IS OUR PROMISE - Bank of Baroda ( · PDF fileI have the pleasure to present the Bank’s...
Transcript of IS OUR PROMISE - Bank of Baroda ( · PDF fileI have the pleasure to present the Bank’s...
COMPANY INFORMATION
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
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Chairman’s Report
Company information
Corporate governance
Report of the Directors
Statement of Directors' responsibilities
Report of the independent auditor
Financial statements:
Statement of profit and loss
Statement of other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes: Significant accounting policies
Notes
DEPENDABILIT YIS OUR PROMISE
TABLE OF CONTENTSAnnual Report and Financial Statementsfor the Year Ended 31 December 2014
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CHAIRMAN’S REPORT
Dear Stakeholders,
I have the pleasure to present the Bank’s Annual Audited Report and Financial Statements for the year ended 31st December 2014.
KENYAN ECONOMY
The Kenyan Gross Domestic Product (GDP) is estimated to have expanded by 5.3 per cent in 2014 as compared to a growth of 5.7 per cent in the year 2013. The performance was supported by;
• Increasedgovernmentandprivateconsumption• Lowoilprices• Increaseinexportsofgoodsandservices.• StabilityoftheKenyaShillingagainstmajorcurrencies,despiteaslightdepreciationagainsttheUSdollar.
The expected growth in GDP for the country is 6.9% (revised from initial 6.5%) for the year 2015.
Thecountryexperienceddepressedrainfallduring the lastquarterof2014whileweather forecastpoints toapossibilityof insufficient longrainsin parts of the country. The performance of the agriculture sector is therefore likely to remain close to the 2014 level due to its reliance on rain fed water.Inflationisprojectedtoeasein2015supportedbylowerpricesofoilandelectricity.Improvedexternalenvironmentandasustainedstronginternal demand are likely to fuel growth in many sectors of the economy in the year 2015. Investments in the construction industry is likely to remain robustagainstabackgroundofstableinterestratescoupledwiththeongoinggovernmentinfrastructuralprojectsandtheprivatesector’sresilientparticipation especially in the real estate development. However, the economy is still prone to following challenges:
- Inadequate Government Expenditure- DelayinreleaseoffundsbytheGovernmenttovarioussectorsofeconomy,thusputtingstrainontheoverallfinancialenvironment- Anticipated effects of devolution of the government are still slow- Security concerns - Tourism(oneofthemajorsectorsofeconomy)continuestobeaffected- Inadequate rainfall may affect the Agriculture activity, which continues to be the largest contributor to GDP
On the international scene, the world economy is estimated to have grown by 3.3 per cent in the year 2014. This growth rate is similar to the revised growth of 3.3 per cent in 2013. This low growth was due to persistent weak import demand from advanced economies, slower expansion of global supply chains and shifts in demand towards less import intensive products. The global economic prospects for 2015 are better with world real GDP projectedtogrowat3.5percentintheyear2015subjecttocontinuedrecoveryfromtheglobalfinancialcrisis.Thisisexpectedtoimpactpositivelyon Kenya’s economic growth.
BANKING SECTOR
TheKenyanbankingsectorcomprisedof43commercialbanks,1mortgagefinancecompany,9microfinancebanks,8 representativeofficesofforeignbanks,87foreignexchangebureaus,13moneyremittanceprovidersand2creditreferencebureausasat31stDecember2014.
Thebankingsectorbalancesheetincreasedby19.3percentfromKshs2,732.8billioninDecember2013toKshs3,261.1billioninDecember2014.Themajorcomponentsofthebalancesheetontheassetsidewereloansandadvances,governmentsecuritiesandplacements,whichaccountedfor58.3percent,20.4percentand5.3percentoftotalassets,respectively.
The banking sector gross loans and advances grew from Kshs 1,605.2 billion in December 2013 to Kshs 1,972.1 billion in December 2014 translating to a growth of 22.9 percent. The growth was attributed to increase in lending to personal/households, trade, manufacturing, transport and communication andrealestatesectors.LoansandadvancesnetofprovisionsstoodatKshs1,950.8billioninDecember2014upfromKshs1,589.0billionregisteredin a similar period in 2013.
Deposits from customers which form the main source of funding for the banking sector accounted for 71.5 percent of total funding liabilities. The depositbasegrewby17.7percent fromKshs1,980.2billion inDecember2013 toKshs2,331.6billion inDecember2014mainlysupportedbyaggressive mobilization of deposits by banks, remittances and receipts from exports.
The banking sector registered enhanced capital levels in December 2014 with total shareholders’ funds growing by 22.6 percent from Kshs 431.5 billion in December 2013 to Kshs 529.1 billion in December 2014. Core capital and total capital increased from Kshs 341.9 billion and Kshs 407.5 billiontoKshs422.1billionandKshs508.4billion,respectivelyoverthesameperiod.However,theratiosofcoreandtotalcapitaltototalrisk-weightedassets declined from 19.5 percent and 23.2 percent in December 2013 to 15.9 percent and 19.2 percent, respectively. The decline in capital adequacy ratios was as a result of increase in total risk weighted assets occasioned by the capital charge for market and operational risks that took effect from January 2014.
Thestockofgrossnon-performingloans(NPLs)increasedby32.9percentfromKshs80.6billioninDecember2013toKshs107.1billioninDecember2014.Similarly,theratioofgrossNPLstogrossloansgrewfrom5.0percentinDecember2013to5.4percentinDecember2014.Ontheotherhand,thecoverageratiowhichismeasuredasapercentageofspecificprovisionstototalNPLsdeclinedfrom44.4percentto41.1percentinDecember2014.
Thebankingsectorregisteredagrowthof13.3percentinpre-taxprofits,fromKshs124.3billioninDecember2013toKshs140.9billionasatendofDecember 2014. The annualized return on assets declined to 3.4 percent from 3.6 percent over the same period. Similarly, return on equity decreased to26.6percentfrom28.8percentoverthesameperiod.Totalincomeincreasedby15.8percentfromKshs358.3billioninDecember2013toKshs414.8billioninDecember2014,whiletotalexpensesincreasedby17.1percentfromKshs233.2billioninDecember2013toKshs274.0billionin
Ranjan Dhawan
CHAIRMAN’S REPORT
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
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CHAIRMAN’S REPORT (continued)
December2014.Interestonloansandadvances,feesandcommissionsandgovernmentsecuritieswerethemajorsourcesofincomeaccountingfor59.2percent,18.8percentand15.1percentoftotalincomerespectively.
The Kenya Banks’ Reference Rate (KBRR) was introduced in July 2014 by the Central Bank of Kenya (CBK). The is now the base rate for lending by commercialbanksandmicrofinancebanksaswellasforpricingmortgageproducts.TheKBRRisreviewedandannouncedbytheCBKaftereverysixmonths.Atitsinceptionon8thJuly,2014theCBKcomputedandsettheKBRRat9.13percent.Itwasreviewedto8.54percenton14thJanuary2015 following a reduction in the 2-month weighted moving average of the 91-day Treasury bill rate.
PERFORMANCE OF THE BANK
TheBank’soperatingincomestoodatKshs2.78billionfortheyearended31stDecember2014comparedtoKshs2.58billioninDecember2013translatingtoanincreaseofKshs0.2billion.Thisreflectsa7.88%growthinoperatingprofitduringtheyear.Duringtheyear2014,DepositsgrewbyKshs6.81billiontostandatKshs48.68Billionon31stDecember2014fromKshs41.88Billionon31stDecember2013,thustranslatingtoagrowthof 16.25% over last year in local currency. Advances grew by Kshs 4.93 billion to stand at Kshs 29.00 billion as at 31st December 2014 from Kshs 24.07 billion as at 31st December 2013, indicating a growth of 20.50% over last year in local currency. Total Business of the Bank grew by Kshs 11.74 billion during the year to stand at Kshs 77.69 Billion as at 31st December 2014 from Kshs 65.94 Billion as at 31st December 2013, showing a growth of 17.80%overlastyear.Thegrowthwasmorethandoubleascomparedtothepreviousyear.TheratioofGrossNPAasapercentageoftotaladvancesstood at 3.67% as at 31st December 2014 compared to a ratio of 2.49% as at December 2013.
AWARDS & ACCOLADES
The report of the Central Bank of Kenya in respect of the 2014 Annual Inspection of our Bank was received and I am pleased to inform that the Bank wasadjudgedasSTRONG.
TheperformanceoftheBankhasbeenadjudgedandacknowledgedbytheIndustryfromtimetotime.InBankingAwards2014(EastAfrica),Bankreceivedtwoawardsfrom“ThinkBusiness”–MostEfficientBank(2ndRunnersUp)&BestBankinKenyaTierII(2ndRunnersUp).
OTHER MAJOR DEVELOPMENTS
• AnewbranchatMeruwasopenedinJune2014.• ThefacilityofSMSalertshasbeenintroducedbyourBank&e-cashreceipthasbeenintroducedtosafeguardtheinterestsofourcustomers.• TheBanksuccessfullyrelocateditsDigoRoadBranchtonewandspaciouspremisesatKizingoareaatMombasaandIamhopefulthatit
would translate to increased business volume.• WorkfortheproposedDiamondPlazabranchinNairobiisalmostcompleteandweexpecttoopenthebranchinJune2015.Thiswillbeour
12th branch.• AspartofImagebuildingunderCorporateSocialResponsibilityactivitiesduringtheyear2014,wedonatedKshs1.00millionto“BeyondZero”
campaignandhadaparticipationof60staffmembersinthe“FirstLadyHalfMarathon”.Wehavealsodonated300blanketstoSalvationArmyThika Primary School for the Blind.
WAY FORWARD
Our emphasis for the current year is mainly to mobilize maximum retail business by aggressively marketing the existing retail products as also to come up with new products to augment our customer base. Of course mobilization of maximum CASA (Current Accounts and Savings Bank Accounts) would be given priority over the term deposits to make the Bank more competitive in the market with regard to pricing as also to have better spread.
WeareintheprocessofimplementationandintroductionofVISAcards.WearecurrentlyfollowingupwithVISAandPaynetforimplementationaspertheprojectplan.Duringtheyear,wealsointendtoforayintomobilebankingasalsoexplorethepossibilityofhavingourownATMs.
Another area of priority and concern is credit monitoring, which we are regularly strengthening by regular follow ups and by taking preventive measures. Assets under stress are regularly discussed under different forums for remedial action and for improvement in the overall health of the credit portfolio.
As part of the Bank’s expansion strategy, a proposal to open a branch on Mombasa Road, Nairobi has already been approved and we hope to commenceoperationbytheendofcurrentfinancialyear.Wearealsoexploringthepossibilityforopeninganewbranchinoneoftheupcountrytowns in near future.
ACKNOWLEDGEMENT
I take this opportunity to thank the Government and the Central Bank of Kenya for continued co-operation and support to our Bank. I also appreciate thepatronage&supportofouresteemedcustomersandthebusinesspartners.Ithankthemanagementandstafffortheirdedication&hardworkwhich resulted in sustained increase in our business and bottom line during the year. I would also like to thank my fellow Directors for their continued support,&timelyguidance.
Welookforwardtoworktowardsmeetingthecustomers’andshareholders’expectationsinthecomingyearandseekyourcontinuedsupportandgood wishes.Thank you.
(RanjanDhawan)Chairman-BankofBaroda(Kenya)Ltd.
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NameRanjan Dhawan
Age60 Years
NationalityIndian
PositionChairman andNon-Executive Director
Date of Appointment24-May-2013
Other DirectorshipsBank of Baroda (India),Bank of Baroda (Tanzania) Ltd. & Bank of Baroda Capital Markets Ltd (India)
QualificationsB.Com, MBA (Finance), ACMA (U.K.), CIA (USA)
Percentage of Shareholding in the bankNone
NameYatish C. Tewari
Age56 Years
NationalityIndian
PositionManaging Director
Date of Appointment07 December 2013
Other DirectorshipsNone
QualificationsB. Sc, JAIIB
Percentage of Shareholdingin the bankOne share held in trust
NameMr. Patrick K. Njoroge
Age48 Years
NationalityKenyan
PositionNon-Executive Director
Date of Appointment18 August 2014
Other DirectorshipsKenya Association of Investments GroupEast Africa Capital Consultants Algorithm LimitedAmalgamated Chama Limited
QualificationsICPAK, ACIB, MBAInsititute of Directors
Percentage of Shareholding in the bank None
NameMr. Rajiv S. Abhyankar
Age59 Years
Nationality Indian
PositionNon-Executive Director
Date of Appointment 13 January 2015
Other Directorships None
Qualifications M. Sc, CAIIB
Percentage of Shareholding in the bank None
NamePhilip Burh
Age54 Years
NationalityIndian
PositionDirector (Executive)
Date of Appointment17 March 2014
Other DirectorshipsNone
QualificationsB. A, MBA, JAIIB, Certificate in Information Technology
Percentage of Shareholding in the bankNone
NameVikram C. Kanji
Age48 Years
NationalityKenyan
PositionNon-Executive Director
Date of Appointment22-Jan-2010
Other DirectorshipsLeadway Investments Ltd -(Executive), Suvila Ltd-(Executive), Mombasa Cements Ltd (Non-Executive),Kontiki Ltd Safari Sumset Ltd.
QualificationsSolicitor (enrolled with Law Society of UK), Advocate of High Court of Kenya, Certified Public Secretary of Kenya
Percentage of Shareholding in the bank during the year None
BOARD OF DIRECTORS
COMPANY INFORMATION
COMPANY INFORMATION
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
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NameRanjan Dhawan
Age60 Years
NationalityIndian
PositionChairman andNon-Executive Director
Date of Appointment24-May-2013
Other DirectorshipsBank of Baroda (India),Bank of Baroda (Tanzania) Ltd. & Bank of Baroda Capital Markets Ltd (India)
QualificationsB.Com, MBA (Finance), ACMA (U.K.), CIA (USA)
Percentage of Shareholding in the bankNone
NameYatish C. Tewari
Age56 Years
NationalityIndian
PositionManaging Director
Date of Appointment07 December 2013
Other DirectorshipsNone
QualificationsB. Sc, JAIIB
Percentage of Shareholdingin the bankOne share held in trust
NameMr. Patrick K. Njoroge
Age48 Years
NationalityKenyan
PositionNon-Executive Director
Date of Appointment18 August 2014
Other DirectorshipsKenya Association of Investments GroupEast Africa Capital Consultants Algorithm LimitedAmalgamated Chama Limited
QualificationsICPAK, ACIB, MBAInsititute of Directors
Percentage of Shareholding in the bank None
NameMr. Rajiv S. Abhyankar
Age59 Years
Nationality Indian
PositionNon-Executive Director
Date of Appointment 13 January 2015
Other Directorships None
Qualifications M. Sc, CAIIB
Percentage of Shareholding in the bank None
NamePhilip Burh
Age54 Years
NationalityIndian
PositionDirector (Executive)
Date of Appointment17 March 2014
Other DirectorshipsNone
QualificationsB. A, MBA, JAIIB, Certificate in Information Technology
Percentage of Shareholding in the bankNone
NameVikram C. Kanji
Age48 Years
NationalityKenyan
PositionNon-Executive Director
Date of Appointment22-Jan-2010
Other DirectorshipsLeadway Investments Ltd -(Executive), Suvila Ltd-(Executive), Mombasa Cements Ltd (Non-Executive),Kontiki Ltd Safari Sumset Ltd.
QualificationsSolicitor (enrolled with Law Society of UK), Advocate of High Court of Kenya, Certified Public Secretary of Kenya
Percentage of Shareholding in the bank during the year None
BOARD OF DIRECTORS (continued)
COMPANY INFORMATION (continued)
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COMPANY INFORMATION (continued)
PRINCIPAL SHAREHOLDERSBankofBaroda–India 86.70%
PRINCIPAL OFFICERS Mr. Yatish C. Tewari - Managing Director Mr.KumarAjaySingh - Head-OperationsMs. Elizabeth Nyambutu - Head - Credit Mr.WinstonSore - Head-InternalAuditMr.SanjayKumarRay - Head-TreasuryMr. Amit Gupta - Head - Risk Management / Compliance Ms.MariaGorettMakokha - Head-Treasury(BackOffice)Mr. Patrick Sila - Head - Finance Mr. Rakesh R. Mehta - Branch Head - Digo Road Branch, Mombasa Mr. Gopal Saxena - Branch Head - Thika Branch Mr. Banambar Behera - Branch Head - Kisumu Branch Mr.RajanPrasad - BranchHead-SaritCentreBranch,NairobiMr. Philip Burh - Branch Head - Industrial Area Branch, Nairobi Mr. Raman Kumar - Branch Head - Eldoret Branch Mr. S. K. Palanivelu - Branch Head - Nakuru Branch Mr.AdityaN.Singh - BranchHead-NairobiMain(Office)BranchMr. Paul M. Kairu - Branch Head - Kakamega Branch Ms.NeelaK.Raj - BranchHead-NyaliBranch,MombasaMr. Elias K. Karanu - Branch Head - Meru Branch REGISTERED OFFICE Baroda House P.O. Box 30033, 00100 NAIROBI - KENYA Telephone:(020)2248402,2248412,2226416 Fax: (020) 316070/310439 E-mail: [email protected]; [email protected] INDEPENDENT AUDITOR PKF Kenya CertifiedPublicAccountants KalamuHouse,GrevilleaGrove,Westlands P.O.Box14077,00800 Telephone: (020) 4270000, (0732) 144000 NAIROBI - KENYA COMPANY SECRETARY Africa Registrars CertifiedPublicSecretariesKenya - Re Towers UpperhillP.O. Box 1243, 00100 NAIROBI - KENYA LEGAL ADVISORS PRINCIPAL VALUERSHamilton,Harrison&Mathews(incorporatingOraro&Co) NjihiaNjoroge&CoA.B.Patel&PatelAdvocates CrystalValuersLimitedMwaura&WachiraAdvocates DatooKithikuLimitedPatel&PatelAdvocates CoralPropertiesLimited
PRINCIPAL CORRESPONDENTS Bank of Baroda - Mumbai, IndiaBankofBaroda - NewYork,U.S.A.BankofBaroda - London,U.K.Bank of Baroda - Brussels, BelgiumBank of Baroda - Durban, South AfricaBank of Baroda - Sydney, AustraliaBank of India - Tokyo, JapanBank of Montreal - Toronto, CanadaUnionBankofSwitzerland - Zurich,Switzerland
Eldoret BranchCharotar Patel Plaza, Moi StreetP.O. Box 1517, 30100ELDORETTelephone: (053) 2063341Fax: (053) 2063540E-mail: [email protected]
Industrial Area Branch, NairobiEnterprise RoadP.O. Box 18269, 00500NAIROBITelephone: (020) 555971/2/3Direct: (020) 555945Fax: (020) 555943E-mail: [email protected]
Sarit Centre Branch, NairobiLower Ground Floor, Sarit CentreP.O. Box 886, 00606Westlands, NAIROBITelephone: (020) 3752590/91Fax: (020) 3752592E-mail: [email protected]
Nakuru BranchVickers House, Kenyatta AvenueP.O. Box 12408, 20100NAKURUTelephone: (051) 2211718Fax: (051) 2211719E-mail: [email protected]
Nyali Branch, MombasaNyali Road, Texas TowersP.O. Box 95450, 80106MOMBASATelephone: (041) 4471103Fax: (041) 4471104E-mail: [email protected]
Nairobi Main (O�ce) BranchBaroda House, 29 Koinange StreetP.O. Box 30033, 00100 NAIROBI Telephone: (020) 2248402/12Fax: (020) 310439 E-mail: [email protected] Digo Road Branch, MombasaPlot No. XXV/61, KIZINGOP.O.Box No. 90260, 80100 MOMBASA Telephone: (041) 224507/8, 2226211Fax: (041) 228607 E-mail: [email protected]
Kisumu Branch Central Square P.O. Box 966, 40100 KISUMU Telephone: (057) 2021768/74, 2020303Fax: (057) 2024375 E-mail: [email protected] Thika Branch Kenyatta Avenue P.O. Box 794, 01000 THIKA Telephone: (067) 22379, 30048Fax: (067) 30048 E-mail: [email protected] Kakamega Branch Kenyatta Avenue P.O. Box 2873 KAKAMEGA Telephone: (020) 2111777 Fax: (056) 31766 E-mail: [email protected]
Meru BranchBrown Rock Building, Njuri Ncheke Street P.O. Box 2762, 60200 MERU Telephone: (064) 2341342 Fax: (064) 30623 E-mail: [email protected]
Baroda House, 29 Koinange StreetP.O. Box 30033, 00100
NAIROBITelephone: (020) 2248402 / 2248412 / 2226416
Fax: (020) 316070/310439E-mail: [email protected]; [email protected]
BRANCH NETWORK
HEAD OFFICE
COMPANY INFORMATION
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
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Eldoret BranchCharotar Patel Plaza, Moi StreetP.O. Box 1517, 30100ELDORETTelephone: (053) 2063341Fax: (053) 2063540E-mail: [email protected]
Industrial Area Branch, NairobiEnterprise RoadP.O. Box 18269, 00500NAIROBITelephone: (020) 555971/2/3Direct: (020) 555945Fax: (020) 555943E-mail: [email protected]
Sarit Centre Branch, NairobiLower Ground Floor, Sarit CentreP.O. Box 886, 00606Westlands, NAIROBITelephone: (020) 3752590/91Fax: (020) 3752592E-mail: [email protected]
Nakuru BranchVickers House, Kenyatta AvenueP.O. Box 12408, 20100NAKURUTelephone: (051) 2211718Fax: (051) 2211719E-mail: [email protected]
Nyali Branch, MombasaNyali Road, Texas TowersP.O. Box 95450, 80106MOMBASATelephone: (041) 4471103Fax: (041) 4471104E-mail: [email protected]
Nairobi Main (O�ce) BranchBaroda House, 29 Koinange StreetP.O. Box 30033, 00100 NAIROBI Telephone: (020) 2248402/12Fax: (020) 310439 E-mail: [email protected] Digo Road Branch, MombasaPlot No. XXV/61, KIZINGOP.O.Box No. 90260, 80100 MOMBASA Telephone: (041) 224507/8, 2226211Fax: (041) 228607 E-mail: [email protected]
Kisumu Branch Central Square P.O. Box 966, 40100 KISUMU Telephone: (057) 2021768/74, 2020303Fax: (057) 2024375 E-mail: [email protected] Thika Branch Kenyatta Avenue P.O. Box 794, 01000 THIKA Telephone: (067) 22379, 30048Fax: (067) 30048 E-mail: [email protected] Kakamega Branch Kenyatta Avenue P.O. Box 2873 KAKAMEGA Telephone: (020) 2111777 Fax: (056) 31766 E-mail: [email protected]
Meru BranchBrown Rock Building, Njuri Ncheke Street P.O. Box 2762, 60200 MERU Telephone: (064) 2341342 Fax: (064) 30623 E-mail: [email protected]
Baroda House, 29 Koinange StreetP.O. Box 30033, 00100
NAIROBITelephone: (020) 2248402 / 2248412 / 2226416
Fax: (020) 316070/310439E-mail: [email protected]; [email protected]
BRANCH NETWORK
HEAD OFFICE
COMPANY INFORMATION (continued)
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Board AuditCommittee
CreditCommittee
Asset and LiabilityCommittee
Composition
Board Risk ManagementCommittee
ExecutiveCommittee
Three Non-Executive Directors
Two Executive and TwoNon-Executive Directors.
Two Executive DirectorsHead CreditHead OperationsHead Treasury Head Treasury (Back Office) Head Risk / ComplianceHead Finance
One Executive Director Three Non-Executive Director
Director ExecutiveHead OperationsHead CreditHead ITHead Treasury Head HR & AdministrationHead Finance
Main function
Strengthening the control environment, financial reporting and auditing function.
Appraisal and approval of credit applications andreviewing credit portfolio.
Monitoring and management of the statement of financial position including liquidity risk, interest rate risk, foreign currency risk and compliance with all statutory requirements.
Ensuring quality, integrity and reliability of the Bank's risk management function.
To act as link between the Board and Management in implementing operational plans, annual budgets and periodic review of operations, strategic plans and identification of opportunities.
Frequency of meetings per Annum (minimum)
Quarterly Quarterly Monthly Quarterly Three times a year
Chairperson
Mr. Patrick K. Njoroge Mr. Patrick K. Njoroge Mr. Yatish C. Tewari Mr. Patrick K. Njoroge Mr. Philip Burh
Members
Mr. Vikram C. KanjiMr. Rajiv S Abhyankar
Mr. Yatish C. TewariMr. Vikram C. KanjiMr. Philip BurhMr. Rajiv S Abhyankar
Ms. Elizabeth NyambutuMr. Kumar Ajay SinghMr. Sanjay Kumar RayMs. Maria G. MakokhaMr. Amit Kumar GuptaMr. Patrick Sila
Mr Vikram C KanjiMr. Rajiv S AbhyankarMr. Yatish C. Tewari
Mr. Kumar Ajay SinghMs. Elizabeth NyambutuMr. Patrick KombeMr. Sanjay Kumar RayMr. Kennedy MachokaMr. Patrick Sila
The Board & management committees as at the date of this report comprise:
BOARD & MANAGEMENT COMMITTEES
COMPANY INFORMATION (continued)
CORPORATEGOVERNANCE
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
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Board AuditCommittee
CreditCommittee
Asset and LiabilityCommittee
Composition
Board Risk ManagementCommittee
ExecutiveCommittee
Three Non-Executive Directors
Two Executive and TwoNon-Executive Directors.
Two Executive DirectorsHead CreditHead OperationsHead Treasury Head Treasury (Back Office) Head Risk / ComplianceHead Finance
One Executive Director Three Non-Executive Director
Director ExecutiveHead OperationsHead CreditHead ITHead Treasury Head HR & AdministrationHead Finance
Main function
Strengthening the control environment, financial reporting and auditing function.
Appraisal and approval of credit applications andreviewing credit portfolio.
Monitoring and management of the statement of financial position including liquidity risk, interest rate risk, foreign currency risk and compliance with all statutory requirements.
Ensuring quality, integrity and reliability of the Bank's risk management function.
To act as link between the Board and Management in implementing operational plans, annual budgets and periodic review of operations, strategic plans and identification of opportunities.
Frequency of meetings per Annum (minimum)
Quarterly Quarterly Monthly Quarterly Three times a year
Chairperson
Mr. Patrick K. Njoroge Mr. Patrick K. Njoroge Mr. Yatish C. Tewari Mr. Patrick K. Njoroge Mr. Philip Burh
Members
Mr. Vikram C. KanjiMr. Rajiv S Abhyankar
Mr. Yatish C. TewariMr. Vikram C. KanjiMr. Philip BurhMr. Rajiv S Abhyankar
Ms. Elizabeth NyambutuMr. Kumar Ajay SinghMr. Sanjay Kumar RayMs. Maria G. MakokhaMr. Amit Kumar GuptaMr. Patrick Sila
Mr Vikram C KanjiMr. Rajiv S AbhyankarMr. Yatish C. Tewari
Mr. Kumar Ajay SinghMs. Elizabeth NyambutuMr. Patrick KombeMr. Sanjay Kumar RayMr. Kennedy MachokaMr. Patrick Sila
CORPORATEGOVERNANCE
The Bank places strong importance on maintaining a sound control environment and applying the highest standards to continue its business integrity and professionalism in all areas of activities. It shall continue its endeavour to enhance shareholders’ value by protecting their interests and defend their rights by ensuring performance at all levels and maximising returns with minimal use of resources in its pursuit of excellence in corporate life. Respective Responsibilities
The shareholders’ role is to appoint the Board of Directors and the external auditors. This role is extended to holding the Boardaccountableandresponsibleforefficientandeffectivegovernance.
The Board of Directors is responsible for the governance of the Bank, and to conduct the business and operations of the Bank with integrity and in accordance with generally accepted corporate practices, in a manner based on transparency, accountability and responsibility.
Board of Directors
The composition of the Board is set out on page 1. The Board is chaired by a Non-Executive Chairman and comprises of the Managing Director (Executive Director), one other Executive Director and three other Non-Executive Directors. All Non-Executive Directors are independent of management. The Board has varied and extensive skills in the areas of banking, business management, accountancy and information communication and technology. The Directors’ responsibilities are set out in the Statement of Directors Responsibilities on page 9. The Directors are responsible for thedevelopmentofinternalfinancialcontrolswhichprovidesafeguardagainstmaterialmis-statementsandfraudandalsoforthefairpresentationofthefinancialstatements.
The Board meets on a quarterly basis and has a formal schedule of matters reserved for discussion. During the year under review, the Board meetings were held on the following dates: - 10 March 2014 - 14 March 2014 - 25 March 2014 - 17 June 2014 -18September2014 - 23 December 2014 The attendance of individual Directors is as follows:
Name of Director Period Meetings held During Meetings their tenure Attended
Mr.RanjanDhawan 01January2014to31December2014 6 4Mr. Yatish C. Tewari 01 January 2014 to 31 December 2014 6 6Mr. Philip Burh 17 March 2014 to 31 December 2014 4 4Mr.PatrickK.Njoroge 18August2014to31December2014 2 2Mr. J. K. Muiruri * 01 January 2014 to 19 September 2014 5 5Mr.VikramC.Kanji 01January2014to31December2014 6 6Mr.V.H.Thatte** 01January2014to01August2014 4 3* Since resigned on 19/09/2014**Sinceresignedon01/08/2014
The Board has appointed various sub-committees to which it has delegated certain responsibilities with the chairperson ofthesub-committeesreportingtotheBoard.Thecompositionofthesub-committeesissetoutonpage8.
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CORPORATEGOVERNANCE(continued)
Board Evaluation
In compliance with the Prudential Guidelines issued by the Central Bank of Kenya and also part of good corporate governance, each member of the Board including the Chairman conducted a peer evaluation exercise for the year 2014. This involved a self review of the Board’s capacity, functionality and effectiveness of performance against its set objectives.ThisenabledtheBoardtoassessitsareasofstrengthsandweaknessandthenknowhowtobalanceitsskills, expertise and knowledge. The Board Performance evaluation covered the following:
(a) The Board Self EvaluationThe Board’s performance during the year was evaluated by each member where members were allowed to give their opinion on how the Board had performed. Members were satisfied that the Board had performed to theirexpectations.
(b) The Director Peer EvaluationA Directors’ Peer evaluation exercise was conducted for each member. Each director was required to give the ratings on the performance of each member of the Board. (c) The Board Chairman’s Evaluation The Board members assessed the Chairman’s performance and noted that the Board managed to achieve its business targets for year 2014 under his Chairmanship. The Chairman was effective during the year. Board Committees
Board Audit Committee
The committee comprises three Non-Executive Directors. The committee meets on a quarterly basis and its functions include:
• Monitoringandstrengtheningtheeffectivenessofmanagementinformationandinternalcontrolsystems.• Reviewoffinancialinformationandimprovingthequalityoffinancialreporting.• Strengthening theeffectivenessof internalandexternalaudit functions,anddeliberatingonsignificant issues
arising from internal and external audits, and inspections carried out by the Bank Supervision Department of Central Bank of Kenya.
• Increasingthestakeholders’confidenceinthecredibilityandstabilityoftheinstitution.• Monitoringinstancesofnon-compliancewiththeInternationalFinancialReportingStandards,applicablelegislation
and the Central Bank of Kenya Prudential Regulations and other pronouncements.
Credit Committee
The committee is chaired by a Non-Executive Director and comprises of the two Executive Directors, two Non-Executive Director and the Head of Credit as convener. It meets at least once in a quarter. The functions of the committee include Credit monitoring, appraisal and approval of credit applications based on limits set by the Board. The committee also monitors and reviews non-performing advances and ensures that adequate loan loss provisions are held against delinquent accounts in accordance with the guidelines issued by the Central Bank of Kenya and International Accounting Standards Board. Board Risk Management Committee The committee, chaired by an Executive Director and comprising various departmental heads, meets on a quarterly basis to ensure quality, integrity and reliability of Risk Management function and programme by way of assisting the Board of Directors in the discharge of duties relating to the corporate accountability, reviewing the integrity of the risk control systems, monitoring external developments relating to the practice of corporate accountability and providing independentandobjectiveoversight.
CORPORATEGOVERNANCE
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
11
Management Committees Asset and Liability Committee The committee, chaired by the Managing Director, comprising one Director (Executive) and various departmental heads, meetsonamonthlybasistodiscussoperationalissuesandtomonitorandmanagethestatementoffinancialpositionto ensure that adequate resources are available to meet anticipated fund demands and to monitor compliance with all statutory requirements. The committee is also responsible for developing a framework for monitoring the banking risks including operational, liquidity, maturity, interest rate and exchange rate risks. Executive Committee
The committee, chaired by an Executive Director and comprising various departmental heads, meets at least three timesayeartoimplementoperationalplans,annualbudgeting,periodicreviewsofoperations,strategicplans,ALCOstrategies,identificationandmanagementofkeyrisksandopportunities. Directors’ Remuneration
TheremunerationtoallDirectorsisbasedontheresponsibilitiesallocatedtotheDirectors,andissubjecttoregularreview to ensure that it adequately compensates them for the time spent on the affairs of the Bank.
The remuneration paid to the Directors and key management staff is disclosed in note 32 to the financialstatements.
Relationship with Shareholders
The Bank is a private limited liability company with the details of the main shareholder set out on page 2. Shareholders have full access through the Managing Director to all information they require in respect of the Bank and its affairs. In accordance with the guidelines issued by the Central Bank of Kenya, the Bank publishes quarterly accounts in the Kenyan newspapers.
(Mr. Yatish C. Tewari) Managing Director 16th March 2015
CORPORATEGOVERNANCE(continued)
12
REPORT OF THE DIRECTORS
The Directors submit their report and the audited financial statements for the year ended 31 December 2014, inaccordance with Section 22 of the Banking Act and Section 157 of the Kenyan Companies Act, which disclose the state of affairs of the Bank. PRINCIPAL ACTIVITIES TheBankislicensedundertheBankingActandprovidesbanking,financialandrelatedservices. 2014 2013 RESULTS Shs ‘000 Shs ‘000
Profitbeforetax 2,694,608 2,505,027
Tax (477,697) (465,331)
Profitfortheyear 2,216,911 2,039,696
DIVIDEND
TheDirectorsproposeafinaldividendofShs.3.80pershare(2013:Shs.3.60pershare)amountingtoShs.188.05million(2013:Shs.178.14million). DIRECTORS TheDirectorswhoheldofficeduringtheyearandtothedateofthisreportareshownonpage1.In accordance with the Bank’s Articles of Association, no Director is due for retirement by rotation. INDEPENDENT AUDITOR TheBank’sauditor,PKFKenya,hasindicatedwillingnesstocontinueinofficeinaccordancewithSection159(2)oftheKenyanCompaniesAct,subjecttoapprovaloftheCentralBankofKenyainaccordancewithSection24(1)oftheBankingAct(Cap.488).
BY ORDER OF THE BOARD
16th March 2015
REPORT/STATEMENT
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
13
STATEMENTOFDIRECTORS’RESPONSIBILITIES
TheKenyanCompaniesActrequirestheDirectorstopreparefinancialstatementsforeachfinancialyearwhichgiveatrueandfairviewofthestateofaffairsoftheBankasattheendofthefinancialyearandofitsprofitorlossforthatyear. It also requires the Directors to ensure that the Bank maintains proper accounting records that disclose, with reasonableaccuracy,thefinancialpositionoftheBank.TheDirectorsarealsoresponsibleforsafeguardingtheassetsof the Bank. TheDirectorsacceptresponsibilityforthepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterial misstatement whether due to fraud or error. They also accept responsibility for:
i. Designing, implementing and maintaining such internal control as they determine is necessary to enable the preparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
ii. Selecting and applying appropriate accounting policies.iii.Makingaccountingestimatesandjudgementsthatarereasonableinthecircumstances;
TheDirectorsareoftheopinionthatthefinancialstatementsgiveatrueandfairviewofthefinancialpositionoftheBankasat31December2014andof theBank’sfinancialperformanceandcashflows for theyear thenended inaccordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act. Nothing has come to the attention of the Directors to indicate that the Bank will not remain a goingconcern for at least the next twelve months from the date of this statement
Approved by the Board of Directors on 16th March 2015 signed on its behalf by:
DIRECTOR MANAGING DIRECTOR
REPORTOFTHEINDEPENDENTAUDITOR
TO THE MEMBERS OF BANK OF BARODA (KENYA) LIMITED
REPORT ON THE FINANCIAL STATEMENTS
WehaveauditedtheaccompanyingfinancialstatementsofBankofBaroda(Kenya)Limitedsetoutonpages15to55,whichcomprisethestatementoffinancialpositionasat31December2014andthestatementofprofitorloss,statementofothercomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation. Directors’ responsibility for the financial statements
TheDirectorsareresponsibleforthepreparationoffinancialstatementsthatgiveatrueandfairviewinaccordancewith International Financial Reporting Standards and the Kenyan Companies Act, and for such internal control as managementdetermines isnecessary toenable thepreparationof financial statements thatare free frommaterialmisstatement, whether due to fraud or error. Auditor’s responsibility
Ourresponsibilityistoexpressanindependentopiniononthesefinancialstatementsbasedonouraudit.Weconductedour audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsare free from material misstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftheriskofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinorderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentationofthefinancialstatements.
Webelieve that theaudit evidencewehaveobtained is sufficient andappropriate to providea basis for our auditopinion. Opinion
Inouropinion,theaccompanyingfinancialstatementsgiveatrueandfairviewofthefinancialpositionofBankofBaroda(Kenya)Limitedasat31December2014andofitsfinancialperformanceanditscashflowsfortheyearthenendedinaccordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act. Report on other legal requirements
AsrequiredbytheCompaniesAct(Cap.486)wereporttoyou,basedonouraudit,that:
(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(ii) in our opinion proper books of account have been kept by the Bank, so far as appears from our examination of those books; and
(iii)theBank’sstatementoffinancialposition,statementofprofitorlossandstatementofothercomprehensiveincomeare in agreement with the books of account.
CertifiedPublicAccountantsPIN NO. P051130467R
NAIROBI: 31st MARCH 2015
The engagement partner responsible for the audit resulting in this independent auditor’s report is CPA Darshan Shah - P/No. 2051.62/15
14
STATEMENTOFPROFITORLOSS
2014 2013 Notes Shs ‘000 Shs ‘000 Interestincome 1 6,807,462 6,085,923
Interest expense 2 (3,431,210) (3,041,539)
NET INTEREST INCOME 3,376,252 3,044,384
Feesandcommissionincome 151,786 163,334
Foreign exchange trading income 79,622 77,635
Other income 3 24,375 34,600
OPERATING INCOME 3,632,035 3,319,953
Increaseinimpairmentlossesonloansandadvances 4 (85,464) (71,511)
Otheroperatingexpenses 5 (851,963) (743,415)
PROFIT BEFORE TAX 2,694,608 2,505,027 Tax charge 6 (477,697) (465,331)
PROFIT FOR THE YEAR 2,216,911 2,039,696
EARNINGS PER SHARE Basicanddiluted(Shs.pershare) 7 44.80 41.22
DIVIDEND Proposedfinaldividendfortheyear 8 188,046 178,149
DIVIDEND PER SHARE (Shs. per share) 8 3.80 3.60 Thenotesonpages21to55formanintegralpartofthesefinancialstatements.
Report of the independent auditor - Pages 14.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
15
16STATEMENTOFOTHERCOMPREHENSIVEINCOME
2014 2013 Notes Shs ‘000 Shs ‘000 Profit for the year 2,216,911 2,039,696
Items that may be reclassified subsequently to profit or loss:
Fair value gains and (losses) on available-for-sale financialassets- government securities 255,333 (55,370)-corporatebonds 15 3,958 (4,956)-quotedshares 15 163 (381) Total comprehensive income for the year 2,476,365 1,978,989 Thenotesonpages21to55formanintegralpartofthesefinancialstatements. Report of the independent auditor - Pages 14.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
17STATEMENTOFFINANCIALPOSITION
2014 2013 Notes Shs’000 Shs’000 ASSETS Cash Cash in hand 307,935 265,970 Balances with Central Bank of Kenya 9 2,713,519 2,131,439 Governmentsecurities 10 28,480,500 24,251,152Placements with and loans and advances to other banking institutions 11 1,194,965 1,024,391 Other assets 12 377,622 271,336 Loansandadvancestocustomers(net) 13 28,388,852 23,578,559Investment properties 14 23,522 24,141 Investment securities 15 206,162 264,693 Intangibleassets 16 4,896 3,759Propertyandequipment 17 126,928 132,638Deferredtax 18 82,573 73,446Tax recoverable 37,176 - TOTAL ASSETS 61,944,650 52,021,524 LIABILITIES Customerdeposits 19 48,683,189 41,876,522Deposits due to and borrowings from other banking institutions 20 3,036,350 2,112,076 Otherliabilities 21 357,780 363,910Current tax - 99,901
TOTAL LIABILITIES 52,077,319 44,452,409
SHAREHOLDERS’ EQUITY
Sharecapital 22 989,717 989,717Retainedearnings 8,416,924 6,497,900Fairvaluereserve (86,209) (345,944)Statutoryloanlossreserve 358,853 249,293Proposeddividend 8 188,046 178,149
TOTAL SHAREHOLDERS’ EQUITY 9,867,331 7,569,115 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 61,944,650 52,021,524 Thefinancialstatementsonpages15to55wereapprovedandauthorisedforissuebytheBoardofDirectorson16th March 2015 and were signed on its behalf by:
Managing Director Director
Director Thenotesonpages21to55formanintegralpartofthesefinancialstatements. Report of the independent auditor - Pages 14.
18STATEMENTSOFCHANGESINEQUITY
STA
TE
ME
NT
S O
F C
HA
NG
ES
IN E
QU
ITY
Ava
ilabl
e-fo
r-sa
le fa
ir v
alue
res
erve
s
Sh
are
Ret
ain
ed
Lo
an lo
ss
Go
vern
men
t C
orp
ora
te
Qu
ote
d
Pro
po
sed
cap
ital
e
arn
ing
s re
serv
e s
ecu
riti
es
bo
nd
s sh
ares
d
ivid
end
T
ota
l
N
ote
s S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0
Year
en
ded
31
Dec
emb
er 2
014
At s
tart
of
year
989
,717
6,
497,
900
249,
293
(339
,372
) (6
,291
) (2
81)
178,
149
7,5
69,1
15
R
ealis
atio
n of
fair
valu
e re
serv
e
-
(281
) -
- -
281
- -
Tran
sfer
to s
tatu
tory
loan
loss
res
erve
- (1
09,5
60)
109,
560
- -
- -
-
To
tal c
ompr
ehen
sive
inco
me
for
the
year
-
2,21
6,91
1 -
255,
333
3,95
8 16
3 -
2,47
6,36
5
Tr
ansa
ctio
ns w
ith o
wne
rs:
D
ivid
ends
:
- F
inal
for
2013
(pa
id)
8 -
- -
- -
- (1
78,1
49)
(178
,149
)
- F
inal
for
2014
(pr
opos
ed)
8 -
(188
,046
) -
- -
- 18
8,04
6 -
At e
nd o
f ye
ar
98
9,71
7 8,
416,
924
358,
853
(84,
039)
(2
,333
) 16
3 18
8,04
6 9
,867
,331
The
not
es o
n pa
ges
21 to
55
form
an
inte
gral
par
t of
thes
e fin
anci
al s
tate
men
ts.
R
epor
t of
the
inde
pend
ent a
udito
r -
Pag
es 1
4.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
19STATEMENTSOFCHANGESINEQUITY
S
TAT
EM
EN
TS
OF
CH
AN
GE
S IN
EQ
UIT
Y
A
vaila
ble-
for-
sale
fair
val
ue r
eser
ves
S
har
e R
etai
ned
L
oan
loss
G
ove
rnm
ent
Co
rpo
rate
Q
uo
ted
P
rop
ose
d
ca
pit
al
ear
nin
gs
rese
rve
sec
uri
ties
b
on
ds
shar
es
div
iden
d
To
tal
No
tes
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Ye
ar e
nd
ed 3
1 D
ecem
ber
201
3
At s
tart
of
year
989,
717
4,64
6,79
5 23
8,79
3 (2
84,0
02)
(1,3
35)
158
168,
252
5,7
58,3
78
R
ealis
atio
n of
fair
valu
e re
serv
e
- 58
-
- -
(58)
-
-
Tr
ansf
er to
sta
tuto
ry lo
an lo
ss r
eser
ve
-
(10,
500)
10
,500
-
- -
- -
Tota
l com
preh
ensi
ve in
com
e/(lo
ss)
for
the
year
- 2,
039,
696
- (5
5,37
0)
(4,9
56)
(381
) -
1,97
8,98
9
Tran
sact
ions
with
ow
ners
:
Div
iden
ds:
-
Fin
al fo
r 20
12 (
paid
) 8
- -
- -
- -
(168
,252
) (1
68,2
52)
- F
inal
for
2013
(pr
opos
ed)
8 -
(178
,149
) -
- -
- 17
8,14
9 -
At e
nd o
f ye
ar
98
9,71
7 6,
497,
900
249,
293
(339
,372
) (6
,291
) (2
81)
178,
149
7,56
9,11
5
T
he n
otes
on
page
s 21
to 5
5 fo
rm a
n in
tegr
al p
art o
f th
ese
finan
cial
sta
tem
ents
.
Rep
ort o
f th
e in
depe
nden
t aud
itor
- P
ages
14.
20STATEMENTOFCASHFLOWS
2014 2013 Notes Shs ‘000 Shs ‘000 CASH FLOWS FROM OPERATING ACTIVITIESInterestreceipts 6,913,771 6,240,881Interest payments (3,393,104) (3,274,707)Feesandcommissionreceipts 251,958 266,010Paymentstoemployeesandsuppliers (788,046) (727,086)Tax paid (623,901) (255,000) Cash flows from operating activities before changes in operating assets and liabilities 2,360,678 2,250,098 Changes in operating assets and liabilities: - cash reserve ratio 9 (602,917) (266,745)-loansandadvances (4,941,298) (1,729,158)-otherassets (94,405) 101,368-customerdeposits 6,768,561 3,727,226-otherliabilities (16,760) 23,287 NET CASH FROM OPERATING ACTIVITIES 3,473,859 4,106,076
Cash flows from investing activities Purchase of intangible assets 16 (3,495) (226)Purchaseofpropertyandequipment 17 (44,816) (8,592)Purchaseofgovernmentsecurities (5,462,335) (8,191,460)Dividends received 3 793 425 Proceedsfromdisposalofgovernmentsecurities 516,331 689,073Proceedsfrommaturityofgovernmentsecurities 1,813,350 3,213,350Proceedsfrommaturityofinvestmentsecurities 15 60,589 35,588Proceedsfromdisposalofpropertyandequipment - 98
NET CASH (USED IN) INVESTING ACTIVITIES (3,119,583) (4,261,744)
Cash flows from financing activities Dividendpaid (178,149) (168,252)
NET CASH (USED IN) FINANCING ACTIVITIES (178,149) (168,252)
Net (decrease)/increase in cash and cash equivalents 176,127 (323,920)
CASH AND CASH EQUIVALENTS AT START OF THE YEAR 23 (755,198) (431,278)
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 23 (579,071) (755,198) Thenotesonpages21to55formanintegralpartofthesefinancialstatements. Report of the independent auditor - Pages 14.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
21NOTES
SIGNIFICANT ACCOUNTING POLICIES
1. GENERAL INFORMATION
BankofBaroda(Kenya)LimitedisincorporatedinKenyaundertheCompaniesActasaprivatelimitedliabilitycompanyandisdomiciledinKenya.TheBankislicensedundertheBankingActandprovidebanking,financialand related services.
The Bank operates 11 branches within Kenya.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Theprincipalaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
The financial statements have been prepared under the historical cost convention, except as indicatedotherwise below and are in accordance with International Financial Reporting Standards (IFRS) as revised by the International Accounting Standards Board (IASB). The historical cost convention is generally based on the fair value of the consideration given in exchange of assets. 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Bank takes into account the characteristics of the asset or liability if market participants would take those characteristics into when pricing the asset or liability at the measurementdate.Fairvalueformeasurementand/ordisclosurepurposesinthesefinancialstatementsisdetermined on such a basis.
Inaddition,forfinancialreportingpurposes,fairvaluemeasurementsarecategorisedintolevel1,2or3basedonthedegreetowhichtheinputstothefairvaluemeasurementsareobservableandthesignificanceoftheinputs to the fair value measurement in its entirety, which are described as follows: - Level1inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesthatthe
entity can access at the measurement date.- Level2inputsareinputs,otherthanquotedpricesincludedwithinLevel1,thatareobservablefortheasset
or liability, either directly or indirectly; and- Level3inputsareunobservableinputsfortheassetorliability.
Going concern TheThefinancialperformanceoftheBankissetoutintheReportoftheDirector’sandinthestatementof
profitorlossandthestatementofothercomprehensiveincome.ThefinancialpositionoftheBankissetoutinthestatementoffinancialposition.Disclosuresinrespectofriskandcapitalmanagementaresetoutinnotes25 to 31.
BasedonthefinancialperformanceandpositionoftheBankanditsriskmanagementpolicies,theDirectorsare of the opinion that the Bank is well placed to continue in business for the foreseeable future and as a result thefinancialstatementsarepreparedonagoingconcernbasis.
New and amended standards adopted by the Bank
ThefollowingnewandrevisedStandardsandInterpretationshavebeenadoptedinthecurrentyear.Unlessotherwisedisclosed, theiradoptionhashadnomaterial impacton theamounts reported in thesefinancialstatements:- Amendments to IFRS2 in respect toShare-basedPayment -The standardamends thedefinitionsof
‘vestingcondition’and ‘marketcondition’anaddsdefinitions for ‘performancecondition’ and ‘servicecondition’.AdoptionofIFRS2hadnomaterialimpactonthefinancialstatementsastheBankdoesnothave Share-based Payments.
22NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Basis of preparation (continued)
- Amendments to IFRS 3 in respect to Business Combinations - The standard requires that contingent considerationthatisclassifiedasanassetoraliabilitytobemeasuredatfairvalueateachreportingdatewithgainsandlossesrecognisedinprofitorloss.
Further amendments also clarify that IFRS 3 excludes from its scope the accounting for the formation of ajointarrangementinthefinancialstatementsofthejointarrangementitself.AdoptionofIFRS3hadnomaterialimpactonthefinancialstatements.
- AmendmentstoIFRS10,12andIAS27inrespectofdefinitionofInvestmentEntityandtherequirementsforanentitythatmeetsthisdefinitionnottoconsolidateit’ssubsidiariesbutinsteadmeasurethematfairvaluethroughprofitorloss.
- Amendments to IAS32 -OffsettingFinancialAssets andFinancial Liabilities clarifying themeaning ofcurrent legal enforceable right of set off and simultaneous realisation and settlement.
- AmendmentstoIAS36inrespectofrecoverableamountdisclosuresfornonfinancialassets.
- Amendments to IAS 39 in respect of Novation of Derivatives and Continuation of Hedge Accounting.
- IFRICInterpretation21-LevieswhichdealswithrecognitionofliabilitytopayimposedbyaGovernment.
New standards, amendments and interpretations issued but not effective
AtthedateofauthorisationofthesefinancialstatementsthefollowingStandardsandInterpretationswhichhavenotbeenappliedinthesefinancialstatementswereinissuebutnotyeteffectivefortheyearpresented:
- IFRS5inrespectofguidanceonreclassificationswhichwillbeeffectivefortheaccountingperiodsbeginningon or after 1 July 2016.
- IFRS 9 in respect of Financial Instruments which will be effective for the accounting periods beginning on
orafter1January2018. - IFRS 15 in respect of Revenue from Contracts with Customers which will be effective for accounting periods
beginning on or after 1 January 2017. - AmendmentstoIAS16andIAS38inrespectofClarificationofAcceptableMethodsofDepreciationand
Amortisation which will be effective for accounting periods beginning on or after 1 January 2016.
- AmendmentstoIAS19inrespectofDefinedBenefitPlans:EmployeeContributionswhichwillbeeffectivefor accounting periods beginning on or after 1 July 2014.
- Annual improvements to IFRS’s which will be effective for accounting periods beginning on or after 1 July 2014 as follows:
- IFRS2-Definitionofvestingconditions - IFRS 3 - accounting for contingent consideration in a business combination - IFRS8-Aggregationofoperatingsegmentsandreconciliationoftotalreportablesegmentassetsto
entity’s assets - IFRS 13 - Carrying of short term receivables and payables at invoiced amounts- IAS 16 and IAS 38 - Proportionate restatement of depreciation/amortisation accumulated on
revaluation - IAS 24 - Management fee paid to a management entity- IFRS3-Scopeexclusionsforjointventures- IAS 40 - Application of IAS 40 vs. IFRS 3 on acquisition of investment property
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
23NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Critical accounting estimates and judgements
TheBank’s financial statements and its financial results are influenced by its accounting policies and theassumptions,estimatesandjudgementsmadebymanagement.
Theseassumptions,estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperienceand other factors, including expectations of future events that are believed to be reasonable
- Key sources of estimation uncertainty Managementhasmadethefollowingestimatesthathaveasignificantriskofresultinginamaterialadjustmentto
thecarryingamountsofassetsandliabilitieswithinthenextfinancialyear:
- Impairment of loans and advances: Critical estimates have been made by the management in arriving at the discounted values of securities in
order to arrive at the impairment charges for non-performing loans and advances. The values of securities are discounted using both the International Financial Reporting Standards and the Prudential Guidelines issuedbytheCentralBankofKenya.ThePrudentialGuidelinesprovideaspecificbasisofdiscountingsecurities whilst discounting according to International Accounting Standard 39 (IAS 39) on ‘Financial Instruments: Recognition and Measurement’ is based on historical experience and other relevant factors, discounted to net present values.
- Useful lives of property and equipment and intangible assets: Management reviews the useful lives and residual values of the items of property and equipment and
intangibleassetsonaregularbasis.Duringthefinancialyear,thedirectorsreviewedtheperiodoverwhichleasehold improvements are amortised to a standard period of 10 years for all the leasehold improvements andnotovertheremainingleaseperiodasitwasbefore.Therewerenoothersignificantchangesintheuseful lives and residual values.
- Significant judgements made by management in applying the Bank’s accounting policies
Managementhasmadethefollowingjudgementsthatareconsideredtohavethemostsignificanteffectonthe
amountsrecognisedinthefinancialstatements:
- Impairment losses on loans and advances: The Bank reviews its loan portfolio to assess the likelihood of impairment on a quarterly basis. In determining
whethera loanoradvance is impaired, themanagementmakes judgementas towhether there isanyevidenceindicatingthatthereisameasurabledecreaseintheestimatedfuturecashflowsexpectedfromthat loan or advance.
Managementusejudgementbasedonhistoricalexperienceforsuchassetswithcreditriskcharacteristicsand as to whether there are any conditions that would indicate potential impairment. The methodology and assumptionsusedforestimatingboththeamountandtimingoffuturecashflowsarereviewedregularlytoreduce any differences between loss estimates and actual loss experience.
- Heldtomaturityfinancialassets: ThedirectorshavereviewedtheBank’sheldtomaturityfinancialassetsinthelightofitscapitalmaintenance
andliquidityrequirementsandhaveconfirmedtheBank’spositiveintentionandabilitytoholdthoseassetsto maturity.
- Non-financialassets: TheBankreviewsitsnonfinancialassetstoassessthelikelihoodofimpairmentonanannualbasis.In
determiningwhethersuchassetsareimpaired,managementmakejudgementsastowhetherthereareany conditions that indicate potential impairment of such assets.
24NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Critical accounting estimates and judgements (continued)
- Financial assets classified as ‘held-to-maturity’: Inaccordancewith the requirementsof InternationalFinancialReportingStandards theBankclassifiessomefinancialassetsthatareheldtocollectthecontractualcashflowsgeneratedat‘amortisedcost’underthe‘held-to-maturity’category.Thisclassificationrequiressignificantjudgement.Inmakingthisjudgement,theBankevaluatesitsintentionandabilitytoholdsuchassetstocollectthecontractualcashflowstillmaturity.
If theBankwere to fail tohold theseassets tomaturityother thanunderspecificcircumstances, itwouldberequired to reclassify theentire category as ‘fair value throughprofit or loss’ andmeasure theassets at fairvalueinsteadofamortisedcost.Insuchaninstance,fairvaluegainsandlosseswouldberecognisedinprofitorloss.
-Impairmentoffinancialassetsclassifiedatfairvalueonthestatementoffinancialposition:
TheBankdeterminesthatfinancialassetscarriedatfairvalueareimpairedwhentherehasbeenasignificantor prolonged decline in their fair values below its original cost. This determination of what is significant orprolongedrequiressignificantjudgement.Inmakingthisjudgement,theBankevaluatesamongotherfactors,thevolatilityinshareprice.Inaddition,objectiveevidenceofimpairmentmaybedeteriorationinthefinancialhealthof the investee, industryandsectorperformance,changes in technology,andoperationalandfinancingcashflows.
(c) Translation of foreign currencies
- Functional and presentation currency: ItemsincludedinthefinancialstatementsoftheBankaremeasuredusingthecurrencyoftheprimaryeconomic
environment inwhichtheBankoperates(‘thefunctionalcurrency’).Thefinancialstatementsarepresented inKenya Shillings.
- Transactions and balances: Transactions in foreign currencies during the year are converted into Kenya Shillings (the functional currency)
at rates ruling at the transaction dates. Assets and liabilities at the reporting date which are expressed in foreign currencies are translated into Kenya Shillings at rates ruling at that date. The resulting differences from conversion andtranslationaredealtwithinprofitorlossintheyearinwhichtheyarise.
(d) Revenue recognition Revenueisrecognisedonlywhenitisprobablethattheeconomicbenefitsassociatedwiththetransactionwill
flow to theBank.TheBank recognises revenuewhen theamountof revenuecanbe reliablymeasured, it isprobablethatfutureeconomicbenefitswillflowtotheBankandwhenthespecificcriteriahavebeenmetforeachof the Bank’s activities as described below. The amount of revenue is not considered to be reliably measured until all contingencies relating to the transaction have been resolved. The Bank bases its estimates on historical results,takingintoconsiderationthetypeofcustomer,typeoftransactionandspecificsofeacharrangement.
- Interestincomeisrecognisedonanaccrualsbasisintheprofitorlossfortheyearusingtheeffectiveyield on the asset. Interest income includes income from loans and advances, income from placements withloansandadvancestootherbankinginstitutionsandincomefromgovernmentsecurities.Whenfinancialassetsbecomeimpaired, interest incomeisthereafterrecognisedatratesusedtodiscountfuturecashflowsforthepurposesofmeasuringtherecoverableamount.
- Fees and commissions income are recognised at the time of effecting the transaction.
- Foreign exchange trading income is recognised at the time of effecting the transaction. It includes income from spot and forward deals and translated foreign currency assets and liabilities.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
25NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Revenue recognition (continued)- Dividend income is recognised when the shareholders right to receive payment has been
established - Rental income is accrued by reference to time on a straight line basis over the lease term.
(e) Interest expense Interestforallinterest-bearingfinancialliabilitiesisrecognisedwithininterestexpenseinprofitorlossusingthe
effective interest method. Interest expense includes expense incurred on customer deposits, placements and overnight borrowings with
other banking institutions.
(f) Property and equipment
All property and equipment is initially recorded at cost and thereafter stated at historical cost less depreciation. Historical cost comprises expenditure initially incurred to bring the asset to its location and condition ready for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
onlywhen it isprobable that futureeconomicbenefitsassociatedwith the itemwill flow to theBankand thecost can be reliably measured. The carrying amount of the replaced part is derecognised. All other repairs and maintenancearechargedtoprofitorlossduringthefinancialyearinwhichtheyareincurred.
Buildingsaredepreciatedonastraightlinebasisovertheremainingperiodofthelease.Leaseholdimprovementsare depreciated on a straight line basis over a period of ten years.
Computers and electronic equipment are depreciated on a straight line basis over a period of three years.
Depreciation on all other assets is calculated on a reducing balance basis to write down the cost of each asset to its residual value over its estimated useful life using the following annual rates:
Rate % Motor vehicles 25.00 Furnitureandfittings 12.50
Theassetsresidualvaluesandusefullivesarereviewed,andadjustedifappropriate,attheendofeachreportingperiod.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains or losses on disposal of property and equipment are determined by comparing the proceeds with the carryingamountandaretakenintoaccountindeterminingoperatingprofit.
(g) Investment properties
Investment properties are long-term investments in land and buildings that are not occupied substantially for own use. Investment properties are initially recognised at cost and subsequently stated at historical cost less accumulated depreciation.
Subsequent expenditure on investment properties where such expenditure increases the future economic value
in excess of the original assessed standard of performance is added to the carrying amount of the investment property. All other expenditure is recognised as an expense in the year which it is incurred.
Depreciation is calculated on the straight line basis to write down the cost of the property to its residual value over its estimated useful life of 50 years.
26NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Investment properties (continued)
Theproperties residualvaluesanduseful livesare reviewed,andadjusted ifappropriate,at theendofeachreporting period.
The properties carrying amounts are written down immediately to their recoverable amount if the carrying amount
is greater than their estimated recoverable amount. Gains or losses on disposal of investment property are determined by comparing the proceeds with the carrying
amountandaretakenintoaccountindeterminingoperatingprofit.
(h) Financial instruments
FinancialassetsandfinancialliabilitiesarerecognisedwhentheBankbecomesapartytothecontractualprovisionsoftheinstrument.Managementdeterminesallclassificationoffinancialassetsatinitialrecognition.
- Financial assets
Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedat fair value through profit or loss. Financial assets carried at fair value through profit or loss are initiallyrecognisedatfairvalueandtransactioncostsareexpensedinprofitorloss.
TheBank’sfinancialassetsfallintothefollowingcategories:
- Held-to-Maturity: financial assets with fixed or determinable payments and fixed maturity where themanagement have the positive intent and ability to hold to maturity. Subsequent to initial recognition, such assets are carried at amortised cost using the effective interest rate method. Changes in the carrying amount arerecognisedinprofitorloss.
- Available-for-Sale:Available-for-sale:financialassetsthatareheldforanindefiniteperiodoftime,which
may be sold in response to needs for liquidity or changes in interest rate. Subsequent to initial recognition, they arecarriedatfairvaluewithgainsandlossesrecognisedinothercomprehensiveincome,untilthefinancialasset is derecognised or impaired. At this time, the cumulative gain or loss previously recognised in equity is recognised is transferred to retained earnings. Interest calculated using the effective interest method and gains andlossesondisposalofassetsclassifiedasavailable-for-sale’arerecognisedinprofitorloss.Dividendson‘available-for-sale’equityinstrumentsarerecognisedinprofitorlosswhentheentity’srighttoreceivepaymentis established.
- Loans and receivables:financialassetswithfixedordeterminablepaymentsthatarenotquotedinanactive market other than:
-thosethattheentityintendstosellimmediatelyorintheshortterm,whichareclassifiedas‘heldfortrading’,andthosethattheentityuponinitialrecognitiondesignateditas‘fairvaluethroughprofitorloss’; - those that the entity upon initial recognition designates as ‘available-for-sale’; or
- those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.
Subsequent to initial recognition, they are carried at amortised cost using the effective interest method. Changes inthecarryingamountarerecognisedintheprofitorloss.
Purchasesandsalesoffinancialassetsarerecognisedonthetradedatei.e.thedateonwhichtheBankcommitsto purchase or sell the asset.
Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhave
been transferred and the Bank has transferred substantially all risks and rewards of ownership.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
27NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Financial instruments (continued)
Gainsandlossesondisposalofinvestmentswhosechangesinfairvaluewereinitiallyrecognisedintheprofitorloss are determined by reference to their carrying amount and are taken into account in determining operating profit.Ondisposalofassetswhosechangesinfairvaluewereinitiallyrecognisedinequity,thegains/lossesarerecognisedinthereserve,wherethefairvalueswereinitiallyrecognised.Anyresultantsurplus/deficitafterthetransfer of the gains/losses are transferred to retained earnings.
TheBankdoesnothaveanyfinancialassetsclassifiedaseither‘heldfortrading’or‘fairvaluethroughprofitor
loss’. Managementclassifiesfinancialassetsasfollows: Cash in hand, balances with Central Bank of Kenya, placements with and loans and advances from other banking
institutions, other assets, tax recoverable and loans and advances to customers are classified as loans andreceivables and are carried at amortised cost.
The portfolio of government securities has been split by bond into the ‘held-to-maturity’ and ‘available-for-sale’
classesoffinancialassets.Thefairvaluesofgovernmentsecuritiesclassifiedasavailableforsalearebasedonthe market prices as at the reporting date.
Investment securities are classified as ‘available-for-sale’ (AFS) financial assets. The fair values of quoted
investmentsandcorporatebondsarebasedoncurrentbidpricesatthereportingdate.Wherefairvaluescannotbe reliably measured (unquoted investments), the Bank carries these investments at cost less provision for impairment.
Wherefinancialassetsarecarriedatfairvalueinthestatementoffinancialposition,managementclassifythefair
valuesoffinancialassetsbasedonthequalitativecharacteristicsofthefairvaluationasatthefinancialyearend.The three hierarchy levels used by management are:
- Level 1:wherefairvaluesarebasedonnon-adjustedquotedpricesinactivemarketsforidenticalfinancialassets.
- Level 2:wherefairvaluesarebasedonadjustedquotedpricesandobservablepricesofsimilarfinancial
assets. - Level 3: where fair values are not based on observable market data.
- Financial liabilities
TheBank’s financial liabilitieswhich includecustomerdeposits,depositsdue tootherbanking institutions,current tax and other liabilities fall into the following category:
- Financial liabilities measured at amortised cost: These are initially measured at fair value and subsequently
measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised as
interestexpenseintheprofitorlossunderfinancecosts. Allfinancial liabilitiesareclassifiedascurrent liabilitiesunless theBankhasanunconditional right todefer
settlement of the liability for at least 12 months after the date of this report. Financial liabilities are derecognised when, and only when, the Bank’s obligations are discharged, cancelled or
expired. Offsetting financial instruments Financialassetsandliabilitiesareoffsetandthenetamountreportedinthestatementoffinancialpositionwhen
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
28NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Impairment of financial assets
- Assets carried at amortised cost
TheBankassessesatthedateofthereportwhetherthereisobjectiveevidencethatafinancialassetisimpaired.Afinancialassetisimpairedandimpairmentlossesareincurredonlyifthereisevidenceofimpairmentasaresultof one or more events that occurred after the initial recognition of the asset and that a certain event has an impact ontheestimatedfuturecashflowsofthefinancialasset.
ThecriteriathattheBankusestodeterminethatthereisobjectiveevidenceofanimpairmentlossinclude: •Defaultincontractualpaymentsofprincipalorinterest;
•Cashflowdifficultiesexperiencedbytheborrowerorissuer(forexample,decliningfinancialratios) •Breachofloancovenantsorconditions; •InitiationofBankruptcyproceedings; •Deteriorationoftheborrower’sorissuer’scompetitiveposition; •Deteriorationinthevalueofcollateral;and •Thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties
- Impairment of loans and advances Loansandadvancesare recognisedwhen cash is advanced to borrowers. Loansandadvancesare initiallyrecognised at fair value and are subsequently carried at amortised cost less provision for impairment losses. Management uses the Prudential Guidelines issued by the Central Bank of Kenya when arriving at impairment provisions(whetherspecificorgeneral).Managementclassifiestheperformanceofeachloanaccountinlinewiththe requirements of these guidelines as follows:
Category Performance guideline for classification of account Normal - Accounts are performing as per the contractual terms, are not in arrears and are operating
within the sanctioned credit limits Watch -Accountsthatareinarrearsand/orexceedthesanctionedlimitforperiodsbetween30to90
days Sub-standard -Accountsthatareinarrearsand/orexceedthesanctionedlimitforperiodsbetween90to180
days Doubtful -Accountsthatareinarrearsand/orexceedthesanctionedlimitforperiodsbetween180to365
days Loss -Accountsthatareinarrearsand/orexceedthesanctionedlimitforperiodsover365days
Aspecificcreditriskprovisionforloanimpairmentisestablishedtoprovideformanagement’sestimateofcreditlossesassoonastherecoveryofanexposureisidentifiedasdoubtful.Inarrivingatsuchprovisions,presentvalue of future expected cash flows, including amounts recoverable from securities, discounted at effectiveinterest rates of loans are taken into account. A general credit risk provision for loan impairment is also provided for in accordance with the requirements of the Prudential Guidelines issued by the Central Bank of Kenya. This ranges from between 1% to 3% of the gross advancesclassifiedasNormalandWatch(perthecategorisationrequiredbytheCentralBankofKenya).Thesegeneral provisions are held on the statutory loan loss reserve under shareholders equity. Where provisions computed in accordance with the Prudential Guidelines exceed those under InternationalAccounting Standard 39 (IAS 39) on ‘Financial Instruments’, the excess is credited to reserves under retained earnings.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
29NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Impairment of financial assets (continued)
The Prudential Guidelines and IAS 39 are used by the Bank to determine when a loan becomes impaired. The Bank first assesseswhether objective evidence of impairment exists individually for financial assets that areindividuallysignificant,and individuallyorcollectively forfinancialassets thatarenot individuallysignificant. IftheBankdeterminesthatnoobjectiveevidenceofimpairmentexistsforanindividuallyassessedfinancialasset,whethersignificantornot,itincludestheassetinagroupoffinancialassetswithsimilarcreditriskcharacteristicsand collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is/or continues to be recognised are not included in a collective assessment of impairment.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that havenot been incurred) discountedat theeffective interest rate and the discounted value of the collateral. The carrying amount of the asset is reduced and theamountofthelossisrecognisedinprofitorloss.
Thecalculationofthepresentvalueoftheestimatedfuturecashflowsofacollateralisedfinancialassetreflectsthecashflowsthatmayresultfromforeclosurelesscostsforobtainingandsellingthecollateral,whetherornotforeclosure is probable. Forthepurposesofacollectiveevaluationof impairment,financialassetsaregroupedonthebasisofsimilarcredit risk characteristics (i.e. on the basis of the Bank’s grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevanttotheestimationoffuturecashflowsofsuchassetsbybeingindicativeofthedebtors’abilitytopayallamounts due according to the contractual terms of the assets being evaluated.
Historical lossexperience isadjustedon thebasisof currentobservabledata to reflect theeffectsof currentconditions that did not affect the period on which the historical loss experience is based and to remove the effects ofconditionsinthehistoricalperiodthatdonotcurrentlyexist.Estimatesofchangesinfuturecashflowsforgroupsofassetsshouldreflectandbedirectionallyconsistentwithchangesinrelatedobservabledatafromperiodtoperiod (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology and assumptions usedforestimatingfuturecashflowsarereviewedregularlybytheBanktoreduceanydifferencesbetweenlossestimates and actual loss experience.
Whenaloanisuncollectible,itiswrittenoffagainsttherelatedprovisionforloanimpairment.Suchloansarewrittenoff after all the necessary procedures have been completed and the amount of the loss has been determined.
If,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelyto an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), thepreviouslyrecognisedimpairmentlossisreversedinprofitorloss.
- Renegotiated loans
Loans thatareeithersubject tocollective impairmentassessmentor individuallysignificantandwhose termshave been renegotiated are considered to be past due. They will continue to be treated as past due unless all past due interest is paid in cash at the time of renegotiation and a sustained record of performance has been maintained.
•Assetsclassifiedatfairvalueonthestatementoffinancialposition
TheBankassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetoragroupoffinancialassetsareimpaired.Inthecaseofequityinvestmentsheldatfairvalueasignificantorprolongeddeclineinthefairvalueofthesecuritybelowitscostisobjectiveevidenceofimpairment. resulting in the recognition of an impairment loss. If any such evidence exists, the cumulative loss (the difference between the acquisition cost andthecurrentfairvalue,lessanyimpairmentlossespreviouslyrecognisedinprofitorloss)iseliminatedfromequityandrecognisedinprofitorloss.Impairmentlossesrecognisedinprofitorlossonequityinstrumentsarenotreversedthroughprofitorloss.
30NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Impairment of non-financial assets
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiablecashflows(cash-generatingunits).
Non-financialassetsthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentateach
reporting date. (k) Retirement benefit obligations TheBankoperatesadefinedcontributionpensionschemeforitsemployees,theassetsofwhichareheldina
separate trustee administered guaranteed scheme managed by an insurance company. The pension plan is funded by contributions from the employees and the Bank. The Bank’s contributions are
chargedtoprofitorlossintheyeartowhichtheyrelate.TheBankhasnofurtherpaymentobligationsoncethecontributions have been paid.
TheBankanditsemployeescontributetotheNationalSocialSecurityFund(NSSF),astatutorydefinedcontribution
schemeregisteredundertheNSSFAct.TheBank’scontributionstothedefinedcontributionschemearechargedtoprofitorlossintheyeartowhichtheyrelate.
(l) Employee entitlements
Employee entitlements to gratuity and long service awards are recognised when they accrue to employees. A provision is made for the estimated liability for such entitlements as a result of services rendered by employees up to the date of the reporting period.
The estimated monetary liability for employees’ accrued annual leave entitlement as at the date of this report is
recognised as an expense accrual. m) Intangible assets - Computer software
Computer software programmes are capitalised on the basis of the costs incurred to acquire and bring to use the specificsoftware.Thesecostsareamortisedonastraightlinebasisovertheirusefulliveswhichareestimatedtobe 5 years.
Costs associated with developing or maintaining computer software programmes are recognised as an expense asincurred.CoststhataredirectlyassociatedwiththeacquisitionofidentifiableanduniquesoftwareproductscontrolledbytheBank,andthatwillprobablygenerateeconomicbenefitsexceedingcostsbeyondoneyear,arerecognised as intangible assets.
(n) Accounting for leases The Bank as a lessee:
Leasesofassetswhereasignificantproportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleasesarechargedtoprofitor lossonastraight line basis over the lease period.
The Bank as a lessor: Assets leased to third parties under operating leases are included in investment properties in the statement of
financialposition.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
31NOTES (continued)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Taxation Thetaxexpensefortheperiodcomprisescurrentanddeferredtax.Taxisrecognisedintheprofitorlossforthe
year. Current tax Currenttaxisprovidedonthebasisoftheresultsfortheyear,adjustedinaccordancewithtaxlegislation.
Deferred tax Deferred tax is provided using the liability method for all temporary differences arising between the tax bases of
assetsandliabilitiesandtheircarryingvaluesforfinancialreportingpurposes.Currentlyenactedtaxratesareused to determined deferred tax. Deferred tax assets are recognised only to the extent that it is probable that futuretaxableprofitswillbeavailableagainstwhichtemporarydifferencescanbeutilised.
(p) Dividends Proposed dividends are disclosed as a separate component of equity until declared.
Dividends are recognised as a liabilities in the period in which they are approved by the Bank’s shareholders.
(q) Cash and cash equivalents Forthepurposesofthecashflowstatement,cashandcashequivalentscomprisecash,balancesduetoandfrom
other banking institutions, balances with Central Bank of Kenya (excluding cash reserve ratio) and government securities maturing within 91 days from the reporting date.
(r) Contingent liabilities Letters of credit, acceptances, guarantees and performance bonds are accounted for as off balance sheet
transactions and disclosed as contingent liabilities. Estimates of the outcome and of the financial effect ofcontingentliabilitiesismadebythemanagementbasedontheinformationavailableuptothedatethefinancialstatementsareapprovedforissuebytheDirectors.Anyexpectedlossischargedtoprofitorloss.
(s) Foreign exchange forward contracts Foreign exchange forward contracts are marked to market and are carried at their fair value and shown as
commitments.Gainsandlossesonforeignexchangeforwardcontractsaredealtwithonanetbasisinprofitorloss in the year in which they arise.
(t) Share capital Ordinarysharesareclassifiedasequity.
(u) Provisions under other liabilities Provisions under other liabilities are recognised when the Bank has a present legal or constructive obligation,
asaresultofpasteventsanditisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequired to settle the obligation and a reliable estimate of the amount of the obligation can be made.
(v) Statutory loan loss reserve The Prudential Guidelines issued by the Central Bank of Kenya require the Bank to make general provisions
against impairment of loans and advances. These amounts are recognised in the statutory loan loss reserve in shareholders equity. The loan loss reserve is not distributable.
(w) Comparatives Wherenecessary,comparativefigureshavebeenadjustedtoconformwithchangesinpresentationinthecurrent
year.
32NOTES (continued)
2014 20131. INTEREST INCOME Shs’000 Shs’000 Loansandadvancestocustomers 4,074,952 3,754,527 Governmentsecurities 2,640,248 2,247,823 Corporate bonds 26,939 31,195 Depositsandbalancesduefrombankinginstitutions 64,762 51,348 Other income 561 1,030
6,807,462 6,085,923 2. INTEREST EXPENSE Timedeposits 3,310,855 2,937,217 Customerdeposits 78,394 70,509 Depositsandbalancesduetobankinginstitutions 41,961 33,813 3,431,210 3,041,539 3. OTHER INCOME/(LOSSES) Profitondisposalofgovernmentsecurities 3,249 9,134 Rentalincome 19,803 13,443 Dividend income 793 425 Recoveries of advances previously impaired 95 10,764 Miscellaneousincome 435 834
24,375 34,600 4. IMPAIRMENT LOSSES ON LOANS AND ADVANCES Loansandadvancestocustomers: -Additionalprovisions 85,464 71,511
Net increase in impairment provisions 85,464 71,511
5. (a) OTHER OPERATING EXPENSES Staffcosts(Note5(b) 412,868 378,313 Directors’ emoluments: -fees 890 1,010 -other 11,384 10,428 Depreciation of investment properties (Note 14) 619 619 Amortisationofintangibleassets(Note16) 2,358 1,659 Depreciationonpropertyandequipment(Note17) 50,310 35,528 Property and equipment written 71 - Auditors’ remuneration: -currentyear 3,628 3,655 Contribution to Deposit Protection Fund 59,926 51,526 Operatingleaserentals 87,689 72,386 Other operating expenses: - administration 163,444 140,256 -establishment 58,776 48,035
851,963 743,415
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
33NOTES (continued)
2014 20135. (b) STAFF COSTS Shs ’000 Shs ’000 The following items are included under staff costs: Staff leave 4,657 6,122 Pension costs: - Staff gratuity 24,326 14,400 -Definedcontributionscheme 17,510 16,920 - National Social Security Fund (NSSF) 362 372
6. TAX Currenttax 486,824 473,010 Deferredtax(credit)(Note18) (9,127) (7,679) 477,697 465,331 ThetaxontheBank’sprofitbeforetaxdiffersfromthetheoretical amount that would arise using the basic tax rate as follows: Profitbeforetax 2,694,608 2,505,027 Taxcalculatedatarateof30%(2013:30%) 808,382 751,508 - expenses not deductible for tax purposes 7,266 7,710 -incomenotsubjecttotax (337,951) (293,887) Tax charge 477,697 465,331
7. EARNINGS PER SHARE
Basicearningspershareiscalculatedontheprofitattributabletotheshareholdersandontheweightedaveragenumberofsharesoutstandingduringtheyearadjustedfortheeffectofthebonussharesissuedifany.
2014 2013
Netprofitfortheyearattributabletoshareholders(Shs.‘000) 2,216,911 2,039,696 Adjustedweightedaveragenumberofordinarysharesinissue(‘000) 49,486 49,486
Earningspershare-basicanddiluted(Shs.) 44.80 41.22 There were no potentially dilutive shares outstanding as at 31 December 2014 and 2013. 8. DIVIDEND
Proposeddividendsareaccounted forasaseparatecomponentofequityuntil theyhavebeen ratifiedatanannualgeneralmeeting.Attheforthcomingannualgeneralmeetingafinaldividendinrespectoftheyearended31December2014ofShs.3.80pershare(2013:Shs.3.60)amountingtoShs.188.04million(2013:Shs.178.14million) is to be proposed.
Whereapplicable,paymentofdividendsissubjecttodeductionofwithholdingtaxatarate5%forresidentsand10% for non-residents.
34NOTES (continued)
2014 20139. BALANCES WITH CENTRAL BANK OF KENYA Shs’000 Shs’000 Balances with Central Bank of Kenya -cashreserveratio 2,687,053 2,084,136 - other (Note 23) 26,466 47,303 2,713,519 2,131,439
The cash reserve ratio balance is non interest bearing and is based on the value of customer deposits as adjustedinaccordancewithCentralBankofKenyarequirements.Asat31December2014thecashreserveratiorequirement was 5.25% (2013: 5.25%) of all customer deposits. These funds are not available for the Bank’s day to day operations. 2014 2013
10. GOVERNMENT SECURITIES Shs’000 Shs’000 Treasury bills - ‘held to maturity’ 927,912 19,214 Treasurybonds-‘available-for-sale’ 9,605,169 9,716,280 Treasurybonds-‘heldtomaturity’ 17,947,419 14,515,658 28,480,500 24,251,152 Comprising Maturing within 91 days (Note 23) 927,912 19,214 Maturing after 91 days but within one year 907,007 2,001,614 Maturingwithinonetothreeyears 10,258,463 1,700,022 Maturingafterthreeyears 16,387,118 20,530,302 28,480,500 24,251,152
The fair valuesof thegovernment securities classifiedas ‘available-for-sale’ financial assetsarecategorisedunderLevel1basedontheinformationsetoutinaccountingpolicy(h). 2014 2013
11. PLACEMENT WITH AND LOANS AND ADVANCES TO Shs’000 Shs’000 OTHER BANKING INSTITUTIONS Balances with banking institutions in Kenya 950,200 564,216 Balances with banking institutions abroad 195,495 272,027 Balanceswithparentbank 49,270 188,148 1,194,965 1,024,391 12. OTHER ASSETS IItems in transit 212,342 167,937 Otherreceivablesandprepayments 165,280 103,399 377,622 271,336 13. LOANS AND ADVANCES TO CUSTOMERS a)Loansandadvancestocustomers Loansandoverdrafts 28,639,324 23,859,280 Billsdiscountedandforeignbillspurchases 362,899 208,393 Gross loans and advances to customers (Note 13 (c)) 29,002,223 24,067,673 Suspendedinterest (118,746) (73,205) Provision for impaired loans and advances (Note 13 (b)) (494,625) (415,909) Loans and advances to customers net of provision for impairment (Note 13(d)) 28,388,852 23,578,559
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
35NOTES (continued)
2014 2013 13. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Shs ‘000 Shs ‘000 b) Provision for impaired loans and advances - Specific provision Atstartofyear 415,909 359,181
New provisions -Additionalprovisionsduringtheyear 85,464 71,511 - Provision utilised during the year for write off (6,653) (4,019) - Recoveries (95) (10,764) Netdecrease/(increase)inprovisionforimpairment 78,716 56,728 At end of year 494,625 415,909
Loansandadvanceshavebeenwrittendowntotheirrecoverableamount.NonperformingloansandadvancesonwhichprovisionsforimpairmenthavebeenrecognisedamounttoShs.1.064billion(2013:Shs.Shs.598.364million).TheseareincludedinthestatementoffinancialpositionnetofprovisionsatShs.451.255million(2013:Shs.73.205million).IntheopinionoftheDirectors,sufficientsecuritiesareheldtocovertheexposureonsuchloansandadvances.InterestincomeamountingtoShs.118.746million(2013:Shs.73.295million)onimpairedloansandadvanceshasnotbeenrecognisedasthemanagementfeelsnoeconomicbenefitofsuchinterestwillflowtotheBank.
From past experience, the management is of the opinion that 1% provision for normal accounts and 3% provision for watch accounts is adequate to cover any accounts which might become delinquent in the future.
c) Concentration
Economic sector risk concentrations within the loans and advances portfolio are as follows: 2014 2013 Shs ‘000 % Shs ‘000 %
Agriculture 664,413 2.29% 620,055 2.58% Manufacturing 5,909,636 20.38% 6,094,323 25.32% BuildingandConstruction 4,080,658 14.07% 2,945,623 12.24% MiningandQuarrying 819,667 2.83% 617,170 2.56% EnergyandWater 71,335 0.25% 74,609 0.31% Trade 8,375,315 28.88% 7,017,224 29.16% Tourism, Restaurant and Hotels 1,221,567 4.21% 1,051,636 4.37% TransportandCommunication 2,626,915 9.06% 1,225,782 5.09% Real Estate 4,073,790 14.05% 3,753,991 15.60% FinancialServices 91,208 0.31% 55,086 0.23% Social,CommunityandPersonalHouseholds 1,067,719 3.68% 612,174 2.92% 29,002,223 100% 24,067,673 100%
36NOTES (continued)
13. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) 2014 2013 d) Loans and advances neither past due nor impaired, Shs ‘000 Shs ‘000 past due but not impaired and individually impaired Neitherpastduenorimpaired 24,308,813 23,000,423 Pastduebutnotimpaired 3,628,784 468,885 Individuallyimpaired 1,064,626 598,365
Gross loans and advances to customers 29,002,223 24,067,673 Less:Provisionforimpairedloansandadvancesand suspendedinterest (613,371) (489,114)
Net loans and advances to customers (Note 13(a)) 28,388,852 23,578,559 Theloansandadvancespastduebutnotimpairedareagedbetween30to90days.Loansandadvancesthatareagedpast180daysareconsideredimpaired.
The credit quality of the portfolio of loans and advances that were past due but not impaired can be assessed by reference to the internal rating system adopted by the Bank. The loans and advances past due but not impaired can be analysed as follows: 2014 2013
Shs ‘000 Shs ‘000 Watch 3,628,784 468,885
The fair value of the collateral for loans and advances past due but not impaired is considered adequate. Loans and advances individually impaired
The fair value of the collateral for loans and advances individually impaired is Shs. 451.255 million. Loans and advances renegotiated
Restructuring activities include extended payment arrangements, approved external management plans, modificationanddeferralofpayments.Followingrestructuring,apreviouslyoverduecustomeraccountisresettoa substandard status and managed together with other similar accounts. Restructuring policies and practices are basedonindicatorsorcriteriawhich,inthejudgmentofthecreditcommitteeindicatethatpaymentwillmostlikelycontinue. These policies are kept under continuous review.
Repossessed collateral
As at 31 December 2014 and 2013 the Bank did not hold possession of any repossed collateral held as security.
14. INVESTMENT PROPERTIES 2014 2013 Shs ‘000 Shs ‘000 Cost At start and end of year 30,950 30,950 Depreciation Atstartofyear 6,809 6,190 Charge for the year 619 619 Atendofyear 7,428 6,809 Net book value 23,522 24,141
RentalincomeamountingtoShs.19.80million(2013:Shs.13.44million)withrespecttoinvestmentproperties hasbeenrecognisedinprofitorlossunderotherincome.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
37
15. INVESTMENT SECURITIES - ‘AVAILABLE-FOR-SALE’ 2014 2013 Shs ‘000 Shs ‘000 Quoted equity investments: At start of year 2,062 2,443 Fairvalue(loss)/gain 163 (381)
At end of the year 2,225 2,062
Unquoted equity investments: At start and end of year 19,391 19,391 Corporate bonds Atstartofyear 243,240 286,339 Redemption (60,588) (35,587) Interest income for the year 26,939 31,195 Interest income received (29,003) (33,751) Fairvalue(loss) 3,958 (4,956) At end of the year 184,546 243,240
206,162 264,693
ThefairvaluesofthequotedequityinvestmentsandcorporatebondsarecategorisedunderLevel1basedonthe information set out in accounting policy (h).
16. Intangible assets - software 2014 2013 Shs ‘000 Shs ‘000 Cost Atstartofyear 8,296 8,070 Additions 3,495 226 Atendofyear 11,791 8,296
Amortisation Atstartofyear 4,537 2,878 Chargefortheyear 2,358 1,659 Atendofyear 6,895 4,537 Net book value 4,896 3,759
Amortisationcostofintangibleassetsarerecognisedinotheroperatingexpensesinprofitorloss.
NOTES (continued)
38
17. PROPERTY AND EQUIPMENT Year ended 31 December 2014 Computers Furniture Leasehold and electronic Motor and Buildings Improvements equipment vehicles fittings Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Cost Atstartofyear 11,123 104,816 130,112 23,426 105,164 374,641 Additions - 12,118 15,662 4,650 12,386 44,816 Disposals - - (1,478) - (147) (1,625)
Atendofyear 11,123 116,934 144,296 28,076 117,403 417,832 Depreciation Atstartofyear 4,674 66,979 98,640 17,698 54,012 242,003 Chargefortheyear 223 8,359 31,042 2,594 8,092 50,310 Disposals - - (1,365) - (44) (1,409) Atendofyear 4,897 75,338 128,317 20,292 62,060 290,904 Net book value 6,226 41,596 15,979 7,784 55,343 126,928
In the opinion of the directors, there is no impairment in the value of property and equipment. All additions to property and equipment during the year were made on a cash basis. Year ended 31 December 2013 Computers Furniture Leasehold and electronic Motor and Buildings Improvements equipment vehicles fittings Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Cost Atstartofyear 11,123 104,247 124,410 23,426 103,610 366,816 Additions - 569 6,469 - 1,554 8,592 Disposals - - (767) - - (767) Atendofyear 11,123 104,816 130,112 23,426 105,164 374,641 Depreciation Atstartofyear 4,452 53,121 87,048 15,789 46,734 207,144 Chargefortheyear 222 13,858 12,261 1,909 7,278 35,528 Disposals - - (669) - - (669)
Atendofyear 4,674 66,979 98,640 17,698 54,012 242,003 Netbookvalue 6,449 37,837 31,472 5,728 51,152 132,638
NOTES (continued)
19-Customers’deposit-2013&2012???(itshouldbe2014&2013)
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
39
18. DEFERRED TAX
Deferred tax is calculated on all temporary differences under the liability method using a principal tax rate of 30% (2013: 30%). The movement on the deferred tax account is as follows: 2014 2013
Shs’000 Shs’000 As start of year (73,446) (65,767) Profitorloss(credit)(Note6) (9,127) (7,679) Atendofyear (82,573) (73,446)
Deferredtaxassetsanddeferredtaxcharge/(credit)intheprofitorlossareattributabletothefollowing: Charge/ At start (credit) to At end of year profit or loss of year Shs ‘000 Shs ‘000 Shs ‘000 Propertyandequipment (5,643) (5,937) (11,580) Provision for staff accruals (52,214) (3,190) (55,404) Provision for impairment (13,719) - (13,719) Generalprovision (1,870) - (1,870) (73,446) (9,127) (82,573)
19. CUSTOMER DEPOSITS 2014 2013 Shs ‘000 Shs ‘000
CurrentandSavingsaccounts 8,774,134 8,143,343 Term deposits 39,909,055 33,733,179 48,683,189 41,876,522 Analysis of customer deposits by maturity:
Payablewithin90days 31,400,396 28,282,738 Payableafter90daysandwithinoneyear 14,794,424 13,422,387 Payableafteroneyear 2,488,369 171,397 48,683,189 41,876,522 Concentration: The economic sector concentrations within the customer deposits portfolio were as follows:
2014 2013 Shs’000 % Shs’000 % Nonprofitinstitutionsandindividuals 39,854,223 81.86% 33,707,432 80.49% Privatecompanies 8,621,808 17.71% 7,547,942 18.02% Insurancecompanies 207,158 0.43% 621,148 1.48% 48,683,189 100% 41,876,522 100%
IncludedincustomeraccountsweredepositsofShs.1,818.336million(2013:Shs.1,722.079million)heldascollateral for loans and advances. The fair value of those deposits approximates the carrying amount.
NOTES (continued)
40
20. DEPOSITS DUE TO OTHER BANKING INSTITUTIONS 2014 2013 Shs ‘000 Shs ‘000 Parentbank 91,947 198,301 Foreign banks 2,944,403 1,913,775 3,036,350 2,112,076 21. OTHER LIABILITIES Staffleaveandgratuityaccrual 184,675 174,048 Bills payable 1,946 1,194 Otheraccountspayable 171,159 188,668 357,780 363,910 Other liabilities are expected to be settled within 12 months from the reporting date. No. of ordinary shares Issued and paid up capital
22. SHARE CAPITAL 2014 2013 2014 2013 ‘000 ‘000 Shs ‘000 Shs ‘000 Atstartandendofyear 49,486 49,486 989,717 989,717
The authorised share capital of the company is Shs. 2 billion (2013: Shs. 2 billion) representing 100 million (2013: 100 million) ordinary shares of Shs. 20 each. 23. CASH AND CASH EQUIVALENTS Changes during the Forthepurposesofthestatementofcashflows, 2014 2013 year cash and cash equivalents comprise the following: Shs’000 Shs’000 Shs’000 Cash in hand 307,935 265,970 41,965 Government securities maturing within 91 days aftertheyearend(Note10) 927,912 19,214 908,698 BalanceswithCentralBankofKenya(Note9) 26,466 47,303 (20,837) Placements with and loans and advances from other banking institutions (Note 11) 1,194,965 1,024,391 170,574 Deposits due to other banking institutions (Note 20) (3,036,350) (2,112,076) (924,274) (579,072) (755,198) 176,126
24. OFF BALANCE SHEET FINANCIAL INSTRUMENTS, CONTINGENT LIABILITIES AND COMMITMENTS
In common with banking business, the Bank conducts business involving acceptances, guarantees, performance bondsandlettersofguarantees.Themajorityofthesefacilitiesareoffsetbycorrespondingobligationsfromthirdparties. 2014 2013 Contingent liabilities Shs’000 Shs’000
Spots 235,709 117,015 Lettersofcredit 1,535,026 1,534,278 Lettersofguarantees 3,745,504 4,759,174 Billssentforcollection 819,425 965,746 6,335,664 7,376,213
NOTES (continued)
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
41NOTES (continued)
24. OFF BALANCE SHEET FINANCIAL INSTRUMENTS, CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)
AnacceptanceisanundertakingbyaBanktopayabillofexchangeonaspecifiedduedate.TheBankexpectsmostacceptancestobepresentedandreimbursementbythecustomerisnormallyimmediate.Lettersofcreditcommit the Bank to make payments to third parties on production of credit compliant documents which are subsequently reimbursed by customers.
Guarantees are generally written by a Bank to support the performance of a customer to third parties. The Bank will only be required to meet these obligations in the event of the customers default. Basedontheestimateofthefinancialeffectofthecontingenciesandthecorrespondingobligationsfromthirdparties, no loss is anticipated.
The Bank has open lines of credit facilities with correspondent Banks. Commitments 2014 2013
Shs Shs Undrawnformalstand-byfacilities,creditlines 2,969,370 2,740,594
Commitments to lend are agreements to lend to customers in future subject to certain conditions. Suchcommitmentsarenormallymadeforafixedperiod.TheBankmaywithdrawfromitscontractualobligationfortheundrawn portion of agreed facilities by giving reasonable notice to the customer.
The pending litigation claims relate to cases instituted by third parties against the Bank. Judgement in respect of these cases had not been determined as at 31 December 2014. The directors are of the opinion that no liabilities will crystallise. Capital commitments
There were no capital expenditure contracted as at the reporting date. Operating lease commitments 2014 2013 The future minimum lease payments under non-cancellable Shs’000 Shs’000 operating leases are as follows: -notlaterthan1year 88,257 72,626 -laterthan1yearandnotlaterthan5years 327,785 60,673 416,042 133,299
TheDirectorsareoftheviewthatfuturenetrevenues,fundingandcashflowswillbesufficienttocoverthesecommitments.
25. FINANCIAL RISK MANAGEMENT TheBank’sactivitiesexposes it toavarietyoffinancial risksandthoseactivities involveanalysis,evaluation,acceptanceandmanagementofsomedegreeofriskorcombinationofrisks.Takingriskiscoretothefinancialbusiness, and the operational risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on theBank’sfinancialperformance.
The Bank’s risk management policies are designed to identify and analyse these risks, to set risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date management informationsystems.TheBankregularlyreviewsitsriskmanagementpoliciesandsystemstoreflectchangesinmarkets, products and emerging best practice.
42NOTES (continued)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Management function is carried out by the Bank’s Risk Management Department under policies approved bytheBoardofDirectors.TheBank’sRiskManagementDepartmentidentifies,measures,monitorsandcontrolsfinancialrisksinclosecoordinationwithvariousotherdepartmentalheads.TheBankhasBoardapprovedpoliciescoveringspecificareas,suchascreditrisk,marketrisk,liquidityriskandoperationalrisk
The most important types of risk are credit risk, liquidity risk, market risk and operational risk. Market risk includes currency risk, interest rate risk and price risk. (a) Credit risk TheBanktakesonexposuretocreditrisk,whichistheriskthatacustomerwillcauseafinancial lossfortheBankby failing to fulfilacontractualobligation.Credit risk is themost important risk for theBank’sbusiness.Management therefore carefully manages its exposure to credit risk. Credit risk mainly arises from customer loans and advances, credit cards, investing activities and loan commitments (off balance sheet financialinstruments). The credit risk management and control are centralised in credit and treasury departments of the Bank. - Measurement of credit risk
• Loans and advances
Inmeasuringcreditriskofloansandadvancestocustomers,theBankreflectsvariouscomponents. These include:
- the probability of default by the borrower/client on their contractual obligations; - current exposures on the borrower/client and the likely future development, from which the Bank derives the exposure at default; and - the likely recovery ratio on the defaulted obligations.
Thesecreditriskmeasurements,whichreflectexpectedloss,areembeddedintheBank’sdailyoperational management. The operational measurements can be contrasted with impairment allowances required under IAS 39andthebankingActwhicharebasedonlossesthathavebeenincurredatthedateofthestatementoffinancial position rather than expected losses. The Bank assesses the probability of default of individual borrower/client using internal rating internally methods tailored to the various categories of the borrower/client. These have been developed and combine statistical analysiswiththecreditdepartment’sjudgmentandarevalidated,whereappropriate,bycomparisonwithexternally available data. Managementassessesthecreditqualityofthecustomer,takingintoaccounttheirfinancialposition,past experience and other factors. Individual limits are set based on internal or external information in accordance with limits set by the management. The utilisation of credit limits is regularly monitored. Corrective action is taken where necessary.
• Investments
For investments, external ratings in addition to the requirements of the banking Act are used by the Bank for better credit quality and maintain a readily available source to meet the funding requirement at the same time.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
43
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
- Risk limit control and mitigation policies
TheBankmeasures,monitorsandcontrolsconcentrationsofcreditriskwherevertheyareidentified.TheBankstructures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or group’s of borrowers, and to industry segments. Such risks are monitored on a continous basis and subjecttoanannualormorefrequentreview,whenconsiderednecessary.Limitsonthelevelof credit risk by product and industry/sector are approved as and when required by the Risk Management Committee.
Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Someotherspecificcontrolandmitigationmeasuresareoutlinedbelow:
• Collateral The Bank employs a range of policies and practices to mitigate credit risk. The most common one is to obtain collateral for loans and advances to customers. The types of collateral obtained include: •Mortgagesoverproperties;•Chargesoverbusinessassetssuchaslandandbuildings,inventoryandreceivables;•Chargesoverfinancialinstrumentssuchasinvestments. •Depositsplacedunderlien
• Credit-related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and letters of credit carry the same credit risk as loans. Letters of credit (which arewrittenundertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank up to astipulatedamountunderspecifictermsandconditions)arecollateralisedbytheunderlyingshipmentsofgoods to which they relate and therefore carry less risk than a direct advance or loan.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,guaranteesorlettersofcredit.Withrespecttocreditriskoncommitmentstoextendcredit,theBankispotentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customersmaintaining specific credit standards. The Bankmonitors the term to maturity of creditcommitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.
- Impairment and provisioning policies
The Bank’s internal and external systems focus more on credit-quality mapping from the inception of the lending oftheloanoradvance.Incontrast, impairmentprovisionsarerecognisedforfinancialreportingpurposesonlyforlossesthathavebeenincurredatthedateofthestatementoffinancialpositionbasedonobjectiveevidenceof impairment. Theimpairmentprovisionshowninthestatementoffinacialpositionattheyear-endisderivedaftertakingvariousfactors into consideration as described in accounting policy (k). The Bank’s management uses basis under IAS 39 and the Prudential Guidelines to determine the amount of impairment.
NOTES (continued)
44
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
- Exposure to credit risk Themanagementisconfidentinitsabilitytocontinuetocontrolandsustainminimalexposureofcreditrisktothe Bankresultingfrombothitsloanandadvancesportfolioandotherfinancialassetsbasedonthefollowing:
• Themaximumexposuretocreditriskarisesfromloansandadvancestocustomerswhichform45.86%(2013:45.25%)oftotalfinancialassets;46.02%(2013:46.45%)representsinvestmentsingovernmentsecurities.
• 96.33%(2013:97.51%)oftheloansandadvancesportfolioiscategorisedinthetoptwogrades(NormalandWatch).
• 12.51%(2013:1.95%)oftheloansandadvancesportfolioareconsideredtobepastduebutnotimpaired(note 13).
• Mostofitsloansandadvancestocustomersareperformingasperthecovenantsandthenon-performingones have been provided for. The loans and advances are also secured.
• Cashinhand,balanceswithCentralBankofKenyaandplacementswithotherbankinginstitutionsareheldwithsoundfinancialinstitutions.
• Governmentsecuritiesareconsideredstableinvestmentsastheriskisconsiderednegligible.
• Management considers the historical information available to assess the credit risk on investmentsecurities.
Exposuretothisriskhasbeenquantifiedineachfinancialassetnoteinthefinancialstatementsalongwithanyconcentration of risk.
(b) Market risk Market risk is the risk that changes in the market prices, which includes currency exchange rates, interest rates
andbidprices,willaffectthefairvalueorfuturecashflowsoffinancialinstruments.Marketriskarisesfromopenpositions in interest rates and foreign currencies, both ofwhich are exposed to general and specificmarketmovementsandchangesinthelevelofvolatility.Theobjectivesofmarketriskmanagementistomanageandcontrol market risk exposures within acceptable limits, while optimising on the return on risk. Overall management ofmarketriskrestswiththeAssetsandLiabilityCommittee(ALCO).
The treasurydepartment is responsible for thedevelopmentof detailed riskmanagementpolicies, subject toreviewandapprovalbyALCO,andforthedaytodayimplementationofthesepolicies.
Market risks arise mainly from trading and non-trading activities.
Trading portfolios include those positions arising from market-making transactions where the Bank acts as a principal with clients or with the market.
Non-trading portfolios primarily arise from the interest rate management of the entity’s retail and commercial banking assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Bank’s available-for-sale investments.
Themajormeasurementtechniquesusedtomeasureandcontrolmarketriskareoutlinedbelow:
NOTES (continued)
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
45
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Market risk (continued)
- ALCO review ALCOmeetsonamonthlybasistoreviewthefollowing:
•AsummaryoftheBank’saggregateexposureonmarketrisk•AsummaryoftheBank’smaturity/repricinggaps•AreportindicatingthattheBankisincompliancewiththeBoard’ssetexposurelimits•Acomparisonofpastforecastorriskestimateswithactualresultstoidentifyanyshortcomings
- Review of the treasury department The Risk Management Department monitors foreign exchange risk in close co-ordination with the Finance Department. Regular reports are prepared by the Finance Department of the Bank. Some of these reports include: •Netovernightpositionsbycurrency •Maturitydistributionbycurrencyoftheassetsandliabilitiesforbothonandoffbalancesheetitems •Outstandingcontracts(ifany)bysettlementdateandcurrency •Totalvaluesofcontracts,spotsandfutures •Aggregatedealinglimits •Exceptionalreportsforexamplelimitsorlineexcesses
(c) Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank’s processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as those arising out of legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risk arises from the Bank’s operations and is faced by all other business entities.
TheBankendeavourstomanagetheoperationalriskbycreatingabalancebetweenavoidanceofcostorfinanciallosses and damage to the Bank’s reputation within overall cost effectiveness and to avoid control procedures that restrict creativity and initiative. The key responsibility for development policies and programs to implement the Bank’s operational risk management is with the senior Management of the Bank. The above is achieved by development of overall standards for the Bank to manage the risk in the following areas:
•Segregationofdutiesincludingindependentauthorisationoftransactions •Monitoringandreconciliationoftransactions •Compliancetoregulatoryandlegalrequirement •Documentationofcontrolandprocedure •Assessmentoftheoperationalriskonaperiodicbasistoaddressthedeficienciesobserved,ifany•Reportingofoperationallossesandinitiationofremedialaction •Developmentofcontingencyplans •Givingtrainingtostafftoimprovetheirprofessionalcompetency •Ethicalstandards •Obtaininginsurancewhereverfeasible,asariskmitigationmeasure.
(d) Risk measurement and control
Interest rate, currency, credit, liquidity and other risks are actively monitored by Management to ensure compliance with the Bank’s risk limits. The Bank’s risk limits are assessed regularly to ensure their appropriateness, given its objectivesandstrategiesandcurrentmarketconditions.AvarietyoftechniquesareusedbytheBankinmeasuring the risks inherent in its trading and non-trading positions.
NOTES (continued)
46
26. CURRENCY RISK
The Bank operates wholly within Kenya and its assets and liabilities are reported in the local currency. It conducts trade with Correspondent Banks and takes deposits and lends in other currencies also. The Bank’s currency
position and exposure are managed within the exposure guideline of 10% of the core capital as stipulated by the Central Bank of Kenya. This position is monitored on a daily basis by the Management.
Thesignificantcurrencypositionsaredetailedbelow: AT 31 DECEMBER 2014 US $ GB £ Euros Others Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Assets Cash and Bank balances 12,902 311 733 - 13,946 BalanceswithCentralBankofKenya 17,696 3,805 4,877 87 26,465 Depositsduefromotherbankinginstitutions - 165,309 25,628 53,827 244,764 Loansandadvancestocustomers 3,966,042 137,504 - - 4,103,546 Total assets 3,996,640 306,929 31,238 53,914 4,388,721 Liabilities Customerdeposits 1,187,500 307,819 27,923 - 1,523,242 Deposits due to other banking institutions 2,944,403 - - 91,947 3,036,350 Total liabilities 4,131,903 307,819 27,923 91,947 4,559,592
Net statement of finacial position gap (135,263) (890) 3,315 (38,033) (170,871) Off balance sheet net notionalposition (126,836) - - (54,131) (180,967)
AT 31 DECEMBER 2013 Totalassets 2,780,769 219,153 61,543 202,833 3,264,298 Totalliabilities (2,826,647) (213,426) (55,439) (200,316) (3,295,828) Netbalancesheetpositiongap (45,878) 5,727 6,104 2,517 (31,530)
NOTES (continued)
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
47
26. CURRENCY RISK (CONTINUED)
Foreign exchange risk sensitivity
Thetablebelowsummarisestheeffectonpost-taxprofithadtheKenyaShillingweakenedby10%againsteachcurrency, with all other variables held constant. If the Kenya shilling strengthened against each currency, the effect would have been the opposite.
Year 2014 US $ GB £ Euros Others Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000Effectonprofit- increase/(decrease) (9,468) (62) 232 (2,662) (11,960) Year 2013 US $ GB £ Euros Others Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000Effectonprofit- increase/(decrease) (3,211) 401 427 176 (2,207)
NOTES (continued)
48
27.
INT
ER
ES
T R
AT
E R
ISK
TheBankisexposedtovariousrisksassociatedwiththeeffectsoffluctuationintheprevailinglevelsofmarketinterestratesonitsfinancialposition
andcashflow
s.Them
anagem
entcloselymonitorstheinterestratetrendstom
inimisethepotentialadverseimpactofinterestratechanges.The
tabl
e be
low
sum
mar
ises
the
expo
sure
to in
tere
st r
ate
risk
at th
e re
port
ing
date
. Inc
lude
d in
the
tabl
e ar
e th
e as
sets
and
liab
ilitie
s at
car
ryin
g am
ount
s,
categorisedbytheearlierofcontractualrepricingorm
aturitydates.TheBankdoesnothaveanyderivativefinancialinstrum
ents.TheBankdoes
not b
ear
any
inte
rest
rat
e ris
k on
off
bala
nce
shee
t ite
ms.
NOTES (continued)
U
pto
3
- 6
6 -
12
1 -
3 O
ver
No
n in
tere
st
3 m
on
ths
mo
nth
s m
on
ths
year
s 3
year
s b
eari
ng
To
tal
AT
31
DE
CE
MB
ER
201
4 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
A
SS
ET
S
Cas
h in
han
d -
- -
- -
307,
935
307,
935
Bal
ance
s w
ith C
entr
al B
ank
of K
enya
-
- -
- -
2,71
3,51
9 2,
713,
519
Gov
ernm
ent s
ecur
ities
-
- 19
,573
3,
543,
399
24,2
22,6
45
694,
882
28,4
80,5
00
Pla
cem
ents
with
and
loan
s an
d ad
vanc
es to
ot
her
bank
ing
inst
itutio
ns
1,09
1,14
8 -
- -
- 10
3,81
7 1,
194,
965
Oth
er a
sset
s -
- -
- -
377,
622
377,
622
Loan
s an
d ad
vanc
es to
cus
tom
ers
16,3
91,7
64
392,
918
916,
416
3,81
2,84
7 5,
810,
281
1,06
4,62
6 28
,388
,852
In
vest
men
t pro
pert
ies
- -
- -
- 23
,522
23
,522
O
ther
inve
stm
ents
-
-
-
- 18
4,32
8 21
,834
20
6,16
2 In
tang
ible
ass
ets
-
-
-
- -
4,89
6 4,
896
Pro
pert
y an
d eq
uipm
ent
- -
- -
-
126,
928
126,
928
Def
erre
d ta
x -
- -
-
- 82
,573
82
,573
- -
- -
- 37
,176
37
,176
To
tal a
sset
s 1
7,48
2,91
2 39
2,91
8 93
5,98
9 7,
356,
246
30,2
17,2
54
5,55
9,33
0 61
,944
,650
LIA
BIL
ITIE
S A
ND
SH
AR
EH
OL
DE
RS
' EQ
UIT
Y
Cus
tom
er d
epos
its
28,0
79,9
91
9,21
2,89
0 5,
581,
534
943,
326
1,54
5,04
3 3,
320,
405
48,6
83,1
89
Dep
osits
due
to o
ther
ban
king
inst
itutio
ns
2,37
4,98
6 -
- -
- 66
1,36
4 3,
036,
350
Oth
er li
abili
ties
- -
- -
- 35
7,78
0 35
7,78
0 S
hare
hold
ers'
equ
ity
- -
- -
- 9,
867,
331
9,86
7,33
1
Tota
l lia
bili
ties
an
d s
har
eho
lder
s' e
qu
ity
30
,454
,977
9,
212,
890
5,58
1,53
4 94
3,32
6 1,
545,
043
14,2
06,8
80
61,9
44,6
50
Net
sta
tem
ent
of
fin
anci
al p
osi
tio
n in
tere
st
sen
siti
vity
gap
(1
2,97
2,06
5)
(8,8
19,9
72)
(4,6
45,5
45)
6,41
2,92
0 28
,672
,211
(8
,647
,550
) -
AT
31
DE
CE
MB
ER
201
3
To
tal a
sset
s 14
,565
,517
1,
059,
666
1,93
2,59
3 4,
486,
715
25,2
03,3
67
4,77
3,66
6 52
,021
,524
To
tal l
iabi
litie
s an
d sh
areh
olde
rs' e
quity
26
,249
,141
8,
404,
620
5,01
7,76
7 11
3,73
2 57
,665
12
,178
,599
52
,021
,524
On
bal
ance
sh
eet
inte
rest
sen
siti
vity
gap
(
11,6
83,6
24)
(7,3
44,9
54)
(3,0
85,1
74)
4,37
2,98
3 25
,145
,702
(7
,404
,933
) -
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
49
27. INTEREST RATE RISK ( CONTINUED) The table below summarises the effective interest rates calculated on a weighted average basis, by majorcurrenciesformonetaryfinancialassetsandliabilities: 2014 2013 Shs. US$ GB£ Euro Shs US $ GB£ Euro
% % % % % % % % Government securities 10.72 - - - 11.55 - - - Placementswithotherbankinginstitutions 8.24 - - - 12.30 - 0.60 - Loansandadvancestocustomers 17.49 7.94 7.34 - 18.94 7.45 7.72 5.66 Customer Deposits 7.79 - - - 7.77 - - - Borrowings from other banking institutions - 1.74 - - - 1.75 - - Interest rate risk sensitivity
At 31 December 2014, if the weighted average interest rates had been 10 percent higher with all other variables heldconstant,post-taxprofitfortheyearwouldhavebeenasfollows: 2014 2013 Shs Shs
Effectoninterestincome-increase 476,522 308,508 Effectoninterestexpense-(increase) (240,185) (284,492) Neteffectonprofitaftertax-increase 236,337 24,016 28. PRICE RISK SENSITIVITY
The Bank is exposed to price risk on quoted shares, corporate bonds and government securities because of investmentsthatareclassifiedonthestatementoffinancialpositionas‘Available-for-sale’. The table below summarises the impact on increase in the market price on the Bank’s equity net of tax. The analysis is based on the assumption that the market prices had increased by 5% with all other variables held constant and all the Banks equity instruments moved according to the historical correlation with the price: Impact on equity 2014 2013 Effectofincrease 489,597 498,079
29. LIQUIDITY RISK
Liquidity risk is the risk that theBank is unable tomeet its paymentobligationsassociatedwith its financialliabilities as they fall due and to replace funds when they are withdrawn.
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for Banks ever to be completely matched since business transacted isoftenofuncertaintermsandofdifferenttypes.Anunmatchedpositionpotentiallyenhancesprofitability,butcanalso increase the risk of losses. The maturity of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as they mature are important factors in assessing the liquidity of the Bank and its exposure to changes in interest and exchange rates.
The Bank does not maintain cash resources to meet all liabilities as they fall due as experience shows that a minimum level of reinvestment of maturing funds can be predicted with high level of certainty. The management has set limits on the minimum portion of maturing funds available to meet such withdrawals and on the level of interbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.Themanagementreviewsthematurityprofileonaweeklybasisandensuresthatsufficientliquidityismaintained to meet maturing deposits which substantially are generally rolled over into new deposits. The Bank fully complies with the Central Bank of Kenya’s minimum cash reserve ratio (5.25 %) and liquidity ratio (20 %) requirements, with the average liquidity maintained at 60.5% (2013: 60.6%) during the year.
NOTES (continued)
50
29. LIQUIDITY RISK (continued)
NOTES (continued)
The
tabl
e be
low
ana
lyse
s as
sets
and
liab
ilitie
s in
to th
e re
leva
nt m
atur
ity g
roup
ings
bas
ed o
n th
e re
mai
ning
per
iod
at th
e re
port
ing
date
to
the
cont
ract
ual m
atur
ity d
ate.
Up
to
3 -
6 6
- 12
1
- 3
Ove
r
3
mo
nth
m
on
ths
mo
nth
s ye
ars
3 ye
ars
Tota
lA
T 3
1 D
EC
EM
BE
R 2
014
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
AS
SE
TS
Cas
h in
han
d 30
7,93
5 -
- -
- 30
7,93
5 B
alan
ces
with
Cen
tral
Ban
k of
Ken
ya
1,90
8,16
3 47
3,78
8 -
330,
472
1,09
6 2,
713,
519
Gov
ernm
ent s
ecur
ities
36
4,40
8 52
2,53
6 20
,063
3,
632,
015
23,9
41,4
78
28,4
80,5
00
Pla
cem
ents
with
and
loan
s an
d ad
vanc
es to
ot
her
bank
ing
inst
itutio
ns
1,19
4,96
5 -
-
-
-
1,1
94,9
65
Oth
er a
sset
s 37
7,62
2 -
- -
- 37
7,62
2 Lo
ans
and
adva
nces
to c
usto
mer
s 16
,391
,764
39
2,91
8 91
6,41
6 3,
812,
847
6,87
4,90
7 28
,388
,852
Inve
stm
ent p
rope
rtie
s -
- -
- 23
,522
23
,522
Oth
er in
vest
men
ts
- -
- -
206,
162
206,
162
Inta
ngib
le a
sset
s -
- -
- 4,
896
4,89
6P
rope
rty
and
equi
pmen
t -
- -
- 12
6,92
8 12
6,92
8D
efer
red
tax
- -
- -
82,5
73
82,5
73Ta
x re
cove
rabl
e -
37
,176
-
- -
37,1
76
Tota
l ass
ets
20,
544,
857
1
,426
,418
9
36,4
79
7,7
75,3
34
31,
261,
562
6
1,94
4,65
0
LIA
BIL
ITIE
S A
ND
SH
AR
EH
OL
DE
RS
' EQ
UIT
Y
Cus
tom
er d
epos
its
31,4
00,3
96
9,21
2,89
0 5,
581,
534
943,
326
1,54
5,04
3 48
,683
,189
Dep
osits
due
to o
ther
ban
king
inst
itutio
ns
3,03
6,35
0 -
- -
- 3,
036,
350
Oth
er li
abili
ties
357,
780
- -
- -
357,
780
Sha
reho
lder
s' e
quity
-
188,
046
(86,
209)
-
9,76
5,49
4 9,
867,
331
Tota
l lia
bili
ties
an
d s
har
eho
lder
s' e
qu
ity
34,7
94,5
26
9,40
0,93
6 5,
495,
325
943,
326
11,3
10,5
37
61,9
44,6
50
Net
liq
uid
ity
gap
(1
4,24
9,66
9)
(7,9
74,5
18)
(4,5
58,8
46)
6,83
2,00
8 19
,951
,025
-
AT
31
DE
CE
MB
ER
201
3
To
tal a
sset
s 16
,832
,325
1,
517,
223
1,98
2,07
6 4,
767,
424
26,9
22,4
76
52,0
21,5
24To
tal l
iabi
litie
s an
d sh
areh
olde
rs' e
quity
30
,758
,724
8,
682,
670
4,67
1,82
3 11
3,73
2 7,
794,
575
52,0
21,5
24
Net
liq
uid
ity
gap
(
13,9
26,3
99)
(7,1
65,4
47)
(2,6
89,7
47)
4,65
3,69
2 19
,127
,901
-
Exp
erie
nce
indi
cate
s th
at c
usto
mer
dep
osits
are
mai
ntai
ned
for
long
er p
erio
ds th
an th
e co
ntra
ctua
l mat
urity
dat
es. T
he d
epos
it ba
se is
co
nsid
ered
to b
e of
a s
tabl
e an
d lo
ng te
rm n
atur
e.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
51
30. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES IntheopinionoftheDirectors,thefairvaluesoffinancialassetsandfinancialliabilitiesarenotmateriallydifferent
from their carrying values. 31. CAPITAL MANAGEMENT TheBank’sobjectiveswhenmanagingcapital,whichisabroaderconceptthanthe‘equity’onthefaceofthe
statementoffinancialposition,are: •TocomplywiththecapitalrequirementssetbytheCentralBankofKenya •TosafeguardtheBank’sabilitytocontinueasagoingconcernsothat itcancontinuetoprovidereturnsforshareholdersandbenefitsforotherstakeholders;and
•Tomaintainastrongcapitalbasetosupportthedevelopmentofitsbusiness.
The Bank monitors the adequacy of its capital using ratios established by Central Bank of Kenya. These ratios measure capital adequacy by comparing the Bank’s core capital with total risk-weighted assets plus risk weighed off-balance sheet items, total deposit liabilities and total risk-weighted off balance sheet items.
Credit Risk Weighted Assets
Assets are weighted according to broad categories of notional credit risk, being assigned a risk weighting according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50% and 100%) are applied. e.g. cash in hand (domestic and foreign), balances held with Central Bank of Kenya including securities issued by the Government of Kenya have a zero risk weighting, which means that no capital is required to support the holding of these assets. Property, plant and equipment carries a 100% risk weighting. Based on these guidelines it means that they must be supported by capital equal to 100% of the carrying amount.Other asset categories have intermediate weightings.
Off-balance sheet credit related commitments such as guarantees and acceptances, performance bonds, documentary credit etc., are taken into account by applying different categories of credit risk conversion factors, designedtoconverttheseitemsintostatementoffinancialpositionequivalents.Theresultingcreditequivalentamounts are thenweighted for credit risk using the same percentages as for statement of financial positionassets.Core capital (Tier 1) consists of paid-up share capital, retained profits less non-dealing investments.Supplementary capital (Tier 2) includes general provisions and non-dealing investments.
Market Risk Weighted Assets
This is the risk of loss in on and off balance sheet position arising from movement in market prices. These risks pertain to inherent risk related instruments in the trading book, commodities risk throughout the bank, equities risk and foreign exchange risk in the trading and banking books of the bank. Different risk weights are applied as per the Prudential Regulation.
Operational Risk Weighted Assets
This is the risk of loss resulting from inadequate or failed internal process, people or from external events. The operational risk is calculated using theBasic IndicatorApproach.Under this approach the capital charge foroperationalriskisafixedpercentageofaveragepositiveannualgrossincomeoftheinstitutionoverthepastthreeyears. Annual gross income is the sum of net interest income and net non interest income.
NOTES (continued)
52NOTES (continued)
31. CAPITAL MANAGEMENT (CONTINUED) Balance sheet - nominal values Risk weighted amount 2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Cash in hand 307,935 265,970 - - Balances with Central Bank of Kenya 2,713,519 2,131,439 - - Governmentsecurities 28,480,500 24,251,152 - - Placements with and loans and advances from otherbankinginstitutions 1,194,965 1,024,391 238,993 204,878 Other assets 377,622 271,336 377,622 271,336 Loansandadvancestocustomers 28,388,852 23,578,559 26,088,645 21,503,213 Investment properties 23,522 24,141 23,522 24,141 Other investments 206,162 264,693 206,162 264,693 Intangibleassets 4,896 3,759 4,896 3,759 Propertyandequipment 126,928 132,638 126,928 132,638 Deferredtax 82,573 73,446 82,573 73,446 Tax recoverable 37,176 - 37,176 - Total assets 61,944,650 52,021,524 27,186,517 22,478,104 Off balance sheet positions 6,335,664 7,376,213 4,018,004 4,450,232
TotalRiskWeightedAssets 68,280,314 59,397,737 31,204,521 26,928,336 Less:MarketRiskqualifyingAssets included in above (206,162) (264,693) (206,162) (264,693) AdjustedCreditRiskWeightedAssets 68,074,152 59,133,044 30,998,359 26,663,643
Market Risk
Interestrateriskcapitalcharge 310,502 332,178 3,881,275 4,152,223 Foreignexchangeriskcapitalcharge 991 3,422 12,389 42,783 Commodities risk capital charge - - - - Total market risk capital charge 311,493 335,600 3,893,664 4,195,006 Total market risk weighted assets 3,893,664 4,195,006 3,893,664 4,195,006
Operational risk
Netinterestincome -2013 3,044,384 - - - - 2012 2,147,779 - - - -2011 2,286,130 - - - Net non interest income - 2013 275,569 - - - - 2012 319,357 - - - - 2011 169,361 - - - Grossincome 8,242,580 - - - Average gross income 2,747,527 - 412,129 Total operational risk weighted assets 2,747,527 - 5,151,613 - Total risk weighted assets 74,715,343 - 40,043,636 -
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
53
31. CAPITAL MANAGEMENT (CONTINUED) Capital 2014 2013 Capital adequacy requirement calculation Shs’000 Shs ‘000 Tier1capital 9,324,068 7,414,171 Tier2capital 358,853 249,293 TotalCapital 9,682,921 7,663,464 Totaldepositliabilities 48,683,189 41,876,522 Risk weighted amounts for loans and advances to customers are stated net of impairment losses. These balances havealsobeenoffsetagainstfixeddepositsandshorttermdepositsplacedbycustomersassecurities.Thereis noborrowerwitheitherfundedornon-fundedfacilities,exceedingtwentyfivepercentofcorecapital. Actual ratios Minimum requirement 2014 2013 2014 2013 % % % % Corecapitaltototalriskweightedassets 23.28 20.90 10.5 10.5 Totalcapitaltototalriskweightedassets 24.18 21.60 14.5 14.5 Corecapitaltodepositliabilities 19.15 17.70 8.0 8.0
32. RELATED PARTY TRANSACTIONS
Included in loans and advances and customer deposits are amounts advanced to/received from certain Directors and companies in which Directors are involved either as shareholders or Directors (related companies). In addition, contingent liabilities (Note 24) include guarantees and letters of credit which have been issued to related companies.
The following transactions were carried out with related parties: 2014 2013 a) Interest received from loans and advances to: Shs’000 Shs’000 Directors Related companies 1,222 3,655 Seniormanagementemployees 162 80 other employees 10,125 9,495 11,509 13,230 b) Interest paid on deposits from: Directors 3,117 1,065 Relatedcompanies 6,794 4,816 Senior management employees 21 35 Other employees 333 251 10,265 6,167 c) Management fees paid Relatedcompanies 41,079 40,086
NOTES (continued)
54
32.
RE
LA
TE
D P
AR
TY
TR
AN
SA
CT
ION
S (
CO
NT
INU
ED
)
NOTES (continued)
Dir
ecto
rsco
mp
anie
sem
plo
yees
emp
loye
esO
ther
S
enio
r m
anag
emen
tR
elat
ed
20
14
2013
20
14
2013
20
14
2013
20
14
2013
d)
Ou
tsta
nd
ing
loan
s an
d a
dva
nce
s S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 A
t sta
rt o
f yea
r -
- 18
,106
31
,681
2,
128
1,86
1 13
9,79
7 12
5,63
8 A
dvan
ces
durin
g th
e ye
ar
- -
- 7,
130
1,00
0 2,
000
64,5
30
57,4
71
Inte
rest
cha
rged
-
- 1,
222
3,65
4 16
3 80
10
,125
9,
495
Rep
aym
ents
dur
ing
the
year
-
- (1
9,32
8)
(24,
359)
(9
69)
(1,8
13)
(43,
070)
(5
2,80
7)
At e
nd o
f yea
r -
- -
18,1
06
2,32
2 2,
128
171,
382
139,
797
The
loan
s an
d ad
vanc
es to
rel
ated
par
ties
are
perf
orm
ing
.
No
prov
isio
ns h
ave
been
rec
ogni
sed
in r
espe
ct o
f the
loan
s an
d ad
vanc
es to
Dire
ctor
s, r
elat
ed p
artie
s or
sta
ff as
they
are
per
form
ing
wel
l.
20
14
2013
20
14
2013
20
14
2013
20
14
2013
e) D
epo
sits
S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0 S
hs'
000
Sh
s'00
0
At s
tart
of y
ear
52,0
94
11,2
68
117,
674
167,
398
574
1,96
9 39
,924
22
,602
Dep
osits
rec
eive
d du
ring
the
year
10
7,37
7 16
1,09
7 1,
264,
754
1,02
5,95
1 33
,240
22
,131
38
9,56
2 28
,736
Inte
rest
pai
d du
ring
the
year
3,
117
1,06
5 6,
794
4,81
6 21
35
33
3 25
1W
ithdr
awal
s du
ring
the
year
(1
51,9
17)
(121
,336
) (1
,256
,070
) (1
,080
,491
) (3
1,94
9)
(23,
561)
(2
60,3
22)
(11,
665)
At e
nd o
f yea
r 10
,671
52
,094
13
3,15
2 11
7,67
4 1,
886
574
169,
497
39,9
24
D
irec
tors
com
pan
ies
emp
loye
esem
plo
yees
Oth
er
Sen
ior
man
agem
ent
Rel
ated
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
55NOTES (continued)
32. RELATED PARTY TRANSACTIONS (CONTINUED) f) Undrawn formal stand by facilities, credit lines 2014 2013 and other commitments to lend: Shs’000 Shs’000 Relatedcompanies - 16,648
g) Directors emoluments 2014 2013 Shs’000 Shs’000 -fees 890 1,010 -others 11,384 10,428 12,274 11,438
h) Key management personnel compensation Key management includes the directors and other members of key management. 2014 2013 Shs’000 Shs’000 Short-termemployeebenefits 47,491 42,982 Post-employmentbenefits 2,208 2,063 49,699 45,045 All transactions with related parties were at arms length and at terms and conditions similar to those offered to othermajorcustomers. 33. PRESENTATION CURRENCY ThefinancialstatementsarepresentedintothenearestthousandKenyaShillings(Shs’000).
56Appendix I
SCHEDULEOFOTHEROPERATINGEXPENDITURE 2014 2013 1. STAFF COSTS Shs’000 Shs’000 Leavebenefits 4,657 6,122 Pensionfundcontributions 17,872 17,292 Salariesandwages 307,110 290,986 Fringebenefittax 875 779 Staffandotherexpenses 42,369 30,822 Staff housing 20,663 17,154 Staff medical 19,141 14,906 Stafftraining 181 252 Total staff costs 412,868 378,313 2. ADMINISTRATIVE EXPENSES Advertising 15,579 15,139 Broker commissions - 2,123 Computerexpenses 18,661 13,721 Donationsandfines 2,012 375 Subscriptionsandperiodicals 1,406 4,285 Entertainment 3,721 2,684 Legalandprofessionalfees 59,169 41,841 Miscellaneous 20,651 22,200 Postages,telephones,telexandfax 4,782 5,999 Printing and stationery 12,750 9,576 Secretarial fees 195 177 Insurance 12,721 10,046 Travelling and motor vehicle 11,797 12,090 Total administrative expenses 163,444 140,256 3 OPERATING EXPENSES Electricityandwater 18,381 10,219 Insurance 451 734 Licences 2,654 2,747 Officecleaning 5,395 4,219 Repairsandmaintenance 31,895 30,116 Total operating expenses 58,776 48,035
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
57Appendix II
SCHEDULEOFOTHEROPERATINGEXPENDITURE
OTHER DISCLOSURES 2014 2013 Kshs “000” Kshs “000” 1 NON-PERFORMING LOANS AND ADVANCES a) GrossNon-performingloansandadvances 1,064,626 598,364b) LessInterestinSuspense 118,746 73,204c) TotalNon-PerformingLoansandAdvances(a-b) 945,880 525,160d) LessLoanLossProvision 494,625 415,909e) NetNon-PerformingLoansandAdvances(c-d) 451,255 109,251f) DiscountedValueofSecurities 451,255 109,251g) Net NPLs Exposure (e-f) - - 2 INSIDER LOANS AND ADVANCES h) Directors,ShareholdersandAssociates - 18,106i) Employees 171,382 141,924j) TotalInsiderLoansandAdvancesandotherfacilities 171,382 160,030 3 OFF-BALANCE SHEET ITEMS a) Lettersofcredit,guarantees,acceptances 5,280,529 6,293,452b) Forwards, swaps and options 235,709 117,015 b) Othercontingentliabilities 819,425 965,746c) TotalContingentLiabilities 6,335,663 7,376,213 4 CAPITAL STRENGTH a) Corecapital 9,324,068 7,414,171b) Minimum Statutory Capital 1,000,000 1,000,000 c) Excess(a-b) 8,324,068 6,414,171d) SupplementaryCapital 358,853 249,293e) TotalCapital(a+d) 9,682,921 7,663,464f) Totalriskweightedassets 40,043,636 35,458,332g) CoreCapital/TotaldepositsLiabilities 19.2% 17.7%h) MinimumstatutoryRatio 8.0% 8.0%i) Excess 11.2% 9.7%j) CoreCapital/totalriskweightedassets 23.3% 20.9%k) Minimum Statutory Ratio 10.5% 10.5%l) Excess(j-k) 12.8% 10.4%m) Total Capital/total risk weighted assets 24.2% 21.6%n) Minimum statutory Ratio 14.5% 14.5%o) Excess (m-n) 9.7% 7.1% 5 LIQUIDITY a) LiquidityRatio 60.5% 60.6%b) Minimum Statutory Ratio 20.0% 20.0%c) Excess (a-b) 40.5% 40.6%
58
Corporate Social Responsibility
Bank donated Kshs 1Million to “Beyond Zero” foundation. Bank Officials and Directors presenting the cheque to
Her Excellency Margaret Kenyatta, 1st Lady, Republic of Kenya recieving the cheque.
Bank donated 300 blankets to S.A. Thika Primary School for the Blind.
Mr. Yatish C. Tewari, Managing Director seen distributing the blankets.
Team Baroda at S.A. Thika Primary School for the Blind, on the occasion of distribution of blankets.
Mr. Yatish C. Tewari, Managing Director recieving the “Most Efficient Bank” award on the occasion of Banking
Awards 2015 organised by Think Business.
Award winning Team Baroda.
Shareholders and Board of Directors of the bank on the occasion of 22nd Annual General Meeting at Nairobi.
Proud Moments
Annual General Meeting 2014
Appendix III - Financial Highlights
4,744 4,936
5,758
7,569
9,867
- 500
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 9,000 9,500
10,000
2010 2011 2012 2013 2014
Ksh
s. in
Mill
ion
s
Shareholders' Fund
32,332 36,701
46,138
52,022
61,945
- 5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000
2010 2011 2012 2013 2014 K
shs.
in M
illio
ns
Total Assets
25,600 30,264
38,382 41,877
48,683
13,830 19,738 22,353 24,068
29,002
2010 2011 2012 2013 2014
Business Volume _ Kshs. Millions
Deposits Advances
252.76
306.76
359.38 399.66
462.41
- 50
100 150 200 250 300 350 400 450 500
2010 2011 2012 2013 2014
Ksh
s. in
Mill
ion
s
Business Per Employee
1,393 1,364 1,376
2,040 2,217 1,883 1,876
1,675
2,577 2,780
2010 2011 2012 2013 2014
Profitability _ Kshs. Millions
Net Profit Operating Profit
95.86 99.74 116.36
152.95
199.40
- 10 20 30 40 50 60 70 80 90
100 110 120 130 140 150 160 170 180 190 200
2010 2011 2012 2013 2014
Bo
ok
Val
ue
in K
shs.
Book Value Per Share
FINANCIAL STATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
59
Corporate Social Responsibility
Bank donated Kshs 1Million to “Beyond Zero” foundation. Bank Officials and Directors presenting the cheque to
Her Excellency Margaret Kenyatta, 1st Lady, Republic of Kenya.
Bank donated 300 blankets to S.A. Thika Primary School for the Blind.
Mr. Yatish C. Tewari, Managing Director seen distributing the blankets.
Team Baroda at S.A. Thika Primary School for the Blind, on the occasion of distribution of blankets.
Mr. Yatish C. Tewari, Managing Director recieving the “Most Efficient Bank” award on the occasion of Banking
Awards 2015 organised by Think Business.
Award winning Team Baroda.
Shareholders and Board of Directors of the bank on the occasion of 22nd Annual General Meeting at Nairobi.
Proud Moments
Annual General Meeting 2014
PHOTO GALLERY
60
Opening of Meru Branch
Bank’s 11th branch at Meru opened on 27th June 2014.Hon. Abdul Rahim Dawood (MP, North Imenti
Constituency) cutting the ribbon, while Mr. Yatish C. Tewari, Managing Director, shareholders and members
of staff look on.
Staff members of newly opened Meru branch with Mr. Yatish C. Tewari, Managing Director and
officials of Head Office.
Bank paid tribute to the victims of Westgate attack on its 1st anniversary at Amani Garden, Karura Forest, Nairobi.
Digo Road branch, Mombasa relocated to a new State-of-Art premises at Kizingo Area, Mombasa. Mr Ramesh Kumar, Assistant High Commissioner
India, Mombasa cutting the ribbon while Mr. Yatish C. Tewari, Managing Director and Mr Vikram C. Kanji,
Director look on.
An internal view of the State-of-Art branch premises of Digo Road Branch, Mombasa.
Relocation of Digo Road Branch
Chairman’s Visit
Tribute to Westgate Victims
Mr. Ranjan Dhawan, Chairman, meeting the members of staff at Head Office, Nairobi.
PHOTOGALLERY(continued)
“Te
am
Ba
rod
a”
Tog
eth
er
we
ca
n..
. To
ge
the
r w
e w
ill..
.
FINANCIALSTATEMENTS
Annual Report and Financial Statementsfor the Year Ended 31 December 2014
61
Opening of Meru Branch
Bank’s 11th branch at Meru opened on 27th June 2014.Hon. Abdul Rahim Dawood (MP, North Imenti
Constituency) cutting the ribbon, while Mr. Yatish C. Tewari, Managing Director, shareholders and members
of staff look on.
Staff members of newly opened Meru branch with Mr. Yatish C. Tewari, Managing Director and
officials of Head Office.
Bank paid tribute to the victims of Westgate attack on its 1st anniversary at Amani Garden, Karura Forest, Nairobi.
Digo Road branch, Mombasa relocated to a new State-of-Art premises at Kizingo Area, Mombasa. Mr Ramesh Kumar, Assistant High Commissioner
India, Mombasa cutting the ribbon while Mr. Yatish C. Tewari, Managing Director and Mr Vikram C. Kanji,
Director look on.
An internal view of the State-of-Art branch premises of Digo Road Branch, Mombasa.
Relocation of Digo Road Branch
Chairman’s Visit
Tribute to Westgate Victims
Mr. Ranjan Dhawan, Chairman, meeting the members of staff at Head Office, Nairobi.
“Te
am
Ba
rod
a”
Tog
eth
er
we
ca
n..
. To
ge
the
r w
e w
ill..
.
62NOTES