annual report | 2016 - universal merchant bank annual report.pdf · 4 universal merchant bank |...

A N N U A L R E P O R T | 2 0 1 6

UNIVERSAL MERCHANT BANK | 2016 Annual Report 3

Table of Contents

Notice of Annual General Meeting 4

Financial Highlights 5

Corporate Information 6

Corporate Profile 7

Report from Directors 8

Corporate Governance 10

Board of Directors 14

Management 20

Report from the Chairperson 24

Report from the Chief Executive Officer 26

Year in Review 30

Independent Auditor’s Report 36

Financial Statements 38-43

Notes to the Financial Statements 44-94

Resolutions 96

Proxy Form 97

UNIVERSAL MERCHANT BANK | 2016 Annual Report4

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that, the 43rd Annual General Meeting of Universal Merchant Bank Limited will be held at the Movenpick Ambassador Hotel, Accra on, Thursday 27th April, 2017 at 10.00 a.m. to transact the following businesses:

AgendaOrdinary Business

1. To receive the Chairpersons’ report.

2. To receive the Chief Executive Officers’ report.

3. To receive and consider for adoption the reports of the Directors and Auditors, and the Financial Statements of the Company for the year ended 31st December, 2016.

4. To confirm the appointment of two new (additional) Directors.

5. To declare a dividend.

6. To authorise the Directors to determine/fix the fees of the auditors for the 2017 audit.

7. To authorise the Company to determine Director’s Fees.

Dated at Accra this 29th day of March, 2017.By Order of the Board,

SignedBRENDA SEMEVO AFARI (MRS.)COMPANY SECRETARY

NOTES:1. A member entitled to attend and vote at the Annual General Meeting may appoint a Proxy to attend and vote on its’ behalf.

Such a Proxy need not be a Member of the Bank

2. A copy of the instrument appointing a Proxy may be deposited at the registered office of the Bank, located at SSNIT Emporium, Airport City, Liberation Road, Accra, at any time prior to the commencement of the meeting in accordance with Regulation 55(3) of the Regulations of the Bank.


Financial Highlights

2016 GH¢ ‘000

2015 GH¢ ‘000

At 31 December

Total Assets 2,789,941 1,418,366

Loans and Advances to Customers 752,906 640,093

Deposits from Customers 1,406,009 898,220

Shareholders’ Fund 164,627 145,295

Investment Securities 663,331 257,332

For the Year Ended 31 December

Profit/(loss) Before Tax 27,387 (7,558)

Profit/(loss) After Tax 20,444 (5,766)

Dividend per Share (Ghana pesewas): - -

Earnings per Share (Ghana pesewas):

- Basic 0.00353 (0.0020)

- Diluted 0.00353 (0.0020)

Return on Equity (%) 12.41% (3.97%)

Return on Assets (%) 0.73% (0.41%)

At 31 December

Number of Staff 466 430

Number of Branches 32 28

Number of ATMs 55 56

All amounts disclosed are those of the Bank


Corporate Information

Directors Mrs. Elizabeth Zormelo Chairperson

Mr. John Awuah Chief Executive Officer

Mr. Menson Torkornoo Non Executive Director

Mr. Mawuli Hedo Non Executive Director

Dr. Alhassan Iddrisu Non Executive Director

Mr. William Ofei-Quartey Non Executive Director

Mr. Joseph Tackie Non Executive Director

Mr. Ras Boateng Non Executive Director

Mr. Ken Tshribi Non Executive Director

Mr. Kwame Adjei-Adjivonh Executive Director (appointed 30/03/2016)

Mr. Benjamin Amenumey Executive Director (appointed 30/03/2016)

Secretary Mrs. Brenda Semevo Afari SSNIT Emporium Liberation Road, Airport City P. O. Box GP 401 Accra

Auditor KPMG Chartered Accountants13 Yiyiwa Drive, AbelenkpeP. O. Box GP 242, Accra

Registered Office SSNIT EmporiumLiberation Road, Airport City P. O. Box GP 401, Accra


Corporate ProfileCorporate Headquarters: SSNIT Emporium Building, Liberation Road, Airport City, Accra-Ghana

Postal Address: P. O. Box GP 401, Accra, Ghana

Tel: 0302 666 331

Toll-Free Lines: MTN 0800 -100880; Airtel and Vodafone 0800 -10088; Other Lines 0302633988

Email: [email protected]

Facebook: www.facebook.com/myumbbank

Twitter: www.twitter.com/myumbbank

LinkedIn: www.linkedin.com/company/universal-merchant-bank Universal Merchant Bank (UMB) is a full-service financial institution specializing in customized banking products and services. Opened on March 15, 1972, UMB is a leading Ghanaian indigenous bank with considerable financial expertise. Through our Corporate, Business, Private, Personal and Internet Banking departments we are able to adequately address the financial needs of various segments of the market. Furthermore, our Trade, Treasury and Credit departments complement our broad range of financial services with their unique and innovative banking products. Additionally, with 31 branches across Ghana, 2 UMB Centre for Businesses in Kumasi and Accra and a vast ATM network, UMB makes banking easy and accessible.

MissionTo lead, create and professionally provide a wide range of innovative and superior banking services that guarantee returns exceeding stakeholders’ expectations.

VisionUMB aspires to be positioned as a leading Ghanaian Bank and a leader in innovative banking solutions by 2020.

Core ValuesSpeedPassionExcellenceEthicsDiligence

Board of DirectorsBoard Chairperson, Mrs. Elizabeth Zormelo

Mr. John Awuah

Mr. Benjamin Amenumey

Mr. Kwame Adjei-Adjivonh

Mr. Ras Boateng

Mr. Mawuli Hedo

Dr. Alhassan Iddrisu

Mr. William Ofei - Quartey

Mr. Joseph Tackie

Mr. Menson Torkornoo

Mr. Ken Tshribi

Company Secretary, Mrs. Brenda Semevo Afari


Report of the Directors

The Directors present their report and the financial statements of Universal Merchant Bank (“the Bank”) for the year ended 31 December 2016.

Directors’ Responsibility StatementThe Directors are responsible for the preparation of financial statements that give a true and fair view of Universal Merchant Bank Limited, comprising the statement of financial position at 31 December 2016, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738). In addition, the Directors are responsible for the preparation of the Directors’ report.

The Directors are also responsible for such internal controls as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

The Directors have made an assessment of the ability of the company to continue as a going concern and have no reason to believe that the business will not be a going concern in the year ahead.

The Auditor is responsible for reporting on whether the financial statements give a true and fair view in accordance with the applicable financial reporting framework and relevant laws.

Principal ActivitiesThe Bank has a universal license which entitles it to undertake the business of banking. There was no change in the nature of the Bank’s business during the year.

Parent CompanyThe Bank is a subsidiary of Fortiz Private Equity Fund limited, a company incorporated in Ghana.

Subsidiaries and AssociatesMerban Properties Limited is wholly-owned by the Bank and remained its subsidiary at the reporting date. This company has, however, been dormant for a number of years.

The Bank has 25% interest in the following Companies which made them its associates at the reporting date

• UMB Investment Holdings Limited (UMBIHL)• UMB Stockbrokers Limited (UMBSL)• Strategic Debt solutions Limited (SDSL) originally Merban

Asset Recovery Trust (MART)

Directors’ Interest None of the Directors had any interest in the shares of the Bank at the reporting date.

None of the Directors had a material interest in any contract of significance except a contract of service in the normal course of business with Executive Directors.

Auditors The Directors recommend that KPMG continue in office, in accordance with Section 134(5) of the Companies Act, 1963 (Act 179). This recommendation is subject to the approval of the shareholders at the next annual general meeting.


In accordance with section 29 (b) of the Banking Act, 2004 Act 673 as amended, an amount of GH¢ 10.4m was transferred to the statutory reserve fund from net profit for the year in 2016 (2015: Nil).

DividendThe Directors cannot declare dividend whiles there remain a deficit on the income surplus account.

The Directors confirm that to the best of their knowledge:

• the financial statements which have been prepared in accordance with applicable laws and the Bank’s financial reporting framework, give a true and fair view of the Bank’s financial position, performance and cash flows and

• the state of the Bank’s affairs is satisfactory.

Financial ResultsThe Bank’s results for the year are summarised as follows:

Note2016

GH¢ ‘0002015

GH¢ ‘000

Total Revenue 196,334 154,000

Profit/(loss) Before Tax 27,387 (7,558)

from which is added/(deducted):

Share of Associate’s profit/(loss) 87 (8)

Tax Expense 17a (7,030) 1,800

Resulting in profit/(loss) after tax of 20,444 (5,766)

Add or deduct:

reversal of deferred tax on fair value reserves - 2,101

reversal of revaluation on disposal and - 22,569

deduction of deficit brought forward from the previous year of (108,820) (121,721)

Resulting in a total deficiton the income surplus account of (88,376) (102,817)

less transfers to credit risk reserve of 35 (28,942) (6,003)

less transfers to statutory reserve fund of 36 (10,384) -

leaving a net deficit on the income surplus account of (127,702) (108,820)

Approval of the Financial StatementsThe financial statements were approved by the Board of Directors on 29 March 2017 and signed on their behalf by:

John Awuah Elizabeth Zormelo C.E.O. Chairperson


Corporate GovernanceThe Directors of the Bank respect and are committed to the principles of good corporate governance. To ensure effective control and monitoring of the Bank’s business, the Board has five (5) committees namely: Credit Committee, Audit & Compliance Committee, Human Resource, Institutional Renewal and Legal Committee, Risk Management Committee, Strategy, Finance and Capital Management Committee . The responsibilities of the relevant committees are set out below:

The Credit CommitteeThe Board of Directors has the overall responsibility for credit policy and management of the Bank.

ResponsibilitiesThe Board of Directors remains the ultimate credit approval level in the Bank and has the responsibility to

• review and approve the Bank’s credit policy manual

• review and monitor quality of loan portfolio

• review exposure policy and other indicators.

• approve all loans above US$ 5,000,000 or its equivalent.

• approve all related party transactions i.e. the Bank’s transactions with Directors and their spouses, children and close family members, shareholders and key management staff.

• approve loans to Politically Exposed Persons (PEP) .

However, to improve the credit delivery process at Board level and ensure effective credit governance is in place, a Credit Committee has been set up with the following responsibilities:

• approve loans whose value is more than US$ 2,500,000 or its equivalent but less than or equal to US$ 5,000,000 or its equivalent.

• review of loan portfolio on quarterly basis.

• make recommendations to the Board on all credit policy and delivery matters.

Membership • Three (3) or more Non- Executive Directors as determined by

the Board and the Chief Executive Officer.

• Chief Operating Officer, Head of Corporate Banking and/or Head of Retail, Head of Enterprise Risk are to be in attendance of meetings.

The Audit & Compliance CommitteeThe Audit and Compliance Committee supervises and monitors all audit and compliance matters. It provides direct supervision over the Bank’s operations.

ResponsibilitiesThe responsibilities of the Audit and Compliance Committee are as follows:

• approve the Internal Audit plan for the year.

• propose to the Board of Directors the appointment of independent External Auditors and make recommendations for their fees.

• evaluate the effectiveness of Internal Control Systems and analyse periodic information on such systems.

• review procurement policies and practices for the Bank’s own expenditures.

• evaluate the results of work performed by the External Auditors

• examine the process of preparation of annual and interim financial statements on the basis of reports provided by those responsible for the related function at least once a year.

• evaluate potential findings arising from the Bank’s Internal Audit function or from other third parties’ examinations and/or investigations, in particular the inspection reports from the Bank of Ghana (BOG).

• evaluate the adequacy and effectiveness of the Bank’s procedures and systems for ensuring compliance with legal and regulatory requirements and internal policies.

• oversee procedures and internal controls consistent with the Bank’s corporate governance structure, including evaluating the work plans prepared by the Bank’s Compliance and Anti-Money Laundering Functions.

• meet at least twice in a year with the External Auditor to approve their audit plan and receive their final report respectively.

• maintain effective working relationships with the Board of Directors, management and the Internal and External Auditors.

Membership• The Audit and Compliance Committee is composed of three

(3) or more Non-Executive Directors as determined by the Board.

• The Chairman of the Audit and Compliance Committee will be selected by the Board of Directors from the members of the Audit and Compliance Committee.

• The Company Secretary of the Bank shall be the Secretary to the Audit and Compliance Committee.


Members of the Audit and Compliance Committee shall avoid placing themselves in any position of real or apparent conflict of interest, and in any such case shall notify the Chairman of the Committee (or the Committee as a whole, in the case when such member is the Chairman) and excuse themselves from participating in discussions or voting on such issues.

The Human Resource, Institutional Renewal & Legal CommitteeResponsibilitiesThis Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities in respect of the formulation, review and provision of guidance to the Bank on all Human Resource, legal, and Organisational matters.

The Committee shall:

• review recruitment and selection policy, procedures and integrity of same.

• ensure selection in both execution and result/impact propels the vision and strategy of the Bank.

• ensure the Bank is fully compliant with all relevant aspects of the Labour Law.

• ensure placement and orientation policies are in place.

• ensure performance management systems are in place to provide adequate guidance for employee task behaviours, brand behaviours and values demonstration and thus build a performance culture that facilitates/feeds into appropriate people management.

• ensure policies regarding training and development are in place to facilitate sound competencies and succession across all the Bank’s operations.

• review and ensure sound compensation policy and benefits regime that takes account of affordability, market trends, staff and company performance in a manner that enables the Bank to attract and retain best performers.

• provide for sound termination and exit policy and arrangements.

• provide general guidance to the Board and also to management on all human resource issues.

• be the initial point of review for all Human Resource related appeals and petitions and guide the Board on all possible appellate matters.

• recommend to the Board for approval HR plans, establishment and training and development strategy for the year.

• recommend to the Board for approval all Human Resource and Organizational structure issues and attend to any matters referred to it by the Board and its other Sub Committees.

MembershipThe Human Resource Committee shall be comprised of three (3) or more Non- Executive Directors as determined by the Board and the Chief Executive Officer. Membership of the HR Committee - including a Chairman, shall be appointed by the Board of Directors.

The Risk Management CommitteeThe Risk Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities in respect of:

• The risks inherent in the business of the Bank and the control processes with respect to such risks.

• The risk profile of the Bank.

• The risk management activities of the Bank.

• Information Technology governance and its operations in the Bank.

ResponsibilitiesThe Risk Committee shall:

• review the risk appetite of the Bank on the basis of the analysis from the Head/Enterprise Risk and formulate appropriate policies for its implementation.

• approve the credit rating system used by the Bank and the basic policies for asset and liability management as developed by the Assets and Liabilities Committee (ALCO).

• review significant financial and other risk exposures and the steps management has taken to monitor, control and report such exposures, including, without limitation, review of credit, market, liquidity, reputation, operational, fraud and strategic risks and evaluate risk exposure and tolerance and approve appropriate transaction or trading limits.

• review the scope of the work of the risk department and their planned activities with respect to the risk management activities of the Bank.

• review reports and significant findings identified by the risk department with respect to the risk management activities of the Bank, together with management’s responses and follow-up to these reports.

• review significant reports from regulatory agencies relating to risk issues and management responses.

• review the activities of the internal Information Technology governance framework and/or CORBIT and its operations in the Bank.

• attend to any matters referred to it by the Board and its other Sub-Committees.

• review and re-assess the adequacy of these terms of reference periodically and recommend changes to the Board when necessary.


Membership The Risk Committee shall be comprised of three (3) or more Non-Executive Directors as determined by the Board and the Chief Executive Officer. Risk Committee members, including a Chairman, shall be appointed by the Board of Directors.

The Strategy, Finance and Capital Management Committee The Committee shall oversee, review, develop, recommend and report to the Board on issues related to the analysis of the financial performance and capital management of the Bank.

Responsibilities The Committee shall:

• ensure that there are processes in place for the development of an annual operating budget.

• review and recommend to the Board financial assumptions used to develop operating budget and the strategic plan.

• review and recommend to the Board annual operating plan and budget.

• review the quarterly financial performance of the Bank and compare actual performance against budget.

• review and recommend to the Board plans developed by management to address variances between budget and actual performance, revenues and forecasts.

• monitor implementation of plans to address variances and report to the Board.

• review and monitor the Bank’s long term capital expenditure plan.

• ensure there are processes in place to manage the assets of the Bank effectively and efficiently.

• review and make recommendations concerning material asset acquisitions (software and hardware) that are or were not contemplated in the annual operating plan.

• review and provide recommendations to the Board.

• review and make recommendations to the Board concerning financial and banking transactions.

• consider the proposed strategic plan and its contents and recommendations before it is submitted to the Board for approval.

• after approval of the strategy, monitors the Bank’s performance vis a vis the strategy.

• receive reports from management, as required by the Board, on any new and significant emerging threats which may impact the Bank’s operations with a view to ensuring, where possible, that the Bank takes appropriate action to address those threats.

• receive reports from management on corporate performance with a view to ensuring that the Bank delivers its mandate in a consistent, effective and efficient manner.

• provide oversight of, and advise management on, any material change to the major element of its business as the Committee deems necessary.

• monitor the financial performance and the forecasts in the strategy and

• provide oversight, advise or make recommendations in accordance with the committee’s legislated mandate, with regard to any other issues that may arise requiring strategic consideration.

Membership The Committee shall be comprised of three non-executive Directors, the majority of whom should have experience in financial matters.

ResponsibilitiesThe Committee will, in accordance with the Bank’s approved Strategic Plan for the year, consider management’s proposals, provide oversight and advice to management and provide recommendations to the Board on matters relating to the Bank’s future direction which may include performing the following duties and responsibilities:

The Board Committees met regularly and submitted appropriate reports to the Board to facilitate its decisions.

Systems of Internal ControlThe Bank generally has effective systems of internal controls through which risks are identified, managed and monitored. These controls are designed to provide reasonable assurance of the appropriateness of controls to adequately address risks faced by the Bank. The corporate internal audit and compliance function of the Bank plays a key role in providing an objective view and continuing assessment of the effectiveness of the internal control systems. The systems of internal control are implemented and monitored by appropriately trained personnel with clearly defined duties and reporting lines.

Anti-Money LaunderingUMB maintained its focus on assessing, identifying and mitigating money laundering risks. The assessment included the annual review of the Bank’s branches, products and customers to guarantee that the necessary mechanisms are in place to mitigate emerging risks. The Bank continues to comply with the requirements of Ghana Anti-Money Laundering Act, Bank of Ghana guidelines on Anti-Money Laundering and the Financial Task Force recommendations.


Board of Directors

MRS. ELIZABETH ZORMELOBoard Chairperson

Mrs. Zormelo is the Executive Director of Zormelo & Associates, where she has been responsible for Human Resources Management Consulting for the past seven years.

Prior to this she occupied several Human Resource leadership roles in Barclays Bank both locally and at Pan African level for over nine years. She also worked as a Principal Consultant with Deloitte & Touche West Africa and with Network South East in the UK in different generalist Human Resource positions.

She qualified as a lawyer in 1988 after obtaining an LLB from the University of Ghana in 1986. She also holds a MSc. Economics from UCL, University of London and a Post Graduate Diploma in Human Resources from Thames Valley University, UK.

MR. JOHN AWUAHChief Executive Officer

Prior to joining UMB, Mr. John Awuah was the Chief Finance Officer and Director of Finance of GCB Bank Limited. He joined GCB from Ecobank Capital where he was the Group Chief Finance Officer and exercised leadership over the Finance Functions of Ghana, Nigeria, Cote d’Ivoire, Cameroon, Kenya and Zimbabwe.

He has had senior management experience with Barclays Bank of Ghana, United Bank for Africa Ghana Ltd. (UBA Ghana Ltd.) and Standard Chartered Bank Ghana Ltd. with industry exposure from Tractor & Equipment (now Mantrac Ghana) and Western Castings Ltd. in various capacities.

Mr. Awuah is a known subject matter expert on financial controls and governance in Ghana and has had many years of progressively responsible work experience in areas including Financial Control, Regulatory Reporting, Credit Control, Performance Management, Taxation, Market Risk Monitoring, Financial Accounting, Business Partnering, Business Analytics, Operational Risk and Corporate Strategy. He is a Fellow of the Association of Chartered Certified Accountants (UK) and a member of the Institute of Chartered Accountants (Ghana). He holds a Bachelor of Commerce degree from the University of Cape Coast (Ghana) with first class honors and MBA (with merit) from the Oxford Institute of International Finance – Oxford Brookes University (UK). He is the Board Chairman of Radiance Pharmacy and also the Advisory Board Chairman of ENS Africa, Ghana. He also serves on the Boards of Phoenix Life Assurance, UMB Foundation, UMB and Excel College.


MR. BENJAMIN AMENUMEYChief Operating Officer

Benjamin has been the Chief Operating Officer of UMB since the beginning of February, 2016.

Benjamin brings to the role his highly specialized knowledge of Banking Operations. He has over 21 years of experience in Banking Operations, Internal Control, Treasury and Treasury Operations.

He previously worked with Agricultural Development Bank and Barclays Bank Ghana Limited in various roles in Trade Services, Reconciliation, Remittances, SWIFT, Back Office Support, Treasury Operation, Operations Support for Consumer Banking, Corporate Banking, Payments, Cards Operations Unit, Cash Management Unit, and Treasury and Money markets activities, Properties and Procurement among others.

Board of Directors

MR. KWAME ADJEI-ADJIVONHChief Finance Officer

Kwame is the Chief Finance Officer of UMB. Prior to joining UMB, Kwame had exercised leadership roles in Portfolio Management, Internal Audit, Finance, Strategic Planning and Information Technology within the Reinsurance and the Investment Banking industries. Previously, he was the Head, Treasury and Investment at Ghana Reinsurance Company Ltd (Ghana Re), the leading reinsurer in Ghana with operational footprint across Africa. Prior to that, he served as the Head, Internal Audit, and also the Senior Manager, Finance. He joined Ghana Re from CDH Financial Holdings Ltd, where he led the strategic planning and Information Technology functions. Prior to that role, he served as the Head, Finance for the group where he exercised leadership over the Finance function for the Holding company and its subsidiaries. A Chartered Accountant and a Chartered Financial Analyst with over 18 years of experience, he holds a Bachelors of Arts degree in Economics with Statistics from the University of Ghana.


Board of Directors

MR. RAS BOATENGBoard Member

Mr. Ras A. Boateng, CFA is a top level professional with over twenty years of broad management experience in Insurance, Fund Management and Investment Banking.

Until May 2010, Ras was the Chief Executive Officer of the National Health Insurance Authority (NHIA) where he served as the key architect and builder of Africa’s first successful social health insurance program.

Prior to joining the NHIA, Ras had held other executive positions such as Deputy Director General (SSNIT -Ghana), Vice President and Director of Investments (Hanover Investments, Inc – USA), Vice President, Debt Capital Markets (Paine Webber Inc., USA), Actuarial Associate, Group Pension & Employee Benefit Services (Connecticut General life Insurance Company---CIGNA, USA).

Ras was educated at the Massachusetts Institute of Technology – MIT, where he earned an (MSc. Management with concentration in Finance and Applied Economics); (BSc. Industrial Engineering & Applied Mathematics); University of Illinois – Urbana Champaign (Post Graduate Certificate, Investment Analysis and Portfolio Management).

Ras was the first Ghanaian awarded the CFA Charter, he significantly influenced the selection of Accra as the sole CFA examination centre for West Africa and served on the CFA examination board as a grader of CFA professional examinations from 1997 until 2008. He co-chaired the National Bond Market Development Committee whose work culminated in recommendations to the Ghanaian government for sovereign credit rating, a global bond issue and a central securities depository (CSD) of the Ghana Stock Exchange. Ras serves as a Director on the Boards of Millennium Insurance Company, and Universal Merchant Bank.

He is a member of the Chartered Financial Analysts Institute and a member of the Boston Securities Analysts Society. Ras is an avid reader of history, philosophy and social development.

MR. MAWULI HEDOBoard Member

Mr. Mawuli Hedo is an Investment Banker and is currently the Chief Executive Officer of The FirstGroup Ghana Ltd.

FirstGroup is a Management Consultancy Firm and a Private Equity Company with investment concentration in Media, Finance and Banking, Insurance, Real Estate, ICT among others.

Prior to joining FirstGroup Ghana, Mawuli was the CEO of FirstBanC Financial Services, a leading Investment Banking Firm in Ghana. He worked with Strategic African Securities Finance Group prior to FirstBanC. He has been involved in many Corporate Finance deals on the Ghana Stock Exchange.

He led the team in the marketing of the first retail bond in Ghana; the Government of Ghana’s Golden Jubilee Bonds. The Marketing of the Bonds took him to the United Kingdom, (UK), USA, Germany, and Canada where the bonds were marketed to Ghanaians in the Diaspora.

In June 2008, Mawuli made a presentation to the members of Parliament at Ghana’s Parliament House to defend the need for raising local retail finance for developmental projects. Mawuli holds an MSc in Finance.


Board of Directors

MR. WILLIAM OFEI-QUARTEYBoard Member

Mr. William Ofei-Quartey is a specialized Investment Analyst with 14 years of increasing experience, exposure and responsibility.

He has experience in all the sectors of the Ghanaian Economy with special knowledge and experience in the Financial Industry.

He currently manages Government of Ghana Bonds held by Social Security and National Insurance Trust (SSNIT) and other Government loan facilities granted by the Trust.

Mr. Ofei-Quartey holds a bachelor’s degree in Economics and a Diploma in Education from the University of Cape Coast. He also holds an MBA in Accounting & Finance from the Maastricht School of Management in The Netherlands.

DR. ALHASSAN IDDRISUBoard Member

Dr. Alhassan Iddrisu is currently the Director of the Economic Research and Forecasting Division (ERFD) of the Ministry of Finance. Prior to this position, he headed the Real Sector Division (RSD) of the Ministry from 2010 to the first quarter of 2013 after heading the then Economic Planning Division (EPD) of the Ministry from 2008 to 2010.

Dr. Iddrisu, who is an economist with wide experience in economic policy and management, has played key roles in the management of the Ghanaian economy since he joined the Ministry in 1997. He has been instrumental in macroeconomic management, public financial management reforms in Ghana, in salary administration and reforms, in the preparation and implementation of the national budget, and in the management of petroleum revenues in Ghana’s nascent petroleum industry.

Dr. Iddrisu serves on several boards and committees, where his vast experience and knowledge in Economics are brought to bear on national development. He has also consulted for a number of local and international organizations and provided lecturing and facilitation services in the area of economic policy and management in reputable domestic and international institutions such as the University of Ghana, the Ghana Institute of Management and Public Administration (GIMPA) in Ghana, and the West African Institute for Financial and Economic Management (WAEFEM) in Nigeria.

Dr. Iddrisu holds a PhD and a Masters in International Development Studies from the National Graduate Institute for Policy Studies (GRIPS), Tokyo; a MPhil in Economics from the University of Ghana; and a BA in Economics and Statistics from the University of Ghana, Legon, Accra.


Board of Directors

MR. JOSEPH TACKIEBoard Member

Mr. Joseph Tackie has over 25 years of practical experience in working with the Private Sector and Small and Medium Scale Enterprises (SMEs) in Ghana and has a field based understanding of SME development and its role in enhancing livelihoods and the relevant macro-economic and international issues impinging on SME development.

Mr. Tackie is currently the CEO of the National Medium-Term Private Sector Development Strategy (PSDS II) having previously served as the Coordinator of the Trade Sector Support Programme (TSSP) and the Industrial Sector Support Programme (ISSP) at the Ministry of Trade and Industry.

He is the Chairman of the recently launched Ghana Commodity Exchange (GCX), member of the Board of Directors of the National Board for Small Scales Industries (NBSSI), member of the Steering Committees of the Ghana Skills and Technology Development Programme (GSTDP) and the Support to Private Sector Development Programme at the Royal Danish Embassy.

As an accomplished entrepreneur Mr. Tackie is the Founder and Chief Executive Officer of Global Entrepreneurship Solutions, Meaty Foods Limited, and Co-Founder and Executive Director of Small Business Development Foundation.

As a Business Consultant, Mr. Tackie had extensive engagement in consulting at O.I.M International B.V. (Cape Town, SA) in Organizational Structuring and Re-structuring, Strategic Human Resources Development, Development of Codes of Conduct and Monitoring Mechanisms, Leadership Training and Coaching amongst others.

Mr. Joe Tackie has tremendous experience in corporate governance and boardroom dynamics and serves on several Boards across industries.

He is an Adjunct Lecturer in Entrepreneurship Strategies at the Graduate Business School of the Central University College and has delivered several seminars and talks on Entrepreneurial Leadership and Innovation. He is a distinguished speaker at several international conferences.

Mr. Tackie is a Doctoral Candidate for Business Administration and Masters in Leading Innovation and Change and holds a B.Sc. (Hons) in Agriculture and Executive MBA in Entrepreneurial Management. He is a member of Ghana Association of Consultants.

MR. MENSON TORKORNOOBoard Member

Mr. Menson Torkornoo was the Managing Director and Chief Executive Officer of Amalgamated Bank Limited (now Bank of Africa, Ghana). Mr. Torkornoo was also the Deputy Managing Director prior to becoming the substantive Managing Director.

He joined Amalbank in June 2006 with over 10 years of banking experience as the Head of Foreign and International Operations at the then Oceanic Bank International PLC of Nigeria. Mr. Torkornoo had a stint with Stoy Hayward, Chartered Accountants, the 7th largest Accounting Firm in London for six months in 1989.

He is a Chartered Accountant (CA Ghana) and a Chartered Banker ACIB, Chartered Institute of Bankers, Nigeria (CIBN).

He also holds a Post Graduate Diploma in Management Sciences and MBA in Banking and Finance both at Enugu State University of Science and Technology in Nigeria. He is also a Fellow of the Board Room Institute (FBI).


MRS. BRENDA SEMEVO AFARICompany Secretary

Mrs. Brenda Semevo Afari joined Universal Merchant Bank in April 2015, after seven very successful years as Chief Legal Affairs and Corporate Governance Officer at the Forum for Agricultural Research in Africa, a technical arm of the African Union Commission responsible for implementing Pillar IV of the Comprehensive African Agriculture Development Program (CAADP Pillar IV).

She has considerable experience in the Ghanaian financial sector having worked with Standard Chartered Bank Ghana Limited for 4 years and for another three years with Awoonor Law Consultancy a reputable firm of Corporate and Investment Lawyers.

She has supported institutions in obtaining and administering loans and / or grants from financial institutions and international development organizations including the World Bank and European Union Commission and has facilitated the efficient running of Boards across the continent.

Brenda is a Lawyer with 15 years hands on experience in the general practice of law and corporate governance. Specialized areas of law include business/commercial, investment and corporate law, legal aspects of banking and finance and international non-profit organizations. Her work has taken her to over 15 countries in Africa and Europe.

She holds an LLM in Banking and Finance from the London School of Economics and Political Science, an LLB from the University of Ghana and GCE O and A Levels from Achimota School. She is also in the final stage of gaining membership to the Institute of Chartered Secretaries and Administrators, London UK and is a Chevening Scholar.

MR. KEN TSHRIBIBoard Member

Mr. Ken Tshribi is a seasoned Lawyer with considerable experience in the areas of corporate law, projects, banking, investments, international transactions, commercial, mining law, company secretarial as well as corporate ethics and compliance.

Ken obtained his qualification as a Solicitor and Barrister-at-Law in 1984 in Ghana. He is also a Solicitor of England and Wales. Ken spent 13 years in the banking industry where he played key roles as in-house counsel advising on corporate legal matters, financial structuring and transactions, syndicated financing and investments.

In 1996, Ken moved to the mining industry and played pivotal roles in the areas of cross-border transactions, projects, project finance, joint ventures, mergers and acquisitions, stock exchange issues, dispute resolution and cross-border mining rights issues. Ken was the global head of AngloGold Ashanti’s global regulatory compliance and corporate ethics based in Johannesburg, South Africa until October 2012.

Ken is a member of the Society of Corporate Compliance and Ethics. He was previously involved in teaching of law and legal journal editing.

Board of Directors

Management

MR. JOHN AWUAHChief Executive Officer

MR. BENJAMIN AMENUMEYChief Operating Officer

Prior to joining UMB, Mr. John Awuah was the Chief Finance Officer and Director of Finance of GCB Bank Limited. He joined GCB from Ecobank Capital where he was the Group Chief Finance Officer and exercised leadership over the Finance Functions of Ghana, Nigeria, Cote d’Ivoire, Cameroon, Kenya and Zimbabwe.

He has had senior management experience with Barclays Bank of Ghana, United Bank for Africa Ghana Ltd. (UBA Ghana Ltd.) and Standard Chartered Bank Ghana Ltd. with industry exposure from Tractor & Equipment (now Mantrac Ghana) and Western Castings Ltd. in various capacities.

Mr. Awuah is a known subject matter expert on financial controls and governance in Ghana and has had many years of progressively responsible work experience in areas including Financial Control, Regulatory Reporting, Credit Control, Performance Management, Taxation, Market Risk Monitoring, Financial Accounting, Business Partnering, Business Analytics, Operational Risk and Corporate Strategy. He is a Fellow of the Association of Chartered Certified Accountants (UK) and a member of the Institute of Chartered Accountants (Ghana). He holds a Bachelor of Commerce degree from the University of Cape Coast (Ghana) with first class honors and MBA (with merit) from the Oxford Institute of International Finance – Oxford Brookes University (UK). He is the Board Chairman of Radiance Pharmacy and also the Advisory Board Chairman of ENS Africa, Ghana. He also serves on the Boards of Phoenix Life Assurance, UMB Foundation, UMB and Excel College.

Benjamin has been the Chief Operating Officer of UMB since the beginning of February, 2016.

Benjamin brings to the role his highly specialized knowledge of Banking Operations. He has over 21 years of experience in Banking Operations, Internal Control, Treasury and Treasury Operations.

He previously worked with Agricultural Development Bank and Barclays Bank Ghana Limited in various roles in Trade Services, Reconciliation, Remittances, SWIFT, Back Office Support, Treasury Operation, Operations Support for Consumer Banking, Corporate Banking, Payments, Cards Operations Unit, Cash Management Unit, and Treasury and Money markets activities, Properties and Procurement among others.


MR. KWAME ADJEI-ADJIVONHChief Finance Officer

Kwame is the Chief Finance Officer of UMB. Prior to joining UMB, Kwame had exercised leadership roles in Portfolio Management, Internal Audit, Finance, Strategic Planning and Information Technology within the Reinsurance and the Investment Banking industries. Previously, he was the Head, Treasury and Investment at Ghana Reinsurance Company Ltd (Ghana Re), the leading reinsurer in Ghana with operational footprint across Africa. Prior to that, he served as the Head, Internal Audit, and also the Senior Manager, Finance. He joined Ghana Re from CDH Financial Holdings Ltd, where he led the strategic planning and Information Technology functions. Prior to that role, he served as the Head, Finance for the group where he exercised leadership over the Finance function for the Holding company and its subsidiaries. A Chartered Accountant and a Chartered Financial Analyst with over 18 years of experience, he holds a Bachelors of Arts degree in Economics with Statistics from the University of Ghana.

MRS. NELLY ABOTCHIEDirector, Corporate Banking

Nelly began her banking career with UMB in 1995. She re-joined the Bank in 2015 after working for several years at United Bank for Africa Ghana Limited. Nelly is a consummate banking professional with over 20 years of experience in corporate banking, retail banking and consumer banking. She holds a Bachelor of Arts degree in Sociology from the University of Ghana, Legon and an MBA in Marketing from the University of Ghana, Legon

Management

MRS. GIFTY AFUA SACKEYChief Internal Auditor

Gifty joined UMB from Stanbic Bank Ghana Limited. She previously worked with Guaranty Trust Bank as the Head of Internal Control, Department for Internal Development (DFID) as the Senior Regional Auditor for West Africa; Finance and Internal Audit Departments of Societe Generale Ghana Limited and KPMG as an Audit Senior.

She has over 16 years of demonstrable experience in Risk and Control Assessment, Fraud Investigations, Reporting, Training and Operational, financial and compliance related audits.

She is a Fellow of the Association of Certified Chartered Accountants (FCCA), a registered member of the IIA (Institute of Internal Auditors) and holds a Bachelor of Commerce Degree.


MR. KEVIN ADARKWAHDirector, Treasury

MR. FELIX K.A. DATEDirector, Enterprise Risk

Kevin joined UMB from Agricultural Development Bank where he worked as a Treasurer and had oversight of the Bank’s Treasury Business.

He previously worked with GFX Brokers Limited where he was Director, Institutional FX and also with Standard Chartered Bank where he rose through the ranks to Director, Head- Rates and Foreign Exchange Trading. Kevin brings to the role his highly specialized knowledge of treasury with a proven track record in revenue generation and growth, product implementation and risk management. He has over 21 years of experience in Treasury Management, Risks, Assets and Liability Management, Forex trading, cash instruments and financial market products.

Kevin is a Chartered Banker and he holds an EMBA. He is also part qualified with ACCA.

Felix joined UMB in 2015. He joined UMB from Barclays Bank Ghana Ltd, where he was until his appointment, the Head of Compliance. He has previously held the portfolio of Head of Credit Risk Control in the Global Shared Service Centre of Standard Chartered Bank (SCB), with responsibility for Ghana and 5 other West African Countries. He has also held previous roles in Coopers & Lybrand (now PricewaterhouseCoopers) and Western Telesystems Ghana Ltd (now Airtel Ghana). He has over 23 years of experience gained from working in multinational and international organizations in risk management, compliance, audit and accountancy. Felix is a Chartered Accountant, whose first degree is in Economics and Geography, from the Kwame Nkrumah University of Science and Technology. He is currently pursuing an International MBA programme with the Australian Institute of Business (AIB), Australia and he is a member of the Institute of Chartered Accountants, Ghana.

MR. KEVIN CAINDirector, Consumer and Business Banking

Kevin joined UMB in 2017. He is a seasoned banking professional with over 30 years of international consulting, banking and general management experience in over fifteen countries across Europe, the Middle East and Africa. He also has an enviable track record of executing successful SME and commercial banking initiatives.

Prior to joining UMB, Kevin was a consultant for the East African Development Bank in Uganda. He also completed a 3 year International Finance Corporation (IFC) sponsored project in Kenya where he served as the Resident Advisor to Bank of Africa and assisted in developing their SME business in Kenya, Uganda and Tanzania.

Kevin was also a member of the IFC team that carried out the diagnostic review of Fidelity Bank and Keystone Bank in Lagos, Nigeria. He was also the Head of Wholesale Banking of Doha Bank in Qatar and he is credited with setting up the very successful SME unit within Doha Bank.

Management


MR. ERNEST PASCAL GEMADZIEDirector, Legal

Ernest joined UMB in 2015 having worked with GN Bank Limited and Intercontinental Bank (now Access Bank Ghana Limited). He has over 15 years of experience as a Lawyer and over 7 years in Credit, Legal and Recovery issues. He holds a Bachelor of Law Degree (LLB) from the University of Ghana and a Barrister-At-Law Certificate (BL) from the Ghana School of Law. He also possesses a Postgraduate Diploma from the Institute of Social Studies (ISS)-The Netherlands and International Law Development Organizations, (IDLO), Italy.

MS. AKWELLEY ADOLEY BULLEYDirector, Human Resource

Akwelley joined UMB in 2016 from Agricultural Development Bank Ltd where she worked as Human Capital Management Executive and Executive Head, Human Resources. She has experience from Millicom Ghana Limited (Tigo) as Head of Human Resources, Holiday Inn as the Human Resources Manager and Cadbury Ghana Limited as the Human Resources Manager and the Employee Relations Manager.

She holds an MA in Employment Studies and Human Resource Management and a BA (Hons) in Psychology with Linguistics. A certified coach, she is also a member of the CIPD (UK) and a certified test administrator.

MS. YVONNE BOTCHEYDirector, Marketing and Communications

Yvonne, a multilingual legal and brand management professional with over 10 years of experience in North America, Europe and Africa, joined UMB in 2014. She is the successful founder of YYB Luxury Brand Consulting, and she previously worked at Eki Orleans in London and Chloé in Paris. She holds an MBA in International Luxury Brand Management from ESSEC Business School in Paris, France, a law degree from Harvard Law School in Cambridge, Massachusetts, United States and a Bachelor of Arts degree from McGill University in Montreal, Québec, Canada.

Management



Report from the Chairperson

Dear Shareholders,

It is my pleasure to present to you, the annual report and financial statements of your bank for the year ended December 31, 2016, a year in which UMB delivered strong results despite the macroeconomic challenges we experienced. This has been achieved as a result of the focus on our strategy, which supports our vision to become Ghana’s bank of choice by 2020. We proactively focused on identifying growth opportunities and enhancing the customer experience by providing ‘first in class’ service and ensuring that our employees exceeded the expectations of our customers wherever they were. I am proud to say that, this is what has resulted in turning the fortunes of the bank around and we expect to build on this in the coming years.

Operating EnvironmentGlobal growth remained sluggish in 2016 as global trade stalled, investment decelerated, and policy uncertainty increased. This is estimated to have slowed down by 3.1% in 2016, lower than the 3.2% recorded in 2015. The lethargic growth, largely, stemmed from weaker-than-anticipated growth in the United States and China as well as the negative market sentiments that crept up after the United Kingdom voted in favor of leaving the European Union.

Consequently, the predominantly commodity export-driven economies of sub-Saharan Africa experienced sharp slowdowns or recessions as lower commodity prices exacerbated the situation.

Ghana’s real GDP growth declined from 3.9% in 2015 to 3.6% in 2016. The growth rate recorded was below the government’s revised GDP growth target of 4.1%.

The inflation rate driven by non-food basket items remained high throughout 2016, ending the year with a rate of 15.4%. The

monetary policy rate remained unchanged at 26% throughout the year under review until November 2016 when the Central Bank reduced the rate by 50bps to 25.5% on the premise of a positive inflation outlook.

The Cedi remained relatively stable during this period depreciating by 9.6% by 31 December.

Financial PerformanceNotwithstanding the difficult operating environment, UMB’s total operating income surged from GHS 154m in 2015 to GHS 196.3m (+27.5% y/y). Profit before tax increased from a loss of GHS 7.6m in 2015 to a profit of GHS 27.4m; recording over 450% growth when compared with 2015. Our profit after tax increased from a loss of GHS 5.8m to a profit of GHS 20.4m. Shareholders’ funds increased from GHS 145.3min 2015 to GHS 164.6m in 2016, representing an increase of 13.3%. I believe that this forms a springboard from which we can achieve greater results in the coming years.

DividendThe Board of Directors have not recommended the declaration of dividend as the income surplus account remains in deficit. We believe this decision will pay off in the medium term, as profits are ploughed back to augment the working capital of the Bank. Shareholders, in our view, will be the primary beneficiaries of a profitable and competitive UMB.

Corporate GovernanceExpectations of Boards of banking institutions have increased post the global financial crisis, which make prudent and proactive corporate governance essential. UMB is committed to the principles of good corporate governance and sound

Mrs. Elizabeth ZormeloBoard Chairperson


risk management which are of fundamental importance in the banking business. As a Board we have worked through the Risk Management, Audit and Compliance Committees to ensure that we adhere to the regulatory framework and best practice to protect the bank’s license to do business. In the year under review two major Bills affecting the practice of Banking were passed into law; the new Banking Act for Banks and Specialised Deposit-Taking Institutions, 2016, Act 930 replaced the Banking Act, 2004, Act 673 and all subsequent amendments as contained in the Banking (Amendment) Act, 2007 Act 738, and the Ghana Deposit Protection Act, 2016, Act 931.

New Directors

During the period under review, we had two appointments to the Board. Mr. Kwame Adjei-Adjivonh, the Chief Finance Officer, and Mr. Benjamin Amenumey, the Chief Operating Officer, both joined the Board on March 30, 2016 as Executive Directors. Mr. Adjei-Adjivonh is a Chartered Accountant and a Chartered Financial Analyst with over 19 years of experience. He previously held leadership roles in Portfolio Management, Internal Audit, Finance, Strategic Planning and Information Technology within the Reinsurance and the Investment Banking industry. Prior to UMB, he was the Head of Treasury and Investment at Ghana Reinsurance Company Ltd. Mr. Amenumey, a Fellow of the Chartered Institute of Bankers, has over 22 years of experience in Banking Operations, Internal Control, Treasury and Treasury Operations. He previously worked with the Agricultural Development Bank and Barclays Bank Ghana Limited.

OutlookThe banking industry continues to be competitive with the addition of four more universal banks in 2017, bringing the total number of universal banks in Ghana to 34. Despite the competitive pressure, UMB remains confident in its long term plans and strategic priorities, innovative products and exceptional customer service. I am also confident in our management team and employees to consistently deliver excellent results in the coming years. We continue to develop our employees to meet the increasing challenges in this competitive environment. We also continue to streamline our operations to improve the speed with which we serve our valued customers while actively minimizing the risks we face.

I am also delighted to state that your Bank has partnered with the government through the Ministry of Trade and Industry to make its “One District, One Factory” goal, a reality through the PPP Incubator Centre. UMB has earmarked up to USD 100million to support this initiative.The Centre will not only be approving and advancing loans, but will also provide a range of services and technical support to applicants. Our goal is to develop relationships with these businesses to become structured, efficient, locally and globally competitive and sustainable.

This year, UMB celebrates its 45th anniversary, with the key theme of the year being “Enhancing Customer Experience”. For the year 2017 and beyond, UMB will further enhance customer service and position itself to be a leading Ghanaian Bank and a leader in innovative banking solutions. I am optimistic about the future of our Bank.

ConclusionFinally, on behalf of the Board of Directors, I wish to express our appreciation and gratitude to all of our customers and other stakeholders for their unrelenting support and encouragement. I also wish to express our gratitude to our employees without whose efforts we would not have achieved these results. I know we can count on your commitment and support as we continue this journey.

Thank you.


Report from the Chief Executive Officer

“The goal as a company is to have customer service that is not just the best but legendary.”~ Sam Walton, founder of Wal-Mart Stores, Inc.

IntroductionI am pleased to present to you, our shareholders, the 2016 financial performance of your Bank. The global economic environment in 2016 was very challenging. According to the World Bank, stagnant global trade, subdued investment, and heightened policy uncertainty characterised the global economy in 2016. According to the IMF’s World Economic Outlook (WEO), the global economic growth in 2016 declined to 3.1%, compared to the 3.2% recorded in 2015. This was largely attributed to the market uncertainties that prevailed as a result of perceived negative macroeconomic consequences of the “Brexit vote” and a general economic slowdown in China as well as in other major economies.

The Ghanaian economy was not extricated from the global phenomenon as the country recorded a real economic growth of 3.6%, the lowest in the past 26 years (according to IMF’s WEO database). The crisis on energy, fiscal imbalance, and high interest costs contributed significantly to this anaemic growth. Average inflation for the period under review was 17.5%, which was higher than the 17.1% recorded in 2015. Monetary policy response to the inflationary pressures remained hawkish as the benchmark policy rate remained at 26% until November 2016 when the Central bank reduced the rate by 50bps to 25.5%.

Mr. John AwuahChief Executive Officer

Developments in the Banking IndustryThe challenging macroeconomic environment impacted adversely on the industry during 2016, especially in the area of credit delivery despite the restructuring of the Volta River Authority (VRA) exposure to Banks and to some extent, the Bulk Oil Distribution Companies (BDCs) debts, which brought respite to the industry. Industry loans and advances grew nominally by 17.6% from GHS 30.1bn in 2015 to GHS 35.4bn in 2016. However, in terms of real growth, loans and advances grew marginally by 1.9%, which was significantly lower than the average real growth rate of 10.1% recorded over the last five years.

The industry’s Non-Performing Loan (NPL) ratio deteriorated from 14.7% in 2015 to 17.3% in 2016. This translated into non-performing loans of GHS 6.2bn in 2016, which was 40.9% higher than the GHS 4.4bn recorded in 2015.

Financial PerformanceConsidering the macroeconomic backdrop in which UMB operated, I am glad to announce that the Bank performed well as a result of our focus on delivering exceptional customer service. From a loss of GHS 7.6m recorded in 2015, your bank registered a profit before tax of GHS 27.4m in 2016. This was driven by a 43.9% growth in net interest income to GHS 143.1m. The growth in net interest income stemmed from a robust growth in interest earning assets, which increased 89.9% to GHS 1.7bn.

However, non-interest revenue declined 2.4% to GHS 53.3m due to a 44.1% decline in net trading income to GHS 17.1m, which was precipitated by a reduction in FX trading income on the back of lower than expected volatility in exchange rates.


Nonetheless, total operating income increased from GHS 154m in 2015 to GHS 196.3m (+27.5% y/y), which demonstrated the resilience of the business and the potency of the earnings capacity of your Bank. Despite the significant rising trend of the NPL ratios in the industry, our Bank bucked the trend with a marginal increase due to the improved risk assessment framework and enhancement of organisational risk culture at all levels. Thus, the Bank’s NPL ratio increased from 6.3% in 2015 to 10.6%, which was well below the industry’s ratio of 17.3%. Impairments also fell by 90.3% to GHS 11.2m as the effect of legacy NPLs waned in 2016.

Despite the macroeconomic backdrop, the bank grew its loan book by 17.6% to GHS 752.9m. I am elated to state that customer deposits increased from GHS 898.2m in 2015 to GHS 1.4bn (+56.5% y/y), recording one of the highest growth rates in the market.

Operational PerformanceWe began the year by rolling out our new core banking application, T24, in January 2016, to improve efficiencies in our service delivery and also to facilitate speed to adoption of emerging technologies. During the year, the Bank embarked on several strategic initiatives to improve our relationships with our clients. We expanded our footprint by opening the Sakaman, University of Ghana, and the University of Professional Studies (UPSA) branches. We launched the first UMB Centre for Businesses in Ashtown, Kumasi. The UMB Centre for Businesses offers specialized services to Small and Medium Scale Enterprises (SMEs). While a lot of organizations provide services to SMEs, we at UMB have taken the bold step of setting up a dedicated operational infrastructure outside of our normal banking operations to cater exclusively to the SME sector.

We also launched several new products including our Bancassurance product line with Phoenix Insurance Company Ltd, the UMB Salary Overdraft and three new VISA cards; the VISA Prepaid Card, the VISA Business Card for our SME and Corporate customers and the VISA Platinum Card for members of our Private Banking unit, the Prominence Club.

As a bank that is determined to be a leader in technological innovations in the industry, we also established a state of the art mobile banking infrastructure for our customers to conduct their banking. In line with this, UMB partnered with key stakeholders such as Interpay, MTN Mobile Money and Airtel Money to make the payment of school fees very easy and stress-free for both high school and tertiary students. We also partnered with SSNIT and Africa World Airlines (AWA) to enable customers to pay their SSNIT Contributions and to purchase their AWA tickets, respectively, at our branches. We extended the working hours of the UMB Customer Contact Centre and the centre is now open Monday to Friday from 7am to 9pm.

Additionally, in order to capitalize on the growing trade relationship between Ghana and China, we established a desk, that is staffed with Relationship Managers who are fluent in

Mandarin (the main Chinese language) to provide tailor-made products and services to Chinese businesses in Ghana.

Corporate Social ResponsibilityUMB adheres to the view that a “business that makes nothing, but profit is a poor business”. In this regard, we used our annual Health Walk in September 2016 to raise funds to support the Princess Marie Louise Children’s Hospital.

UMB was also the platinum sponsor of the SME Financing Fair in Accra, which brought together stakeholders in the SME sector to discuss viable solutions to the challenges facing SMEs in Ghana. The Bank was also the Innovation Partner of TEDxAccra 2016. TED is a non-profit organization devoted to spreading ideas, usually in the form of short and powerful talks.

UMB is committed to the development of youth in Ghana and in that vein we continued our partnership with the West African Examination Council to provide a full scholarship to the top overall performing student and laptops to the top three overall performing students in WASSCE.

OutlookOur strategic theme for 2017 is “Enhancing Customer Experience”. In the words of Jeff Bezos, CEO of Amazon, and I quote: “we see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” At UMB, we are reviewing and upgrading all of our consumer touch points so that we provide a better overall experience to our customers.

A key initiative that is consistent with our customer-focused theme is the launch of our mobile and agency banking platform, which is expected to give our customers speed and convenience in our service offering. I am personally eager and excited to lead this initiative which I believe will set the industry standard for innovative mobile banking.

I am also excited to share that for the first time, our customers will be able to walk into any of our branches, apply and receive a VISA card in a matter of minutes.

We are also enhancing our retail credit sanctioning platform, so that our retail customers will be able to access loans on our platform within 24 hours after fully submitting all loan requirements.

In early 2017, we welcomed Mr. Kevin Cain, a seasoned banker with over 30 years of international banking experience, to the UMB family as our new Director of Consumer and Business Banking. In this role, Kevin is responsible for the strategic direction and growth of the Personal Banking, Private Banking and Business Banking arms of the bank. Kevin has already hit the ground running and through his efforts, UMB is now a proud member of the UK – Ghana Chamber of Commerce.


Lastly, in line to support the industrialisation drive of the government and also to take advantage of the newly emerging business opportunities inherent in the Ghanaian economy, UMB has allocated up to USD 100 million to support the government’s “One District, One Factory” initiative. Any entity can access this credit facility if its business concept is approved by the Ministry of Trade & Industry. The business concept must also meet the Bank’s feasibility assessment criteria. I am proud to announce that the bank is ready to support any entity that successfully satisfies the selection criteria with between USD 1 million and USD 5 million (cedi equivalent) in funding. To show the Bank’s readiness to implement this strategy, we have set up the UMB Public-Private Partnership (PPP) Incubator Centre to cater exclusively to the needs of enterprises that seek to undertake a project under the “One District, One Factory” model. We are of the view that this strategic partnership with the government will augment business growth and accelerate industrialisation

ConclusionI would like to express my sincere appreciation to our customers for their unflinching confidence in UMB and to the Board of Directors for their direction and support. I would also like to thank the hardworking staff of UMB and to cheer them on to aim high and stay motivated for us to continue to achieve our objectives for 2017.

Thank you and may God bless us all!


Year In ReviewUMB and Harvard Business School Partnership In January 2016, UMB welcomed six students from Harvard Business School as part of a required first-year course at Harvard Business School called FIELD, which stands for Field Immersion Experiences for Leadership Development. UMB is one of 156 FIELD Global Partners in 13 countries around the world.

The students conducted research to ascertain the banking needs of tertiary students in Ghana and presented their final recommendations to the executive committee of the bank.

UMB and Phoenix Insurance PartnershipUMB expanded its Bancassurance offering by introducing three new insurance products - the UMB Family/Accident Insurance, the UMB Motor Insurance and the UMB Householders/Homeowners Insurance. The products, which are underwritten by Phoenix Insurance Company, were launched at an impressive ceremony held on February 24, 2016, at UMB’s Head Office in Airport City.

Dignitaries present at the event included Mr. S. N. K. Davor, Deputy Commissioner of Insurance, Mr. Adu Sarkodee, GCEO, CDH Financial Holdings and Mr. Sonny Heward-Mills, Managing Director of Phoenix Insurance.

Gender Sensitivity in Branch Management AwardAt the 3rd National Women in Finance Awards held in Accra, UMB received the Gender Sensitivity in Branch Management Award for being a “respected institution within the finance industry which has innovatively pushed an equitable number of its female staff to occupy respected leadership positions at the branch management level.”

This award is a strong endorsement of UMB’s long history of and commitment to creating equal opportunities for women to advance in the company.

Presentation of Full Scholarship to Overall Best WASSCE StudentIn fulfillment of UMB’s partnership agreement with the West African Examinations Council (WAEC), in March 2016, the bank presented a full scholarship to Jessica Ayeley Quaye, the overall best student at the 2015 WASSCE organized by the West African Examinations Council (WAEC).

The CEO of UMB, Mr. John Awuah presented the scholarship on behalf of the bank and recounted how the 2014 winner, Master Hassan Michail, could not get into the university because of financial constraints. Hassan is currently studying at KNUST as a result of UMB’s intervention. The story of Hassan is why the bank is committed to WAEC and UMB looks forward to expanding its support to WAEC.

Officials of UMB in a group photo with the students from Harvard Business School.

Madam Jennifer Josephine Amoah presents the award to the UMB team.

The CEO of UMB, Mr. John Awuah with other dignitaries at the launch.


Ruth Ewura-Ama Awudzi and Danielle Amo-Mensah who were the second and third highest scorers in the 2015 WASSCE respectively, also received a laptop each and some souvenirs from UMB.

UMB CEO Speaks at TEDxAccra 2016UMB was the Innovation Partner of TEDxAccra 2016 and the headline sponsor of the TEDxAccra Innovation Session. In connection with UMB’s sponsorship, our CEO was one of the featured speakers during the TEDxAccra Innovation Session that was held on April 23, 2016. TED is a non-profit organization devoted to spreading ideas, usually in the form of short, powerful talks. TEDxAccra is an independently organized TED event.

Mr. Awuah spoke on the topic, “Enhancing Innovation in Ghanaian Youth” and he encouraged the audience to rethink youth development by placing strong emphasis on helping young people in Ghana to develop a mindset that focuses on finding innovative solutions to problems.

Participation in SME Financing FairThe Business Banking unit of UMB participated in a two - day SME Financing Fair that was held at the International Conference Centre in Accra from April 26 to April 27, 2016. The theme of the fair was, “SME Financing in Ghana – Enhancing Access and Reducing Costs” and it was aimed at bringing stakeholders in the SME sector together to find sustainable solutions to the challenges of SME financing in Ghana.

UMB was a platinum sponsor of the fair and was represented by the Business Banking unit of the bank led by Mr. Ernest Tetteh, UMB’s Head of Business Banking. Mr. Tetteh was also one of the speakers at the fair and he spoke on the topic, “Finding Solutions to the High Cost of Finance for SMEs”.

9th Pillars of Modern Ghana Awards 2016Our CEO, Mr. John Awuah, chaired the 9th Pillars of Modern Ghana Awards organized by the West African International Press. The awards recognize individuals and corporate entities who have made an indelible impact on the development of Ghana. The Special Guest of Honour at the event was Hon. Dr. Bernice Heloo, the former Deputy Minister of Environment, Science, Technology and Innovation.

Mr. Awuah, was also the keynote speaker at the event and he spoke on the topic, “Enhancing the Growth of SMEs in Ghana”. In his speech, Mr. Awuah outlined a few recommendations for growing the SME sector including a stronger collaboration between banks and the offering of world class advisory services by banks to SMEs.

Best Performing Bank – MTN Mobile Money Month UMB won the award for Best Performing Bank, MTN Mobile Money Month 2015. UMB was presented with this award at a ceremony held to honour outstanding MTN Mobile Money partners.

Mr. Myles Hagan, UMB’s Head of Channels accepted the award on behalf of the Bank from Mr. Eli Hini, the Senior Manager, Mobile Financial Services, MTN Ghana.

Mr. John Awuah presenting the scholarship to Jessica Ayeley Quaye

Mr. John Awuah delivering his presentation at TedXAccra 2016

Staff of UMB with Hon.Dr. Rashid Pelpuo, the former Minister of State, Private Sector Development and PPP.

Mr. Awuah giving the keynote speech at the 9th Pillar of Modern Ghana Awards


This award is a strong endorsement of UMB’s achievements in the mobile financial services sector and the commitment of the bank to provide its customers with alternative channels for their financial needs.

Business Seminar for Osu Night Market VendorsUMB organized a business seminar for vendors of the Osu Night Market on May 23, 2016. This seminar was organized in line with the bank’s strategy to expand its SME banking services to the informal sector of the economy.

Relationship Managers from the Business Banking department of UMB outlined some of the Bank’s bespoke SME products and they also discussed how UMB can assist the vendors to grow their businesses and to manage their resources in a more efficient manner.

China - Ghana Economic and Trade ForumThe Corporate Banking unit of UMB participated in the China – Ghana Economic and Trade Forum organized by the Embassy of the People’s Republic of China. The event was held at the Kempinksi Hotel on June 28, 2016 and was organized to enhance trade and investment cooperation between Ghanaian and Chinese entrepreneurs.

Some of the dignitaries who spoke at the event included Her Excellency the Chinese Ambassador to Ghana, Madame Sun Baohong, the former Minister of Agriculture, Hon. Mohammed Muniru Limuna, the President of Ghana Chamber of Commerce and Industry, Nana Dr Appiagyei Dankawoso I, the President of China Enterprises Chamber of Commerce in Ghana, Mr. Liu Kang among others.

Indian Business SeminarUMB organized a seminar for the Indian Business Community in Ghana on July 7, 2016 at the Labadi Beach Hotel. The seminar was organized under the theme, “Conquering the Tax Landscape in Ghana.”

The key note presentation was delivered by renowned tax expert, Mr. Abdallah Ali -Nakyea, Managing Partner of Ali - Nakyea and Associates. He took participants through some of the recent changes in the tax regime in Ghana and outlined several key features that benefit entrepreneurs and businesses. The heads of various business units within UMB also introduced participants to the bank’s impressive portfolio of products and services.

Branch OpeningsIn the past year, UMB inaugurated three new branches to bring the bank’s rich assortment of financial products and services to existing and potential customers living in and around the Sakaman, the University of Ghana and the University of Professional Studies, Accra (UPSA) areas. The three branches increased the bank’s branch outlet to thirty-one (31).

Mr. Myles Hagan, Head of Channels receiving the award from Mr. Eli Hini of MTN

Relationship Managers from the Business Banking unit interacting with the Osu Night Market Vendors A cross section of participants at the UMB Indian Business

Seminar

Mr. John Awuah, speaking at the China – Ghana Forum


The new branches are also part of the bank’s strategy to enhance customer convenience by investing in the expansion of both physical and digital channels.

UMB Staff Health WalkUMB organized a health walk for its staff members in Accra on September 24, 2016. In 2015, the management of the bank initiated the annual Staff Health Walk to bring to the fore the importance of exercising and healthy living.

Also, as part of the health walk, UMB staff members raised funds to support the Princess Marie Louise Children’s Hospital and at the end of the walk, UMB presented an amount of GHc10, 000 to the hospital to enhance their operations.

Launch of UMB Centre for BusinessesThe viability and growth of SMEs in Ghana was given a boost in October 2016 when UMB launched the first UMB Centre for Businesses in Kumasi. Located on the Ashanti New Town road in Ashtown, this innovative Centre will set a new standard in the delivery of SME banking services and enhance the competitiveness of UMB in the SME segment.

SMEs are unique and face peculiar challenges and that is why UMB has taken the bold step of setting up an operational infrastructure outside of its normal banking operations to cater exclusively to the needs of SMEs.

Introduction of Three New VISA CardsIn late 2016, UMB introduced three additional VISA cards to give its customers more options in carrying out their transactions. As one of Ghana’s most customer centric banks, UMB partnered with Visa Inc. in April 2015 to introduce the UMB VISA Classic debit card. However, the bank recognized that while the VISA Classic card gave customers more options, it did not fully satisfy the unique needs of certain categories of customers. The bank therefore introduced the UMB VISA Prepaid card, the UMB VISA Business card and the UMB VISA Platinum card.

The investment made in bringing these new cards to the bank’s cherished customers is a clear indication of UMB’s unflinching commitment to put customers at the centre of everything that we do.

Baffour Owusu Amankwatia VI, Bantamahene, cutting the ribbon to officially open the UMB Centre for Businesses

A cross section of UMB staff members at the walk.

UMB Chief Operating Officer, Mr. Benjamin Amenumey and Rev. Stephen Wengam, Lead Pastor Cedar Mountain Assemblies Of God church, cutting the ribbon to open the new UMB University Of Ghana branch.


Brand Leadership AwardUMB received the “Brand Leadership Award” at the 6th Brand Excellence Awards organized by Premier Brands Ghana. The award was in recognition of the bank’s strategic rebranding, which has elevated it into a nationally recognized and competitive universal bank.

Receiving the award on behalf of the bank, UMB’s Director of Marketing and Communications, Ms. Yvonne Botchey, dedicated the award to the bank’s cherished customers and expressed her appreciation to the Board and Management of UMB for recognizing the strategic importance of the bank’s brand.

Student Friendly Bank of the Year Award UMB was honoured with the “Student Friendly Bank of the Year” award at the annual Ghana Tertiary Awards organized by Youth Web Ghana. This award recognizes UMB’s tireless effort in building a strong relationship with the youth in Ghana, especially tertiary students. The award was presented by Mr. Richmond Amiga-Sarpong, Chief Executive Officer of Youth Web Ghana.

Our CEO, Mr. John Awuah, received the award on behalf of the bank and said that the bank is humbled by the award recognition and that he is happy to see that UMB’s belief in the value of providing stellar financial services to the youth has been validated.

Staff of the Marketing and Communications Department of UMB Bank proudly displaying the “Brand Leadership Award”

The CEO of UMB Bank, Mr. John Awuah receiving the “Student Friendly Bank of the Year” award on behalf of the bank.


Independent Auditor’s ReportTo The Members of Universal Merchant Bank Limited

Opinion We have audited the financial statements of Universal Merchant Bank Limited, which comprise the statement of financial position at 31 December 2016, and the statement of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 38 to 94.

In our opinion, these financial statements give a true and fair view of the financial position of Universal Merchant Bank Limited at 31 December 2016, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and in the manner required by the Companies Act, 1963 (Act 179), and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738).

Basis of OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the ‘Auditor’s Responsibilities for the Audit of the Financial Statements’ section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Ghana, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other InformationThe Directors are responsible for the other information. The other information comprises the information included in the Annual Report and the Directors’ Report as required by the Companies Act, 1963 (Act 179), and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738) but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial StatementsThe Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179), and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738), and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Bank or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for overseeing the Bank’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.


• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Directors through the Audit and Compliance Committee of the Board regarding, among other matters, the planned scope and timing of the audit and sig-nificant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on Other Legal and Regulatory RequirementsCompliance with the requirements of Section 133 of the Companies Act, 1963 (Act 179) and Section 78 of the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738).

We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.

In our opinion, proper books of account have been kept, and the statements of financial position and comprehensive income are in agreement with the books of account.

The Bank’s transactions were within its powers and the Bank generally complied with the relevant provisions of the Banking Act, 2004 Act 673 as amended by the Banking (Amendment) Act, 2007 Act 738.

The engagement partner on the audit resulting in this independent auditor’s report is Anthony K. Sarpong (ICAG/P/1369).

FOR AND ON BEHALF OF:KPMG: (ICAG/F/2017/038)CHARTERED ACCOUNTANTS13 YIYIWA DRIVE, ABELENKPE P. O. BOX GP 242,ACCRA March 29, 2017


Statements of Comprehensive IncomeFor The Year Ended 31 December 2016

Note2016

GH¢ ‘0002015

GH¢ ‘000

Interest income 6 303,330 201,392

Interest expense 7 (160,267) (101,990)

Net interest income 143,063 99,402

Fee and commission income 8 31,203 22,776

Fee and commission expense 9 (1,983) (568)

Net fees and commission income 29,220 22,208

Net trading income 10 17,115 30,593

Other operating income 11 6,936 1,797

Net trading and other income 24,051 32,390

Total Revenue 196,334 154,000

Impairment expense 14 (11,194) (115,445)

Personnel expense 13 (49,407) (47,618)

Operating expense 12 (92,344) (62,121)

Depreciation and amortisation 26a; 27 (13,343) (9,821)

Operating income/(loss) 30,046 (81,005)

Other income 15 341 10,143

(Loss)/gain on derecognition offinancial Assets at amortised cost 21e;21f; 22a (3,000) 63,304

Profit/(Loss) before tax 27,387 (7,558)

Share of Associate’s profit/(loss) 24 87 (8)

Taxation 16 (7,030) 1,800

Profit/ (Loss) for the yearattributable to: 20,444 (5,766)

Controlling equity holders of the Bank 19,626 (5,481)

Non-controlling interest 818 (285)

Profit/(Loss) for the year 20,444 (5,766)


Statements of Comprehensive IncomeFor The Year Ended 31 December 2016

Note2016

GH¢ ‘0002015

GH¢ ‘000

Other Comprehensive Income

Items that are or may be reclassified to profit or loss

Share in net changes in fair value of Available- for-Sale equity investments 36 (37) (3)

Items that will never be reclassified to profit or loss

Actuarial gain/ (loss) on defined benefit obligations 42 (1,434) 1,776

Deferred tax released (charge)/on actuarial gain 359 (444)

Deferred tax released on disposed buildings - 7,052

Deferred tax released on reversal of fair value reserve - 274

Total comprehensive income for the year 19,332 2,889

attributable to:

Controlling equity holders of the Bank 18,559 2,746

Non-controlling interest 773 143

Total comprehensive income for the year 19,332 2,889

Basic earningss per share (in GH¢) 0.00353 (0.0020)

Diluted earnings per share (in GH¢) 0.00353 (0.0020)

The accompanying notes on pages 44 to 94 form an integral part of these financial statements.


Statements of Financial PositionAs At 31 December 2016

Note2016

GH¢ ‘0002015

GH¢ ‘000

Assets

Cash and cash equivalents 17 874,645 329,699

Investment securities 18 663,331 257,332

Loans and advances to banks 19 288,038 -

Loans and advances to customers 21a 752,906 640,093

Investment in other securities 20 3,377 3,327

Other assets 25 132,252 135,090

Property and equipment 26a 61,657 49,715

Intangible assets 27 13,735 3,110

Total Assets 2,789,941 1,418,366

Liabilities

Deposits from customers 28 1,406,009 898,220

Borrowings 29 745,516 167,377

Other liabilities 30 467,345 205,129

Current Taxation 16b 525 251

Deferred tax Liability 16c 2,460 863

Employee benefit obligations 42 3,459 1,231

Total Liabilities 2,625,314 1,273,071

Shareholders’ Fund

Stated capital 31 208,800 195,200

Deposit for shares 32 - 13,600

Credit risk reserve 34 39,415 10,473

Revaluation reserves 33 17,771 17,771

Income surplus (127,702) (108,820)

Statutory reserve fund 35 26,426 16,042

Available for sale reserve 36 (40) (3)

Other reserves 37 (43) 1,032

Total shareholders’ fund 164,627 145,295

Total liabilities and shareholders’ fund 2,789,941 1,418,366

John AwuahC.E.O.

Elizabeth ZomeloBoard Chairperson



Statement of Changes In EquityFor The Year Ended 31 December 2016

StatedCapital

GH¢’000

Depositfor

SharesGH¢’000

Reval-uation

reservesGH¢’000

IncomeSurplus

GH¢’000

Credit Risk

ReserveGH¢’000

Statutory Reserve

FundGH¢’000

Available for sale & Other

ReservesGH¢’000

TotalGH¢’000

Balance as at 1 Jan 2016 195,200 13,600 17,771 (108,820) 10,473 16,042 1,029 145,295

Total comprehensive income

Net Profit/(loss) for the year - - - 20,444 - - - 20,444

Other comprehensive income, net of tax

Bank’s share of associate’s net fair value gains/ (loss) - - - - - - (37) (37)

Actuarial loss on employee benefit obligations - - - - - - (1,434) (1,434)

Deferred tax released on actuarial loss on employeebenefit obligations - - - - - - 359 359

Total other comprehensive income - - - 20,444 - - (1,112) (1,112)

Total comprehensive income - - 20,444 - (1,112) 19,332

Transaction with Shareholders

Deposit for shares - (13,600) - - - - - (13,600)

Proceeds from issue of shares 13,600 - - - - - - 13,600

Statutory Transfers

Transfer from income surplus - - - (39,326) 28,942 10,384 - -

Balance as at 31 Dec 2016 208,800 - 17,771 (127,702) 39,415 26,426 (83) 164,627



Statement of Changes In EquityFor The Year Ended 31 December 2016

StatedCapital

GH¢’000

Depositfor

SharesGH¢’000

Reval-uation

reservesGH¢’000

IncomeSurplus

GH¢’000

Credit Risk

ReserveGH¢’000

Statutory Reserve

FundGH¢’000

Available for sale & Other

ReservesGH¢’000

TotalGH¢’000

Balance as at 1 Jan 2015 158,800 10,000 33,288 (121,721) 4,470 16,042 1,527 102,406

Total comprehensive income

Net Profit/(loss) for the year - - - (5,766) - - - (5,766)

Other comprehensive income, net of tax

Reversal and release on deferred tax on fair value reserve - - - 2,101 - - (1,827) 274

Disposal of land and buildings - - (22,569) 22,569 - - - -

Deferred tax released on disposed assets - - 7,052 - - - - 7,052

Bank’s share of associate’s net fair value gains/ (loss) - - - - - (3) (3)

Actuarial gain net of tax - - 1,332 1,332

Total other comprehensive income - - (15,517) 24,670 (498) 8,655

Total comprehensive income - - (15,517) 18,904 - (498) 2,889

Transaction with Shareholders

Deposit for shares - 3,600 - - - - - 3,600

Issue of shares 36,400 - - - - - - 36,400

Statutory Transfers

Transfer from income surplus - - - (6,003) 6,003 - - -

Balance as at 31 Dec 2015 195,200 13,600 17,771 (108,820) 10,473 16,042 1,029 145,295



Statement of Cash FlowFor The Year Ended 31 December 2016

Note2016

GH¢ ‘0002015

GH¢ ‘000

Cashflows from operations

Profit/(Loss) before taxation 27,387 (7,558)

Adjustments for:

Depreciation & amortisation 27a&28 13,343 9,821

(Gain)/loss on disposal of property and equipment - (5,518)

(Gain)/loss on disposal of subsidiaries - (2,653)

(Gain)/loss on disposal of de-recognition of financial assets 22e;22f;23a 3,000 (63,304)

Profit/(Loss) before working capital changes 43,730 (69,212)

(Increase)/decrease in investment securities 19 (405,999) (116,410)

(Increase)/decrease in loan and advances to banks 20 (288,038) -

(Increase)/decrease in loans & advances to customers 22a (112,813) (43,665)

(Increase)/decrease in bond (investment in MART) - 7,342

(Increase)/decrease in other assets accounts 26 2,838 16,431

Increase/(decrease) in amounts deposits from customers 29 507,789 80,770

Increase/(decrease) in amounts due to banks and other institutions - (135)

Increase/(decrease) in borrowings 30 578,139 5,000

Increase/(decrease) in other liabilities 31 262,216 23,121

Employee benefit paid 43 (232) (732)

Cash generated from/(used in) operations 587,630 (97,490)

Corporate tax paid (4,800) -

582,830 (97,490)

Investing Activities

Purchase of property and equipment 27a (23,000) (14,297)

Purchase of intangible asset 28 (13,082) (2,222)

Proceeds from sale of assets 27c - 274

Net cash used in investing activities (36,082) (16,245)

Financing Activities

Deposit for shares 33 - 40,000

Net cash from investing activities - 40,000

Increase/ (decrease) in cash and cash equivalents 546,748 (73,735)

Cash and cash equivalents at 1 January 18 329,699 392,290

Effect of exchange rate fluctuations (1,802) 11,144

Cash and cash equivalents at 31 December 874,645 329,699



Notes to the Financial StatementsFor The Year Ended 31 December 2016

1.0 Reporting EntityUniversal Merchant Bank Limited is a Bank incorporated in Ghana. The Bank operates with a universal banking license and undertakes all banking services.

2.0 Basis Of Accountinga. Statement of Compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in a manner required by the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738).

b. Basis of MeasurementThe financial statements have been prepared under the historical cost convention, except for the following material items:• Defined benefit obligations measured at the present

value of future benefit to employees, net of the fair value of fund assets.

• Available for sale financial assets measured at fair value.• Land and Buildings are measured at revalued cost.

c. Functional and Presentation Currency

The financial statements are presented in Ghana cedis, which is the Bank’s functional currency. All financial information presented in Ghana cedis have been rounded to the nearest thousands, except where otherwise indicated.

d. Use of Judgements and estimatesIn preparing these financial statements, Management has made judgements, estimates and assumptions that affect the application of the Bank’s accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

e. Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in note 4.

f. Assumptions and estimation uncertaintiesInformation about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December

2016 is set out below. These relate to the impairment of financial instruments, property and equipment measured at revalued cost and the measurement of defined benefit obligations.

i. Impairment of financial instrumentsAssets accounted for at amortised cost are evaluated for impairment on the basis described below.

The individual components of the total allowance for impairment applies to financial assets evaluated individually for impairment and is based on management’s best estimate of the present value of cash flows that are expected to be received. In estimating these cash flows, management makes judgments about a debtor’s financial situation and the net realizable value of any underlying collateral. Each impaired asset is assessed on its merits and the workout strategy. Estimates of cash flows considered recoverable are independently approved by the Credit Risk Function.

A collective component of the total allowance is established for:• Banks of homogeneous loans that are not considered

individually significant; and• Banks of assets that are individually significant but

that were not found to be individually impaired (loss ‘incurred but not reported’ or IBNR).

The collective allowance for Banks of homogeneous loans is established using a formula approach based on historical loss rate experience.

IBNR allowance covers credit losses inherent in portfolios of loans and advances, and held-to-maturity investment securities with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired items but the individual impaired items cannot yet be identified.

The accuracy of the allowance depends on the model assumptions and parameters used in determining the collective allowance. ii. Defined Benefit obligationKey actuarial assumptions used in the measurement of defined benefit obligations are described below.

iii. Revaluation of property and equipment Assumptions used in the measurement of property and equipment recognised at revalued amounts are described below.


3.0 Significant Accounting PoliciesThe accounting policies set out below have been applied consist-ently to all periods presented in these financial statements, and have been applied consistently by the Bank.

3.1 Foreign Currency TranslationTransactions in foreign currencies are translated into the respec-tive functional currency of the Bank’s entities using exchange rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at spot exchange rates at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amor-tised cost in the foreign currency translated at the spot exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are generally recognised in profit or loss. However, foreign exchange gains and losses arising from the translation of items recognised in other comprehensive income are presented in other comprehensive income.

3.2 Interest Interest income and expenses are recognised in profit or loss us-ing the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability.

When calculating the effective interest rate, the Bank estimates future cashflows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate Transaction costs include incre-mental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

Interest income and expenses presented in the statement of profit or loss and OCI include:

• Interest on financial assets and liabilities at amortised cost calculated on an effective interest rate basis

• Interest on available-for-sale investment securities on an effective interest basis.

Interest income on all trading assets and liabilities are considered to be incidental to the Bank’s trading operations and are present-ed together with all other changes in the fair value of trading assets and liabilities in net trading income.

a. Fees and CommissionsFees and commission income and expenses that are integral to the effective interest rate on a financial asset of financial liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment management fees, placement fees and syndication fees, facility management fees, fees on Letters of Credit and fees on Guarantees are recognised as the related services are performed. Loan commitment fees for loans that are not likely to be drawn down are recognised upfront, together with related direct costs.

b. Net Trading IncomeNet trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences. Net trading income is recognised when earned.

c. Dividends Dividends are recognised in the profit and loss when the Bank’s right to receive payment is established. Dividends are presented in other revenues.

3.3 Income Tax

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or OCI.

a. Current TaxCurrent tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustments to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

b. Deferred TaxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.


Deferred tax is recognised for:• temporary differences on the initial recognition of

assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit;

• temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

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

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it becomes probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities

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

c. Property and Equipment

a. Recognition and Measurement

Items of property and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and any accumulated impairment loss

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

If significant parts of an item of property or equipment have different useful lives, then they are accounted for

as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment is recognised within other income in profit or loss.

Leasehold and freehold buildings are carried at revalued amounts less subsequent accumulated depreciation and subsequent accumulated impairment losses. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.

An increase in the carrying amount of leasehold/freehold buildings as a result of a revaluation is recognised in other comprehensive income and accumulated in equity under revaluation surplus. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

A revaluation decrease is recognised in profit or loss. However, the decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

Other items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

b. Subsequent Expenditure

Subsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow into the entity.

c. Depreciation

Depreciation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful lives of property and equipment. Leased assets are depreciated over the shorter of the lease term and the useful life of the asset if the asset will not revert back to the Bank.

The estimated depreciation rates for the current and comparative periods are as follows:


Office Furniture and Equipment 20% Motor Vehicles 20%Building 3% Leasehold Land Lease period Computers - Hardware 33.3%

Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. Freehold land is not depreciated as it is deemed to have an indefinite life.

d. Capital work in progress

Property and equipment under construction is stated at initial cost and depreciated from the date the asset is made available for use over its estimated useful life. Assets are transferred from capital work in progress to an appropriate category of property and equipment when commissioned and ready for its intended use.

e. Dual-use property

Properties that are part used for own-use activities and part for rental activities are considered dual-use properties. This would result in the property being considered to be classified as part property and equipment and the other part as investment property. If a significant portion of the property is used for own-use and the portion rented out cannot be sold or leased out separately under a finance lease, then the entire property is classified as property and equipment. The Bank considers an own-use portion above 95% of the measure as significant.

f. Disposal

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains and losses on disposals are included in the statement of comprehensive income.

g. Impairment

Impairment tests are carried out on property, plant and equipment when there is an indicator of impairment, and where the carrying amounts are more than the recoverable amounts, they are written down to the recoverable amounts.

3.4 Intangible Assets - Computer Software

Intangible assets comprise computer software licenses. Software acquired by the Bank is measured at cost less accumulated amor-tisation and any accumulated impairment losses.

Subsequent expenditure on software is capitalised only when it increases future economic benefits embodied in the specific as-set to which it relates. All other expenditure is expensed as in-curred.

Software is amortised on a straight line basis in profit or loss over its estimated useful life, from the date that it is available for use. The estimated useful life of software for the current and compara-tive periods is three years.

Amortisation methods, useful lives and residual values are re-viewed at each reporting date and adjusted, if appropriate.

At the end of each reporting period, intangible assets are re-viewed for indications of impairment or changes in estimated future economic benefits. If such indications exist, the intangible assets are analysed to assess whether their carrying amount is ful-ly recoverable. An impairment loss is recognised if the carrying amount exceeds the recoverable amount.

3.5 Impairment of Non-Financial AssetsThe carrying amounts of the Bank’s non-financial assets other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit (CGU) exceeds its recoverable amount.

The recoverable amount is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rates that reflect current market assessments of the time value of money and the risk specific to the asset.

A previously recognised impairment loss is reversed where there has been a change in circumstances or in the basis of estimation used to determine the recoverable value, but only to the extent that the asset’s net carrying amount does not exceed the carry-ing amount of the asset that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.6 Employee Benefitsa. Defined Contribution Plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as personnel expenses in profit or loss in the period during which related services are rendered. The Bank has the


following defined contribution schemes:

i. Provident Fund

This is a defined contribution scheme managed by a Board of trustees on behalf of the Bank. All contributions are charged to profit and loss as incurred and included in staff costs. Employees contribute 5% of their basic salary to the Fund whilst the Bank contributes 11.5%. Obligations under the plan are limited to the relevant contributions which have been recognised in the financial statements and are settled on due dates to the fund manager.

ii. End of Service BenefitThis is a defined contribution scheme managed by the Bank. All contributions are charged to the statement of profit and loss as incurred and included in staff costs. Employees contribute 2.5% of their basic salary to the Fund whilst the Bank contributes 6%. Obligations under the plan are limited to the relevant contributions which have been recognised in the financial statements and are settled on due dates to the fund manager.

iii. Social Security ContributionsThe Bank makes a defined contribution of 13% of employees’ basic salary as Social Security, a mandatory defined contribution plan managed by Social Security and National Insurance Trust (SSNIT). This is charged to the statement of comprehensive income as incurred and included in staff costs. The Bank’s obligation is limited to the relevant contributions, which have been recognised in the financial statements. The pension liabilities and obligations, however, rest with SSNIT.

a. Defined Benefit Plans

The Bank’s obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefits that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a Qualified Actuary using the projected unit credit method. Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses is recognised immediately in other comprehensive income.

The Bank determines the net interest expense (income) on the defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the defined benefit liability at the period end, taking into account any changes in the defined benefit liability during the period as a result of contributions and benefit payments.

Net interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in statement of comprehensive income. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefits that relate to past service or the gain or loss on curtailment is recognised immediately in statement of comprehensive income. The Bank recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

The Bank has the following defined benefit plans:

b. Other post-employment benefit

i. Long Service AwardLong service awards accrue to employees based on graduated periods of uninterrupted service. This is the amount of future benefit that employees have earned in return for their service in the current and prior periods. These awards accrue over the service life of employees. Re-measurements made are recognised in profit or loss in the period in which they arise.

These awards accrue over the service life of employees and are paid at achievement of set milestones as outlined below:

No of Years USD GH¢ (equivalent)

10 600 2,541

15 1,600 6,776

20 3,400 14,399

25 8,500 35,997

30 9,500 40,232

ii. Post-Retirement Medical CareThe Bank pays for post-retirement medical care of the Bank’s staff for two years after retirement.

c. Termination Benefits

The Bank recognises termination benefits as an expense when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan or providing termination benefits as a result of an offer made to encourage voluntary redundancy. If benefits are not expected to be wholly settled within 12 months of the reporting date, then they are discounted.

d. Short-term Employment benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit sharing plans, if the Bank has a present


legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

i. Provision for Employee Leave Days OutstandingA provision is made for the estimated liability from cumulating annual leave accrued at the statement of financial position date.

3.7 Stated Capital and Reserves

a. Share Capital

The Bank classifies capital and equity instruments in accordance with the contractual terms of the instrument. Incremental costs that are directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments.

Dividends on ordinary shares are recognised in the period in which they are approved by the shareholders. Dividend proposed which is yet to be approved by shareholders, is disclosed by way of notes.

b. Statutory Reserves

Statutory reserves are based on the requirements of section 29(1) of the Banking Act. Transfers into statutory reserves are made in accordance with the relationship between the Bank’s reserve fund and it’s paid up capital, which determines the proportion of profits for the period that should be transferred.

i. Where the reserve fund is less than 50% of the stated capital then an amount not less than 50% of net profit for the year is transferred to the reserve fund.

ii. Where the reserve fund is more than 50% but less than 100% of the stated capital, then an amount not less than 25% of net profit is transferred to the reserve fund.

iii. Where the reserve is equal to 100% of the stated cap-ital, then an amount not less than 12.5% of the net profit for the year is transferred to the reserve fund.

c. Regulatory Credit Risk Reserve

This is a reserve created to set aside the excess or shortfalls between amounts recognised as impairment loss on loans and advances based on provisions made for bad and doubtful loans and advances calculated in accordance with IFRS and the Bank of Ghana’s prudential guidelines.

2016GH¢ ‘000

2015GH¢ ‘000

Impairment (Bank of Ghana’s prudential guidelines)

89,941 50,666

Impairment (IFRS) (50,526) (40,193)

Transferred to credit risk reserve 39,415 10,473

d. Fiduciary Activities

The Bank acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. The assets and incomes arising thereon are excluded from these financial statements, as they are not assets of the Bank.

3.8 Financial Assets and LiabilitiesAll financial assets and liabilities are recognised in the statement of financial position and measured in accordance with their as-signed category.

The Bank initially recognises loans and receivables on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date, which is the date on which the Bank becomes a party to the contractual pro-visions of the instrument.

The Bank initially recognises loans and receivables on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date, which is the date on which the Bank becomes a party to the contractual pro-visions of the instrument.

a. Financial Assets

The Bank classifies its financial assets in the following categories: held to maturity, loans and receivables and available-for-sale financial assets. Management determines the classification of its financial assets at initial recognition.

i. Held-to-maturity The Bank classifies investments in securities as held-to-maturity.

Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity and which are not designated at fair value through profit or loss or available-for-sale.

Held to maturity assets are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at amortised cost using the effective interest method.


Any sale or reclassification of a significant amount of held to maturity asset not close to their maturity would result in the reclassification of all held to maturity assets as available-for-sale, and would prevent the Bank from classifying investment securities as held-to-maturity for the current and the following two financial years. Differences between the carrying amount (amortised cost) and the fair value on the date of the reclassification are recognised in other comprehensive income.

ii. Loans and Receivables

Loans and receivables comprises cash and cash equivalents, advances to Banks, loans and advances to customers and other assets.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and that the Bank does not intend to sell immediately or in the near term.

Loans and receivables are initially recognised at fair value plus incremental direct transaction costs, and subsequently measured at amortised cost using the effective interest method less any impairment losses.

iii. Available-For-Sale Financial Assets

Available-for-sale financial assets are financial assets that are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices that are not classified as held-to-maturity investments, financial assets at fair value through profit or loss or loans and receivables.

Available-for-sale investments comprise investment in equity securities.

Unquoted equity securities whose fair value cannot be measured reliably are carried at cost. All other available-for-sale investments are measured at fair value after initial recognition.

Interest income is recognised in profit or loss using the effective interest method. Dividends on available-for-sale equity instruments are recognised in profit or loss in dividend income when the Bank’s right to receive payment is established.

Other fair value changes, other than impairment losses are recognised in other comprehensive income and presented in the fair value reserve within equity. When the investment is sold, the gain or loss accumulated in equity is reclassified to profit or loss.

Available-for-sale investments comprise investment in equity securities.

Unquoted equity securities whose fair value cannot be measured reliably are carried at cost. All other available-for-sale investments are measured at fair value after initial recognition.

Interest income is recognised in profit or loss using the effective interest method. Dividends on available-for-sale equity instruments are recognised in profit or loss in dividend income when the Bank’s right to receive payment is established.

Other fair value changes, other than impairment losses are recognised in other comprehensive income and presented in the fair value reserve within equity. When the investment is sold, the gain or loss accumulated in equity is reclassified to profit or loss.

d. Financial Liabilities

The Bank classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost.

i. Other liabilities Measured At Amortised Cost

Financial liabilities that are not classified at fair value through profit or loss fall into this category and are measured at amortised cost.

Financial liabilities measured at amortised cost include deposits from customers, other liabilities and borrowings for which the fair value option is not applied.

c. Derecognition

i. Financial Assets

The Bank derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risk and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial asset that is created or retained by the Bank is recognised as a separate asset or liability.

On derecognition of a financial asset, the difference between the carrying amount of the asset and the consideration received is recognised in profit or loss. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Bank is recognised as a separate asset or liability.

ii. Financial Liabilities

The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled,


or expire. This is mainly made up of customer deposits accounts, overnight placements by other banks and other financial institutions and medium term borrowings. They are measured initially at fair value and subsequently at amortised cost.

d. Offsetting

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Bank has a legal right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under applicable accounting standards, or for gains and losses arising from a Bank of similar transactions such as in the Banks’ trading activity.

e. Fair Value Measurement

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 in the principal or, in its absence, the most advantageous market to which the Bank has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Bank uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If the Bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Bank measures assets and long positions at a bid price and liabilities and short positions at an ask price.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

f. Cash and Cash Equivalents

Cash and cash equivalents include notes and coins on hand, balances held with Bank of Ghana, other bank balances and highly liquid financial assets with original maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-term commitments.

g. Impairment of Financial Assets

i. Assets carried at Amortised Cost

The Bank assesses whether there is objective evidence that a financial asset or Bank of financial assets is impaired at each reporting date. A financial asset or a Bank of financial assets is considered impaired only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on estimated future cash flows of the financial asset or Bank of financial assets that can be reliably estimated.

The criteria used to determine whether there is objective evidence of an impairment loss include:

1. Significant financial difficulty faced by the issuer or obligor.

2. A breach in the form of default or delinquency in interest or principal payments.

3. Granting the borrower, as a result of financial difficulty, a concession that the lender would not otherwise consider.

4. A likely probability that the borrower will enter Bankruptcy or other financial reorganisation.

5. The disappearance of an active market for that financial asset because of financial difficulties and

6. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a Bank of financial assets since their initial recognition, although the decrease cannot yet be identified with the individual assets in the Bank.

The Bank assesses whether objective evidence of impairment exists individually for financial assets that


are individually significant and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Bank of financial assets with similar credit risk characteristics and 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 loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

The calculation of the present value of estimated future cash flows of a collateralised financial asset reflects cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are Banked on the basis of similar credit risk characteristics (that is, 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 relevant to the estimation of future cash flows for Banks of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in Banks of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of assets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

Estimates of changes in future cash flows for Banks of assets should reflect and be directionally consistent with changes in related observable data from period to period including property prices, payment status and other factors indicative of changes in the probability of losses and their magnitude. The methodology and assumptions used for estimating future cash flows are

reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience.

When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all necessary procedures have been completed and the amount of loss has been determined. Impairment charges relating to loans and advances are recognised in loan impairment charges whilst impairment charges relating to investment securities (held to maturity and loans and receivables categories) are recognised in ‘Net gains/(losses) on investment securities.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can objectively be related to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in profit or loss.

ii. Assets Classified As Available-For-Sale

The Bank assesses whether there is objective evidence that a financial asset or a Bank of financial assets is impaired at each reporting date. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. In general, the Bank considers a decline of 20% to be significant and a period of nine months to be prolonged. However, in specific circumstances a smaller decline or a shorter period may be appropriate.

Impairment losses are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can objectively be related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through other comprehensive income.

iii. Renegotiated Loans

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised. If the cash flows of the


renegotiated asset are substantially different, then the contractual rights to cash flows from the original financial asset is derecognised and the new financial asset is recognised at fair value. The impairment loss before an expected restructuring is measured as follows:

• If the expected restructuring will not result in derecog-nition of the existing asset, then the estimated cash flows arising from the modified financial asset are in-cluded in the measurement of the existing asset based on their expected timing and amounts discounted at the original effective interest rate of the existing finan-cial asset.

• If the expected restructuring will result in derecogni-tion of the existing asset, then the expected fair value of new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

3.9 Leases

a. Lease Payments - Lessee

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance lease are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

b. Lease Assets - LesseeAssets held by the Bank under leases that transfer to the Bank substantially all of the risks and rewards of ownership are classified as finance leases. The leased asset is initially measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.

Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases are classified as operating leases and are not recognised in the Bank’s statement of financial position.

c. Lease assets - Lessor

Where significant portions of the risks and rewards of ownership or leases are retained by the lessor, such leases are classified as operating leases.

Lease income from operating leases are recognised in other income on a straight-line basis over the period of the lease.

3.10 ProvisionsProvisions are recognised, if as a result of past events, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

3.11 Contingent LiabilitiesLetters of credit, acceptances, guarantees and performance bonds are generally written by the Bank to support performance by a customer to third parties. The Bank will only be required to meet these obligations in the event of the customer’s default. These obligations are accounted for as off statement of financial position transactions and disclosed as contingent liabilities.

3.12 Events after the Statement of Financial Position Date

Events after the statement of financial position date are reflected in the financial statements only to the extent that they relate to the year under consideration and the effect is material.

3.13 Financial Guarantees and Loan CommitmentsFinancial guarantee contracts are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.

4.0 Financial Risk Management

4.1 Introduction and Overview The Bank’s activities expose it to a variety of operational and financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or


combination of risks. Taking risk is core to the Bank’s business, 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 its financial performance. The most important types of risk include:

• Credit Risk• Liquidity Risk• Market Risk (includes currency, interest rate and other

price risk)• Operational Risk

4.1.1 Risk Management FrameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has established a Risk Oversight Committee and a Risk Department to assist in the discharge of this responsibility.

The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations.

The Bank’s Risk Committee is responsible among other things for authorising the scope of the risk management function and renewing and assessing the integrity of the risk control systems, ensuring that the risk policies and strategies are effectively managed.

4.2 Credit RiskCredit risk is the potential for financial loss due to the failure of counterparties to meet obligations to pay the Bank in accordance with agreed terms. Credit risk is the most important risk for the Bank’s business. Management carefully manages its exposure to credit risk. Credit risk is attributed to both on-balance sheet financial instruments such as loans, overdrafts, debt securities and other bills, investments, and acceptances and credit equivalent amounts related to off-balance sheet financial items. The Bank’s approach to credit risk management preserves the independence and integrity of risk assessment, while being integrated into business management processes. Credit risk is managed through a framework that sets out policies and procedures covering the identification, measurement and management of credit risk. The goal of credit risk management is to evaluate and manage credit risk in order to further enhance a strong credit culture.

a. Concentration Risk Credit concentration risk is the risk of loss to the Bank arising from excessive concentration of exposure

to a single counterparty, industry sector, product or geographic area. Large exposure limits have been established under the Bank’s credit policy in order to avoid excessive losses from any single counter-party who is unable to fulfil its payment obligations. These risks are monitored on an ongoing basis and subject to annual or more frequent reviews when considered necessary.

b. Credit MitigationPotential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, credit insurance, other guarantees and monitoring.

The reliance that can be placed on these mitigants is carefully assessed in the light of issues such as legal certainty and enforceability, market valuation and counterparty risk of the guarantor. Risk mitigation policies determine the eligibility of collateral types.

i. CollateralIn order to proactively respond to credit deterioration, the Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advanced, which is common practice. Collateral is held to mitigate credit risk exposures. Collateral types that are eligible for risk mitigation include: cash residential, commercial and industrial property, property and equipment such as motor vehicles, plant and machinery and Bank guarantees.

The risk mitigation policy prescribes the frequency of valuation for different collateral types, based on the level of price volatility of each type of collateral and the nature of the underlying product or risk exposure. Where appropriate, collateral values are adjusted to reflect current market conditions. Longer-term finance and lending to corporate entities are generally secured while individual credit facilities are generally unsecured. In addition, in order to minimise credit loss, the Bank seeks additional collateral from counterparties as soon as impairment indicators are noticed for relevant individual loans and advances.

ii. Monitoring

a. Early Alerts Corporate Banking, Personal Banking and Business Banking (Small and Medium Scale Enterprise (SME)) accounts are placed on early alert status when they display signs of weakness. Such accounts and portfolios are subject to a dedicated process of oversight involving Senior Risk Officers and Remedial Officers in the Loans Recovery Unit. The approach to Early Alerts monitoring include but not limited to:

• Deterioration of the customer’s financial position• Delays by customers in settling their dues• Overdraft balances exceeding approved limits• Clear indications of the customer not being able to


settle commitments on due dates Customer payment plans are re-evaluated and remedial actions agreed and monitored until delinquency situations are resolved. Remedial actions include, but are not limited to, exposure reduction, security enhancement and movement of the account to the Loans Recovery Unit

b. Risk grading of Loans and advancesThe Bank has a loan grading system that reflects the strength of the qualities of the loan book.Grade ‘A’ - shows the strongest qualities of the loan book whiles Grade ‘E’ shows the weakest qualities of same.

c. Credit Related CommitmentsDocumentary and commercial letters of credit are written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions. The primary purpose of these instruments is to ensure that funds are available to a customer as required.

Guarantees and standby letters of credit carry less risk than direct loans. These arrangements are collateralised by the underlying shipments of goods. The likelihood of loss amounts is far less than the entire commitment as most commitments to extend credit of this nature are contingent upon the customer maintaining specific cash in margin accounts. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

d. Maximum Exposure to Credit Risk The table below represents the maximum credit risk exposure to the Bank at 31 December 2016, without taking into account any collateral held or other credit enhancements attached.

2016 GH¢ ‘000

2015 GH¢ ‘000

On-Balance Sheet Items (Net Carrying Amount)

Cash and cash equivalent 744,335 279,129

Investment securities 663,331 257,332

Loans and advances to banks 288,038 -

Loans and advances to customers 752,906 640,093

Other assets 101,864 126,972

2,550,474 1,303,526

Off-Balance Sheet Items

Letters of credit 137,128 105,854

Guarantees and indemnities 83,411 38,346

Unrecognised loan commitment 117,257 12,439

337,796 156,639


e. Credit Quality Analysis The tables below set out information about the credit quality of financial assets and the allowance for impairment held by the Bank against those assets:

Loans& advances

to customersGH¢ ‘000

Loans& advances

to banksGH¢ ‘000

InvestmentsecuritiesGH¢ ‘000

Cash& Cash

equivalentsGH¢ ‘000

Lending& financial

guaranteescommitments

GH¢ ‘000

2016 MAXIMUM EXPOSURE

Gross carrying amount 803,584 288,038 663,331 874,645

Amount committed / guaranteed 337,796

At amortised costGrade A 700,139 - - - -

Grade B 17,481 - - - -

Grade C 4,067 - - - -

Grade D 3,056 - - - -

Grade E 78,841 - - - -

Total gross amount 803,584 288,038 663,331 874,645 337,796

Allowance for impairment (50,678) - - - -

Net carrying amount 752,906 288,038 663,331 874,645 337,796

Off Balance Sheet Current: Lending commitments - - - - 137,128

Current: Financial guarantees - - - - 83,412

Current: Unrecognised loan commitments - - - - 117,257

Total exposure - - - - 337,796

2015 MAXIMUM EXPOSUREGross carrying amount 680,442 - 257,332 329,699 -

Amount committed / guaranteed - - - - 156,639

At amortised costGrade A 611,674 - - - -

Grade B 23,375 - - - -

Grade C 2,031 - - - -

Grade D 2,386 - - - -

Grade E 40,975 - - - -

Total gross amount 680,441 - 257,332 329,699 156,639


Net carrying amount 640,093 - 257,332 329,699 156,639

Off Balance Sheet Current: Lending commitments - - - - 105,854



Total exposure - - - - 156,639


f. Credit Quality Analysis – Impaired and Unimpaired Loans

Loans& advances


Loans& advances

to banksGH¢ ‘000

InvestmentsecuritiesGH¢ ‘000

CashCash


Lending& financial

guaranteescommitments

GH¢ ‘000

2016Neither past due nor impaired30 days and below: 700,139 288,038 663,331 874,645 337,796

Past due but not impaired30 -90 days 17,482 - - - -

90 -180 days 2,007 - - - -

180 days + 8,125 - - - -

27,614 - - - -

Significantly impairedGrade C 2,060 - - - -

Grade D 2,871 - - - -

Grade E 70,751 - - - -

75,682 - - - -

Allowance for impairment

Individual 43,205 - - - -

Collective 7,474 - - - -

Total allowance for impairment 50,679 - - - -

2015Neither past due nor impaired30 days or less: 635,049 - 257,332 329,699 156,639

Past due but not impaired 52 - - - -

30 -90 days 15 - - - -

90 -180 days 5,122 - - - -

180 days + 5,189 - - - -

Significantly impairedGrade C 1,979 - - - -

Grade D 2,371 - - - -

Grade E 35,853 - - - -

40,203 - - - -

Allowance for impairment

Individual 36,968 - - - -

Collective 3,380 - - - -

Total allowance for impairment 40,193 - - - -


g. Past due but not impairedThese are loans and advances that are past due and have been assessed for impairment. However, these loans and advances are supported by significant collaterals and cash flows from agreed repayment terms. The present value of these estimated cash flows exceed the carrying amounts of the loans and advances.

As shown above, 50% of the total maximum exposure is derived from loans and advances to banks and loans and advances to customers (2015: 67%) whiles investments held in investment securities represents 23 % (2015: 22%).

Management is confident in its ability to continue controlling and sustaining minimal exposure to credit risk arising from both its loans and advances portfolio and investment securities.

h. Financial assets neither past due nor impairedLoans and advances to customersThe credit quality of the portfolio of loans and advances to customers that were neither past due nor impaired is assessed by reference to an internal rating system adopted by the Bank. Loans graded as current loans are considered as neither past due nor impaired.

Cash and cash equivalentsIncluded in the Bank’s cash and cash equivalents are balances held with the Bank of Ghana and other financial institutions. None of these balances were impaired at the reporting date and at 31 December 2015.

Investment securitiesThe Bank’s investments comprise investment in investment securities. None of these investments were impaired at the reporting date and at 31 December 2015.

Advances to BanksThese are the Bank’s overnight placements with other Banks and financial institutions. None of these placements were impaired at the reporting date and at 31 December 2016.

i. Loans and advances past due but not impairedLoans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. Loans that are aged more than 90 days are tested individually for impairment but may be determined as not impaired due to the values of collaterals held. Such loans are also considered as past due but not impaired.

j. Loans and advances renegotiatedThe contractual terms of a loan may be modified for a number of reasons including market conditions, customer retention and other factors not related to a current or potential credit deterioration of the customer. An existing loan whose terms have been modified may be derecognised and the renegotiated loan recognised as a

new loan at fair value in accordance with the accounting policy set out above.

The Bank renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities’) to maximise collection opportunities and minimise the risk of default. Under the Bank’s forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default and there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.

The revised terms usually include extending the maturity, changing the timing of interest payments, modifying and extending payment arrangements and approving external management plans. Corporate loans are subject to forbearance activities.

For the purposes of disclosures in these financial statements, ‘loans with renegotiated terms’ are defined as loans that have been restructured due to a deterioration in the borrower’s financial position, for which the Bank has made concessions by agreeing to terms and conditions that are more favourable for the borrower than the Bank had provided initially and that it would not otherwise consider. A loan continues to be presented as part of loans with renegotiated terms until maturity, early payment or write-off.

Irrespective of whether loans with renegotiated terms have been derecognised, they remain disclosed as impaired until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows and there are no other indicators of impairment.

k. Write-Off PolicyThe Bank writes off a loan/security balance (and any related allowances for impairment losses) when the Credit Risk department determines that the loans cannot be collected and a Board and Bank of Ghana approval is given. This determination is reached after considering information such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation, or that discounted proceeds from collateral will not be sufficient to pay back the entire exposure.

l. Concentrations of Credit Risk The Bank monitors concentrations of credit risk by industry, product and type of customer. An analysis of concentrations of credit risk from loans and advances, lending commitments, financial guarantees and investment securities is shown as follows:


i. Concentrations by Sector

Loans& advances


Loans& advances

to banks GH¢ ‘000

Invest-ment

securities GH¢ ‘000

Cash& cash


Lending& financial

guarantees commitments

GH¢ ‘000

2016

Gross carrying amount 803,584 288,038 663,331 874,645


Concentration by sector:

Agriculture, forestry & fishing 18 - - - -

Mining & quarrying 346 - - - -

Manufacturing 60,889 - - - -

Construction 39,797 - - - -

Electricity, gas & water 334,292 - - - -

Commerce & finance 263,258 - - - -

Transport, storage & communication 24,845 - - - -

Services 74,037 - - - -

Miscellaneous and staff 6,102 - - - -

Total gross amount 803,584 288,038 663,331 874,645 337,796




Loans& advances


Loans& advances


Investmentsecurities

GH¢ ‘000

Cash& cash


Lending& financial


GH¢ ‘000

2015

Gross carrying amount 680,442 - 257,332 329,699 -


Concentration by sector:

Agriculture, forestry & fishing 55 - - - -

Mining & quarrying 518 - - - -

Manufacturing 56,994 - - - -

Construction 26,238 - - - -

Electricity, gas & water 312,546 - - - -

Commerce & finance 142,612 - - - -

Transport, storage & communication 16,866 - - - -

Services 121,676 - - - -

Miscellaneous and staff 2,936 - - - -

Total gross amount 680,441 - 257,332 329,699 156,639



iii. Concentration by Product

Loans& advances


Loans& advances



GH¢ ‘000

Cash& cash


Lending& financial


GH¢ ‘000

Gross carrying amount 803,584 288,038 663,331 874,645 -


Concentration by product:

Term loans 469,165 - - - -

Overdrafts 324,648 - - - -

Leasing 368 - - - -

Staff Loans 9,403 - - - -

Letters of credit - - - - 137,128

Guarantees and indemnities - - - - 83,411

Unrecognised loan commitments - - - - 117,257

803,584 288,038 663,331 874,645 337,796




iii. Concentration by Product

Loans& advances


Loans& advances



GH¢ ‘000

Cash& cash


Lending& financial


GH¢ ‘000



Concentration by product:

Term loans 351,578 - - - -

Overdrafts 314,219 - - - -

Leasing 657 - - - -

Staff Loans 13,987 - - - -

Letters of credit - - - - 105,854

Guarantees and indemnities - - - - 38,346

Unrecognised loan commitments - - - - 12,439

680,441 - 257,332 329,699 156,639



iv. Concentration by Type of Customer Lending

Loans& advances


Loans& advances



GH¢ ‘000

Cash& cash


Lending& financial


GH¢ ‘000

2016



Concentration by type of customer:

Public enterprises 311,753 102,247 663,331 197,299 69,853

Private enterprises 482,428 185,791 - 677,346 267,943

Staff 9,403 - - - -

803,584 288,038 663,331 874,645 337,796




Loans& advances


Loans& advances



GH¢ ‘000

Cash& cash


Lending & financial


GH¢ ‘000

2015



Concentration by type of customer:

Public enterprises 313,766 - 257,332 137,036 -

Private enterprises 352,688 - 192,663 156,639

Staff 13,987 - - -

680,441 - 257,332 329,699 156,639



iv. Concentration by Location

Loans& advances


Loans& advances



GH¢ ‘000

Cash& cash


Lending& financial


GH¢ ‘000

2016



Concentration by location:

Within Ghana 803,584 288,038 663,331 725,614 -

Outside Ghana - - - 119,031 337,796

803,584 288,038 663,331 844,645 337,796



2015


Amount committed / guaranteed - - - - 156,639

Concentration by location:

Within Ghana 680,441 - 257,332 168,791 -

Outside Ghana - - - 160,908 156,639

680,441 - 257,332 329,699 156,639




m. Collateral held and other credit enhancements, and their financial effect The Bank holds collateral and other credit enhancements against certain types of its credit exposures. The table below sets out the principal types of collateral held against different types of financial assets.

i. Type of exposure –

Percentage of exposure that is subject to collateral requirement

Principal type of collateral held

December2016

December2015

Loans and advances to customer’s 122% 146% Legal mortgage debenture /fixed deposits/cash/t’bills/ vehicles

Corporate term loans and overdraft 107% 168% Legal mortgage/ debentures

SME 320% 78% Legal mortgage debenture /fixed deposits/t’bills/

Personal loans 118% 12% Legal mortgage debenture /fixed deposits/cash/t’bills

Staff loans 70% 67% Motor Vehicles

ii. Loans and advances to customersThe general creditworthiness of a customer tends to be the most relevant indicator of credit quality of a loan extended to it. However, collateral provides additional security and the Bank generally requests that borrowers provide it. The Bank may take collateral in the form of a first charge over real estate, floating charges over all assets and other liens and guarantees.

Because of the Bank’s focus on customers’ creditworthiness, the Bank does not routinely update the valuation of collateral held against all loans and advances to customers. Valuation of collateral is updated in a three year cycle for loans whose credit risk has deteriorated significantly and are being monitored more closely.

iii. Other types of collateral and credit enhancementsIn addition to collaterals obtained for loans, the Bank also holds other types of collateral and credit enhancements such as second and floating charges for which specific values are not generally available.

iv. Assets obtained by taking possession of collateral Repossessed items are expected to be sold within one year of repossession. Repossessed items are not recognised in the Bank’s books. Proceeds from their sale are used to reduce related outstanding indebtedness.

The Bank did not hold any financial and non- financial assets resulting from taking possession of collateral held as security against loans and advances at the reporting date.

v. Offsetting financial assets and financial liabilities. The Bank did not hold any financial assets and financial liabilities that are off-set in the statement of financial position at the reporting date.

n. Impaired loans and advances Set out below is an analysis of the gross and net (of allowance for impairment) amounts of individually impaired loans and advances by risk grade.


i. Loans and Advances to customers

GrossGH¢ ‘000

Impairment Allowance

GH¢ ‘000Net

GH¢ ‘000

2016

Grade C 2,060 2,004 56

Grade D 2,871 2,749 121

Grade E 70,751 38,303 32,448

75,682 43,056 32,625

2015

Grade C 2,031 1,711 320

Grade D 2,381 2,126 255

Grade E 40,830 32,982 7,848

45,242 36,819 8,423

4.3 Liquidity RiskLiquidity risk is the risk that the Bank will encounter difficulty in meeting obligations from its financial liabilities. The risk arises from mismatches in cash flows.

a. Management of RiskThe Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation. Treasury Department maintains a portfolio of short-term liquid assets, largely made up of short-term liquid investment securities, loans and advances to Banks and other inter-Bank facilities, to ensure that sufficient liquidity is maintained within the Bank as a whole.

All liquidity policies and procedures are subject to review and approval by the Asset and Liability Committee (ALCO), which is responsible for ensuring compliance with both statutory and prudential liquidity requirements. These responsibilities are managed through various policies and procedures which include the following:

i. Control of Cash flowThe day-to-day funding is managed by monitoring future cash flows including undrawn commitments to ensure that requirements are met at all times.

ii. Management of Portfolio of Liquid AssetsThe Bank maintains a portfolio of highly marketable assets that can easily be liquidated to raise funds in the event of unforeseen disruption to the Bank’s cash flow.

iii. Monitoring of Liquidity RatiosLiquidity ratios are monitored against internal guidelines as well as regulatory and statutory requirements to ensure that the Bank is compliant at all times.

Details of the reported Bank ratio of net liquid assets to deposits from customers at the reporting date and during the reporting period were as follows:

2016 %

2015 %

Liquidity Ratio

At reporting date 60 37

Average for the period 119 95

Maximum for the period 187 119

Minimum for the period 87 77


The monitoring and reporting take the form of a daily, weekly and monthly cash flow measurements and projections. The starting point for these projections is the analysis of the contractual and behavioural maturities of the Assets and Liabilities.

Compliance with Regulatory Liquidity RequirementsThe Bank complied with all regulatory liquidity requirements in 2016.

iv. Maturity Gap ManagementThe maturity profiles of assets and liabilities is provided as follows:

Maturity Analysis for Financial Assets and Liabilities

TotalGH¢’000

Below 3 Months

GH¢’000

3 to 6 Months

GH¢’000

6 to 12 Months

GH¢’000

Over One YearGH¢’000

2016

Financial Assets

Cash and cash equivalents 874,645 874,645 - - -

Investment securities 663,331 256,714 280,468 93,345 32,804

Loans and advances to banks 288,038 - 255,325 32,713 -

Loans and advances to customers 752,906 277,872 14,946 27,114 432,974

Other assets 101,864 101,864 - - -

Investment in other securities 3,377 - - - 3,377

2,684,161 1,511,095 550,739 153,172 469,155

Financial Liabilities

Deposits from customers 1,406,009 1,259,651 129,042 17,289 28

Borrowings 715,516 715,516 - - -

Other liabilities 467,346 453,677 50 13,619 -

Employee Benefit Obligation - - - - 3,459

Off Balance Sheet Items

Letters of credit 137,128 61,439 43,190 - 32,499

Financial Guarantees 83,411 6,344 21,769 52,611 2,687

Unrecognised Loan commitments 117,257 117,257 - - -

2,926,667 2,613,884 194,051 83,519 38,673

Net liquidity gap (242,506) (1,102,789) 356,688 69,653 430,482


TotalGH¢’000

Below 3Months

GH¢’000

3 to 6Months

GH¢’000

6 to 12Months

GH¢’000

Over OneYear

GH¢’000

2015

Financial Assets

Cash and cash equivalents 329,699 329,699 - - -

Investment securities 257,332 103,202 32,987 121,143 -

Loans and advances to banks - - - - -


Investment in other securities 3,327 - - - 3,327

1,230,451 653,425 291,971 177,285 107,770

Financial Liabilities

Deposits from customers 898,220 571,930 180,147 61,852 84,291

Borrowings 167,377 11,069 156,308 - -

Other liabilities 205,129 41,526 26,626 2356 134,621

Employee Benefit Obligation 1,231 - - - 1,231

Off Balance Sheet Items

Letters of credit 105,854 98,738 2,542 4,047 527

Financial Guarantees 38,346 16,178 17,538 2,064 2,567

Unrecognised Loan commitments 12,439 12,439 - - -

1,428,596 751,880 383,161 70,319 223,237

Net liquidity gap (198,145) (98,455) (91,190) 106,966 (115,467)

v. Financial assets available to support future funding

In the normal course of business, assets are sometimes pledged for specific purposes. The table below sets out the availa-bility of the Bank’s financial assets to support future funding.

Encumbered Pledged as

CollateralGH¢’000

Unencumbered Available as


Other**GH¢’000

TotalGH¢’000

2016

Cash and cash equivalents - 874,645 874,645

Investment securities 212,102 451,229 - 663,331

Loans and advances to banks - 288,038 - 288,038

Loans and advances to customers - - 752,906 752,906

Investment in other securities - - 3,377 3,377

Other assets - 101,864 - 101,864

Total assets 212,102 1,715,776 756,283 2,684,161


Encumbered Pledged as


Unencumbered Available as


Other**GH¢’000

TotalGH¢’000

2015

Cash and cash equivalents - 329,699 - 329,699

Investment securities - 257,332 - 257,332

Loans and advances to banks - - - -

Loans and advances to customers - - 640,093 640,093

Investment in other securities - - 3,327 3,327

Other assets - 126,972 - 126,972

Total assets - 714,003 643,420 1,357,423

** Represents assets that are not restricted for use as collateral, but the Bank would not consider them as readily available to secure funding in the normal course of business.

In addition, the Bank has not received collateral that it is permitted to sell or re-pledge in the absence of default.

4.4 Market Risks

Market risk is the risk that changes in market prices -such as interest rate, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s / issuer’s credit standing) -will affect the bank’s income or the value of its holdings of financial instruments. The objective of the Bank’s market risk management is to manage and control market risk exposures within acceptable parameters to ensure the Bank’s solvency while optimising the return on risk.

The Bank’s exposure to market risk arises principally from customer-driven transactions and pension obligations. The Bank does not engage in proprietary trading.

a. Management of Market RisksOverall responsibility for management of market risk rests with Assets and Liability Committee (ALCO). The Risk Department is responsible for the development of detailed market risk management policies (subject to review and approval by ALCO) and for the day to day implementation of those policies.

b. Foreign Exchange RiskThe Bank operates wholly within Ghana and its assets and liabilities are carried in local and foreign currency. The Bank maintains trade with correspondent Banks and takes deposits and lends in foreign currencies. Assets and Liabilities denominated in foreign currencies are translated to cedis at the reporting date inter-Bank rate. Gains and losses resulting from foreign currency transactions and translations are included in the profit for the year. The Bank is exposed to the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

The exchange rates used for translating the major foreign currency balances at the reporting date were as follows:

GH¢ to

Average Rate Reporting Rate

2016 2015 2016 2015

GH¢ GH¢ GH¢ GH¢

USD 3.9298 3.7178 4.2349 3.7950

EUR 4.3550 4.12451 4.4617 4.1320

GBP 5.3501 5.6867 5.2096 5.6165

CHF - 3.8690 - 3.8058

ZAR 0.2678 0.2928 0.246 0.2453

CNY 0.5931 0.6019 0.6094 0.5869


Currency exposure at year end in cedi equivalent of the following major currencies The table below summarises the Bank’s exposure to foreign currency exchange rate risk at balance sheet date.

TotalGH¢’000

USDGH¢’000

GBPGH¢’000

EUROGH¢’000

OthersGH¢’000

2016

Assets

Cash and cash equivalents 85,676 77,298 4,788 3,073 517

Loans and advances to banks 121,362 102,285 3,379 15,524 174

Loans and advances to customers 256,369 243,486 1 12,882 -

Leasing debtors - - - - -

Other assets 68,744 67,596 1,148 - -

Total assets 532,151 490,665 9,316 31,479 691

Liabilities

Deposits from customers 355,140 314,373 9,995 30,771 -

Due to Banks and other institutions - - - - -

Borrowings 172,997 172,997 - - -

Other liabilities 5,657 4,317 10 1,330 -

Total liabilities 533,794 491,687 10,005 32,101 -

Net on-balance sheet position (1,643) (1,022) (689) (622) 691

Off-balance sheet credit commitments 145,864 123,620 3,482 18,763 -

TotalGH¢’000

USDGH¢’000

GBPGH¢’000

EUROGH¢’000

OthersGH¢’000

2015

Assets

Cash and cash equivalents 124,498 81,294 14,896 28,294 14

Loans and advances to customers 328,530 328,471 59 - -

Other assets 304 - 304 - -

Total assets 453,332 409,765 15,259 28,294 14

Liabilities

Deposits from customers 264,287 225,705 11,327 27,255 -

Due to Banks and other institutions - - - - -

Borrowings 161,799 161,799 - - -

Other liabilities 13,324 11,805 912 606 -

Total liabilities 439,410 399,309 12,239 27,861 -

Net on-balance sheet position 13,922 10,456 3,020 433 14

Off-balance sheet credit commitments 116,185 104,852 8,603 2,730 -


c. Foreign Exchange Sensitivity

The following table shows the effect of a strengthening or weakening of GH¢ against all other currencies on profit or loss. This sensitivity analysis indicates the potential impact on profit or loss based on foreign currency exposures recorded at 31 December. (See “currency risk” above).

It does not represent actual or future gains or losses. The sensitivity analysis is based on the percentage difference between the highest daily exchange rate and the average exchange rate per currency recorded in the course of the respective financial year.

A strengthening/weakening of the GH¢, by the rates shown in the table, against the following currencies at 31 December would have impacted equity and profit or loss by the amounts shown below:

This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2014.

As of December 2016 2015

in GH¢ ’000 % Change

Profit or loss impact:

StrengtheningEquity impact: Strengthening % Change

Profit or loss impact:

StrengtheningEquity impact: Strengthening

USD 9% 6,126,211 6,126,211 14% 2,313 2,313

EUR 5% 30,636 30,636 16% 30 30

GBP 8% 148,207 148,207 17% 520 520

CNY 5% 31,842 31,842 15% 93 93

ZAR 15% 15,097 15,097 18% 3 3

d. Interest Rate RiskThe principal risk to which the Bank’s non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. The maturities of asset and liabilities and the ability to replace at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the Bank’s exposure to changes in interest rates and liquidity.

Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands.

Interest rates on advances to customers and other risk assets are pegged to the Bank’s base lending rate. The base rate is adjusted from time to time to reflect the cost of funds.

The Assets and Liability Committee closely monitors the interest rate trends to minimise the potential adverse impact of interest rate changes. A summary of the Group’s interest rate gap position on non-trading portfolios is as follows:

Up to 1 mthGH¢’000

1.3 mthsGH¢’000

3-12 mthsGH¢’000

Over 1 yrGH¢’000

TotalGH¢’000

2016

Assets

Cash and cash equivalents 428,006 - - - 428,006

Investment securities 256,714 280,468 93,345 32,805 663,331

Loans and advances to banks - 255,325 32,713 - 288,038


Total financial assets 1,075,511 552,469 172,283 327,804 2,128,066


Up to 1 mthGH¢’000

1.3 mthsGH¢’000

3-12 mthsGH¢’000

Over 1 yrGH¢’000

TotalGH¢’000

Liabilities

Interest bearing deposits 65,280 205,222 141,457 27 411,986

Borrowings 304,000 385,997 - - 689,997

Total financial liabilities 369,280 591,219 141,457 27 1,101,983

Interest rate gap 706,231 (38,750) 30,826 327,777 1,026,083

2015

Assets

Cash and cash equivalents 71,749 13,655 - - 85,404

Investment securities 103,203 32,987 121,142 - 257,332



Total financial assets 370,181 72,094 436,269 100,288 978,832

Liabilities

Interest bearing deposits 599,515 151,436 242,000 84,291 1,077,242

Borrowings 10,491 - 156,308 - 166,799

Total financial liabilities 610,006 151,436 398,308 84,291 1,244,041

Interest rate gap (239,825) (79,342) 37,961 15,997 265,209

Analysis of Bank’s sensitivity to market interest

Standard scenarios that are considered on a monthly basis include a 100 and 50 basis point (bp) parallel fall or rise in market interest rates. A change of a 100 or 50 basis points in interest rates at the reporting date would have impacted equity and profit or loss by the amounts shown below:

Increase100bp

ParallelGH¢’000

Decrease100bp

ParallelGH¢’000

Increase50bp

ParallelGH¢’000

Decrease50bp

ParallelGH¢’000

2016

At 31 December 20,259 16,576 19,339 17,497

Average for the period 13,029 10,660 12,436 11,252

Maximum for the period 20,259 16,576 19,339 17,497

Minimum for the period 9,008 7,370 8,598 7,779

2015

At 31 December 8,758 7,166 8,360 7,564

Average for the period 9,106 7,450 8,692 7,864

Maximum for the period 11,571 9,467 11,045 9,993

Minimum for the period 6,408 5,243 6,117 5,534

2016 cont.


e. Market Risk Monitoring and ControlThe Bank’s Treasury department is responsible for monitoring the Bank’s exposure to market risk. The analysis of impact of unlikely but plausible events by means of scenario analysis enables management to gain a better understanding of risks that the Bank is potentially exposed to under adverse conditions.

f. Compliance and Regulatory RiskCompliance and Regulatory risk includes the risk of non-compliance with regulatory requirements. The Bank’s Compliance Unit is responsible for establishing and maintaining an appropriate framework of the Bank’s compliance policies and procedures. Compliance with such policies and procedures is the responsibility of all managers. However, the Compliance Unit monitors and reports on compliance to Executive Management and the Board. The Bank generally complied with regulatory requirements.

4.5 Operational Risks

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 from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Bank’s operations and are faced by all business entities.

a. Management of Operational RisksThe Bank’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Bank’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Bank standards for the management of operational risk in the following areas:• requirements for appropriate segregation of duties, including the independent authorisation of transactions • requirements for the reconciliation and monitoring of transactions • compliance with regulatory and other legal requirements • documentation of controls and procedures • requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to

address the risks identified • requirements for the reporting of operational losses and proposed remedial action • development of contingency plans • training and professional development • ethical and business standards • risk mitigation, including insurance where this is effective.

Compliance with the Bank’s standards is supported by a program of periodic reviews undertaken by Internal Audit division. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Bank.

4.6 Capital ManagementThe Bank of Ghana sets and monitors capital requirements for the Bank. The Bank’s objectives when managing capital are:

• To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for the sharehold-ers and benefits for the other stakeholders.

• To maintain a strong capital base to support the current and future development needs of the business. • To comply with the capital requirements set by the Bank of Ghana.

Capital adequacy and use of regulatory capital are monitored by management employing techniques based on the guidelines developed by the Bank of Ghana for supervisory purposes. The required information is filed with the Bank of Ghana on a monthly basis and the capital adequacy ratio on quarterly basis.

i. Regulatory CapitalThe Bank’s regulatory capital is analysed into two tiers:• Tier 1 capital includes Stated Capital, Disclosed Reserves and Permanent Non Cumulative Reserves.• Tier 2 capital includes Revaluation Reserves and Subordinated Term Debts


Non-risk weighted assets are classified as cash on hand, claims on government and claims on the Bank of Ghana. Risk-weighted assets are determined according to specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures.

The Bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and the Bank recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position.

Capital adequacy and the use of regulatory capital are monitored daily by management, employing techniques based on guidelines developed by the Basel Committee as implemented by Bank of Ghana for supervisory purposes. The required information is filed with Bank of Ghana on a monthly basis. Bank of Ghana requires each bank to:• Hold a minimum regulatory capital of GH¢60 million; and• Maintain a ratio of total regulatory capital to risk-weighted assets plus risk weighted off balance sheet assets above a

required minimum of 10%.

The Bank generally complied with the minimum regulatory capital of GH¢60 million and met the minimum capital adequacy ratio of 10% at the reporting date. ii. Capital AdequacyRelevant rules and ratios of the Basel Accord on Banking supervision, which have been adopted by the Bank of Ghana are used in monitoring the adequacy of the Bank’s capitals. The Capital Adequacy Ratio (CAR) at the reporting date is shown below:

2016GH¢’000

2015 GH¢’000

Stated capital 208,800 208,800

Statutory reserves 26,426 16,042

Income surplus (127,702) (108,820)

107,524 116,022

Deduct:

Intangibles/other assets (10,742) (5,464)

Investment in subsidiaries and associates (1,227) (1,177)

Investment in capital of other Banks and financial institutions (806) (806)

Net tier 1 capital 94,749 108,575

Tier 2 capital

Other reserves (43) 1,029

Revaluation reserves 17,771 17,771

Subordinated Term Debt 30,000 -

47,728 18,800

Total regulated capital 142,477 127,375

Risk weighted assets

On balance sheet 1,052,888 855,570

Off balance sheet 220,539 152,206

50% of net open position 2,409 4,392

100% of previous 3 years average annual gross income 130,044 98,753

Total risk weighted assets 1,405,880 1,110,921

Capital Adequacy Ratio (CAR) 10.13% 11.47%


6. Fair values of financial instrumentsThe fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Bank determines fair values using other valuation techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

The Bank’s land and buildings are measured using the revaluation model. The revalued amounts are determined using open market values.

i. Valuation modelsThe Bank measures fair values using the following fair value hierarchy, which reflects the significance of inputs used in making the measurements.

• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

• Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation techniques include risk free and benchmark interest rates, credit spreads and other premiums used in estimating discount rates and foreign currency exchange rates and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

i. Valuation modelsThe Bank uses widely recognised valuation models for determining the fair value of common and more simple financial instruments that use only observable market data and require little management judgment and estimation.

Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determining fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

ii. Valuation frameworkThe objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions. A fair value measurement requires an entity to determine all the following:a. The particular asset or liability that is the subject of measurement (consistently with the unit of account).b. The principal (or most advantageous) market for the asset or liability.c. The valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop

inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised.

The Bank has an established control framework with respect to the measurement of fair values. This framework includes a Valuation Support function which is in the Finance Unit but independent of the Financial Reporting function and reports to the Director of Finance and Administration that has overall responsibility for independently verifying the results of trading and investment operations and all significant fair value measurements. Specific controls include:• Verification of observable pricing. • Re-performance of model valuations. • A review and approval process for new models and changes to existing models involving both Finance and Risk

management Departments.


• Half yearly calibration and back-testing of models against observed market transactions. • Analysis and investigation of significant daily valuation movements and • Review of significant unobservable inputs, valuation adjustments and significant changes to the fair value measurement of

Level 3 instruments compared with the previous month, by Senior Finance and Risk management personnel.

When third party information, such as broker quotes or pricing services, is used to measure fair value, the Finance Unit assesses and documents, the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS.

This includes: • Verifying that the broker or pricing service is approved by the Bank for use in pricing the relevant type of financial instru-

ment. • Understanding how the fair value has been arrived at and the extent to which it represents actual market transactions. • Where prices for similar instruments are used to measure fair value, how these prices have been adjusted to reflect the

characteristics of the instrument subject to measurement and • If a number of quotes for the same financial instrument have been obtained, how fair value has been determined using

those quotes.

Significant valuation issues are reported to the Board Audit Committee. iii. Level 3 fair value measurementsAt the reporting date, the Bank had no financial instruments on its statement of financial position whose fair value measurement were included in level 3 of the fair value hierarchy.

f. Financial instruments not measured at fair valueThe following table sets out the fair values of financial instruments not measured at fair value in the statement of financial position, analysed by reference to levels in the fair value hierarchy into which each fair value measurement is categorised:

Level 1GH¢’000

Level 2GH¢’000

Level 3GH¢’000

Total FairValue

GH¢’000

TotalCarryingAmount

GH¢’000

2016

Assets

Cash and cash equivalents - 874,645 - 874,645 874,645

Investment securities - 637,834 - 637,834 663,331

Loans and advances to banks - 288,038 - 288,038 288,038

Loans and advances to customers - 752,906 - 752,906 759,730

Investment in other securities - 1,227 2,150 3,377 3,377

Other assets - 101,864 - 101,864 101,864

Total assets - 2,656,514 2,150 2,658,664 2,690,985

Liabilities

Deposits from customers - 1,289,869 - 1,289,869 1,406,009

Borrowings - 745,392 - 745,392 745,516

Other liabilities - 467,346 - 467,346 467,346

- 2,502,607 - 2,502,607 2,618,871


Level 1GH¢’000

Level 2GH¢’000

Level 3GH¢’000

Total FairValue

GH¢’000

TotalCarryingAmount

GH¢’000

2015

Assets

Cash and cash equivalents - 329,699 - 329,699 329,699

Investment securities - 254,984 - 254,984 257,332


Loans and advances to customers - 634,565 - 634,565 640,093

Investment in other securities - 1,177 2,150 3,327 3,327

Other assets - 129,600 - 129,600 129,600

Total assets - 1,350,025 2,150 1,352,175 1,360,051

Liabilities

Deposits from customers - 862,588 - 862,588 898,220

Borrowings - 167,377 - 167,377 167,377

Other liabilities - - 205,129 205,129 205,129

- 1,029,965 205,129 1,235,094 1,270,726 The fair value of investment securities is based on market prices or broker/dealer price quotations. Where this information is not available, fair value is determined using quoted market prices for securities with similar credit, maturity and yield characteristics.

Where applicable, the fair value of loans and advances to customers is based on observable market transactions. Where observable market transactions are not available, fair value is estimated using valuation models such as discounted cash flow techniques which represent the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine the fair value. For collateral-dependent impaired loans, the fair value is measured based on the value of the underlying collateral.

The fair value of advances due to and from Banks is based on discounted cash flow techniques applying the rates of similar maturities and terms.

The fair value of term deposits by customers is estimated using discounted cash flow techniques, applying the rates that are offered for deposits of similar maturities and terms. The fair value of deposits payable on demand is the amount payable at the reporting date.

Fair values of borrowings are estimated using discounted cash flow techniques, applying rates that are offered for borrowings of similar maturities and terms. No fair value disclosures are provided for investments in other equity securities that are measured at cost less any impairment losses because their fair values cannot be measured reliably. These investments are unquoted equity investments with no observable market data. There is no active market for these investments and the Bank does not intend to dispose off these investments in the foreseeable future.

5.0 Social Responsibilities2016

GH¢ ‘000 2015

GH¢ ‘000

The Bank spent the following amounts in fulfilling

Social responsibilities 212 78

Osu Night Market 30

UG Alumni Association 20


2016GH¢ ‘000

2015GH¢ 000

Korlebu Teaching Hospital 10

SME Financing Fair 10

Others 142

UMB /Joy FM Food Relief Fund 50

June 3 Disaster Fund 10

Others 18

6.0 Interest Income

2016GH¢ ‘000

2015GH¢ 000

Financial assets measured at amortised cost

Placements 70,082 11,617

Loans and advances 164,501 153,080

Leasing 89 1,864

Investment securities 68,658 34,831

303,330 201,392 Included in Interest Income from Loans and Advances for the year ended 31 Dec 2016 is a total of GH¢ 3 million (December 2015: GH¢ 34 million) accrued on impaired financial assets.

7.0 Interest Expense

2016GH¢ ‘000

2015GH¢ 000

Financial liabilities measured at amortised cost

Deposits from customers 104,440 88,486

Borrowings 55,827 13,504

160,267 101,990

8.0 Fee and Commission Income2016

GH¢ ‘0002015

GH¢ 000


Retail banking customer fees 23,752 17,875

Corporate banking 7,451 4,901

31,203 22,776

9.0 Fee and Commission Expense2016

GH¢ ‘0002015

GH¢ 000


Interbank transaction fees 1,983 568

5.0 Social Responsibilities Cont.


10. Net Trading Income

2016GH¢ ‘000

2015GH¢ 000

Foreign exchange 16,986 30,593

Others 129 -

17,115 30,593

11. Other Operating Income2016

GH¢ ‘0002015

GH¢ 000Bad debt recovered - specific 15 848

Others 6,921 949

6,936 1,797

12. Operating Expenses2016

GH¢ ‘0002015

GH¢ 000Auditor’s remuneration 144 144

Directors’ fees 909 916

Administrative expenses 90,433 59,659

Advertisements 826 1,309

Donation 32 93

92,344 62,121

13. Personnel Expenses2016

GH¢ ‘0002015

GH¢ 000Salaries and emoluments 18,603 17,971

Contributions to defined contribution plans 3,859 4,011

End of service benefit contribution 874 926

Training expenses 718 655

Other allowances 22,869 22,277

Medical expenses 2,484 1,778

49,407 47,618

The average number of persons employed during the period was 466 430

14. Impairment Expense2016

GH¢ ‘0002015

GH¢ 000Specific 7,457 78,149

Collective 3,128 4,343

MART - 32,748

Leasing-specific (4) (220)

Bad debts & other write -off 613 425

At 31 December 11,194 115,445


15. Other Income

2016GH¢ ‘000

2015GH¢ 000

Profit on sale of asset (Note 29e) - 5,518

Profit from disposal of subsidiaries ( Note 26) - 2,653

Miscellaneous income/Others 341 1,972

341 10,143

16. Income Tax 16a. Tax Charged to Statement of Comprehensive Income

2016GH¢ ‘000

2015GH¢ 000

Current income tax (note 18b) 5,074 -

National stabilisation levy (note 18b) - -

Deferred tax income (note 18c) 1,956 (1,800)

7,030 (1,800) 16b. Movement on Income tax

Balance1/1/2016GH¢ ‘000

Paymentsduring year

GH¢ ‘000

Charge forthe year/

adjustmentGH¢ ‘000

Balance12/31/2016

GH¢ ‘000

Year of assessment

Up to 2015 (6) - - (6)

2016 - (4,000) 5,074 1,074

(6) (4,000) 5,074 1,068

National Stabilisation Levy

Year of assessment

Up to 2015 257 - - 257

2016 - (800) - (800)

Total 251 (4,800) 5,074 525

The tax positions up to the 2015 year of assessment have been agreed with the tax authorities. The tax position for the 2016 year of assessment is yet to be agreed with the tax authorities.

The National Fiscal Stabilisation Levy Act, 2013 (862) was introduced in 2013 and is effective prospectively from July 2013 with an eighteen (18) months tenure. On 31 December 2014, Act (862) was amended by Act (882) to extend the date of expiration of the national fiscal stabilisation levy and to provide for related matters. Under the amendment Act, the levy is payable in respect of profit before tax for the 2013 to 2017 years of assessment. 16c. Deferred Tax

2016GH¢ ‘000

2015GH¢ ‘000

Balance at 1 January 863 9,545

Charged/(Released) for the year 1,597 (8,682)

Balance at 31 December 2,460 863


16d. Deferred Tax breakdown

Balance1/1/2016GH¢ ‘000

Movementsduring year

GH¢ ‘000

Balance 12/31/2016

GH¢ ‘000

Recognised in Profit and Loss

Accelerated depreciation (4,310) 4,310 -

Impairment on loans and advances (1,086) (782) (1,868)

Impairment on leasing (1) 1 -

Other items in profit and loss 3,597 (1,573) 2,024

(1,800) 1,956 156

Recognised in OCI

Available for sale investment - - -

Actuarial gains 444 (359) 85

Revaluation gain on land & building 2,219 - 2,219

2,663 (359) 2,304

Net deferred tax liability 863 1,597 2,460 16e. Deferred Tax breakdown

Balance1/1/2015GH¢ ‘000

Movementsduring year

GH¢ ‘000

Balance 12/31/2015

GH¢ ‘000

Recognised in Profit and Loss

Accelerated depreciation - (4,310) (4,310)

Impairment on loans and advances - (1,086) (1,086)

Impairment on leasing - (1) (1)

Other items in profit and loss - 3,597 3,597

- (1,800) (1,800)

Recognised in OCI

Available for sale investment 274 (274) -

Actuarial gains - 444 444

Revaluation gain on land & building 9,271 (7,052) 2,219

9,545 (6,882) 2,663

Net deferred tax liability 9,545 (8,682) 863

A reconciliation of the tax charge that would result from applying the corporation tax rate in Ghana to profit before tax to tax charge for the year is given as follows:

16f. Reconciliation of Effective Tax Rate

Bank 2016

GH¢ ‘000

Bank 2015

GH¢ ‘000

Profit/(Loss) before tax 27,387 (7,558)

Income tax using the domestic tax rate (25%) 6,847 (1,890)

Non-deductible expenses 9,098 8,645


2016GH¢ ‘000

2015GH¢ ‘000

Tax exempt income (9,056) (4,133)

Income subjected to tax at a different rate (188) -

Tax Incentive - (77)

6,701 2,545

Effective Tax Rate 24% (34%)

17. Cash and Cash Equivalents

2016GH¢ ‘000

2015GH¢ ‘000

Cash on hand 70,330 31,755

Balances with Bank of Ghana 197,298 137,036

Items in the course of collection 59,980 18,815

Other nostro balances 119,032 56,689

Cash and cash equivalents 446,640 244,295

Short term placements 428,005 85,404

874,645 329,699

18. Investment Securities2016

GH¢ ‘0002015

GH¢ ‘000

Treasury bills/notes 663,331 257,332

At 1 January 257,332 132,590

Additions 643,923 249,000

Redeemed on maturity (257,332) (132,590)

Accrued income 19,408 8,332

At 31 December 663,331 257,332

Maturing within 90 days of acquisition 444,336 50,221

Maturing after 90 days but within 182 days 142,475 73,562

Maturing after 182 days of acquisition 76,520 133,549

663,331 257,332

There was no indication of impairment of investment securities held at the reporting date and similar date at prior year.

19. Loans and Advances To Banks2016

GH¢ ‘0002015

GH¢ ‘000

Placement with other Banks & other financial institutions 288,038 -

Maturing within 12 months 288,038 -

16f. Reconciliation of Effective Tax Rate


20. Investment In Other Securities2016

GH¢ ‘0002015

GH¢ ‘000

Comprising

Unlisted equity securities 2,150 2,150

Associates (note 25) 1,227 1,177

3,377 3,327

The Bank has investments in the following entities:

Name Nature of BusinessCountry of

IncorporationPercentage

Interest

i. City Car Park Limited To implement and manage multi-storey car park in Central Accra.

Ghana 14.80%

ii. West African Guarantee Fund (GARI)

To support private sector through the provision of partial guarantee.

Togo 0.83%

21a. Loans and Advances To Customers

2016 GH¢ ‘000

2015GH¢ ‘000

Term Loans 478,568 328,644

Overdrafts 324,648 351,140

Leasing debtors (note 23) 368 658

803,584 680,442

Impairment allowance (note 22b; 23) (50,678) (40,349)

Net loans and advances 752,906 640,093

a. Loans and advances to customers and staff 803,216 679,784

b. Non-performing loans ratio (prudential) 10.6% 6.3%

c. Non-performing loans ratio (IFRS) 9% 7%

d. 50 largest exposures to total exposures 87% 86%

21b. Movement in Impairment Allowance

2016 GH¢ ‘000

2015GH¢ ‘000

Balance at 1 January 40,193 58,085

Amounts written off against impairment (252) (331)

Increase in impairment 10,585 82,492

Released on disposal - (100,053)

50,526 40,193


21c. Specific Allowance for Impairment2016

GH¢ ‘0002015

GH¢ ‘000Balance at 1 January 35,850 54,242

Amounts written off against impairment (251) (331)


Released on disposals - (96,210)

43,056 35,850

21d. Collective Allowance for Impairment2016

GH¢ ‘0002015

GH¢ ‘000Balance at 1 January 4,343 3,843



7,470 4,343

21e. Gain/ (Loss) on de-recognitionThe Bank during the year derecognised some loans whose terms were significantly modified as a result of restructuring arrangement. The analysis of the gains/ (loss) from the de-recognition are shown below:

2016GH¢ ‘000

2015GH¢ ‘000

Gross loans and advances 127,949 113,977

Impairment allowance (14,296) (100,053)

Net loans and advances 113,653 13,924

Restructured amount/sale proceeds (110,653) (58,862)

Loss/gain on derecognition 3,000 (44,938)

21f. Gain/ (Loss) of de-recognition of MART Bonds

2016GH¢ ‘000

2015GH¢ ‘000

Cost - 212,728

Net recoveries made - 1,321

Impairment allowance - (212,728)

Net book value - 1,321

Sales proceeds - (15,000)

Gain on disposal - (13,679)

22. Leasing Debtors

2016GH¢ ‘000

2015GH¢ ‘000

Leasing debtors 368 9,075

Unearned interest & discounts - (96)

Disposals - (8,321)

Gross leasing debtors 368 658


2016GH¢ ‘000

2015GH¢ ‘000

Impairment allowance - Specific 149 7,020

- Collective 3 5


Allowance for impairment 152 156

Net leasing debtors 216 502

22a. Gain/Loss on de-recognition2016

GH¢ ‘0002015

GH¢ ‘000The gain on de-recognition of leasing debtors is shown below:

Gross lease debtors - 8,320

Impairment allowance - (6,869)

Net lease debtors - 1,451

Sale proceeds - (6,138)

Gain on de-recognition - (4,687)

23. Investment In Subsidiaries

2016GH¢ ‘000

2015GH¢ ‘000

Shares - -

Gain on sale of controlling interest - 2,653

24. Investment In Associates2016

GH¢ ‘0002015

GH¢ ‘000At 1 January 1,177 -

Additions - 1,188

Share of associates’ fair value loss (37) (3)

Share of associates’ profit/(loss) 87 (8)

At 31 December 1,227 1,177

The Bank has three associates that are equity accounted for. They are UMB Investment Holdings Limited (UMBIHL); UMB Stockbrokers Limited (UMBSL) and Strategic Debt Solutions Limited (SDSL).

UMB Investment Holdings Limited

UMB Stockbrokers Limited

Strategic Debt Solutions Limited (SDSL)

The relationship with the Bank

Common control, no direct relationship to the Bank’s operations



Principal place of business/country of incorporation

Accra, Ghana Accra, Ghana Accra, Ghana

Ownership interest/voting rights

25% 25% 25%

22. Leasing Debtors


Extract from the Financial Statements of Associates

UMBIHL UMBSBL SDSL Total

2016GH¢’000

2015GH¢’000

2016GH¢’000

2015GH¢’000

2016GH¢’000

2015GH¢’000

2016GH¢’000

2015GH¢’000

Revenue 5,992 2,160 311 428 786 - 7,089 2,588

Profit/Loss from continuing operations 791 211 (361) (377) (83) - 346 (166)

Other comprehensive income /(Loss) (117) (46) (32) (34) - - (149) (80)

Total comprehensive income/Loss 674 165 (393) (411) (83) - 197 (246)

Attributable to investee’s shareholders 674 165 (393) (411) (83) - 197 (246)

Total assets 16,057 10,744 1,398 1,495 384 212,778 17,840 225,017

Total liabilities (11,320) (7,475) (909) (651) 417 (212,728) (12,646) (220,854)

Net assets 4,737 3,269 489 844 (33) 50 5,194 4,163

Attributable to investee’s shareholders 4,737 3,269 489 844 (33) 50 5,194 4,163

Bank’s interest in net assets at 1 January

1,032 1,025 132 150 13 13 1,177 1,188

Total comprehensive in-come/Loss to the Bank

168 7 (97) (18) (21) - 50 (11)

Additions - - - - - - - -

Dividends received during the year - - - - - - - -

Bank’s interest at 31 December 1,200 1,032 35 132 (8) 13 1,227 1,177

25. Other Assets

2016GH¢ ‘000

2015GH¢ ‘000

Accounts receivable 114,685 129,626

Prepaid expenses 17,567 5,464

132,252 135,090


26a. Property & Equipment

Land &BuildingsGH¢ ‘000

OfficeFurniture &Equipment

GH¢ ‘000

MotorVehicles

GH¢ ‘000

Capital Work-In-ProgressGH¢ ‘000

TotalGH¢ ‘000

Cost/Revalued amount

Balance at 01.01.2016 14,500 60,637 2,436 3,297 80,870

Additions - 12,884 4,081 6,035 23,000

Balance at 31.12.2016 14,500 73,521 6,517 9,332 103,870

Depreciation

Balance at 01.01.2016 415 29,794 946 - 31,155

Charge for the year 415 9,603 883 - 10,901

Adjustment - 159 (2) - 157

Balance at 31.12.2016 830 39,556 1,827 - 42,213

Net book value

At 31.12.16 13,670 33,965 4,690 9,332 61,657

At 31.12.15 14,085 30,843 1,490 3,297 49,715

There was no indication of impairment of property and equipment held by the Bank at 31 December 2016 (2015: nil). None of the property and equipment of the Bank had been pledged as securities for liabilities and there were no restrictions on the title of any of the Bank’s property and equipment at the reporting date and at the end of the previous year.

Contractual commitment for the acquisition of property and equipment. There was no contractual commitments for the acquisition of property and equipment in 31 December 2016 and 31 December 2015.

26b. Disposal of Property and Equipment

2016GH¢ ‘000

2015GH¢ ‘000

Cost - 27,965

Accumulated depreciation - (863)

Net book value - 27,102

Sales proceeds - 32,620

Gain / (loss) on disposal - 5,518

27. Intangible Assets2016

GH¢ ‘0002015

GH¢ ‘000

Cost/valuation


Additions 13,082 2,237

Transfers - 15

Adjustment (15) -

Balance at 31 December 19,745 6,678


Amortisation


Charge for the year 2,442 492

Adjustment - 2


Net book value 13,735 3,110

Intangible Assets represent Computer Software. There was no indication of impairment of intangible assets held by the Bank at the reporting date and at the end of the previous year.

28. Deposits From Customers

2016GH¢ ‘000

2015GH¢ ‘000

Current accounts 863,166 546,238

Savings accounts 109,326 77,234

Time deposits 433,517 405,892

Cash margins - (131,144)

1,406,009 898,220

Analysis by Type of Depositor:

Individuals and private enterprises 716,187 775,402

Public enterprises 418,695 37,282

Financial institutions 271,127 85,536

1,406,009 898,220

Maturing within 12 months 1,405,981 813,929

Maturing after 12 months 28 84,291

1,406,009 898,220

a. 20 largest depositors to total deposit ratio 42% 27.8%

29. Borrowings2016

GH¢ ‘0002015

GH¢ ‘000

Loans from banks 529,740 5,067

Due to other institutions 185,776 162,310

Subordinated debt 30,000 -

745,516 167,377

Loans from banks represents borrowings of GHS 500 million and GHS 5 million from Bank of Ghana and ARP Apex Bank for 180 days and 91 days respectively and may both be renewed on expiry. Interest for both facilities, is at a rate of 26% per annum. Principal plus any outstanding interest are payable on maturity.

Loans from other institutions represent borrowings of GHS 12 million and USD 41 million obtained from Social Security and National Insurance Trust (SSNIT) and Ghana National Petroleum Company (GNPC) respectively. Interest rates charged on these loans were 22.5% and 6% respectively. Both loans are for a period of 91 days and may be renewed on expiry. Principal plus any outstanding interest are payable on maturity.


Subordinated debt represents a convertible debt of GHS 30 million, obtained from Fortiz Private Equity Fund for a period of 5 years. Interest rate is at 18% per annum. The instrument could be converted at any time at a mutually agreed price between the borrower and the lender.

The subordinated debt was received at year end. Consequently, its dilutive effect on the earnings per share was negligible.

30. Other Liabilities2016

GH¢ ‘0002015

GH¢ ‘000

Creditors & Accruals 38,569 57,346

Bills Payable 21,150 16,639

Cash margins 19,047 131,144

Funds held in trust 388,579 -

467,345 205,129

Funds held in trust represents funds that the Bank has received for custody on behalf of other parties.

31. Stated Capital2016

Number of Shares

2015Number of

Shares

Authorised:

Number of Ordinary Shares of no par value 20,000,000 5,000,000

Issued:

2016Number of

Shares

2015Number of

Shares

2016Amount

GH¢ ‘000

2015Amount

GH¢ ‘000

Issued for cash 5,948,169 4,773,625 140,005 126,405

Capitalisation issue 98,750 98,750 24,995 24,995

Amount paid other than cash 127,264 127,264 43,800 43,800

6,174,183 4,999,639 208,800 195,200

a. There is no unpaid liability on any share and there is no share in treasury.

32. Deposit For Shares

2016GH¢ ‘000

2015GH¢ ‘000

Deposit for Shares - 13,600


33. Revaluation Reserves

2016GH¢ ‘000

2015GH¢ ‘000

Balance at 1 January

Deferred tax on revaluation gain on land and buildings 17,771 33,288

Disposals/reversals - (22,569)

Deferred tax released on disposed assets - 7,052

17,771 17,771

34. Credit Risk Reserve

2016GH¢ ‘000

2015GH¢ ‘000


Transfer from income surplus 28,942 6,003


This represents a transfer from / to income surplus of an amount representing the excess of provision made under Bank of Ghana prudential norms over the impairment allowance made under IFRS impairment principles.

35. Statutory Reserve Fund2016

GH¢ ‘0002015

GH¢ ‘000


Transfers from income surplus 10,384 -


This represents amounts set aside as a non-distributable reserve from annual profits in accordance with section 29 of the Banking Act, 2004 (Act 673).

36. Available For Sale Reserve

2016GH¢ ‘000

2015GH¢ ‘000

Balance at 1 January (3) 1,827

Reversal - (1,827)

Share of fair value loss in associates (37) (3)

(40) (3)

37. Other Reserves2016

GH¢ ‘0002015

GH¢ ‘000

Balance at 1 January 1,032 (300)

Actuarial gain/(loss) (1,434) 1,776

Deferred Tax 359 (444)

Balance at 31 December (43) 1,032

Other reserves represent actuarial gains and losses on pension obligations recognised through other comprehensive income.


38. Contingencies And Commitments Off balance sheet itemsAs part of normal banking practice, the Bank engages in business activities involving acceptances, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties, the nominal amounts of which are not reflected in the statements of financial position. Nature of instrumentsAn acceptance is an undertaking by a Bank to pay a bill of exchange drawn on a customer. The Bank expects most acceptances to be presented, but reimbursement by the customer is normally immediate.

Other contingent liabilities include transactions related customs and performance bonds and are generally short-term commitments to third parties.

Commitments to lend to a customer in the future are made subject to certain conditions. Such commitments are either made for a fixed period or agreed maturity dates but are cancellable by the lender subject to notice requirements. Documentary credits commit the Bank to make payments to third parties on the production of documents, which are usually reimbursed immediately by customers.

Customers are required to deposit cash in a margin account in respect of documentary and commercial letters of credit. The following summarise the nominal principal amounts of contingent liabilities and commitments with off-balance sheet risks.

2016GH¢ ‘000

2015GH¢ ‘000

Letters of credit 148,062 110,685

Guarantees and indemnities 85,929 41,521

Gross Exposure 233,991 152,206

Cash cover (13,451) (8,006)

Net Exposure 220,540 144,200

Unrecognised loan commitments 117,257 -

337,797 144,200 Legal proceedingsThere were a number of legal proceedings pending against the Bank at 31 December 2016 and 2015 Some of these cases have been brought against the Bank by former employees, customers and others. Potential liabilities that may arise should the cases be decided against the Bank are estimated at GH¢103m (2015: 3.39m).

39. Related Partiesa. Transactions with Executive Directors and key management personnel Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Bank (directly or indirectly) and comprise the Directors and senior management of Universal Merchant Bank Limited. There were no material transactions with companies in which a Director or other members of key management personnel (or any connected person) is related. No provisions have been made in respect of loans to Directors or other members of key management personnel (or any connected person).


Remuneration of Executive Directors and other key management personnel

2016GH¢ ‘000

2015GH¢ ‘000

Salaries and other short-term benefits 6,248 5,028

Loans

Loans outstanding at 1 January 451 1,650

Net movement during the year (34) (1,199)

Loans outstanding at 31 December 417 451

Deposits

Deposits at 1 January 362 843

Net movement during the year (239) (481)

Deposits at 31 December 123 362 Loans to Executive Directors and key management personnel include car and other personal loans which are given under terms that are no more favourable than those given to other staff. Interest rates charged on balances outstanding from related parties are a tenth of the rates that would be charged in an arm’s length transaction. All other transactions with related parties are at an arm’s length.

No impairment has been recognised in respect of loans granted to Executive Directors and key management personnel at 31 December 2016 and 2015. The car loans are secured by the underlying assets. All other loans are unsecured.

No loans were advanced to non-executive Directors during the year. There were no balances outstanding on account of loans due from non-executive Directors at the reporting date.

b. Transactions with Parent Company:The transactions between the Bank and its parent, Fortiz Private Equity Fund Limited, during the year were as follows:

2016GH¢ ‘000

2015GH¢ ‘000

Purchase of non-performing loans - 65,000

Purchase of MART bond - 15,000

Purchase of 75% shares in Subsidiaries - 3,563

- 83,563

c. Transactions with other related parties are shown below:

Advances including the followingamounts were lent to Related Parties:

2016GH¢ ‘000

2015GH¢ ‘000

Other Shareholders (SIC Life) 2,506 5,372

Officers and other employees 15,809 13,337

18,315 18,709

Maximum amount due from officers of the company 16,227 13,987


40. Provision for Employee Leave Days Outstanding2016

GH¢ ‘0002015

GH¢ ‘000

Balance at 1 January 1,142 677

Additional provision during the year 821 657

Payments during the year - (189)

Write back - (3)


41. Details Of ShareholdingHolding Number of Shares

2016 2015 2016 2015

Name of Shareholder

a. Fortiz Private Equity Fund Limited 96.00% 95.05% 5,927 4,752

b. Social Security And National Insurance Trust (SSNIT) 3.59% 4.43% 222 222

c. SIC Life Company Limited 0.41% 0.52% 25 26

100.00% 100.00% 6,174 5,000

Number of shares in thousands

42. Employee BenefitsPost-employment and long-term benefit planApart from the legally required social security scheme, the Bank contributes to the following post-employment defined benefit plans.

• Plan A - long service awards accrue to employees based on graduated periods of uninterrupted service. • Plan B - The Bank also pays post retirement medical care of its staff for two years after retirement or voluntary exit.

These defined benefit plans expose the Bank to actuarial risks, such as longevity risk, interest rate risk and market (investment risk).

Movement in defined benefit liability- 2016GH¢ ‘000

2015GH¢ ‘000


Included in profit and loss

Current service cost 218 402

Interest cost 808 97

Included in other comprehensive income

Re-measurement of loss (gain)

- Actuarial loss (gain) arising from:

- Experience 1,434 (1,776)

Benefit paid (232) (732)



Actuarial assumptions

2016 %

2015 %

Discount rate 19.1 24

Future salary growth 11 20

Medical inflation 16.5 16.5

Sensitivity AnalysisReasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

IncreaseGH¢ ‘000

DecreaseGH¢ ‘000

Discount rate (1% movement) 3,441 3,380

Medical inflation (1% movement) 374 313 Although the analysis does not take into account the full distribution of cash flows expected under the plans, it does provide an approximation of the sensitivity of the assumptions shown.

43. Classification of Financial InstrumentsDesignated

at Fair Value through Profit

or LossGH¢’000

Held to Maturity GH¢’000

Availablefor Sale

GH¢’000

Loans & Receivables

GH¢’000

FinancialLiabilities at

Amortised Cost GH¢’000

Total GH¢’000

Assets

Cash and cash equivalents - - - 874,645 - 874,645

Investment securities - 663,331 - - - 663,331

Loans and advances - - - 288,038 - 288,038

Investment in other securities - 2,150 1,227 - - 3,377

Loans and advances to customers - - - 752,906 - 752,906

Other assets - - - 101,864 - 101,864

Total at 31 Dec 2016 - 665,481 1,227 2,017,453 - 2,684,161

Liabilities

Deposits from customers - - - - 1,406,009 1,406,009

Borrowings - - - - 715,516 715,516

Other liabilities - - - - 471,991 471,991

Employee benefit obligations - - - - 3,459 3,459

Total at 31 Dec 2016 - - - - 2,596,975 2,596,975


Designatedat Fair Value

through Profit or Loss

GH¢’000

Held to MaturityGH¢’000

Availablefor Sale

GH¢’000

Loans & Receivables

GH¢’000

FinancialLiabilities at

AmortisedCost GH¢’000

TotalGH¢’000

Assets

Cash and cash equivalents - - - 329,699 - 329,699

Investment securities - 257,332 - - - 257,332

Loans and advances to banks - - - - - -

Investment in other securities - 2,150 1,177 - - 3,327

Loans and advances to customers

- - - 640,093 - 640,093

Other assets - - - 126,972 - 126,972

Total at 31 Dec 2015 - 259,482 1,177 1,096,764 - 1,357,423

Liabilities

Deposits from customers - - - - 897,992 897,992

Borrowings - - - - 167,377 167,377

Other liabilities - - - - 205,129 205,129

Employee benefit obligations - - - - 1,231 1,231

Total at 31 Dec 2015 - - - - 1,271,729 1,271,729

44. New Standards And Interpretations Not Yet Adopted A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016 and earlier application is permitted; however, the Bank has not applied these new or amended standards in preparing these financial statements. Those which may be relevant to the Bank are set out below. The Bank does not plan to adopt these standards early.

Standard/Interpretation Effective datePeriods beginning on or after

IFRS 15 Revenue from contracts with customers 1 January 2018

IFRS 9 Financial Instruments 1 January 2018

(amendment to IAS 7) Disclosure initiative 1 January 2017

(amendment to IAS 12) Recognition of deferred tax for unrealised losses 1 January 2017 i. IFRS 9 Financial InstrumentsIFRS 9 published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Bank is assessing the potential impact on its financial statements resulting from the application of IFRS 9. Given the nature of the Bank’s operations, this standard is expected to have a pervasive impact on the Bank’s financial statements. In particular, calculation of impairment of financial instruments on an expected credit loss basis is expected to result in an increase in the overall level of impairment allowances.


ii. IFRS 15 Revenue from Contracts with CustomersIFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Bank however does not plan to early adopt the standard.

The Bank is assessing the potential impact on its financial statements resulting from the application of IFRS 15, therefore the impact is currently unknown. iii. Disclosure Initiative (Amendments to IAS 7)The amendments require disclosures that enable users of the financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cashflow and non-cash changes.

The amendments are effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Bank however does not plan to early adopt the standard.

The Bank is assessing the potential impact on its financial statements resulting from the amendments, therefore the impact is currently unknown.

iv. Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12)The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value.

The amendments are effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Bank however does not plan to early adopt the standard.

The Bank is assessing the potential impact on its financial statements resulting from the amendments. It however, does not expect any significant impact.

45. ComparativesExcept when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information.


APPENDIX 1A. VALUE ADDED STATEMENT

2016GH¢ ‘000

2015GH¢ ‘000

Interest earned and other operating income 339,486 298,557

Direct cost of Services (255,221) (164,242)

Value added by banking services 84,265 134,315

Non-banking Income 17,130 31,440

Impairments (11,194) (115,446)

Value Added 90,201 50,309

Distributed as follows:

To Employees:

Directors (without executives) 909 941

Executive Directors - -

Other employees 48,475 47,114

To Government:

Income tax (7,030) 1,800

To providers of capital:

Dividends to shareholders - -

To expansion and growth:

Depreciation 10,901 9,007

Amortisation 2,442 813

Retained earnings 20,444 (5,766)

B. REGULATORY DISCLOSURES

Quantitative Disclosures

Capital Adequacy Ratio (CAR) 10.13% 11.47%

Liquidity ratio 60% 37%

Non-performing loans ratio 10.6% 6.3%

Regulatory breaches

Capital Adequacy Ratio (CAR) 2 times 10 times

Single Obligor 7 times 12 times

Liquidity None None


Resolutions – 2017 UMB Annual General Meeting

The Board of Directors will be proposing the following resolutions, which will be put to the 2017 Annual General Meeting:

Ordinary Resolutions

Resolution 1 – Approval of AccountsThe general meeting approves the accounts of the Company for the financial year ended on December 31, 2016. The general meeting discharges the Directors and Auditors from all liabilities in relation to any act or action performed by them with respect to the affairs of the Company for the financial year ended 31st December, 2016.

Resolution 2 – Confirmation of New DirectorshipThe General Meeting confirms the appointment of Messrs Kwame Adjei-Adjivonh as Executive Director. It is noted that Mr. Adjei-Adjivonh has been appointed Chief Finance Officer of the Bank.

Resolution 3 – Confirmation of New DirectorshipThe General Meeting confirms the appointment of Messrs Benjamin Amenumey as Executive Director. It is noted that Mr. Amenumey has been appointed Chief Operating Officer of the Bank.

Resolution 4 – Declaration of a DividendThe General Meeting hereby declares that, no dividend shall be paid to members of the Company for the financial year ended 31st December, 2016.

Resolution 5 – Determination / Fixing of Auditors FeesThe General Meeting hereby authorizes the Board of Directors to determine / Fix the remuneration of the Auditors for the Bank’s 2017 audit.

Resolution 6 – Directors FeesThe General Meeting hereby authorizes the Company to determine the fees of the Directors.


Proxy Form43rd ANNUAL GENERAL MEETING of Universal Merchant Bank Limited to be held at 10.00 a.m. on, Thursday 27th April, 2017 at the Movenpick Ambassador Hotel, Accra.

I/WE

of

being a member/members of the above-named Company hereby appoint

of or failing him/her

of as my/our Proxy to vote for me/us on my/our behalf at the

Annual/Extraordinary General Meeting of the Company to be held on the 27th day of April, 2017 and at any adjournment thereof.

Signed this day of 2017.

For and on behalf of

Website: www.myumbbank.com MTN: 0800-100880 Airtel & Vodafone: 0800-10088Other Lines: 0302-633988

Pick up your instant VISA card today.

Walk into any UMB branch and walk out with a UMB Visa Classic card,UMB Visa Prepaid card or UMB Visa Business card in a matter of minutes.It's that easy!

Get your Visa Cardin minutes at UMBGet your Visa Cardin minutes at UMB

annual report | 2016 - universal merchant bank annual report.pdf · 4 universal merchant bank |...

Documents