant rate of return over the expected life of the loan. Hence, it recognises the effect of potentially different interest
rates charged at various stages, and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
Financial liabilities are initially measured at their fair value, except in the case of financial liabilities recorded at FVPL, transaction costs are added to, or
subtracted from, this amount. Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL when they
are held for trading and derivative instruments or the fair value designation is applied.
After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into
account any discount or premium on issue funds, and costs that are an integral part of the EIR. The Bank classifies financial liabilities as held for trading when
they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are
managed together, for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading liabilities are recorded and measured in the
statement of financial position at fair value.
47
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.7.2
Fees and commission
2.7.3
Other operating income
2.7.4
Income tax expense
2.7.5
Valuation of Financial Instruments
· The likelihood and expected timing of future cash flows on the instrument. These cash flows are usually governed by the terms of the instrument,
although judgment may be required when the ability of the counterparty to service the instrument in accordance with the contractual terms is in doubt. Future
cash flows may be sensitive to changes in market rates;
· Selecting an appropriate discount rate for the instrument. The determination of this is based on the assessment of what a market participant would
regard as the appropriate spread of the rate for the instrument over the appropriate rate; and
· Judgment to determine what model to use to calculate fair value in areas where the choice of valuation model is particularly subjective, for example,
when valuing complex derivative products.
When applying a model with unobservable inputs, estimates are made to reflect uncertainties in fair values resulting from a lack of market data inputs, for
example, as a result of illiquidity in the market. For these instruments, the fair value measurement is less reliable. Inputs into valuations based on unobservable
data are inherently uncertain because there is little or no current market data available from which to determine the level at which an arm‘s length transaction
would occur under normal business conditions. However, in most cases there is some market data available on which to base a determination of fair value, for
example historical data, and the fair values of most financial instruments are based on some market observable inputs even when unobservable inputs are
significant.
Given the uncertainty and subjective nature of valuing financial instruments at fair value, it is possible that the outcomes in the next financial year could differ
from the assumptions used, and this could result in a material adjustment to the carrying amount of financial instruments measured at fair value.
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the
effective interest rate.
Other fees and commission income including account servicing fees, investment management fees, sales commission, placement fees and syndication fees are
recognised as the related services are performed. When a loan commitment is not expected to result in the draw down of a loan, the related loan commitment
fees are recognised on a straight line basis over the commitment period.
The main assumptions and estimates which management consider when applying a model with valuation techniques are:
Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.
Included in other operating income are other income, profit on sale of property and equipment rental income and fair value gain on financial instruments at
FVTPL .
Rental income
Rental income arising from operating leases on properties is accounted for on a straight-line basis over the lease terms and is included in other income in the
statement of profit or loss due to its operating nature.
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting
date and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on
tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the
deferred taxes relate to the same taxable entity and the same taxation authority.
The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation
technique is used. The majority of valuation techniques employ only observable market data and so the reliability of the fair value measurement is high.
However, certain financial instruments are valued on the basis of valuation techniques that feature one or more significant market inputs that are unobservable.
Valuation techniques that rely to a greater extent on unobservable inputs require a higher level of management judgment to calculate a fair value than those
based wholly on observable inputs.
48
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
Fair value measurement
2.7.6
Cash and cash equivalents
2.7.7
Property and equipment
i
Recognition and measurement
ii
Subsequent costs
iii Depreciation
Motor vehicles 4 years
Office furniture and equipment 10 years
Buildings 50 years
Computer equipment 5 years
Depreciation is provided on the depreciable amount of items of property, plant and equipment on a straight-line basis over their estimated useful economic
lives. The depreciable amount is the gross carrying amount, less the estimated residual value at the end of its useful economic life. Work in progress is not
depreciated.
The estimated useful lives are as follows:
Land is not depreciated. Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant and
equipment are kept under review to take account of any change in circumstances.
When deciding on depreciation rates and methods, the principal factors the Bank takes into account are the expected rate of technological developments and
expected market requirements for, and the expected pattern of usage of, the assets. When reviewing residual values, the Bank estimates the amount that it
would currently obtain for the disposal of the asset after deducting the estimated cost of disposal if the asset were already of the age and condition expected at
the end of its useful economic life.
Property, plant and equipment is subject to an impairment review if there are events or changes in circumstances which indicate that the carrying amount may
not be recoverable.
For the statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with other financial institutions,
other short-term, highly liquid investments with original terms to maturity of three months or less that are readily convertible to cash and which are subject to
an insignificant risk of changes in value. Restricted cash are not part of cash and cash equivalents.
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
The cost of the relevant property, plant and equipment includes and is made up of expenditures that are directly attributable to the acquisition of the assets.
Additions and subsequent expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the assets
and the cost of the asset can be measured reliably. All other repairs and maintenance are charged to the profit and loss statement during the period in which
they were incurred.
Construction cost in respect of offices is carried at cost as work in progress. On completion of construction, the related amounts are transferred to the
appropriate category of property, plant and equipment. Payments in advance for items of property, plant and equipment are included as prepayments in other
assets and upon delivery are reclassified as additions in the appropriate category of property, plant and equipment. No depreciation is charged until the assets
are available for use.
The cost of replacing a part of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic
benefits embodied within the part will flow to the bank and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The cost
of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.
The Bank measures financial instruments, such as, quoted equities, at fair value at each reporting date. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
. In the principal market for the asset or liability, or
. In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to the Bank. The fair value of an asset or a liability is measured using the assumptions that
market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement
of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling
it to another market participant that would use the asset in its highest and best use.
The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the use of unobservable inputs.
49
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
iv De-recognition
v
Gain or loss on sale of property, plant and equipment
2.7.8
Intangible assets
2.8.1
Employee benefits
i
Post employment benefits
ii
Short term employee benefits
2.8.2 Share Capital
Share issue costs
Share premium
Dividends on ordinary shares.
Short-term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period which employees have
provided services in the year. Bonuses are recognised to the extent that the Bank has a present obligation to its employees that can be measured reliably.
All expenses related to employee benefits are recognised in the profit or loss as personnel expenses.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds reflected in the share
premium.
Premiums from the issue of shares are reported in share premium.
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s shareholders. Dividends declared after the
reporting date are recognized in the subsequent period.
The recoverable amount of the asset is the higher of the assets or the cash-generating unit’s fair value less cost to sell and its value in use. Fair value less cost to
sell is calculated by reference to the amount at which the asset could be disposed of in a binding sale agreement in an arm’s length transaction evidenced by an
active market or recent transactions for similar assets.
The carrying values of tangible and intangible assets, excluding goodwill, are written down by the amount of any impairment and this loss is recognised in the
profit or loss in the period in which it occurs. In subsequent years, the Bank assesses whether indications exist that impairment losses previously recognized for
tangible and intangible assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset
is recalculated and, if required, its carrying amount is increased to the revised recoverable amount. The increase is recognized in other operating income as an
impairment reversal. An impairment reversal is recognized only if it arises from a change in the assumptions that were used to calculate the recoverable amount.
The increase in an asset's carrying amount due to an impairment reversal is limited to the depreciated amount that would have been recognized had the original
impairment not occurred.
The Bank operates a defined contribution pension plan. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
pension plans are recognised as personnel expense in profit or loss in the periods during which services are rendered by employees.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined
contribution plan that are due more than 12 months after the end of the reporting period in which the employees render the service are discounted to their
present value at the reporting date.
For defined contribution schemes, the Bank recognises contributions due in respect of the accounting period in the profit or loss. Any contributions unpaid at the
reporting date are included as a liability.
An item of property and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal.
The gain or loss on the disposal of premises and equipment is determined as the difference between the carrying amount of the assets at the time of disposal
and the proceeds of disposal, and is recognized as an item of other income in the year in which the significant risks and rewards of ownership are transferred to
the buyer.
Intangible assets consist of computer software and costs associated with the development of software for internal use. Computer software is stated at cost, less
amortisation and accumulated impairment losses, if any. Costs that are directly associated with the production of identifiable and unique software products,
which are controlled by the Bank and which will probably generate economic benefits exceeding costs are recognized as intangible assets. These costs are
amortised on the basis of expected useful lives of the software which range from three to five years. Amortisation methods, useful lives and residual values are
reviewed at each financial year-end and adjusted if appropriate. Costs associated with maintaining software programs are recognized as expenses when
incurred.
At each reporting date, or more frequently where events or changes in circumstances dictate, tangible and intangible assets excluding goodwill, are assessed for
indications of impairment. If indications are present, these assets are subject to an impairment review. For the purpose of conducting impairment reviews, cash-
generating units are the lowest level at which management monitors the return on investment on assets. The impairment review includes the comparison of the
carrying amount of the asset with its recoverable amount.
Impairment of tangible and intangible assets excluding goodwill
50
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Summary of significant accounting policies
2.8.3
Equity reserve
2.8.4
(Loss)/Earnings per share
2.8.5 Leases
Bank as a lessee
Bank as a lessor
2.8.6 Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets are classified
as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as
met only when the sale is highly probable and the asset is available for immediate sale in its present condition, management has committed to the sale, and the
sale is expected to have been completed within one year from the date of classification.
The Bank makes use of valuation experts to determine the fair value less cost to sell of these properties.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effective interest
and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have
been outstanding assuming the conversion of all dilutive potential ordinary shares.
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement at the inception date and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset, even if that right is not explicitly specified in an arrangement.
The Bank applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The bank has
adopted the short term lease exemption for its leases and recognizes short term lease rentals on a straight line basis in the profit or loss statement.
The Bank subsequently measures the lease liability by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to
reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications.
The corresponding lease liabilities, where applicable, are included in other liabilities.
Leases where the Bank does not transfer substantially all of the risk and benefits of ownership of the asset are classified as operating leases. Initial direct costs
incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income.
Regulatory risk reserve details the difference between the impairment on loans and advances computed based on the Central Bank of Nigeria Prudential
Guidelines compared with the expected credit loss model used in calculating the impairment under IFRS 9.
The reserves recorded in equity on the Bank’s statement of financial position include:
Statutory reserve details un-distributable earnings required to be kept by the nation's central bank in accordance with the national law. The national law requires
every Primary Mortgage Bank (PMB) to maintain a reserve fund and shall, out of its net profit after taxation and before any dividend is declared, transfer to the
statutory reserve as follows:
a. Where the reserve fund is less than the paid-up share capital, a minimum of 20% of the net profit; or
b. Where the reserve fund is equal to or in excess of the paid-up share capital, a minimum of 10% of net profit;
c. No transfer to the reserve fund shall be made until all identifiable losses have been made good.
Basic Loss per share is calculated by dividing net profit after tax applicable to equity holders of the Bank, excluding any costs of servicing other equity
instruments, by the weighted average number of ordinary shares outstanding during the financial year.
51
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3
Financial risk management
3.1
Introduction and overview
The Bank defines risk as the possibility of losses or profits foregone, which may be caused by internal or external factors.
3.2
•TheBankconsiderssoundriskmanagementtobethefoundationofalong-lastingfinancialinstitution.
•Riskofficersareempoweredtoperformtheirdutiesprofessionallyandindependentlywithoutundueinterference.
•Riskmanagementisgovernedbywell-definedpoliciesthatareclearlycommunicatedacrosstheBank.
•Thereisaclearsegregationofdutiesbetweenmarket-facingbusinessunitsandriskmanagementfunctions.
•Risksarereportedopenlyandfullytotheappropriatelevelsoncetheyareidentified.
3.3 Credit risk
3.3.1
•Riskmanagementisasharedresponsibility.Therefore,theBankaimstobuildasharedperspectiveonrisksthatis
grounded in consensus.
TheBank’saimistoachieveanappropriatebalancebetweenriskandreturnandminimisepotentialadverseeffectsontheBank’sfinancial
performance
Risk management is carried out by a central risk department (Bank chief risk officer) under policies approved by the Board of Directors. Chief
Risk Officer identifies, evaluates financial risks in close co-operation with the Bank’s operating units. The Board provides written principles for
overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk. In
addition, internal audit is responsible for the independent review of risk management and the control environment. There has been no
significant change in the risk policy of the Bank during the year.
The risks arising from financial instruments to which the Bank is exposed are financial risks, which includes credit risk, liquidity risk and
market risk (discussed in subsequent sections)
ThekeyelementsoftheBank’sriskmanagementphilosophyarethefollowing:
•TheBankcontinuestoadoptaholisticandintegratedapproachtoriskmanagementand,therefore,bringsallrisks
together under one or a limited number of oversight functions.
•TheBank’sriskmanagementgovernancestructureisclearlydefined.
•Risk-relatedissuesaretakenintoconsiderationinallbusinessdecisions.TheBankshallcontinuetostriveto
maintain a conservative balance between risk and revenue considerations
•RiskofficersworkasalliesandthoughtpartnerstootherstakeholderswithinandoutsidetheBank,andare
guided in the exercise of their powers by a deep sense of responsibility, professionalism and respect for other
parties.
Credit risk is the risk of suffering financial loss, should any of the Bank customers, clients or market counterparties fail to fulfil their
contractual obligations to the Bank. Credit risk arises mainly from commercial and consumer loans and advances and loan commitments
arising from such lending activities, but can also arise from credit enhancement provided, such as financial guarantees, letters of credit,
endorsements and acceptances.
Credit risk is the single largest risk for the Bank business; management therefore carefully manages its exposure to credit risk. The credit risk
management and control are centralised in a credit risk management team, which reports to the Board of Directors and head of each business
unit regularly.
In measuring credit risk of loans and advances to customers and to Bank’s at a counterparty level, the Bank reflects the following
components:
•Thecharacterandcapacitytopayoftheclientorcounterpartyonitscontractualobligations;
•Credithistoryofthecounterparty;and
•Thelikelyrecoveryratioincaseofdefaultobligations–valueofcollateralandotherwaysout.TheBank’sratingscale
reflects the range of default probabilities defined for each rating class. This means that, in principle, exposures migrate
between classes as the assessment of their probability of default changes. The rating tools are reviewed and upgraded
when necessary. The Bank regularly validates the performance of the rating and their predictive power with regard to
default events.
52
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.3.2
Portfolio limits
Single obligor limits
3.3.3
Impairment assessment
Definition of default and cure
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or
group of borrowers, and to regional and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more
frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and country are approved quarterly
by the Board of Directors.
Risk limit control and mitigation policies
TheBankmanages,limitsandcontrolsconcentrationsofcreditriskwherevertheyareidentified−inparticular,toindividualcounterparties
andBank’s,andtoindustries.
ItistheBank’spolicytoconsiderafinancialinstrumentas‘cured’andtherefore-classifiedoutofStage3whennoneofthedefaultcriteria
have been present for at least three consecutive months. The decision whether to classify an asset as Stage 2 or Stage 1 once cured depends
on the updated credit grade, at the time of the cure, and whether this indicates there has been a significant increase in credit risk compared
to initial recognition.
The process of setting the limits is as follows:
•TheBankengagesinadetailedportfolioplanannually.Indrawinguptheplan,theBankreviewsthemacro-economicfactors,
identifies the growth sectors of the economy and conducts a risk rating of the sectors to determine its acceptable target market industries
andexception.TheBank’stargetloanportfolioisthendistributedacrossacceptabletargetmarketindustries,strategicbusinessunitsand
approved product programmes.
Presently, the Bank does not have any exposure to counterparties domiciled outside Nigeria. However, the Bank has a fully developed country
risk rating system that could be employed, should the need arise. In such eventuality, limits will be graduated on country risk rating.
•Limitsareimposedonloanstoindividualborrowers.TheBankasamatterofpolicydoesnotlendaboveitsregulatorylendinglimit,which
is20%ofitsshareholders’fundsunimpairedbylosses.Theinternalguidancelimitis,however,setat20%forcorporatecustomersand5%for
individual customers of its shareholders funds unimpaired by losses to a single borrower.
•Productprogrammescontainguidelinesonsingleobligorlimits.
•ExceptwiththeapprovaloftheBoardofDirectors,theBankshallnotlendmorethan:
–20%oftheBank’sshareholders’fundstoanyBank.Onlycompaniesrated‘A’orbettermayqualifyforthislevelofexposure.
· The Bank also sets internal credit approval limits for various levels in the credit process.
· Approval limits are set by the Board of Directors and reviewed from time to time as the circumstances of the Bank demand. Exposure to
credit risk is also managed through regular analysis of borrowers and potential borrowers to meet interest and capital repayment obligations
and by changing these lending limits where appropriate.
The Bank considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the
borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the Bank also considers a variety of instances that may indicate
unlikeliness to pay. When such events occur, the Bank carefully considers whether the event should result in treating the customer as
defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate. Such events include:
•Internalratingoftheborrowerindicatingdefaultornear-default
•TheborrowerrequestingemergencyfundingfromtheBank
•Theborrowerhavingpastdueliabilitiestopubliccreditorsoremployees
•Theborrowerisdeceased
•Amaterialdecreaseintheborrower’sturnoverorthelossofamajorcustomer
•AcovenantbreachnotwaivedbytheBank
53
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
The Bank's PD estimation process
PRODUCT TYPES AVERAGE 12M UNADJUSTED PDS
2020 2019
Mortgage Loans 12.61% 9.93%
Advance Loans 1.47% 1.47%
NHF Loans 12.45% 12.41%
Exposure at Default
Loss given default
Significant increase in credit risk
The PDs for each portfolios were computed using the portfolio migration approach. Up to 4years historical information are to be generated to
determine the movement of performing loan to non performing loans over the available observable periods. The yearly PDs are obtained by
dividing the non performing loans at year end over the performing loans as at the beginning of the year. Thereafter an average of the four
years would finally be obtained for each portfolio which is called 12M Unadjusted PDs. These 12M Unadjusted PDs are then adjusted for IFRS
9 ECL calculations to incorporate forward looking information and the IFRS 9 Stage classification of the exposure. This is repeated for each
economic scenarios as appropriate.
The exposure at default(EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation,
addressingboththeclient’sabilitytoincreaseitsexposurewhileapproachingdefaultandpotentialearlyrepaymentstoo.
To calculate the EAD for a Stage 1 loan, the Bank assesses the possible default events within 12 months for the calculation of the 12mECL.
However, if a Stage 1 loan that is expected to default in the 12 months from the balance sheet date and is also expected to cure and
subsequently default again, then all linked default events are taken into account. For Stage 2 and Stage 3 financial assets, the exposure at
default is considered for events over the lifetime of the instruments.
The Bank determines EADs by modelling the range of possible exposure outcomes at various points in time, corresponding the multiple
scenarios.TheIFRS9PDsarethenassignedtoeacheconomicscenariobasedontheoutcomeofBank’smodels.
The Bank segments its products into smaller homogeneous portfolios, based on key characteristics that are relevant to the estimation of
future cash flows. The applied data is based on historically collected loss data and involves a wider set of transaction characteristics (e.g.,
product types) as well as borrower characteristics.
Further recent data and forward-looking economic scenarios are used in order to determine the IFRS 9 LGD rate for each group of financial
instruments. When assessing forward-looking information, the expectation is based on multiple scenarios. Examples of key inputs involve
changes in historical recoveries and outstanding exposure, payment status or other factors that are indicative of losses in the group.
The Bank estimates regulatory and IFRS 9 LGDs on a different basis. Under IFRS 9, LGD rates are estimated for each product type. The inputs
for these LGD rates are estimated and, where possible, calibrated through back testing against recent recoveries. These are repeated for each
economic scenario as appropriate.
The Bank continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is
subject to 12mECL or LTECL, the Bank assesses whether there has been a significant increase in credit risk since initial recognition. The Bank
considered an exposures to have significantly increased in credit risk in credit risk when the IFRS 9 lifetime PD has doubled since initial
recognition.
The Bank also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset, such as moving a
customer/facility to the watch list, or the account becoming forborne. In certain cases, the Bank may also consider that events explained
under definition of default as significant increase in credit risk as opposed to a default. Regardless of the change in credit grades, if
contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating ECLs on a collective basis for a group of similar assets, the Bank applies the same principles for assessing whether there has
been a significant increase in credit risk since initial recognition.
54
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Analysis of inputs to the ECL model under multiple economic scenarios
31 December 2020 Key drivers ECL Scenario 2021
Exchange Rate (Nigerian Naira to US Dollars) ₦
Best case
363
Base case
374
Worst case
381
Inflation Rate %
Best case
13.06%
Base case
13.50%
Worst case
14.36%
Crude oil Price ₦
Best case
48.29
Base case
48.28
Worst case
48.26
31 December 2019 Key drivers ECL Scenario 2020
Exchange Rate (Nigerian Naira to US Dollars) ₦
Best case 365
Base case 390
Worst case 400
31 December 2020
Balances with CBN
and Due from Banks
Financial
instrument at
amortised
cost
Mortgage Home
Loan
Advance Loans NHF Loans Total
Upside (11.67%)
6,866
20,722
80,112 2,381 3,395 113,476
Base (80.00%) 47,793
142,366
632,526 16,334 23,891 862,911
Downside (8.33%)
5,125
14,887
74,623 1,702 2,568 98,905
Total
59,784 177,975 787,261 20,417 29,854 1,075,291
31 December 2019
Balances with CBN
and Due from Banks
Financial
instrument at
amortised
cost
Mortgage Home
Loan
Advance Loans NHF Loans Total
Upside (10.83%)
387 16,493 129,774 2,001 940 149,595
Base (80,00%) 3,234 121,834 1,139,762 14,780 13,779 1,293,389
Downside (9.17%)
383 13,965 152,296 1,693 2,172 170,509
Total
4,003 152,292 1,421,832 18,475 16,891 1,613,493
An overview of the approach to estimating ECLs is set out in Note 2.6.6 Summary of significant accounting policies and in Note 2.4
Significant accounting judgements, estimates and assumptions. To ensure completeness and accuracy, the Bank obtains the data used from
third party sources (Central Bank of Nigeria, Trading Economies) and a team of expert within its credit risk department verifies the accuracy
of inputs to the Bank’ ECL models including determining the weights attributable to the multiple scenarios. The following tables set out the
key drivers of expected loss and the assumptions used for the Bank’s base case estimate, ECLs based on the base case, plus the effect of the
use of multiple economic scenarios as at 31 December 2020 and 31 December 2019.
The tables show the values of the key forward looking economic variables/assumptions used in each of the economic scenarios for the ECL
calculations.
The following tables outline the impact of multiple scenarios on the allowance:
55
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Determination of regulatory risk reserves
(a)
(b)
Statement of prudential adjustments 31 December 31 December
In thousands of Naira Note 2020 2019
IFRS-based impairments and credit losses:
Total ECL Under IFRS 9
1,075,291 1,613,493
18
837,531 1,457,198
Balances with CBN
16
2,226 791
17
57,558 3,212
Financial assets at amortized cost
20 24,053 -
Other assets 21
153,923 152,292
1,075,291 1,613,493
Prudential provisions and credit losses:
1,732,143 3,647,277
36,523 26,448
Provision for other assets
153,923 152,292
Total regulatory impairment based on prudential guidelines (b) 1,922,589 3,826,017
Required balance in regulatory risk reserves (c = b - a), where b>a
847,298 2,212,524
IFRS impairment allowances by the Bank (a)
Provisions under Prudential Guidelines are determined using the time based provisioning regime prescribed by the Central Bank of Nigeria
Regulatory and Supervisory Framework for Mortgage Banks in Nigeria. This is at variance with the expected credit loss model required by
IFRS under IFRS 9. As a result of the differences in the methodology/provision regime, there will be variances in the impairments allowances
required under the two methodologies.
Impairment for loans recognised in the profit or loss is determined based on the requirements of IFRS. However, the IFRS impairment is
compared with provisions determined under prudential guidelines and the expected impact/changes is recognised in general reserves as
follows:
•IfprudentialprovisionsisgreaterthanIFRSimpairment;theexcessprovisionresultingtherefromistransferredfromtheretained
earnings/accumulated losses account to a "regulatory risk reserve".
•IfprudentialprovisionsislessthanIFRSimpairment;IFRSdeterminedimpairmentischargedtotheprofitorloss.Thecumulativebalancein
the regulatory risk reserve is thereafter reversed to the retained earnings/accumulated losses account.
The regulatory risk reserve is considered a non-distributable reserve and is classified under Tier 1 as part of the core capital. The Bank has
complied with the requirements of the guidelines as follows:
Loans and advances
Due from Banks
Specific provision on loans and advances
General provision on loans and advances
56
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.3.4
Collateral
Credit enhancement
2020 2019
₦'000 ₦'000
Guaranteed facilities (NHFL) 67,208 67,208
•TheCollateralRiskRatinggridindicatestheacceptablecollateraltypesrated1–7frombesttoworstinorderofliquidity.
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds
advances, which is common practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk
mitigation. The principal collateral types for loans and advances are:
•Mortgagesoverresidentialproperties.
•Chargesoverbusinessassetssuchaspremises,inventoryandcashdeposits.
•Chargesoverfinancialinstrumentssuchasdebtsecuritiesandequities.
Longer-term finance and lending to corporate entities are generally secured, in addition, in order to minimise the credit loss, the Bank will
seek additional collateral from the counterparty as soon as impairment indicators are identified for the relevant individual loans and advances.
Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. Debt securities,
treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are
secured by portfolios of financial instruments.
Estimate of the value of collateral and other security enhancements held against loans and advances to customers and banks is shown below
Collateral Risk Rating (CRR)/Facility Risk Rating (FRR)
•TheBankdoesnotlendtospeculativegradeobligors,onanunsecuredbasis.TheFacilityRiskRating(FRR)isdifferentfromtheObligorRisk
Rating (ORR) to the extent of the perceived value of enhancement provided.
5. Legal mortgage or debenture on business premises, factory assets or
commercial real estates in locations A and B
6. Equitable mortgages on real estates in any location
7. Letters of comfort or awareness, guarantee of non-investments grade
banks and corporates
Collateral risk rating Collateral type
1. Cash/Treasury bills
2. Marketable securities, guarantee/receivables of investment grade banks
and corporates
3. Enforceable lien on fast-moving inventory in bonded warehouses
4. Legal mortgage on residential business real estate in prime locations A and B
In the ordinary course of business, the Bank is exposed to the risk of having financial instruments that are not recognised in the financial
position.TheinstrumentsareusedmainlyasinterimSecuritiesforNationalHousingFundsLoans(“NHFL”).Theguaranteesareexpectedto
be discharged as soon as legal mortgages are perfected. The contractual amounts of the off- statement of financial position financial
instruments are:
The value of the guarantees are equal to the value of the loans they have been obtained for.
57
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Maximum exposure to credit risk before collateral held or credit enhancements
31 December 2020
Maximum
Exposure to
credit risk
Total Collateral
Value
Net Exposure Associated ECLs
In ₦’thousands
Financial Assets
Cash balances with central bank
292,000 - 292,000 2,226
Due from banks
8,850,767 - 8,850,767 57,558
Loans and advances
Mortgage loans
4,807,300 7,470,008 (2,662,708) 787,260
NHF Loans
235,485 426,064 (190,579) 29,854
Advance loans
582,838 1,252,282 (669,444) 20,417
Securities at amortised cost
2,850,417 - 2,850,417 24,053
Other financial assets
181,919 - 181,919 153,923
Total Financial Assets at
amortised cost
17,800,726 9,148,354 8,652,372 1,075,291
31 December 2019
Maximum
Exposure to
credit risk
Total Collateral
Value
Net Exposure Associated ECLs
In ₦’thousands
Financial Assets
Cash balances with central bank
129,254 - 129,254 791
Due from banks
1,834,617 - 1,834,617 3,212
Loans and advances
-
Mortgage loans
8,296,776 11,926,660 (3,629,884) 1,421,832
NHF Loans
357,332 877,955 (520,623) 16,891
Advance loans
541,231 935,790 (394,559) 18,475
Securities at amortised cost
648,316 - 648,316 -
Other financial assets
241,013 - 241,013 152,292
Total Financial Assets at
amortised cost
12,048,539 13,740,405 (1,691,866) 1,613,493
3.3.5 Analysis of risk concentration
Fair Value of collateral and credit enhancements held
TheBank’smaximumexposuretocreditriskat31December2020and31December2019respectivelyisrepresentedbythenetcarrying
amounts of the financial assets in the Statement of Financial Position excluding cash in hand.
Fair Value of collateral and credit enhancements held
The following table shows the risk concentration by industry for the components of the statement of financial position.
The Bank's concentration of risk are managed by client/counterparty, industry sector region (See Note 3.3.5.1) and geographic sector (Note
3.3.5.2).
58
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.3.5.1
Industry analysis
31 December 2020
Financial services
Government Others Total
In ₦’thousands
Financial Assets
Cash balances with central bank - 292,000 - 292,000
Due from banks 8,850,767 - - 8,850,767
Loans and advances
Construction Loans (CCL) - - 2,327,500 2,327,500
Loan and Advances (MSCHL) - - 171,042 171,042
Mortgage FMBN bonds (FMBN) - - 3,664 3,664
Mortgage Home Loans (MHL) - - 2,251,063 2,251,063
NHF Loans - - 231,821 231,821
School Loans - - 208,845 208,845
Staff Mortgage Loans - - 14,071 14,071
Staff Personal Loans - - 10,801 10,801
Staff Share Loan - - 406,816 406,816
Total loans and advances - - 5,625,623 5,625,623
Securities at amortised cost 1,024,481 1,825,936 - 2,850,417
Other financial assets - - 181,919 181,919
Total gross carrying amount
9,875,248 2,117,936
5,807,542 17,800,726
Expected credit loss (81,611) (2,226) (991,454) (1,075,291)
Total Financial Assets 9,793,637 2,115,710 4,816,088 16,725,435
31 December 2019
Financial services
Government Others Total
In ₦’thousands
Financial Assets
Cash balances with central bank - 129,254 - 129,254
Due from banks 1,834,617 - - 1,834,617
Loans and advances -
Construction Loans (CCL) - - 3,500,470 3,500,470
Loan and Advances (MSCHL) - - 109,080 109,080
Mortgage FMBN bonds (FMBN) - - 3,834 3,834
Mortgage Home Loans (MHL) - - 4,497,273 4,497,273
NHF Loans - - 353,499 353,499
School Loans - - 274,020 274,020
Staff Mortgage Loans - - 25,013 25,013
Staff Personal Loans - - 30 30
Staff Share Loan - - 432,120 432,120
Total loans and advances - - 9,195,339 9,195,339
Securities at amortised cost - 648,316 - 648,316
Other financial assets - - 241,013 241,013
Total gross carrying amount 1,834,617 777,570 9,436,352 12,048,539
Expected credit loss (3,212) (791) (1,609,490) (1,613,493)
Total Financial Assets 1,831,405 776,779 7,826,862 10,435,046
59
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.3.5.2
Geographic Analysis
2020 2019
₦’000 ₦’000
Cashwithcentralbank–Headoffice
292,000 129,254
Due from banks – Head
office
8,850,767 1,834,617
Expected credit loss
(83,837) (4,003)
9,058,930 1,959,868
Loans and advances:
Head Office
3,952,406 6,996,777
Apapa
33,603 129,436
Festac
- 22,773
Okota
8,721 18,639
LasuOjo
1,439 5,409
Asaba
2,309 4,213
Agbara
1,796 1,796
Abuja 1
222,635 481,398
Abuja 2
731,527 1,181,568
Victoria Island
670,685 350,409
Baze
503 2,921
Total loans and advances
5,625,623 9,195,339
Expected credit loss (837,531)
(1,457,198)
Net loans and advances 4,788,092 7,738,141
Securities at amortised cost
1,825,936 648,316
Other financial assets
181,919 241,013
Expected credit losses (177,976) (152,292)
1,829,879 737,037
Total financial assets
15,676,902 10,435,046
3.4 Liquidity risk
3.4.1
Liquidity risk
For this table, the Bank has allocated exposures to regions based on the state of domicile of its counterparties:
Liquidity risk is the risk that the Bank is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn,
cash requirements from contractual commitments, or other cash outflows, such as debt maturities or margin calls for derivatives. Such
outflows would deplete available cash resources for client lending, trading activities and investments. In extreme circumstances, lack of
liquidity could result in reductions in the statement of financial position and sales of assets, or potentially an inability to fulfil lending
commitments. The risk that the Bank will be unable to do so is inherent in all Bank operations and can be affected by a range of institution-
specific and market-wide events including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural
disasters.
Net cash with central and due for banks
60
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Bank Treasury also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the usage of overdraft
facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.
Liquidity risk is the risk that the Bank is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn,
cash requirements from contractual commitments, or other cash outflows, such as debt maturities or margin calls for derivatives. Such
outflows would deplete available cash resources for client lending, trading activities and investments. In extreme circumstances, lack of
liquidity could result in reductions in the statement of financial position and sales of assets, or potentially an inability to fulfil lending
commitments. The risk that the Bank will be unable to do so is inherent in all Bank operations and can be affected by a range of institution-
specific and market-wide events including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural
disasters.
The Bank liquidity management process, as carried out within the Bank and monitored by a separate team in the Bank known as the asset and
liability management committee (ALCO), its functions include:
•Day-to-dayfunding,managedbymonitoringfuturecashflowstoensurethatrequirementscanbemet.This
includes replenishment of funds as they mature or borrowed by customers.
•Maintainingaportfolioofhighlymarketableassetsthatcaneasilybeliquidatedasprotectionagainstany
unforeseen interruption to cash flow;
•Monitoringtheliquidityratiosofthestatementoffinancialpositionagainstinternalandregulatoryrequirements;
and
•Managingtheconcentrationandprofileofdebtmaturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these
are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial
liabilities and the expected collection date of the financial assets.
Management of liquidity risk
61
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.4.2 Maturity analysis
3.4.2a
Up to 3
months
3-6 months
7 to 12
months
After 12
months
Total
₦'000 ₦'000 ₦'000 ₦'000 ₦'000
As at 31 December 2020
Cash on hand 2,020 - - - 2,020
Due from banks 8,850,767 - - - 8,850,767
Loans and advances 2,593,826 503 216,797 2,818,213 5,629,338
Securities at amortised cost 2,850,417 - - - 2,850,417
Other assets 181,919 - - - 181,919
Cash balances with central bank 292,000 - - - 292,000
Total financial assets 14,770,949 503 216,797 2,818,213 - 17,806,461
Due to customers 13,838,007 617,553 87,047 86,833 14,629,440
Other financial liabilities 207,380 - - - 207,380
Due to the National Housing Fund - - - 269,300 269,300
Total financial liabilities 14,045,387 617,553 87,047 356,133 15,106,120
Net financial assets (liabilities) 725,562 (617,050) 129,750 2,462,080 2,700,341
As at 31 December 2019
Cash on hand 785 - - - 785
Due from banks 1,834,617 - - - 1,834,617
Loans and advances 4,195,146 8,499 2,920,170 2,071,524 9,195,339
Securties at amortised cost 648,316 - - - 648,316
Other assets 269,711 - - - 269,711
Cash balances with central bank 129,254 - - - 129,254
Total financial assets 7,077,829 8,499 2,920,170 2,071,524 12,078,022
Due to customers 5,630,954 594,213 32,047 83,383 6,340,597
Other financial liabilities 148,078 - - - 148,078
Due to the National Housing Fund - - - 380,286 380,286
Total financial liabilities 5,779,032 594,213 32,047 463,669 - 6,868,961
Net financial assets (liabilities) 1,298,797 (585,714) 2,888,123 1,607,855 5,209,061
The table below analyses financial assets and liabilities of the Bank into relevant maturity based on the remaining period at reporting date to
the contractual maturity date. The table includes both principal and interest earned as at year end.
Other financial liabilities include account payable and lease liability.
62
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.4.2 Maturity analysis of assets and liabilities
3.4.2b
Current Non-current Total
₦'000 ₦'000 ₦'000
As at 31 December 2020
Assets
Cash on hand 2,020 - 2,020
Cash balances with central bank - 289,774 289,774
Due from banks 8,793,209 8,793,209
Loans and advances 3,686,831 1,101,261 4,788,092
Equity investments at FVTPL - 329,334 329,334
Securities at amortised cost 2,826,364 - 2,826,364
Other assets 117,742 - 117,742
Property and equipment - 1,092,515 1,092,515
Intangible assets - 16,619 16,619
Non-current assets held for sale 264,681 - 264,681
Total assets
15,690,847 2,829,503 18,520,350
Liabilities
Due to customers 14,542,607 86,833 14,629,440
Current income tax payable 21,606 21,606
Other liabilities 244,963 - 244,963
Due to the National Housing Fund - 269,300 269,300
Total liabilities
14,809,176 356,133 15,165,309
As at 31 December 2019
Assets
Cash on hand 785 - 785
Cash balances with central bank - 128,463 128,463
Due from banks 1,831,405 1,831,405
Loans and advances 5,958,369 1,779,772 7,738,141
Equity investments at FVTPL - 258,778 258,778
Securities at amortised cost 648,316 - 648,316
Other assets 213,188 - 213,188
Property and equipment - 1,094,520 1,094,520
Intangible assets - 11,515 11,515
Non-current assets held for sale 334,681 - 334,681
Total assets
8,986,744 3,273,048 12,259,792
Liabilities
Due to customers 5,610,398 730,199 6,340,597
Current income tax payable 27,982 27,982
Other liabilities 170,638 - 170,638
Due to the National Housing Fund - 325,835 325,835
Total liabilities 5,809,018 1,056,034 6,865,052
The table below analyses the assets and liabilities of the Bank according to when they are expected to be recovered or settled.
63
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.5 Market risk
3.5.1 Management of market risk
TheBank’smarketriskpolicyandstrategyareanchoredonthefollowing:
i.
ii.
iii.
Effective utilisation of risk capital;
iv.
v.
Independent market risk management function that reports directly to Management;
vi.
vii.
viii
ix.
3.5.2 Market risk measurement techniques
(a) Value at risk (VAR)
• Interest rate risks result from exposures to changes in the level and shape of the yield curve, the volatility of interest rates and credit
spreads.
Market risk is the exposure to an adverse change in the market value of our trading and investment positions caused by a change in prices and
rates.
Such positions result from market making, proprietary trading, underwriting and investing activities.
The market risk factors are foreign exchange rates, commodity price, interest rates, and equity prices.
Each market risk category the Bank is exposed to daily is described below:
•Foreignexchangerisksarisefromexposurestochangesinspotandforwardratesandvolatilitiesoftheexchangerates.
The Bank uses parametric method as its VAR methodology with an observation period of two years obtained from published data from
preapprovedsources.VARiscalculatedontheBank’spositionsatcloseofbusiness.
•Equitypricerisksresultfromexposurestothechangesinpricesandvolatilitiesofindividualequities.
The Bank has put in place a clearly defined market risk management framework that provides the Board of Directors and Management with
guidance on market risk management processes. The Bank has also prescribed tolerable market related losses, vis-a-vis the quantum of available
capital and level of other risk exposures.
Product diversification which involves trading, application and investment in a wide range and class of products such as corporate securities and
government securities;
Risk taking within well-defined limits with the sole purpose of creating and enhancing shareholder value and competitive advantage;
Continuous re-evaluation of risk appetite and communication of same through market risk limits;
Robust market risk management infrastructure reinforced by a strong automated system for controlling, monitoring and reporting market risk
Deployment of a variety of tools to monitor and restrict market risk exposures such as position limits, sensitivity analysis, ratio analysis and
management action triggers;
Setting the internal Open Position Limit (OPL) lower than the CBN prescribed limit (currently 5% of shareholders’ funds). The Bank has put in place
an approval process for exceeding the internal OPL limit. However, any trading above the CBN regulated OPL limit must be approved by the
Central Bank; and
Enforcement of market risk operating limits and other risk management guidelines that will ensure consistent compliance with OPL limit.
The Bank applies a ‘value at risk’ (VAR) methodology to its trading portfolios (including assets and liabilities designated at fair value) and at a Bank
level to estimate the market risk of positions held and the maximum losses expected, based upon a number of assumptions for various changes in
market conditions. The Board sets limits on the value of risk that may be accepted by the Bank, which are monitored on a daily basis by Bank
Treasury. Interest rate risk in the non-trading book is measured through the use of interest rate repricing gap analysis.
VAR, in general, is a quantitative measure of market risk which applies recent historic market conditions to estimate the potential future loss in
market value that will not be exceeded in a set time period at a set statistical confidence level. VAR is calculated for expected movements over a
minimum of one business day and to a confidence level of 99% and a 10-day holding period. The confidence level suggests that potential daily
losses, in excess of the VAR measure, are likely to be experienced three times per year in every 250 days.
64
#
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
(b) Stress tests
3.5.3 Foreign exchange risk
The Bank is yet to adopt the use of VAR for its equity exposure as a result of low market liquidity. The Bank does not trade in commodity and
therefore is not exposed to commodity risk except in transactions where commodities have been used as collateral for credit transactions. The
latter is covered under credit risk management.
The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are monitored daily.
The table below summarises the Bank exposure to foreign currency exchange rate risk at 31 December 2020 and 31 December 2019. Included in
the table are the Bank financial instruments at carrying amounts, categorised by currency.
Stress tests provide an indication of the potential size of losses that could arise in extreme conditions.
In recognition of the volatile market environment and the frequency of regulations that have had a significant effect on market rates and prices,
the Bank augments other risk measures with stress testing to evaluate the potential impact of possible extreme movements in financial variables
on portfolio values that are rare but plausible.
Stress testing is an integral part of the market risk management framework and considers both historical market events and forward-looking
scenarios.
Non-trading book: Other sensitivity analyses
Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The ALCO has responsibility for reviewing stress
exposures and, where necessary, enforcing reductions in overall market risk exposure. The stress testing methodology assumes that scope for
management action would be limited during a stress event, reflecting the decrease in market liquidity that often occurs. Regular stress test
scenarios are applied to interest rates, exchange rates, and equity prices.
65
#
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
NAIRA US DOLLAR EURO TOTAL
₦'000 ₦'000 ₦'000 ₦'000
AS AT 31 DECEMBER 2020
Financial assets:
Cash and balances with central banks / due from banks
9,084,448 258 297 9,085,003
Loans and advances 4,788,092 - - 4,788,092
Other financial assets 93,945 - - 93,945
Equity investments at FVTPL 329,334 - - 329,334
Securities at amortised cost 2,826,364 - - 2,826,364
17,122,183 258 297 17,122,738
Financial liabilities:
Due to customers
14,629,440 - - 14,629,440
Other financial liabilities
244,501 - - 244,501
Due to the National Housing fund
269,300 - - 269,300
15,143,241 - - 15,143,241
Net open currency position 1,978,942 258 297 1,979,497
AS AT 31 DECEMBER 2019
Financial assets:
Cash and balances with central banks / due from banks
1,960,171 222 260 1,960,653
Loans and advances 7,738,141 - - 7,738,141
Other financial assets 117,419 - - 117,419
Equity investments at FVTPL 258,778 - - 258,778
Securities at amortised cost 648,316 - - 648,316
10,722,825 222 260 10,723,307
Financial liabilities:
Due to customers
6,340,597 - - 6,340,597
Other financial liabilities
169,995 - - 169,995
Due to the National Housing fund
325,835 - - 325,835
6,836,427 - - 6,836,427
Net open currency position 3,886,398 222 260 3,886,880
The Bank’s exposure to foreign currency risk is low. Movement in exchange rate between the US Dollar and the Euro affects reported
earnings through revaluation gain or loss and the statement of financial position size through increase or decrease in the revalued amounts
of assets and liabilities denominated in Euro.
66
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Foreign exchange sensitivity analysis
US DOLLAR EURO
₦'000 ₦'000
As at 31 December 2020
Net foreign currency exposures
258 297
As at 31 December 2019
Net foreign currency exposures
222 260
Profit/ (loss)
₦12,900
Naira weakens by 5% against the US Dollar
Profit/(loss)
₦(12,900)
Naira strengthens by 5% against the Euro
Profit/(loss)
₦14,850
Naira weakens by 5% against the Euro
Profit/(loss)
₦(14,850)
Profit/ (loss)
₦11,100
Naira weakens by 5% against the US Dollar
Profit/(loss)
₦(11,100)
Naira strengthens by 5% against the Euro
Profit/(loss)
₦13,000
Naira weakens by 5% against the Euro
Profit/(loss)
₦(13,000)
3.5.4
Equity and commodity price risk
Equity price sensitivity analysis
2020 2019
Impact on total comprehensive income ₦'000 ₦'000
16,467 12,939
(16,467) (12,939)
3.5.5 Interest rate risk
The Bank does not deal in commodities and is therefore not exposed to any commodity price risk.
The following table details the sensitivity to a 5% increase and decrease in equity prices. Management believe that a 5% movement in either
direction is reasonably possible at the reporting date.
5% increase with all other variables held constant
5% decrease with all other variables held constant
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial
instruments. The Bank manages this risk by ensuring significant portion of its loans are contracted on fixed interest rate. The Bank does not
have any variable rate instrument at the end of the year (2019: Nil)
The Bank does not hedge against this risk, hence, these are the exposures to the risk
The Foreign exchange sensitivity analysis of the Bank is presented below.
For each foreign currency net exposure ,it is reasonable to assume a 5% appreciation/depreciation against the functional currency. If all
other variables are held constant, the tables below present the impacts on profit or loss before tax if these currency movements had
occurred.
The Bank is exposed to the US Dollar and Euro currencies.
The following table details the sensitivity to a 5% increase and decrease in Naira against the US Dollar and Euro. Management believe that a
5% movement in either direction is reasonably possible at the reporting date. The sensitivity analyses below include outstanding US Dollar
and Euro denominated assets and liabilities. A positive number indicates an increase in profit where Naira strengthens by 5% against the US
Dollar and Euro. For a 5% weakening of Naira against the US Dollar and Euro, there would be an equal and opposite impact on profit, and the
balance below would be negative.
Foreign exchange sensitivity analysis (31 December 2019)
Foreign exchange sensitivity analysis (31 December 2020)
Naira strengthens by 5% against the US Dollar
Naira strengthens by 5% against the US Dollar
The Bank is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (NSE) and other non-quoted
investments. Equity securities quoted on the NSE is exposed to movement based on the general movement of the all share index and
movement in prices of specific securities held by the Bank.
The Bank holds 5,000,000 quoted shares in Universal Insurance Plc with a market value of N1 million and 55,555,555 quoted shares in
Nigeria Mortgage Refinance Bank with carrying value of N257.78million as at year end.
67
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
3.6
(a)
Level 1 Level 2 Level 3 Total
₦'000 ₦'000 ₦'000 ₦'000
AS AT 31 DECEMBER 2020
Assets measured at fair value
Financial investments - securities at FVTPL 329,334 - - 329,334
Assets for which fair value is disclosed
Loans and advances - - 4,196,525 4,196,525
Financial Investments- securities at amortised cost - - 2,850,417 2,850,417
329,334 - 7,046,942 7,376,276
Liabilities for which fair value is disclosed
Due to the National Housing Fund - - 43,241 43,241
- - 43,241 43,241
Level 1 Level 2 Level 3 Total
AS AT 31 DECEMBER 2019 ₦'000 ₦'000 ₦'000 ₦'000
Assets measured at fair value
Equity investments at FVTPL 258,778 - - 258,778
Assets for which fair value is disclosed
Loans and advances - - 8,318,502 8,318,502
Financial Investments- securities at amortised cost - - 651,558 651,558
258,778 - 8,970,059 9,228,837
Liabilities for which fair value is disclosed
Due to the National Housing Fund - - 334,600 334,600
- - 334,600 334,600
Quoted equity instrument
Level 1 equity securities relates to securities quoted on the Nigerian Stock Exchange and NASD.
(b)
2020 2019 2020 2019
₦'000 ₦'000 ₦'000 ₦'000
Loans and advances 5,625,623 9,195,339 4,196,525 6,236,438
Financial investments - securities at FVTPL 329,334 258,778 329,334 258,778
Financial Investments- securities at amortised cost 2,850,417 648,316 2,850,417 648,316
8,805,374 10,102,433 7,376,276 7,143,532
Due to the National Housing Fund 269,300 325,835 43,241 35,881
Fair value of financial assets and liabilities
Financial instruments measured at fair value
IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs
reflect market data obtained from independent sources; unobservable inputs reflect the Bank market assumptions. These two types of inputs have created the
following fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.
The fair value of the loans and advances and Due to NHF have been determined using the discounted cash flow method (DCF") using the Central Bank of Nigeria prime
lending rate at the year end, the significant observable input.
Set out below is a comparison by class of the carrying amounts and fair values of the Bank's financial instruments that are carried in the financial statements.
Carrying value
Fair value
There have been no transfer between the levels.
The fair values of cash balances with Central Bank, Due from Banks and other liabilities estimates their carrying amounts due to their short nature.
68
#
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
(c)
(ii) Equity securities
(iii) Loans and advances
3.7 Capital management
•TocomplywiththecapitalrequirementssetbytheregulatorsofthebankingmarketswheretheBankoperates;
2020 2019
Tier 1 capital ₦'000 ₦'000
Share capital 3,230,769 2,100,000
Share premium 4,008,277 2,877,126
Accumulated losses (5,029,743) (2,097,353)
Statutory reserve 298,440 298,440
Regulatory reserve - -
Total regulatory capital
2,507,743 3,178,213
In accordance with CBN circular BSD/DIR/GEN/LAB/07/021, regulatory reserve is no longer included in Tier 1 capital computation.
Risk-weighted assets
On statement of financial position 8,086,248 8,337,963
Off statement of financial position 33,442 33,442
8,119,690 8,371,405
31% 38%
Minimum Capital Adequacy Ratio (CAR) 10% 10%
The regulatory capital requirements are strictly observed when managing economic capital. The Bank’s regulatory capital, comprising of the following two tiers, is
managed by Risk Management, Treasury and Strategy.
•Tier 1 capital: share capital, retained earnings and reserves created by appropriations, statutory reserve, non-controlling interests arising on consolidation from
interestsinpermanentshareholders’equity.
•Tier 2 capital: qualifying subordinated loan capital, collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held
as available for sale.
The table below summarises the composition of regulatory capital and the ratios of the Bank for the year ended 31 December 2020. During the year, the Bank complied
with all of the externally imposed capital requirements to which it is subject.
Risk-weighted Capital Adequacy Ratio (CAR)
The Bank maintains a ratio of Total Regulatory Capital to its risk-weighted assets (the ‘Basel ratio’) above a minimum level required by the regulatory authority which
takes into account the risk profile of the Bank.
The fair value of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for the instrument. As at the reporting date, the
Bank does not have any plan to dispose the investments and plans to hold the investment for the foreseeable future.
Loans and advances are carried at amortised cost gross of expected credit loss. The estimated fair value of loans and advances represents the discounted amount of
estimated future cash flows expected to be received. Expected cash flows are discounted at average of prime lending rate and maximum lending rate to determine fair
value.
Fair value of financial investments at amortised cost approximates the carrying amount due to their short term nature.
(v) Due to customers, other liabilities and Due to NHF
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair
values of due to NHF are determined using average of prime lending rate and maximum lending rate appropriate for the remaining term to maturity.
TheBankobjectiveswhenmanagingcapital,whichisabroaderconceptthanthe‘equity’onthefaceofthestatementoffinancialposition,are:
•TosafeguardtheBank’sabilitytocontinueasagoingconcernsothatitcancontinuetoprovidereturnsforshareholdersandbenefitsforotherstakeholders;and
•Tomaintainastrongcapitalbasetosupportthedevelopmentofitsbusiness.
Capital adequacy and the use of Regulatory Capital are monitored daily by the Bank’s management, employing techniques based on the CBN guideline. The required
information is filed with the CBN on a quarterly basis.
(iv) Financial Investments -securities at amortised cost
Fair valuation methods and assumptions
69
#
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
4
4.1
4.2
North
South
Total
Year ended 31 December, 2020 ₦'000 ₦'000 ₦'000
Interest income calculated using
the effective interest rate
199,690 1,199,748 1,399,438
Interest expense calculated
using the effective interest rate
(54,550) (484,828) (539,378)
Net interest income
145,140 714,920 860,060
Fees and commision income
13 588 601
Loss on disposal of non-current asset held for sale
- (860) (860)
Other operating income
3,811 116,455 120,266
Total operating income
148,964 831,103 980,067
Credit loss expense
- (3,887,927) (3,887,927)
Net operating income
148,964 (3,056,824) (2,907,860)
Personnel expenses
(41,806) (372,635) (414,441)
Depreciation
(5,662) (52,016) (57,678)
Amortisation
- (6,502) (6,502)
Other operating expenses
(27,077) (884,314) (911,391)
Total operating expenses
(74,545) (1,315,467) (1,390,012)
Segment loss
74,419 (4,372,291) (4,297,872)
Income tax expense
- (3,747) (3,747)
Loss for the year 74,419 (4,376,038) (4,301,619)
The following is an analysis of the Bank’s revenue and results from continuing operations by reportable
segment.
Segment reporting
Information regarding the results of each reportable segment is included below. Performance is measured based
on segment profit (or loss) before income taxes, as included in the internal management reports that are
reviewed by the Bank’s CEO. The CEO is considered the chief operating decision maker in the Bank. Segment
profit is used to measure performance as management believes that such information is the most relevant in
evaluating the results of certain segments relative to other entities that operate within this industry. Inter-
segmentpricingisdeterminedonanarm’slengthbasis.
Services from which reportable segments derive their revenues
Information reported to the chief operating decision maker (the CEO) for the purposes of resource allocation
and assessment of segment performance focuses on types of goods or services delivered or provided. The
Bank's reportable segments under IFRS 8 are based on geography and are splited between the north and the
south of the Country
Geographical segment revenues and results
70
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
North
South
Total
Assets ₦'000 ₦'000 ₦'000
As at December 31, 2020
Cash on hand
(43) (1,977) (2,020)
Cash balances with central bank
- (289,774)
(289,774)
Due from banks
- (8,793,209) (8,793,209)
Loans and advances
(955,176) (3,832,916) (4,788,092)
Financial investments - equity
instrument at FVTPL
-
(329,334) (329,334)
Financial Investments- securities
at amortised cost
- (2,826,364) (2,826,364)
Other assets
(877) (116,865) (117,742)
Property and equipment
(172,875) (919,640) (1,092,515)
Intangible assets
- (16,619) (16,619)
Non-current assets held for sale
- (264,681) (264,681)
(1,128,971) (17,391,379) (18,520,350)
Liabilities
Deposits from customers
1,977,392 12,652,048 14,629,440
Other liabilities
9,748 235,215 244,963
Current income tax payable
- 21,606 21,606
Due to National Housing Fund
263,505 5,795 269,300
2,250,645 12,914,664 15,165,309
North South Total
Year ended 31 December, 2019
₦'000 ₦'000 ₦'000
87,809 1,036,936 1,124,745
(31,185) (456,472) (487,657)
Net interest income
56,624 580,464 637,088
Fees and commision income
3,800 232,186 235,986
Loss on disposal of non-current asset held for sale
- (13,796) (13,796)
Other operating income
6,356 21,088 27,444
Total operating income
66,780 819,942 886,722
Credit loss expense
(8,775) (70,783) (79,558)
Net operating income
58,005 749,159 807,164
Personnel expenses
(37,450) (295,642) (333,092)
Depreciation
(7,315) (31,938) (39,253)
Amortisation
- (13,151) (13,151)
Other operating expenses
(29,068) (444,543) (473,611)
Total operating expenses
(73,833) (785,274) (859,107)
Segment loss
(15,828) (36,115) (51,943)
Income tax expense
(835) (9,858) (10,693)
Loss for the year (16,663) (45,973) (62,636)
Interest income calculated using the effective interest
rate method
Interest expense calculated using the effective interest
rate method
71
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
North
South
Total
Assets ₦'000 ₦'000 ₦'000
As at December 31, 2019
Cash on hand 120 665 785
Cash balances with central bank - 128,463 128,463
Due from banks - 1,831,405 1,831,405
Loans and advances 1,664,690 6,073,451 7,738,141
Financial investments - equity
instrument at FVTPL
- 258,778 258,778
Financial Investments- securities
at amortised cost
- 648,316 648,316
Other assets 1,953 211,235 213,188
Property and equipment 174,930 919,590 1,094,520
Intangible assets - 11,515 11,515
Non-current assets held for sale - 334,681 334,681
1,841,693 10,418,099 12,259,792
Liabilities
Deposits from customers 463,156 5,877,441 6,340,597
Other liabilities 17,374 153,264 170,638
Current income tax payable 835 27,147 27,982
Due to National Housing Fund 312,767 13,068 325,835
794,132 6,070,920 6,865,052
The Bank's operations are geographically divided into two segments (North and South) based on its operations
within the nothern and southern Nigeria. The bank does not have operations outside the country.
* All liabilities are allocated to reportable segments other than current tax liabilities. Liabilities for which
reportable segments are jointly liable are allocated in proportion to segment assets.
For the purposes of monitoring segment performance and allocating resources between segments:
* All assets are allocated to reportable segments.
72
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
5
Interest income calculated using the effective interest rate method
₦'000 ₦'000
Loans and advances 758,194 1,019,670
Cash and short term funds 616,357 86,760
Investment securities at amortized cost 24,887 18,315
1,399,438
1,124,745
2020 2019
6
Interest expense calculated using the effective interest rate method ₦'000 ₦'000
Due to customers
526,954 474,162
Due to NHF
12,424 13,434
Borrowings
- 61
539,378 487,657
2020 2019
7
Fees and commission income ₦'000 ₦'000
Mortgage fees 601 235,972
Legal fees - 14
601 235,986
2020 2019
8
Other operating income ₦'000 ₦'000
Rental income
10,940
11,057
Other income
36,692
13,195
Profit on disposal of property, plant and equipment
2,005
3,192
Fair value gain or loss on financial investments at FVTPL
70,556
-
Foreign exchange gain
73
-
120,266 27,444
Other income includes dividend income earned on equity investments, card maintenance fees, e-charges fees etc.
2020 2019
9
Credit loss expense ₦'000 ₦'000
Credit loss expense- Loans and advances
3,806,463 79,216
Credit loss expense- balances due from CBN
1,435 193
Credit loss expense- balances due from banks
54,346 149
Credit loss expense- other assets
1,630 -
Credit loss expense- Financial assets at amortised cost
24,053 -
3,887,927 79,558
During the year, the bank got an approval from the board to write off N4.42billion worth of loans.
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
Balances with Central Bank of Nigeria 1,435 - - 1,435
Due from banks 54,346 - - 54,346
Other assets 1,630 - - 1,630
Loans and advances (139,216) (22,543) 3,968,222 3,806,463
Financial assests at amortised cost 24,053 - - 24,053
Total impairment loss (57,752) (22,543) 3,968,222 3,887,927
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
Balances with Central Bank of Nigeria 193 - - 193
Due from banks 149 - - 149
Loans and advances 105,168 7,474 (33,426) 79,216
Total impairment loss 105,510 7,474 (33,426) 79,558
The interest on borrowings relates to loans obtained from Netherlands Development Finance Company (FMO) and Nigeria Mortgage
Refinancing Company which have been fully settled in 2019.
The table below shows the ECL charges on financial instruments for the year ended 31 December 2019:
The table below shows the ECL charges on financial instruments for the year ended 31 December 2020:
Fees and commission were earned from services provided overtime. The portion of the fee income earned over time in the course of the year
amounted to N601,193 (2019: N235,986,189). The portion of the fee income earned at a point in time is nil (2019: nil).
73
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020
2019
10 Personnel expenses ₦'000 ₦'000
Wages, salaries and other staff costs
361,416 288,830
Retirement contribution plan
24,119 20,489
Medical expenses
28,906 23,773
414,441 333,092
2020 2019
11 Depreciation
₦'000 ₦'000
Depreciation of property, plant and equipment (Note 22)
57,678 39,253
57,678 39,253
2020 2019
12 Other operating expenses ₦'000 ₦'000
Directors remuneration
108,090 92,159
Subscriptions, publications, stationeries and communications
106,090 76,291
Property and equipment repairs and maintenance
38,429 39,495
Insurance expenses
29,677 29,552
Electricity and gas
26,578 23,682
Deposit insurance commission
27,741 25,218
Auditors remuneration
12,000 12,000
Professional fees
30,052 24,311
Security costs
7,148 7,466
Advertisement
3,722 4,907
Bank charges
1,543 2,657
Donation
397 480
Lease charges - short term 7,807
7,807
Directors related expenses
368,959 3,614
Other expenses
143,158 123,972
911,391 473,611
2020 2019
13 Income tax expense ₦'000 ₦'000
13.1 Current income tax for the year
Income tax
3,747 6,941
Education tax
- 3,182
Capital gains tax
- 570
Total current income tax expense
3,747 10,693
Deferred tax (Net)
Deferred Tax - Current origination and revesal
- -
Income tax expense
3,747 10,693
13.2 Reconciliation of effective tax rate
The effective income tax rate for 2020 is 0.1% (2019: 21%).
2020 2019
13.2 Reconciliation of effective tax rate ₦'000 ₦'000
Loss before income tax (4,297,872) (51,943)
Income tax using the domestic
Corporation tax rate 30% (2019: 30%)
(1,289,362) (15,583)
Income not subject to tax
(176,166) (2,669)
Non-deductible expenses
552,846 60,126
Education tax
- 3,182
Capital gains tax
- 570
Unrecognised tax losses*
912,682 (41,874)
Effect of minimum tax floor
3,747 6,941
3,747 10,693
Other expenses is made up of rates, service charges, staff training, travelling expenses, lunch costs and general expenses.
The Bank is assessed on minimum tax for 2020 in compliance with the provision of the Finance Act 2020.
Where in any year of assessment the ascertainment of total assessable profits from all sources of a Bank results in a loss or where a
Bank’s ascertained total profits results in no tax payable or tax payable which is less than the minimum tax there shall be levied and paid
by the Bank, the minimum tax as prescribed in the subsection (2) of this sections. In compliance with Finance Act 2020, the rate shall be
reduced to 0.25% for tax returns filed in respect of any year of assessment that is due on any date between 1st January 2020 and 31st
December 2021.
74
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
₦'000 ₦'000
13.3 Current income tax payable
At beginning of the year
27,982 32,289
Income tax expense
3,747 10,693
Payments during the year
(10,123) (15,000)
At end of the year
21,606 27,982
*Unrecognised tax losses have been disclosed in the reconciliation along with prior year.
14 Loss per share attributable to ordinary equity holders (Kobo) - Basic and Diluted
Basic
2020 2019
Loss after income tax attributable to the shareholders (₦'000)
(4,301,619) (62,636)
Issued share capital (Unit '000)
4,200,000 4,200,000
Add: Additional share issued during the year
2,137,619 -
Weighted average number of shares ('000)
6,337,619 4,200,000
(in kobo)
(67.87) (1.49)
Diluted
2020 2019
15 Cash on hand
₦'000 ₦'000
Cash
2,020 785
2,020 785
16 Cash balances with central bank
Deposits with CBN
292,000 129,254
Allowances for impairment on Deposits with CBN
(2,226) (791)
289,774 128,463
See Note 17 for nature of deposits with CBN.
16.1 Impairment allowance on cash balances with CBN
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
- - - -
Standard grade
292,000 - - 292,000
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - - -
Total
292,000 - - 292,000
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
- - - -
Standard grade
129,254 - - 129,254
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - - -
Total
129,254 - - 129,254
Basic loss per share has been calculated based on loss after tax attributable to the shareholders during the year and the weighted
average number of issued share capital of 6,337,619 at year end (2019: 4,200,000,000 )
There was no diluting instruments as at the reporting date. Hence, diluted loss per share is the same as basic loss per share.
The table below shows the credit quality and the maximum exposure to credit risk based on the Bank’s internal credit rating system and
year-end stage classification. The amounts presented are gross of impairment allowances.
2019
2020
75
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as follows:
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020
129,254 - - 129,254
New assets originated or purchased
162,746 - - 162,746
Assets derecognised or repaid (excluding write-offs)
- - - -
Change in fair value
- - - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - - -
Foreign exchange adjustments
- - - -
At 31 December 2020
292,000 - - 292,000
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019
116,935 - - 116,935
New assets originated or purchased
12,319 - - 12,319
Assets derecognised or repaid (excluding write-offs)
- - - -
Change in fair value
- - - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - - -
Foreign exchange adjustments
- - - -
At 31 December 2019
129,254 - - 129,254
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
791 - - 791
New assets originated or purchased
1,435 - - 1,435
Assets derecognised or repaid (excluding write offs)
- - - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Recoveries
- - - -
Amounts written off
- - - -
At 31 December 2020
2,226 - - 2,226
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2019
598 - - 598
New assets originated or purchased
193 - - 193
Assets derecognised or repaid (excluding write offs)
- - - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Recoveries
- - - -
Amounts written off
- - - -
At 31 December 2019
791 - - 791
Changes due to modifications not resulting in
Impact on year end ECL of exposures transferred between stages during the
Changes due to modifications not resulting in
Impact on year end ECL of exposures transferred between stages during the
76
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
17 Due from banks ₦'000 ₦'000
Balances with FMBN 250 250
Balances with other banks 493,453 273,106
Fixed placement with banks 8,357,064 1,561,261
8,850,767 1,834,617
Allowances for impairment on Balances due from other banks (57,558) (3,212)
8,793,209
1,831,405
Rate range analysis:
Balances with other banks
Fixed placements with banks 3.0%-15.0% 6.0%-15.0%
17.1 Impairment allowance on due from banks
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000
Performing
Standard grade 8,850,767 - -
8,850,767
Sub-standard grade - - -
-
Non- performing - - - -
Individually impaired - - -
-
Total 8,850,767 - - 8,850,767
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000
Performing
Standard grade 1,834,617 - -
1,834,617
Sub-standard grade - - -
-
Non- performing - - - -
Individually impaired - - -
-
Total 1,834,617 - - 1,834,617
An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as follows:
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020 1,834,617
- - 1,834,617
New assets originated or purchased
8,850,767 - - 8,850,767
Assets derecognised or repaid (excluding write-offs)
(1,834,617) - - (1,834,617)
Change in fair value
- - - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - - -
Foreign exchange adjustments
- - - -
At 31 December 2020 8,850,767 - - 8,850,767
The balance with FMBN is a mandatory specified deposit required for the National Housing Fund on-lending loan. Balance with other
banks earns interest at floating rates based on daily bank deposit rates. Fixed placements with banks are made for varying periods of
between one day and three months, depending on the immediate cash requirements of the Bank, and earn interest at the respective
fixed placement rates.
The Bank has restricted cash balances with the Central Bank of Nigeria and the FMBN. This balance is made up of CBN and FMBN
cash reserve requirement. The cash reserve ratio represents a mandatory cash deposit which should be held with the Central Bank of
Nigeria as a regulatory requirement. Restricted deposits with Central Bank and Federal Mortgage Bank are not available for use in
the Bank's day-to-day operations.
ThetablebelowshowsthecreditqualityandthemaximumexposuretocreditriskbasedontheBank’sinternalcreditratingsystem
and year-end stage classification. The amounts presented are gross of impairment allowances.
2019
2020
77
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019 770,060
- -
770,060
New assets originated or purchased
1,325,891 - -
1,325,891
Assets derecognised or repaid (excluding write-offs)
(261,334) - -
(261,334)
Change in fair value
- - -
-
Transfers to Stage 1
- - -
-
Transfers to Stage 2
- - -
-
Transfers to Stage 3
- - -
-
Changes due to modifications not derecognised
- - -
-
Amounts written off
- - -
-
Foreign exchange adjustments
- - -
-
At 31 December 2019 1,834,617 - -
1,834,617
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
3,212 - - 3,212
New assets originated or purchased
57,558 - - 57,558
Assets derecognised or repaid (excluding write offs)
(3,212) - - (3,212)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Recoveries
- - - -
Amounts written off
- - - -
At 31 December 2020
57,558 - - 57,558
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2019 3,063
- - 3,063
New assets originated or purchased
1,261 - - 1,261
Assets derecognised or repaid (excluding write offs) (1,112)
- - (1,112)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Recoveries
- - - -
Amounts written off
- - - -
At 31 December 2019 3,212 - - 3,212
2020 2019
18 Loans and advances ₦'000 ₦'000
Mortgages 4,807,300 8,296,776
Advances 582,838 541,231
National Housing Fund 235,485 357,332
5,625,623 9,195,339
ECL allowance- Mortgages (787,260) (1,421,832)
- Advance (20,417) (18,475)
- National Housing Fund (29,854) (16,891)
ECL Allowance- Loans and Advances (837,531) (1,457,198)
Total
4,788,092
7,738,141
Impact on year end ECL of exposures transferred between
Changes due to modifications not resulting in
Impact on year end ECL of exposures transferred between
Changes due to modifications not resulting in
78
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
18.1 Impairment allowances on Loans and advances
18.1.1 Mortgages
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
Standard grade
2,259,834 - - 2,259,834
Sub-standard grade
- 15,024 - 15,024
Non- performing
Individually impaired
- - 2,532,442 2,532,442
Total
2,259,834 15,024 2,532,442 4,807,300
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
Standard grade
2,620,110 - - 2,620,110
Sub-standard grade
- 391,073 - 391,073
Non- performing
Individually impaired
- - 5,285,593 5,285,593
Total
2,620,110 391,073 5,285,593 8,296,776
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020
2,620,110 391,073 5,285,593 8,296,776
New assets originated or purchased
5,261,890 - - 5,261,890
Assets derecognised or repaid (excluding write-offs)
(562,038) (376,235) (3,435,808) (4,374,081)
Transfers to Stage 1
- - - -
Transfers to Stage 2
(186) 186 - -
Transfers to Stage 3
(5,059,942) - 5,059,942 -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - (4,377,285) (4,377,285)
Foreign exchange adjustments
- - - -
At 31 December 2020
2,259,834 15,024 2,532,442 4,807,300
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019
2,614,447 423,143 4,787,823 7,825,413
New assets originated or purchased
1,200,582 - - 1,200,582
Assets derecognised or repaid (excluding write-offs)
(607,614) (14,143) - (621,757)
Transfers to Stage 1
17,927 (17,927) - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(605,232) - 605,232 -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - (107,462) (107,462)
Foreign exchange adjustments
- - - -
At 31 December 2019
2,620,110 391,073 5,285,593 8,296,776
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
152,992 22,280 1,246,560 1,421,832
New assets originated or purchased
2,576,865 - - 2,576,865
Assets derecognised or repaid (excluding write offs)
(9,111) (22,280) (204,760) (236,151)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(2,706,564) - 2,706,564 -
Impact on year end ECL of exposures transferred between
- - 1,401,999 1,401,999
Unwind of discount (recognised in interest income)
- - - -
Recoveries
- - - -
Amounts written off
- - (4,377,285) (4,377,285)
At 31 December 2020
14,182 0 773,078 787,260
An analysis of changes in the gross carrying amount and the corresponding ECL allowance in relation to mortgage loan is, as follows:
ThetablebelowshowsthecreditqualityandthemaximumexposuretocreditriskbasedontheBank’sinternalcreditratingsystem
and year-end stage classification. The amounts presented are gross of impairment allowances.
2020
2019
79
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2019
113,208 15,008 1,335,592 1,463,808
New assets originated or purchased
81,911 - - 81,911
Assets derecognised or repaid (excluding write offs)
(13,030) - (3,395) (16,425)
Transfers to Stage 1
3,156 (3,156) - -
Transfers to Stage 2
(10,428) 10,428 - -
Transfers to Stage 3
(21,825) 21,825 -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Recoveries
- - - -
Amounts written off
- - (107,462) (107,462)
At 31 December 2019
152,992 22,280 1,246,560 1,421,832
18.1.2 Advance loans
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
-
Standard grade
560,653 - - 560,653
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - 22,185 22,185
Total
560,653 - 22,185 582,838
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
Standard grade
521,087 - - 521,087
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - 20,144 20,144
Total
521,087 - 20,144 541,231
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020
521,087 - 20,144 541,231
New assets originated or purchased
113,879 - - 113,879
Assets derecognised or repaid (excluding write-offs)
(72,259) - (13) (72,272)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(2,054) - 2,054 -
Amounts written off
- - - -
Foreign exchange adjustments
- - - -
At 31 December 2020
560,653 - 22,185 582,838
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019
600,317 - 53,182 653,499
New assets originated or purchased
22,241 - - 22,241
Assets derecognised or repaid (excluding write-offs)
(62,159) - - (62,159)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(39,312) - 39,312 -
Amounts written off
- - (72,350) (72,350)
Foreign exchange adjustments
- - - -
At 31 December 2019
521,087 - 20,144 541,231
Impact on year end ECL of exposures transferred between
ThetablebelowshowsthecreditqualityandthemaximumexposuretocreditriskbasedontheBank’sinternalcreditratingsystem
and year-end stage classification. The amounts presented are gross of impairment allowances.
2020
2019
Changes due to modifications not resulting in
An analysis of changes in the gross carrying amount and the corresponding ECL allowance in relation to Advance loan is, as follows:
The decrease in ECLs of the mortgage portfolio was driven by a reduction in the gross carrying amount of the portfolio and
movements between stages as a result of increases in credit risk and a deterioration in economic condition.
80
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
- - 18,475 18,475
New assets originated or purchased
2,464 - - 2,464
Assets derecognised or repaid (excluding write offs)
(1,930) - - (1,930)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(523) - 523 -
- - 1,408 1,408
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Amounts written off
- - - -
At 31 December 2020
11 - 20,406 20,417
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2019
16 - 50,976 50,992
New assets originated or purchased
5,077 - - 5,077
Assets derecognised or repaid (excluding write offs)
(16) - - (16)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(5,077) - 5,077 -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Amounts written off
- - (37,578) (37,578)
At 31 December 2019
- - 18,475 18,475
18.1.3 National Housing Fund
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3
Individual
Total
N '000 N '000 N '000
Performing
Standard grade
160,906 - - 160,906
Sub-standard grade
- 10,307 - 10,307
Non- performing
- - - -
Individually impaired
- - 64,272 64,272
Total
160,906 10,307 64,272 235,485
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3
Individual
Total
N '000 N '000 N '000
Performing
Standard grade
187,045 - - 187,045
Sub-standard grade
- 11,704 - 11,704
Non- performing
- - - -
Individually impaired
- - 158,583 158,583
Total
187,045 11,704 158,583 357,332
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020
187,045 11,704 158,583 357,332
New assets originated or purchased
59,659 - - 59,659
Assets derecognised or repaid (excluding write-offs)
(26,047) (1,397) (105,218) (132,662)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(59,644) - 59,644 -
Changes due to modifications not derecognised
- - - -
Amounts written off
(107) - (48,737) - 48,844
Foreign exchange adjustments
- - - -
At 31 December 2020
160,906 10,307 64,272 235,485
2020
Impact on year end ECL of exposures transferred between
stages during the year
Impact on year end ECL of exposures transferred between
stages during the year
Changes due to modifications not resulting in
Changes due to modifications not resulting in
2019
ThetablebelowshowsthecreditqualityandthemaximumexposuretocreditriskbasedontheBank’sinternalcreditratingsystem
and year-end stage classification. The amounts presented are gross of impairment allowances.
An analysis of changes in the gross carrying amount and the corresponding ECL allowances in relation to National Housing Fund is,
as follows:
The increase in ECLs of the advance portfolio was driven by an increase in the gross carrying amount of the portfolio and movements
between stages as a result of increases in credit risk and a deterioration in economic condition.
81
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019
165,338 14,995 152,017 332,350
New assets originated or purchased
30,909 - - 30,909
Assets derecognised or repaid (excluding write-offs)
- 5,927 - - (5,927)
Change in fair value
- - - -
Transfers to Stage 1
20,433 (4,571) (15,862) -
Transfers to Stage 2
- 1,280 (1,280) -
Transfers to Stage 3
(23,708) - 23,708 -
Changes due to modifications not derecognised
- - - -
Amounts written off
- - - -
Foreign exchange adjustments
- - - -
At 31 December 2019
187,045 11,704 158,583 357,332
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
568 263 16,060 16,891
New assets originated or purchased
29,842 - - 29,842
Assets derecognised or repaid (excluding write offs)
(449) (263) (5,345) (6,057)
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
(29,810) - 29,810 -
- - 16,438 16,438
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - 21,584 21,584
Amounts written off
(107) - (48,737) (48,844)
At 31 December 2020
44 - 29,810 29,854
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2019
539 61 7,621 8,221
New assets originated or purchased
8,759 - - 8,759
Assets derecognised or repaid (excluding write offs)
(89) - - (89)
Transfers to Stage 1
160 (115) (45) -
Transfers to Stage 2
- 317 (317) -
Transfers to Stage 3
(8,801) - 8,801 -
- - - -
Unwind of discount (recognised in interest income)
- - - -
- - - -
Changes to models and inputs used for ECL calculations
- - - -
Amounts written off
- - - -
At 31 December 2019
568 263 16,060 16,891
18.2 Analysis by sector (Gross)
2020 2019
₦'000 ₦'000
Construction Loans
2,327,500 3,500,470
Mortgage FMBN bonds
3,664 3,834
Mortgage Home Loans
2,251,063 4,497,273
NHF Loans
231,821 353,499
School Loans
208,845 274,020
Staff Mortgage Loan
14,071 25,013
Staff Personal Loan
10,801 30
Staff Share Loan
406,816 432,120
Other Loans
171,042 109,080
5,625,623 9,195,339
Impact on year end ECL of exposures transferred between
Impact on year end ECL of exposures transferred between
Changes due to modifications not resulting in
Changes due to modifications not resulting in
The increase in ECLs of the NHF portfolio was driven by a reduction in the collateral values attached to the NHF portfolios.
82
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
18.3 Analysis by security (gross) 2020 2019
₦'000 ₦'000
Secured against real estate
4,848,464 8,420,763
Other security
756,315 755,589
Unsecured
20,844 18,987
5,625,623 9,195,339
Other security consists of assets with other securities such as equities, salary domiciliation, third party guarantee and cash in lien.
18.4 Loans and advances general terms and conditions
Interest rate ₦'000 Interest rate ₦'000
Tenor
1 to 5 years 10.1 4,077,746 14 6,759,958
6 to 10 years 7.8 957,195 12 1,076,865
11 to 15years 6.3 560,224 8 686,483
Above 15years 6 30,459 7 672,033
5,625,623 9,195,339
2020 2019
19 Financial investments - securities at FVTPL
₦'000 ₦'000
Quoted equity investments
258,778 258,778
Fair value gain or loss on financial investments at FVTPL
70,556 -
329,334 258,778
2020 2019
₦'000 ₦'000
20 Financial Investments- securities at amortised cost
Treasury bills
- 648,316
FGN Bonds
1,825,936 -
Corporate bonds
1,024,481 -
2,850,417 648,316
(24,053)
-
2,826,364 648,316
20.1 Impairment allowance on securities at amortised cost
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
- - - -
Standard grade
2,850,417 - - 2,850,417
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - - -
Total
2,850,417 - - 2,850,417
Internal rating grade
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Performing
- - - -
Standard grade
648,316 - - 648,316
Sub-standard grade
- - - -
Non- performing
- - - -
Individually impaired
- - - -
Total
648,316 - - 648,316
2020
2019
Allowance for impairment on Investment Securities at amortised cost
Equity investment represents shares in Universal Insurance Plc and the Nigeria Mortgage Refinancing Company (NMRC). These
shares are quoted on the National Association of Securities Dealer.
The securities measured at amortised cost as disclosed here consist of investment in federal government bonds and corporate
bond. The outstanding balance above includes interest accrued.
2020
2019
The rates are average rate of interests per annum for the loans and advances within the different tenor ranges.
The table below shows the credit quality and the maximum exposure to credit risk based on the Bank’s internal credit rating
system and year-end stage classification. The amounts presented are gross of impairment allowances.
For the purpose of cashflows statement, actual cash outflow for the purchase of financial investment at amortised cost is
N2,825,530 (2019: N630,001).
83
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as follows:
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2020 648,316 - -
648,316
New assets originated or purchased
2,825,530
- -
2,825,530
Assets derecognised or repaid (excluding write-offs) (648,316) - - (648,316)
Accrued interest 24,887 - -
24,887
Transfers to Stage 1 - - -
-
Transfers to Stage 2 - - -
-
Transfers to Stage 3 - - -
-
Changes due to modifications not derecognised - - -
-
Amounts written off - - -
-
Foreign exchange adjustments - - -
-
At 31 December 2020
2,850,417
- -
2,850,417
An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as follows:
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
Gross carrying amount as at 1 January 2019 - - -
-
New assets originated or purchased
630,001
- -
630,001
Assets derecognised or repaid (excluding write-offs) - - - -
Accrued interest 18,315 - -
18,315
Transfers to Stage 1 - - -
-
Transfers to Stage 2 - - -
-
Transfers to Stage 3 - - -
-
Changes due to modifications not derecognised - - -
-
Amounts written off - - -
-
Foreign exchange adjustments - - -
-
At 31 December 2019
648,316
- -
648,316
Stage 1
Individual
Stage 2
Individual
Stage 3 Total
N '000 N '000 N '000 N '000
ECL allowance as at 1 January 2020
- - - -
New assets originated or purchased
24,053 - - 24,053
Assets derecognised or repaid (excluding write offs) -
- - -
Transfers to Stage 1
- - - -
Transfers to Stage 2
- - - -
Transfers to Stage 3
- - - -
At 31 December 2020
24,053 - - 24,053
84
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
21 Other assets
2020 2019
₦'000 ₦'000
Financial assets:
Sundry receivables
30,375 89,469
Balance with other financial institutions
151,544 151,544
181,919 241,013
Non financial assets:
Prepayments
14,059 89,500
Witholding tax receivable
65,949 28,698
Stationery and stocks
9,738 6,269
89,746 124,467
Total Gross amount
271,665 365,480
Allowance for impairment of other assets - (note 21.1)
(153,923) (152,292)
117,742 213,188
Sundry receivables is made up of fees receivable and the resultant provision for the year is detailed in Note 21.1 .
Other assets are due within 3 months of the year end; hence, their carrying value approximate to their fair value.
21.1 Movement of allowance for impairment of other assets
2020 2019
₦'000 ₦'000
Balance at the beginning of year
152,292 152,292
Provision for the year
1,630 -
End of the year
153,923 152,292
Balance with other financial institutions had been being fully provided for in the prior year.
85
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
22 Property and Equipment
Land and Office furniture Computer Motor
building and equipment equipment vehicles Total
₦'000 ₦'000 ₦'000 ₦'000 ₦'000
Cost
At 1 January 2020
1,156,972 185,373 107,315 253,709 1,703,369
Additions
- 19,573 22,100 14,000 55,673
Disposal
- (3,426) - (71,490) (74,916)
At 31 December 2020
1,156,972 201,520 129,415 196,219 1,684,126
Accumulated depreciation
At 1 January 2020
172,519 150,670 103,764 181,896 608,849
Charge for the year
22,898 11,759 3,375 19,646 57,678
Disposals
- (3,426) - (71,490) (74,916)
At 31 December 2020
195,417 159,003 107,139 130,052 591,611
Cost
At 1 January 2019
1,156,972 184,232 106,461 209,988 1,657,653
Additions
- 1,141 854 71,500 73,495
Disposal
- - - (27,779) (27,779)
At 31 December 2019
1,156,972 185,373 107,315 253,709 1,703,369
Accumulated depreciation
At 1 January 2019
149,596 139,569 102,285 205,925 597,375
Charge for the year
22,923 11,101 1,479 3,750 39,253
Disposals
- - - (27,779) (27,779)
At 31 December 2019
172,519 150,670 103,764 181,896 608,849
NBV at 31 December 2020
961,555 42,517 22,276 66,167 1,092,515
NBV at 31 December 2019
984,453 34,703 3,551 71,813 1,094,520
There were no restrictions on title ,no asset pledge as security for liabilities and no contractual commitment to purchase PPE during the year.
86
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
23 Intangible assets
Computer Total Computer Total
Software Software
₦'000 ₦'000 ₦'000 ₦'000
Cost
At 1 January
124,031 124,031 120,831 120,831
Addition 11,606 11,606 3,200 3,200
At 31 December 135,637 135,637 124,031 124,031
Accumulated Amortisation
At 1 January
112,516
112,516 99,365 99,365
Amortisation charge
6,502
6,502 13,151 13,151
At 31 December 119,018 119,018 112,516 112,516
Carrying amount
16,619 16,619 11,515 11,515
24 Non-current assets-held for sale
2020 2019
₦'000 ₦'000
As at 1 January 334,681 2,368,626
Returned assets - 45,251
Disposal (70,000) (2,079,196)
As at 31 December 264,681 334,681
No asset was repossessed from customers that defaulted on loans and advances during the year (2019: nil)
In the year ended 31 December 2013, the CBN stipulated that the Bank should commence disposal of all real
estate developments in its books. Consequently, the Bank commenced plans to dispose of these assets. The
criteria to classify the assets as non-current assets held for sale were first met as at 31 December 2013. Sale of all
the assets have not been completed at the year end due to circumstances beyond the Bank's control, however
significant portion of the assets have been sold and the Bank is committed to dispose -off the remaining assets
within the next 12 months.
The intangible assets consist wholly of the Bank's computer software.
The Bank performed its annual impairment test as at 31 December 2020 and 2019, and there were no indicators of
impairment of assets held as at these dates.
2020
2019
87
#
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
₦'000 ₦'000
25 Deposits from customers
Demand Deposits
3,581,097 762,688
Savings Deposits
2,084,120 1,274,514
Term Deposits
8,964,223 4,303,395
14,629,440 6,340,597
Within one year
14,542,607 6,257,214
More than one year
86,833 83,383
14,629,440 6,340,597
26 Other liabilities
Financial Liabilities
Accounts payable
200,194 146,392
Lease liability
7,186 1,686
207,380 148,078
Non- Financial Liabilities
Other liabilities
34,240 15,902
Information technology levy
1,487 2,412
Staff pension contribution
1,394 3,603
Rent received in advance
462 643
37,583 22,560
244,963 170,638
Terms and Conditions of other liabilities
2020 2019
Defined contribution scheme ₦'000 ₦'000
Pension liability 1,394 3,603
Accounts payable and other liabilities are made up of various expenses such as audit fee, rates, etc.
which have been incurred during the year but remained unpaid as at the year end. The Bank
normally settles such expenses within one to three months from the day of receipt of service to
which it relates.
Information technology levy represents 1% of profit before tax in line with section 12(2) of the
NITDA Act which became effective in 2007.
The Bank and its employees make a joint contribution of 10% and 8%, respectively, on each of the
qualifying employee’s salary, housing and transport allowance to each employee's retirement
savings account maintained with their nominated pension fund administrators.
The Bank's liabilities in respect of the defined contribution scheme are charged against the profit or
loss of the year in which they become payable. Payments are made to pension fund administration
companies who are financially independent of the Bank.
Lease liability is in respect of lease of office space for some of the Bank's branches. The Bank's
enforceable right under the Nigerian law is to the extent of the amount paid. The lease liability
relates to accruals of the short term leases and this will expire within the next 12 months.
88
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
₦'000 ₦'000
27 Due to National Housing Fund
Due to National Housing Fund
269,300 325,835
28 Deferred tax liabilities
2020 2019
₦'000 ₦'000
28.1 Deferred tax liabilities are attributable to the following:
Accelerated tax depreciation
251,667 227,658
Non-current assets held for sale
2,633 203,416
Allowances for loan losses
(31,384) (57,634)
Other assets
46,210 45,688
Net fair value gain on financial asset
- 920
Unutilised capitalised allowance
(318,419) (274,228)
Tax loss carried forward
(1,554,965) (300,825)
Unrecognised deferred tax assets
1,604,258 155,005
- -
28.2 Movements in temporary differences during the year:
At beginning of
year
Recognised
in equity
1 January
2020
Recognised in
profit or loss
At end of year
₦'000 ₦'000 ₦'000 ₦'000
Accelerated depreciation
227,658 - 24,009 251,667
Non-current assets held for sale
203,416 - (200,783) 2,633
Allowances for loan losses
(57,634) - 26,250 (31,384)
Other assets
45,688 - 522 46,210
Net fair value gain on financial asset
920 - (920) -
Unutilised capitalised allowance
(274,228) - (44,191) (318,419)
Tax loss carried forward
(300,825) - (1,254,140) (1,554,965)
Unrecognised deferred tax assets
155,005 - 1,449,253 1,604,258
- - - -
Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax
rate of 30% (2019: 30%).
The funds are obtained from the Federal Mortgage Bank of Nigeria (“FMBN”) for the purpose of on-lending of this
fund to qualifying members of the National Housing Fund loan scheme. The funds are obtained at 4% per annum
from FMBN and issued to customers at 6% per annum.
89
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
29 Share capital
₦'000 ₦'000
29.1 Authorised
Ordinary shares of 50 kobo each
6,000,000 6,000,000
2020 2019
29.2 Issued and fully paid
Unit'000 Unit'000
Ordinary shares of 50k each
6,461,538 4,200,000
₦'000 ₦'000
Issued and fully paid
3,230,769 2,100,000
2020 2020
2019 2019
30.2.1 Movement in share capital
Unit'000 ₦'000 Unit'000 ₦'000
At 1 January
4,200,000 2,100,000
4,200,000 2,100,000
Share issued at 50kobo each
2,261,538 1,130,769
- -
At 31 December
6,461,538 3,230,769 4,200,000 2,100,000
2020 2019
30 Share premium
₦'000 ₦'000
Balance as at 31 December
4,008,277 2,877,126
2020 2019
31.1 Movement in share premium
₦'000 ₦'000
At 1 January
2,877,126 2,877,126
Share premium on issued shares at 55k each
1,243,846 -
Transaction costs on share issue
(112,695) -
At 31 December
4,008,277 2,877,126
2020
31.2 For cashflow purposes,
₦'000
Proceeds from share issue
2,374,615
Transaction costs on share issue
(112,695)
2020 2019
₦'000 ₦'000
31 Accumulated losses:
Balance at beginning of year (2,093,350) (1,328,039)
Loss for the year (4,301,619) (62,636)
Transfer from/ (to) regulatory risk reserve 1,365,226 (702,675)
Balance at end of year (5,029,743) (2,093,350)
There is no movement in the authorised share capital during the year.
During the year, the Bank increased its issued share capital by 2.26billion shares at 50 kobo each.
Share premium reserves represents the excess of share issued price over the nominal value per share. The movement in share premium is
as a result of the additional shares issued.
90
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
32 Statutory reserve:
2020 2019
₦'000 ₦'000
At the beginning of the year
298,440 298,440
Transfer from profit or loss account
- -
At the end of the year
298,440 298,440
2020 2019
33 Additional cash flow information
₦'000 ₦'000
Cash and cash equivalents
Cash on hand (note 15)
2,020 785
Balances with other banks
493,453 273,106
Fixed placement with banks
8,357,064 1,561,261
8,852,537
1,835,152
2020 2019
33.1 Change in Operating assets ₦'000 ₦'000
Net change in loans and advances to customers (856,414) (529,116)
Net change in other assets 93,816 (132,892)
Net change in cash reserve with CBN (162,746) (12,319)
Net change in financial instruments at amortised cost (2,177,214) (630,001)
(3,102,558) (1,304,328)
The tenor for the fixed placements ranges between less than 90days
Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by section 16(1) of the
Banks and Other Financial Institutions Act of Nigeria, an appropriation of 20% of profit after tax is made if the statutory reserve is less than
paid-up share capital and 10% if the statutory reserve is greater than the paid-up capital.
In view of loss made during the year, no appropriation is made (2019: Nil).
ThedepositswiththeCentralBankandFMBN(seeNotes16and17)arenotavailabletofinancetheBank’sday–to–dayoperationsand,
therefore, are not part of cash and cash equivalents.
Undistributable earnings required to be kept in line with the central bank of Nigeria's Prudential guideline.
91
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
Note
2020 2019
33.2 Change in operating liabilities ₦'000 ₦'000
Net change in due to customers
8,288,843
442,278
Net change in due to National Housing Fund (56,535) (27,692)
Net change in other liabilities 74,325 (45,682)
8,306,633 368,904
33.3 Adjustment for non-cash items
Depreciation of property and equipment 11
57,678 39,253
Short term lease expenses 11
- 7,807
Amortisation of intangible assets 23
6,502 13,151
Impairment charge on loans and advances 9
3,806,463 79,216
Impairment charge on cash balances with central bank 9
1,435 193
Impairment charge on due from banks 9
54,346 149
Impairment charge on financial assets at amortised cost 9
24,053 -
Impairment charge on other assets 9
1,630 -
Accrued interest on financial assets designated at amortised cost 5
(24,887) (18,315)
Loss on sale of non-current assets held for sale
860 13,796
Fair value gain on equity instruments at FVPL (70,556) -
Dividend income received (21,500) -
Profit on sale of property and equipment (2,005) (3,192)
3,834,019 132,058
33.4 Operational cashflows from interest*
Interest paid 588,690 488,118
Interest received 1,399,438 978,697
34 Contingencies and commitments
34.1
34.2 Capital commitments
34.3 Claims and litigations
Guarantees and other commitments
The Bank has no guarantees and other commitments as at 31 December 2020 (2019:Nil).
At the year end, the Bank had no capital commitment.
The Bank in the ordinary course of business is presently involved in two (2019: four) claims and litigations relating to
customer disputes. Maximum exposure for the Bank is ₦150,000,000 (2019: ₦150,400,000). Management does not believe
these claims and litigations will be successful. Thus, no provision has been made.
* Cash flows from operating interest is analysed into interest paid and received. This is also reflected for prior year.
92
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
35 Operating leases
Bank as lessee
Below is the undiscounted potential future rental payments relating to periods following the lease term of a year.
2020 2019
₦'000 ₦'000
Due within 1 year 7,808 7,808
Due 2-5 years - -
Due greater than 5 years - -
7,808 7,808
Bank as lessor
2020 2019
₦'000 ₦'000
Due within one year 9,943
Due within two-five years - -
- 9,943
As at 31 December 2020, there are no future minimum lease payments under the non-cancellable operating leases.
The total rent recognised as income during the year is ₦10.94million (2019: ₦11.057million).
The Bank entered into commercial leases for premises. These leases have an average life of one year but they are renewable
annually. There are no restrictions placed upon the lessee by entering into these leases.
There is no separate amount for minimum lease payment, contingent rents and sublease payment. None of the lease was sub-
leased during the year. There is no restriction imposed by the lease arrangement.
The Bank acts as lessor of commercial premises. These leases have an average life of one year with no renewal option. There are
no restrictions placed upon the lessee by entering into these leases.
The properties are occupied by the Bank for its business operations with insignificant space being rented to third parties.
The Bank has received rental income in advance for properties and has been capitalised in other liabilities as ₦462,000 (2019:
₦643,000).
93
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
36 Related party disclosures
Amount Amount Interest Interest
Relationship to outstanding outstanding paid paid Nature of
Name of Borrower Bank 2020 2019 2020 2019 Facility type Status security
₦'000 ₦'000 ₦'000 ₦'000
Rosabon Investment Company
Limited
Bank's former chairman is
majority shareholder and
director of the Company
8,107 36,955 5,458 11,225 Working capital Performing Equitable mortgage/Cash
Infant Jesus Academy
Bank'sformer MD/CEO is a
Director of the School
153,700 194,800 24,171 29,899 Mortgage loan Performing Legal mortgage
Chike Chiemeke
A brother to the Bank's
former MD/CEO
- 17,417 866 3,160 Mortgage loan Performing Legal mortgage
Mr. Madu Hamman Bank's Managing Director - - - 6 Housing loan Performing Legal mortgage
Nwosisi Andrew
Bank's former executive
director
- - - 58 Housing loan Performing Legal mortgage
Osnon Capital Limited
The Bank's Director (Nonso
Okpala is a Director of the
Company)
185,978 - 5,557 - Housing loan Performing Legal mortgage
347,785 249,172 36,052 44,348
Terms and conditions of transactions with related parties
An analysis of insider related credit granted to companies and individuals with whom the key management of the Bank are related or in which the key management have related
interests are as stated below. Credit facilities were provided by the Bank to related parties on commercial terms. Loans and advances to related parties at the reporting date,
which are all performing amounted to ₦347.8million (2019: ₦249.1million).
The Bank rents properties for two of its branches from the the Bank's former chairman who retired at the end of February 2020. The rental charge for the current year is
₦5,500,000 (2019: ₦5,500,000) and the amount payable at the year end is ₦6,416,710 (2019: ₦416,686.68).
The above-mentioned outstanding balances arose from the ordinary course of business. The interest rates charged to and by related parties are at normal commercial rates.
Outstanding balances at the year-end are fully secured for the year ended 31 December 2020 and 2019, all related party facilities were performing at year end and as such there
were no amounts provided for.
94
ABBEY MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
36.1 Key management compensation ₦'000 ₦'000
Salaries and other short term employee benefits 75,832 70,379
Post -employment benefits 4,349 4,026
80,181 74,405
36.2
Directors emoluments
Fees 23,638 14,750
Executive Compensation 75,832 70,379
Defined contribution scheme 4,349 4,026
Sitting allowances 8,620 7,030
112,439 96,185
The highest paid Director's compensation 21,381 29,000
37
Events after reporting date
Share issue
Covid 19 Impact
Funding and Liquidity
Analysis of balance sheet
38 Dividend payable
No dividend was paid or proposed for the year (2019: Nil).
39 Compliance with banking regulations
In addition to the private placement of N2.37 billion whose full proceeds the bank received after CBN verification in January 2020,
a rights issue of 4 for 7 amounting to 3.69 billion units of ordinary shares of 50k at 82 kobo per share is in progress and had
reached an advance stage as at 31 December 2020. The Acceptance List for the rights issue opened on 4 January 2021 and this has
closed 11 February 2021.
Management has assessed the impact of the COVID-19 on the going concern of Bank and has concluded that the use of the going
concern is appropriate and that the Bank will be able to recover its assets and discharge its liabilities in the foreseeable future for
at least the next 12 months. Management however has noted COVID-19 as strategic and operational risks and is monitoring it
closely and mitigating its impact as appropriate.
The pandemic is expected to impact liquidity risk, exchange rate risk and interest rate risk faced by the bank. The Bank has a
robust liquidity management framework and contingency funding plan that builds in adequate buffers to support liquidity run-off
in a stress scenario. The liquidity ratio of the bank as at 31 December 2020 was 61.99% and projects that it will remain above the
the regulatory limit 20% during the crisis period. Also the Bank’ will be less impacted by foreign exchange risk as its exposure to
foreign assets is insignificant.
The Bank as performed a line-by-line analysis of its balance sheet and has done an assessment of whether the current uncertainty
may impact any of the amounts presented at 31 December 2020. The Bank has assessed that the coronavirus affects the business
of the Bank’s borrowing customers. The Bank has performed an analysis and reviewed the portfolio and the impact the pandemic
would have on the Bank’s credit portfolio. Management has concluded however that the amounts recognised in the financial
statements do not require further adjustment but will continue to monitor situation as new information becomes available and
adjustment thereof will be reflected in the appropriate reporting period.
The Bank complied with all CBN regulations during the year, there were no contraventions to be reported during the period.
95
ABBEY MORTGAGE BANK PLC
40 REGULATORY RISK RESERVE
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
₦’000 ₦’000
Regulatory risk reserve:
Balance at beginning of the year
2,212,524 1,509,849
Transfer (from) /to retained earnings
(1,365,226) 702,675
847,298 2,212,524
STATEMENT OF PRUDENTIAL ADJUSTMENTS
2020 2019
₦’000 ₦’000
PRUDENTIAL GUIDELINES PROVISION:
General
36,523 26,448
Specific
1,732,143 3,647,277
Provision on other assets
153,923 152,292
Total
1,922,589 3,826,017
IFRS PROVISIONS:
Expected credit loss allowance
1,075,291 1,613,493
1,075,291 1,613,493
IFRS impairment allowance lower than prudential provision
847,298 2,212,524
(ii) Prudential Provisions is less than IFRS provisions; the excess charges resulting should be transferred
from the regulatory risk reserve account to the retained earnings to the extent of the non-distributable
reserve previously recognized.
(i) Prudential Provisions is greater than IFRS provisions; transfer the difference from the retained
earnings to a non-distributable regulatory reserve.
The Regulatory Risk Reserve accounts for the difference between the allowance for impairment on loans
and advances computed based on the Central Bank of Nigeria Prudential Guidelines compared with the
expected credit loss model used in calculating the impairment under IFRS.
The Regulatory Body, the Central Bank of Nigeria (CBN) stipulates that provisions for loans recognized in
the profit or loss account shall be determined based on the requirements of IFRS. The IFRS provisions
should be compared with provisions determined under prudential guidelines and the expected
impact/changes in general reserve should be treated as follows:
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Other National Disclosures
ABBEY MORTGAGE BANK PLC
STATEMENT OF VALUE ADDED
FOR THE YEAR ENDED 31 DECEMBER 2020
₦'000
% ₦'000 %
Gross income
1,519,445 1,374,379
Interest expense
(539,378) (487,657)
980,067 886,722
Impairment charge
(3,887,927) (79,558)
Brought-in-materials and services-local
(911,391) (473,611)
Value (consumed)/added
(3,819,251) 100 333,553 100
Applied to pay:
Employee as wages, salaries and pensions
414,441 (11) 333,092 (100)
Income tax
3,747 (0) 10,693 (3)
Retained in business:
Depreciation and amortisation
64,180 (2) 52,404 (16)
Loss for the year
(4,301,619) 113 (62,636) 19
Value (consumed)/added
(3,819,251) 100 333,553 (100)
2020
2019
Value added / (consumed) represents the additional wealth which the company has been able to create by its own and employees
efforts . This statement shows the allocation of that wealth among the employees, shareholders, government and that retained for
the future creation of more wealth.
This information is presented for the purpose of the requirements of the Companies and Allied Matters Act 2020.
98
ABBEY MORTGAGE BANK PLC
FIVE-YEAR FINANCIAL SUMMARY
STATEMENT OF FINANCIAL POSITION
AS AT
2020 2019 2018 2017 2016
Assets ₦'000 ₦'000 ₦'000 ₦'000 ₦'000
Cash on hand 2,020 785 986 2,687 11,037
Due from banks 8,793,209 1,831,405 766,997 782,007 896,009
Cash balances with central bank 289,774 128,463 116,337 115,507 101,046
Loans and advances 4,788,092 7,738,141 7,288,241 7,458,506 6,900,080
Financial Investments - available for sale - - - 207,500 207,500
Financial Investments -held to maturity - - - - 336,163.00
Financial investments - securities at FVTPL 329,334 258,778 258,778 - -
Financial Investments- securities at amortised cost 2,826,364 648,316 - - -
Other assets 117,742 213,188 81,834 64,128 417,906
Property and equipment 1,092,515 1,094,520 1,060,278 1,084,748 1,133,787
Intangible assets 16,619 11,515 21,466 32,176 45,583
Non-current assets held for sale 264,681 334,681 2,368,626 2,493,564 2,403,663
Total Assets 18,520,350 12,259,792 11,963,543 12,240,823 12,452,774
Liabilities and equity
Deposits from customers 14,629,440 6,340,597 5,898,319 5,356,098 5,328,649
Current income tax liability 21,606 27,982 32,289 37,434 57,720
Other liabilities 244,963 170,638 216,320 232,492 205,352
Borrowings - - 5,712 14,670 24,245
Due to National Housing Fund 269,300 325,835 353,527 374,237 398,541
15,165,309 6,865,052 6,506,167 6,014,931 6,014,507
Equity
Share capital 3,230,769 2,100,000 2,100,000 2,100,000 2,100,000
Share premium 4,008,277 2,877,126 2,877,126 2,877,126 2,877,126
(Accumulated losses) / retained earnings (5,029,743) (2,097,353) (1,328,039) (191,496) 193,676
Statutory reserve 298,440 298,440 298,440 298,440 298,440
Regulatory risk reserve 847,298 2,216,527 1,509,849 1,141,822 969,025
Total equity 3,355,041 5,394,740 5,457,376 6,225,892 6,438,267
Total liabilities and equity 18,520,350 12,259,792 11,963,543 12,240,823 12,452,774
31 DECEMBER
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ABBEY MORTGAGE BANK PLC
FIVE-YEAR FINANCIAL SUMMARY
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED
2020 2019 2018 2017 2016
₦'000 ₦'000 ₦'000 ₦'000 ₦'000
Net operating income 980,067 886,722 903,583 919,215 772,730
Impairment charge for loans and other assets (3,887,927) (79,558) (566,743) (167,938) (101,786)
Operating expenses (1,390,012) (859,107) (973,320) (929,184) (907,173)
Loss before income tax (4,297,872) (51,943) (636,480) (177,907) (134,443)
Income tax expense (3,747) (10,693) (29,039) (34,468) (33,554)
Loss for the year (4,301,619) (62,636) (665,519) (212,375) (167,997)
Other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss in subsequent period:
Reclassification of net loss to income statement - - - - -
- - - - -
Total comprehensive loss for the year (4,301,619) (62,636) (665,519) (212,375) (167,997)
(Loss) / earnings per share (Kobo) - Basic and diluted (67.87) (1.49) (15.85) (5.06) (4.00)
31 DECEMBER
(Loss) / earnings per share (basic) are based on the (loss) / profit after tax and weighted number of ordinary shares in issue and paid up at
the end of every accounting year.
100