quality at every step. - polaris bank limited

Qualityat everystep.

MISSION

We will leverage our

knowledge of an ever -

changing world to

design innovative

solutions that

facilitate our customers'

enterprise

VISION

To be the preferred partner

providing superior financial

solutions for our customers

VALUES

Boldness

Sustainability

Innovative

Continous Learning

Trustworthy

POLARIS BANK ANNUAL REPORT & FINANCIAL STATEMENTS 2019

4

TABLE

of contents

NOTICE OF ANNUAL GENERAL MEETING 5

RESULTS AT A GLANCE 6

DIRECTORS AND ADVISERS 7

CORPORATE GOVERNANCE REPORT 9

SUSTAINABILITY REPORT 17

CHAIRMAN’S STATEMENT 26

MANAGING DIRECTOR’S STATEMENT 31

PROFILE OF DIRECTORS 39

REPORT OF THE DIRECTORS 44

REPORT OF THE INDEPENDENT CONSULTANT 47

STATEMENT OF DIRECTORS' RESPONSIBILITIES 48

INDEPENDENT AUDITOR’S REPORT 50

STATEMENT OF COMPREHENSIVE INCOME 56

STATEMENT OF FINANCIAL POSITION 57

STATEMENT OF CHANGES IN EQUITY 58-61

STATEMENT OF CASHFLOWS 62

NOTES TO THE FINANCIAL STATEMENTS 63-156

MANAGEMENT TEAM 159

PRODUCTS & SERVICES 162-174

CORPORATE DIRECTORY 176-182

PROXY FORM 183


5

Date: May 28, 2020

Venue: The Head Office, Polaris Bank Limited 3, Akin Adesola Street, Victoria Island, Lagos.

Time: 11:00a.m.

ORDINARY BUSINESS

The following businesses will be transacted at the meeting as ordinary businesses:

1. To receive and consider the Audited Financial Statements for the period from September 21 to December 31,2018 and year

ended December 31,2019, together with the Reports of the Directors and Auditors, respectively

2. To re-elect Directors.

3. To appoint Messrs. PricewaterhouseCoopers as the Bank's Auditors.

4. To authorize the Directors to fix the remuneration of the Auditors.

SPECIAL BUSINESS

The following business will be transacted at the meeting as a special business:

5. To fix the Directors' fees for the year ending December 31, 2020 .

PROXY

A person entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his / her stead. A proxy need not

be a member of the company. To be valid, the proxy form must be duly signed by the shareholder and stamped at the Stamp Duties

office and returned to the Company Secretariat of the Bank at 3, Akin Adesola Street, Victoria Island, Lagos, not less than 48 hours

before the date and time scheduled for the meeting.

NOTICE OF

annual generalmeeting

NOTICE IS HEREBY GIVEN to you that the Annual General Meeting of

Polaris Bank Limited will hold as follows:

BY THE ORDER OF THE BOARD

BABATUNDE OSIBODUGENERAL COUNSEL/COMPANY SECRETARYFRC/2016/NBA/000000154643, Akin Adesola Street, Victoria Island, Lagoswww.polarisbanklimited.com


6

RESULTS AT A

glance

GROSS EARNINGS PROFIT BEFORE TAX PROFIT AFTER TAX

N150.36 billion N27.34 billion N26.29 billion

(All amounts in millions of Naira unless otherwise stated)

31 December

2019

21 September - 31

December

2018

31 December

2019

21 September - 31

December

2018

Major Income Statement items

Gross Earnings 150,361 37,392 150,848 37,392

Profit Before Tax 27,342 2,456 27,829 2,456

Profit After Tax 26,290 2,856 27,350 2,431

31 December

2019

31 December

2018

31 December

2019

31 December

2018

Major Statement of Financial Position items

Loans and Advances to customers 188,738 340,050 188,738 340,050

Deposits from customers 857,885 861,044 857,885 861,044

Total Assets 1,156,644 1,168,658 1,143,266 1,150,095

Total Liabilities 1,069,754 1,109,901 1,060,277 1,097,133

GROUP BANK

GROUP BANK


7

DIRECTORS AND

advisersDIRECTORS APPOINTED BY CENTRAL BANK OF NIGERIA

DIRECTOR CAPACITY

1 Mr. Muhammad K. Ahmad, OON Chairman/Non-Executive Director

2 Mr. Adetokunbo M. Abiru Managing Director/CEO

3 Alhaji Abdullahi M. Umar Non-Executive Director

4 Mr. Austin E. Jo-Madugu Non-Executive Director

5 Mr. Bata G. Wakawa Non-Executive Director

6 Mr. Olu O. Odugbemi Non-Executive Director

7 Mr. Abdullahi S. Mohammed Executive Director

8 Mr. Innocent C. Ike Executive Director

GENERAL COUNSEL/

COMPANY SECRETARYMr. Babatunde Osibodu

FRC/2016/NBA/00000015464

REGISTERED OFFICE 3, Akin Adesola Street, Victoria Island,

Lagos

WEBSITE www.polarisbanklimited.com

TELEPHONE +(234) -1- 2701600

Landmark Towers

5B Water Corporation Drive,

Victoria Island, Lagos

www.pwc.com/ng

AUDITORS

PricewaterhouseCoopers

(Chartered Accountants)

CORPORATE GOVERNANCE REPORT

8


9

As a private limited liability company, the Bank is required to

adhere to the CBN Code of Corporate Governance for Banks and

Discount Houses in Nigeria 2014, and more recently, the new

Nigerian Code of Corporate Governance 2018. As it continues to

institutionalise sound Corporate Governance, the Bank remains

committed to ensuring compliance with these Corporate

Governance regulations as well as other best practices.

Board Structure & Composition

The Board of Polaris Bank was appointed at the inception of the

Bank on September 21, 2018. As at December 31, 2019, the Board

was composed of eight (8) members. Five (5) of them were Non-

Executive Directors (NEDs) including the Chairman and the other

three (3) were Executive Directors (EDs), including the Managing

Director/Chief Executive Officer. Its members have varied

experiences in Finance and Accounting, Banking, Public Service,

Strategy & Innovation, Business Entrepreneurship, Risk

Management and Governance amongst others.

The positions of the Chairman and the Managing Director are

separate and held by two individuals, thereby ensuring that no

one individual has unfettered powers of decision making. The

Chairman provides overall leadership and direction to the Board.

His primary responsibility is to ensure effective operation of the

Board towards achieving the Bank’s strategic objectives,

including enhancing shareholder value. The Managing

Director/Chief Executive Officer is the Head of Management and

is responsible for the day-to-day management of the Bank

toward achieving its corporate objectives.

Furthermore, in the interest of safeguarding the objectivity and

independence of the Board, there are no two members of the

same family on the Board concurrently.

No changes took place in the structure of the Board during the

2019 Financial Year.

Roles and Responsibilities of the Board

The Board provides leadership and vision to the Company in a

manner that will enhance Shareholder value and ensure that the

Bank’s long-term vision is realised. Some decisions are reserved

for the Board, such as approval of corporate strategy and annual

budgets, approval of policies, risk management strategy,

succession planning and the appointment , training,

remuneration and replacement of Board members and senior

Management amongst others. The roles and responsibilities of

the Board are outlined below:

CORPORATE

governance reportFOR THE YEAR ENDED 31 DECEMBER 2019

A culture of alignment with sound Corporate Governance practices is pivotal to the success,and survival of an enterprise. Polaris Bank recognises this, and therefore ensures thatthere are effective governance policies, practices and structures in place to guide theaffairs of the enterprise. The activities of the organisation, including oversight byManagement and the Board of Directors are carried out in a manner consistent with theCorporate Governance principles of Fairness, Probity, Accountability, Responsibility, andTransparency.

The Chairman provides overall leadership and direction to the Board.


10

. Defining levels of materiality, reserving specific powers

to itself and delegating other matters within authority

to Management;

. Retention of full and effective control over the Bank

and monitoring Management’s implementation of

Board plans and strategies;

. Ensuring ethical behaviour and compliance with

relevant laws and regulations, audit and accounting

principles, and the Bank’s governing documents;. Striving to act above and beyond the minimum

requirements and benchmark of international best

practices;

. Ensuring a healthy balance of the interests of all the

Bank’s relevant stakeholders;

. Being aware of, and committing to, the underlying

principles of good governance; and

. Approval of specific financial and non-financial

objectives and policies proposed by Management.

Appointment, Induction and Training of Board Members

The criteria for the appointment of members to the Board are laid

down in the Board Succession Planning Policy which is a formal,

transparent and rigorous process. New members are selected

based on their wealth of experience, relevant leadership skills,

integrity, meeting the fit and proper person criteria and

competence amongst others . The process of Board

appointments is not concluded until the nominees are duly

appointed/approved by the Central Bank of Nigeria (CBN) and

ratified by Shareholders in general meeting

Upon appointment to the Board, Directors are taken through a

formal induction process which is anchored by the Company

Secretary. The induction process is targeted at facilitating their

understanding of the Bank and the environment and markets in

which it operates. As part of the induction programme, Board

members are provided access to various materials such as

corporate information of the Bank, Minutes of Board and Board

Committee meetings, as well as Annual Reports and Accounts.

This is then followed by interactive sessions with key Senior

Management staff to deepen the Directors’ understanding of the

materials provided.

The Bank appreciates the crucial importance of continuous

learning to the effectiveness of the Board in the discharge of its

functions. Board members are therefore provided with relevant

training programmes.

Board Evaluation

In line with Corporate Governance regulations and best practices

in Corporate Governance, the Bank has a formal process for the

evaluation of the Board. Annually, an independent consultant is

engaged to conduct a performance evaluation of the Board as a

whole, its Committees, the Chairman and individual Directors.

The appraisal process involves a benchmark of the Bank’s

existing governance documentation, structure and practices,

with relevant Corporate Governance regulations and best

practices to enable the identification of governance gaps, one-

on-one interview sessions with the Directors, 360 degree

appraisal process for directors, and feedback sessions with the

Chairman, the Chief Executive Officer and the Company

Secretary.

The Board has engaged an independent consultant, KPMG

Professional Services, to carry out the annual Board and

Individual Performance Appraisal for the 2019 financial year.

The report of the Appraisal will be presented to the Bank’s

shareholders, and a copy will be sent to the Central Bank of

Nigeria (CBN) in line with regulation.

Shareholders

Polaris Bank is a private limited liability company, wholly owned

by the Assets Management Corporation of Nigerian, an agency of

the CBN.

The Board and Management of the Bank ensures an open line of

communication and full disclosure of all matters relating to the

Bank’s operations to AMCON and obtains approval of the agency

where required. The first Annual General Meeting (AGM) of the

Bank will be held in May 2020.

The Company Secretary

The Company Secretary is accountable to the Board as a whole

and advises the Board through the Chairman and the Managing

Director on all matters of governance, including their duties. He

ensures that the Board receives relevant information, including

agenda and documents for consideration at the Board and

Board Committee meetings. The Company Secretary ensures

that the Bank is in compliance with all regulatory and statutory

requirements.



11

Board Meetings

At the beginning of each financial year, meetings of the Board,

and its Committees are scheduled in advance for the entire year.

The agenda for each meeting and the supporting Board papers

are sent to Directors at least 7 days before the meeting to provide

them sufficient time to review the papers and request for

additional information, where necessary. For review at Board

meetings, the members receive reports on the implementation

of the corporate strategy and the financial performance of the

Bank. Directors have access to Management through the

Company Secretariat and take independent advice from

Consultants where required. The Board operates as a cohesive

team; thus, decisions are reached by consensus.

The membership of the Board during the 2019 financial year is as

shown below:

During the year, there were six (6) meetings of the Board of

Directors on January 24, March 6, May 7, August 8, November 7,

and December 12. The Board recorded 100% membership

attendance at these meetings as ALL Directors were present..

Board Committees

The Board Committees of the Bank as at December 31, 2019 were

as follows:

• Board Governance, Nominations & Compensation

Committee • Board Credit Committee • Board Finance & General Purposes Committee • Board Audit & Risk Management Committee

Board Governance, Nominations & Compensation

Committee (BGNCC)

The Committee is established to assist the Board in carrying out

its oversight responsibility with respect to the Bank’s compliance

with corporate governance best practices, nominations to the

Board, and implementation of appropriate compensation for the

Bank’s staff as well as Board members. The major terms of

reference of the Committee are:

• Assisting the Board in the identification of people

e l i g i b l e t o b e c o m e B o a r d m e m b e r s a n d

recommending the director nominees for approval.

• Recommending to the Board corporate governance

best practices applicable to the Bank and monitoring

compliance by the Bank with the approved corporate

governance codes and guidelines.

• Assisting the Board in fulfilling its responsibility with

respect to the design and implementation of

appropriate compensation and remuneration

packages for Directors.

• Assisting the Board in fulfilling its responsibility with

respect to the design and implementation of strategic

Human Capital Management policies, including

compensation and remuneration packages for staff.

• Coordinating the annual Board performance

evaluation; and

• Reviewing Board Committee Charters in collaboration

with the respective Committees and making

appropriate recommendations for changes,

periodically.

*The membership of the Committee during the 2019 Financial

year is as shown below:

During the 2019 financial year, there were seven (7) meetings of

the BGNCC on January 21, January 24, April 29, July 30,

September 6, October 29 and December 10. The Committee

recorded 100% attendance at these meetings as its Chairman

and ALL members were present.

*The MD/CEO is in attendance at the Committee's meetings.


1. Mr. Muhammad K. Ahmad (OON) Chairman

2. Mr. Adetokunbo M. Abiru Managing Director/CEO

3. Mr. Abdullahi S. Mohammed Executive Director

4. Mr. Innocent C. Ike Executive Director

5. Alhaji Abdullahi M. Umar Non-Executive Director

6. Mr. Austin E. Jo-Madugu Non-Executive Director

7. Mr. Bata G. Wakawa Non-Executive Director

8. Mr. Olu O. Odugbemi Non-Executive Director

NAME CAPACITY

1. Mr. Austin E. Jo-Madugu Non-Executive Director (Chairman)



NAME CAPACITY


12

Board Credit Committee (BCC)

The Committee is established to assist the Board in carrying out

its oversight responsibility with respect to the Bank’s credit policy

and reviewing all credits in excess of the limits delegated to

Management. It also recommends those above its approval limit

to the Board for approval. The major terms of reference include

the following:

• Reviewing the Bank’s Credit Policy, including defining

levels and limits of lending authority, and making

recommendations accordingly to the Board for

approval.

• Considering and approving credits in excess of

Management limits but within the limits set by the

Board and recommending those above its limit to the

Board for approval.

• Considering and approving all insider-related credit

applications, irrespective of the size, up to its approval

limit and recommending those above its limit to the

Board for approval.

• Considering and approving write-offs in excess of

Management limits but within the limits set by the

Board and recommending those above its limit to the

Board for approval.

• Monitoring loan quality through the review of quarterly

reports on facilities and potential loss forecasts.

• Reviewing fully provisioned loans and loan recovery

efforts from time to time.

• Approving credit guidelines for strategic plans and

projects.

The membership of the Committee during the 2019 financial year

is as shown below:

During the 2019 financial year, there were six (6) meetings of the

BCC on January 21, March 4, April 29, July 30, September 6, and

October 29. The Committee recorded 100% attendance at these

meetings as its Chairman and ALL members were present.

Board Finance & General Purposes Committee (BF&GPC)

The Committee is established to assist the Board in fulfilling its

oversight responsibilities with respect to strategic, financial and

corporate development matters. Its major terms of reference

include the following:

• Defining the strategic business focus and plans of the

Bank.

• Determining the policies, strategies and financial

objectives of the Bank, and overseeing and monitoring

the pursuit of these policies, strategies and financial

objectives.

• Overseeing the acquisition and disposal of any

significant asset or business of the Bank, subject to the

approval of the Board.

• Defining capital expenditure limits and approving all

capital expenditure within its limit and recommending

those above its limit to the Board for consideration and

approval.

• Reviewing and recommending to the Board for

approval, the procurement strategy and policy for the

Bank.

• Approving and recommending to the Board for

approval, the acquisition, establishment, disposal or

closure of any branch, business outlet of the Bank.

• Ensuring that all major contracts are carried out

according to the terms and conditions of the contract

agreements.

• Oversight responsibility in respect of the Bank’s

corporate strategy and material, financial and other

significant matters relating to the Bank’s annual

budget, capital investment policies, mergers and

acquisitions, and the Bank’s performance review, dra�,

amongst others.

The membership of the Committee during the 2019 financial year

is as shown below:

1. Mr. Bata G. Wakawa Non-Executive Director (Chairman)






NAME CAPACITY

1. Alhaji Abdullahi M. Umar Non-Executive Director (Chairman)






NAME CAPACITY


13

During the 2019 financial year, there were five (5) meetings of the

BF&GPC on January 22, April 30, July 31, September 6, and

October 30. The Committee recorded 100% attendance at these

meetings as its Chairman and ALL members were present.

Board Audit and Risk Management Committee (BARMC)

The Committee is established to assist the Board in fulfilling its

responsibility with respect of Audit & Risk Management. Its major

terms of reference include the following:

. Reviewing the integrity of the Bank’s financial

reporting and overseeing the independence and

objectivity of the external auditors.

• Assisting in the oversight of compliance with

regulatory requirements, and assessing qualifications

and independence of external auditor, as well as,

performance of the Bank’s internal audit function.

• Ensuring the development of a comprehensive

internal control framework for the Bank, providing

o v e rs i g h t o f M a n a ge m e n t ’s p ro ce s s fo r t h e

identification of significant fraud risks across the Bank

and ensuring that adequate prevention, detection and

reporting mechanisms are in place.

• Reviewing and recommending to the Board, the

appropriate risk management policy and framework,

including risk appetite and risk strategy, for the Bank.

• Ensuring the adequacy and effectiveness of risk

management and the controls in place, clearly

delineating the Bank’s overall risk tolerance level by

reviewing and approving risk limits.

• M o n i to r i n g a n d re v i e w i n g p e r i o d i ca l l y, t h e

implementation of the Bank’s risk management

strategy.

• Making recommendations on the appointment and

removal of the Chief Compliance Officer and the Chief

Internal Auditor.

*The membership of the Committee during the 2019 financial

year is as shown below:

During the 2019 financial year, there were four (4) meetings of the

BARMC on January 22, April 30, July 31, and October 30. The

Committee recorded 100% attendance at these meetings as its

Chairman and ALL members were present.

*The MD/CEO and other Executives are in attendance at the

Committee’s meetings.

In addition to their individual meetings, the BF&GPC and BARMC

also held joint meetings to consider matters such as the Bank’s

Budget and Accounts. The joint meetings were held on January

22 and December 10.

Remuneration of Directors

Only Non-Executive Directors are entitled to Directors’ Annual

Fees as well as Sitting Allowances for attendance at Board and

Committee meetings. Remuneration for Executive Directors

comprises a basic salary, allowances, performance incentive,

tied to the Bank’s performance.

The schedule of annual fees (excluding withholding tax at 10%)

paid to Non-Executive Directors for the year ended December 31,

2019 is as follows:


1. Mr. Olu O. Odugbemi Non-Executive Director (Chairman)



NAME CAPACITY

S/N Fees & Allowances Amount

1. Annual Fee for Board Chairman N5m

2. Annual Fee for Non-Executive Directors N3.5m

3. Sitting Allowance for Board Committee Meetings N250,000

4. Sitting Allowance for Chairman of Board Committee Meetings N300,000

5. Sitting Allowance for Board of Directors Meetings N350,000

6. Sitting Allowance for Board Chairman N550,000


14

Whistle-Blowing Policy

The Bank has established and implements a whistle-blowing

Policy which is an avenue for employees of the Bank,

stakeholders and the general public to report suspected or

known acts of fraud, malpractice, or other unethical activity.

The whistle-blowing framework includes a dedicated and active

email address to reach the Bank’s Chief Internal Auditor (CIA),

phone lines to the CIA and the CBN, and a conspicuous whistle-

blowing channel on the Bank’s website. Information on the

whistle blowing procedure is available to staff and customers

and also published in conspicuous places in the banking halls.

The whistle-blowing facility has the assurance of confidentiality

to protect the identity and interest of the whistle-blower. Periodic

reports on whistleblowing are presented to the Board of

Directors and sent to the CBN.

Disclosures

The Board has a policy of openness and transparency. Director-

related facilities are disclosed during consideration, and the

related party does not participate in the consideration of the

facility or remain in the Board room during the consideration. NoDirector of the Bank currently provides professional services to

the Bank.

During the 2019 Financial Year, the Bank incurred a CBN penalty

of N2million for delay in implementing two of the prior year's

recommendations from the external auditor's management

letter. The Bank was also fined the sum of N4million by the CBN

for writing-off interest portion of N2,067,685.00 on a legacy

insider-related loan to Onas Farms without prior CBN approval.

Management Committees

The Board delegates to Management, through the Managing

Director/CEO, all authority necessary for the day-to-day

management of the Bank. The Managing Director is the Head of

the Management team and has the discretion to request

Management Committees to take Management decisions and

actions that promote the corporate objectives of the Bank, with

due regard to Management’s limits as approved by the Board.

The Management Committees, composed of Management staff

selected according to their roles and responsibilities, all have

their Terms of Reference. Each Management Committee is

headed by a Chairman and has a Secretary appointed to perform

the secretarial functions for the Committee.

The standing Management Committees of the Bank are as

follows:

The Executive Committee (EXCO)

It is the highest-level Management Committee. It comprises the

Managing Director/CEO, as the Chairman, Executive Directors,

and Directorate Heads. Some of its Terms of Reference include:

• M a k i n g re co m m e n d a t i o n s o n t h e s t ra teg i c

development of the Bank in the areas of branch

expansion, branding and market presence.

• Considering of the financial performance of the Bank.

• Considering internal policies and processes and

making recommendations to the Board for approval.

• Considering the performance evaluation of staff and

issues of manpower planning, human capital and non-

human capital optimization.

• Ensuring that laid-down internal control procedures

are adequate and duly observed.

• Providing oversight function for the Bank’s accounting

and financial reporting, and its internal and external

audit.

• Reviewing the findings of any examination by

regulatory agencies, and any auditor observation,

including investigations.

• Monitoring and reviewing the effectiveness of the

Bank’s risk management systems and processes to

confirm its consistency with the Bank’s strategy and

business plan.

Assets & Liabilities Committee (ALCO)

The Committee is responsible for coordinating the Bank’s

borrowing and lending strategy, and funds acquisition to meet

profitability objectives as interest rates change. It monitors

actions by the regulators that may affect interest rates, and

impact of any policy change on the Bank’s business.

Criticized Assets Review Committee (CARC)

The Committee monitors the effectiveness and application of

credit risk management and ensures that all relevant

documentation pertaining to credit application and collateral

security are effected. It also reviews reports on challenged

accounts and oversees the development of loan loss provision

policy. It ensures that the systems established by Management to

identify credit risks, assess, manage and monitor loans are

operating effectively.



15

Tenders Committee (TC)

The Tenders Committee reviews the Bank’s tendering and

procurement policies and practices to ensure that the operating

policies and procedures relating to tendering and procurement

are recognised as “best practices”, and all Tenders are conducted

in a fair and ethical manner and that no conflict of interest exists

with any Director or employee connected to the tendering and

procurement process.

Disciplinary Committee (DC)

The Committee is responsible for considering complaints made

against staff members on matters relating to misconduct of staff,

in accordance with the Bank’s disciplinary framework. It also

r e v i e w s t h e D i s c i p l i n a r y R e g u l a t i o n s a n d m a k e s

recommendations for changes to Management.

Appeal Disciplinary Committee (ADC)

The Committee is established to review appeals from staff or ex-

staff on cases decided by the Disciplinary Committee.

Management Credit Committee (MCC)

The Committee is established to approve credits within its limit,

approve write-offs on excess interest and refund of interest within

its limit, and review fully provisioned loans and loan recovery

efforts, reports on credit quality, and policy procedure

adherence.

IT Steering Committee (ITSC)

The Committee is established to review, monitor and prioritize

major IT projects. It ensures that IT strategy is aligned with the

strategic goals of the Bank and procures business solutions that

leverage technology.

General Purposes Committee (GPC)

The Committee is established to carry out the following

functions:

• Provide oversight and direction for execution of

Investor Relations strategy and program such as

Financial Reporting & Stakeholder Engagement.

• Establish firm reputation for timely, transparent, and

reliable financial reporting/disclosure.

• Attract investors with long-term stake and ensure an

expanded & sustained access to lower-cost capital

from local and foreign financial markets.• Review and approve recommended processes and

present to EXCO for ratification.

• Ensure that process improvement activities are clearly

and functionally linked to the regional peculiarities

and strategic imperatives are capable of achieving the

key objectives of cost containment, service quality and

regularity compliance amongst others.

• Consider the Bank’s strategy towards CSR &

Sustainability related issues and monitor relevant

external developments.

• Consider and approve resource allocation for

identified and recommended CSR investments and

projects.

Product Development Committee (PDC)

The Committee is established to oversee the product

development process in the Bank. It defines the product

development process and strategy, reviews new products to

ensure alignment with the Bank’s strategic goals and objectives,

m o n i to rs t h e p e r fo r m a n ce o f p ro d u c t s a n d m a ke s

recommendations to Executive Management.

Process Review Committee (PRC)

The Committee is established to carry out comprehensive review

of processes designed by the Bank’s Business Process Re-

Engineering Team and make recommendations to Executive

Management. The Committee reviews process initiatives to

ensure that objectives of cost, service quality, speed and

regulatory compliance are achieved.

Polaris Bank appreciates the immense importance of sound

Corporate Governance in delivering value to its stakeholders and

building a sustainable enterprise. It therefore remains

committed to upholding the highest standards of Governance in

all the processes of the enterprise.

BY ORDER OF THE BOARD

BABATUNDE OSIBODUGENERAL COUNSEL/COMPANY SECRETARYFRC/2016/NBA/00000015464

Lagos, Nigeria February 13, 2020


SUSTAINABILITYREPORT

16


17

We believe that organizations that are genuinely concerned

about the environment and take active steps to manage the

environmental and social governance aspects of their activities

are best positioned to minimize risks and costs, capitalizing on a

plethora of opportunities to attract capital hence ensuring long-

term success of the organization. Our business activities and

operations at Polaris Bank have shi�ed from the regular business

model that focuses only on shareholder value and brand

acceptance; they are designed to ensure that we lend

responsibly, promote financial inclusion, encourage diversity,

invest in our employees, adhere to health and safety standards,

and reduce (or eliminate where possible) negative impact on the

environment, while continuing to grow a profitable and

sustainable business. Polaris Bank’s 2019 edition of the

Sustainability report reveals how the Bank’s policy and

framework aligns with its plan of building a world class work

environment. It also shows the general progress the Bank has

made to improve its agenda across the three stakeholder groups

– clients, people and community. In the area of Environmental,

Social and Governance (ESG), the Bank has steadily maintained a

robust management system by reviewing its Risk Assessment

Toolkit to meet industry and international standards.

OUR STRATEGY

As a principal financial Institution, Polaris Bank will continue to

focus on the importance of Sustainability to execute its business

activities and operations. The Bank recognizes the irrefutable

relationship between increasing the quality of life of people, the

long-term sustainable growth of its business activities &

operations and the environment where it operates. Hence,

sustainable activities of the Bank are woven around three

cardinal guidelines as indicated below:

1. Responsible Banking

2. Sustainable Economic growth

3. Community investments

RESPONSIBLE BANKING

Governance

The business priorit ies of the Bank with regards to

environmental, social and ethical issues are determined by the

Board Governance, Nomination and Compensation Committee.

The committee (through the Board, Audit and Risk Management

C o m m i t t e e ) a l s o i n t e g ra t e s t h e m a n a g e m e n t a n d

implementation of the Environmental and Social Risk

Management policy into the Bank’s business decisions.

The Environmental & Social Risk Management Framework

(ESRMF) sets out the agenda for consistent and systematic

management of E&S risks at Polaris Bank. It was built based on

Polaris Bank’s business principles and underlying commitment

to respect human rights and the environment.

The assessment portal has been continuously updated and

enhanced to screen qualifying transactions for environmental

and social risk towards efficient business decision making. The

portal is guided to ensure that the Bank’s risk management

processes are aligned with international best practice through

efficient internal standards and external collaborations such as

UNEPFI, IFC, ILO, Equator principles etc.

SUSTAINABILITY

report

At Polaris Bank, our commitment to sustainability reflects our values. Our strategy is focused primarily on responsible business practices which drive our role in ensuring long term economic development through the provision of sustainable financial products and advisory services. We are in active pursuits of the triple bottom line which consists of the three Ps: People, planet and profit.


18

Employees

Polaris Bank is committed to the wellbeing of its employees

through effective engagements such as: health programmes,

trainings, competitive benefits and adequate compensation to

promote staff retention. As an equal opportunity employer, we

are passionate about providing a safe and conducive work

environment for all our employees.

In line with the commitment to harnessing our employees’

potential through continuous learning and development, the

Bank invested in various capacity building and employee

empowerment programmes focused on providing the required

support , solutions, knowledge and skills to meet the

developmental needs of the work force. This was achieved

through a detailed training curriculum which included

assessments to determine the level at which learning took place

and if set objectives were met.

The immense engagement drive influenced the behaviour of the

work force which resulted in enhanced work performance. Based

on the training policy of the Bank, all employees are entitled to a

variety of capacity building initiatives to boost their distinct

abilities. The Bank’s robust e-learning portal with a combination

of classroom learning enhances its vision for continuous

knowledge acquisition and professional development.

Gender, Diversity and Inclusion

Polaris Bank celebrates individuality and diversity and treats its

workforce equally with respect, dignity and fairness. In line with

best practices, the Bank offers equitable remuneration and

capacity development opportunities for all regardless of gender,

ethnicity, ideology or creed. Polaris Bank also ensures that

applications for employment by persons with disabilities are

given utmost consideration. In the event that any staff member

becomes physically challenged, appropriate training and

counselling sessions will be organized to guarantee continuous

employment with the Bank as required.

Health and Safety

The Bank has been successful in achieving a safe and healthy

working environment which is solely based on the shared

responsibilities of its employees.

Over the years, the Bank has maintained an enviable Health,

Safety and Environment (HSE) framework. The Bank is held

accountable for the enforcement of the HSE framework which is

cascaded to employees, customers and other stakeholders on

the Bank’s premises. Polaris Bank ensures adequate practices

and procedures which provides an appropriate working

environment for the workforce to deliver their utmost ability.

Polaris Bank remains ISO 22301 certified and operates within the

protocols: A Business Continuity Management certification

which ensures the timely resumption of business operations in

the event of an incident occurring and the protection of

personnel and the organization.

Malaria and Other Serious Diseases

One of Polaris Bank’s main goal is to ensure consistent

improvement in the well-being of the Bank’s workforce thereby

ensuring that employees are fit mentally, physically, emotionally

and are subsequently productive at optimal levels.

The Bank in partnership with some Health Management

Organizations (HMO) operates a structure where employees are

registered with hospitals under the insurance scheme to

undertake various health management issues like malaria to

other more serious ailments for them and their listed

dependents. An annual Health assessment week also held in the

Bank to reiterate the importance of healthy living for all staff.

Various Health topics have been used as themes for the week;

ranging from Physical Health, Mental Health, Healthy Living, and

Nutrition to Consistent Health checks.

The annual health week was held in November 2019 with the

theme: “PHYSICAL ACTIVITY – KEY TO ALL ROUND

WELLNESS”. The objective was to empower employees with

information on the importance of physical activity to all-round

wellness, give insights into how to incorporate more physical

activity in their work life, encourage and inspire a healthy lifestyle,

inform and educate on the dangers of a sedentary lifestyle vis-a

vis how to combat same.

HIV Testing, Confidentiality and Disclosure

Polaris Bank is known to regularly contribute to events that

provide sensitization for the Human Immunodeficiency

Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS). As an

institution that shows great concern for the well-being of its staff,

the Bank takes initiatives that promote awareness, prevention

and management of the disease and also supports any

individual who is affected. In addition, the Bank encourages

nondiscrimination on HIV/AIDS particularly in the workplace and

does not require employees, their dependents, job applicants or

other third parties to undergo HIV testing as a precondition for

employment or receipt of benefits.

SUSTAINABILITY REPORT


19

Code of ethics

For Polaris Bank, Sustainability is necessary to attract and retain

dedicated employees with a strong service mind-set for business

continuity and long-term performance. The Bank’s core values

which are the foundation for its culture as well as its procedures

are described in the Bank’s Code of Conduct which focuses on

areas of ethical risk. The Code which is attested at the beginning

of each year by every employee, provides guidance to help

employees recognize and deal with ethical issues, availing

mechanisms for employees to report unethical conduct and

foster a culture of honesty and accountability amongst its

employees.

Human Rights

As a reputable financial institution, Polaris Bank aims to set a

positive example of how to respect and promote human rights.

T h e B a n k h a s f a i r r e c r u i t m e n t p r a c t i c e s t h a t a r e

nondiscriminatory.

In addition, as part of our Social and Environmental Management

System, questions bothering on human rights has been

integrated into the Environmental & Social Risk Assessment

Portal. The Bank’s site visitation team also note human rights

issues as part of the system’s checklist to ensure our clients are

not violating human rights.

In Polaris Bank, the rights of the individual is demonstrated in

accordance with the 1948 Universal Declaration of Human Rights

(UDHR) as well as the International Labor Organizations (ILO)

standards regarding child and forced labor, the rights to organize

and bargain collectively, freedom of association, enhance social

protection and strengthen dialogue on work-related issues.

Collaboration

Organisations sign up for Sustainability partnerships to attain

greater accomplishments from such associations. Polaris Bank

appreciates the importance of working jointly with local and

international institutions that promote environmentally and

socially responsible economic development, while ensuring that

its activities do not undermine the ability of future generations to

meet their needs.

To this end, Polaris Bank is a member of some of the leading

global organisations in sustainability, which include the United

Nations Environment Programme and financial Institutions

(UNEP FI), Global Reporting Initiative (GRI) and Child & Youth

Finance International (CYFI). Polaris Bank is also the only

Nigerian bank represented in the GRI G4 Pioneer Group.

Environmental Responsibility

The Bank’s attention to environmental preservation cannot be

over-emphasized. This reflects in its steady commitment to

mitigating and possibly bringing to the barest minimum the

impact on the environment arising from its business decisions.

Our commitment to continuous vendor monitoring and

management programmes has been beneficial to its

environmental sustainability motives. We engaged the Bank’s

vendors in a capacity building workshop to develop skills and

provide necessary education in Environmental & Social Risk

(E&S) Management. This is reflected in the improved compliance

by vendors and suppliers to ethical business practices.

The Bank has also continuously reduced its negative impact on

the environment by reducing pollution caused by diesel usage

through the use of alternative sources of energy. More business

offices are being solar powered whilst also maintaining a strict

closing time of 6pm across all branches nationwide to reduce

energy consumption and carbon emission.

As a Bank we are also committed to reducing our carbon

footprint by ensuring the use of recycled paper at the same time

tracking printing costs and paper usage.

SUSTAINABLE ECONOMIC GROWTH

Access to Finance

Polaris Bank is committed to developing products and services

that improve accessibility to finance. The Bank takes pleasure in

understanding its customer’s needs and strives to surpass them

by undertaking a proactive customer engagement process using

different channels, publications, email alert/SMS, social media,

focus group, written communications, marketing calls,

advertising and business seminars.

The Bank has also provided various channel choices for

customers to ensure substantial access to Banking services at all

times for both the advantaged and disadvantaged individuals. In

order to ensure that possessing a disability is not a hindrance to

accessing our services, the Bank is currently upgrading more of

its branches to accommodate wheelchair access for the

physically challenged customers.

Polaris Bank has continually enhanced its credit process to fully

integrate the Environmental and Social Risk Analysis into the

lending, monitoring and reporting process for specific project-

finance transactions within a stipulated threshold.



20

Products and Innovation

At Polaris Bank, we constantly improve and expand the retail

portfolio with emphasis on driving transactional banking while

delivering outstanding customer service through the provision of

fast, secure, reliable and convenient electronic and retail banking

products, platforms and services. We have innovative products

and services designed to cater for all classes in the society.

Our team of experts have also simplified our services with

technology driven processes to enable more people have access

to financial services which encourages a positive and rewarding

savings culture. Highlights of some of our distinct Products and

Innovations include:

• Polaris Flex Salary Account: This is an account targeted

at salaried individuals who earn a monthly income of

up to N50,000.

• Polaris Ease Salary Account: This is an account

targeted at salaried individuals who earn a monthly

income of up to N100,000.

• Health Loan: Gives opportunity for SMEs in the Health

Sector to access finance for the daily running of their

business.

• Market Loan: Grants access to short term working

capital loan to SMEs who deal in fast moving consumer

goods in preapproved market locations

• Education Loan: Reviewed existing product in tune

with current market realities. Beneficiaries of Education loans are private nursery,

primary, secondary and tertiary institution

• Launched a capacity building program in partnership

with Facebook to train SMEs to leverage social media

as an access to market tool. Trained over 500 SMEs in 9

locations across 6 regions.

• Digital Salary Advance: the product enables salaried

employees who are eligible to access salary advance

via their phones by dialing USSD code *833*12.

• Short Term Asset Finance: This product is designed to

enable customers acquire choice consumer

household assets from pre-qualified merchants of the

Bank and enjoy a flexible and convenient repayment

plan

• Successful integration of Polaris Collect with Infinity

Systems on Ebonyi State IGR Collections and

commenced sensitization to enhance our market

share in the State.

• Implementation of the digital banking gateway

• Commenced pilot of the agency banking platform

(Surepadi)

COMMUNITY INVESTMENTS

Financial Literacy

The Bank believes sustainable economic development cannot

be achieved without the ability of customers to make informed

and effective decisions. Polaris Bank dedicates time and

resources to helping customers with the knowledge, skills and

confidence required to make financial decisions.

To demonstrate Polaris Bank’s commitment, its Sustainability

team working with the Products & Markets group across the

different geopolitical zones have delivered Financial Literacy

seminars/classes in several schools (primary and secondary) in

clusters every quarter across the nation over a period, in addition

to contributing various educational materials to school visited.

To date, the team has been able to reach over 80,000 students in

over 180 schools across major cities in Nigeria.

The Bank will continue to work with the CBN and use its

employees through volunteerism schemes for greater impact

and coverage through various initiatives in the year ahead.

Corporate Social Responsibility

At Polaris Bank, we believe that beyond the benefits of our

business to society, we have a critical role to play in providing

support systems and structures that enable individuals,

institutions and communities reach their full potentials.

Our commitment to this ideal thus runs just as deep as our

passion for creating value and is driven by the belief that building

a strong business and making the world a better place are

essential ingredients for long-term success.

Consistent with our Sustainability and CSR policy, our

interventions are driven by strategic focus and significant

investments in Education, Health & Safety, Women & Youth

Empowerment, Environment, Social infrastructure, Sports and

Cultural & Civic Projects; six areas which are essential pillars to

building a sustainable society.

It is for this reason that we have fully integrated corporate social

responsibility into our business model and continue to maintain

a clearly defined CSR strategy focused on championing

humanitarian causes and fostering initiatives that transform lives

and upli� communities.



21

In 2019, we continued to deepen the impact of our initiatives;

funding developmental projects, championing humanitarian

causes, expanding access to quality education, promoting

cultural heritage and creating opportunities for economic

empowerment. In this report, you will find testimonials that

reflect our progressive impact in enriching people’s lives. Details

of our initiatives include:

• Provided Prosthetic breasts and customized bras for

registered breast cancer survivors to ameliorate the

plight of those who have lost their self-confidence and

self-esteem as a result of stigmatization, following

mastectomy.

• Construction of Bank Road at Obafemi Awolowo

University (OAU): Provided seamless access to over

36,000 estimated population in the university

community

• Facilitated a worthwhile on-boarding experience for

over 6,500 fresh undergraduates: Partnered with

Obafemi Awolowo University (OAU) to organise their

Freshers’ Orientation Programme

• Sponsored 8 of the Bank's customers to FATE

Foundation: Built entrepreneurial capacity for eight

young entrepreneurs in an all-expense paid business

empowerment training

• Sponsored Afroprom for graduating students drawn

from select public and private secondary schools:

Facilitated a semi-formal black tie dance and

gathering of 3,000 graduating students drawn from

popular public and private secondary schools in Lagos

on the threshold of pursuing their dreams of Higher

Education.

• Donated towards the WIMBIZ 2019 Conference which

had over 1,700 women in attendance across various

sectors. The Bank sponsored 10 female staff members

to reaffirm its support for women

• Sponsored the Sisters’ Keepers Initiative, Kano maiden

workshop in Kano for Social Impact and Awareness on

right of Women and Girl Child: Reached over 400

women spanning across education, business and

politics with several account opening

• Sponsored Nigerian Artisans & Technicians 2019

Conference: Over 6,000 artisans present with strong

SME stakeholders/regulators (SMEDAN, FIRS, CPC &

Ministry of Labour) in attendance

• Partnered with Guild of Corporate Online Publishers to

organise the Annual Conference of the association:

Beyond deepening the knowledge of the publishers, it

also reinforced brand partnership with a critical media

stakeholder.

• Sponsored the 4th Lagos Digital NIPR Summit: The

Bank got extensive visibility on the sponsorship which

reinforced the brand perception of Polaris as a

knowledge driver in a knowledge economy.

• Sponsored Sarius Palmetum Garden Abuja in support

of Botanical Gardening with over 1000 classes of plants

which include 250 species of palm trees

• Sponsored the Head of Service Games (HOS Games),

Alausa, Lagos

CUSTOMERS’ COMPLAINTS AND PETITIONS

At Polaris Bank, our customers are fundamental to our business

and our commitment is to ensure we deliver an enjoyable and

satisfying banking experience to them.

The Bank deployed various feedback and engagement initiatives

geared towards obtaining direct feedback from customers on

their experiences and satisfaction levels with our products and

services across all our channels. This greatly assisted us in

improving our customers’ experience as well as strengthening

our relationships with them.

To further close the gap between our service delivery and

customer expectations, we carried out several reviews of our

business processes and service standards to increase value

creation and ensure a rewarding banking experience.

The improvement is expected to continue, as Polaris Bank

maintains a strong focus on surpassing customers’ expectations

while ensuring the swi� resolution of customer complaints

through prompt, impartial and fair investigations.

Complaint/Feedback Channels:

The Bank’s dedicated channels for the receipt and processing of

complaints include:

• Our 24/7 Contact Centre- The Yes Centre• Our Branches and Head Office• Customer Experience Management Department• Consumer Protection Department• Social media platforms including Twitter and

Facebook.



22

The Complaint Management system in the Bank has been set up

to:

• Ensure that all customers complaints received are

resolved promptly and satisfactorily.

• Ensure that customers’ concerns and complaints are

handled in line with our customer experience strategy

and relevant legal/regulatory requirements.

• Minimize reasons for complaints by learning from

them and improving on our products and services

The Consumer Protection desk has continued to perform its

mediation role between the Bank and its customers, thus

ensuring fair hearing and right to compensation as necessary.

This has been achieved by managing redress issues

professionally towards amicable resolution and customer

retention as well as continuous education on our products and

services, hence ensuring full consumer knowledge and

education. The desk has maintained its commitment to the apex

bank in line with its guidelines on resolution of complaints and

pursuit of Consumer Protection.

Complaints Report/Breakdown

The Bank received a total of 547,926 (Five Hundred and Forty

Seven Thousand, Nine Hundred and Twenty Six) complaints

which comprise of complaints logged on the Consumer

Complaints Management System (CCMS) and redress

complaints from the CBN within the review period (January -

December 2019) across various channels including Branches, Yes

Centre, Complaint Management and Consumer Protection desk.

From the 547,926 complaints received which also include the 382

petitions brought forward from December 2018, a total of 542,796

(Five Hundred and Forty-Seven Thousand, Seven Hundred and

Ninety-Six) were resolved satisfactorily while 5130 (Five

Thousand, One Hundred and Thirty) remained unresolved with

resolution efforts ongoing. Percentage of resolved complaints as

at 31st December 2019 stands at 99.06%.

Analysis of Complaints

Graphical Representation of Complaints

During the period under review, the sum of N52,507,993,857.15

(Fi�y two Billion, Five hundred and Seven Million, Nine Hundred

and Nine Three Thousand, Eight Hundred and Fi�y Seven Naira,

Fi�een Kobo) was claimed by various customers from petitions

reviewed. However, complaints involving the sum of

N51,495,530,627.23 were resolved, while the sum of

N124,319,369.79 was paid out as refunds.


S/N Narration Total No. of Complaints

Total No. Resolved

Total No. Unresolved

1 Total 547,926 542,796 5,130

2 Percentage

Distribution 100% 99.06 0.94

99.060.94

No. of Complaints Recieved

Total No. Resolved Total No. Unresolved

S/N DESCRIPTION NUMBER AMOUNT CLAIMED (NGN)

Jan-Dec 2019 Oct-Dec 2018 2019 2019

AMOUNT REFUNDED (NGN)

Pending

Complaints

B/F

382 4021

2

3

4

5

Received

Complaints 547,544 1,917 52,507,993,857.15

Resolved

Complaints 542,796 1,822 51,495,530,627.23 124,319,369.79

Unresolved

Complaints

escalated

to CBN for

intervention

126 115

Unresolved

complaints

pending

with the

bank C/F

5,004 382

Tabular Breakdown of Customers’ complaints and claims


23

Customers’ complaints and petitions received for the

period include but not limited to the following:

• Card ser vices, including, Card issuance, ATM

withdrawals, POS transactions etc.

• Internet Banking related issues

• Contentious withdrawals and charges

• General Account complaints.

Analysis of Fraud and Forgeries Return

During the period under review, the bank recorded 102 fraud

cases. The total amount involved is N1,914,982,813.00 and

$321,132.85. However, a total of N99,662,635.76 and $30,991.95

were lost and these are analyzed below:


S/N Nature of fraud No of cases 31 December

2019

31 December

2019

1 ATM 15 11,129,098.96 991.95 10.36

2 Internet Banking 8 16,157,007.17 - 14.56

3 Mobile 20 19,201,282.50 - 17.30

4 Impersonation 13 18,062,221.90 - 16.28

5 Cheque Related 12 4,672,942.46 - 4.21

6 Outright the� 21 1,540,740.00 - 1.39

7 Cyber Fraud 2 3,743,039.14 - 3.37

8 General 11 25,156,303.63 30,000.00 32.53

Total 102 99,662,635.76 30,991.95 100.00

Amount lost (N) Amount lost ($) % Total (N)

11,490,863.13

16,157,007.17

19,201,282.50

18,062,221.90

4,672,942.46

1,540,740.00

3,743,039.14

36,097,303.63

110,965,399.93

CHAIRMAN’SSTATEMENT

24


26

Today, I am delighted to note that Polaris Bank is strong, stable

and not only firmly on a path to sustainable profitability but

strongly positioned to be a future determining bank in the fast-

changing Financial Service space. We have laid a solid

foundation for an enduring, effective, efficient, agile, innovative

and resilient Bank and the performance numbers do bear me

witness.

Our Humble Beginning

When, pursuant to intervening action by the CBN, I assumed the

Chairmanship of the Board of the defunct Skye Bank PLC on July

4th, 2016, the task ahead of us appeared daunting. The bank was

groaning under the weight of non-performing loans and liquidity

pressures, the prudential ratios were a far cry from regulatory

compliance, services were below par, the I.T Infrastructure was

obsolete, staff morale was at its lowest ebb there was immense

pressure from both local and foreign lenders by recalling their

funds. To cap it all, some of the Bank’s major customers along

with key mandates had also taken a walk, as a flight to safety.

However, with the staunch support of the CBN, we were able to

turn around the fortunes of that bank following the decision of

the regulators to incorporate Polaris Bank to take over the assets

and some liabilities of Skye Bank and retain the same Board and

Management.

Polaris Bank was birthed on September 21, 2018 as a private

limited company, wholly owned by the Asset Management

Corporation of Nigeria (AMCON), and on the same day, it took

over the assets and some liabilities of the defunct Skye Bank. As

attested by the financial results being approved today, the story

is completely different. Most prudential ratios, including Capital

Adequacy and Liquidity, are firmly in compliance, all matured

obligations across currencies have been discharged, service

levels have improved tremendously, the technology platforms

and infrastructure are being upgraded and the workforce is well

motivated. Although there are still a few of the legacy challenges

that we are dealing with, we are confident that with your usual

support and the commitment of the Board and Management,

they will also soon be resolved. The progress made so far will

suffice to stand Polaris Bank out for all of history in Financial

Services Industry and in Academia as a classical model for

successful regulatory intervention. While acknowledging the

valued critical and unrelenting support received from our

regulators, the CBN and AMCON our owners, I must also express

my appreciation to my colleagues on the Board and the

Management of the Bank for the completely different story we

are telling today.

Operating Environment, Business Strategy and Business

Overview

The business environment is increasingly becoming challenging

to navigate. Economic growth has been very sluggish, and

businesses are not having the best of times. Regulatory demands

kept mounting, from rising prudential requirements, to thinning

charges and margins. In addition, the sphere of competition is

also widening beyond traditional financial institutions to include

existential threats from FInTechs and other non-traditional

players. Amid all of these, we remain confident that Polaris will

find, defend and be among the leading innovative banks in the

evolving order of financial service offerings.

CHAIRMAN’S

statement

It is with great pleasure that I present the 2019 Annual Reports and Accounts of our Bank. This is

our first full year of operations since Polaris Bank came into being and acquired the assets and

some of the liabilities of the defunct Skye Bank.


27

Given the foregoing, it became clear early on in this assignment

that an overhaul of the business processes and strategy including

digital transformation was critical to turning the fortunes of

Polaris around and compete effectively and efficiently in the fast-

changing banking space. Working with top rated industry

consultants across disciplines such as business development,

technology, strategy and brand, we carved out a medium-term

corporate transformation program. This includes digital

transformation / technology refresh, Business strategy, Brand

and culture realignment. The implementation of all the

components of the corporate strategy has commenced and in

less than a year on the journey, significant milestones have been

achieved. Indeed, I am pleased to announce that we are ahead of

timelines on many of our performance benchmarks.

Although we are still on the corporate transformation journey,

initial results are very encouraging, and we are confident of even

more impressive outcomes on both the quantitative and

qualitative fronts going forward. Our customer service is

improving, and our target is to rank among the very best in the

industry in the not-too-distant future. Also, our digital platforms

are more stable, the foundation of our IT infrastructure has been

solidified and is infinitely more robust, and our customers 'overall experience has witnessed strong improvement. We are

winning market share and have started getting unsolicited

corresponding banking business offers from foreign lenders.

The financial results we posted in our first full year of operation is

a testimony to the progress we have made in our goal of

transforming the Bank. We posted ₦150.4bn in gross earnings,

N27.34bn in Profit Before Tax and ₦26.29bn in Profit A�er Tax.

Our deposits stood at N857.8bn and loan book at N261bn. Return

on Equity was at 33.0% and Return on Assets at 2.4%. The results

compare favourably with the best in the industry and I must seize

this opportunity to appreciate and congratulate the Board,

Management and indeed the entire staff of the Bank for a job well

done.

Corporate Governance

One of our very first action points on coming on-board was to put

in place a strong and transparent corporate governance

framework that ensures adequate Board oversight and more

importantly Board transparency and accountability. The Board is

supported by four Board committees, namely the Board

Governance, Nominations and Compensations Committee,

Board Audit and Risk Management Committee, Board Credit

Committee and Board Finance and General Purpose Committee,

each with direct oversight over their respective areas of

responsibilities. All capital expenditure above N100m requires

the approval of the Board Finance and General purpose

committee, and the Board Credit Committee is required to

approve any credit facility in excess of N500m. Furthermore, all

policy documents underlying the Bank's operations require

Board approval to become effective. These are just a few of the

measures put in place to entrench corporate governance and

promote Board accountability.

Responsibility to Our Society

At Polaris, we are deeply committed to the well-being of the

society where we operate, and this is demonstrated by our robust

CSR budget. Our operations are wholly guided by strict

considerations for environmental protection and we do not

support any business whose activities are inimical to

environmental and societal well-being. The Bank is a signatory to

the United Nations Environmental Program – Financial Initiative

(UNEP-FI), the body responsible for coordinating sustainable

banking practices. The Chief Executive Officer, Mr. Tokunbo

Abiru, is also a nominated champion for gender equality,

�HeforShe” by the Lagos State Ministry for Women's Affairs in

collaboration with the United Nations. Our commitment to

promoting financial literacy is demonstrated through our annual

participation in the Global Money week campaign, an annual

financial awareness campaign which inspires children and

young people to learn about money, saving, creating livelihoods,

gaining employment and becoming entrepreneurs. Amid many

other Corporate Social Responsibility (CSR) activities we are

involved in, we supported government efforts toward fighting the

COVID-19 pandemic by donating fully accessorized hospital beds

to the Lagos state Government and Nigeria Centre for Decease

Control (NCDC). We also supported the Private Sector coalition

effort towards combating the virus.

CHAIRMAN’S STATEMENT

the progress we have made in our

goal of transforming the Bank.

We posted ₦150.4bn in gross

earnings, N27.34bn in Profit Before

Tax and ₦26.29bn in Profit A�er Tax.


28

What the Future holds

The horizon was very hazy when we started this journey, but

today, you will agree with me that the future of this enterprise is

much more promising. We are advancing in our corporate

transformation Journey toward making Polaris a digital bank

that will not only compete but lead the frontier of innovations. We

will continue to invest in Technology, strengthen our Cyber

security capabilities and broaden product offerings to the unique

needs of the banking public. While acknowledging that COVID-

19 has dampened the business climate, casting a shadow of

recession on economic outlook, Polaris will continue to fashion

appropriate strategic responses to weather the storm of the

pandemic. We are optimistic about the evolving strength and

profile of the brand we are building for sustainable wealth

creation for maximum value realization.

On behalf of the Board and Management, I thank you for the

opportunity given to us to serve and the confidence reposed on

us. I also appreciate the immense contributions of our most

valued asset (our staff for their support, dedication and

productivity) during this reporting period.

Thank you all.

CHAIRMAN’S STATEMENT

While acknowledging that COVID-19

has dampened the business

climate, casting a shadow of

recession on economic outlook,

Polaris will continue to fashion

appropriate strategic responses to

weather the storm of the pandemic

MANAGING DIRECTOR’SSTATEMENT

29


31

A Challenging beginning

When Polaris Bank took over the assets and some liabilities of the

defunct Skye Bank in September 2018 and we assumed its affairs,

we were clear on the enormity of task ahead of us and the

directions in which we must move. The defunct Bank was

challenged on many fronts; prudential ratios (including liquidity

and capital adequacy) were out of compliance, the financial

position statement was not in a good state, there were non-

performing loans (NPL) challenges , core technology

infrastructure and many related applications were obsolete,

customer’s experience was sub-optimal and staff morale could

be a lot better. Despite all these challenges, we also saw

possibilities, hidden potentials of a brand that could redefine the

banking landscape, compete and challenge the very best in the

in the industry and we set out on a journey to make that happen.

Our Vision - Corporate Transformation

We engaged leading consultants for clear and concise

articulation of the vision we have for Polaris Bank. This requires

complete enterprise transformation with a medium-term

strategy broken down into; revamping our information

technology infrastructure, redefining the business strategy, re-

projecting the brand and digital transformation. We have

achieved significant mileage on this Corporate Transformation

journey, and you will agree with me that the early signs are very

promising. While we are repositioning our I.T infrastructure to

world class standards, we are equally implementing a robust

digital transformation to actualize our vision of making Polaris a

truly digital Bank. Given the demographics of this environment,

we primarily pursued a retail banking strategy, with focus on

growth sectors in the commercial banking space with cautious

play in Corporate Banking. With all these transformational

initiatives ongoing, very soon, we are confident Polaris will

assume a pride of place in the industry, leading innovation and

delivering world-class customer experience leveraging cutting-

edge technology. We have also deepened our product offering to

address the unique needs of different customer segments across

age, geography, gender and business types. To further reinforce

the evolving brand value in the mind of the banking public, we

are re-projecting our brand identity both in the virtual and

physical environment.

Our Performance and Our Business

A review of the result shows positive performance across all

financial indices, an early validation of the corporate

transformation journey the Bank embarked upon. Amidst stiff

competition, challenging regulatory and harsh macro-economic

conditions, the Bank posted ₦150.4bn in gross earnings in its first

full year of operation. PBT stood at N27.34bn and PAT at N26.29n.

By refocusing on deposits sources, our deposit declined

marginally to N857.8billion from N861b at which we closed our

first three months of operation in December 2018 following our

resolve to rebalance the deposit portfolio toward more stable

and less expensive retail deposits.

MANAGING DIRECTOR’S

statement

Let me start by expressing my sincere gratitude to our primary regulator, the Central Bank of

Nigeria (CBN), and AMCON for the opportunity and privilege to lead the Management team of this

fledging institution. I am equally grateful to the Board, under the Chairmanship of Mr.

Muhammad Kabiru Ahmad, for its leadership and invaluable support that has helped to bring

Polaris to where it is today. I also commend the entire workforce of the Bank for commitment

and sense of dedication to duty and together we will continue to deepen Polaris footprints on

the history of corporate transformation in Nigeria.

Amidst stiff competition, challenging regulatory and

harsh macro-economic conditions, the Bank posted

₦150.4bn


32

The loan book closed the year at N261bn. Our Return on Equity

(ROE) and while Return on Assets (ROA) were also very decent at

33.0% and 2.4% respectively (both are above industry average)

Underpinning our financial performance is the implementation

of our corporate transformation program. Thus, our retail

business is anchored on our capability to provide value to

individuals and small businesses. The retail products are

therefore designed and customized across variants of individual

current accounts, savings and investment accounts, debit and

credit cards, financial inclusion products as well as consumer

and personal loans.

Our SME Banking franchise, on the other hand, incorporates

current accounts, deposits investments, overdra�s, loans and

other credit facilities including foreign currency and derivative

products tailored to meet unique customer needs and

conditions. We have expanded the frontiers of our retail product

offerings to the needs and yearnings of today’s market to include

Payday Loan, Cluster Lending, Personal Home Loan and Asset

Finance Loan. The Bank Introduced SME products targeted at

high growth sectors of the economy i.e. Market and Health Sector

Loans for traders, hospitals, pharmacies and diagnostic

laboratories. We are also partnering with Fintechs to further

broaden the reach and span of our credit products.

We recognize the rapid technological and digital evolution

financial service space is witnessing not only in Nigeria but

globally. Beyond Technology being a tool for offering traditional

banking services, it has come to radically overhaul traditional

banking processes and structure. As such, the Bank is upgrading

its I.T infrastructure and applications to world class standards.

We have also strengthened our personnel capacity in the digital

banking space accordingly and have upgraded our mobile and

internet banking apps, improved the offerings via our USSD

platform, *833#, deployed many POS terminals, replaced old

ATMs etc. we are gaining traction on our agency banking offering,

“Sure padi”, targeted at promoting financial inclusion which

launched early this year. All of these have started yielding fruits in

improved efficiency, service delivery and enhanced customer

experience. We are also seeing sustained growth in transaction

volumes, revenue lines, industry position and market share

across all electronic platforms.

The Bank and Our Society

At Polaris Bank, we believe our long-term success is tied to the

well-being of the society where we operate. Our commitment to

social responsibility runs just as deep as our passion for creating

value. Consistent with our Sustainability and CSR policy, our

interventions are driven by strategic focus and significant

investments in Education, Health & Safety, Women & Youth

Empowerment, Environment, Social infrastructure, Sports and

Cultural & Civic Projects; six areas which are essential pillars to

building a sustainable society.

In out short existence, we are fast becoming associated with

bodies and initiatives that promote the cause of our environment

and humanity at large. The Bank operates strictly on sustainable

banking principles and any business we commit funding to must

have come out clean on our environmental and social impact

screening. The Bank is a signatory to the United Nations

Environmental Program – Financial Initiative (UNEP-FI), the body

responsible for coordinating sustainable banking practices. As

the Chief Executive Officer and in recognition of the Bank’s

commitment to sustainable banking practices, I was nominated

a gender equality champion, “HeforShe” by the Lagos State

Ministry for Women’s Affairs in collaboration with UN Women.It is for this reason that we have fully integrated corporate social

responsibility into our business model and continue to maintain

a clearly defined CSR strategy focused on championing

humanitarian causes and fostering initiatives that transform lives

and upli� communities. In 2019, we continued to deepen the

impact of our initiatives; funding developmental projects,

championing humanitarian causes, expanding access to quality

education, promoting cultural heritage and creating

opportunities for economic empowerment.

Our People

The Bank’s Human resource remains its priority. In a world where

change is constant, having the right people in the right roles is key

to how we create more value for all our stakeholders. Human

resource acquisitions, deployments and development therefore

becomes a critical part of the transformation journey. This has

led to several initiatives developed to harness the Bank’s

potentials with the aim of achieving our corporate objective

using a two-pronged approach; leveraging talent acquisition for

strategic roles as well as rejigging our Learning & Development

curriculum. Our success in 2019 is down to the hard work of

thousands of talented and dedicated staff. Throughout the year,

we remained focused on building an inclusive Bank with equal

opportunities regardless of gender, ethnicity or background.

Each employee’s is provided required trainings and tools

required to discharge his or her responsibilities. Although our

work environment is very professional, nonetheless, every staff is

made to feel at home while at work. We are also very conscious of

not breeding a toxic environment that could be psychologically

depressing on one hand and inimical to productivity on the

other. Working with leading Human Resource consultants,

Officers within the Assistant Manager to Senior Manager cadre

are now fully equipped with leadership skills through the Polaris

Management Development Programme.

MANAGING DIRECTOR’S STATEMENT


33

Empowered for the Future

Looking back at how far we have come in this short time, you will

agree with me that we have marched on confidently, writing one

of the most challenging but successful business turnaround

stories in corporate Nigeria and particularly in the financial

services industry. Looking ahead, we have laid a solid foundation

for a brand that stands out and built to deliver sustainable

growth for decades to come. Our long-term commitment to

supporting our customers, opening doors to new opportunities

for our communities and enabling businesses to thrive remains

just as strong. We are excited by our goal to become a ‘Top Retail

and digitally led Bank’ in Nigeria, and in getting there, we will

continue to leverage our knowledge and design innovative

solutions that facilitate our customer’s enterprise. The signs so

far have been ver y encouraging and with sustained

implementation of our corporate strategy, we are sure of

becoming the preferred Partner providing superior financial

solutions to our Customers. At Polaris, we are not afraid to be

different from the pack.

Thank you.

MANAGING DIRECTOR’S STATEMENT

Our long-term commitment to

supporting our customers, opening

doors to new opportunities for our

communities and enabling

businesses to thrive remains just

as strong.

BOARD OF DIRECTORS

34

MR. MUHAMMAD K. AHMAD, OON CHAIRMAN

MR. ADETOKUNBO M. ABIRUMANAGING DIRECTOR/CEO

35

ALHAJI ABDULLAHI M. UMAR

NON-EXECUTIVE DIRECTOR

MR. BATA G. WAKAWA


MR. AUSTIN E. JO-MADUGU


MR. OLU O. ODUGBEMI


36

MR. INNOCENT C. IKE

EXECUTIVE DIRECTOR

MR. ABDULLAHI S. MOHAMMED

EXECUTIVE DIRECTOR

BABATUNDE OSIBODUGENERAL COUNSEL/COMPANY SECRETARY

37


39

MUHAMMAD K. AHMAD, OON Chairman

Muhammad K. Ahmad, OON, has over 35 years' distinguished

experience leading and working in various public sector

organisations and financial services institutions in Nigeria.

As the pioneer Director General and Chief Executive Officer of the

Nat ional Pension Commission, Ahmad oversaw the

establishment and growth of the Pension industry in Nigeria.

Prior to that, he had worked as a Bank Supervisor at the Nigeria

Deposit Insurance Corporation (NDIC) where he rose to become a

Director and member of the Interim Management Board, and at

the Central Bank of Liberia.

Ahmad is Chairman of the Board of Directors of Polaris Bank

Limited, an Independent Non-Executive Director of MTN Nigeria

Communications Plc; Chairman of the Board of Credent Capital

Advisory and the Board of International Energy Assurance; a

member of the Governing Council of Pan African University; and

President of Council of the Board of Society for Corporate

Governance Nigeria.

He is the founder of Jewel Development Foundation, a graduate

assistant platform, and Certium Consulting, a strategy advisory

and business applications company. He was a member of the

Boards of Directors of FBN Holdings PLC, and FATE Foundation, a

non-profit private sector-led organisation whose mission is to

foster wealth creation by enabling aspiring and emerging

Nigerian entrepreneurs.

Ahmad chairs the Technical Committee of the National Council

on Privatisation (NCP) of which the Vice President of Nigeria is the

chairman. He chaired the Technical Committee of the Financial

Reporting Council of Nigeria, which produced the Nigerian Code

of Corporate Governance 2018.

Ahmad chaired the Technical Committee that produced the

North East Transformation Strategy (NESTS), a medium-term

Regional Development Strategy, for the sustainable socio-

economic transformation and reconstruction of the Region, a

strategy promoted by the six Governors of the constituent states

of the region. He also assisted in the development of the Buhari

Plan, which was initiated by the Federal Government of Nigeria to

provide a framework for coordinating all initiatives and

interventions by various actors for early recovery and sustainable

development of the North East region. Ahmad currently

coordinates and leads a team to develop Borno 2045

Development Plan.

He has a Masters Diploma in Innovation and Strategy from

University of Oxford and has also attended courses and programs

in various first-rate business and management schools,

including Harvard Business School, IMD and INSEAD.

Ahmad was honored by the Federal Government of Nigeria with

the award of the Officer of the Order of the Niger (OON) in

recognition of his stellar contributions to the development of the

public and private sectors in the country

PROFILE OF

directors


40

ADETOKUNBO M. ABIRU Managing Director/CEO

Adetokunbo Mukhail Abiru (Tokunbo) is the Managing

Director/CEO of Polaris Bank Limited. He parades about three (3)

decades of professional banking and financial services

experience covering both private and public sectors of the

economy.

He rose to the position of Executive Director at First Bank Nigeria

Ltd (2013-16), and was also the Honourable Commissioner of

Finance, Lagos State, between 2011-13 under the dynamic and

transformational leadership of Babatunde R. Fashola (SAN) as

Governor.

He was appointed in July 2016 by the Central Bank of Nigeria

(CBN), as Group Managing Director to lead the turnaround of the

regulator-induced takeover of the then troubled Skye Bank, in a

bid to preserve the stability of the overall Nigerian Financial

System. The successful completion of the assignment gave birth

to today's Polaris Bank Limited.

Tokunbo has also served in various reputable boards including:

Airtel Mobile Networks Limited; FBN Capital Limited (now FBN

Quest Merchant Bank Limited); FBN Bank Sierra –Leone Limited;

and Nigeria Inter-Bank Settlement System Plc (NIBSS).

He holds a B.Sc. Economics from Lagos State University. He is an

alumnus of Harvard Business School & Lagos Business School

(Executive Education Programmes); a Fellow of the Institute of

Chartered Accountant of Nigeria (FCA) and a Honourary Fellow of

the Chartered Institute of Bankers of Nigeria (FCIB). He is happily

married with children.

ABDULLAHI M. UMARNon-Executive Director

Alhaji Abdullah Umar has over 45 years of work experience

spanning different fields including the Insurance, Manufacturing

and the Public Service. He has obtained various qualifications

from different institutions including the Kitson College

Technology, Leeds, United Kingdom and the Ohio University,

USA.

An accomplished entrepreneur, Alhaji Umar has thriving

businesses and investments in various sectors of the economy,

including Manufacturing and General Commerce.

PROFILE OF DIRECTORS


41

AUSTIN E. JO-MADUGUNon- Executive Director

Mr. Austin Jo-Madugu is an alumnus of Ahmadu Bello University,

Zaria, BSc, Sociology, First Class Honours, 1976 and New York

University, Stern's School of Business, New York, MBA, 1982. He

was at St. Paul 's College, Kufena Zaria from 1966 to 1972 for both

his O' and A' levels before proceeding to the university. He began

his working life at the Centre for Management Development,

Lagos in 1977 as a Management Trainee. His banking career

started at Chase Merchant Bank in 1983 in Credit and Marketing.

He also worked at UBA and at the Bank of Industry from where he

retired as General Manager, Operations in 2012. Mr. Jo-Madugu has attended various local and international

e xe c u t i v e p ro g ra m m e s i n c l u d i n g t h o s e a t I N S E A D ,

Fontainebleau, France; Columbia University Business School,

New York, USA and the Philippines Development Finance

Institute, Manila, Philippines. He is member of the Institute of

Directors and Nigerian Institute of Management. He is from Kogi

State and is happily married with children.

BATA G. WAKAWANon- Executive Director

Mr. Bata Garba Wakawa has over 23 years of banking experience.

He obtained a B.Sc. Hons degree in Business Administration from

the prestigious Ahmadu Bello University, Zaria in 1982 and an

MBA degree from Bayero University, Kano in March 1996. His full time banking career started when he le� Borno State Civil

Service in 1984 for Central Bank of Nigeria on a senior supervisor

grade until June 1986 when he joined UBA PLC.

He rose through the ranks whilst being responsible for

Commercial Banking, Monitor ing and Control (R isk

Management), Inspection, Reconciliation and Control,

Transaction banking, Branch Co-ordination and Control and

Area Office Administration in Jos, Abuja and the 6 states of the

North East geo-political region. He voluntarily retired in

November 2007 as Senior Branch Cluster Manager in charge of all

branches in Borno and Yobe States.

He has attended several management, professional and

leadership trainings both locally and abroad.

Mr. Wakawa is from Borno State and happily married with

children.



42

OLU O. ODUGBEMINon-Executive Director

Olu Odugbemi FCA, FCTI. Agronomist, Economist, Auditor,

Chartered Accountant, Ex banker and Financial consultant. Olu is

an alumni of INSEAD Fontainebleau, France Strategic

Management Services and 1991 British Council ODASS Scholar.

He holds B.Sc (First Class Hons, GPA 6.8/7.0), University of Ibadan;

M.Sc (Distinction Hons, 1992) Imperial College, University of

London and 1999 SAP FI/CO R3 Certification from SAP Academy

Woodmead, Johannesburg. He is a Fellow, Institute of Chartered

Accountants and Chartered Institute of Taxation of Nigeria.

His multidisciplinary educational background is complemented

by over 25 years of cross functional business experience in Audit

and Management consulting, Treasury & FI Relationship

management, Corporate Finance, Strategy, Retail and Corporate

Banking garnered in Deloitte, Touche & International (now

Akintola Williams Deloitte & Co) and three top ranking Nigerian

Banks namely Ecobank Plc., Citizens International Bank and UBA

Plc.

Olu was involved in the design of the Legal and Operational

framework for Central Securities Clearing System (1994/97), and

he participated in several landmark transactions such as the

$1.0bn syndication for NLNG project trains 4 & 5, $160million

syndicated Senior Secured Facility for Bonny Gas Transport;

USD50million short term note issuance facility for two leading

MNOCs; and the Syndication of $230m term facility for a leading

IPP in Lagos working with three leading international financial

institutions namely FMO, Afrexim and Banque Belgolaise in

perhaps the most successful power transaction of that nature in

the country to date.

At UBA Plc, Olu served at management level for nine years and

was at various times Senior Manager, Strategy (1997), Head, Oil &

Gas Upstream (1999), Sector Head, Power (2002), Sector Head,

Mortgage Banking and Divisional Head, UBA Home Loans (2005).

He worked with the Mckinsey team in Project Quest (2001) to cra�

UBA Corporate and Retail Strategy and played a central role as

Strategy team member in the UBA/STB merger integration in

April 2005. He disengaged from UBA Plc. In February 2006 to

pursue personal interest in Financial Consulting.

Olu is a consultant to several local and multinational companies

in the financial sector space and is happily married with a

daughter.

ABDULLAHI S. MOHAMMEDExecutive Director

Abdullahi Sarki Mohammed was born in Kano and had his early

education between Kano and Kaduna States before proceeding

to the Bowling Green State University, Ohio USA for his Bachelor

and Masters Degrees. He returned to Nigeria in 1987 to

commence his career with Cement Company of Northern Nigeria

Plc., Sokoto, where he served as a Staff Development and

Training Senior Instructor. He subsequently joined Century

Merchant Bank Limited in 1991 as an Officer and Head of Treasury

Department of Kano Area Office. During his stint at Century

Merchant Bank he had the responsibility of establishing the

business operation in the Federal Capital Territory, Abuja.

Abdullahi later in 1995 moved to Kakawa Discount House Ltd. as

an Admin Manager. In 1998, he went to establish the Abuja Area

Office where he was overseeing the 19 northern states. In 1999, he

took up appointment as the Commissioner for Works, Housing

and Transport in Kano State and Member, Kano State Executive

Council. He was also at various times, the relief commissioner in

the Ministries of Health and Water Resources. He later returned to

Kakawa Discount House Ltd. until 2003 when he joined First Bank

of Nigeria Ltd. where he rose to become a Deputy General

Manager in 2013. He was at various times in First Bank

responsible for the Bank's Business Development in Benue, Kogi,

Nasarawa, Niger, Kano, and Jigawa States as well as FCT – Abuja,

until his appointment as the Group Head in Charge of

Commercial Banking in the North overseeing commercial

Banking Business in the whole of Northern Nigeria.

Abdullahi was the Executive Director in charge of Abuja &

Northern Business Directorate of the erstwhile Skye Bank, a

position he continues to hold on the Board of Polaris Bank

Limited. He has also served as Director on the Board of Skye Bank

Guinea Ltd and Trustfund Pensions Ltd.

Abdullahi has attended courses both in Nigeria and Overseas

including those at the London Business School and the

prestigious INSEAD. He is also member of the 37th SMP of the

Lagos Business School and Honorary Senior Member of CIBN. He

is an avid golf player and happily married with children.



43

INNOCENT C. IKEExecutive Director

Innocent is a leading finance and banking professional with over

three decades of outstanding career in leading commercial

banks in Nigeria. He has been involved in developing and

executing major corporate transformation and turn-around

projects in the nation's financial services industry leveraging a

combination of deep industry knowledge as well as the

application of relevant technologies and innovation.

He was appointed Executive Director (Technology & Services) in

the defunct Skye Bank Plc in July 2016, following the Central Bank

of Nigeria's intervention in the bank. He was, subsequently

reappointed in the same capacity in Polaris Bank Limited in

September 2018, upon the acquisition of the assets and some

liabilities of the defunct Skye Bank Plc by Polaris Bank. He

currently leads the bank's on-going Digital Transformation

Project while also overseeing the South-South/South-East

Directorate.

Prior to his appointment on the Board of Skye Bank, Innocent

was an Executive Director in Keystone Bank Limited, where he

recorded outstanding contributions and achievements resulting

in the successful turn-around, repositioning and eventual

divestment of the bank by the Assets Management Corporation

of Nigeria (AMCON).

Before joining the Board of Keystone Bank in August 2014,

Innocent had played key roles in the growth and transformation

of Access Bank Plc, where, during a ten-year span, he rose to

become a General Manager with responsibilities in the Corporate

& Commercial Banking Divisions, and was at various times

responsible for the Federal Capital Territory and the South-South

Regions of the Bank.

Innocent has also been Chairman of Skye Bank Gambia Limited,

and is currently a director of Mainone Cable Company Limited,

Unified Payments Systems Limited and Pay Attitude Global

Limited.

To prepare him for a successful career in the financial services

industry and leadership roles in the corporate world, Innocent

had acquired very sound professional training and exposure in

some of Nigeria's most reputable financial institutions. He

worked in the erstwhile Fortune international Bank Plc as well as

GT Bank Plc. where he spent most of the early years of his career

and occupied several key and sensitive positions in Treasury,

Currency Trading, Commercial Banking as well as Banking

Operations Units. He equally trained and qualified as a Chartered

Accountant in the international accounting firm of Deloitte,

where he handled key audit and consulting assignments.

Innocent, a graduate of Accounting from the University of Lagos,

where he was the Best Graduating Student in 1988, is a Fellow of

the Institute of Chartered Accountants of Nigeria (ICAN), a

Certified IFRS expert and an Honorary Senior Member of the

Chartered Institute of Bankers of Nigeria (CIBN). He holds an

Executive Certificate in Strategy & Innovation from MIT Sloan

School of Management, Boston and has at various times

attended global management and leadership programs in

world-class institutions including Harvard Business School,

Wharton Business School, International Management

Development Institute (IMD) Switzerland, etc. He is also a

Member of Institute of Directors (IOD).

Innocent is blessed with a lovely wife and four wonderful

children.

RECOMMENDATION FOR RE-ELECTION OF NON-EXECUTIVE

DIRECTORS

In accordance with the provisions of Section 259 of the

Companies and Allied Matters Act, 2004, at the first Annual

General Meeting all the directors shall retire from office, and at

the Annual General Meeting in every subsequent year, one-third

of the directors for the time-being shall retire from office.

The 2020 Annual General Meeting of the Bank, being its first, all

the Non-executive Directors shall retire from office and being

eligible, will present themselves for re-election. Their

individual/peer evaluation conducted as part of the annual

Board evaluation for the years ended December 31, 2018 and

December 31, 2019 were satisfactory.



44

CORPORATE STRUCTURE AND BUSINESS

Polaris Bank Limited is a private limited liability company

incorporated as Polaris Limited on September 14, 2018 and re-

named as Polaris Bank Limited, by special resolution on

September 21, 2018, in accordance with the provisions of the

Companies and Allied Matters Act, 1990. It was issued a banking

license on September 21, 2018 to carry on Commercial Banking

Business on National Basis. The Head Office of the Bank is

situated at No. 3, Akin Adesola Street, Victoria Island, Lagos.

Polaris Bank Limited was established by the Central Bank of

Nigeria (CBN), in consultation with the Nigeria Deposit Insurance

Corporation (NDIC). The Bank was therefore established to

assume all the assets and some of the liabilities of Skye Bank,

and was fully capitalized by the Asset Management Company of

Nigeria (AMCON), an agency of the CBN.

Polaris Bank leverages past lessons, and therefore has a culture

of entrenching sound corporate governance and risk

management practices. Also, the Bank recognizes that excellent

service delivery through innovation of products and services that

are well adapted to the needs of its retail, commercial and

corporate customers, is pivotal to its growth in market influence.

These are in turn driven by cutting edge Information Technology

and a digitalized system, in view of the evolving role of

Technology as not only an enabler of business, but also, as

business in itself. The Bank therefore continuously invests in

digital transformation and upgrades in line with the changing

environment, to meet its overarching goal of excellent service

delivery.

The Bank’s consolidated financial statements have been

prepared in accordance with the International Financial

Reporting Standard (IFRS) and extant CBN regulations.

1. OPERATING RESULTS

2. ANALYSIS OF SHAREHOLDING

The Bank’s authorized share capital is N25,000,000,000 divided

into 25,000,000,000 ordinary shares of N1 each. The issued

shares are 25,000,000,000. The fully paid-up share capital is

N25,000,000,000

The Bank’s shares are wholly owned by AMCON through the

following nominees:

REPORT OF THE

directorsFOR THE YEAR ENDED DECEMBER 31, 2019

In compliance with the Companies & Allied Matters Act, the Directors of Polaris Bank Limited arepleased to present to members the audited financial statements of the Bank for the year ended

31 December 2019.

Group Bank

31 December

2019

21 September -

31 December

2018

31 December

2019

21 September -

31 December

2018

Gross earnings 150,361 37,392 150,848 37,392

Profit before tax 27,342 2,456 27,829 2,456

Tax (479) (25) (479) (25)

Profit a�er tax 26,863 2,431 27,350

Continuing operations 26,863 2,431 27,350 2,431

Discontinued operations ( 573) 425 - -

S/N Nominee No. of Shares Held % of Shares Held

1. Alpharea Limited 12,500,000,000 50

2. Omicron Fox Limited 12,500,000,000 50


45

3. DIRECTORS

The following were Directors of the Bank who served during the

period under review:

4. DIRECTORS’ FEES

The Annual Fees for the Chairman was proposed at N5million,

while the fees for other Directors was proposed at N3.5million

each. Only Non-Executive Directors are entitled to Annual fees.

5. PROPERTY, PLANT AND EQUIPMENT

Details of changes in fixed assets during the year are shown in the

note to the financial statements on page 139. In the opinion of

Directors, the market value of the Bank’s properties is not less

than the value shown in the financial statements.

6. DIRECTORS’ INTERESTS

As at December 31, 2019, the Directors held no interests in the

issued Share Capital of the Bank, directly or indirectly, the Bank

being wholly owned by AMCON through nominees.

7. EMPLOYMENT & EMPLOYEE RELATIONSHIP

Polaris Bank recognises that its employees have the ability to

significantly impact productivity, customer satisfaction,

retention, growth and its bottom line, and that an organization is

only as good as its people. These realities guide its strategy to

attract, develop, engage and retain talents, and the Bank is fully

committed to creating a work environment that enables

employees to realize their full potential and improve

organizational performance. As part of our efforts to motivate

staff adequately, substantial rewards are made available to staff

members who perform excellently, in accordance with the Bank’s

Rewards and Recognition policy.

The Executive Management of the Bank operates an open-door

policy and employees can approach them to express their

concerns and their viewpoints confidently. In addition, the Bankhas a Whistleblowing Policy, through which employees can draw

attention to various issues. Employees also have access to the

telephone numbers and mailing addresses of all other staff

members.

Code of Conduct & Ethics

Polaris Bank employees are bound by the Bank’s Code of

Conduct & Ethics, which is attested to at the point of

employment, as well as annually by all employees. The Bank’s

Directors are bound by the CBN Code of Conduct for Directors,

which is also annually attested to by all Directors.

Employment of Disabled Persons

Polaris Bank is an equal opportunity employer. It appreciates the

fact that disabled people can participate in, and contribute to

society in all aspects of life, and therefore provides equal

opportunities for disabled persons, ensuring that there is no

discrimination against them on recruitment for employment,

determination of salaries, promotion and other benefits. The

Bank also considers of utmost importance, the welfare and

rehabilitation of staff members who may unfortunately become

disabled during the course of their working life. Currently, there

are no disabled employees in the Bank.

Occupational Health and Safety

Polaris Bank ensures that occupational, health and safety risks

are managed and controlled adequately and that there is full

compliance with core standards on the subject. The Bank has a

formal Policy on Health, Safety and Environment. Fire prevention

and fire-fighting equipment are installed in strategic locations of

the premises and regular fire drills are carried out bankwide. Also,

the Bank provides an organised health scheme platform to all

levels of staff through partnerships with various Health

Management Organisations.

The Group operates both a Personal Accident and Workmen’s

Compensation insurance covers for the benefit of its employees.

It also operates a contributory pension plan in line with the

Pension Reform Act, 2004.

Welfare of Employees

A healthy and motivated workforce is at the forefront of the

Bank’s goals, given its impact on employee productivity. In

addition to an effective health insurance scheme operated by the

Bank for its employees and their immediate family members, the

Bank organizes periodic health checks and counseling for

employees. Regular fitness exercises are held to inspire physical

activity which is key to all-round wellness. There are also regular

health talks and education on healthy living through invaluable

information shared on the Bank’s

REPORT OF THE DIRECTORS

NAME CAPACITY

1. Mr. Muhammad K. Ahmad Chairman

2. Mr. Adetokunbo M. Abiru MD/CEO








46

intranet and at its weekly Knowledge Sharing Sessions where

employees are encouraged to live a healthy life and maintain a

good work-life balance.

Employee Involvement and Training

The Bank provides ongoing professional development and

training to equip staff members with important skills to boost

their relevance, develop their capacity, as well as maximize their

contribution to the Bank’s business. This is achieved through

structured and comprehensive training programmes adapted to

each employee’s job function.

Given the evolution of the banking industry and integration of

technology and digital into banking which has generated

seamless opportunities in the financial space, the Bank ensured

that staff members were trained on specific knowledge on digital

trends and opportunities to build a pool of competent banking

professionals who can sustain the growing momentum of the

banking sector and help to open new standards of profit margins

and customer responsiveness.

Also, individual and collective participation in problem solving is

encouraged at all levels in order to achieve a high level of

employee engagement. The Bank utilizes its intranet to keep

employees abreast of issues affecting them, the Bank and the

industry as a whole. Interaction between staff members and

Management is highly encouraged and the Bank has an

interactive portal through which its CEO interacts with staff

members. Employees also have access to a ‘feedback and

concerns’ portal to give their comments.

8. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Polaris Bank believes in impacting host communities who have

provided the enabling, business friendly environment for the

Bank to actualize its goals. We go beyond the call of duty to

identify worthy causes to which significant financial resources

are deployed.

As an embedded financial institution and an integral part of

society’s social fabric, at Polaris Bank, we believe that businesses

cannot succeed in ailing and failing communities due to social,economic or environmental challenges, and this informs the

Bank’s continuous investment in host communities.

Donations and Gi�s

During the reporting period (January 1, 2019 to December 31,

2019), the Bank executed various CSR initiatives with respect to

the fight against Breast Cancer. In addition to providing free

monthly breast cancer screening, it carried out the following:

9. POST BALANCE SHEET EVENTS

There are no post Balance Sheet events that could have effect on

the state of affairs of the Bank as at 31 December 2019 which have

not been adequately provided for or disclosed.

10. ANALYSIS OF THE BOARD AND TOP MANAGEMENT

STAFF

11. AUDITORS

Messrs. PricewaterhouseCoopers have indicated their

willingness, to continue in office in accordance with Section 357

(2) of the Companies and Allied Matters Act.

BY ORDER OF THE BOARD

BABATUNDE OSIBODUGENERAL COUNSEL/COMPANY SECRETARYFRC/2016/NBA/00000015464

Lagos, NigeriaFebruary 17, 2020

S/N Subject Amount (N)

1 Support to C.O.P.E for provision of Prosthetic breasts and customized

bras for breast cancer survivors. 2,250,000

2 Support to C.O.P.E for facility upgrade and breast cancer

awareness/treatment. 500,000

3 Support to Obafemi Awolowo University (OAU) for construction of

access road to the university community. 3,829,058

4 Partnered Obafemi Awolowo University (OAU) to organize Freshers’

Orientation Program to enhance onboarding experience. 250,000

5 Equipped Bethel American University’s library with Dictionaries to

enhance English Language learning. 25,000

6 Facilitated media capacity building to support development

communication for journalists in the online, broadcast &

prints segments. 7,514,940

7 Partnered and supported FATE Foundation to build entrepreneurial

capacity for SME customers 3,960,000

8 Facilitated financial literacy education in 31 schools in 7 states of the

federation to commemorate World Savings Day 2019. 1,688,671

9 Support for urban renewal in Kano metropolis in line with SDG 11:

Sustainable Cities & Communities. 3,250,000

TOTAL 23,267,669

REPORT OF THE DIRECTORS

ANALYSIS OF BOARD AND TOP MANAGEMENT STAFF

Gender

Number

Male Female Total

Gender

Percentage

Male Female

Board Members

Executive & Non-Executive 8 0 8 100% 0%

Top Management Staff(AGM - GM) 30 2 32 94% 6%

Total 38 2 40 95% 5%


47


48

· Proper accounting records are maintained;

· Applicable accounting standards are followed;

· Suitable accounting policies are adopted and consistently applied;

· Judgments and estimates made are reasonable and prudent;

· The going concern basis is used, unless it is inappropriate to presume that the Bank will continue in business; and

· Internal control procedures are instituted which as far as reasonably possible, safeguard the assets of the Bank and

prevent and detect fraud and other irregularities.

The Directors accept responsibility for the preparation of the financial statements in accordance with the International Financial

Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act, the Financial Reporting Council

of Nigeria Act 2011, the Banks and other Financial Institutions Act, the Central Bank of Nigeria Prudential guidelines and other

relevant regulations issued by the Central Bank of Nigeria.

The Directors accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the

financial statements as well as adequate systems of financial control.

Nothing has come to the attention of the Directors to indicate that the Group will not remain a going concern for at least twelve

months from the date of this statement.

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

IN RELATION TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019

MR ADETOKUNBO M. ABIRU

MANAGING DIRECTOR

FRC/2017/ICAN/00000016556

February 13, 2020

MR MUHAMMAD K. AHMAD, OON

CHAIRMAN

FRC/2017/IODN/0000002581

February 13, 2020

STATEMENT OF DIRECTORS’

responsibilities

In accordance with the provisions of the Companies and Allied Matters Act and the Banks and

Other Financial Institutions Act, the Directors are responsible for the preparation of the financial

statements which give a true and fair view of the state of affairs of the Bank and of the profit or

loss for the period 1 January 2019 to 31 December 2019 and in so doing they ensure that:

INDEPENDENT AUDITORSREPORT

49


50

Our opinion

In our opinion, the consolidated and separate financial

statements give a true and fair view of the consolidated and

separate financial position of Polaris Bank Limited (“the bank”)

and its subsidiaries (together “the group”) as at 31 December

2019, and of their consolidated and separate financial

performance and their consolidated and separate cash flows for

the year then ended in accordance with International Financial

Reporting Standards and the requirements of the Companies

and Allied Matters Act, the Banks and Other Financial Institutions

Act and the Financial Reporting Council of Nigeria Act.

What we have audited

Polaris Bank Limited’s consolidated and separate financial

statements comprise: . the consolidated and separate statements of

comprehensive income for the year ended 31

December 2019;

. the consolidated and separate statements of financial

position as at 31 December 2019;

. the consolidated and separate statements of changes

in equity for the year then ended;

. the consolidated and separate statements of cash

flows for the year then ended; and

. the notes to the consolidated and separate financial

statements, which include a summary of significant

accounting policies.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (ISAs). Our responsibilities under those

standards are further described in the Auditor’s responsibilities

for the audit of the consolidated and separate financial

statements section of our report.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the

International Code of Ethics for Professional Accountants

(including International Independence Standards), i.e. the IESBA

Code issued by the International Ethics Standards Board for

Accountants. We have fulfilled our other ethical responsibilities

in accordance with the IESBA Code.

Key audit matters

Key audit matters are those matters that, in our professional

judgment, were of most significance in our audit of the

consolidated and separate financial statements of the current

period. These matters were addressed in the context of our audit

of the consolidated and separate financial statements as a

whole, and in forming our opinion thereon, and we do not

provide a separate opinion on these matters.

INDEPENDENT AUDITOR’S

reportTO THE MEMBERS OF POLARIS BANK LIMITED

Report on the audit of the consolidated and separate financial statements


51

Impairment allowance on loans and advances N 73 billion (

See note 2.6, 6 and 21)

Gross loans and advances as at 31 December 2019 was N 261

billion and related impairment allowance was N 73 billion.

We focused on this area because of the significant value of loans

and advances and because the directors make significant

judgement in measuring credit risk of loans and advances.

Key areas of judgement include:

. Determination of the criteria for assessing significant

increase in credit risk (SICR) and definition of default;

. Determination of the appropriateness of the expected

credit loss model used to determine the credit loss

estimate;

. Determination of forward looking information applied

within the expected credit loss models;

. Segmentation of the portfolio to reflect shared risk;

. Determination of the 12 month and lifetime probability

of default (PD);

. Determination of the lifetime exposure at default (EAD)

as well as assessing the credit conversion factor ;and

. Estimation of loss given default (LGD) by considering

collateral values having adjusted for haircut and time

value of money as well as estimation of the amount

and timing of recoveries on unsecured exposures.

This is considered a key audit matter in the consolidated and

separate financial statements

How our audit addressed the key audit matter

We adopted a full substantive approach in assessing the loan loss

impairment made by directors.

We assessed directors staging criteria against its actual

experience, the provisions of IFRS 9, “Financial instruments” as

well as the days past due presumption for significant increase in

credit risk and determination of default.

We applied a risk based testing approach to evaluate the

reasonableness of directors staging by selecting a sample of

credit facilities and reviewing related customer files and account

statements.

We checked the details of the borrowers’ account history, the

nature of the facility, the industry and other factors that could

indicate deterioration in the financial condition of the borrowers

and their capacity to repay.

For other facilities not subjected to detailed review of customer

files, we assessed a sample from this population for impairment

triggers using computer assisted audit techniques. Using our

credit modelling experts we:

. Reviewed management’s definition of default to

ensure that it considers both quantitative and

qualitative factors, is consistent with internal risk

management processes, considers the backstop

criteria and is also in line with regulatory requirements;

. Re v i e w e d m o d e l m et h o d o l o g y a d o p te d b y

management in estimating the risk parameters, input

models, as well as the ECL calculation engine for

reasonableness;

. Assessed the reasonableness of forward looking

information incorporated into the impairment

calculations by corroborating management’s

assumptions using publicly available information

from external sources;

. Challenged directors judgement on portfolio

segmentation to ensure segmentation of portfolio to

reflect shared risk; and

. We independently determined the PD, EAD and LGD

using management data.

. We reviewed the CCF applied in modelling the EAD for

undrawn commitments, as well as the uncrystallised

exposures for offbalance sheet facilities

We tested the valuation of collaterals by evaluating the valuation

reports and assessing directors overlays made on the

recoverability of collateral considering the current economic

condition and the state of the assets held as collateral.

We reviewed the IFRS 9 disclosures for reasonableness.

Other information

The directors are responsible for the other information. The other

information obtained at the date of this auditor’s report are

General information, Report of the Directors, Statement of

Directors’ responsibilities, Sustainability Report and Value added

statement but does not include the consolidated and separate

financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial

statements does not cover the other information and we do not

express an audit opinion or any form of assurance conclusion

thereon.

INDEPENDENT AUDITOR’S REPORT


52

In connection with our audit of the consolidated and separate

financial statements, our responsibility is to read the other

information and, in doing so, consider whether the other

information is materially inconsistent with the consolidated and

separate financial statements or our knowledge obtained in the

audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other

information that we obtained prior to the date of this auditor’s

report, we conclude that there is a material misstatement of this

other information, we are required to report that fact. We have

nothing to report in this regard.

Responsibilities of the directors and those charged with

governance for the consolidated and separate financial

statements

The directors are responsible for the preparation of the

consolidated and separate financial statements that give a true

and fair view in accordance with International Financial

Reporting Standards and the requirements of the Companies

and Allied Matters Act, the Financial Reporting Council of Nigeria

Act, the Banks and Other Financial Institutions Act, and for such

internal control as the directors determine is necessary to enable

the preparation of consolidated and separate financial

statements that are free from material misstatement, whether

due to fraud or error.

In preparing the consolidated and separate financial statements,

the directors are responsible for assessing the Group’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

Group or to cease operations, or have no realistic alternative but

to do so.

Those charged with governance are responsible for overseeing

the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated

and separate financial statements

Our objectives are to obtain reasonable assurance about

whether the consolidated and separate 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 consolidated and separate 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 consolidated and separate 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 Group’s internal control.

. Evaluate the appropriateness of accounting policies

used and the reasonableness of accounting estimates

and related disclosures made by the directors.

. Conclude on the appropriateness of the directors’ use

of the going concern basis of accounting and, based on

the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that

may cast significant doubt on the Group’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 consolidated and separate 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 Group to cease to continue as a going

concern.

. Evaluate the overall presentation, structure and

content of the consolidated and separate financial

statements, including the disclosures, and whether

the consolidated and separate financial statements

represent the underlying transactions and events in a

manner that achieves fair presentation.



53

. Obtain sufficient appropriate audit evidence regarding

the financial information of the entities or business

activities within the Group to express an opinion on

the consolidated and separate financial statements.

We are responsible for the direction, supervision and

performance of the group audit. We remain solely

responsible for our audit opinion.

We communicate with those charged with governance

regarding, among other matters, the planned scope and timing

of the audit and significant audit findings, including any

significant deficiencies in internal control that we identify during

our audit.

From the matters communicated with those charged with

governance, we determine those matters that were of most

significance in the audit of the consolidated and separate

financial statements of the current period and are therefore the

key audit matters. We describe these matters in our auditor’s

report unless law or regulation precludes public disclosure about

the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our

report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benefits

of such communication.

Report on other legal and regulatory requirements

The Companies and Allied Matters Act and the Banks and Other

Financial Institutions Act require that in carrying out our audit we

consider and report to you on the following matters. We confirm

that:

i) we have obtained all the information and explanations

which to the best of our knowledge and belief were

necessary for the purposes of our audit;

ii) the bank has kept proper books of account, so far as

appears from our examination of those books and

returns adequate for our audit have been received

from branches not visited by us;

iii) the bank’s statement of financial position and

statement of comprehensive income are in agreement

with the books of account;

iv) the information required by Central Bank of Nigeria

Circular BSD/1/2004 on insider related credits is

disclosed in Note 40.7 to the consolidated and

separate financial statements; and

v) as disclosed in Note 43.2 to the consolidated and

separate financial statements, the bank paid penalties

in respect of contraventions of certain sections of the

Banks and Other Financial Institutions Act and

relevant circulars issued by the Central Bank of Nigeria

during the year ended 31 December 2019.


For: PricewaterhouseCoopers 15 April 2020

Chartered Accountants

Lagos, Nigeria

Engagement Partner: Samuel Abu

FRC/2013/ICAN/ 00000001495

CONSOLIDATED AND SEPARATEFINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019

55


56

STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2019


Group Group Bank 21 September - 21 September -31

December 31 December31

December 31 December

2019 2018 2019 2018

Notes

Interest income on amortized cost financial assets 7 131,650 24,374 131,650 24,374Interest income on fair value through profit/loss 8 1,961 215 1,961 215Interest expense 9 (45,814) (15,212) (45,814) (15,212)

Net interest income 87,797 9,377 87,797 9,377Impairment loss on loans and other financial assets 14 (14,126) (2,796) (14,126) (2,796)

73,671 6,581 73,671 6,581

Net fee and commission income 10 & 11 8,536 2,159 8,536 2,159Net trading and foreign exchange income 12 950 8,820 950 8,820Other operating income 13 3,997 1,066 4,484 1,066

Net operating profit 87,154 18,626 87,641 18,626

Employee benefit costs 15 (26,428) (6,606) (26,428) (6,606)Administration and general expenses 16 (28,863) (8,457) (28,863) (8,457)Depreciation and amortisation 17 (4,521) (1,107) (4,521) (1,107)

Profit before tax 27,342 2,456 27,829 2,456

Taxation 34 (479) (25) (479) (25)

Profit for the period from continuing operations 26,863 2,431 27,350 2,431

Profit/ (loss) for the period from discontinued operations (573) 425 - -

Profit for the period 26,290 2,856 27,350 2,431

Profit attributable to:Owners of the Bank 26,211 2,777 27,350 2,431

Continuing operations 26,863 2,431 27,350 2,431Discontinued operations (652) 346 - -

Non-controlling interests 79 79 - -Continuing operations - - - -Discontinued operations 79 79 - -

26,290 2,856 27,350 2,431Other comprehensive income:Items that may be subsequently reclassified to

profit or lossCurrency translation differences arising from foreign

operations (388) 1,880 - -Items that will not be reclassified to profit or

loss

Net gains on investments in equity instruments

designated at fair value through other

comprehensive income 2,677 98 2,677 98

Other comprehensive income for the period,

net of tax 2,289 1,978 2,677 98

Total comprehensive income for the period 28,579 4,834 30,027 2,529

Total comprehensive income attributable to:

Owners of the bank 28,500 4,755 30,027 2,529Continuing operations 29,152 4,409 30,027 2,529Discontinued operations (652) 346 - -

Non-controlling interests 79 79 - -Continuing operations - - - -Discontinued operations 79 79 - -

28,579 4,834 30,027 2,529

The accompanying notes form an integral part of these financial statements

Bank


57

STATEMENT OF FINANCIAL POSITIONAs at 31 December 2019


AssetsCash and balances with central banksDue from banks and other financial institutionsFinancial assets held at fair value through

profit or lossLoans and advances to customersInvestment securities: - Amortised cost - Fair value through other comprehensive

Income (FVTOCI)Assets pledged as collateralPrepayment and other assetsOther loans and receivablesRight of use assetsProperty, plant and equipmentIntangible assets

Assets classified as held for sale

Total assets

LiabilitiesDue to other financial institutionsDeposits from customersLease liabilitiesBorrowings from local and foreign

institutionsCurrent tax liabilityAccruals and other liabilitiesRetirement benefit obligation

Liabilities classified as held for sale

Total liabilities

EquityShare capitalShare premiumRetained earningsReorganisation reserveOther reserves

Non-controlling interest

Total equity

Total equity and liabilities

Mr Muhammad K. Ahmad, OON Mr Adetokunbo. M. Abiru Mr Pius OlaoyeChairman Managing Director / CEOFRC NO: 2017/IODN/0000002581

The accompanying notes form an integral part of these financial statements

Chief Financial Officer FRC No: 2016/ICAN/00000014239 FRC No: 2017/ICAN/00000016556

The financial statements were approved and authorised for issue by the Board of Directors on 13 February 2020 and

signed on its behalf by:

Group Group Bank Bank

31 December 31 December 31 December 31 December2019 2018 2019 2018

26,484 28,026 26,484 28,02662,076 68,966 62,076 68,966

1,264 57 1,264 57188,738 340,050 188,738 340,050

517,071 531,805 517,071 531,805

17,362 14,634 17,362 14,63442,084 58,262 42,084 58,26248,046 54,795 48,046 55,580

182,594 - 182,594 -3,637 - 3,637 -

51,623 48,311 51,623 48,311180 284 180 284

1,141,159 1,145,190 1,141,159 1,145,975

15,485 23,468 2,107 4,120

1,156,644 1,168,658 1,143,266 1,150,095

- 25 - 25857,885 861,044 857,885 861,044

2,645 - 2,645 -

100,920 137,694 100,920 137,694819 365 819 365

97,945 97,076 97,997 97,99411 11 11 11

1,060,225 1,096,215 1,060,277 1,097,133

9,529 13,686 - -

1,069,754 1,109,901 1,060,277 1,097,133

25,000 25,000 25,000 25,000873,450 873,450 873,450 873,450

3,467 (26,004) 4,395 (26,215)(848,017) (848,017) (848,017) (848,017)

31,796 32,767 28,161 28,74485,696 57,196 82,989 52,962

Notes1819

2021

22

23242525b262829

30

313227

33343536

30

37a37b

37e37c

37d 1,194 1,561 - -

86,890 58,757 82,989 52,962

1,156,644 1,168,658 1,143,266 1,150,095

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61


62

STATEMENT OF CASH FLOWSFor the year ended 31 December 2019


Group Group Bank Bank31 December 31 December 31 December 31 December

2019 2018 2019 2018

Operating activities Note

Net cash used in operating activities 38 (68,722) 19,899 (68,722) 19,899

Investing activities

Acquisition of investment securities (715,493) (487,816) (715,493) (487,816)Interest received on investment securities 73,659 281 73,659 281

Dividend received 484 196 484 196Acquisition of property and equipment (9,649) (503) (9,649) (503)

Proceeds from the sale of property and equipment 252 302 252 302

Acquisition of intangible assets (127) (9) (127) (9)Net proceeds from disposal of subsidiaries 2,363 - 2,363

Payment for Right of Use asset (554) - (554) -

Proceeds from disposed and matured investment

securities

750,764 90,411 750,764 90,411

Net cash used in investing activities 101,699 (397,138) 101,699 (397,138)

Cash flows from financing activities

Interest paid on interest bearing borrowings (5,049) (3,418) (5,049) (3,418)Proceeds from shares issued - 898,450 - 898,450Repayment of interest bearing borrowings (37,598) (516,094) (37,598) (516,094)

Net cash provided by financing activities (42,647) 378,938 (42,647) 378,938

Net decrease in cash and cash equivalents (9,670) 1,700 (9,670) 1,700

Opening cash and cash equivalents 96,992 93,682 96,992 93,682Effect of exchange rate fluctuations on cash held 1,238 1,610 1,238 1,610

Net decrease in cash and cash equivalents (9,670) 1,700 (9,670) 1,700

Cash and cash equivalents at

31 December

18.1 88,560 96,992 88,560 96,992


63

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2019


1

2

2.1

2.2

2.2(a)

Reporting entity

Summary of significant accounting policies

Statement of compliance

The consolidated and separate financial statements of the Bank and the Group for the year ended 31 December 2019 have been

prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards

Board (IASB), and the interpretations of these standards, issued by the International Financial Reporting Interpretations Committee

(IFRIC).

Basis of preparation

The accompanying financial statements comprise the financial statements of Polaris Bank Limited (referred to as the "Bank" or "the

Parent") and its subsidiaries (referred to together as "the Group"). The Bank is a company incorporated in Nigeria under the Companies

and Allied Matters Act.

These consolidated and separate financial statements for the year ended 31 December 2019, are prepared for the Bank and the Group

respectively. The Bank and the Group are primarily involved in wholesale, corporate and retail banking and mortgage financing.

These financial statements were authorised for issue by the Board of Directors on 13 February 2020.

The principal accounting policies adopted in the preparation of these consolidated and separate financial statements are set out below.

These policies are applicable to both the Bank and Group financial statements and have been consistently applied.

These financial statements comprise the statement of comprehensive income, the statement of financial position, the statement of

changes in equity, the statement of cash flow and the notes.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires

management to exercise its judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a

significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying

assumptions are appropriate and that the Group’s financial statements therefore present the financial position and results fairly. The

areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the

consolidated financial statements, are disclosed in Note 6.

Basis of measurement

These financial statements have been prepared in accordance with the going concern principle under the historical cost convention

except for the following:

-Derivative financial instruments which are measured at fair value.

-Non derivative financial instruments, carried at fair value through profit or loss, are measured at fair value.

-Fair value through other comprehensive income (FVOCI), financial assets are measured at fair value through equity.

-Assets and liabilities held for trading are measured at fair value.

-Assets and liabilities held for principal and interest payments are measured at amortised cost.

New and amended standards and interpretations

IFRS 16 Leases

The Bank had to change its accounting policies as a result of adopting IFRS 16. The Bank elected to adopt the new rules retrospectively

but recognised the cumulative effect of initially applying the new standard on 1 January 2019. This note is disclosed in note 26.

Leases- Accounting policy from 1 January 2019:

The Bank leases several assets including buildings. Lease terms are negotiated on an individual basis and contain different terms and

conditions, including extension options. The lease period ranges from 1 year to 40 years. The lease agreements do not impose any

covenants, however, leased assets may not be used as security for borrowing purposes. Contracts may contain both lease and non-

lease components. The bank has elected not to separate lease and non lease components and instead accounts for these as a single

lease component. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which

the leased asset is available for use by the Bank. Assets and liabilities arising from lease are initially measured on a present value basis.

The following standards and interpretations apply for the first time to financial reporting periods

commencing on or after 1 January 2019:

Polaris Bank Limited commenced banking operations on September 21, 2018 after it took over and assumed ownership of assets and

certain liabilities of Skye Bank Plc. The Bank was issued operating license by the Central Bank of Nigeria (CBN) whilst the operating license

of Skye Bank was revoked by the Central Bank of Nigeria. The address of the Bank's registered office is 3 Akin Adesola Street, Victoria

Island, Lagos.


64



Lease Liabilities

At the commencement date of a lease, the Bank recognises lease liabilities measured at the present value of lease payments to be

made over the lease term. Lease liabilities include the net present value of the following lease payments:

- fixed payments (including in-substance fixed payments), less any lease incentives receivable

- variable lease payment that are based on an index or a rate

- amounts expected to be payable by the Bank under residual value guarantees

- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option and

- payments of penalties for terminating the lease, if the lease term reflects the Bank exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The

variable lease payments do not depend on an index or a rate are recognised as expense in the period in which the event or condition

that triggers the payment occurs.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Bank's

incremental borrowing rate is used, being the rate that the Bank would have to pay to borrow the funds necessary to obtain an asset of

similar value to the right use asset in a similar economic environment with similar terms, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so

as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. After the commencement

date, the amount of lease liabilities is increased to reflct the accretion of interest and reduced for the lease payments made. In addition,

the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance

fixed lease payments or a change in the assessment to purchase the underlying asset. The lease term refers to the contractual period of

a lease.

Right of use assets

Right of use assets are measured at cost comprising the following:

- the amount of the initial measurement of lease liability

- any lease payments made at or before the commencement date less any lease incentives received

- any initial direct costs, and

- restoration costs.

Right of use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the

Bank is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets's useful life.

Short-term leases and leases of low value

The Bank did not apply the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of

12 months or less from the commencement date and do not contain a purchase option). It also did not apply the lease of low-value

assets recognition exemption to leases that are considered of low value (i.e low value assets). Low-value assets are assets with lease

amount of less than $5,000 when new. Lease payments on short -term leases and leases of low-value assets are recognised as expense

in profit or loss on a straight-line basis over the lease term.

Impact of adoption

As 31 December

2018

Reclassification Remeasurement As at 1 January

2019Right of Use Asset - 1,103 1,443 2,546 Prepaid Rent 1,103 (1,103) - -

The interpretation explains how to recognise and measure deferred and current income tax assets and liabilities where there is

uncertainty over a tax treatment.

In particular, it discusses:

a. how to determine the appropriate unit of account, and that each uncertain tax treatment should be considered separately or together

as a group, depending on which approach better predicts theresolution of the uncertainty

b. that the entity should assume a tax authority will examine the uncertain tax treatments and have full knowledge of all related

information, i. e that detection risk should be ignored

c.that the entity should reflect the effect of the uncertainty in its income tax accounting when it is not probable that the tax

authorities will accept the treatment

Amendments to IAS 19

This amendment was issued 7 february 2018 and became effective 1 January 2019. It prescribes the accounting for all types of

employee benefits except share based payment, to which IFRS 2 applies. Employee benefits are all forms of consideration given by an

entity in exchange for service rendered by employees or for the termination of employment. IAS 19 requires an entity to recognise:

> a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and

> an expense when the entity consumes the economic benefit arising from the service provided by an employee in exchange for

employee benefits.

The amendments clarify that:

> On amendment, curtailment or settlement of a defined benefit plan, a company now uses updated actuarial assumptions to determine

its current service cost and net interest for the period; and the effect of the asset ceiling is disregarded when calculating the gain or loss

on any settlement of the plan and is dealt with separately in other comprehensive income (OCI).

Interpretation 23 Uncertainty over Income Tax Treatments


65



2.2.1

2.2.2

2.3

(a)

Foreign currency translation

Except where indicated, financial information presented in Naira has been rounded to the nearest million.

Prepayment Features with Negative Compensation – Amendments to IFRS 9

The narrow-scope amendments made to IFRS 9 Financial Instruments in October 2017 enable entities to measure certain prepayable

financial assets with negative compensation at amortised cost. These assets, which include some loan and debt securities, would

otherwise have to be measured at fair value through profit or loss. To qualify for amortised cost measurement, the negative

compensation must be ‘reasonable compensation for early termination of the contract’

and the asset must be held within a ‘held to collect’ business model.

Translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in

profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value, such

as equities classified as fair value through OCI, are included in other comprehensive income.

Items included in the consolidated financial statements of each of the Group's entities are measured using the currency of the primary

economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in

Nigerian Naira (“N”), which is the Group’s presentation currency.

(b)

Foreign currency transactions, that is transactions denominated or that require settlement in a foreign currency, are translated into the

functional currency using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign

currency are translated using the closing rate as at the reporting date. Non-monetary items measured at historical cost denominated in

a foreign currency are translated with the exchange rate as at the date of initial recognition; non-monetary items in a foreign currency

that are measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the year end translation of

monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income, except

when deferred in other comprehensive income as qualifying cash flow hedging instruments and qualifying net investment hedging

instruments.

All foreign exchange gains and losses recognised in the income statement are presented net in the Income Statement. Foreign

Transactions and balances

Accounting policies

The Group has adopted all the relevant standards applicable from the date of its incorporation.

Functional and presentation currency

New standards and interpretations not yet adopted

Certain new accounting standards and interpretation have been published that are not mandatory for 31 December 2019 and have not

been early adopted by the Group.

IFRS 17 – Insurance Contracts

IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2021. The new IFRS 17

standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the

scope of the Standard. The objective of IFRS 17 is to ensure an entity provides relevant information that faithfully represents those

contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the

entity's financial position, financial performance and cashflows. This standard does not impact the Group in anyway as the Bank and its

subsidiary companies do not engage in insurance business.

Definition of Material –Amendments to IAS 1 and IAS 8

The IASB has made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting

Estimates and Errors which use a consistent definition of materiality throughout International Financial Reporting Standards and the

Conceptual Framework for Financial Reporting, clarify when information is material and incorporate some of the guidance in IAS 1 about

immaterial information

Definition of a Business – Amendments to IFRS 3

The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly

contribute to the ability to create outputs. The definition of the term ‘outputs’ is amended to focus on goods and services provided to

customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic

Changes in the fair value of monetary securities denominated in foreign currency measured at fair value through OCI are analysed

between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount

of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in

carrying amount are recognised in other comprehensive income.


66



(c)

2.4

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the

Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns

through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They

are deconsolidated from the date that control ceases.

Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value

of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses

arising from such re-measurement are recognised in profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses

are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting

policies. Accounting policies of the subsidiaries have been changed where necessary to reflect the accounting policies of the group.

Basis of consolidation

The financial statements of the subsidiaries used to prepare the consolidated financial statements were prepared as of the parent

company’s reporting date.

Group companies (foreign operations)

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as

transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant

share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling

interests are also recorded in equity.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to

the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either in

profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured,

and its subsequent settlement is accounted for within equity.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a

subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests

issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent

consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an

acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of

acquiree’s identifiable net assets. Investment in subsidiaries are reported at cost less impairment (if any) in the separate financial

statements of the Bank.

Changes in ownership interests in subsidiaries without change of control

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a

functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that

statement of financial position;

• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable

approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are

translated at the dates of the transactions); and

• all resulting exchange differences are recognised in other comprehensive income.

Exchange differences arising from the above process are reported in shareholders' equity as 'Foreign currency translation reserve'.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and

other currency instruments designated as hedges of such investments, are taken to 'Other comprehensive income'. When a foreign

operation is disposed of, or partially disposed of, such exchange differences are recognised in the consolidated income statement as

part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets

and liabilities of the foreign entity and translated at the closing rate.


67



Capital reorganisation

2.5 Current and deferred income tax

Current income tax

Deferred income tax

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is

lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of

subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously

recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the

related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit

or loss.

Common control transactions

The current income tax charge is calculated on the basis of the applicable tax laws in the respective jurisdiction and it consists of

Company Income Tax, Education Tax and NITDEF Tax. Company Income Tax is assessed at 30% statutory rate of total profit,

Education Tax is computed as 2% of assessable profit while NITDEF tax is a 1% levy on Profit Before Tax of the Bank. The Group

periodically evaluates positions taken in tax returns; ensuring information disclosed are in agreement with the underlying tax liability

which has been adequately provided for in the financial statements.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current

tax liabilities and when the deferred income taxes assets and liabilities relate to taxes levied by the same taxation authority on either

the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent

that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other

comprehensive income or directly in equity, respectively.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which

the temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from

investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal

of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the

foreseeable future.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and

joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient

taxable profit available against which the temporary difference can be utilised.

Disposal of subsidiaries

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they

arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or

liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable

profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end

of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax

liability is settled.

When there is Capital reorganisation, the Group recognizes the assets and liabilities of the defunct entity in its consolidated financial

statements at their pre-combination carrying amounts. The assets and liabilities are not remeasured to fair values but are recognised at

their book values on the date of the reorganisation.

Business combinations in which all of the combining entities or businesses are ultimately controlled by the same party or parties both

before and after the business combination (and where that control is not transitory) are referred to as common control transactions.

The Group accounts for the transaction at book values in its consolidated financial statements. The book values of the acquired entity

are the consolidated book values as reflected in the group annual financial statements. The excess of the cost of the transaction over

the Group’s proportionate share of the net asset value acquired in common control transactions, will be allocated to the existing

business combination reserve in equity. Where comparative periods are presented, the financial statements and financial information

are not restated.


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2.6 Financial assets and liabilities

2.6.1 Financial assets

(a) Debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans,

government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse. Debt

investment securities

Classification and subsequent measurement of debt instruments depend on:

(i) the Group's business model for managing the asset; and

(ii) the Cash flow characteristics of the asset.

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

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of

principal and interest (SPPI), and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these

assets is adjusted by any expected credit loss allowance recognised and measured as described in note 2.6.1 (f). Interest income from

these financial assets is included in 'interest income' using the effective interest rate method.

Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows

and for selling the assets, where the assets' cash flows represent solely payments of principal and interest, and that are not designated

at FVTPL, are measured at fair value. Movements in the carrying amount are taken through OCI, except for the recognition of

impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are

recognised in profit or loss.

Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value

through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not

part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net trading income and

foreign exchange income' in the period in which it arises.

SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the

Group assesses whether the financial instruments' cash flows represent solely payments of principal and interest (the 'SPPI test'). In

making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement i.e.

interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is

consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent

with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

The Group reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification

takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none

occurred during the period.

Business model: the business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the

Group's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash

flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the

financial assets are classified as part of 'other' business model and measured at FVTPL. Factors considered by the Group in determining

the business for a group of assets include past experience on how the cash flows for these assets were collected, how the assets

performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are

compensated. For example, the Group's business model for the mortgage loan book is to hold to collect contractual cash flows.

The Group classifies its financial instruments in the following categories: at fair value through profit or loss (FVTPL), amortised costs

and fair value through other comprehensive income (FVOCI). The Group's financial assets classified as amortised cost includes loans

and advances to customers; other loans and receivables; and investment securities. The classification depends on the purpose for which

the financial assets were acquired and their characteristics.

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Regular way purchases and sales of financial assets are recognised on settlement-date on which the Group commits to purchase or sell

the asset. At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair

value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction

costs of financial assets carried at FVPL are expensed in profit or loss.


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(b) Equity Instruments

Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not

contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments

include basic ordinary shares.

The Group subsequently measures all equity investments at fair value through profit or loss, except where the Group's management

has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income.

When this is election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss,

including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair

value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the

Group's right to receive payment is established.

Gains and losses on equity investments at FVTPL are included in the 'Net trading income' line in the statement of comprehensive

income.

(d) Modification of loans

• Significant change in the interest rate.

• Change in the currency the loan is denominated in.

(e ) Derecognition other than on a modification

• Significant extension of the loan term when the borrower is not in financial difficulty.

• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.

If the terms are substantially different, the Group derecognises the original financial asset and recognises a 'new' asset at fair value and

recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial

recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk

has occurred. However, the Group also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial

recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed

payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecogntion.

If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group

recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss

in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest

rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have

expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or

(ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and the Group has not retained control.

The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual

obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are

accounted for as 'pass through' transfers that result in derecognition if the Group:

(i) Has no obligation to make payments unless it collects equivalent amounts from the assets;

(ii) Is prohibited from selling or pledging the assets; and

(iii) Has an obligation to remit any cash it collects from the assets without material delay.

The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the

Group assesses whether or not the new terms are substantially different to the original terms. The Group does this by considering,

among others, the following factors:

( c) Impairment

The Group assesses on a forward - looking basis the expected credit losses ('ECL') associated with its debt instruments carried at

amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Group

recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

• The time value of money; and

• Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current

conditions and forecasts of future economic conditions.

• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to the amounts the

borrower is expected to be able to pay

• Whether any substantial new terms are introduced, such as a profit share/equity based return that substantially affects the risk profile

of the loan.


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(f)

Stage 1

(Initial recognition)

12-Month expected credit losses

(g)

Lifetime expected credit losses

(Credit-impaired assets)

Lifetime expected credit losses

Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing

transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined

repurchase price, and the criteria for derecognition are therefore not met.

(Significant increase in credit risk since

initial recognition)

Change in credit quality since initial recognition

Significant increase in credit risk (SICR)

The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following

quantitative, qualitative or backstop criteria have been met. At each reporting period, the Bank assesses whether there has been a

significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the remaining

expected life from the reporting date and the date of origination. The assessment considers borrower-specific quantitative information

without consideration of collateral, and the impact of forward-looking macroeconomic factors.

Quantitative criteria:

The quantitative criteria considers deterioration in the credit rating of the obligor/counterparty based on facilities with days past due of

above 30 days, these facilities are considered to have significant increase in credit risk by the Group. The Bank has also adopted the

CBN Risk Management Guidelines in determining its significant increase in credit risk criteria.

Qualitative Criteria

The occurrence of any of the under listed indicators in the Bank's Portfolio shall be considered as a significant increase in credit risk:

• Actual or expected significant change in the financial instrument's external credit rating.

• Actual or expected or for retail portfolios, if the borrower meets one or more of the following criteria.

• Identification of the loan or customer on a 'watchlist' or other forbearance indicators.

• Significant financial difficulty of a borrower or issuer.

• Classification of an exposure by a licensed credit risk management, including credit bureaus.

• Deterioration of relevant credit risk drivers for an individual obligor or pool of obligors.

• Expectation of forbearance or restructuring due to financial difficulties.

• Significant increases in credit risk on other financial instruments of the same borrower.

Deterioration in credit worthiness due factors other than those listed above

The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are discussed below:

Expected credit loss (ECL) measurement

IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial recognition as summarised below:

• A financial instrument that is not credit-impaired on initial recognition is classified in 'Stage 1' and has its credit risk continuously

monitored by the Group.

• If a significant increase in credit risk ('SICR') since initial recognition is identified, the financial instruments is moved to 'Stage 2' but is

not yet deemed to be credit- impaired. Please refer to note 2.6.1 g for a description of how the Group determines when a significant

increase in credit risk has occurred.

• If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'. Please refer to note 2.6.1 i for a

description of how the Group defines credit-impaired and default.

• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses that

result from default events possible within the next 12 months. Instruments in stages 2 or 3 have their ECL measured based on

expected credit losses on a lifetime basis. Please refer to note 2.6.1 j for a description of inputs, assumptions and estimation techniques

used in measuring the ECL.

• A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking information. Note 2.6.1 j

includes an explanation of how the Group has incorporated this in its ECL models.

• Purchased or originated credit-impaired financial assets are those financial assets that are credit-impaired on initial recognition. Their

ECL is always measured on a lifetime basis (Stage 3).

Stage 2 Stage 3


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(h)

(i)

(j)

The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure or collective

segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid

or defaulted in an earlier month). This effectively calculates an ECL for each future month, which is then discounted back to the

reporting date and summed. The discount rate used in the ECL calculation is the original effective interest rate.

The Lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at how defaults develop

on a portfolio from the point of initial recognition throughout the lifetime of the loans. The maturity profile is based on historical

observed data and is assumed to be the same across all assets within a portfolio and credit grade band. This is supported by historical

analysis.

The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition of default used

for internal credit risk management purposes. The default definition has been applied consistently to model the Probability of Default

(PD), Exposure at Default (EAD) and Loss given Default (LGD) throughout the Group's expected loss calculations. An instrument is

considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for a consecutive period of

six months. This period of six months has been determined based on an analysis which considers the likelihood of a financial instrument

returning to default status after cure using different possible cure definitions.

Low Credit risk exemption

The Group has not used the low credit risk exemption for any financial instruments apart from Debt investment securities (FGN treasury

bills and bonds) and balances due from other banks in the period ended 31 December 2019.

Definition of default and credit-impaired assets

The Group defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it meets one or

more of the following criteria:

Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty. These are instances

where:

• The borrower is in long-term forbearance

• The borrower is deceased

• The borrower is insolvent

• The borrower is in branch of financial covenant(s)

• An active market for that financial asset has disappeared because of financial difficulties

• Concessions have been made by the lender relating to the borrower's financial difficulty

• It is becoming probable that the borrower will enter bankruptcy

• Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.

Measuring ECL - Explanation of inputs, assumptions and estimation techniques

The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a significant increase

in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected credit losses are

the discounted product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as follows:

• EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or over the

remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the Group includes the current drawn balance plus any

further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.

• Loss Given Default (LGD) represents the Group's expectation of the extent of loss on a defaulted exposure. LGD varies by type of

counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per

unit of exposure at the time of default (EAD). LGD is calculated on a 12-month or lifetime basis, where 12-month LGD is the percentage

of loss expected to be made if the default occurs in the next 12 months and Lifetime LGD is the percentage of loss expected to be made

if the default occurs over the remaining expected lifetime of the loan.

• The PD represents the likelihood of a borrower defaulting on its financial obligation (based on the "Definition of default and credit-

impaired" above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.


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(k)

(l)

Macroeconomic variables incorporated in the ECL models

The Group relies on a broad range of forward looking information as economic inputs, such as: GDP growth. The inputs and models

used for calculating expected credit losses may not always capture all characteristics of the market at the date of the financial

statements. To reflect this, qualitative adjustments or overlays may be made as temporary adjustments using expert credit judgement.

The macro-economic parameters used are the same across risk management and capital planning process. See note 3.1.3iv for

additional details.

Forward-looking information incorporated in the ECL models

The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Group has performed historical

analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio.

These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. Expert judgement has also

been applied in this process. Forecasts of these economic variables (the "base economic scenario") are provided by the Predictive

Analytics' team on a quarterly basis and provide the best estimate view of the economy over the next four years. The impact of these

economic variables on the PD, EAD and LGD has been determined by performing statistical analysis to understand the impact that

changes in these variables have had historically on default rates and on the components of LGD and EAD.

In addition to the base economic scenario, the Predictive Analytics' team also provide other possible scenarios along with scenario

weightings. The number of other scenarios used is set based on the analysis of each major product type to ensure non-linearieties are

captured. The number of scenarios and their attributes are reassessed at each reporting date. At the reporting period, for all portfolios,

the Group concluded that three scenarios appropriately captured non-linearities.The scenario weightings are determined by a

combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario

is representative of. The assessment of SICR is performed using the Lifetime PD under each of the base, and the other scenarios,

multiplied by the associated scenario weighting, along with qualitative and backstop indicators. This determines whether the whole

financial instrument is in Stage 1, Stage 2 or Stage 3 and hence whether 12-month or lifetime ECL should be recorded. Following this

assessment, the Group measures ECL as either a probability weighted 12 month ECL (Stage 1), or a probability weighted lifetime ECL

(Stages 2 and 3). These probability-weighted ECLs are determined by running each scenario through relevant ECL model and

The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type.

• For amortising products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over a 12

month or lifetime basis. This will also be adjusted for any expected prepayments made by a borrower. Early repayment/refinance

assumptions are also incorporated into the calculation.

• For revolving products, the exposure at default is predicted by taking current drawn balance and adding a "credit conversion factor"

which allows for the expected drawdown of the remaining limit by the time of default. These assumptions vary by product type and

current limit utilisation band, based on analysis of the Group's recent default data.

To estimate expected credit loss for off balance sheet exposures, credit conversion factor (CCF) is usually computed. CCF is a modelled

assumption which represents the proportion of any undrawn exposure that is expected to be drawn prior to a default event occuring. It

is a factor that coverts an off balance sheet exposure to its credit exposure equivalent.

The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries made post default. These vary by

product type.

• For secured products, this is primarily based on collateral type and projected collateral values, historical discounts to market/book

values due to forced sales, time to repossession and recovery costs observed.

• For unsecured products, LGD's are typically set at product level due to the limited differentiation in recoveries achieved across

different borrowers. These LGD's are influenced by collection strategies, including contracted debt sales and price.


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2.6.2

(ii) Derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged,

cancelled or expires).

The exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as substantial

modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the

recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the

new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10%

different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative

factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features

attached to the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument

and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of term is accounted for

as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or

modification is not accounted for as an extinguishment, any cost of fees incurred adjust the carrying amount of the liability and are

amortised over the remaining term of the modified liability.

Financial guarantee contracts and loan commitments

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss its

incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial

guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking

facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

i) The amount of the loss allowance; and

ii) The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.

Loan commitments provided by the Group are measured as the amount of the loss allowance. The Group has not provided any

commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another

financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for contracts that

include both a loan and an undrawn commitment and the Group cannot separately identify the expected credit losses on the undrawn

commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised

together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount

of the loan, the expected credit losses are recognised as a provision.

Financial Liabilities

(i) Classification and subsequent measurement

In the current period, financial liabilities are classified and subsequently measured at amortised cost, except for:

Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading (e.g.

short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial

liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in

the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount

that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount

of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in

which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;

• Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition whereby a financial liability is

recognised for the consideration received for the transfer. In subsequent periods, the Group recognises any expense incurred on the

financial liability; and

• Financial guarantee contracts and loan commitments


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2.7 Offsetting financial instruments

2.8 Assets pledged as collateral

2.9 Interest income and expense

a

2.10 Fees and commission income

2.11 Net trading and foreign exchange income

Interest income and expense for all interest-earning and interest bearing financial instruments are recognised in the income statement

within 'interest income' and 'interest expense' using 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, the next re-pricing date) to the carrying amount of the financial asset or liability. When calculating the effective interest

rate, the Group estimates future cash flows considering all contractual terms of the financial instruments but not future credit losses.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when the Group has a legally

enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the

liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal

course of business and in the event of default, insolvency or bankruptcy of the counterparty.

Income and expenses are presented on a net basis only when permitted under IFRSs or for gains and losses arising from a group of

similar transactions such as in the Group's trading activity.

Financial assets transferred to external parties that do not qualify for de-recognition are reclassified in the statement of financial

position from investment securities to assets pledged as collateral, if the transferee has received the right to sell or re-pledge them in

the event of default from agreed terms.

Initial recognition of assets pledged as collateral is at fair value, whilst subsequent measurement is based on the classification of the

financial asset. Assets pledged as collateral are either designated as FVOCI or amortised cost. Where the assets pledged as collateral

are designated as FVOCI, subsequent measurement is at fair-value through OCI. Assets pledged as collateral are measured at

amortised cost.

a) POCI (Purchased or originated credit-impaired) financial assets, for which the original credit-adjusted effective interest rate is applied

to the amortised cost of the financial asset.

b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or stage 3), for which interest revenue is

calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision)

The calculation of the effective interest rate includes contractual fees paid or received, transaction costs, and discounts or premiums

that re an integral part of the effective interest rate.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability.

Interest income and expense presented in the income statement include:

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

• Interest on financial assets and liabilities measured at FVTPL is calculated on an effective interest rate basis.

Net trading income and foreign exchange income comprises net fair value changes in held for trading securities, net fair value gain on

derivative instrument, and foreign exchange translation and trading gains/losses.

Fees and commission that are integral to the effective interest rate on a financial asset are included in the measurement of the effective

interest rate. Fees, such as processing and management fees charged for assessing the financial position of the borrower, evaluating

and reviewing guarantee, collateral and other security, negotiation of instruments’ terms, preparing and processing documentation and

finalising the transaction are an integral part of the effective interest rate on a financial asset or liability and are included in the

measurement of the effective interest rate of financial assets or liabilities.

Other fees and commissions which relates mainly to transaction and service fees, including loan account structuring and service fees,

investment management and other fiduciary activity fees, sales commission, placement line fees, syndication fees and guarantee

issuance fees are recognised as the related services are provided or performed.

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


75



2.12 Dividend income

2.13 Impairment of non-financial assets

2.14 Non-current assets (or disposal groups) held for sale

2.15 Leases

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally

through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less

costs to sell.

Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are

classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if lower,

the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other

short-term and long-term payables. Each lease payment is allocated between the liability and the finance cost. The finance cost is

charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the

liability for each period.

The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the

asset's useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease

term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are

classified as operating leases. Lease income from operating leases where the group is a lessor is recognised in income on a straight-line

basis over the lease term. The respective leased assets are included in the balance sheet based on their nature.

Any impairment loss in a disposal group is allocated first to goodwill and then to the remaining assets and liabilities on a prorata basis

except that loss is allocated to inventories, deferred tax assets, employee benefits and investment property which continue to be

measured in accordance with the group's accounting policies.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects

current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised in the income statement if the carrying amount of an asset or its cash generating unit exceeds its

recoverable amount. A cash generating unit is the smallest identifiable asset group that generates cash flows that largely are

independent from other assets and groups. Impairment losses recognised in respect of cash-generating units are allocated first to

reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit

(group of units) on a pro rata basis.

The carrying amounts of the Group’s non-financial 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. For goodwill and intangible

assets that have indefinite useful lives or that are not available for use, the recoverable amount is estimated each year.

Dividend income is recognised when the right to receive income is established. Dividends are reflected as a component of other

operating income.


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2.16 Property, plant and equipment

i. Recognition and measurement

ii. Subsequent costs

iii. Depreciation

iv. Derecognition

Capital work in progress is not depreciated. Upon completion it is transferred to the relevant asset category. Depreciation methods,

useful lives and residual values are reassessed at each reporting date.

An item of property and equipment is derecognised on disposal or when no future economic benefits are expected from its use or

disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the

carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant and equipment

are kept under review on an annual basis to take account of any change in circumstances.

Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or classified

as held for sale in accordance with IFRS 5. A non-current asset or disposal group is not depreciated while it is classified as held for sale.

Depreciation is recognised in the income statement on a straight-line basis to write down the cost of each asset, to their residual values

over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets under finance lease are

depreciated over the shorter of the lease term and their useful lives.

The cost of replacing part of an item of property, plant or equipment is recognised in the carrying amount of the item if it is probable

that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying

amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the

financial period in which they are incurred.

The Group recognizes items of property, plant and equipment at the time the cost is incurred. These costs include costs incurred initially

to acquire or construct an item of property, plant and equipment as well as the costs of its dismantlement, removal or restoration, the

obligation for which an entity incurs as a consequence of using the item during a particular period.

The assets’ carrying values and useful lives are reviewed, and written down if appropriate, at each reporting date. Assets are impaired

whenever events or changes in circumstances indicate that the carrying amount is less than the recoverable amount.

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes

expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property or equipment have different

useful lives, they are accounted for as separate items (major components) of property and equipment.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land and buildings - Over the shorter of the useful life of 50 years or lease term

Leasehold improvements - Over the shorter of the useful life of 50 years or lease term

Motor vehicles - 4 years

Computer hardware - 3 years

Furniture and fittings - 5 years

Plant and machinery - 5 years


77



2.17 Intangible assets

Goodwill

Software

Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific

asset to which it relates. All other expenditure is expensed as incurred.

Goodwill arises on the acquisition of subsidiaries and represents the excess of the cost of the acquisition over the Group's interest in the

net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiaries at the date of acquisition. When

the excess is negative, it is recognised immediately in profit or loss. Goodwill on acquisition of subsidiaries is included in intangible

assets.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential

impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value

in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently

reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Amortisation method, useful lives, and residual values are reviewed at each financial year-end and adjusted if appropriate.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is

available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the

asset. The estimated useful life of software is 3 years.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs,

that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated

represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is

monitored at the operating segment level.

Software acquired by the Group is stated at cost less accumulated amortisation and accumulated impairment losses. Expenditure on

internally developed software is recognised as an asset when the Group is able to demonstrate its intention and ability to complete the

development and use the software in a manner that will generate future economic benefits, and can reliably measure the costs to

complete the development.

Development costs previously expensed cannot be capitalised. The capitalised costs of internally developed software include all costs

directly attributable to developing the software and capitalised borrowing costs, and are amortised over its useful life. Internally

developed software is stated at capitalised cost less accumulated amortisation and impairment.


78



2.18 Employee benefits

Defined contribution plans

Defined benefit plans

Termination benefits

Short-term employee benefits

2.19 Provisions

2.20 Financial guarantees

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A

liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group 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.

A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring

either has commenced or has been announced publicly. The Group recognizes no provision for future operating losses.

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of

withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary

redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be

accepted, and the number of acceptances can be estimated reliably.

A provision is recognized if, as a result of a past event, the Group 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. Provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,

where appropriate, the risks specific to the liability.

Past-service costs are recognised immediately in the income statement. The net interest cost is calculated by applying the discount rate

to the net balance of the defined benefit obligation. This cost is included in employee benefit expense in the income statement.

A defined contribution plan is a pension plan under which the Group pays fixed contributions to a separate entity. The Group has no

legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits

relating to employee service in the current and prior periods.

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually

dependent on one or more factors, such as age, years of service and compensation. The liability recognised in the statement of financial

position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting

period. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The

present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of

high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity

approximating the terms of the related pension liability.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than

the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the

expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established,

the Group recognises any impairment loss on the assets associated with that contract.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity

in other comprehensive income in the period in which they arise.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension fund administrators (PFA) on

a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The

contributions are recognised as employee benefit expense in the income statement when they are due. Prepaid contributions are

recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Financial guarantee contracts are contracts that require the issuer 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.

Financial guarantees are initially recognised in the consolidated financial statements at their fair values on the date that the guarantee

was given; and the initial fair value amortised over the life of the financial guarantee. The guarantee liability is subsequently carried at

the higher of this amortised amount and the present value of any expected payment (when a payment under the guarantee has

become probable).

The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense, except where

included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current

year, benefit changes curtailments and settlements.


79



2.21 Share capital

Ordinary shares are classified as equity.

Share issue costs

Dividends on the Bank's ordinary shares

2.22 Borrowings

2.23 Discontinued operations

2.24 Repossessed Collateral

In certain circumstances, property is repossesed following the foreclosure on loans that are in default. Repossessed properties are

measured at the lower of carrying amount and fair value less costs to sell and reported within 'Prepayments and other assets'.

The Group presents discontinued operations in a separate line in the consolidated income statement if an entity or a component of an

entity has been disposed of or is classified as held for sale and:

(a) Represents a separate major line of business or geographical area of operations;

(b) Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

(c) Is a subsidiary acquired exclusively with a view to resale (for example, certain private equity investments).

Net profit from discontinued operations includes the net total of operating profit and loss before tax from operations, including net gain

or loss on sale before tax or measurement to fair value less costs to sell and discontinued operations tax expense. A component of an

entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the

rest of the Group´s operations and cash flows. If an entity or a component of an entity is classified as a discontinued operation, the

Group restates prior periods in the consolidated income statement.

Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a

deduction, net of tax, from the proceeds.

Dividends on the Bank's ordinary shares are recognised in equity in the period in which they are approved by the Bank’s shareholders.

Dividends for the year that are declared after the date of the consolidated statement of financial position are dealt with in the

subsequent events note.

Once classified as held for sale or distribution, intangible assets and property, plant and equipment are no longer amortised or

depreciated, and any equity accounted investee is no longer equity accounted.

Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on re-measurement are

recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss.

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or

distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held

for sale or distribution, the assets, or components of a disposal group, are re-measured in accordance with the Group’s accounting

policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs

to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on pro rata

basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property

or biological assets, which continue to be measured in accordance with the Group’s accounting policies.

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised

cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement

over the period of the borrowings using the effective interest method.

Fees paid on the establishment of borrowings are recognised as transaction costs of the borrowing to the extent that it is probable that

some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent that there is no

evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity

services and amortised over the period of the facility to which it relates.

No dividends has been proposed by management for the current period.

Where the Bank or any member of the Group purchases the Bank’s equity share capital (treasury shares), the consideration paid,

including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Bank’s equity

holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received,

net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the

company’s equity holders.


80



3 Financial risk management

The following section discusses the Group's risk management policies. The measurement of ECL under IFRS 9 uses the

information and approaches that the Group uses to manage credit risk, though certain adjustments are made in order to

comply with the requirements of IFRS 9. The approach taken for IFRS 9 measurement purposes is discussed separately in

note 2.6.1.

The need for proper risk management cannot be over emphasized hence the Group recognises the need to invest in

establishing appropriate structures, develop its personnel and deploy the right technology to support its risk practices which

will further strengthen risk management values and beliefs across board. The Group's aim is to achieve an appropriate

balance between risk and return while minimising potential adverse effects on the Group's financial performance.

Risk management is at the center of the Group's operations. The Group practices a robust risk management system which

embodies proactive identification measurement, treatment, monitoring and reporting of all material risks to which it is

exposed. The Group is primarily exposed to credit, market and operational risks. Other risks faced by the group include but is

not limited to liquidity, settlement, reputational, legal, strategic and compliance risks. The management of these risks is in

unison with the Group’s capital management in general and the Group’s strategic objectives in particular.

The Enterprise Wide Risk Management Directorate is responsible for carrying out risk management in line with global best

practice and with the ultimate objective of delivering value to the Group’s shareholders. The risk management practice

adopted begins with establishing a general context from policy and guidance notes approved by the Board of Directors. The

practice further cascades into risk identification, risk analysis, evaluation, mitigation and communication.

The communication of risks helps to inculcate homogenous risk principles shared across the Group that eventually shapes in

general, risk awareness and response. A common risk management language improves the risk culture of the group hence

making everybody a stake holder in the risk process. The Group’s risk management is organised along the three line of

defense shown in the figure below:

These risk organisations are geared towards protection of the Group's Customer deposits, ensure optimum Capital

Management and boost risk adjusted profit margins for the enhancement of Shareholders value. The dynamic nature of risks

is a basis for the regular review of risk management policies and systems by the Group for effective and relevance. This

makes risk management in the Group, a veritable tool for decision making since is aligns with the prevailing market

conditions.

BUSINESS UNITS

- Interface with customers

- Risk origination

CONTROL GROUPS

- Provide risk oversight

- Provide controls

INTERNAL AUDIT

- Validation

-Assurance of risk management

processes


81



Enterprise risk management framework

Polaris Bank has an enterprise risk management structure that aligns its practice within the strategy and regulatory standards

for capital management. It spells out the risk types, policies within which they are treated and the metrics for their

management and/or control. The Board has the overall responsibility for risk management within the Bank. The Board

enhances value for shareholders through various committees that includes but is not restricted to the committees shown in

the diagram below:

The Committees at Board and Management levels are responsible for reviewing and recommending risk management policies,

procedures and profiles including risk philosophy, risk appetite and risk tolerance of the Group. The oversight functions cut

across all risk areas. The Committees monitor the Group's plans and progress towards meeting regulatory Risk-Based

Supervision requirements and implementation of Basel precepts as well as the overall Regulatory and Economic Capital

Adequacy. Other functions of these Committees include:

Risk Management Philosophy

Group defines risk management philosophy as the set of values, attitudes and practices that shows how it would perceive and

or respond to any risk to which it is exposed. The principles that guide the management of risk across the Group are:

1. A general acceptance that enterprise risk-management is mandatory, and not optional.

2. Retention of ownership and accountability for risk and risk management right from the business unit or other unit where it

was first identified.

3. Striking a conservative balance between risk and reward. This is achieved by aligning risk appetite with business strategy,

diversifying risk, pricing risk appropriately, mitigating risk through preventive and detective controls and updating risk

registry.

4. Making risk management a shared responsibility .All business segments are responsible for active management of their

risks, with direction and oversight provided by the Risk Management Group, and other corporate support groups.

5. Risk knowledge and understanding as a basis for decision making. The enterprise performs a rigorous assessment of risks

in relationships, products, transactions and other business activities.

6. Avoidance of activities that are not consistent with our Values, Code of Conduct or Policies - This contributes to the

protection of our reputation and the uniformity of our principles.

7. Focus on clients as an act of good risk management. We know our clients, build a relationship with them and ensure that

the services we provide are suitable for and understood by them.

BOARD OF DIRECTORS

INTERNAL AUDITORS EXTERNAL AUDITORS

BOARD AUDIT AND RISK MANAGEMENT

COMMITTEE

MANAGEMENT RISK COMITTEE

MANAGEMENT CREDIT COMMITTEE

ASSETS AND LIABILITY COMMITTEE

BOARD CREDIT COMMITEE


82



COMMITTEE

Board Audit & Risk

Board Audit &

Risk Management

Management Risk

Management

Credit

Assets and

Liability

Board Credit

Risk Organization and Governance

Diagram 1: Risk Organisation

RESPONSIBILITY

The Board at all times ensures that a systematic, documented assessment of the processes and outcomes surrounding key

risks is undertaken. It also ensures the regular review of risk management systems and policies to reflect prevailing realities.

Provision of validation, assurance, independence and objectivity of the

internal and external auditors.

Definition of the Bank’s risk appetite and the provision of appropriate

structure and resources for the identification, assessment, measurement,

monitoring and control of risks across the group.

Planning, management and control of the Bank`s overall risks.

Oversees credit approval that falls within the mandated approval limit.

Reviews and recommendation of credit policy direction to the BCC

Ensures adequate liquidity to meet the Bank’s funding need as well as

management of the interest rate and foreign exchange risk.

Provision of oversight for the Bank’s lending process, including its credit

policy, framework and strategy

The Group’s structure defines responsibility for risk management across all levels of authority. The Board of Directors, through

its various committees, articulates the vision, sets the tone and provides strategic direction for the management of risk across

the Group. Executive Management transforms the strategic direction and policies set by the Board into procedures and

processes, they institute an effective hierarchy to execute and implement the policies.

Board of Directors

Board Audit & Risk Management Commi�ee

BUSINESS UNITS

Extern

al Au

dit

Inte

rnal A

ud

it

Management Commi�ee

Board Credit Commi�ee

Management Credit Commi�ee

Asset and Liability Management

Commi�ee

Risk Management Commi�ee

Enterprise Risk Management

Credit Risk Management

Market Risk Management

Opera�onal Risk Management

Co

mp

lian

ce

Finan

ce

The Enterprise Risk Management Group, headed by a General Manager, who reports to the Board through the Managing

Director/CEO, has the primary responsibility of managing these risks on a day today basis and maintains a consolidated and

holistic view of the different risk types.


83



Diagram 2: The Enterprise Risk Management Organogram

The Bank’s Enterprise risk management is made up of credit, market and operational risks with the operational risk further

encompassing strategic and legal risks. MIS and Predictive analytics operate independently of the three major risk classes.

The credit analysis team through the Chief Credit Officer reports to the Directorate Head Risk Management.

MD/CEO

Directorate Head /Chief Risk Officer

ComplianceDepartment

Remedial Assets

Head, Credit Risk

Por�olio Planning, MIS and

Market Risk Opera�onal Risk

Loan Review

Credit Admin & Compliance

Collateral Review

Retail Risk

Predic�ve Analy�cs

Strategic Risk

ALM

& TradeLiquidity Risk

Chief Credit OfficerOpera�onal Risk

Management

Compliance Risk

Legal Risk

BCP

IT Risk

CreditAnalysis


Risk management strategies and objectives

Risk management objectives

• To optimise risk/return decisions, while establishing strong and independent review and challenge structures.• To ensure that business growth plans are properly supported by effective risk infrastructure.

• To improve the control and co-ordination of risk taking across the business.

The Group Enterprise-wide Risk Management Directorate manages all aspects of risk including threats and opportunities. The risk

management infrastructure therefore encompasses a comprehensive and integrated approach to identifying, managing, monitoring

and reporting. It also allows for effective risk communication that results in good awareness which makes collective risk

management a culture.

Diagram 3: The Risk Governance Pyramid

The overall business strategy of the Bank revolves around present and future practices, policies and projections that would increase

earnings. The risk strategies however provide quantitative and qualitative guidance to maximize returns while minimising risks.

These strategies align well with the Bank’s risk appetite framework and measures. The strategy and principles used include:

• To manage the Group’s risk profile and ensure that its financial deliverables are met given a range of adverse business conditions.

• Placing emphasis on diversity, quality and stability of earning after thorough risk assessment• Leveraging on competitive advantages with a focus on core businesses• Ability to quantify to a very large extent all material risk faced.• Making disciplined and selective strategic investments

The Group’s risk management objectives are:

• To identify material risks to the Group and ensure that business activities and plans are consistent with its risk appetite.

Board

Board Audit & Risk Management

Risk Management Commi�ee

Risk Management Units

Business Units

Internal Control

Oversight

Oversight

Escalation

Co-ordination

Ownership

Assurance/Validation


84



85



Scope of Polaris Bank's Risk Management

Credit risk

Market risk

Liquidity risk

Compliance risk

Strategic risk

Risk Appetite

Risk Management Methodology

The Group uses risk methodologies that cut across the 4T’s of response. The type of risk determines whether it would be

transferred, tolerated, treated or terminated. The major risks however fall under the treatment methodology. The Bank manages

risk to derive value for all stakeholders. Its sets about achieving this by formulating policies and procedures that guides actions and

reactions. Some of the policies and procedures are shown in the diagram below:

The policies sets the tone but to ensure adherence, several exception reports on customers and activities of the Group are

generated by the various audit control units for management’s decision making. These include:

Potential loss owing to obligor default

Risk that value of on and off-balance sheet positions of a financial institution will be adversely affected by

movements in market rates or prices.

Potential loss arising from inability to meet obligations, or fund increases in assets as they fall due without

incurring unacceptable cost or losses.

Potential loss arising from non-compliance with laws, regulations, standards or code of conducts of local

industry regulators.

Potential loss arising from current and prospective impact on earnings or capital due to:

i) Adverse business decisions

ii) Improper implementation of decisions

iii) Lack of responsiveness to industry changes

• Monthly Management Profitability Reports (MPR) for the marketing teams

• Monthly Operations Performance Reports (OPR) for the support teams

• Quarterly Business Profitability Review

• Annual Bank-wide performance appraisal systems

“In the Pursuit of the Group’s objectives of maximizing its earnings and shareholders value, the Group exhibits a “moderate”

appetite for risk. This measure is quantified by the various board approved risk limits/thresholds and reflected in the Group’s culture

as well as its approach to Business.”

Our Risk Appetite Statement defines the amount and type of risk the Group is willing to accept in the pursuit of its strategic

objectives, while recognising a range of possible outcomes as business plans are implemented. In arriving at the risk appetite, the

enterprise risk framework which is approved by the Board Audit Risk Management Committee combines a top-down view of its

capacity to take risk with a bottom-up view of the business risk profile requested and recommended by each business area. The

Group defines its risk appetite at the enterprise level as well as across different risk areas using qualitative and quantitative measures.

Po

lici

es a

nd

pro

ced

ure

s

ERM

Credit

Human Resources

Standard operations

IT

FX Exposure


86



Table 1: Risk Appetite Definition Approach

The risk management process begins with establishing a context followed by risk identification and definition. Risks identified must

be analysed and measured before effective monitoring and reporting can be executed.

Establishing a Context

This is achieved through policies and strategies adopted by the Bank to guide its business and operations. The Management

approves of these policies and have a role to play in their implementation. Lines of action and responses are detailed in the event of

crystallisation of risks.

Risk identification

The Group embarks on a thorough risk identification process on a cause, effect and impact basis. This helps to unearth risk in new

products, processes and activities. This risks discovered are added to risk register. These actions are carried out in addition to the

periodic review of the risk profile of existing products, processes and activities. The concept of risk identification at a fundamental

stage cuts across credit, operations, Market, Liquidity, Legal, Compliance and Strategic Risks. This is achieved through:

• Periodic review of existing products

• Defined Key Risk Indicators

• Regular update of the risk register

• Periodic risk and control self-assessment exercise

• A framework for the analysis and assessment of risks associated with new markets or products.

Risk Measurement

The Risk Management Group is responsible for developing and sustaining an appropriate suite of risk management techniques to

support the operations of the various business lines. This function includes estimating the value of transactions, risk exposures,

credit risk rating and parameters regulatory and economic capital for the Bank. The techniques used are dependent of the risk

types. Some risk require quantitative modelling and stress testing while some are more subjectively or qualitatively measured. At

every point, the use of models is balanced with a good governance structure and application of sound and experienced judgment.

All methodologies used for risk measurement are subject to internal and external validation for relevance, accuracy and to

determine whether risk level are within the Bank’s appetite.

The Group measures its performance against its Risk Appetite and reports this to the Executive Management and Board on a

quarterly basis; this may prompt a rebalancing of the business mix to achieve less risk on a diversified basis. The risk appetite

definition and monitoring enables the Group to:

• Identify unused risk capacity, and thus highlight profitable opportunities

• Improve risk and return characteristics across the business

• Meet growth targets within an overall risk appetite and protect the Group's performance

• Improve Executive Management control and co-ordination of risk-taking across businesses

The Risk Management Process

Qualitative Quantitative –

Limits and

Thresholds

Quantitative –

Key Risk

Indicators

Risk Element Risk Appetite Definition Approach

Strategic Risk

Compliance Risk

Enterprise Risk

Credit Risk

Market Risk

Liquidity Risk

Legal Risk


87



Risk monitoring and Reporting

Monitoring is a very important part of the risk management process. It helps to ensure that business activities are within the

approved limits of guideline. It also aligns the transactions to the Bank’s strategies and risk appetite. Where there is a breach, such

is reported to senior management and/or the Board depending on the limit of guideline.

Reporting helps to capture the collective measures of risk across products and businesses in compliance or in breach of the policies,

limits and guidelines. They also provide a clear statement of the amounts, types, and sensitivities of the various risks in the Bank’s

portfolios. Senior Management and the Board use this information to understand the Bank’s risk profile and the performance of the

portfolios. Reports and rendered daily, weekly, monthly, quarterly, semi -annually or annually depending on the risk and recipient.

The control functions also work independently to review risk practices in line with the framework. They also submit reports that are

used to check if the risk reports are reflective of the actual practices.

• Sensitivity Analysis and Stress Testing

The Group conducts sensitivity analysis and stress test to estimate the potential impact of risk levels on income and capital as a

result of fluctuations in market conditions, liquidity and other risk factors. This gives the Bank an idea of its expected and

unexpected losses. The results from different areas (credit, market, operational liquidity etc.) are consolidated at an enterprise

level. Enterprise-wide stress testing is also integrated with both the strategic and financial planning processes. It is developed with

input from a broad base of stakeholders, and results are integrated into management decision-making processes for capital,

funding, market risk limits, and credit risk strategy. The development and review of this exercise is subject to formalized policies

and approval from senior management.

Models are veritable tools used for stress test and other quantitative risk measures. They help achieve outputs like Expected

Losses(EL), Unexpected Losses(UL), stressed non-performing loans, Exposure at Default(EAD), Probability of Default(PD), Loss

Given Default(LGD), Value at Risk (VaR), duration, maturity gap and rating grades. Since these models have become a vital part of

decision making, the Banks manages the risk inherent in their usage by validation, and revalidation internally and by reputable

External Consultants. In addition, staff are trained to use these models to achieve a high level of accuracy. The models are also

frequently used to reflect prevailing risk factors and best practice.

Basel and Capital Management

Polaris Bank is in the forefront of Basel implementation and it is constantly building resource capacity for the migration to the

internal rating based approach of capital management.

The Basel II regulatory capital framework governs minimum regulatory capital requirements .This framework is organised under

three pillars:

Pillar 1: The Bank uses Basel and CBN compliant methodologies and parameters to calculate its minimum capital requirements while

putting in place measures to achieve the regulatory capital figures stipulated by Basel and CBN

Pillar 2: This pillar contains the internal capital adequacy and assessment process (ICAAP). It is a formal internal assessment of

capital adequacy in relation to strategies, risk appetite, and actual risk profile. It is also a regulatory requirement. To this end, the

Bank has an ICAAP Committee charged with producing the ICAAP report on an annual basis as required by the regulators. The Bank

also has a Capital Management Committee that allocates capital after proper reviews of risk profile and concentration vis a vis

return.

Pillar 3: The Bank is transparent in all its process and reports its business operations in a precise manner. It enhances public

disclosure (both quantitative and qualitative) of specific details of risks being assumed, and how capital and risk are being managed

under the Basel framework.

The CBN specifies approaches for quantifying the risk weighted assets for credit, market and operational risk for the purpose of

determining regulatory capital. Although the computations are consistent with the requirements of Pillar 1 Basel II Accord, certain

sections have been adjusted to reflect the peculiarities of the Nigerian environment. In compliance with CBN, the Bank has adopted

the Standardized approach in determining capital charge for credit risk and market risk while capital charge for operational risk was

determined using Basic Indicator Approach (BIA).


88



Management of Credit Risk

Credit risk is the risk of an economic loss arising from the failure of a counterparties to fulfil its contractual obligations; its effect is

measured by the cost of replacing cash flows if the other party defaults.

Credit Risk Guiding Principles

Credit Risk Management in the Group is guided by the following principles:

a. A strategic rather than a purely opportunistic approach in the creation of its credit risk portfolio.

b. Clear articulation of policy guidelines on exposures, concentrations, pricing, collateral, customer-product matrices and portfolio

liquidity.

c. Maintenance of an integrated tracking system to measure actual against targeted risk asset composition and close monitoring of

risk, return and asset quality indicators.

d. The Group shall work to minimize the risk arising from a build-up of concentration in its Credit Risk Asset portfolio in any sector,

obligor or industry.

e. Portfolio liquidity and flexibility shall be important balancing elements in the creation of Credit Risk Assets by the Group.

f. Loan pricing for each exposure shall be determined by the obligor’s risk profile as represented by his risk rating.

g. Irrespective of the rewards, the Group will always put Credit Risk before pecuniary considerations.

h. The Group shall not engage in lending activities where though the returns look promising, the purpose of the loan and or its

source of repayment are unknown or at best speculative.

The Management of Credit Risk occurs broadly on 3 levels: the Board level, Management level and Risk Management Group level.

At the Board level, Credit Risk is managed by the Board Credit Committee and Board Audit & Risk Management Committee with the

following roles:

i. Regular and ad-hoc review and approval of Credit Risk Strategy

ii. Approval of the Group’s Credit Risk Appetite

iii. Monitoring the effectiveness of the Group’s Credit Risk Measurement and Control Systems

iv. Custody of the Group’s Credit Risk Framework

v. Approval of credit requests above Management Credit Committee limits

vi. Approval of the Group’s Credit Risk Rating Systems

vii. Monitoring compliance to portfolio concentration limits

At the Management level, Credit Risk is managed by the Management Risk Committee(MRC), Management Credit Committee

(MCC), the Portfolio Planning Committee (PPC) and the Rating Committee.

The role of the MCC includes among others:

a. Approval of credit facility requests within the limits of management but above the limits of various Business Unit Heads (including

the Managing Director).

b. Review and recommendation for approval to the Board Credit Committee on credit facilities above Management limit.

c. Review and recommendation to the Board Credit Committee of Credit Policies and Standards.

Credit risk is the risk of suffering financial loss, should any of the Group's customers, client or market counterparties fail to fulfil

their contractual obligations to the Group. Credit risk arises mainly from interbank, commercial and consumer loans and advances,

and loan commitments arising from such lending activities, but can also arise from credit enhancement provided, such as credit

derivatives (credit default swaps), financial guarantees, letters of credit, endorsements and acceptances.

Credit risk is the single largest risk within the Group, being an integral part of the Group’s business activities and is inherent in

traditional products – loans, commitments to lend and contingent liabilities, such as letters of credit – and in “traded products” such

as repurchase agreements (repos and reverse repos). The Group is also exposed to credit risks arising from investments in debt

securities and other exposures arising from its trading activities - trading exposures.

The Group defines credit risk as the risk that its customers will be unable or unwilling to pay interest, and/or principal or fail to

perform their obligations as specified in the loan contract engaged between the customer and the Group.

Credit Risk Management


89



Credit Origination

The role of the Portfolio Planning Committee includes among others:

a. Review and recommendation for approval to the Board Audit and Risk Management Committee, the Group’s portfolio limit

concentration policy for sector, industry, region, product type, customer type and obligor rating.

b. Review and recommendation for approval to the Board Risk Management Committee, any changes in the Group’s portfolio limit

concentration policy.

c. Monitoring of the actual portfolio concentration limits against targeted performance.

d. Supervision of stress tests for the Group’s Credit Risk portfolio.

The credit risk assessment of loan exposures is centralized in a Credit Analysis team, headed by the Chief Credit Officer, who

reports to the CEO and Board of Directors through the Chief Risk Officer.

There are various levels of filtration in the process of creating credit risk asset in the Group including;

i. Clearly defined exposure concentration limits

ii. Originated transactions going through Centralized Sector Analysts for quality assurance

iii. The extensive use of the rating mechanism to objectively set Risk Acceptance Criteria

iv. Defined Target Markets indicating preferred sectors and obligors for whom credit assets can be created.

The credit approval process flow is depicted below:

The Centralized Specialist Analyst role is a risk management function, and all credits are reviewed for quality assurance, risk

acceptance criteria and conformity with portfolio strategy before being recommended for further processing and approvals along the

designated business line. Approval limits are delegated within the various underwriting levels based on loan value and collateral

arrangement. This assurance process is well institutionalized.

Credit Risk Monitoring

Credit risk monitoring is the responsibility of the Loan Review Department which also reports to the Managing Director (MD) and

Board through the Chief Risk Officer, the activity is carried out both at the individual obligor level (covering on and off balance sheet

exposures) and overall portfolio level.

The overriding objective of credit risk monitoring is to ensure that the quality of the Group's credit portfolio is tracked on a day to

day basis so as to take prompt and appropriate remedial measures as soon as any deterioration or potential deterioration is

identified.

Acct Officer Team Leader

BDM/

Business

Unit

Head

Centralised

Specialist Analyst Maker/

Checker

Under-writers

1-7

Legal Maker/

Checker

Credit Admin

Maker/

Checker

Draw-

down

Maker/

Checker

LOAN DISB’MENT

CREDITAPPROVAL

Activates:

• Credit Rating• Transaction Rating

• This is Limit Based

• Underwriting Levels 1-6;

Level 1- Regional ManagerLevel 2- Head of DirectorateLevel 3- GMDLevel 4- MCCLevel 5- BCCLevel 6- BOD


90



The assessment of credit exposure is very critical. The Banks uses models due to variations in the associated risk factors in credit

risk.

Credit Risk Measurement

In determining the probability of default the Bank has estimated the migration rates of loans from risk group 1 to risk group 2 and

quality of the performing book on a quarter by quarter basis. The movement between each risk group is based on the worse of the

credit quality and the days past due of the loan. Any facility with days past due above 90 days moves from risk group 1 to risk

group 2. Each loan facility is grouped based on its sector/industry and further sub-divided into 2 risk group. See below;

Furthermore, significant increase in credit risk is the main factor that determines movement of a financial asset from Stage 1 to

Stage 2, all obligors with days past due obligation of more than 30 days are migrated to stage 2. An obligor is moved into stage 3 if

past due obligation is over 90 days unless there is a rebuttable assumption used by Management.A facility in Stage 3 can

subsequently be deemed “cured”. A facility is deemed to be “cured” when there is a significant reduction in the credit risk of the

financial instrument. “Cured” facilities within Stage 2 are monitored for a probationary period of 90 days to confirm if the credit risk

has decreased sufficiently before they can be migrated from Stage 2 to Stage 1 while “Cured” facilities within Stage 3 are monitored

for a probationary period of 180 days before migration from Stage 3 to Stage 1.

The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure varies

with changes in market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of

assets entails further estimations as to the likelihood of defaults occurring, of the associated loss ratios and of defaults occurring, of

the associated loss ratios and of default correlations between counterparties. The Group measures credit risk using Probability of

Default (PD), Exposure of Default (EAD) and Loss Given Default (LGD). This is similar to the approach used for the purposes of

measuring Expected Credit Loss (ECL) under IFRS 9.

The Bank has several models for the quantification and measurement of credit risk but key to them all is credit risk rating system.

There are credit risk parameters engendered in the rating system for the estimation of entity and transactions risks. These

parameters include but is not restricted to probability of default, loss given default and exposure at default which are transparent

and may be replicated in order to provide consistency of credit adjudication, as well as minimum lending standards for each of the

risk rating categories.

• Probability of Default (PD)

The PD represents the likelihood of a borrower defaulting on its financial obligation either over the next 12 months (12 M PD), over

the remaining lifetime (Lifetime PD) of the obligation.

• Exposure at Default (EAD)

EAD is the amount the Group is owed at the time of default or at the reporting date. This basically the sum of the facilities principal

and interest outstanding at reporting date.

• Loss Given Default (LGD)

The Group's expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparties, type and seniority of

claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of exposure at the time of

default (EAD). LGD is calculated on a 12 month or lifetime basis, where 12-month LGD mirrors the probable loss the Group is likely

to incur on its outstanding facilities. This entails measuring the net realisable value of facility collaterals as well as the present value

of any future expected cash flow. The essence of this measure is to statistically measure the Group's historical loss experience.

Risk Group IFRS 9

Stage

1 Stage 11 Stage 22 Stage 3

Number of days past

due

0-3031-90

Above 90 days


91



Authority limits on credit

Legal Lending Limits

Credit Approval Limits

Collateral policies

- Cash and Government Securities

- Shares and Stocks of Listed Companies and Financial Guarantees- Plant and Equipment- Properties/Real Estates- General Inventories and Receivables- Letter of Lien and Documents of title to goods

- Other Assets

S/N Collateral Type Coverage

(%)1 Cash 110

2 Shares 150

3 Property 150

4 Leases 120

5 Financial Guarantees 100

6 Government Securities 110

7 Other Assets 150

8 Insurance 120

9 Stocks and Goods 150

10 Invoice Discounting 130

11 130

12 Bank Guarantee 100

The Group only accepts collaterals that are enforceable and must fall under any of the following categories:

While these collaterals are acceptable to the Group, they must provide adequate cover for the proposed facility and must be easy to

transfer to the Group, with good legal documentation. They must also be easily realisable, with very stable value outlook.

The approved collateral coverage ratio for the Group’s facilities is as stated below:

Stocks/Goods (Trade

Finance only)

- Single Obligor Limit: The total outstanding statutory exposure for any single person or group of connected persons shall not

exceed 20% of the shareholders fund unimpaired by losses.

- Public Sector Limit: The total outstanding exposures (on and off balance sheet) to all tiers of government and their agencies shall

not at any point exceed 10% of the Bank’s credit portfolio.

- Large Exposure Limits: Aggregate large exposures in the Group shall not exceed eight times (8X) the shareholders fund

unimpaired by losses. A large exposure is defined as an outstanding exposure to a single obligor that is at least 10% of the Bank

shareholders fund unimpaired by losses.

- Specialized Loan limits: The total specialized loans in the portfolio of credit exposure (both on and off balance sheet) must not

exceed 20% of total outstanding.

- Group Approval Limits: Group approvals shall be required in respect of credit exposures that are in excess of the approved

individual credit approval authority. Group approval authority shall be defined at the following levels:

* The Board of Directors (BOD)

* Board Credit Committee (BCC)

* Management Credit Committee (MCC)

The Group has a structured Credit Risk Collateral Management system, which continuously ensures the eligibility, adequacy and

quality of collaterals used as mitigants for credit exposures. The objective of which, is to ensure that the Group has a fall-back

position for all classes of its assets.

Our collateral management system is guided by the collateral policy, which is a part of the Credit Policy and dictates amongst other

things; the continuous review of collateral values to reflect prevailing market conditions and economic realities, the legal perfection

of all pledged collateral and insurance coverage of all pledged collateral, with the Group stated as First Loss Payee.

Approval Levels Obligor limits

Full Board of Directors Above N1.5 billion subject to the Bank's single obligor limit of 20% of shareholders

fund unimpaired by losses

Board Credit Committee Above N500 million and up to N1.5 billion

Managing Director Up to N150 million

Branch/Group/Divisional Heads/ED As delegated by the Managing Director/CEO

Management Credit Committee Above N150 million and up to N500 million


92



Credit collateral

Write-off policy

The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded

there is no reasonable expectation of recovery. Loans (and the related impairment allowance accounts) are normally written off,

either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of

any proceeds from the realization of security. In circumstances where the net realizable value of any collateral has been determined

and there is no reasonable expectation of further recovery, write off may be earlier. Subsequent recoveries of amounts previously

written off are credited to the the statement of comprehensive income.

The Group may write-off financial assets that are still subject to enforcement activity. The outstanding contractual amounts of such

assets written off during the period ended 31 December 2019 was N726 million. The Group still seeks to recover amounts it is

legally owed in full, but which have been partially written off due to no reasonable expectation of recovery.

Loans to individuals or sole proprietors must be secured by tangible, marketable collateral that has a market value that is supported

by a valuation report from a registered estate valuer who is acceptable to the Group. The collateral must also be easy to check and

easy to dispose of. This collateral must be in the possession of, or pledged to, the Group. Client’s account balances must be within

the scope of cover provided by its collateral.

The Group ensures that each credit is reviewed and granted based on the strength of the borrowers’ cash flow. However, the Group

also ensures its credit facilities are well secured as a second way out. The policies that guide collateral for facilities are embedded

within the Group’s credit policy guide. These include the following policy statements amongst others:

The main collateral types acceptable to the Bank for loans and advances include:

All collateral offered must have the following attributes:

• There must be good legal title

• The title must be easy to transfer

• It should be easy and relatively cheap to value

• The value should be appreciating or at least stable

• The security must be easy to sell.

The Group has not included collaterals not easily convertible into cash in calculation of its expected credit loss. All collateral must be

protected by insurance. Exceptions include cash collateral, securities in safe keeping, indemnity or guarantees, or where our interest

is general (for instance in a negative pledge). The insurance policy has to be issued by an insurer acceptable to the Bank. All cash

collateralized facilities shall have a 20% margin to provide cushion for interest and other charges i.e. only 80% of the deposit or

cash collateral may be availed to an obligor.

• Mortgages over residential properties

• Charges over business premises, fixed and floating assets as well as inventory.

• Charges over financial instruments such as equities, treasury bills etc.

The fair values of collaterals are based upon last annual valuation undertaken by independent valuers on behalf of the Bank. The

valuation techniques adopted for properties are based upon fair values of similar properties in the neighbourhood taking into

cognizance the advantages and disadvantages of the comparatives over the subject property and any other factor which can have

effect on the valuation e.g. subsequent movements in house prices, after making allowance for dilapidations. The fair values of

nonproperty collaterals (such as equities, bond, treasury bills, etc.) are determined with reference to market quoted prices or

market values of similar instrument. There were no repossessed collateral during the period.

The same fair value approach is used in determining the collaterals value in the course of sale or realisation.


93



3. Financial risk management

3.1 Credit risk

3.1.1a Maximum exposure to credit risk for financial assets

Group and Bank

31 December 31 December

2019 2018

1,264 57

Other Assets (Cash reserve with CBN) 37,698 37,446

2019

Stage112-month ECL

Stage 2Lifetime ECL

Stage 3Lifetime ECL

Total

Term loans 127,571 241 83,823 211,635

Overdrafts 13,342 128 36,303 49,773

Gross Carrying amount 140,913 369 120,126 261,408

Loss Allowance (3,172) (41) (69,457) (72,670)

Carrying amount 137,741 328 50,669 188,739

Investment securities

561,145 - - 561,145

Loss allowance (1,990) - - (1,990)

Carrying amount 559,155 - - 559,155

Other assets (excluding restricted cash) - - 13,006 13,006

Other loans and receivables 182,594 - - 182,594

Loss allowance - - (4,191) (4,191)

Carrying amount 182,594 - 8,815 191,409

Balances with central banks 3,396 - - 3,396

Loss allowance - - - -


Due from banks and other financial institutions 62,076 - - 62,076

Loss allowance - - - -


2018

Stage112-month ECL

Stage 2Lifetime ECL

Stage 3Lifetime ECL

Total

Term loans 163,803 5,709 74,348 243,860

Overdrafts 11,424 399 278,880 290,703

Gross Carrying amount 175,227 6,108 353,228 534,563

Loss Allowance (15,822) (2,982) (175,708) (194,513)

Carrying amount 159,405 3,126 177,520 340,050

Investment securities

590,483 - - 590,483

Loss allowance (416) - - (416)


Other assets (excluding restricted cash) - - 18,471 18,471

Loss allowance - - (7,812) (7,812)

Carrying amount - - 10,659 10,659

The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment.

The Group's maximum exposure to credit risk for the period 1 January 2019 to 31 December 2019 is represented by the carrying

amounts of the financial assets in the statement of financial position.

Maximum exposure to credit risk - Financial instruments not subject to impairment

Group and Bank

Investment securities: Amortised Costs and

Assets pledged as Collateral

Financial assets held at fair value through profit or loss

Maximum exposure to credit risk - Financial instruments subject to impairment

The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised.

The gross carrying amount of financial assets below also represents the Group's maximum exposure to credit risk on these assets.

Group and Bank

Investment securities: Amortised Costs and

Assets pledged as Collateral


94




2019 2018

Loans exposure to total credit risk exposure 44% 44%

49% 49%Other exposures to total credit risk exposure 7% 7%

Credit exposures relating to off-balance sheet items

Group and Bank Group and Bank


2019 2018

Bonds and guarantees 50,427 40,356

Letters of credit 4,418 2,187

54,845 42,543

Contingencies are disclosed on Note 41

3.1.1b Summary of collaterals held against loans and advances to customers

2019Gross exposure

Impairment allowance Carrying amount

Fair value of collateral held

Term loans 211,635 50,296 161,339 304,835

Overdrafts 49,773 22,374 27,399 154,075

261,408 72,670 188,738 458,910

Analysis by security Stage 1 Stage 2 Stage 3 Total

Secured against real estate 5,638 63 22,678 28,379

Secured by shares 53 - 7 60

Cash Collateral 8,467 0 89 8,556

Otherwise secured 102,768 310 98,172 201,250

Unsecured 22,964 0 199 23,163

Total Gross Loan 139,890 373 121,145 261,408

Fair Value of Collateral (164,892) (17,472) (276,548) (458,911)

(Over)/Under collaterization (25,002) (17,098) (155,403) (197,504)

The Group employs a range of policies and practices to mitigate credit risk. The most common of these is accepting collateral for funds

advanced. The Group has internal policies on the acceptability of specific classes of collateral or credit risk mitigation. Upon initial

recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding

assets. In subsequent periods, the fair value is assessed by reference to market price or indexes of similar assets.

The Group closely monitors collateral held for financial assets considered to be credit- impaired, as it becomes more likely that the

Group will take possession of collateral to mitigate potential credit losses. Financial assets that are credit-impaired and related

collateral held in order to mitigate potential losses are shown below:

The table above shows a worst-case scenario of credit risk exposure to the Group as at 31 December 2019 without taking account of

any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on

amounts reported in the statement of financial position.

Although cash and cash equivalents are also subject to impairment requirements of IFRS 9, the identified impairment loss was

immaterial.

Debt securities exposure to total credit risk exposure


95



2018 Gross exposure Impairment allowance

Carrying amount Fair value of collateral held

Term loans 243,860 69,599 174,261 345,607

Overdrafts 290,703 124,914 165,789 496,515

534,563 194,513 340,050 842,122

Analysis by security Stage 1 Stage 2 Stage 3 Total

Secured against real estate 3,078 121 27,634 30,833

Secured by shares 31 - 8 39

Cash Collateral 6,469 43 5 6,517

Otherwise secured 73,888 5,897 120,936 200,721

Unsecured 92,358 47 204,048 296,453

Total Gross Loan 175,824 6,108 352,631 534,563

Fair Value of Collateral (317,367) (58,739) (466,017) (842,123)

(Over)/Under collaterization (141,543) (52,631) (113,386) (307,560)

3.1.2 Credit quality of financial assets using external ratings

Group Bank


2019 2019

Sovereign ratings

- Nigeria (B+) S&P 3,396 3,396

3,396 3,396

Group Bank


2018 2018

Sovereign ratings

- Nigeria (B+) S&P 6,013 6,013

6,013 6,013

Group Bank


2019 2019

Counterparties with external credit rating (S&P)

- A+ 426 426

- A 14,790 14,790

- BBB+ 45,269 45,269

- BBB 1,085 1,085

- BB+ 5,009 5,009

- BB 68 68

- B 312 312

- Default 138 138

67,097 67,097

The credit quality of financial assets with reference to external ratings has been shown below. This information is provided for balances

due from banks and financial institutions and debt investment securities.

The credit quality of balances due from banks and other financial institutions are assessed by reference to external credit ratings

information about counterparty default rates.

Balances with Central Bank

The credit quality of balances with the Central Bank are assessed by reference to external credit ratings information aboutcounterparty default rates.

Due from other banks and other financial institutions


96



Group Bank


2018 2018

Counterparties with external credit rating (S&P)

- A+ 32,779 32,779

- A 39,404 39,404

- A- 3,285 3,285

- BBB+ 763 763

- B+ 518 518

- BB- 52 52

- B 368 368

77,169 77,169

Financial assets held at fair value through profit or loss

Group Bank


2019 2019

Sovereign ratings

- Nigeria (B+) S&P 1,264 1,264

1,264 1,264

Group Bank


2018 2018

Sovereign ratings

- Nigeria (B+) S&P 57 57

57 57

Investment securities - Debt

Group Bank


2019 2019

Sovereign ratings

- Nigeria (B+) S&P 517,071 517,071

517,071 517,071

Group Bank


2018 2018

Sovereign ratings

- Nigeria (B+) S&P 531,805 531,805

531,805 531,805

The credit quality of debt investment securities (amortized cost investments) are assessed by reference to external credit ratings

information about counterparty default rates.


97



Assets pledged as collateral

Group Bank


2019 2019

Sovereign ratings

- Nigeria (B+) S&P 41,674 41,674

-Other Sovereign Ratings

AA 410 410

42,084 42,084

Group Bank


2018 2018

Sovereign ratings

- Nigeria (B+) S&P 50,449 50,449

-Other Sovereign Ratings

AA 323 323

BBB 7,531 7,531

58,303 58,303

Other Assets

Group Bank


2019 2019

- Unrated 50,704 50,704

50,704 50,704

Group Bank


2018 2018

- Unrated 60,676 60,676

60,676 60,676

Other loans and receivables

Group Bank


2019 2019

Sovereign ratings

- Nigeria (B+) S&P 182,594 182,594

182,594 182,594

3.1.3 Credit Risk concentration

Concentration risk refers to the risk arising from an uneven distribution of counterparties within a credit portfolio or from concentration

in sectors, geographical locations etc. which poses a potential threat to the solvency of the counterparty.

The Group recognizes that concentration risk may exist among loans, which though may have been prudently underwritten, are

collectively sensitive to the same economic and financial or business development events, such that a negative development affecting

these factors may cause loans to perform as if it were a single, large exposure.

The Group complies with regulatory portfolio concentration limits as determined by the CBN. The Group sets internal

thresholds, which are more conservative than the regulatory limits and this acts as a buffer to ensure compliance. In addition to

regulatory limits, the Group uses risk-based measurement systems to define a variety of concentration thresholds for its credit

portfolio. These include; sectors, geographical locations, strategic business units etc.

The Group employs its management information system in monitoring these limits and remedial actions are set in motion at

determined thresholds other tools employed in measuring risk concentrations include, HHI index and GINI coefficient.

Concentration of credit risk arise from financial instruments that have similar characteristics and are affected similarly by changes in

economic or other conditions. This information has been provided along geographical areas and economic sectors.

(All a

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OR

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AN

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(All a

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Decem

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Cre

dit

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Cash a

nd b

ala

nces w

ith c

entr

al banks

6,0

13

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6,0

13

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13

Due f

rom

banks a

nd o

ther

financia

l in

stitu

tions

21,6

21

47,3

45

68,9

66

21,6

21

47,3

45

68,9

66

Fin

ancia

l assets

held

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

57

-57

57

-57

Loans a

nd a

dvances t

o c

usto

mers

: -

Term

loans

243,8

60

-243,8

60

243,8

60

-243,8

60

- O

verd

raft

290,7

03

-290,7

03

290,7

03

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03

Investm

ent

securities

- A

mort

ized C

ost

Investm

ents

531,8

05

-531,8

05

531,8

05

-531,8

05

- F

air v

alu

e t

hro

ugh O

CI

Investm

ents

14,6

34

14,6

34

14,6

34

-14,6

34

Asset

ple

dged a

s c

ollate

ral -

debt

securities

58,3

03

-58,3

03

58,3

03

-58,3

03

Oth

er

assets

52,0

79

52,0

79

52,8

64

-52,8

64

1,2

19,0

75

47,3

45

1,2

66,4

20

1,2

19,8

60

47,3

45

1,2

67,2

05

Cre

dit

Ris

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on

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Bonds a

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es

40,3

56

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50,4

27

40,3

56

-

4

0,3

56

Lett

ers

of

cre

dit

2,1

87

2,2

31

4,4

18

2,1

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-

2,1

87

42,5

43

12,3

02

54,8

45

42,5

43

-

4

2,5

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Wit

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Cre

dit

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Secto

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517,0

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525,0

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Manufa

ctu

ring

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2

1,9

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1,9

61

Oil &

Gas

-

-

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4

1,6

07

-

-

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4

1,6

07

Reta

il-

-

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20,2

53

-

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0,2

53

Serv

ices

-

6

2,0

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96,9

73

-

14,4

74

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8,8

15

182,3

38

Public S

ecto

r

3,3

96

-

68,9

66

-

-

29,9

00

182,5

94

3

7,6

97

322,5

53

To

tal

3,3

96

6

2,0

76

6

8,9

66

188,7

38

517,0

71

4

4,3

74

182,5

94

4

6,5

12

1

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27

Cre

dit

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s

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an

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31

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ber

20

19

Genera

l C

om

merc

e13,7

07

76

13,7

83

13,7

07

-

13,7

07

Manufa

ctu

ring

18,0

67

4,3

27

22,3

94

18,0

67

4,3

47

22,4

14

Oil &

Gas

3,0

37

-

3,0

37

3,0

37

-

3,0

37

Reta

il-

-

-

-

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Serv

ices

15,6

15

15

15,6

30

15,6

15

72

15,6

87

Tota

l

5

0,4

26

4,4

18

5

4,8

44

5

0,4

26

4,4

19

5

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45

The f

ollow

ing t

able

bre

aks d

ow

n t

he G

roup’s

cre

dit e

xposure

at

gro

ss a

mounts

(w

ithout

takin

g into

account

any c

ollate

ral held

or

oth

er

cre

dit s

upport

), a

s c

ate

gori

sed b

y t

he B

ank's

defined industr

y s

ecto

r.

Gro

up

Bala

nces h

eld

wit

h C

en

tral

Ban

k

Du

e f

rom

ban

ks

an

d o

ther

fin

an

cia

l

insti

tuti

on

s

Fin

an

cia

l assets

measu

red

thro

ug

h F

VT

PL

Lo

an

s a

nd

Ad

van

ces t

o

cu

sto

mers

Fin

an

cia

l assets

measu

red

at

am

ort

ized

co

st

Asset

ple

dg

ed

as c

ollate

ral -

deb

t secu

riti

es

Oth

er

assets

To

tal

Oth

er

loan

s a

nd

receiv

ab

les

Ban

kB

on

ds a

nd

gu

ara

nte

es

Lett

ers

of

cre

dit

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lB

on

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ara

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es

Lett

ers

of

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S T

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e ye

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K A

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ATE

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201

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101

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dit

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rG

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1

0,2

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- -

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1,5

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--

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3

1,5

07

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Gas

--

- 365,9

00

--

-

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il-

--

6

,478

--

-

6

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Serv

ices

- 6

8,9

66

- 120,0

82

-7,5

31

52,0

79

248,6

58

Public S

ecto

r 6

,013

- 57

-531,5

66

50,7

72

-

588,4

08

--

--

--

--

To

tal

6

,013

6

8,9

66

57

534,2

32

531,8

05

5

8,3

03

5

2,0

79

1

,251,4

55

Cre

dit

Ris

k c

on

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y in

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s

Gro

up

an

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31

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ber

20

18

Genera

l C

om

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e2,7

27

1,8

57

4,5

84

2,7

27

1,8

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4,5

84

Manufa

ctu

ring

16,6

24

172

16,7

96

16,6

24

172

16,7

96

Oil &

Gas

14,2

92

-14,2

92

14,2

92

-14,2

92

Reta

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--

--

-

Serv

ices

6,7

13

159

6,8

72

6,7

13

159

6,8

72

Tota

l 4

0,3

56

2

,18

8

4

2,5

44

4

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an

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Fin

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ple

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t secu

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es

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er

assets

To

tal

Bon

ds a

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ara

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es

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ers

of

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up

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k

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cia

l assets

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red

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h F

VT

PL

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K A

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red

it R

isk c

on

cen

trati

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by g

eog

rap

hy o

f lo

an

s a

nd

ad

van

ces t

o c

usto

mers

by p

rod

ucts

31

Decem

ber

20

19

Term

loans

161,3

39

-

161,3

39

161,3

39

-

161,3

39

Overd

raft

s27,3

99

-

27,3

99

27,3

99

-

27,3

99

188,7

38

-

188,7

38

188,7

38

-

188,7

38

Cate

gori

zati

on

of

Lo

an

s a

nd

Ad

van

ces

The t

able

belo

w a

naly

ses t

he G

roup's

Loans a

nd a

dvances b

ased o

n t

he c

ate

gorization b

y P

erf

orm

ance o

f th

e L

oans a

nd t

he a

llow

ances t

aken o

n t

hem

31

Decem

ber

20

19

Term

loan

Sta

ge 1

127,5

71

2,7

31

127,5

71

2,7

31

Sta

ge 2

241

11

241

11

Sta

ge 3

83,8

23

47,5

54

83,8

23

47,5

54

21

1,6

35

50

,29

62

11

,63

55

0,2

96

Overd

raft

Sta

ge 1

13,3

42

442

13,3

42

442

Sta

ge 2

128

29

128

29

Sta

ge 3

36,3

03

21,9

03

36,3

03

21,9

03

49

,77

32

2,3

74

49

,77

32

2,3

74

26

1,4

08

72

,67

02

61

,40

87

2,6

70

Gro

up

Ban

k

Gro

up

Ban

kW

ith

in N

igeri

aO

uts

ide

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eri

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lW

ith

in N

igeri

aO

uts

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eri

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l

EX

PO

SU

RE

EC

LE

XP

OS

UR

EE

CL

NO

TE

S T

O T

HE

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AN

CIA

L S

TA

TE

ME

NT

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r th

e ye

ar

end

ed 3

1 D

ece

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er 2

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IS B

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K A

NN

UA

L R

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201

9

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mounts

in m

illions o

f N

air

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nle

ss o

therw

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tate

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31

Decem

ber

20

18

Term

loans

243,8

60

-

243,8

60

243,8

60

-

243,8

60

Overd

raft

s290,7

03

-

290,7

03

290,7

03

-

290,7

03

534,5

63

-

534,5

63

534,5

63

-

534,5

63

Cate

gori

zati

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an

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nd

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van

ces

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able

belo

w a

naly

ses t

he G

roup's

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nd A

dvances b

ased o

n t

he c

ate

gorization b

y P

erf

orm

ance o

f th

e L

oans a

nd t

he a

llow

ances t

aken o

n t

hem

31

Decem

ber

20

18

Term

loan

Sta

ge 1

163,7

93

14,7

30

163,7

93

14,7

30

Sta

ge 2

5,7

09

2,8

17

5,7

09

2,8

17

Sta

ge 3

59,6

92

44,7

57

59,6

92

44,7

57

22

9,1

94

62

,30

42

29

,19

46

2,3

04

Overd

raft

Sta

ge 1

12,1

39

790

12,1

39

790

Sta

ge 2

399

157

399

157

Sta

ge 3

292,8

31

131,2

62

292,8

31

131,2

62

30

5,3

69

13

2,2

09

30

5,3

69

13

2,2

09

53

4,5

63

19

4,5

13

53

4,5

63

19

4,5

13

3.1

.3iv

.D

isclo

su

res o

f vari

ou

s f

acto

rs t

hat

imp

act

the E

CL a

s a

t 3

1 D

ecem

ber

20

19

These facto

rs r

evolv

es a

round:

i iiApplication o

f vary

ing h

air

cut

to u

nderl

yin

g c

ollate

ral and furt

her

dis

counting w

ith t

heir

respective E

IR

iii

The v

ari

ous a

ssum

ptions u

nder

the d

iffere

nt

scenari

os a

re a

s p

resente

d b

elo

w

Scen

ari

oP

eri

od

1P

eri

od

2P

eri

od

3P

eri

od

4G

DP g

row

th r

ate

(%

)U

ptu

rn2.4

%3.0

2%

3.9

8%

4.0

5%

Base

2.3

%2.5

5%

3.3

0%

3.2

0%

Dow

ntu

rn1.1

%2.1

0%

2.6

0%

2.3

5%

Base

Up

sid

eD

ow

nsid

e

50%

25%

25%

Gro

up

Gro

up

Ban

kW

ith

in N

igeri

aO

uts

ide

Nig

eri

aTota

lW

ith

in N

igeri

aO

uts

ide

Nig

eri

aTota

l

EX

PO

SU

RE

EC

LE

XP

OS

UR

EE

CL

Ban

k

Application o

f vary

ing forw

ard

lookin

g info

rmation in r

ela

tion t

o u

nderl

yin

g m

acro

econom

ic a

ssum

ptions a

nd t

he d

egre

e o

f re

sponsiv

eness o

f th

e O

bligors

to t

he a

ssum

ptions a

t diff

ere

nt

degre

e o

f N

orm

al,

Dow

ntu

rn a

nd u

ptu

rn s

cenari

os.

The k

ey d

rivers

for

cre

dit r

isk for

the B

ank is t

he G

DP g

row

th r

ate

.

Pre

dic

ted r

ela

tionship

s b

etw

een t

he k

ey indic

ato

rs a

nd d

efa

ult a

nd loss r

ate

s o

n v

ari

ous p

ort

folios o

f financia

l assets

have b

een d

evelo

ped b

ased o

n a

naly

sin

g h

isto

rical data

over

4 y

ears

.

The w

eig

htings a

ssig

ned t

o e

ach e

conom

ic s

cenari

o d

uri

ng t

he p

eri

od w

ere

as follow

s;

Dis

counting o

f th

e e

xpecte

d futu

re c

ashflow

s fro

m indiv

idual O

bligors

with r

espective e

ffective inte

rest

rate

(EIR

) on t

he s

et

futu

re d

ate

s t

o p

resent

valu

e.


104



3.1.4

Loans and advances to customers

a

Impairment

on stage 1-

12 months

ECL

Impairment

on stage 2-

Lifetime ECL

Not Credit

Impaired

Impairment

on stage 3 -

Lifetime ECL

Credit

Impaired

Total

Gross carrying amount as at 1 January 2019 175,825 6,107 352,631 534,563 Transfer from Stage 1 to Stage 2 (7,791) 7,791 - -

Transfer from Stage 1 to Stage 3 (3,654) - 3,654 -

Write-offs - - (726) (726)

FX and other movements (23,467) (13,529) (235,433) (272,429)

Total Gross 140,913 369 120,126 261,408

Loss Allowance as at 1 January 2019 15,519 2,975 176,019 194,513 Write-offs - - (726) (726)

Net movement (12,347) (2,934) (105,836) (121,117)

` 3,172 41 69,457 72,670

Impairment

on stage 1-

12 months

ECL

Impairment

on stage 2-

Lifetime ECL

Not Credit

Impaired

Impairment

on stage 3 -

Lifetime ECL

Credit

Impaired

Total

Gross carrying amount as at 21 September 2018 205,063 3,914 733,605 942,582 Transfer from Stage 1 to Stage 2 (2,193) 2,193 - (0)

Transfer from Stage 1 to Stage 3 (27,045) - 27,045 0

Write-offs - - (435,155) (435,155)

FX and other movements - - 27,136 27,136

Total Gross 175,825 6,107 352,631 534,563

Loss Allowance as at 21 September 2018 8,015 238 594,593 602,846 Write-offs - - (435,155) (435,155)

Net movement 7,504 2,737 16,581 26,822

Total Allowance 15,519 2,975 176,019 194,513

Group & BankReconciliation of Gross loans and advances


105



b Investment Securities

Impairment

on stage 1-

12 months

ECL

Impairment

on stage 2-

Lifetime ECL

Not Credit

Impaired

Impairment

on stage 3 -

Lifetime ECL

Credit

Impaired

Total

Gross carrying amount as at 1 January 2019 531,805 - 531,805

New financial assets originated or purchased (12,743) - (12,743)

Total Gross Amortised cost Investments 519,062 - - 519,062

Loss Allowance as at 1 January 2019 1,949 1,949

Charge for the year 41 41

1,990 - - 1,990

Assets pledged as collaterals

Gross carrying amount as at 1 January 2019 58,303 - 58,303

Financial assets that have been derecognised (16,219) (16,219)

Total Gross 42,084 - - 42,084

Loss Allowance as at 1 January 2019 41 - - 41

Impairment write-back (41) - - (41)

- - - -

Impairment

on stage 1-

12 months

ECL

Impairment

on stage 2-

Lifetime ECL

Not Credit

Impaired

Impairment

on stage 3 -

Lifetime ECL

Credit

Impaired

Total

Gross carrying amount as at 21 September 2018 925,572 - - 925,572

New financial assets originated or purchased (393,767) - - (393,767)

Total Gross Amortised cost Investments 531,805 - - 531,805

Loss Allowance as at 21 September 2018 1,575 - - 1,575

Financials assets that have been de-recognised during the period 374 - - 374

1,949 - - 1,949


Gross carrying amount as at 21 September 2018 58,544 - - 58,544

Financial assets that have been derecognised (241) (241)

Total Gross 58,303 - - 58,303

Loss Allowance as at 21 September 2018 24 - - 24

New financial assets originated or purchased 17 - - 17

41 - - 41

The loss allowance recognised in the period is impacted by a variety of factors, as described below:

• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of

credit risk or becoming credit-impaired in the period, and the consequent 'step up' between 12-month and Lifetime ECL;

• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular refreshing of inputs

to models;

• Financial assets derecognised during the period and write-offs of allowances related to assets that were written off during the

period.

Group & Bank

Reconciliation of Investment securities- Amortised Costs &


Reconciliation of Investment securities- Amortised Costs &



106



3.1.5 Sensitivity analysis

a Sensitivity of expected credit loss - probability at default (PD)


2019 2018

Pre tax Pre tax

Increase 5,704 755

Decrease (6,149) (761)

(445) (6)

b Sensitivity of expected credit loss - loss given default (LGD)


2019 2018

Pre tax Pre tax

Increase 538 9,724

Decrease (538) (9,724)

- -c Sensitivity of expected credit loss- GDP Growth rate


2019 2018

Pre tax Pre tax

Increase (4) 82

Decrease 4 (82)

- -

Group & Bank

The most significant assumptions affecting the ECL allowance are the following; probability of default, loss given default and macro-

economic variables. Therefore changes to these key variables would directly impact the exposure at default as at reporting date.

The Group in assessing the sensitivity of the Group's profit to fluctuation in GDP growth rate, assumed a 0.5% change in the GDP

growth rate. The chosen change in this macro-economic variable was then applied to the bank's loan portfolio as at the end of year.

The determination of the Group's macro-economic variable is explained in the financial risk management- credit risk measurement

section.

Group & Bank

The Group carried out the following activities in assessing the sensitivity of the Group’s profit to fluctuations in the probability of

default.

The determination of the Group's probability of default (PD) is explained in the financial risk management - credit risk measurement

section.

As at 31 December 2019, if the probability of default increased or decreased by 0.5%, with all other variables (exposure at default

and loss given default) held constant, the impact on impairment charge, which ultimately affects loss before tax and exposure at

default, would have been as set out in the tables below:

The Group in assessing the sensitivity of the Group’s profit to fluctuations in the loss given default, assumed a 0.5% change in the

loss given default. The chosen change in the loss given default was then applied to the bank's loan portfolio as at end of the year.

The determination of the group's loss given default (LGD) is explained in the financial risk management - credit risk measurement

section.

As at 31 December 2019, if the loss given default increased or decreased by five percept, with all other variables (exposure at

default, probability of default) held constant, the impact on impairment charge, which ultimately affects loss before tax and

exposure at default, would have been as set out in the tables below:

Group & Bank

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

107

(All a

mounts

in m

illions o

f N

aira u

nle

ss o

therw

ise s

tate

d)

3.

Fin

an

cia

l R

isk M

an

ag

em

en

t co

nti

nu

ed

3.1

.6D

eb

t secu

riti

es

The t

able

belo

w s

how

s a

naly

sis

of

the G

ross d

ebt

securities into

the d

iffere

nt

cla

ssifi

cations:

31

Decem

ber

20

19

Fin

an

cia

l assets

held

at

fair

valu

e

thro

ug

h p

rofi

t o

r

loss

Fin

an

cia

l

assets

held

at

Am

ort

ised

co

st

Assets

ple

dg

ed

as c

ollate

ral

To

tal

Fin

an

cia

l

assets

held

at

fair

valu

e

thro

ug

h p

rofi

t

or

loss

Fin

an

cia

l

assets

held

at

Am

ort

ised

co

st

Assets

ple

dg

ed

as c

ollate

ral

To

tal

Federa

l govern

ment

bonds

-

56,9

84

14,0

64

71,0

48

-

56,9

84

14,0

64

71,0

48

Sta

te g

overn

ment

bonds

-

9

,114

410

9

,524

-

9

,114

410

9,5

24

Corp

ora

te b

onds

-

1

,674

-

1

,674

-

1

,674

-

1,6

74

Tre

asury

bills

1

,264

449,3

66

27,6

10

478,2

40

1

,264

449,3

66

27,6

10

478,2

40

Euro

bond

-

1

,923

-

1

,923

-

1

,923

-

1,9

23

1

,26

4

5

19

,06

1

4

2,0

84

5

62

,40

9

1

,26

4

5

19

,06

1

4

2,0

84

5

62

,40

9

Gro

up

Ban

k

The G

roup a

nd B

ank's

investm

ent

in r

isk-f

ree G

overn

ment

securities c

onstitu

tes 9

9%

of

debt

instr

um

ents

port

folio.

Investm

ent

in c

orp

ora

te a

nd e

uro

bonds a

ccounts

for

the o

uts

tandin

g 1

%.

31

Decem

ber

20

18

Fin

an

cia

l assets

held

at

fair

valu

e

thro

ug

h p

rofi

t o

r

loss

Fin

an

cia

l

assets

held

at

Am

ort

ised

co

st

Assets

ple

dg

ed

as c

ollate

ral

To

tal

Fin

an

cia

l

assets

held

at

fair

valu

e

thro

ug

h p

rofi

t

or

loss

Fin

an

cia

l

assets

held

at

Am

ort

ised

co

st

Assets

ple

dg

ed

as c

ollate

ral

To

tal

Federa

l govern

ment

bonds

-

34,7

62

25,9

92

60,7

54

-

34,7

62

25,9

92

60,7

54

Sta

te g

overn

ment

bonds

-

16,4

26

323

16,7

49

-

16,4

26

323.0

0 16,7

49

Corp

ora

te b

onds

-

1

,814

-

1

,814

-

1

,814

- 1,8

14

Tre

asury

bills

57

480,7

52

24,4

57

505,2

66

57

480,7

52

24,4

57

505,2

66

Euro

bond

-

-

7

,531

7

,531

-

-

7,5

31

7,5

31

5

7

5

33

,75

4

5

8,3

03

5

92

,11

4

5

7

5

33

,75

4

5

8,3

03

5

92

,11

4

Gro

up

Ban

k


108



3.2 Liquidity Risk

Liquidity Risk management process


2019 2018

At 31 December % %

Average for the year 82 58

Maximum for the year 89 77

Minimum for the year 79 17

Polaris Bank contingency funding plan

In ensuring adequate liquidity at all times, the Group maintains sizeable portfolio of highly marketable securities (mostly

government papers) that can be easily liquidated as protection against any unforeseen interruption to cash flow and

funding obligations. The liquid assets held for managing liquidity risk comprise of:

• Cash and balances with the Central Bank;

• Government Bonds and Treasury Bills

• Highly liquid instruments in the Group’s trading portfolio.

The Group’s liquidity related behaviour is strictly guided by the Board approved liquidity management policy. The policy

defines specific limit that will ensure adequate liquidity position at all times. Maturity re-pricing schedules, projected

liquidity position as well as stress tested liquidity outlook are generated weekly by the Liquidity Risk team for ALCO’s

decision making.

Funding sources are reviewed regularly by the Liquidity Risk Management team to ensure adequate funding diversification

by currency, geography, provider, product and term to maturity. Contingency funding arrangements are also in place as

way-out strategies in the unlikely condition of bank specific liquidity stress / local or global systemic liquidity shocks.

Liquidity risk is the risk that the Group does not have sufficient resources to meet its obligations when they fall due or will

have to meet such obligations at an excessive cost. This may be as a result of high cash outflows such as huge customer

withdrawals, cash requirements from contractual commitments, debt maturities that would deplete available cash

resources for client lending, trading activities and investments. Liquidity risks are categorized into funding liquidity risk –

inability to meet financial obligation as they fall due and market liquidity risk – inability to liquidate financial asset at a fair

market price.

The measure of the Group’s liquidity is the ratio of its liquid assets to total customer deposits. Liquidity management is

operated in a centralized governance control process that covers the entire Group’s liquidity risk management activities.

This is an oversight responsibility of the Asset and Liability Committee (ALCO), discharged through the Market and Liquidity

Risk management function. The Market and Liquidity Risk team monitors the inherent risk and threats to the bank's

immediate and future liquidity conditions, engaging stress testing under normal and severe market scenario as a tool. On

the other hand, Treasury Group ensure adequate funding over with sizeable buffer over regulatory minimum on a

continuous and sustainable basis. The market risk team, which ensures compliance to the board-approved liquidity

management policy, is independent of the funding function.

Details of the reported Bank ratio of net liquid assets to deposits from customers at the reporting date and during the year

were as follows:

Polaris Bank Contingency Funding Plan (CFP) serves as a way-out strategy under stress liquidity situations. The plan

consists of a set of policies and procedures that shall serve as blue print for the Bank to meet its funding needs in a timely

manner under adverse stress conditions. For effectiveness, this plan shall represent estimate of balance sheet changes that

may result from a liquidity, credit and/or market events.

The MD/CEO or the ALCO Chairman are the only persons authorized to activate the CFP. Execution of the Plan involves

funding and non-funding activities.

In the event of a liquidity squeeze, the Bank possesses a Crisis Management Committee that is comprised of heads of

departments of critical departments and is headed by the MD/CEO.


109



3.2 Liquidity Risk

3.2.1 Liquidity Risk Measurement

• Cash and balances with the Central Bank;

• Government Bonds and Treasury Bills

• Highly liquid instruments in the Group’s trading portfolio

• Short term liabilities include local currency deposits from customers.

Assets & Liability Mix 31 December 31 December

2019 2018

Asset components % Proportion % Proportion % Proportion

Cash 4% 26,484 5% 28,026

Cash reserve 6% 37,698 6% 37,446

Treasury bills 77% 450,630 80% 480,809

FGN bonds & other certificates 10% 56,984 6% 34,762

Placements 3% 17,000 3% 19,700

Total 100 588,796 100 600,743

Liability components % Proportion % Proportion % Proportion

Current deposits 31% 265,045 32% 279,819

Savings deposits 20% 167,679 18% 154,536

Term deposits 34% 294,457 35% 303,913

Domiciliary deposits 15% 130,704 15% 122,776

Total 100 857,885 100 861,044

The measure of the Group’s liquidity is the ratio of its liquid assets to total customer deposits.

The liquid assets held for managing liquidity risk comprise:

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

110

(All a

mounts

in m

illions o

f N

aira u

nle

ss o

therw

ise s

tate

d)

3.

Liq

uid

ity R

isk M

easu

rem

en

t co

nti

nu

ed

3.2

.2C

on

tractu

al

matu

rity

of

fin

an

cia

l assets

an

d l

iab

ilit

ies

Gro

ss n

om

inal

(u

nd

isco

un

ted

) m

atu

riti

es o

f fi

nan

cia

l assets

an

d l

iab

ilit

ies

Gro

up

an

d B

an

k

31

Decem

ber

20

19

Carr

yin

g

am

ou

nt

Gro

ss n

om

inal

infl

ow

/(o

utfl

ow

)

Less t

han

90

days

91

- 1

80

days

18

1 -

36

5

days

Over

1 y

ear

bu

t le

ss t

han

5 y

ears

Over

5 y

ears

Fin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

26,4

84

26,4

84

26,4

84

--

--

Due fro

m b

anks a

nd o

ther

financia

l in

stitu

tions

62,0

76

62,0

76

62,0

76

--

--

Fin

ancia

l assets

held

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

1,2

64

1,2

64

1,2

64

--

--

Loans a

nd a

dvances t

o c

usto

mers

188,7

38

261,4

08

66,6

69

2,7

68

3,6

62

52,3

38

135,9

71

Fair v

alu

e t

hro

ugh O

CI

17,3

62

17,3

62

--

--

17,3

62

Am

ort

ised C

ost

financia

l assets

517,0

71

840,4

97

74,1

05

60,4

97

581,8

47

23,2

80

100,7

68

Assets

ple

dged a

s c

ollate

ral

42,0

84

44,3

75

1,6

53

195

12,8

63

3,7

51

25,9

13

Oth

er

loans a

nd r

eceiv

able

s182,5

94

210,6

76

--

210,6

76

--

Oth

er

assets

46,5

13

50,0

04

50,0

04

--

--

1,0

84

,18

6

1,5

14

,14

6

2

82

,25

5

6

3,4

60

80

9,0

48

7

9,3

69

28

0,0

14

Fin

an

cia

l li

ab

ilit

ies

Deposits fro

m c

usto

mers

857,8

85

857,8

85

563,4

28

294,4

57

--

-

Borr

ow

ings fro

m local and fore

ign institu

tions

100,9

20

101,9

32

8,3

82

-4,0

54

12,0

27

77,4

69

Lease lia

bility

2,6

45

5,0

80

--

-313

4,7

67

Oth

er

financia

l liabilitie

s

76,8

37

76,8

37

76,8

37

--

--

1,0

38

,28

7

1,0

41

,73

4

6

48

,64

7

29

4,4

57

4,0

54

1

2,3

40

8

2,2

36

Gap

(asset

- li

ab

ilit

ies)

45

,89

9

4

72

,41

2

(3

66

,39

2)

(2

30

,99

7)

8

04

,99

4

67

,02

9

1

97

,77

8

Cu

mu

lati

ve l

iqu

idit

y g

ap

-

-

(

36

6,3

92

)

(5

97

,38

8)

2

07

,60

6

2

74

,63

4

4

72

,41

2

The follow

ing t

able

s s

how

the u

ndis

counte

d c

ashflow

s o

n t

he G

roup's

financia

l assets

and lia

bilitie

s a

nd o

n t

he b

asis

of th

eir e

arlie

st

possib

le c

ontr

actu

al m

atu

rity

. The g

ross n

om

inal

inflow

/(o

utfl

ow

) dis

clo

sed in t

he t

able

is t

he c

ontr

actu

al, u

ndis

counte

d c

ash fl

ow

on t

he fi

nancia

l assets

and lia

bilitie

s:

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

111

(All a

mounts

in m

illions o

f N

aira u

nle

ss o

therw

ise s

tate

d)

3.2

.2C

on

tractu

al

matu

rity

of

fin

an

cia

l assets

an

d lia

bil

itie

s (

Co

nti

nu

ed

)

Gro

up

an

d B

an

k

31

Decem

ber

20

18

Carr

yin

g

am

ou

nt

Gro

ss n

om

inal

infl

ow

/(o

utfl

ow

)

Less t

han

90

days

91

- 1

80

days

18

1 -

36

5

days

Over

1 y

ear

bu

t le

ss t

han

5 y

ears

Over

5 y

ears

Fin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

28,0

26

28,0

26

28,0

26

--

--

Due fro

m b

anks a

nd o

ther

financia

l in

stitu

tions

68,9

66

68,9

66

68,9

66

--

--

Fin

ancia

l assets

held

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

57

57

57

--

--

Loans a

nd a

dvances t

o c

usto

mers

340,0

50

757,7

67

114,0

29

5,1

67

40,2

21

59,4

29

538,9

21

Fair v

alu

e t

hro

ugh O

CI

14,6

34

14,6

34

--

--

14,6

34

Am

ort

ised C

ost

financia

l assets

531,8

05

639,9

79

97,1

50

1,7

68

438,8

79

15,0

40

87,1

42

Assets

ple

dged a

s c

ollate

ral

58,3

03

98,0

24

3,6

51

430

28,4

15

8,2

86

57,2

42

Oth

er

assets

52,0

79

52,0

79

52,0

79

1,0

93

,92

0

1

,65

9,5

32

3

63

,95

8

7

,36

5

5

07

,51

5

8

2,7

55

6

97

,93

9

Fin

an

cia

l liab

ilit

ies

Due t

o o

ther

financia

l in

stitu

tions

25

25

25

--

--

Deposits fro

m c

usto

mers

861,0

44

861,1

94

845,1

61

7,0

19

9,0

14

--

Borr

ow

ings fro

m local and fore

ign institu

tions

137,6

94

135,7

26

200

3,6

43

39,3

94

11,6

95

80,7

94

Oth

er

financia

l liabilitie

s

73,6

96

73,6

96

73,6

96

1,0

72

,45

9

1

,07

0,6

41

9

19

,08

2

1

0,6

62

4

8,4

08

1

1,6

95

8

0,7

94

Gap

(asset

- liab

ilit

ies)

2

1,4

61

5

88

,89

1

(5

55

,12

4)

(3

,29

7)

4

59

,10

7

7

1,0

60

6

17

,14

6

Cu

mu

lati

ve l

iqu

idit

y g

ap

-

-

(5

55

,12

4)

(5

58

,42

1)

(

99

,31

4)

(2

8,2

54

)

5

88

,89

2

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

112

(All a

mounts

in m

illions o

f N

aira u

nle

ss o

therw

ise s

tate

d)

3.2

.3R

ep

ricin

g p

eri

od

of

fin

an

cia

l assets

an

d l

iab

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Gro

up

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d B

an

k

31

Decem

ber

20

19

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yin

g

am

ou

nt

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tal

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han

90

days

91

- 1

80

days

18

1 -

36

5

days

Over

1 y

ear

bu

t le

ss t

han

5 y

ears

Over

5 y

ears

Fin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

26,4

84

26,4

84

26,4

84

-

-

-

-

Due fro

m b

anks a

nd o

ther

financia

l in

stitu

tions

62,0

76

62,0

76

62,0

76

-

-

-

-

Fin

ancia

l assets

held

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

1,2

64

1,2

64

1,2

64

-

-

-

-

Loans a

nd a

dvances t

o c

usto

mers

188,7

38

261,4

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66,6

69

2,7

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3,6

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52,3

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135,9

71

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17,3

62

17,3

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Am

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ents

517,0

71

840,4

97

74,1

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97

581,8

47

23,2

80

100,7

68

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ple

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ollate

ral

42,0

84

44,3

75

1,6

53

195

12,8

63

3,7

51

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loans a

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210,6

76

--

210,6

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311,5

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-

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ings fro

m local and fore

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101,9

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77,4

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bility

2,6

44

5,0

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-

-

-

313

4,7

67

Oth

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financia

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76,8

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76,8

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76,8

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-

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201

9

113

(All a

mounts

in m

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3.2

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financia

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68,9

66

68,9

66

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66

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held

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52,0

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137,6

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200

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70


114



3.3 Market Risk

Market Risk Management Framework Overview

The Group’s market risk management framework clearly articulates underlining principles that drives the design and

implementation of its market risk exposure management process, which seeks to contain such exposures within its market risk

appetite.

The Bank has developed encompassing processes for effective identification, assessment, monitoring and control of market risks

inherent in its business which is supported by enabling technology, policies/methodologies and tools. Market risk exposure

assessment is a periodic activity guided by Board approved policies and risk limits within which all exposures are contained. The

guiding policies and limits are reviewed periodically to ensure continuous relevance to the fast changing conditions of the

increasingly dynamic market place.

Market risk is the risk of loss in on or off balance sheet positions, as a result of adverse movement in foreign exchange rate,

interest rate, equity or commodity prices. Polaris Bank’s market risk exposures are largely interest and exchange rate induced,

while equity and commodity prices exposures are non-proprietary. Its Market Risk management is a centralized, independent

middle office function responsible for the day to day management which entails risk identification, measurement, monitoring

controlling and reporting.

The Bank has developed encompassing processes for effective identification, assessment, monitoring and control of market risks

inherent in the Bank’s business operations. Its risk management framework is supported by enabling policies/methodologies and

tools to facilitate linkages and to achieve its risk management objectives including market risk related ones.

The market risk management strategy clearly articulates underlining principles that drives the design and implementation of its

exposure management processes, which seek to contain such exposures within a set Board appetite, guided by operational policies.

The independent Market and Liquidity risk function reports daily to the Chief Risk Officer, weekly to Asset-Liability Committee and

quarterly to both the Management and the Board Risk Committees.

Market Risk Measurement:

Adequate risk assessment is critical for effective management. The Bank applies the Value at Risk (VaR) model to measure trading

market risk exposure of the entire trading portfolio. The VaR model runs largely on the variance co-variance method of

computation but is also complemented by historical simulation as well as Expected Shortfall methodologies where key assumption

of the former method prove unsatisfactory. The model (variance co-variance), stated at 99% confidence level over a day horizon,

applies the Exponential Weighted Moving Average (EWMA) model for volatility assessment thereby enhancing the speed of

response to changes in market factors.

Value at risk assessment is undertaken at the portfolio level, which takes cognizance of the risk-reduction benefit of asset returns

correlation. All the model outputs are back tested for accuracy, reliability and predictive power assessment. In addition, periodic

stress tests are also conducted to estimate potential losses in severe market conditions by stressing risk drivers within and

sometimes beyond historically observed levels.

The integrity of the VAR model is validated via back-testing model over a reasonable period (minimum of 250 days). Although a

valuable guide to risk, VAR is always viewed in the context of its limitations i.e.

• The use of historical data as a proxy for estimating future events may not be reflective of the growing complexities and changes

in the interactions of market drivers.

• The holding period assumption may also be flawed particularly in times of market illiquidity when it takes much longer to liquidate

positions

• The likely size of losses under the permissible 1% violation is not stated, which might exceed the Bank’s loss threshold

In adjusting for these limitations, the Bank has, in addition to stress testing, adopted the expected shortfall model, to gain a

statistical sense of the likely size of the extreme loss events. VaR is also assessed at 99% confidence interval and a 10-day holding

period as additional stress factor.

NO

TE

S T

O T

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FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

115

(All a

mounts

in m

illions o

f N

aira u

nle

ss o

therw

ise s

tate

d)

Mark

et

Ris

k M

an

ag

em

en

t Fra

mew

ork

Overv

iew

RIS

K

SO

UR

CE

S

MR

DA

TA

RE

PO

SIT

OR

Y

INT

ER

NA

L A

ND

EX

TE

RN

AL

RE

PO

RT

ING

LIM

IT M

AN

AG

EM

EN

T

EC

ON

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IC C

AP

ITA

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RG

E

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LA

TO

RY

CA

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AL

CH

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MA

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K M

AN

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T F

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ME

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IFIC

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RISK APPETITE

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L D

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TP

OR

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LU

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OP

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PR

OC

ES

SE

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MS

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AT

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ST

AN

DA

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ISE

D/

INT

ER

NA

L B

AS

ED

AP

PR

OA

CH

RISK APPETITE


116



3. Financial Risk management continued

3.3 Market Risk3.3.1 Market Risk measurement techniques

Exposure to market risks - trading portfolios

a Exposure to Interest Rate Risk

FGN BOND TRADING:The portfolio consists of eight(8) actively traded instruments with maturities ranging from 2 to 20years. Decline in

price volatile resulted in reduction in risk profile of the portfolio. The Value at risk (VaR), at 99% confidence interval and one day

horizon, as year-end was 1.08% compared that of the preceding year of 7.2%. The maximum VaR recorded was 3.66%, minimum was

0.38% and an average of 1.30%. Relative to other traded instruments, the bond portfolio recorded the lowest risk profile through the

year.

Treasury Bills Trading: Increased volatility at the shorter end of the curve (less than one year) increased the risk profile of the Treasury

Bills portfolio. The portfolio highest VaR (99% confidence interval, 1 day holding period) was 4.40%, lowest at 0.20% and average

1.23% of position size.

Typically, the Bank trades in the following financial instruments:

1. Treasury bills

2. Bonds

3. Foreign currencies

4. Money market products

The principal risk to which the bank's non trading portfolios are exposed to , is the risk of loss from fluctuations in the future cash flows

or fair values of financial instruments because of change in market interest rates. Interest rate risk is managed principally using interest

rate gaps. Below are some of the key variables used in quantifying, monitoring, controlling and reporting market risk exposure (traded

and non traded) across the group:

• Open position assessment: - for trading and currency risk exposures.

• Value at Risk model (VaR) - for trading and currency risk exposures

• Expected shortfall - for trading and currency risk exposures

• Interest and exchange rate sensitivity - For balance sheet level interest and exchange rate exposures assessment

• Stress testing - Both trading and non-trading exposures.

The Group applies a Value at Risk (VAR) methodology to its trading portfolios (including assets and liabilities that are designated at fair

value) to estimate the market risk exposures of open positions.

VAR is a statistically based estimate of the potential loss on the current portfolio from adverse market movements. It expresses the

‘maximum’ amount the Group might lose, at certain level of confidence (often 99%) given a time horizon (usually 1 day). There is

therefore a specified statistical probability (1%) that actual loss may be greater than the VAR estimate. The VAR model assumes a

certain ‘holding period’ until positions can be closed (1 day). The likely estimate of the size of 1% expected violation of the VaR number

is accessed via stress testing. VaR also assumes that market moves occurring over this holding period will follow a similar pattern to

those that have occurred in the past.

Traded Instruments: The instruments the bank's trade in are strictly provided for in the trading policy which include: Federal

Government securities and foreign currencies. The policy also clarifies requirements for trading in new products as well as position and

loss limits at dealers and product levels.

FX Trading Activities: - The Bank currency trading activity is limited to trading Naira/USD currency pair throughout the financial year.

Volatility levels spiked in the year on the back of sustained pressure on the local currency, interventions and continuous changes in the

markets operational policies . Trading activities in USD/NGNcurrency pair recorded the highest VaR figure (99% confidence interval one

day horizon) of 0.85% of the position size, minimum of 0.16% and average of 0.46%.

The integrity of the VAR model is validated via back-testing model over a reasonable period. Although a valuable guide to risk, VAR is

always viewed in the context of its limitations i.e.

• The use of historical data as a proxy for estimating future events may not be reflective of the growing complexities and changes in the

interactions of market drivers.

• The holding period assumption may also be flawed particularly in times of market illiquidity when it takes much longer to liquidate

positions

• The likely size of losses under the permissible 1% violation is not stated, which might exceed the bank’s loss threshold

In adjusting for these limitations, the Group has, in addition to stress testing, adopted the expected shortfall model, to gain a statistical

sense of the likely size of the extreme loss events. VaR is also assessed at 99% confidence interval and a 10-day holding period as

additional stress factor.


117



Period ended 31 December 2019

Treasury bills FX

Maximum 8.15% 0.79%

Minimum 0.31% 0.13%

Average 1.36% 0.33%

Exposure to market risks - non-trading portfolios


31 December 31

December


2019 2018 2019 2018Pre tax Pre tax

Decrease

Assets (2,693) (2,210) (2,693) (2,210)

Liabilities 2,817 2,689 2,817 2,689

124 479 124 479 Increase

Assets 2,693 2,210 2,693 2,210

Liabilities (2,817) (2,689) (2,817) (2,689)

(124) (479) (124) (479)

Components of Balance Sheet Interest Rate sensitivity


31 December 31

December


2019 2018 2019 2018

Pre tax Pre tax Pre tax Pre tax

Decrease

Financial assets

Due from banks and other financial institutions (168) (172) (168) (172)

Loans and advances to customers (435) (496) (435) (496)

Amortised cost financial assets (2,010) (1,485) (2,010) (1,485)

Assets pledged as collateral (80) (56) (80) (56)

(2,693) (2,209) (2,693) (2,209)Financial liabilities

Deposits from customers 2,817 2,582 2,817 2,582

Borrowings from local and foreign institutions - 108 0 108

2,817 2,690 2,817 2,690

Total 124 481 124 481

Non trading interest rate risk exposures resides on the Group’s balance sheet, resulting from disproportionate impact of interest rate

changes on cash flows arising from asset and liability maturity mismatches leading to volatilities in net interest margin.

VaR ANALYSIS

The table below shows the result of interest rate sensitivity by applying a change of a 100 basis points. The impact on profit or loss is as

follows:

At 31 December 2019, if interest rates had been 100 basis points higher/lower with all other variables held constant, other components

of equity would have been N124 million lower for the Bank. Foreign borrowing has been excluded from the analysis as they are not

considered sensitive to local rate changes.

The aggregated figures presented above are further analysed into their various components as shown in the following tables:

Decisions on interest rate direction is the responsibility of the ALCO, who works with the risk team in the day to day monitoring and

forecasting of market directions, based on macro-economic fundamentals, market dynamics and the monetary/fiscal policy objectives.

Interest rate risk exposure is occasioned by timing differences and optionalities in the maturities of assets and liabilities on the banking

book. Trading book exposures on the other hand is due to proprietary positions in rate and price sensitive financial assets in the

secondary market. These exposures are managed independently by the Market Risk Management function via appropriate policies,

procedures and models aided by technology.


118




31 December 31

December


2019 2018 2019 2018Increase

Financial assets

Due from banks and other financial institutions 168 172 168 172

Loans and advances to customers 435 496 435 496

- Amortised cost financial assets 2,010 1,485 2,010 1,485

Assets pledged as collateral 80 56 80 56

2,693 2,209 2,693 2,209 Financial liabilities

Deposits from customers (2,817) (2,582) (2,817) (2,582)

Borrowings from local and foreign institutions (108) - (108)

Lease liability - - - -

(2,817) (2,690) (2,817) (2,690)

Total (124) (481) (124) (481)


31

December

31

December

31

December

31

December

2019 2018 2019 2018

Pre tax Pre tax Pre tax Pre tax

Decrease 10.4 10.3 10.4 10.3

Increase (10.4) (10.3) (10.4) (10.3)

- - - -

b Foreign Exchange Risk

c Price Risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with

respect to the US dollar, UK pound and Euro. Foreign exchange risk represents exposures to changes in the values of current holdings

and future cash flows denominated in other currencies. The types of instruments exposed to this risk include investments in foreign

subsidiaries, foreign currency-denominated loans and securities, future cash flows in foreign currencies arising from foreign exchange

transactions, foreign currency denominated debt.

In view of the current devaluation of naira, the Bank also ensures that currency trading limits are in line with market realities, foreign

currency lending and funding is subject to approvals by top management. In this case the bank makes use of limits and management

action triggers for strict adherence to the Bank’s internal policies and risk appetite. Further, management ensures that repricing of the

assets is in line with market realities.

The Group maintains strict policy guidance for all its foreign currency related activities, and Board approval is required where business

exigencies necessitate currency exposure creation, which must still be contained within permissible threshold and adequately mitigated.

The Group ensures that foreign currencies denominated assets are matched with foreign currency denominated liabilities to reduce

currency risk exposure (exchange exposure gap). Periodic reports on the Group’s foreign currency exposure are rendered up to the

Board level. In line with the Basel II provision, both trading and non-trading currency exposures are treated as trading positions, and

are therefore subject to fair valuation relative to prevailing market exchange rate (mark-to-market).

Cash flow interest rate risk: This risk arises from the timing differences of exposure of interest rate sensitive assets and liabilities to

changes in market interest rates. The Group manages the cash flow interest rate risk by matching floating rate assets to floating rate

liabilities as much as feasible, while residual exposures are actively managed via different market instruments including interest rate

swaps where practicable.

At 31 December 2019, if interest rates on borrowed funds at amortised cost increased or reduced by 50 basis points with all other

variables held constant, the effect on profit or loss would have been as set out below:

To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is

done in accordance with the limits set by the group.

The Group’s exposure to equity securities price risk arises from investments held by the Group and classified in the balance sheet either

as at fair value through other comprehensive income (FVOCI)


119



Price sensitivity analysis for financial instruments measured at FVOCI:


31D ecember 31D ecember 31D ecember 31D ecember

2019 2018 2019 0

Unquoted Equity at FVOCI 17,352 14,634 17,352 14,63417,352 14,634 17,352 14,634

Impact on Other

comprehensive

income:

Unfavourable change @ 2% decrease in unobservable inputs (120) (101) (120) (101)

Favourable change @ 2% increase in unobservable inputs 71 60 71 60

3. Financial Risk Management continued

3.3.2 Sensitivity of foreign exchange currencies and impact on profit and equity


31 December 31 December 31 December 31 December

2019 2018 2019 2018

Pre tax Pre tax

Dollar

Naira strengthens 1,846 2,666 1,846 2,666

Naira weakens (1,846) (2,666) (1,846) (2,666)

Pounds

Naira strengthens (79) (80) (79) (5)

Naira weakens 79 80 79 5

Euro

Naira strengthens (89) (10) (89) (31)

Naira weakens 89 10 89 31

The Group carried out the following in determining sensitivity of the Group's profit to fluctuations in exchange rate of foreign

currencies:

- Daily foreign exchange rates were obtained and trended

- A reasonably possible change of +/-N10 was determined based on the distribution of one year daily change in exchange rates.

- The chosen reasonable change in exchange rates was then applied to the bank's foreign currency position as at end of the

period.

At 31 December 2019, a change of +/-N10 against the foreign currency with all other variables held constant, the loss for the year

would have increased/(decreased) as set out in the table below mainly as a result of foreign exchange gains or losses on the

translation.

Equity price risk is the risk that the fair value of equities decreases as a result of changes in the level of equity indices and

individual stocks. The non-trading equity price risk exposure arises from equity securities classified as FVOCI. Sensitivity analysis for

the Group's equity securities is shown below.

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

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mb

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019

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IS B

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K A

NN

UA

L R

EP

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T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

120

(All a

mounts

in m

illions o

f N

air

a u

nle

ss o

therw

ise s

tate

d)

3.

Fin

an

cia

l R

isk M

an

ag

em

en

t co

nti

nu

ed

The t

able

belo

w s

um

marizes t

he G

roup's

financia

l assets

and fi

nancia

l liabilitie

s a

t gro

ss a

mount,

cate

gorised b

y c

urr

ency:

Fin

an

cia

l in

str

um

en

ts b

y c

urr

en

cy

Gro

up

an

d B

an

k

31

Decem

ber

20

19

To

tal

Nair

aU

SD

GB

PEu

roFin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

26,4

84

16,3

41

7,1

13

405

2,6

25

Due f

rom

banks a

nd o

ther

financia

l in

stitu

tions

62,0

76

18,9

38

40,5

88

845

1,7

05

Fin

ancia

l assets

at

fair

valu

e t

hro

ugh p

rofit

or

loss

1,2

64

1,2

64

--

-Loans a

nd a

dvances t

o c

usto

mers

188,7

38

150,2

49

38,4

47

-42

Fair

valu

e t

hro

ugh O

CI

investm

ents

29,4

60

29,4

60

--

- -

Am

ort

ised c

ost

investm

ents

514,7

83

514,7

83

--

-Assets

ple

dged a

s c

ollate

ral

44,3

74

43,9

64

410

--

Oth

er

loans a

nd r

eceiv

able

s182,5

94

182,5

94

--

-O

ther

assets

46,5

13

46,5

13

--

-

1,0

96,2

86

1,0

04,1

06

8

6,5

58

1,2

50

4,3

72

Fin

an

cia

l liab

ilit

ies

Due t

o o

ther

financia

l in

stitu

tions

--

--

-D

eposits f

rom

custo

mers

857,8

85

800,0

44

55,2

09

1,9

68

664

Borr

ow

ings f

rom

local and f

ore

ign institu

tions

100,9

20

77,4

77

23,4

43

--

Lease lia

bility

2,6

44

2,6

44

--

-O

ther

liabilitie

s76,8

37

76,8

37

--

-

1,0

38,2

86

9

57,0

02

7

8,6

52

1,9

68

664

Gro

up

an

d B

an

k

31

Decem

ber

20

18

To

tal

Nair

aU

SD

GB

PEu

roFin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

28,0

26

26,9

71

896

84

75

Due f

rom

banks a

nd o

ther

financia

l in

stitu

tions

68,9

66

1,8

60

64,4

04

288

2,4

14

Fin

ancia

l assets

at

fair

valu

e t

hro

ugh p

rofit

or

loss

57

57

--

-Loans a

nd a

dvances t

o c

usto

mers

340,0

50

205,0

45

163,1

85

-50

Fair

valu

e t

hro

ugh O

CI

investm

ents

17,3

61

17,3

61

--

- -

Am

ort

ised c

ost

investm

ents

531,8

05

531,8

05

--

-Assets

ple

dged a

s c

ollate

ral

58,3

03

50,7

72

7,5

31

--

Oth

er

assets

52,0

79

52,0

79

--

-

1,0

96,6

47

8

85,9

50

236,0

16

372

2,5

39

Fin

an

cia

l liab

ilit

ies

Due t

o o

ther

financia

l in

stitu

tions

25

25

--

-D

eposits f

rom

custo

mers

861,0

44

801,2

45

57,0

78

2,0

35

686

Borr

ow

ings f

rom

local and f

ore

ign institu

tions

137,6

94

86,6

45

51,0

49

Oth

er

liabilitie

s97,0

76

97,0

76

--

-

1,0

95,8

39

9

84,9

91

108,1

27

2,0

35

686


121



4.1 Operational Risk

Insigni�icant Minor Moderate Major Signi�icant

Certainly Medium Medium High High High

Highly Likely Medium Medium Medium High High

Likely Low Low Medium Medium High

Unlikely Low Low Medium Medium Medium

Highly Unlikely

Low Low Low Medium Medium

Polaris Bank defines Operational Riskas the risk of loss resulting from inadequate or failed internal processes, people and systems

or from external events. Reputational risk and strategic risk are, in line with general market convention, excluded from the

definition of operational risk.

Operational Risk exists in the natural course of the Bank’s business activity. It is not an objective to eliminate all exposure to

operational risk as this would be neither commercially viable nor indeed possible. The Bank's approach to managing operational risk

is to adopt fit-for-purpose operational risk practices that assist business line management in understanding their inherent risk and

reducing their risk profiles in line with the Bank's risk tolerance, while maximizing their operational performance and efficiency.

The Bank has set minimum requirements for managing Operational Risk through the Bank’s Risk Management and Governance

standards. These requirements have been fully implemented and embedded across the Bank's operations. In addition to meeting

the Bank minimum standards, the operational risk framework sets out a structured and consistent approach for managing

operational risk across the Bank. The risk management approach involves identifying, assessing, measuring, managing, mitigating,

and monitoring the risks associated with operations, enabling comprehensive analysis and reporting of the Bank's operational risk

profile.

The framework is based on the following core components:

1. Risk Identification and Control Methodology: This facilitates the identification of risks and the management thereof across each

business and operational function.

2. Risk and Control Self-Assessments: Each Strategic Business and Support Unit is required to analyse its business activities and

critical processes to identify the key operational risks to which it is exposed, and assess the adequacy and effectiveness of its

controls. For any area where management concludes that the level of residual risk is beyond an acceptable level, it is required to

define corrective action plans to reduce the level of risk. The assessments are facilitated, monitored and challenged by the

Operational Risk Management Department working hand in hand with Process or Business owners who also double as Risk

Champions to each business.

Risk evaluation involves measuring identified risks based on the probability of a loss event occurring (PE) (that is, likelihood) and

the loss given an event (LGE) (that is, impact) using a 5 X 5 Matrix as shown in the table below:

FrequencySeverity

3. Risk Register

Polaris Bank maintains a Risk Register that contains all the identified risks and controls for the different activities/ processes.

This register is populated with the risks identified from previous risk identification exercises (RCSA) and updated frequently as new

risks are identified. The Risk Register is however subject to regular reviews as indicated by the Operational Risk Management

Department.

4. Key Risk Indicators

Based on the key risks and controls identified above, relevant indicators are used to monitor key business environment and

internal control factors that may influence the Bank's operational risk profile. Each indicator has trigger thresholds to provide early-

warning signals of potential risk exposures and/or a potential breakdown of controls.

5. Operational Risk Incidents

Incident management involves the capturing, reporting and management of loss incidents across the Bank. The definition of

operational risk incidents includes not only events resulting in actual loss, but those resulting in non-financial impacts and near

misses. This process is intended to enable the root cause of individual incidents, or trends of incidents, to be analysed and actions

taken to reduce the exposure or to enhance controls. All Operational Risk incidents relating to the Bank's operations are

consolidated within a central database, which is also integrated with risk and control self-assessments and indicators.

The Management of Operational Risk Incidents also includes an Issues and Action Plan phase whereby Corrective Action Plans

(CAP) are developed based on results of root cause analyses of various incidents; responsibilities are assigned while timelines for

resolutions are also agreed.


122



7. Polaris Bank Business Continuity Plan

The Polaris Bank Business Continuity Plan (BCP) contains actions developed to maintain or resume critical operations, including

services to customers, in the event of abnormal/unintended disruption to business. The BCP includes the step by step procedures

for handling major disasters as well as prolonged business interruptions spanning a specified period. This Business Continuity Plan

satisfies the Bank‘s commitment to a practical Enterprise Risk Management approach to support business objectives, and optimize

risk management capabilities by identifying potential threats and impacts and building resilience to ensure the Bank can respond

immediately and effectively to a major incident with minimal disruption to its normal business process.

It also satisfies regulatory requirements from the Central Bank of Nigeria (CBN) which stipulates that Commercial Financial

Institutions must put in place a Business Continuity Plan duly approved by the Management of the Bank within a fixed time frame.

This document is also in line with ISO22301, an international standard that emphasizes the need for a well-defined incident

response structure.

The Bank possesses a Disaster Recovery team headed by the MD/CEO.

Managing Operational Risk

The primary responsibility for managing operational risk forms part of the day-to-day responsibilities of management and

employees at all levels. Business line management is ultimately responsible for owning and managing risks resulting from their

activities. The risks are managed where they arise.

The operational risk management function is independent of business line management and is part of the second line of defense. It

is organized as follows:

• A central function that provides bank wide oversight and reporting. It is also responsible for developing and maintaining the

Operational Risk Management Framework.

• The primary oversight body for operational risk is the Risk Management Committee (RMC), which reports to the Board Risk

Management Committee (BRMC) and ultimately, the Board.

6. Reporting

Operational risk reports are produced on both a regular and on event-driven basis. The reports include a profile of the key risks to

business units' achievement of their business objectives, relevant control issues and operational risk incidents. Specific reports are

prepared on a regular basis for the relevant business unit committees and for the Bank Operational Risk Committee.

5. Operational Risk Incidents

Incident management involves the capturing, reporting and management of loss incidents across the Bank. The definition of

operational risk incidents includes not only events resulting in actual loss, but those resulting in non-financial impacts and near

misses. This process is intended to enable the root cause of individual incidents, or trends of incidents, to be analysed and actions

taken to reduce the exposure or to enhance controls. All Operational Risk incidents relating to the Bank's operations are

consolidated within a central database, which is also integrated with risk and control self-assessments and indicators.

The Management of Operational Risk Incidents also includes an Issues and Action Plan phase whereby Corrective Action Plans

(CAP) are developed based on results of root cause analyses of various incidents; responsibilities are assigned while timelines for

resolutions are also agreed.


123



4.2 Capital Management

Capital Risk Management


31 31

December

31

December

31

December

2019 2018 2019 2018

Tier 1 capital

Share capital 25,000 25,000 25,000 25,000

Share premium 873,450 873,450 873,450 873,450 Statutory reserves 10,430 857 10,302 729 Retained earnings 3,467 (26,004) 4,395 (26,215)Reorganisation reserve (848,017) (848,017) (848,017) (848,017)Non-Controlling Interest 1,194 1,561 - -

Total 65,524 26,847 65,130 24,947 Add/(less)

Intangible assets (179) (284) (179) (284)

Adjusted Total qualifying Tier 1 capital 65,344 26,563 64,950 24,663

Tier 2 capital

Other Qualifying Capital 3,507 3,895 - - Fair value reserves 2,775 98 2,775 98 Adjusted Total qualifying Tier 2 capital 6,282 3,993 2,775 98

Total regulatory capital 71,626 30,556 67,726 24,762

Total risk-weighted assets 488,268 792,978 489,425 793,469

Capital Ratios

14.67% 3.85% 13.84% 3.12%

13.38% 3.35% 13.27% 3.11%

Capital management is central to the Group’s financial stability and sustainability. The Group endeavours to maintain the appropriate

level of capital that is adequate to support our risk profile, regulatory requirements and business needs.

The Group’s Capital Management philosophy is to optimize its capital structure given the peculiarities of its risk profile, by maintaining

adequate levels of capital to cater for all unexpected losses, beyond meeting regulatory requirements. This philosophy guides the Group's

Internal Capital Adequacy Assessment Process (ICAAP), which sets internal capital targets and defines strategies for achieving those

targets consistent with our risk appetite, business plans and operating environment. As part of this process, we have implemented a

program of enterprise-wide stress testing to evaluate the income and capital (economic and regulatory) impacts of several potential

stress events.

In the Group, capital allocations are approved at the Board level and are monitored daily by the Group’s management.

The Central Bank of Nigeria (CBN) has an oversight function and monitors all banks operating in Nigeria to ensure compliance with

capital adequacy requirements. At every point in time, the Group ensures that it has sufficient capital above the regulatory capital to

hedge against any unanticipated shocks.

The Group’s regulatory capital comprises of two tiers:

• Tier 1 capital: share capital (net of any book values of the treasury shares), statutory reserve, non-controlling interest, retained

earnings, reserves created by appropriations of retained earnings and other disclosed reserves. The book value of goodwill is deducted in

arriving at Tier 1 capital.

• Tier 2 capital: qualifying subordinated debt, unrealized gains arising on the fair valuation of equity instruments held as fair value

through OCI. Investments in capital of other banks and financial institutions are deducted from Tier 1 and Tier 2 capital to arrive at the

regulatory capital.

Capital Adequacy Ratio

The Capital Adequacy Ratiois the quotient of the capital base of the Group and the Group's risk weighted asset base. The Central Bank of

Nigeria prescribed a minimum limit of 10% of total qualifying capital/total risk weighted capital/total risk weighted assets as a measure

of capital adequacy

Total regulatory capital expressed as a

percentage of total risk-weighted assets

The table below summarises the composition of regulatory capital and the ratios of the bank for the years presented below.

Total tier 1 capital expressed as a percentage

of risk-weighted assets

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

124

(All a

mounts

in m

illions o

f N

air

a u

nle

ss o

therw

ise s

tate

d)

5Fair

valu

es o

f fi

nan

cia

l assets

an

d l

iab

ilit

ies

Acco

un

tin

g c

lassifi

cati

on

, m

easu

rem

en

t b

asis

an

d f

air

valu

es

The t

able

s b

elo

w s

ets

out

the G

roup's

cla

ssifi

cation o

f each c

lass o

f financia

l assets

and lia

bilitie

s a

nd t

heir fair v

alu

es.

All fair v

alu

e m

easure

ments

are

recurr

ing.

Gro

up

an

d B

an

k

31

Decem

ber

20

19

Fair

valu

e

thro

ug

h

pro

fit

or

loss

Am

ort

ized

Co

sts

Fair

valu

e

thro

ug

h

OC

I

Oth

er

fin

an

cia

l

liab

ilit

ies a

t

am

ort

ised

co

st

To

tal

carr

yin

g

am

ou

nt

Level

1Level

2Level

3Fair

valu

e

Fin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

26,4

84

--

26,4

84

-26,4

84

-

26,4

84

Due fro

m b

anks a

nd o

ther

financia

l in

stitu

tions

62,0

76

--

62,0

76

-62,0

76

-

62,0

76

Fin

ancia

l assets

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

1,2

64

--

-

1

,264

1,2

64

--

1,2

64

Loans a

nd a

dvances t

o c

usto

mers

188,7

38

--

188,7

38

-261,4

08

- 261,4

08

Fair

Valu

e t

hro

ugh O

CI

-

- E

quity investm

ent

measure

d a

t fa

ir v

alu

e17,3

62

-

17,3

62

--

17,3

62

17,3

62

Am

ort

ised C

ost

Investm

ents

-

- T

reasury

bills

447,0

78

--

447,0

78

455,1

02

--

455,1

02

- C

orp

ora

te b

onds

1,6

74

--

1,6

74

--

1,6

74

1,6

74

- S

tate

govern

ment

bonds

9,1

14

--

9,1

14

-10,1

35

-

10,1

35

- F

edera

l govern

ment

bonds

56,9

84

--

56,9

84

57,4

51

--

57,4

51

Assets

ple

dged a

s c

ollate

ral

-

- T

reasury

bills

29,9

00

--

29,9

00

27,8

37

--

27,8

37

- F

edera

l govern

ment

bonds

14,0

64

--

14,0

64

13,6

42

--

13,6

42

- S

tate

govern

ment

bonds

410

--

410

-410

-

410

Oth

er

loans a

nd r

eceiv

able

s182,5

94

--

182,5

94

-182,5

94

--

Oth

er

assets

47,3

54

-

47,3

54

-47,3

54

47,3

54

-

1,2

64

1,0

66,4

70

1

7,3

62

-

1,0

85,0

96

555,2

96

543,1

07

248,9

84

1

,164,7

93

Fin

an

cia

l li

ab

ilit

ies

Due t

o o

ther

financia

l in

stitu

tions

--

--

-

--

-

-

Deposits a

nd o

ther

accounts

--

-857,8

85

857,8

85

--

857,8

85

857,8

85

Borr

ow

ings fro

m local and fore

ign b

anks/I

nstitu

tions

--

-100,9

20

100,9

20

--

100,9

20

100,9

20

Lease lia

bility

2

,644

-

-

2,6

44

-

-

2,6

44

2,6

44

Oth

er

liabilitie

s

--

-97,2

56

97,2

56

--

97,2

56

97,2

56

-

2,6

44

-

1

,056,0

61

1

,058,7

05

-

-

1

,058,7

05

1

,058,7

05

Carr

yin

g a

mo

un

tFair

valu

e

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

SFo

r th

e ye

ar

end

ed 3

1 D

ece

mb

er 2

019

PO

LAR

IS B

AN

K A

NN

UA

L R

EP

OR

T &

FIN

AN

CIA

L ST

ATE

ME

NTS

201

9

125

(All a

mounts

in m

illions o

f N

air

a u

nle

ss o

therw

ise s

tate

d)

Gro

up

an

d B

an

k

31

Decem

ber

20

18

Fair

valu

e

thro

ug

h

pro

fit

or

loss

Am

ort

ized

Co

sts

Fair

valu

e

thro

ug

h

OC

I

Oth

er

fin

an

cia

l

liab

ilit

ies a

t

am

ort

ised

co

st

To

tal

carr

yin

g

am

ou

nt

Level

1Level

2Level

3Fair

valu

e

Fin

an

cia

l assets

Cash a

nd b

ala

nces w

ith c

entr

al banks

-28,0

26

--

28,0

26

-28,0

26

-

28,0

26

Due fro

m b

anks a

nd o

ther

financia

l in

stitu

tions

-68,9

66

--

68,9

66

-68,9

66

-

68,9

66

Fin

ancia

l assets

at

fair v

alu

e t

hro

ugh p

rofit

or

loss

57

--

-

57

57

--

57

Loans a

nd a

dvances t

o c

usto

mers

340,0

50

--

340,0

50

--

340,2

00

340,2

00

Fair

Valu

e t

hro

ugh O

CI

-

-

- E

quity investm

ent

measure

d a

t fa

ir v

alu

e-

-14,6

34

-

14,6

34

--

14,6

34

14,6

34

Am

ort

ised C

ost

Investm

ents

-

-

- T

reasury

bills

-480,7

52

--

480,7

52

474,3

93

--

474,3

93

- C

orp

ora

te b

onds

-1,8

14

--

1,8

14

-1,8

24

1,8

24

- S

tate

govern

ment

bonds

-16,4

26

--

16,4

26

-28,2

62

-

28,2

62

- F

edera

l govern

ment

bonds

-34,7

62

--

34,7

62

29,1

32

--

29,1

32

Assets

ple

dged a

s c

ollate

ral

-

- T

reasury

bills

-24,4

57

--

24,4

57

23,9

98

--

23,9

98

- F

edera

l govern

ment

bonds

-25,9

92

--

25,9

92

29,6

91

--

29,6

91

- S

tate

govern

ment

bonds

-323

--

323

-451

-

451

- E

uro

bonds

-7,5

31

--

7,5

31

-7,0

77

-

7

,077

Oth

er

assets

-52,0

79

--

52,0

79

-52,0

79

52,0

79

-

57

1,0

81,1

78

1

4,6

34

-

1,0

95,8

69

557,2

71

134,6

07

406,9

13

1

,098,7

91

Fin

an

cia

l li

ab

ilit

ies

Due t

o o

ther

financia

l in

stitu

tions

--

-25

25

-25

-

25

Deposits a

nd o

ther

accounts

--

-861,0

44

861,0

44

-861,0

44

861,0

44

Borr

ow

ings fro

m local and fore

ign b

anks/I

nstitu

tions

--

-137,6

94

137,6

94

137,6

94

137,6

94

Lease lia

bility

Oth

er

liabilitie

s

--

-76,8

37

76,8

37

-76,8

37

76,8

37

-

-

- 1

,075,6

00

1

,075,6

00

-

2

5

1

,075,5

75

1

,075,6

00

Carr

yin

g a

mo

un

tFair

valu

e


126



5 Fair values of financial assets and liabilities continued

Fair value of financial assets and liabilities carried at fair value

Recognised fair value measurements

There were no transfers between

Fair value of financial assets and liabilities not carried at fair value

i Cash and balances with central banks and due from banks and other financial institutions

ii Investment securities and assets pledged as collateral

iii Loans and advances to customers

The fair value for financial assets and liabilities that are not carried at fair value were determined respectively as follows:

The Group adopts a single approach in fair valuing its risk assets. This entails valuing all facilities with variable and fixed

interest rates using the discounted cash flow approach (Level 3). The Group’s variable rate facilities are indexed to the

Central Bank of Nigeria Monetary Policy Rate or Nigeria Interbank Offering Rate, with a spread to cover for the inherent

risk of individual facilities.

Financial instruments at fair value (including those held at fair value through profit or loss and fair value through OCI)

are either priced with reference to a quoted market price for that instrument or by using a valuation model. Where the

fair value is calculated using a valuation model, the methodology is to calculate the expected cash flows under the terms

of each specific contract and then discount these values back to a present value. The expected cash flows for each

contract are determined either directly by reference to actual cash flows implicit in observable market prices or through

modelling cash flows using appropriate financial markets pricing models. Wherever possible these models use as their

basis observable market prices and rates including, for example, interest rate yield curves, equities and prices.

The carrying amount of cash and balances with central banks and due from banks and other financial institutions are

reasonable approximation of their fair value.

The fair value for investment securities is based on market prices from financial market dealer price quotations. Where

this information is not available, fair value is estimated using quoted market prices for securities with similar credit,

maturity and yield characteristics.

The group's policy is to recognise transfers into and transfers out of fair value hierachy levels as at the end of the

reporting period.

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded equity securities) is based on

quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the

current market price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation

techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates.

If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. In

valuing the bonds classified as level 2, the price of the assets obtained from an over the counter sercurities exchange

was adopted in arriving at the fair value. It was categorised under level 2 of the fair value hierachy because the price

obtained was an indicative price due to the fact that the market for the instrument is not very active. No adjustment was

made to the input price.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in

level 3.


127



iv Other assets

v Deposit from customers

vi Borrowings from local and foreign banks/institutions

vii Other liabilities

The estimated fair value of fixed interest-bearing borrowings not quoted in an active market is based on discounted cash

flows using the contractual interest rates for these debts over their remaining maturity.

The carrying amount of financial assets in other liabilities is a reasonable approximation of fair value.

The bulk of these financial assets have short (less than 3 months) maturities with the carrying amounts of the financial

assets being a reasonable approximation of fair value.

Fair values of customers’ deposits have been determined using discounted cash flow techniques applying the rates on

deposits of similar maturities and terms to discount the contractual cash flows.


128



6

a

b

c

d

Management is required to make judgements concerning the cause, timing and amount of impairment. In the identification of impairment

indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological

obsolescence, discontinuance of services and other circumstances that could indicate that impairment exists. The Group applies the impairment

assessment to its separate cash generating units. This requires management to make significant judgements and estimates concerning the

existence of impairment indicators, separate cash generating units, remaining useful lives of assets, projected cash flows and net realisable

values. Management’s judgement is also required when assessing whether a previously recognised impairment loss should be reversed.

Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable

that taxable profit will be available against which losses can be utilised. Management judgement is required to determine the amount of deferred

tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies, the

group assessed the probability of expected future taxable profits based on the expected profit for the next five years. Details of the Group's

recognised and unrecognised deferred tax assets and liabilities are as disclosed in note 33.

Determination of impairment of property, plant and equipment and intangible assets

Depreciation and carrying value of property, plant and equipment

The estimation of the useful lives of assets is based on management’s judgement. Any material adjustment to the estimated useful lives of items

of property and equipment will have an impact on the carrying value of these items.

Significant accounting judgments, estimates and assumptions

Allowances for credit losses

The measurement of the expected credit loss allowance for Debt financial assets measured at amortised cost is an area that requires the use of

complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting

and the resulting losses). Explanation of the inputs, assumptions and techniques used in measuring ECL is further detailed in note 2.6.1j.

A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:

• Determining criteria for significant increase in credit risk;

• Choosing appropriate models and assumptions for the measurement of ECL;

• Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and

• Establishing groups of similar financial assets for the purposes of measuring ECL.

In assessing the need for collective loan loss allowances, management considers factors such as credit quality, portfolio size, concentrations, and

economic factors. In order to estimate the required allowance, assumptions are made to define the way expected credit losses are modelled and

to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances

depends on how well future cash flows and model assumptions are determined. Please refer to note 3 for sensitivity analysis of the expected

credit loss to changes to the loss given default (LGD) and probability of default (PD).

Deferred tax assets and unrecognised tax losses

The Group’s financial statements and its financial results are influenced by accounting policies, assumptions, estimates and management

judgement, which necessarily have to be made in the course of preparation of the consolidated financial statements. The Group makes estimates

and assumptions that affect the reported amounts of assets and liabilities within the next financial year. All estimates and assumptions required in

conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and judgements are evaluated on a

continuous basis, and are based on past experience and other factors, including expectations with regard to future events. Accounting policies

and management’s judgements for certain items are especially critical for the Group’s results and financial situation due to their materiality.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty in

these financial statements, which together are deemed critical to the Group's results and financial position, are as follows:


129



e

i

Description

2019 2018Valuation

technique

Unobservable

inputs

Range of

unobservable

inputs

Relationship of

unobservable

inputs to fair

value

Nigeria Interbank

Settlement Systems5,973 5,628

Adjusted fair

value

comparison

approach

Median Price to

earnings (P/E)

ratio of similar

comparable

companies

P/E ratio 25.25x

Illiquidity ratio

19.2%

The higher the

P/E ratio of

similar trading

companies, the

higher the fair

value

Unified Payment

Services Limited7,547 6,912

Adjusted fair

value

comparison

approach

Median Price to

earnings (P/E)

ratio of similar

comparable

companies

P/E ratio 17.06x

Illiquidity ratio

19.2%

The higher the

EV/EBITDA ratio

of similar trading

companies, the

higher the fair

value

AFREXIM Bank 3,431 1,885

Adjusted fair

value

comparison

approach

Median Price to

Net book value

(P/BV) ratio of

similar

comparable

companies

P/BV 1.12X

Illiquidity ratio

19.2%

The higher the

P/E ratio of

similar trading

companies, the

higher the fair

value

FMDQ OTC

Securities Exchange350 199

Adjusted fair

value

comparison

approach

Median Price to

earnings (P/E)

ratio of similar

comparable

companies

P/E ratio 9.43x

Illiquidity ratio

19.2%

The higher the

P/E ratio of

similar trading

companies, the

higher the fair

valueSANEF (Shared

Agent Network

Expansion Facility

50 -

17,351 14,624

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation

techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all

significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

The Group uses widely recognised valuation models for determining the fair value of its financial assets. The fair values of unquoted equity

investments have been generally derived using the adjusted fair value comparison approach. Quoted price per earning or price per book value,

enterprise value to EBITDA ratios of comparable entities in a similar industry were obtained and adjusted for key factors to reflect estimated

ratios of the investment being valued.

Financial instruments in Level 2

Bank

Valuation of financial instruments

Information about fair value measurements using significant unobservable inputs (Level 2)

Adjusting factors used are the Illiquidity Discount which assumes a reduced earning on a private entity in comparison to a publicly quoted entity

and the Haircut adjustment which assumes a reduced earning for an entity located in Nigeria contributed by lower transaction levels in

comparison to an entity in a developed or emerging market. The unobservable inputs used entails Average P/B multiples of comparable

companies and Median of Enterprise value to EBITDA ratio (EV/EBITDA) of similar comparable companies.

The Group’s accounting policy on fair value measurements is discussed under note 2.6. The Group measures fair values using the following

hierarchy of methods.


130



Interest income


21 September - 21 September -


2019 2018 2019 20187 Interest income on amortized cost instruments

Loans and advances to customers:

- Term loans 48,125 7,151 48,125 7,151

- Overdraft 3,943 1,929 3,943 1,929

Cash and short term funds 1,513 131 1,513 131

Investment securities 78,069 15,163 78,069 15,163

131,650 24,374 131,650 24,374

8 Interest income on FVTPL instruments

Investment securities 1,961 215 1,961 215

Total 133,611 24,589 133,611 24,589

9 Interest expense




2019 2018 2019 2018

Savings deposits 4,540 1,077 4,540 1,077

Time deposits 31,654 10,100 31,654 10,100

Interbank takings 230 49 230 49

Borrowed funds 5,085 2,958 5,085 2,958

Current deposits 4,054 1,028 4,054 1,028Leases 251 - 251 -

45,814 15,212 45,814 15,212

10 Fee and commission income




2019 2018 2019 2018

Current account maintenance charges 1,728 498 1,728 498

Commission on telex transfer 2,061 481 2,061 481

Commission on off-balance sheet transactions 216 41 216 41

Remittances fees 2,795 621 2,795 621

Letters of credit commission and fees 242 138 242 138

Commission on cheque book issued 375 122 375 122

Card related commission 3,521 758 3,521 758

Collection revenue 527 184 527 184

Other fee and commission income 338 74 338 74

11,803 2,917 11,803 2,917 Timing of revenue recognition

At a point in time 9,284 2,257 9,284 2,257

Over the life 2,519 660 2,519 660


131



11 Fee and Commission expense




2019 2018 2019 2018

NEFT/NIBSS transfer charges 164 48 164 48

E banking expense 3,003 680 3,003 680

Other fee and commission expense 100 30 100 30

3,267 758 3,267 758

11.1 Net fee and Commission income 8,536 2,159 8,536 2,159

12 Net trading and Foreign Exchange

IncomeGroup Group Bank Bank



2019 2018 2019 2018

Foreign exchange translation gains (unrealised) 450 8,788 450 8,788

Net fair value changes in FVTPL securities

(Treasury bills)

500 32 500 32

950 8,820 950 8,820

13 Other Operating Income




2019 2018 2019 2018

484 196 484 196

Rental income 180 40 180 40

Recoveries on loans previously written off 3,155 425 3,155 425

Gain on disposal of subsidiary - - 487 -

Gain on disposal of property and equipment 65 191 65 191

Sundry income 113 214 113 214

3,997 1,066 4,484 1,066

14 Impairment loss on loans and other financial assets




2019 2018 2019 2018

Impairment charge on other assets (Note 25) 1,166 1,387 1,166 1,387

Impairment charge on loans and advances (Note 21) 14,276 4 14,276 4

Impairment charge on Investment securities - 416 - 416

Impairment reversal on contingents (1,316) - (1,316) -

Loss on disposal of equity instruments - 989 - 989

14,126 2,796 14,126 2,796

15 Employee benefit costs




2019 2018 2019 2018

Wages and salaries 25,223 6,377 25,223 6,377

Defined contribution 452 120 452 120

Other staff cost (note 15.1) 125 66 125 66

Termination expenses 628 43 628 43

26,428 6,606 26,428 6,606

Dividend income on fair value through OCI investments


132



15.1 Other staff cost

15.2 Employees and directors

a Employees

The average number of persons employed by the Group during the period was as follows:




2019 2018 2019 2018Executive directors 3 3 3 3Management 119 126 119 126Non-management 2,390 2,552 2,390 2,552

2,512 2,681 2,512 2,681




2019 2018 2019 2018

N300,001 - N2,000,000 - - - -N2,000,001 - N2,800,000 216 217 216 217N2,800,001 - N3,500,000 - 0 - 0N3,500,001 - N4,000,000 345 247 345 247N4,000,001 - N5,500,000 787 884 787 884N5,500,001 - N6,500,000 0 0N6,500,000 - N7,800,000 444 515 444 515N7,800,001 - N9,000,000 256 471 256 471N9,000,001 and above 461 344 461 344

2,509 2,678 2,509 2,678

b Directors' emoluments




2019 2018 2019 2018

Fees and sitting allowances 55 2 55 2

Other directors' expenses and benefits 102 38 102 38

Total directors' related expenses (note 16) 157 40 157 40

Executive compensation 198 50 198 50

355 90 355 90

Chairman 9 1 9 1

Highest paid director 84 21 84 21

Other staff cost represent benefits accruing to employees with respect to loans granted at below market interest rate

The number of employees of the Group, other than directors, who received emoluments in the following ranges (excluding pension

contributions and certain benefits) were:

Remuneration paid to the Directors was:

Fees and other emoluments disclosed above include amounts paid to:


133






2019 2018 2019 2018

N5,000,001 and N10,000,000 1 6 1 6N10,000,001 and N20,000,000 4 1 4 1N20,000,001 and above 3 1 3 1

8 8 8 8

16 Administration and general expenses




2019 2018 2019 2018

Advertising and business promotion 441 306 441 306

Communication and operational cost 180 47 180 47

Insurance costs 499 121 499 121

Legal and professional fees 1,988 174 1,988 174

NDIC insurance premium 5,034 1,512 5,034 1,512

Repairs and maintenance 3,868 1,047 3,868 1,047

Transport, travel, accommodation 552 91 552 91

Stationery and printing 536 137 536 137

Security expenses 1,320 341 1,320 341

Training expenses 833 43 833 43

Contract services 4,586 1,396 4,586 1,396

Charities and donations 119 8 119 8

Directors' related expenses 157 40 157 40

AMCON sinking fund expenses 3,960 1,080 3,960 1,080

Utilities 837 197 837 197

Office expenses 755 210 755 210

Newspapers and periodicals 11 3 11 3

Operational and other losses 488 761 488 761

Rents and rates 293 306 293 306

Auditors remuneration 210 90 210 90

Cash shipment services 1,048 265 1,048 265

Subscriptions 233 45 233 45

Other administrative expenses 915 237 915 237

28,863 8,457 28,863 8,457

17 Depreciation and amortisation




2019 2018 2019 2018

Depreciation of property, plant and

equipment (note 28)

3,877 1,012 3,877 1,012

Depreciation of right of use ssset (note 27) 413 - 413 -

Amortisation of intangible assets (note 29) 231 95 231 95

4,521 1,107 4,521 1,107

The number of directors who received fees and other emoluments (excluding pension contributions and certain benefit) in the following

ranges was:


134



18 Cash and balances with central banks



2019 2018 2019 2018

Cash in vault 23,088 22,013 23,088 22,013

Operating account with the central banks 3,396 6,013 3,396 6,013

Included in cash and cash equivalents 26,484 28,026 26,484 28,026

18.1 Cash and cash equivalents



2019 2018 2019 2018

Cash in vault (note 18) 23,088 22,013 23,088 22,013

Operating account with the central banks

(note 18)

3,396 6,013 3,396 6,013

Due from banks and other financial

institutions excluding long term placements

and cash collateral (Note 19)

62,076 68,966 62,076 68,966

88,560 96,992 88,560 96,992

19 Due from banks and other financial institutions



2019 2018 2019 2018

Current account balances within Nigeria 1,939 1,921 1,939 1,921

Current account balances and placements outside of Nigeria 43,137 47,345 43,137 47,345

Placements with other banks 17,000 19,700 17,000 19,700

62,076 68,966 62,076 68,966

Current 62,076 68,966 62,076 68,966

20 Financial assets held at fair value through profit or loss



2019 2018 2019 2018

Treasury Bills 1,264 57 1,264 57

1,264 57 1,264 57

Current 1,264 57 1,264 57

1,264 57 1,264 57

Trading securities are fair valued through profit or loss. They were acquired principally for the purpose of trade in the near term and to

take advantages of favourable fluctuations in the market price of the asset. Gains or losses relating to trading securities that are

measured at fair value are included in note 12.

Cash and cash equivalents does not include restricted cash with the Central Bank of Nigeria (CBN) which is not available for use by the

group for normal day to day cash operations.


135



21 Loans and advances to customers



2019 2018 2019 2018


Term loans 211,635 244,295 211,635 244,295

Overdrafts 49,773 290,268 49,773 290,268

261,408 534,563 261,408 534,563 Impairment allowance (note 21.1) (72,670) (194,513) (72,670) (194,513)

188,738 340,050 188,738 340,050

Current 37,731 117,582 37,731 117,582

Non-current 151,007 250,698 151,007 250,698

188,738 340,050 188,738 340,050

21.1 Movement in impairment allowance Group Group Bank Bank


2019 2018 2019 2018

Opening 194,513 602,846 194,513 602,846

Write-offs for the year (726) (408,337) (726) (408,337)

Loans sold to Amcon (135,393) - (135,393) -

Charge for the year 14,276 4 14,276 4

Balance at 31 December 72,670 194,513 72,670 194,513


136



22 Investments held at amortised cost



2019 2018 2019 2018

Treasury bills 449,366 480,752 449,366 480,752

Federal Government of Nigeria bonds 56,984 34,762 56,984 34,762

Corporate bonds 1,674 1,814 1,674 1,814State Government bonds 9,114 16,426 9,114 16,426Eurobonds 1,923 - 1,923 -

519,061 533,754 519,061 533,754 Impairment of debt securities (1,990) (1,949) (1,990) (1,949)

517,071 531,805 517,071 531,805

Current 456,563 478,940 456,563 478,940

Non-current 60,508 52,865 60,508 52,865

517,071 531,805 517,071 531,805 Movement in impairment of debt securities :

Opening Balance 1,949 1,575 1,949 1,575

Charge for the year 41 374 41 374

Closing Balance 1,990 1,949 1,990 1,949

23 Investment securities at fair value through other

comprehensive incomeGroup Group Bank Bank


2019 2018 2019 2018

Quoted equity investment 10 - 10 -Unquoted equity investment 17,352 14,634 17,352 14,634

17,362 14,634 17,362 14,634

24 Assets pledged as collateral



2019 2018 2019 2018

Federal Government of Nigeria Bonds 14,064 25,992 14,064 25,992

Treasury bills 27,610 24,457 27,610 24,457

State Government of Nigeria Bonds 410 323 410 323 Euro Bonds - 7,531 - 7,531

42,084 58,303 42,084 58,303

Impairment on assets pledged as collaterals - (41) - (41)

42,084 58,262 42,084 58,262

Current 27,679 24,419 27,679 24,419

Non current 14,405 33,843 14,405 33,843

42,084 58,262 42,084 58,262

The related liability for assets pledged as collateral

include:Borrowings (Note 32)

Bank of industry 4,317 5,899 4,317 5,899 Afrexim 7,461 36,233 7,461 36,233

11,778 42,132 11,778 42,132

The assets pledged as collateral include assets pledged to third parties under secured borrowing with the related liability disclosed above.

Also included in pledged assets are assets pledged as collateral or security deposits to clearing house and payment agencies ( CBN

Clearing, SystemSpec, Interswitch, FMDQ and Etranzact). The pledges have been made in the normal course of business of the Bank. In

the event of default, the pledgee has the right to realise the pledged assets.

In connection with the Bank’s financing and trading activities, the Bank has pledged assets to secure its borrowings. The Bank is not

allowed to pledge these assets as security for other borrowings or to sell them to another entity. The carrying values of the Group's

pledged assets are as follows:


137



25 Prepayment and other assets



2019 2018 2019 2018

Financial assets

Accounts receivable 3,509 1,242 3,509 1,242

Sundry receivables 8,797 19,338 8,797 19,338

Cash Reserve with CBN 37,698 37,446 37,698 37,446

Intercompany receivables - - 700 2,650

50,004 58,026 50,704 60,676 Impairment allowance (see note 25.1) (3,491) (5,947) (4,191) (7,812)

46,513 52,079 46,513 52,864 Non-financial assets

Prepayments 884 2,177 884 2,177

Inventories 649 539 649 539

1,533 2,716 1,533 2,716

Prepayment and other assets 48,046 54,795 48,046 55,580

Current 46,513 52,079 45,813 50,214

Non-current 1,533 2,716 2,233 5,366

48,046 54,795 48,046 55,580

25.1 Movement in impairment allowance



2019 2018 2019 2018

At Opening 5,947 4,560 7,812 6,425Transfer to property under construction (2,412) - (2,412) -(Reversal)/Charge to profit or loss 1,166 1,387 1,166 1,387

Write offs during the year (1,210) (2,375)

Total 3,491 5,947 4,191 7,812

25b Other loans and receivables



2019 2018 2019 2018

AMCON receivables 182,594 - 182,594 - Impairment of loans and other receivables - - - -

182,594 - 182,594 -


138


26 Right of Use Assets

Building TotalN'm N'm

Opening balance as at 1 January 2019 2,546 2,546

Additions during the year 1,504 1,504Closing balance as at 31 December 2019 4,050 4,050

Depreciation - -

Opening balance as at 1 January 2019 413 413Charge for the year 413 413

Closing balance as at 31 December 2019Net book value as at 31 December 2019 3,637 3,637

27 Lease liabilities

i Lease liabilitiesN'm

Opening balance as at 1 January 2019 1,443

Additions 951

Interest expense 251Closing balance as at 31 December 2019 2,645

Current lease liabilities 5

Non-current lease liabilities 2,6402,645

ii Amounts recognised in the statement of profit or loss

N'm

Depreciation charge of right-of-use assets 413

Interest expense 251

664

The total cash outflow for leases as at December 2019 was N553 million.

iii)

Less than

6 months

6-12

months

Between

1 and 2

years

Between

2 and 5

years Above 5 years

Total contractual

cashflows Carrying amount

Lease liability - - - 313 4,767 5,080 2,645

This note provides information for leases where the Bank is a lessee.

Liquidity risk (maturity analysis of lease liabilities)


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Pro

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2018

3

5,8

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1

8,6

15

15,9

93

2

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3,6

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15,9

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4,3

88

97,4

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2

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35,9

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18,6

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140



29 Intangible assets Bank

Computer Computer

software software

Cost

At 1 January 2019 9,653 9,653

Additions 127 127

At 31 December 2019 9,780 9,780

Amortisation

At 1 January 2019 (9,369) (9,369)

Amortisation charge (231) (231)

At 31 December 2019 (9,600) (9,600)

Net book value

At 31 December 2019 180 180

Cost

At 21 September 2018 9,644 9,644

Additions 9 9

At 31 December 2018 9,653 9,653

Amortisation

At 21 September 2018 (9,274) (9,274)

Amortisation charge (95) (95)

At 31 December 2018 (9,369) (9,369)

Net book value

At 31 December 2018 284 284

*Intangible assets are all externally generated

Group


141



30 Assets classified as held for sale and discontinued operations



2019 2018 2019 2018

Non-current assets held for sale (note 30a) - 137 - 137Discontinued operations (note 30b) - - 2,107 3,983Assets of disposal group held for sale 15,485 23,331 - -

Total assets classified as held for sale 15,485 23,468 2,107 4,120

Liabilities of disposal group held for sale 9,529 13,686 - -

a

b Discontinued operations

Name Country of

incorporation

and place of

business

Nature of

business

Proportion of

ordinary shares

directly held by

parent (%)

Proportion of

ordinary

shares held

by non-

controlling

interests (%)

Carrying

amount

• Skye Bank Guinea Guinea Banking 73 27 1,156

• Skye Finance and Investment Ltd Dublin Financial

services

100 - 9

• Mainstreet Bank Estate Company Ltd Nigeria Property

development

100 - 500

• Mainstreet Securities Ltd Nigeria Financial

services

94 6 442

2,107

The table below shows the total non-controlling interest for the period:

Skye Bank

Guinea

Mainstreet

Securities Ltd

Total

1,124 70 1,194

On 19 February 2016, the board of the defunct Skye Bank approved the disposal of the Group's entire interest in all of its subsidiaries. As

at 31 December 2019, the sale of Four(4) subsidiaries have been completed.

In September 2018, the directors of Skye Finance and Investments Limited (SFIL), the Irish entity, resolved to place the company into

voluntary members liquidation at a board meeting. The affairs of the company was thus handed over to the liquidator.

Consequently, the associated assets and the liabilities of the unsold subsidiaries and SFIL have been presented as held for sale having met

all the conditions to be classified as such in accordance with IFRS 5 as the carrying amount is expected to be recovered principally by a sale

rather than through continuing use. These subsidiaries include:

Assets classified as held for sale as at 31 December 2018 were transferred to Property Plant and Equipment (See note 28) in 2019.


142




2019 2018

Net interest income 711 1,238

Net fee and commission income 338 458

Other operating income 278 188

- 856

Operating expenses (1,142) (2,315)

Profit Before Tax of discontinued operations 185 425 Loss on sale of subsidiaries (see note 30c below) (757) - Taxation - - Profit After Tax of discontinued operations (572) 425

Exchange differences on translation of discontinued operations - 1,880

Other comprehensive income from discontinued operations - 1,880

Net cash inflow/(outflow) from operating activities 78 492

Net cash inflow/(outflow) from investing activities (560) (418)

Net cash inflow/(outflow) from financing activities (1,367) 79

The assets and liabilities of the subsidiaries held for sale are as follows;

Skye Bank

Guinea

Mainstreet

Securities

Limited

MBL Estate Total

Cash and Cash

Equivalent

2,469 675 17 3,161

Investment Securities 6,714 2,271 - 8,985

Loans and advances 1,837 - - 1,837

Other Assets and

receivables

224 (69) 1,265 1,420

Investment

Properties

- - - -

Property, Plant &

Equipment

81 - - 81

Intangible Assets - 1 - 1

Total Assets 11,325 2,878 1,282 15,485

Deposits 6,196 3 6,199

Due to other banks - - -

Current tax liabilities 39 416 455

Deferred Taxation 0 - -

Other Liabilities 926 1,231 652 2,809

Retirement Benefit

Obligation

- - 65 - 65

Total Liabilities 7,161 1,715 652 9,528

Financial risk management disclosures for non-current assets and non-current liabilities held for sale

The summarised results from discontinued operations which have been included in the consolidated income statement are as follows:

In accordance with IFRS 5, the assets and liabilities held for sale were carried at the lower of their fair value less costs to sell and carrying

amount. The financial assets are cash and balance balances, Loans and advances to customers, investment securities and other assets.

The loan facilities of the discontinued operations are spread across sectors in the following percentages of: 63% in the corporate sector,

27% in the retail sector and 10% in the commercial sector. Collateral held against this exposure includes: properties, cash and other

enhancements. Most of the assets and liabilities mature within six months and as such fair value approximated carrying amount.

Investment in securities are trading instruments which are highly liquid and actively traded with maturity of 1 year. Cash and balances with

banks consist of balances held with foreign banks and unrestricted balances with central bank.


143



c Details of sale of subsidiary

The book value of the net assets for the subsidiaries disposed at the date of disposal is as follows:

Skye bank

Gambia

Skye bank

Sierra-Leone

Total

Cash & balance with host Central Bank 656 312 968

Due from bank 612 983 1,595

Placements 1,971 460 2,431

Investment Securities - 1,884 1,884

Loans and Advances 194 778 972

Other Assets 111 324 435

Property Plant and Equipments 1,316 42 1,358

Intangible 216 - 216

Deferred tax asset - 139 139

Total Assets 5,076 4,922 9,998

Deposits from customers 2,830 2,067 4,897

Due to banks 124 - 124

Current income tax 2 - 2

Deferred income Tax 12 - 12

Accruals and other liabilities 635 909 1,544

Total Liabilities 3,603 2,976 6,579

Net assets of disposal group 1,473 1,946 3,419

The profit/ (loss) on the disposed subsidiaries is as follows:

Group

Gambia Sierra-Leone Total

Proceeds from sale of subsidiaries 719 1918 2,637

Disposal cost (243) (31) (274)Net proceeds from sale of subsidiaries 476 1887 2363Fair value of NCI 280 19 299Net assets of subsidiaries at disposal (1,472) (1,947) (3,419)Loss on sale (716) (41) (757)

Bank

31 December

2019

Proceeds from sale of subsidiaries 2,637Disposal cost (274)Net proceeds from sale of subsidiaries 2,363Carrying amount of investments 1,876Profit on sale 487

31 December

2019

Polaris bank fully disposed two of its subsidiaries: Skye bank Gambia and Skye bank Sierra-leone. The sale was effective 1 January 2019


144



31 Due to other financial institutions



2019 2018 2019 2018

Due to banks in Nigeria - 25 - 25

Due to banks outside Nigeria - - -

- 25 - 25

Current - 25 - 25

- 25 - 25

32 Deposits from customers



2019 2018 2019 2018

Current accounts 265,045 279,819 265,045 279,819

Savings account 167,679 154,536 167,679 154,536

Term deposits 294,457 303,913 294,457 303,913

Domiciliary accounts 130,704 122,776 130,704 122,776

857,885 861,044 857,885 861,044

Current 857,885 861,044 857,885 861,044 Non-current - - - -

857,885 861,044 857,885 861,044

33 Borrowings from local and foreign institutions



2019 2018 2019 2018

CBN - State Bailout Funds (note i) 52,813 54,174 52,813 54,174

African Export Import Bank (note ii) 7,461 36,233 7,461 36,233

CBN/BOI intervention fund (note iii) 4,317 5,899 4,317 5,899

European Investment Bank (note iv) 10,043 14,615 10,043 14,615

CBN - Excess Crude Account (note v) 18,298 18,678 18,298 18,678

Afrexim Bank - 201 - 201

CBN - CACS (note vi) 2,042 2,042 2,042 2,042

5,946 5,852 5,946 5,852

100,920 137,694 100,920 137,694

Borrowings

Local 77,470 80,792 77,470 80,792

Foreign 23,450 56,902 23,450 56,902

100,920 137,694 100,920 137,694

Current 51,952 51,952 51,952 51,952 Non-current 48,968 85,742 48,968 85,742

100,920 137,694 100,920 137,694

Foreign loans and borrowings for letters

of credits(note vii)

i

ii

iii

iv

state governments for payment of salaries of the workers of each states. The facility has a tenor of 20 years with a 2% interest rate

per annum payable to the CBN. The Bank is under obligation to disburse the loan at an interest rate of 9% per annum.

This amount of N4.3 billion represents outstanding balance on-lending facilities to various customers of the bank availed by the Central

Bank of Nigeria (CBN). CBN, in a bid to unlock the credit market in Nigeria during the financial year 2010, approved for disbursement a

total sum of N500 billion Debenture Stock through the Bank of Industry to various participating banks for onward lending to Nigerian

SME/Manufacturing sector. The bank accessed this fund to the tune of N9.5 billion for Agricultural financing, N9.1billion for

Manufacturing/SME funds and N263 million on Aviation with a term of 15 years at the rate of 1% per annum.

This amount of N7.46billion represents outstanding balance on the $100Million it facility granted by African Export-

Import Bank on June 28 2019 to the Polaris bank Limited. AFREXIM ammended the structure of the facility to run until 30-Sept-

19.However, the facility was not fully paid in 2019, and hence the bank entered into a restructuring agreement with AFREXIM in 2019

The amount of 10.04 billion (USD 34.45 million) represents the outstanding balance of a global credit granted to Polaris bank by

European Investment Bank used for the finance of small and medium sized investment projects in the productive and human capital

sectors in Nigeria. The facility is due to mature in May 2022. The facility is granted at a rate of 6.27% per annum.

The amount of N52.8billion represents the outstanding balance on bailout facilities granted to the Bank by the CBN for on-lending to

N


145



v The amount of N18.3 billion represents outstanding balance on the excess crude account loan granted to the Bank by the Central Bank of

Nigeria for on-lending to state governments. The facility has a tenor of 20 years with a 2% interest rate per annum payable to the CBN.

The Bank is under obligation to disburse the loan at an interest rate of 9% per annum.

vi

vii

34 Current tax liability



2019 2018 2019 2018

Per statement of comprehensive incomeCurrent income tax - - - -

Education tax 197 - 197 -

Technology tax 280 25 280 25

Nigeria police trust fund 1 - 1 -

Capital gains tax 1 - 1 -

Income tax charge 479 25 479 25



2019 2018 2019 2018

Per statement of financial position

As at 01 January 2019 365 340 365 340 Income tax charge 479 25 479 25 Tax Paid (25) - (25) - As at 31 December 2019 819 365 819 365

Unrecognised deferred tax asset

Effective tax rate reconciliation

31 December 2019

Naira Rate Naira Rate

Profit/(Loss) Before Tax 27,342 100% 27,829 100%

Income tax using the 8,349 31% 8,349 30%

Effect of temporary - 0% - 0%

Impact Education Tax 197 1% 197 1%

Impact Information 280 1% 280 1%

Impact NPTF Levy/tax 1 0% 1 0%

Impact capital gain tax 1 0% 1 0%

Effect of permanent (8,349) -31% (8,349) -30%

Effective Tax Charge 479 2% 479 2%

BankGroup

Borrowings from correspondence banks include loans from foreign banks utilised in funding letters of credits negotiated on behalf of Polaris

Bank's customers for international trade.

Income tax liability is to be settled within one year

The computation of the Bank’s income tax expense and deferred tax was carried out in accordance with the new 2019 Finance Act, CITA

and other relevant tax laws.

The company has not recognised company income tax because it is within its first four years of commencement of business.

An assessment was carried out on Polaris Bank Limited for the year ended December 31, 2019 to identify areas of uncertainty in tax

treatment in accordance with IFRIC 23. The new Finance Act introduces changes to the treatment and calculations of taxation: This

addresses the areas of losses of a capital nature, expenses incurred for the purpose of deriving tax-exempt income, taxes or penalties

borne on behalf of another person and other amendments from the standard.

The amount of 2.04 billion represents the outstanding balance on the on-lending facilities provided by the Central Bank of Nigeria

through the Commercial Agricutlural Credit Scheme (CACS). This is an intervention activity granted by the Central bank of Nigeria in

collaboration with the Federal Government of Nigeria. The facility is for a maximum period of 7 years at a zero percent interest rate to the

Bank.

Deferred tax assets of N6.6 Billion as at 31 December 2019 has not been recognised because it is not probable that future taxable profits

will be available against which they can be utilised.

Unused tax losses for which no deferred tax assets has been recognised was N2.3 billion.

N


146



35 Accruals and other liabilitiesGroup Group Bank Bank


2019 2018 2019 2018

Financial liabilities

Accounts payable 39,163 37,382 39,215 37,382

Customer deposits for letters of credit 699 5,112 699 5,112

Manager's cheque 4,884 5,249 4,884 5,249

AMCON Payable 20,496 14,356 20,496 14,356

Deposit held for sale of subsidiaries 7,106 6,920 7,106 6,920

Uncleared effects 8 276 8 276

Cash card collection settlement 4,429 4,401 4,429 4,401

76,785 73,696 76,837 73,696 Non-financial liabilities

Litigation claims provision (35(i)) 7,559 7,059 7,559 7,059

Other credit balances 11,727 13,131 11,727 14,049

Off Balance Sheet ECL allowance 1,874 3,190 1,874 3,190

21,160 23,380 21,160 24,298

97,945 97,076 97,997 97,994

Current 37,614 36,038 37,614 36,038 Non-current 60,331 61,038 60,383 61,956

97,945 97,076 97,997 97,994

35 (i) Movement in litigation claims provision



2019 2018 2019 2018

Opening balance 7,059 7,059 7,059 7,059 Additional provision 500 - 500 - Closing balance - 7,559 7,059 7,559 7,059

36 Retirement benefit obligation



2019 2018 2019 2018

Defined benefit contribution 11 11 11 11

11 11 11 11

37 Share capital and reserves

a Share capital



2019 2018 2019 2018

Authorised

25,000 25,000 25,000 25,000

Issued and fully paid

Group Bank


2019 2018

Opening 25,000 - Shares issued to AMCON - 25,000 Balance, end of year 25,000 25,000

b) Share premium

Share premium is the excess paid by shareholders over the nominal value of their shares

25 billion ordinary shares of N1 each

(31 December 2019: 25 billion ordinary

shares of N1 each)

The movement on the issued and fully paid up share capital account during the year was as follows:


147



c) Other reserves

i Statutory reserve

ii Small and medium scale industries equity investment scheme (SMEEIS) reserves

iii Fair value reserve

iv Regulatory reserve

v Translation reserve

vi Intervention fund reserve

d Non-controlling interest

e Reorganisation reserve

38 Cash generated from operations



2019 2018 2019 2018

Operating Profit before tax 27,342 2,456 27,829 2,456

Adjustments for:

Depreciation of property and equipment 4,290 1,012 4,290 1,012

Amortisation of intangible assets 231 95 231 95

Profit from sale of subsidiary - - (487) -

(65) (191) (65) (191)

Fair value gain on OCI financial instruments - (98) - (98)

(500) (32) (500) (32)

Impairment on financial assets 14,126 420 14,126 420

Net (gain)/loss on sale of FVOCI investments - 989 - 989

Net interest income (86,284) (9,377) (86,284) (9,377)

Unrealised foreign exchange gain on revaluation (450) (8,788) (450) (8,788)

Dividend income (484) (196) (484) (196)

(41,794) (12,323) (41,794) (12,323)Changes in operating assets and liabilities

1,254 431 1,254 431

Pledged assets - 28,806 - 28,806

6,510 29,484 6,510 19,589

7,677 (3,811) 7,677 (3,811)

Changes in operating liabilities

(3,129) (9,375) (3,129) (9,375)

Accruals and other liabilities 1,319 594 1,319 594

Interest paid on deposits (40,533) (4,140) (40,533) (4,140)

Interest received on loans and advances 128 - 128

(68,697) 19,899 (68,697) 19,899

(25) - (25) -

Net cash used in operating activities (68,722) 19,899 (68,722) 19,899

This represents 10% of the Gross revenue of the bank.

The banking regulations require the bank and other banking subsidiaries of the bank to make an annual appropriation to a statutory

reserve. An appropriation of 30% of profit after taxation is made if the statutory reserve is less than the paid-up share capital and 15% of

profit after taxation if the statutory reserve is greater than the paid up share capital.

Statutory reserves also include other reserves as stipulated by the banking regulations.

The SMEEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set aside a portion

of the profit after taxation in a fund to be used to finance equity investments in qualifying small and medium scale enterprises. Under the

terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of profit after taxation and shall continue

after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after taxation. However, this is no longer mandatory.

The small and medium scale industries equity investment scheme reserves are non-distributable. No appropriations was made to the

SMEEIS reserve during the period.

The risk regulatory risk reserves warehouses the difference between the allowance for impairment losses on balance on loans and advances

based on Central Bank of Nigeria prudential guidelines and Central Bank of the foreign subsidiaries regulations, compared with the

expected credit loss model used in calculating the impairment under IFRSs.

This represents the group's share of exchange differences relating to the translation of the results and net assets of the group’s foreign

operations.

Prepayments and other assets

Net fair value loss/(gain) on financial

assets held at fair value through profit

The fair value reserve includes the net cumulative change in the fair value of FVTOCI investments.


Deposits from customers

Financial assets held at fair value

Reconciliation of profit before tax to

cash generated from operations:

Income tax paid

Gain on disposal of property and

This represents the net liabilty assumed by Polaris Bank Limited in line with its establishment as a bridge bank to assume the assets and

liabilities of Skye Bank Plc. The net liability assumed was transferred to reorganisation reserves.

This represents the non-controlling interest's (NCI) portion of the net assets of the Group.


148



39 Related parties

(a) Subsidiaries

(b) Transactions with key management personnel

40 Related party transactions

40.1 Transaction with Parent Company


2019 2018

Parent company deposit held within the Bank 14,142 94 Receivable from AMCON 182,593 -

The Group is controlled by the Asset Management Corporation of Nigeria who is also the ultimate parent.

Transactions between Polaris Bank and its subsidiaries also meet the definition of related party transactions.

Where these are eliminated on consolidation, they are not disclosed in the consolidated financial statements but

are disclosed in the books of the Bank.

The Group's key management personnel, and persons connected with them, are also considered to be related

parties. The definition of key management includes the close members of family of key personnel and any entity

over which they exercise control. The key management personnel have been identified as executive and non-

executive directors of the Group as well as their close family members. Close members of family are those family

members who may be expected to influence, or be influenced by that individual in their dealings with Polaris Bank

Ltd and its subsidiaries.

Balances and transactions between the Bank, its parent and its subsidiaries, which are related parties of the Bank,

have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group

and other related parties are disclosed below.

Parties are considered to be related if one party has the ability to control the other party or to exercise significant

influence over the other party in making financial and operational decisions, or one other party controls both. The

definition includes subsidiaries, associates, joint ventures and the Group's pension schemes, as well as key

management personnel.

Bank

40.2 Key management compensation



2019 2018 2019 2018

Short-term employee benefits 355 90 355 90

355 90 355 90

The compensation paid to key management is shown below:


149



40.3 Companies'/directors' related deposit liabilities


2019 2018

Balance, beginning of year 47 28

Deposits received during the year 1,253 1,140

Deposits repaid during the year (1,247) (1,121)

Balance, end of year 53 47

40.4 Subsidiaries deposit account balances

Name of company 31 December 31 December

2019 2018

Mainstreet Bank Estate Company Ltd 15 15

Mainstreet Securities Ltd 2 119

Skye Bank Guinea 365 359

Skye Finance and Investment Limited Dublin 1,251 1,182

1,633 1,675

40.5 Loans and advances to related parties


2019 2018

Loans outstanding at 1 January 328,965 288,111

Loans issued during the year 259 30

Exchange difference/Accrued interest Capitalized 30,510 40,842

Loan repayments during the year (16) (18)

Transferred to AMCON (325,371) -

Loans Outstanding as 31 December 2019 34,347 328,965

40.6 Other transactions with related parties


2019 2018

Interest income 2 6

Interest expense 84 228

Fee and commission income 1 1

Interest rates charged on balances outstanding are at rates that would be charged in the normal course of business.

Directors (and close family

members)


members)


members)

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,47

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31

3,3

12


152



40.8 Risk assets outstanding

Directors' off balance-sheet engagement

Name of

company/Individual

Name of related interest Type Loan status Collateral

perfection

status

Nature of security

and security status

31

December

2019

31

December

2018

Home and You Mr. Tokunbo Abiru Bank Guarantee Performing Not perfected Legal mortgage 181 131

Ibadan Electricity Distribution

Co

Mr. Tunde Ayeni Bank Guarantee Lost N/A Cash backed 10,980 10,980

Yola Electricity Distribution

Co

Mr. Tunde Ayeni Bank Guarantee Lost N/A Guarantee 2,715 2,715

Metropolitan Construction

Coy Ltd

Alh. Musiliu Smith Advance Payment

Guarantee

- 819

Natcom Development &

Investment Ltd

Mr. Tunde Ayeni Bank Guarantee - 1,010

13,876 15,655

41 Contingent liabilities and commitments

41.1 Legal proceedings

41.2 Capital commitments

41.3



2019 2018 2019 2018

Performance bonds and 50,427 40,356 50,427 40,356

Letters of credit 4,418 2,187 4,418 2,187

54,845 42,543 54,845 42,543

In the normal course of business, the Group is party to financial instruments with off-balance sheet risk - acceptances, performance bonds and indemnities. The

instruments are used to meet the credit and other financial requirements of customers.

Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these

obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts.

Other contingent liabilities include transaction related customs and performances bond and are, generally, commitments to third parties which are not directly

dependent on the customer’s creditworthiness. Documentary credits commit the Group to make payments to third parties, on production of documents, which are

usually reimbursed immediately by customers. The following tables summarises the nominal principal amount of contingent liabilities and commitments.

Off-balance sheet engagements

There were contingent liabilities in respect of claims and litigations against the Group as at 31 December 2019 amounting to billion. These claims arose in

the normal course of business and are being contested by the Group. The solicitors of the Group are of the view that probable liability which may arise from the

cases pending against the bank is not likely to exceed N 7.8 billion. This probable liability has been fully provided for. (Please refer to note 35)

At the balance sheet date, the Group had no capital commitments in respect of authorized and contracted capital projects for information technology equipment

and software.

N212


153



42 Statement of prudential adjustment

Total impairment Total Total impairment Total

Provision per CBN Guidelines 70,007 70,007 254,579 254,579

Impairment allowance per IFRS 100,607 100,607 226,662 226,662

Amount required in regulatory risk reserve - - 27,917 27,917

43 Events after the reporting period

43.1

43.2

Regulatory Body

Central Bank of Nigeria

Central Bank of Nigeria

43.3

The reconciliation between the CBN recommended provisions and that under IFRS is as shown in the table below:

The new Finance Act was signed into law on 13th January 2020 and is the basis upon which the Bank's tax was calculated.

20182019

Contraventions of the Banks and Other Financial Institutions Act of Nigeria and CBN circulars

Sum of N2 million relating to failure of the bank to implement

two of the prior year's recommendations from the external

auditor's management letter.

Sum of N4 million relating to the bank writing-off an insider

related loan to Onas Farms Limited without CBN approval.

Infraction

For the contraventions mentioned above, the bank was fined in year 2020

A novel strain of coronavirus (COVID-19) that first surfaced in China was classified as a pandemic by the World Health Organization

on March 11, 2020, impacting countries globally. The potential impacts from COVID-19 remain uncertain, including, among other

things, on economic conditions, businesses and consumers.

The Nigerian financial industry is committed to preserving confidence, financial stability and support for the economy. The Central

Bank has committed over N3.5 trillion in stimulus and various moratorium arrangements for loans to the Nigerian economy to

ameliorate the pains arising from the COVID-19 health and economic crisis. The Federal Government and the private sector have also

committed to provide support required to raise public awareness as well as the resources to combat this deadly disease.

The Bank plans to restructure certain credit facilities in line with pronouncement of the Central Bank of Nigeria . Also in the short

term, the Bank would only continue to advance credit facilities to companies whose services have been defined as essential by the

government.

The directors of the Bank are confident that the Bank will continue to operate in the forseeable future as the banking activities are

essential. The Bank continues to operate and serve its customers.


154



44 Segment reporting

44.1 Operating segments by business segment

Retail banking

Commercial banking

Treasury, Corporate and Investment banking

The Bank is divided into three main business segments, as described below, which are the Bank's strategic

business units. The strategic business units offer varied products and services and are managed separately based

on the Bank Management's structure.

Operating segments are reported in accordance with the internal reports provided to the Bank's Executive

Management Committee which is responsible for allocating resources to the operating segments and assessing its

performance.

Retail banking incorporates private banking services, private customer current accounts, deposits, investment

savings products, custody, credit and debit cards, consumer loans and mortgages.

Commercial banking incorporates direct debit facilities, current accounts, deposits, overdrafts, loan and other

credit facilities, foreign currency and derivative products.

Treasury, corporate and investment banking incorporates financial instruments trading, structured financing and

corporate leasing.

No single external customer accounts for 10% or more of the Bank’s revenue.

Information regarding the results of each reportable segment is included below. Performance is measured based

on segment profit before income tax, as included in the internal management reports that are reviewed by the

Executive Management Committee. Segment profit is used to measure performance as management believes that

such information is the most relevant in evaluating the results of certain segments relative to other entities that

operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

The measurement policies the Bank uses for segment reporting are the same as those used in its financial

statements. There have been no changes from prior periods in the measurement methods used to determine

reported segment profit or loss.


Bank

31 December 2019Treasury

corporate

Retail

banking

Commercial

banking

Total

Revenue:Derived from external customers 51,269 42,349 57,230 150,848

Derived from other business segments - - - -

Total revenue 51,269 42,349 57,230 150,848

Interest expenses (8,596) (12,746) (24,472) (45,814)

Fee and commission

expenses

(688) (1,438) (1,141) (3,267)

Net Operating Income 41,985 28,165 31,617 101,767

Expense:Employee benefit and compensation cost (5,582) (11,627) (9,219) (26,428)

Administration and general expenses (6,527) (11,939) (10,397) (28,863)

(11,901) (463) (1,762) (14,126)

(865) (2,039) (1,617) (4,521)

Total cost (24,875) (26,068) (22,995) (73,938)

17,109 2,097 8,622 27,829

Income tax expense (294) (37) (148) (479)

16,815 2,060 8,474 27,350

AssetsLoans and advances to customers 63,875 25,013 99,851 188,738

Others 921,617 14,146 18,765 954,528

Total assets 985,492 39,159 118,616 1,143,266

LiabilitiesDeposits from customers 59,759 385,518 412,609 857,885

Others 96,797 3,662 101,933 202,392

Total liabilities 156,556 389,180 514,542 1,060,277

Revenue is made up of : 131,650

Interest income on fair value through profit/loss 1,961

Net fee and commission 11,803

Other operating income 4,484

Net trading and foreign 950

150,848

Loan impairment charges and impairment charges

on other financial assets

Depreciation and amortisation

Profit before income tax from reportable segments

Profit after income tax from reportable

segments

Interest income on amortized cost financial assets


155



156



Other National Disclosures

31

December

31

December

31

December

31

December

Group 2019 % 2019 % 2018 % 2018 %

Gross income 150,361 150,848 37,392 37,392

Interest expense (45,814) (45,814) (15,212) (15,212)

104,547 105,034 22,180 22,180

Administrative overheads:

- Local (32,130) (32,130) (9,215) (9,215)

- Foreign - - - -

Value added 72,417 72,904 12,965 12,965

Distribution

Employees

- Wages & salaries and other staff cost 26,428 36% 26,428 36% 6,606 51% 6,606 51%

Government

- Taxation 479 1% 479 1% 25 0% 25 0%

The future

- Asset replacement (depreciation) 4,290 6% 4,290 6% 1,012 8% 1,012 8%

- Local

- Asset replacement (amortisation) 231 0% 231 0% 95 1% 95 1%

- Local

- Impairment loss 14,126 20% 14,126 19% 2,796 22% 2,796 22%

- Expansion (transfers to reserves) 26,863 37% 27,350 38% 2,431 19% 2,431 19%

72,417 100% 72,904 100% 12,965 100% 12,965 100%

Group BankGroup Bank

MANAGEMENT

TEAM

158


159

MANAGEMENT

team

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

2223

24

2526

27

2829

30

First Name

Adetokunbo

Innocent

Abdullahi

Segun

Femi

Kolade

Olurotimi

Charles

Charles

Babatunde

Olufemi

Pius

Titi

HassanAdebimpe Oluwabunmi

Ayobamidele Abayomi

Taiwo

Anthony U

Chukwuma PatrickRaphael

Peter

OsazuwaRasheed Adesoye

Olusegun Nelson

RotimiOlayemi

Kayode

OlayinkaOmoyele

Ajodo Egbunu

Surname

Abiru

Ike

Mohammed

Opeke

Aribaloye

Ojo-osagie

Omotayo

Udogu

Oso

Osibodu

Olanihun

Olaoye

Abiodun

Umar

Ihekuna

Adeyinka

Olupeka

Anichebe

UmunnaAbiaziem

Falohun

IgbinobaYusuf

Tawoju

AwosikaNasiru

Oladipo

ObikanyeAdewole

Ocheja

Grade

MD/CEO

ED

ED

GM

GM

GM

GM

DGM

DGM

DGM

DGM

DGM

DGM

DGM

DGM

DGM

AGM

AGM

AGMAGM

AGM

AGMAGM

AGM

AGMAGM

AGM

AGMAGM

AGM

Branch

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head OfficeHead Office

Head Office


Head Office


Head Office


Head Office

Department

Executive Office

Technology & Services

Commercial Banking

Commercial Banking

Enterprise-Wide Risk Management

Commercial Banking

Internal Audit Group

Commercial Banking

Loan Recovery & Remedial AssetsCompany Secretariat

Commercial Banking

Financial Control

Resources Group

Commercial Banking

Products & Markets Development

Digital Banking Group

Human Capital Management

Commercial Banking

Commercial BankingCommercial Banking

Risk Management Group


Legal

Internal Control GroupInternal Audit Group

Commercial Banking

Commercial BankingTreasury

Corporate Banking Group

Job Function

Managing Director/CEO

Executive Director, Technology & Services

Executive Director, Abuja & Northern BusinessDirectorate Head, Lagos Business

Directorate Head, Enterprise-Wide Risk ManagementDirectorate Head, South-West & Kwara Business

Chief Internal Auditor

Group Head, South-East 2 Business Area

Acting Chief Compliance Officer

Company Secretary/Legal Counsel

Group Head, Ikeja/Lagos Public Sector BusinessChief Financial Officer

Group Head, Resources Group

Group Head, North-West Group I

Group Head, Products & Markets Developments

Chief Digital Officer

Group Head, Human Capital Management

Group Head, South East I

Group Head, Apapa BusinessGroup Head, South-South Business Area

Risk Management Group

Group Head, AbujaGroup Head, South West II

Head, Legal Services

Group Head, Internal ControlHead, Branch and HO Field Audit

Group Head, Island Business

Group Head, North-EastAg. Treasurer

Group Head, Corporate Banking Group

Group Head, Branch Coordination

Group Head, North-Central BusinessHead, Lagos Public Sector I

Ag. Chief Information Officer

Group Head, South West IGroup Head, Ibadan Business Area

Head, Lagos Public Sector II

Head, SME Banking & Money Transfer

Group Head, Delta Business Area

Head, IT Services & Operations

Group Head, Edo Business Area

Head, Domestic Operations & Ag. Group Head, Central Operations

Branch Coordination

Commercial BankingPublic Sector Group

Information Technology


Public Sector Group

Products & Market Development.Commercial Banking


Commercial Banking

Domestic Operations

Head Office


Head Office


Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

AGM

AGMAGM

AGM

AGMSM

SM

SM

SM

SM

SM

SM

Obitayo

AbdulsalamAmbode

Nnoli

AkoredeOgidan

Ashiru

Faleye

Ofili

Ogunnubi

Emeribe

Ayinuola

Tolulope

IshakaOlufemi

Tagbo

Abimbola AliAdebukola

Olanrewaju Bankole

Lekan

Veronica Z

Israel

Chinyere L

Tunde Folorunso

31

3233

34

3536

37

38

39

40

41

42


160

Loan Recovery & Remedial Assets

Country MD, Skye Bank Guinea

Head, Corporate Banking Oil & Gas/Telecomms

Group Head, International OperationsExecutive Assistant to the GMD/CEO

Group Head, North-West Group II

Group Head, Mainland BusinessTeam Lead, Agencies & Parastatals

Head, Strategic Brand Management

Chief Credit Officer

Head. Customer Experience Management / Ag. Head, Corporate Planning & StrategyHead, E-Business

Head, Digital Banking Unit/Agile Coach

Head, Revenue Collections & Franchise

Head, IT Governance & Enterprise Architecture

Loan Recovery & Remedial Assets

International Subsidiaries

Corporate Banking Group

International OperationsExecutive Office

Commercial Banking

Commercial BankingPublic Sector Group

Strategic Brand ManagementRisk Management Group

Corporate Planning & Strategy

Business

Digital Banking Group

Revenue Collections


E-

Head Office

Guinea

Head Office


Head Office


Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

Head Office

SM

SM

SM

SMSM

SM

SMSM

SM

SM

SM

SM

SM

SM

SM

Aworekun

Akinbamidele

Alu

AdesanyaFolahan

Badru

Richard-edetSoyannwo

Ezurike

Idowu

Oluyadi

Alli

Daniels

Isiaka

Phillips

Oluwatosin Luqman

Abimbola

Adetutu

AyotundeIsaac

Muntaka Ahmed

VivianAwujoola Yewande

Nduneche

Hakeem Abayomi

Bukola

Abiodun

Peter AkinolaAdekunle Tajudeen

Olusegun Bamidele

43

44

45

4647

48

4950

51

52

53

54

55

56

57

PRODUCTS &

SERVICES

161


162

DIGITAL BANKING

products

CARDS

VERVE DEBIT CARD

The Polaris Bank Verve Card is a Naira denominated card. The card is issued to customers in mass

market segment. It is linked to the cardholders current and/or saving account and allows the

cardholder spend directly from his account.

Transaction Daily Limits Charges

Withdrawals NGN 150,000 within Nigeria

Free on Polaris ATMs, First 3 withdrawals on

other ATMs are free every month, N65

charge for every other withdrawal

Point of Sale NGN 1,000,000 Within Nigeria Free

Online NGN 500,000 Within Nigeria Free

NAIRA DEBIT CARD (STANDARD AND GOLD)

The Polaris Bank Debit Card is globally accepted as a means of payment at over 24 million merchant

locations and over one million ATMs worldwide in more than 220 countries.

The card is issued to customers in all other account segments except the mass affluent. It is linked to

the cardholders current and/or saving account and allows the cardholder spend directly from his

account.

It can be used to make payments on the all channels that is ATM, POS and Online

Debit Standard Mastercard

Visa Classic NGN Debit

Visa Gold USD Debit









163

DIGITAL BANKING PRODUCTS

MASTERCARD PLATINUM NAIRA DEBIT CARD

The MasterCard Platinum debit card is a Naira denominated card, linked directly to a customers

current or savings account. The card is issued to customers in the Mass Affluent segments and

provides customers with higher spend limits among other benefits.

The product feature is benchmarked against global standards with very competitive pricing.








PREPAID CARDS

Polaris Xplorer prepaid card is a Naira denominated card that is pre-loaded with customer’s funds

and can only be used locally in Nigeria.

It is not directly linked to a customers current or savings account, but linked to an internal float

account used to hold the funds loaded on the card.

The card is issued in partnership with organizations and businesses. Hence, the card can be a co-

brand, carrying logos and trademarks of both Polaris and partnering business.

Features of the prepaid cards:• In–Store loyalty card

• Fuel card to monitor fuel expenses by an organization

• Gi� card/affinity card as rewards to customers

• Club/Membership card and access card

• Student and Staff ID cards

VISA NAIRA CREDIT CARD The Polaris Naira credit card is an internationally accepted card with a revolving credit limit. It is a

convenient means of paying for goods and services. The Polaris Naira Credit card is offered in the

following variants:

Visa Classic Naira Credit Card:for individuals whose net monthly salary is between N250,000 and N749,000

Visa Gold Naira Credit Card:for individuals whose net monthly salary is between NGN750,000 and NGN1,249,000

Visa Platinum Credit Card: for individuals whose net monthly salary is NGN1,250,000 and above

VISA CLASSIC NAIRA CREDIT CARD:

VISA GOLD NAIRA CREDIT CARD:

VISA PLATINUM CREDIT CARD

Card Scheme Visa

Validity Period 3 YearsInterest Free Period 45 days

Currency Naira

CollateralSalary domiciliation

Repayment options

10% monthly minimum

Target Market Salary earners


164


USD CREDIT CARDS

The USD Credit Card is an internationally accepted card denominated in dollars. It gives you access

to funds in USD when there is need for convenience in payments and purchases internationally. This

card is a cash back credit Card as it is pre- funded with dollars before use. The card is attached to a

USD card account. It comes in three variants:

VISA CLASSIC USD CREDIT CARD

VISA GOLD USD CREDIT CARD

VISA PLATINUM USD CREDIT CARD

Credit Cards Daily POS

LimitDaily WEB

LimitDaily ATM

LimitMinimum Balance

Card Issuance fee Annual fee

Cash Withdrawal Charges

POS and WEB charges

Visa USD Classic Card (213) $5,000 $2,500 $1,000 $20 $10 $20 2% FreeVisa USD Gold Card (212) $10,000 $5,000 $1,000 $30 $20 $20 2% Free

Visa USD Platinum Card (211) $10,000 $5,000 $1,000 $100 $40 $20 2% Free

POS

A POS (Point of Sale) terminal is a portable electronic payment device which allows acceptance of a

payment card for transactions. The POS ensures that a merchant is assured of payment for his

transaction by providing evidence of successful payment consummation.

It facilitates consummation of payments by transmitting the instructions entered by the payer and

the card information via a communication device to the switch –which then routes this to the

cardholder’s bank. Transactions authorized are similarly routed back to the POS which then

confirms payment and generates receipts.

ATM (AUTOMATED TELLER MACHINE)

An Automated Teller Machine (ATM) is a computerised telecommunications device that provides

the customers of a bank with access to financial transactions in a public space without the need for

a cashier, human clerk or bank teller.

Activities that can be performed on an ATMinclude:• Cash withdrawal• Airtime recharge • Balance Enquiry• Funds Transfer.• Bills payments


165


PolarisMobile

PolarisMobile is a secure, flexible and innovative mobile banking solution enriched with

personalized features to meet customers’ daily banking needs on the go.

Target Market: All retail customers (with smart phones)

This new Mobile App is built to be SAFER. Secure. Available. Flexible. Easy. Reliable

Features of Platform

Registration Options:. Account. Debit Card. In-BranchNote: Registration is FREE!!!

Limit Increase (up to N5m) :. Debit Card . In-Branch. Token

Account Overview:. All accounts linked

to same CIF. Hide/Show Balance (under Profile

Settings)

Send Money:. To Polaris Bank. Other Banks

(including MFBs, PMBs

etc)

Open AccountSME Enrolment

Registration Options:. Airtime Top-up. Data Top-up

Bills Payment. Utilities . Cable TV. Lotteries & Betting. Over 1,000 others

Locations:. Polaris ATMs . Polaris Branches

Receipts:. Download. MyBank Statement. Share via social

media

Block Cards

Stop Cheques

SurePadi is the Bank’s Agent Banking channel used to: expand demand for banking services;

(customer acquisition) decongest bank branches; reduce the cost to serve; and achieve financial

inclusion. It also holds a promise of a low-cost means of market penetration by banks and other

financial institutions, especially into the rural areas.


166


The bank’s USSD Platform to perform electronic transactions without internet

Existing Features

. Buy Airtime/Data

. Send Money

. PayDay Loans

. Pay Bills

. Check Balance

. Block Account

. Change/Forget PIN

. Opt in/Opt out

. Default daily limit – N20k

. Increased daily limit (up to N100k) with 2FA – Token/last 6 digits of Card PAN

. WAEC/JAMB PIN (Note: This is a seasonal service)

PolarisXperience

PolarisXperience is the online Banking solution of the Bank that enables single-view of a

customer’s entire banking world. Benefits. Convenient. Easy to use. Safe and secure. Consistent customer experience across multiple devices. Reliability. Simplicity

Service Offerings. Transfers (Inter/ Intra) & Int’l transfers through FX direct. Airtime Top–up ( Self and third party). Bills Payment. Mini Statement. Set up standing instructions for periodic transfers. Block lost/stolen cards. Stop Cheque

Agent Banking


167


PolarisPayx

This is a Web-based, online real-time Electronic Payment processing platform that facilitates intra-

bank and inter-bank payments. The solution provides an efficient and effective online real-time

platform for managing instant debit and credit transactions and suitable for staff salary payments,

contractor payments, supplier payments, standing order payments and host of bulk payments,

subscriptions and fees. This solution will enable your organization make bulk or individual

payments to beneficiaries across Nigerian Banks with instant credit.

Features and benefits

. PolarisPayx provides an efficient and effective online real-time platform for managing

payments to one or many beneficiaries.

. Accounts can be credited irrespective of bank where they are domiciled

. Real-time online reporting of transaction status

. The solution offers ease of transacting for organizations by enabling them pay

employees, suppliers and other creditors from the comfort of their offices without issuing

cheques

. It saves time, reduces the costs of administration and ensures immediate credit to

beneficiaries

. It eradicates the challenges associated with returned cheques and reduces considerably

the administrative activities and errors involved in cheque management

. Highly secured payment platform

Aggregate Payment Gateway

Offers a consolidation of all major payment gateways (Interswitch Web, Paystack Web, Flutterwave

Rave and Quickteller Instant Transfer) into one universal and simplified platform. It allows

Merchants and Developers access to all the payment gateways from the single connection API

provided.

This means web merchants are able to switch based on pricing, settlement, international

acceptance or support from the providers. APG will also be attractive to other bank’s customers

since they don’t need to have an account with the bank for the integration and it will also open up a

business opportunity to cross sell the bank’s other products to these categories of merchants.


168


College PayCollegePay is a collection, monitoring and reporting solution deployed to Schools to receive

payments from their students across various bank branches nationwide.

It is used to facilitate payments of school fees and other related payments to schools via various

channels (web, bank branch, ATM, POS) on the Interswitch network.

With CollegePay, students can make payments using cash, cheques, internal transfers, bank dra�s

at the bank branch; debit and prepaid cards on the web & ATM channels.

The Schools can log into the reporting portal and view all payments from a single source/ view

immediately they are paid irrespective of the bank or branch where the payment was made.

Polaris Open APIOpen API is a product of the Bank that provides third-party financial service providers safe access to

consumer banking, transaction, and other financial data from the banks and non-financial

institutions through the use of a standardized set of APIs. This platform allows us to provide

requisite solution to Fintechs and third party in a secure and controlled manner so that they can

innovate more, leveraging our services and we generate revenue in turn

Polaris CollectPolaris collect is an online real-time electronic collection platform that facilitates collections across

all Polaris bank branches nationwide. It is fully scalable and can be customized for your

organization. Payments made at bank Synchronizes with a central transaction reporting portal

where your organization can view reports and ascertain payments made.

The Polaris Collect platform will provide accurate information to your organization as it pertains to

what Payment was made, who paid, where it was paid, when it was paid, who received the payment

and how much was paid at every point in time. Payment information will also be available for

viewing online real-time via a web based access granted to authorize users at customer’s

organization

Features and Benefits

. Online real-time consolidated report of all payments made across all Polarisbank

branches

. The reports can be downloaded for internal reconciliation

. The solution provides an audit trail and a log of all successful transactions

. E-receipt generation

. Guarantees Complete financial control

. Highly secured collections solution


169

LIABILITY

products

POLARIS WISE ACCOUNT

This is a high yield hybrid-savings account that enables

customers enjoy higher interest rate, subject to maintenance of a

minimum balance.

Target Market. Civil servants . Businessmen . Lawyers . Medical Doctors. Other prospects in the emerging middle class segment

Benefits/Features. Minimum opening and operating balance of N10,000. Interest rate of 4.5% p.a. on accounts with average

monthly balance of N100,000 & above.. Default interest rate of 4.05% p.a. on accounts with

average monthly balances below N100,000.. Maximum of 3 withdrawals monthly; Interest forfeiture

if withdrawal exceeds three (3) times in a month. Acceptance of other bank cheques above N2million

with references; and below N2million without

references. Debit card issuance. Non-clearing Cheque book issuance. Access to e-channel platforms.

ACCOUNT OPENING DOCUMENTATION. Account opening form. Signature mandate card. 1 passport photograph. Valid means of identification (Int'l passport, Driver’s

license, National ID, Voter’s card). Utility bill (PHCN, Water bill, Waste disposal bill,

tenement, etc.). Resident permit (for expatriates). Reference forms (for cheques above N2million). Premises visitation report. Bank Verification Number (BVN) of Applicant.

POLARIS PEARL ACCOUNT

This is a gender based product designed to cater to the banking

needs of the ever yday woman with special focus on

Professionals, Entrepreneurs and Home makers. The account

can be opened as Savings or Current.

Target Market. Professional women. Women in business. Home makers

Benefits/Features

SAVINGS:. Zero opening and operating balance. Default savings interest rate of 4.05%. Maximum of 4 withdrawals monthly; Interest forfeiture

if withdrawal exceeds four (4) times in a month. Issuance of customized debit cards . Access to Polaris merchant discounts at dedicated

stores. Access to Polaris Women Online community platform. Access to loans. Access to e-channel platforms.

CURRENT:. Minimum opening balance of N5,000. Zero operating balance. Discounted CAM fee of 50k/mille. Customized Visa Signature card available on request. Access to Polaris merchant discounts at dedicated

stores. Access to Polaris Women Online community platform. Access to loans. Access to e-channel platforms. Customized cheque book available on request.


170

LIABILITY PRODUCTS

POLARIS SELECT ACCOUNT - CURRENT

This is a premium banking product designed for high net worth

customers, with monthly income of N750,000 and above.

Target Market. High Net Worth Individuals. Individuals that embark on frequent foreign trips and

vacations. Middle to upper-middle level managers and

professionals.. High ranking civil/public servants.

Benefits/Features. Minimum opening balance of N200,000.00. Zero operating balance. Zero Account Maintenance Charge on balances of

N200,000 and above. . CAM fee of N1/per mille on accounts with balances less

than N200,000.. No limit on number of monthly withdrawals.. Free Priority Pass Membership with 2 free lounge

usages at over 1,000 Airport lounges in the world.. Advisory services.. Access to Visa Signature Card (on invitation). Card issuance - Master Card Platinum Debit Card/Visa. Clearing cheque book issuance. Access to e-channel platforms.

ACCOUNT OPENING DOCUMENTATION. Account opening form. Signature mandate card. 1 passport photograph. Valid means of identification (Int'l passport, Driver’s

license, National ID, Voter’s card) Utility bill (PHCN,

Water bill, Waste disposal bill, Tenement, etc.). Resident permit (for expatriates). Reference forms. Premises visitation report. Bank Verification Number (BVN) of Applicant.

No limit on

number

of monthly

withdrawals.


171

SME

banking

POLARIS BUSINESS ADVANTAGE ACCOUNT - CURRENT

This is a current account specially designed for SMEs to provide

them banking services and solutions to nurture their business for

growth.

Target MarketSmall & Medium Enterprises.

Benefits/Features. Account opening balance of N10,000. Zero minimum operating Balance. Account Maintenance Charge of N1/mille on all debit

transactions. Free Polaris Business Sales record book. Access to business loans. Dedicated Relationship Manager. Access to Internet banking.

POLARIS BUSINESS ADVANTAGE ACCOUNT - EXCEL

This is a premium business account for SMEs with monthly

turnover limit of N500million and above.

Target MarketSMEs with monthly turnover limit of N500million and above.

Benefits/Features. Minimum opening and operating balance of N500,000. CAM fee of N1/mille when minimum operating balance

covenant is breached.. Access to business loans. Dedicated Relationship Manager. Access to Internet banking.

ACCOUNT OPENING DOCUMENTATION - SME

LIMITED LIABILITY COMPANIES

. Account opening form.

. Two suitable reference

. Board resolution to open account.

. One recent passport photographs of each signatory.

. Certified True Copy of Certificate of Incorporation/Registration of Business Name

. Certified True Copy of Memorandum and Article of

Association.. Certified True Copy of form C07/CAC7 (particulars of

Directors) and C02/CAC2 (Allotment of stares).. Residence permit issued by the immigration

Authorities (Expatriates).. Valid Means of Identification. Current paid utility bill (not more than 3 months). Premises visitation Report. Evidence of Registration with Special Control Unit on

Money Laundering (SCUML) for all Designated

Nonfinancial Businesses and Professionals (DNFBP)-

Where applicable. Tax Identification Number (TIN). Legal Search Report. BVN details required

REGISTERED BUSINESS NAMES

. Account opening application form

. One recent passport photographs of each signatory.

. Two suitable reference forms

. Certified copy of certificate of registration of Business

Name. Copy of Forms for application for Registration of

Business Name. Legal Search report. Valid Means of Identification. Current paid utility bill (not more than 3 months). Residence permit issued by the immigration

Authorities (Expatriates).. Premises visitation report. Evidence of Registration with Special Control Unit on

Money Laundering (SCUML) for all Designated

Nonfinancial Businesses and Professionals (DNFBP)-

Where applicable


172

PERSONAL

bankingLOAN PRODUCTS

PERSONAL TERM LOAN

Personal Term Loan is designed to enable salaried employees

access funds to meet urgent personal needs and conveniently

spread repayments.

Target MarketIndividuals in paid employment with organizations on the Bank’s

approved employer list, whose salaries are domiciled with

Polaris Bank.

Product Variants . Personal Term Loan Buy-Over. Personal Term Loan Top-Up. School Fees Loan. Travel Loan

Unique Selling Points. Minimum loan amount of N100,000. Flexible repayment plan. Competitive pricing. No equity contribution required.

PERSONAL TERM LOAN: BUY-OVER

Personal Term Loan Buy-Over variant is targeted at customers

whose salaries are domiciled with other Banks and who have

Personal Term Loan with these banks, but are willing to transfer

their salary account and the loan obligation to Polaris Bank.

Buy-Over requests may be processed as Plain Buy-Over or a Top-

up Buy-Over, based on customers’ request and DSR capacity.

NB: Only performing loans from other banks can be considered

under the Buy-Over option.

PERSONAL TERM LOAN: TOP-UP

Personal Term Loan Top-Up variant is targeted at existing

Personal Term Loan obligors with Polaris Bank, who have good

credit history on current loan repayment obligations, and have

room to increase their existing exposure within the applicable

DSR.

NB: . Existing loan being proposed for top-up should have

run for a minimum of 6 months’ post disbursement. . The existing loan must be liquidated with proceeds

from disbursement of the new loan, while the

customer is credited with the balance.. Customers requesting for Top-up must have good

credit history on past and current loan repayment

obligations.. Where loan being proposed for top-up has run for more

than one year, letter of introduction/undertaking must

be revalidated i.e. represented as part of required

documentation.

POLARIS SALARY ADVANCE

Polaris Salary Advance is designed to enable salaried employees

get up to 50% of their net monthly salary to meet basic needs,

before their next payday. The product is accessible via

convenient digital channels such as USSD and mobile. Target MarketIndividuals in paid employment whose salaries are domiciled

with Polaris Bank. Unique Selling Points . Smart and Convenient Banking. Attractive pricing. Maximum obligor limit of N500,000. Access up to 50% of salary amount. 30 days tenor or next salary date.

AUTO LOAN

The product is designed to part-finance the acquisition of brand

new vehicles for personal use.

Target Market. Individuals in paid employment with organizations on

the Bank’s approved employer list, whose salaries are

domiciled with Polaris Bank.. Self-employed customers with verifiable source of

income. Unique Selling Points. Maximum limit of N40million for salaried employees

and N20million for self-employed customers.. Minimum equity contribution of 10% for salaried

employees (Tier 1) and 20% for salaried employees

(Tier 2 & 3) and self employed.. Maximum tenure of 48 months.. Flexible repayment plan.

ASSET FINANCE

This product is designed to enable salaried employees acquire

household assets from pre-qualified merchants of the Bank, and

enjoy flexible/convenient repayments. Target Market. Individuals in paid employment with organizations on


domiciled with Polaris Bank.

. Individuals in paid employment with organizations on


not domiciled with Polaris Bank, but whose employers

are willing to deduct repayments at source from salary

throughout the loan tenor. Unique Selling Points. Minimum loan amount of N50,000. Maximum obligor limit of N1,000,000. Maximum tenor of up to 12 months. Flexible repayment plan. Reduced interest rate.. Variety of assets to choose from.

MORTGAGE LOAN

The Personal Home Loan product is designed to fund the outright

acquisition of already built residential properties for individuals.

Target Market. Individuals in paid employment with organizations on


domiciled with Polaris Bank.. Self-employed customers with verifiable source of

income.

Unique Selling Points. Maximum obligor limit of up to N100million, subject to

DSR & property location.. Maximum tenor of 180months [15years]. DSR: 33.3% for Income bands of N0 - N500,000; 40% for

Income bands of N501,000 - N1,999,000 and 50% for

Income bands of N2million and above.. Equity contribution: 20% for salaried employees and

30% for Self Employed.. Joint Mortgage option available . Competitive pricing . Flexible repayment plan

SME BANKING LOAN PRODUCTS

MARKET LOAN

The market loan is a short term overdra� facility with a maximum

limit of N5million and tenor of up to 180days (with a 30days clean

up cycle) targeted at traders who deal in fast moving consumer

goods (FMCG)

Target MarketTraders who deal in fast moving consumer goods

Summary of key features & benefits. Loan type –Overdra�. Tenor - up to 180 days (with 30 days clean up cycle). Loan amount - maximum of 5million naira. Competitive Interest rate . Flexible collateral requirements to suit your business. Onboarding on Polaris Bank digital platforms. Access to capacity building programs powered by

Polaris Bank. Dedicated Relationship manager. Financial Advisory

HEALTH LOAN

The Polaris Health Sector Loan is an asset product targeted at

Private Hospitals, Pharmacies, Medical Laboratories and

Diagnostic Centres to support funding needs of SME’s in the

health sector.

Target Market. Private hospitals, Pharmacies , Medical laboratories

and diagnostic centres etc

Summary of key features & benefits. Maximum obligor limit of up to N100million, subject to

DSR & property location.. Maximum amount of N50million depending on the

loan purpose.. Tenor of 180 days for overdra� facility, 24 months for

Term Loan and up to 48 months depending on the cost

of asset/equipment financed.


173


174

. Competitive Interest rate

. Flexible collateral requirements to suit your business.

. Free onboarding on Polaris Bank digital platforms.

. Access to capacity building programs powered by

Polaris Bank

Target Market. Private hospitals, Pharmacies , Medical laboratories

and diagnostic centres etc

Summary of key features & benefits. Maximum obligor limit of up to N100million, subject to

DSR & property location.. Maximum amount of N50million depending on the

loan purpose.. Tenor of 180 days for overdra� facility, 24 months for

Term Loan and up to 48 months depending on the cost

of asset/equipment financed.. Competitive Interest rate. Flexible collateral requirements to suit your business.. Free onboarding on Polaris Bank digital platforms.. Access to capacity building programs powered by

Polaris Bank

EDUCATION LOAN

Polaris Education Loan is a product designed to cater to the

financial needs of Educational Institution. Beneficiaries of this

offering include private Primary, Secondary and Tertiary

institutions. It is available to both new to bank and existing

customers Target Market. Private Nursery, Primary, Secondary and Tertiary

institutions

Summary of key features & benefits. Maximum amount of N100million.. Tenor of 90days for overdra� facility, 12 months for

Term Loan and 36months for asset financing.. Competitive Interest rate Management fee of 1% flat on

the facility amount payable upfront.. Swi� turn-around time in loan processing. Access to facilities with minimal collateral.. Ability to purchase assets which will serve as collateral

for the loan.. Access to other value offerings which include, salary

loans to your staff members, deployment of digital

payment solutions etc.

CORPORATE

DIRECTORY

175


176

CORPORATE

directory

S/N Name Of Institution Address

1 CITIBANK,NEW YORK 399,PARK AVENUE,NEW YORK NY 10043,USA

2 FIRST BANK UK 28 FINSBURY CIRCUS LONDON EC2M 7DT

3 STANDARD CHARTERED BANK

LONDON I, ALDEMANBURY SQUARE , LONDON,EC2V 7SB

4 BANQUE LIBANO FRANCAIS 5,RUE DE ROME,BEIRUT LIBERTY PLAZA,

LEBANON HAMRA-BP:11-0808 BEYROUTH,LIBAN

5 BYBLOS BANK LONDON BYBLOS TOWER,ELIAS SARKIS AVENUE

ASHRAFIEH, BEIRUT, LEBANON

6 FIRST RAND BANK SOUTH AFRICA 1 MERCHANT PLACE CNR , FREDMAN DRAND

RIVONA ROAD, SANDTON,2196

7 BHF BANK GERMANY AKTIENGESELLSCHAFT BOCKENHEIMER

LANDSTRASSE 10 60323 FRANKFURT GERMANY

8 BANK OF BEIRUT 17 A CURZON STREET LONDON W1J 5HS

UNITED KINGDOM

9 UNITED BANK FOR AFRICA, I, ROCKEFELLER PLAZA 8TH FLOOR, NEW YORK,

NEW YORK NY 10020

10 ZENITH BANK UK 39 CORNHILL LONDON EC3V 3ND,UK

11 ACCESS BANK UK 1 CORNHILL LONDON EC3V 3ND,UK

CORRESPONDENT BANKING RELATIONSHIPS


177

S/N Head Office Locations Address

1 Akin Adesola Head Office 3 Akin Adesola Street, Victoria Island , Lagos

2 Churchgate Street PC 28, Churchgate Street, Victoria Island, Lagos

3 Adeola Hopewell 708/709, Adeola Hopewell Street, Victoria Island, Lagos

HEAD OFFICE AND REGIONAL OFFICES

CORPORATE DIRECTORY


178

BRANCH NETWORK

S/N STATE BRANCH NAME ADDRESS

1 ABIA EZIUKWU 3 / 4 EZIUKWE ROAD, ABA

2 ABIA JUBILEE RD ABA 82,JUBILEE ROAD. ABA

3 ABIA UMUAHIA OWERRI ROAD BY OBOWO STREET, OPPOSITE SHOPRITE

4 ABIA UMUAHIA BRANCH* 3,LIBRARY AVENUE UMUAHIA

5 ABIA ARIARIA ABA BRANCH* 246,FAULKS ROAD. ABA

6 ABIA ST. MICHAEL BRANCH 10,ST MICHAEL ROAD ABA

7 ADAMAWA JIMETA BRANCH YOLA No 20, YOLA ROAD, OPPOSITE FCE, JIMETA

8 ADAMAWA MUBI BRANCH NO. 1,AHMADU BELLO WAY, ADJACENT EMIR OF MUBI HOUSE.

LOKUWA, MUBI NORTH LOCAL GOVERNMENT AREA

9 ADAMAWA YOLA 27, GALADIMA AMINU WAY JIMETA

10 AKWA IBOM PRINCE UTUKS 5B PRINCE UTUKS STREET OFF ABAK ROAD

11 AKWA IBOM UYO 2 56, NWANIBA STREET UYO

12 AKWA IBOM UYO BRANCH 2,IKOT-EKPENE ROAD. UYO

13 AKWA IBOM EKET BRANCH* 8A,GRACEBILL ROAD EKET

14 ANAMBRA AWKA 258 ZIK AVENUE ROAD

15 ANAMBRA BRIDGE HEAD MKT C. ONITSHA 50/51 UGA ROAD ONITSHA

16 ANAMBRA BRIDGEHEAD 42 PORT HARCOURT STREET,FEGGE

17 ANAMBRA NEW MARKET ROAD 13 NEW MARKET ROAD ONITSHA

18 ANAMBRA NKPOR BRANCH 4,NWOSA LANE,NKPOR-JUNCTION NKPOR

19 ANAMBRA NNEWI 13 EDO EZEMEWI STREET

20 ANAMBRA OBOSI 3 onyekwere zone ugwuagba obosi

21 ANAMBRA OKEKE STREET BRANCH 55M,OKEKE STREET AWKA

21 ANAMBRA ONITSHA BRIGHT STR 5, BRIGHT STREET. ONITSHA

23 ANAMBRA ONITSHA HEAD BRIDGE B/1,NIGER BRIDGE, INDUS -LAYOUT. ONITSHA

24 BAUCHI BAUCHI NO. 21, AHMED ABDULKADIR ROAD, BAUCHI

25 BAUCHI YAKUBU ROAD 5,YAKUBU ROAD. BAUCHI

26 BAYELSA YENAGOA 196 MBIAMA/YENAGOA

27 BENUE GBOKO BRANCH BCC FACTORY YANDEV GBOKO

28 BENUE MAKURDI* 34,IYORCHIA AYU ROAD. MAKURDI

29 BENUE MAKURDI 88 OTUKPO ROAD OPPOSITE JOSEPH S.T. TARKA HALL

30 BORNO BIU NO. 2, DAMATURU ROAD, BIU TOWN

31 BORNO MAIDUGURI NO. 1, KIRIKASA ROAD BESIDE CBN OFFICE, MAIDUGURI

32 BORNO MAIDUGURI BRANCH 1, KIRIKASSAMA ROAD. MAIDUGURI

33 CROSS RIVERS CALABAR 41, MURTALA MUHAMMED WAY

34 CROSS RIVERS NELSON MANDELA BRANCH 4,NELSON MANDELA ROAD. CALABAR

35 DELTA AGBOR BRANCH 114,OLD BENIN-AGBOR ROAD AGBOR

36 DELTA ALADJA BRANCH DELTA STATE STEEL COMPANY,POB 472 WARRI

37 DELTA ASABA 228, NNEBISI ROAD

38 DELTA ASABA MAIN BRANCH 3 EZENEI ANENUE ASABA

39 DELTA EFFURUN BRANCH 33, OLD SAPELE ROAD WARRI. EFFURUN

40 DELTA OBIARUKU BRANCH 123,OLD SAPELE AGBOR ROAD. OBIARUKU

41 DELTA WARRI 88 A EFFURUN/SAPELE ROAD

42 EBONYI ABAKALIKI PLOT 254 AFIKPO ROAD ABAKALIKI

43 EDO AGENEBODE BRANCH NEW AUCHI ROAD AGENEBODE

44 EDO AKPAKPAVA 100, AKOKPAVA RD. P.O. BOX 356, BENIN CITY

45 EDO BENIN MAIN BRANCH 2,KINGS SQUARE. BENIN CITY

46 EDO EKENWAN BRANCH BENIN 130,EKENWA RD,BY AGHO JUNCTION BENIN

47 EDO FORESTRY 1, Forestry Road, by Ring Road, Benin City,

48 EDO IKPOBA SLOPE BENIN 124,AKPAKPAVA ROAD. BENIN CITY

49 EDO SAPELE 143, SAPELE ROAD

50 EDO UGBOWO 218, UGBOWO LAGOS ROAD

51 EKITI ADO EKITI ORERE OWU STREET P.M.B. 5320 ADO EKITI

52 ENUGU ENUGU MAIN BRANCH 36,OKPARA AVENUE. ENUGU

53 ENUGU OGUI RD ENUGU 96 OGUI ROAD

54 ENUGU OKPARA AVENUE PLOT 3D OKPARA AVENUE

55 ENUGU 9TH MILE BRANCH* 47A,OLD ONITSHA ROAD,9THMILE

56 FCT ABUJA MAIN BRANCH 3, KAURA NAMODA CLOSEAREA 3 GARKI

57 FCT AMINU KANO PLOT 1145 AMINU KANO CRESCENT WUSE II, GARKI

58 FCT ASOKORO PLOT 71 YAKUBU GOWON CRESCENT ASOKORO

59 FCT BWARI ALONG NIGERIA LAW SCHOOL, BWARI

60 FCT CBD2 (Millenium Builder Plaza) 251, Herbert Macaulay Way,

Opposite NNPC Towers Central Business District

61 FCT GARKI PLOT 557 GIMBIYA STREET OFF A/BELLO WAY

62 FCT GRAND SQUARE PLOT 270 GRAND SQUARE BUILDING

63 FCT GWAGWALADA GWAGWALADA CENTRAL AREA DISTRICT FCT GWAGWALADA

64 FCT GWARINPA 3RD AVENUE, GWARIMPA

65 FCT KUBWA 137 GADO NASCO ROAD KUBWA

66 FCT LIFE CAMP No 1, STK Ukaga Road, off Obafemi Awolowo Way, Mbora District, LifeCamp

67 FCT LUGBE PLOT 255/15 FEDERAL HOUSING ESTATE

68 FCT MAITAMA 31, Aguiyi Ironsi Street, Maitama

69 FCT MARARABA NO 27 JOS-KEFFI ROAD

70 FCT MPAPE BRANCH PLOT NO .MF/33 MPAPE LAYOUT

71 FCT NASS National Assembly Complex, Three Arms Zone

72 FCT SHERATON HOTEL BRANCH SHOP NO 10 WITHIN SHERATON HOTEL, NO 1 LADI KWALI RD WUSE ZONE4

73 FCT WUSE PLOT 1949 DALABA ST.,WUSE ZONE 5

74 FCT KARU* KARU/JIKOYI ROAD. OPPOSITE CBN ESTATE, KARU

75 GOMBE GOMBE NO 4, NEW MARKET ROAD

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179

76 GOMBE GOMBE BRANCH PLOT 42, GWANI ROAD

77 IMO MGBIDI BRANCH 65,OWERRI/ONITSHA ROAD. MGBIDI

78 IMO OWERRI 107A DOUGLAS ROAD

79 IMO WHETHERAL ROAD BRANCH 23, WHETHERAL ROAD OWERRI

80 IMO OWERRI TETLOW 178,TETLOW ROAD OWERRI

81 IMO UMUELEMAI BRANCH OLD OKIGWE-UMUAHIA ROAD UMUELEMAI, MBANO

82 IMO URUALLA BRANCH AKWA-ORLU ROAD, URUALLA,IDEATO NORTH LGA

83 JIGAWA DUTSE No 8/9 SANI ABACHA WAY, OPPOSITE PENSION HOUSE, DUTSE

84 JIGAWA GUMEL BRANCH 2 KANO ROAD, OPP. GUMEL POST OFFICE,GUMEL

85 JIGAWA HADEJIA No. 92 MALLAM MADORI ROAD, HADEJIA

86 JIGAWA KAZAURE BRANCH* KANTIN-DAURA ROAD, KAZAURE

87 KADUNA AHMADU BELLO WAY 15/17 AHMADU BELLO WAY

88 KADUNA KACHIA 3 KACHIA ROAD

89 KADUNA KADUNA BYEPASS BRANCH 512A NNAMDI AZIKIWE WAY BY KAGORO CLOSE, KADUNA BYEPASS, TUNDUN WADA

90 KADUNA KADUNA MAIN BRANCH PLOT 1472, MOGADISHU LAYOUT

91 KADUNA KADUNA RACE COURSE 4/6 RACE COURSE MURTALA MOHAMMED WAY

92 KADUNA ZARIA 28 PARK ROAD, ZARIA

93 KANO BAYERO UNIVERSITY KANO BAYERO UNIVERSITY,OLD CAMPUS

94 KANO BELLO RD, KANO 4E,BELLO ROAD

95 KANO DAWANAU MARKET KANO ALONG KANO-KATSINA EXPRESS WAY, DAWANUA MARKET, DAWANAU

96 KANO FRANCE ROAD 8 France Road, Sabon Gari

97 KANO GEZAWA BRANCH NO 9, GUMEL ROAD,GEZAWA TOWN. GEZAWA

98 KANO IBRAHIM TAIWO ROAD 70 IBRAHIM TAIWO RD

99 KANO KANO LAGOS STR BRANCH 9B, LAGOS STREET

100 KANO KURA BRANCH KANO 32KM ALONG KADUNA -KANO EXPRESS WAY ZARIA ROAD ,KURA TOWN

101 KANO MM WAY KANO 1 MURITALA MOHAMMED WAY OPPOSITE KANO CLUB

102 KANO KATSINA RD BRANCH 17, KATSINA ROAD

103 KATSINA KATSINA PLOT B4, IBB WAY

104 KATSINA KATSINA BRANCH 201, IBB WAY

105 KATSINA MALUMFASHI BRANCH FUNTUA/YASHE ROAD,BESIDE ABA NIGERIA LTD, MALUMFASHI

106 KEBBI BIRNIN KEBBI 1 UMARU GWANDU ROAD

107 KEBBI EMIR HARUNA ROAD BRANCH 43, EMIR HARUNA ROAD. BIRNIN KEBBI

108 KOGI AYANGBA BRANCH KM 1, ANKPA ROAD AYANGBA

109 KOGI LOKOJA NO. 433 IBB WAY,OLD LOKOJA-OKENE ROAD, BEFORE SPECIALIST HOSPITAL LOKOJA

110 KOGI ANKPA BRANCH* NO1,LOCAL GOVT SECRETARIAT ROAD ANKPA

111 KOGI IDAH BRANCH* NO.24 AYEGBA OMA-IDOKO ROAD IDAH

112 KWARA ILORIN 20, COMMERCIAL LAYOUT ILORIN

113 KWARA ILORIN MAIN BRANCH 4, MURTALA MOHAMMED ROAD. ILORIN

114 KWARA UNIILORIN UNIVERSITY OF ILORIN MAIN SITE,ILORIN

115 KWARA JEBBA BRANCH N0 1 JEBBA PAPER MILL ROAD JEBBA

116 LAGOS 1ST AVENUE House 1, 200 ROAD, FIRST AVENUE, FESTAC TOWN

117 LAGOS ADEMOLA ADETOKUNBO 50, ADETOKUNBO ADEMOLA STREET, VICTORIA ISLAND

118 LAGOS ADENIRAN OGUNSANYA 81, ADENIRAN OGUNSANYA STREET,

119 LAGOS ADEOLA HOPEWELL 708/709 ADEOLA HOPEWELL STREET

120 LAGOS ADEOLA ODEKU PLOT 232B ADEOLA ODEKU STREET, VICTORIA ISLAND

121 LAGOS ADMIRALTY WAY BRANCH BLOCK A10,PLOT 5, ADMIRALTY LEKKI PHASE 1 LEKKI

122 LAGOS AGO PALACE WAY BRANCH 64 AGO PALACE WAY

123 LAGOS AJOSE ADEOGUN 287 AJOSE ADEOGUN STREET, VICTORIA ISLAND

124 LAGOS AKIN ADESOLA BRANCH 3 AKIN ADESOLA STREET. VICTORIA ISLAND

125 LAGOS AKOWONJO 35 SHASHA ROAD BY AKOWONJO ROUNDABOUTAKOWONJO

128 LAGOS ALFRED REWANE BRANCH 5,ALFRED REWANE ROAD IKOYI

129 LAGOS ALLEN 89, ALLEN AVENUE, ALADE BUS STOP, IKEJA

130 LAGOS APAPA ROAD 125A, APAPA ROAD, EBUTE METTA

131 LAGOS ASPAMDA Hall 2, Olusegun Obasanjo Plaza, Aspamda Market, TRADE FAIR COMPLEX,BADAGRY EXP. WAY, OJO

132 LAGOS AWOLOWO ROAD 81 AWOLOWO ROAD OPPOSITE DOCULAND, ETIOSA LGA IKOYI

133 LAGOS BADAGRY SEME-BORDER EXPRESS ROAD,BADAGRY ROUNDABOUT AREA BADAGRY LAGOS

134 LAGOS BBA ATIKU HALL COMPLEX, BALOGUN BUSINESS ASSOCIATION, BESIDE ANAMBRA PLAZA, INTERNATIONAL TRADE

FAIR COMPLEX, BADAGRY EXPRESSWAY

135 LAGOS BROAD STR BRANCH 51/55 BROAD STREET

136 LAGOS CITYHALL 207 IGBOSERE ROAD, LAGOS ISLAND (LAGOS HIGHCOURT)

137 LAGOS COMPUTER VILLAGE 4 OREMEJI STREET OFF SIMBIAT ABIOLA ROAD

138 LAGOS CREEK ROAD 34, CREEK ROAD,

139 LAGOS DOPEMU 120 LAGOS ABEOKUTA EXP WAY ADE- ADU BUS STOP AGEGE

140 LAGOS EGBE 105, EGBE ROAD , ORI OKE BUSTOP, EJIGBO

141 LAGOS EPE 12, AYETORO ROAD, EPE

142 LAGOS FATAI ATERE 11/12 FATAI ATERE WAY MUSHIN MUSHIN

143 LAGOS IDOLUWO 15, IDOLUWO STREET

144 LAGOS IGANMU BRANCH PLOT 14,JIMOH ODUTOLA STREET OFF ERIC MOORE IGANMU

145 LAGOS IJU 118 IJU ROAD FAGBA

146 LAGOS IKEJA ADENIYI JONES IKEJA PLAZA, 81, MOBOLAJI BANK ANTHONY WAY

147 LAGOS IKEJA ISAAC JOHN 47, ISAAC JOHN STREET,GRA IKEJA

148 LAGOS IKEJA PLAZA IKEJA PLAZA, 81, MOBOLAJI BANK ANTHONY WAY

149 LAGOS IKORODU MAIN 21 AYANGBURIN ROAD, IKORODU GARAGE ROUND ABOUT,IKORODU

150 LAGOS IKORODU SEC. IKORODU LOCAL GOVT. SECRETARIAT, OPPOSITE GENERAL HOSPITAL, IKORODU

151 LAGOS IKOTA SHOPPING COMPLEX ROAD 5,IKOTAT S/COMPLEX KM22 EPE EXP WAY

152 LAGOS IKOTUN 16, IDIMU-IKOTUN ROAD, COLLEGE BUS STOP, IKOTUN

153 LAGOS ILUPEJU BRANCH 6, INDUSTRIAL AVENUE ILUPEJU

154 LAGOS INTL AIRPORT 60 INTERNATIONAL AIRPORT ROAD MAFOLUKU JUNCTION

155 LAGOS ISHERI-OJODU 783,SOMIDE ODUJINRIN AVENUE,OMOLE PHASE 2,OFF ISHERI OLOWORA ROAD,OJODU BERGER

CORPORATE DIRECTORY


180

156 LAGOS ISOLO 27 MUSHIN RD. ISOLO

157 LAGOS KETU 520 IKORODU ROAD P.O. BOX 3480 KETU

158 LAGOS KOFO ABAYOMI 78/84,KOFO ABAYOMI AVENUE. APAPA

159 LAGOS KUDIRAT ABIOLA WAY PLOT 32 KUDIRAT ABIOLA ROAD,OREGUN

160 LAGOS LUTH LAGOS UNIVERSITY TEACHING HOSPITAL, IDI ARABA

161 LAGOS MAGODO 14 CMD ROAD MAGODO

162 LAGOS MARINA 30 MARINA , LAGOS ISLAND

163 LAGOS MATORI 2/4 JIMADE CLOSE,OFF LADIPO STREET

164 LAGOS MONTGOMERY 2, MONTGOMERY ROAD, YABA

165 LAGOS NAHCO BLK.2,WING A,M/M INTERNATIONAL AIRPORT

166 LAGOS OGBA 37/38 OGBA-ISHERI ROAD, OGBA IKEJA

167 LAGOS OGUDU 161, OGUDU ROAD, OGUDU OJOTA

168 LAGOS OJUELEGBA BRANCH 68,OJUELEGBA ROAD. SURULERE

169 LAGOS OKE-ARIN 60, KOSOKO STREET, OKE-ARIN, LAGOS ISLAND

170 LAGOS OPEBI 46 OPEBI ROAD, SALVATION BUS STOP IKEJA

171 LAGOS OSAPA LONDON 14 LEKKI EPE EXPRESSWAY, OSAPA LONDON

172 LAGOS OSOLO WAY 26 OSOLO WAY AJAO ESTATE

173 LAGOS SANGO OTA KM 37, LAGOS/ABEOKUTA EXPRESS RD. TEMIDIRE BUSTOP SANGO OTTA

174 LAGOS SHOMOLU 6 BAJULAIYE ROAD BESIDE MR BIGGS SHOMOLU

175 LAGOS POLARIS HOUSE PLOT 5, COMMERCIAL SCHEME, OPPOSITE IKEJA CITY MALL, CBD ALAUSA IKEJA

176 LAGOS ST. GREGORY ROAD/GLOVER ROAD 22 ST.GREGORY ROAD,OFF AWOLOWO ROAD, IKOYI (CLOSE TO ST GREGORY COLLEGE OBALENDE)

177 LAGOS TOYIN STREET 13 TOYIN STREET, IKEJA

178 LAGOS VICTORIA ISLAND BRANCH PC 28, CHURCHGATE STREET VICTORIA ISLAND

179 LAGOS WAREHOUSE RD 48 WAREHOUSE ROAD APAPA

180 LAGOS WHARF RD 28, WHARF ROAD, APAPA

181 LAGOS ALABA BRANCH* PLOT 1A, BLOCK C LSDPC INDUSTRIAL ESTATE, AMUWO ODOFIN

182 LAGOS FESTAC BRANCH* 2ND AVENUE ROAD,HOUSE NO-12 FESTAC

183 LAGOS IKOYI BRANCH* 27,KEFFI STREET S/W IKOYI

184 LAGOS ISA-WILLIAMS BRANCH* 182/184 BROAD STREET, LAGOS ISLAND

185 NASARAWA LAFIA NO 10 JOS ROAD, OPPOSITE STATE CID OFFICE BESIDE TA'AL CONFERENCE HOTEL LAFIA

186 NIGER BIDA BRANCH 1,ZUNGERU ROAD. BIDA

187 NIGER EBITU UKIWE BRANCH 1A , OLD AIRPORT ROAD MINNA

188 NIGER MINNA 151, BOSSO ROAD, MINNA

189 NIGER SULEJA MAIN BRANCH 1, NEW MARKET ROAD. SULEJA

190 OGUN IJEBU IGBO NO. 70 ADEBOYE ROAD, OKE SOPEN, IJEBU IGBO

191 OGUN IJEBU ODE 81, ABEOKUTA RD. P.M.B.2062 IJEBU ODE

192 OGUN ILARO 52 PMB,ONA OLA QUARTERS ,JUBILEE FLAT BUS STOP YEWA SOUTH LOCAL GOVERNMENT ,ILARO

193 OGUN OBA LIPEDE OBA LIPEDE ULTRA MODERN MARKET, KUTO ABEOKUTA

194 OGUN OKE ILEWO 65B, LALUBU STREET OKE-IKEWO, ABEOKUTA

195 OGUN SAGAMU NO 169, AKARIGBO ROAD, SABO AREA, SAGAMU

196 OGUN SAPON 15, SOKENU ROAD OKE IJEUN P.M.B. 3036 ABEOKUTA

197 OGUN OTTA* KM2, ABEOKUTA EXPRESS WAY OTTA

198 ONDO AKUNGBA P.M.B. 02 IKARE RD. AKUNGBA AKOKO

199 ONDO OBA ADESIDA 92, OBA ADESIDA ROAD, AKURE

200 ONDO IDANRE JIGBOKE QUARTER P.M.B. 502 IDANRE

201 ONDO IKARE JUBILLE ROAD P.M.B. 255 IKARE

202 ONDO ILE-OLUJI TEMIDIRE STREET P.M.B. 711 ILE OLUJI

203 ONDO OKITIPUPA IKOYA/OKITIPUPA ROAD, OKITIPUPA

204 ONDO YABA ONDO 23A YABA ROAD P.M.B. 544

205 ONDO OWO 19, OKE OGUN STREET P.M.B. 1016

206 ONDO OYEMEKUN NO 49 ADEGBOLA JUNCTION, OYEMEKUN ROAD

207 OSUN ALEKUWODO 30 ALEKUWODO ROAD OKEFIA

208 OSUN BOWEN UNIVERSITY BOWEN UNIVERSITY, CAMPUS,

209 OSUN ESA-OKE BRANCH IJEBU-IJESHA ROAD, MARKET SQUARE, ESA -OKE

210 OSUN FAGBEWESA 56, FAGBEWESA ST. OSOGBO

211 OSUN ILA-ORANGUN OKE EJIBO BEFORE ADEKUNKE JUNCTION ILA ORANGUN

212 OSUN ILESA 343, AKURE RD. OKESHA, ILESA

213 OSUN OAU OAU P.M.B.17 OAU, ILE IFE

214 OSUN OBA ADEREMI ROAD 2 OBA ADEREMI ROAD ILE IFE

215 OSUN OSOGBO BRANCH OPPOSITE FAKUNLE COMPREHENSIVE HIGH SCHOOL ,OLAIYA BUSTOP,OSOGBO

216 OSUN EDE TIMI OJA TIMI EDE,BESIDE OBA TIMI PALACE ,EDE

217 OSUN OAU TEACHING HOSPITAL* OAU TEACHING HOSP,COMPLEX ILE-IFE

218 OYO AGBOWO TRANS AMUSEMENT PARK, UI EXPRESS, BODIJA, IBADAN

219 OYO AGODI OPP STATE SECRETARIAT AGODI, CUSTOM BUS STOP, AGODI, IBADAN

220 OYO CHALLENGE ORITA CHALLENGE OPPOSITE ORITA POLICE STATION ALONG NEW-GARRAGE ROAD IBADAN

221 OYO ERUWA HOSPITAL RD STREET, ERUWA

222 OYO IBADAN MAIN BRANCH 3, BANK ROAD, CENTRAL BUSINESS DISTRICT STREET, DUGBE IBADAN

223 OYO IWO ROAD IBADAN OPP YIDI PRAYING GROUND,CIVIC CENTRE BUS STOP GATE, IBADAN

224 OYO ABAYOMI IWO ROAD E9/857B, IWO ROAD AGODI. IBADAN, BA IBRAHIM WAY, DAMATURU.

225 OYO LEBANON 17 LEBANON STREET,OLD GBAGI MARKET

226 OYO MONATAN ADEX BUS-STOP,OPP TOTAL FILLING STATION ,MONATAN .IBADAN

227 OYO OBA ADEBIMPE BESIDE CBN, OPP COCOA MALL BUS STOP,OBA ADEBIMPE RD. IBADAN

228 OYO OGBOMOSHO OJU-ODO APAKE STREET, OGBOMOSHO

229 OYO RING RD IBADAN BESIDE LISTER BUILDING, HIGH COURT BUS STOP, RING ROAD,IBADAN

230 OYO SAKI OPP. SHAKI WEST LG. AJEGUNLE STREET, SHAKI

231 OYO UNIVERSITY OF IBADAN ORITA UI BESIDE UNIVERSITY OF IBADAN FIRST GATE, IBADAN

232 OYO LISTER OPP ADEOYO ROUNDABOUT, BAYSE ONE BUS STOP,RING ROAD IBADAN

233 PLATEAU JOS NO 2 GBADAMOSI CLOSE, OFF MURITALA MOHD WAY, BRITISH AMERICAN JUNCTION, JOS

234 PLATEAU KURU NO 2 NIPSS PLAZA PLATEAU WAY, NIPSS KURU JOS SOUTH

235 PLATEAU M/M WAY JOS BRANCH 23,MURTALA MOHAAMED WAY. JOS

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181

236 RIVERS AGIP AGIP JUNCTION/IKWERRE ROAD

237 RIVERS GARRISON 2,CHOBA ST., 89 ABA ROAD,GARRISON JUNCTION

238 RIVERS IGWURUTA BRANCH 100 AIRPORT ROAD IGWURUTA ROUND ABOUT PORT HARCOURT IKWERRE LGA

239 RIVERS IKWERRE 67, IKWERRE ROAD, MILE 1, DIOBU,

240 RIVERS NCHIA ELEME BRANCH 2,REFINERY ROAD, NCHIA ELEME NCHIA

241 RIVERS OKPORO 119 OKPORO ROAD

242 RIVERS OLU OBASANJO 143 OLU OBASANJO WAY

243 RIVERS ONNE POLARIS BANK LTD NPA-FLT TERMINAL ROAD ONE, ONNE ROUND ABOUT ELEME LGA

244 RIVERS PORT HARCOURT MAIN 26, ABA ROAD. PORT HARCOURT

245 RIVERS RSS BLOCK C, RIVERS SECRETARIAT

246 RIVERS RUMUOLA BRANCH 204, ABA ROAD PORT HARCOURT

247 RIVERS STATION RD BRANCH 1,STATION ROAD PORT HARCOURT

248 RIVERS TRANS AMADI PLOT 270, TRANS AMADI INDUSTRIAL LAYOUT,

249 RIVERS TRANS-AMADI 112,TRAN-AMADI INDUSTRIAL LAYOUT PORT HARCOURT

250 SOKOTO SANI ABACHA WAY SOKOTO 16 SANI ABACHA WAY FORMERLY KANO ROAD

251 SOKOTO SOKOTO MAIN BRANCH 3,MAIDUGURI ROAD. SOKOTO

252 SOKOTO UDUS BRANCH SOKOTO* USMAN DANFODIYO UNIVERSITY, WAMMAKO LOCAL GOVERNMENT AREA

253 TARABA JALINGO HAMMARUWA WAY, OPP. OCEANIC & UNION BANK

254 YOBE DAMATURU PLOT 582A NJIWAJI LAYOUT, BUKAR AB

255 ZAMFARA GUSAU 58, CANTEEN AREA, GUSAU

256 ZAMFARA GUSAU BRANCH 10,CANTEEN ROAD. GUSAU

*THE ASTERISKED BRANCHES WHICH WERE OPEN AS AT DECEMBER 21, 2019, HAVE SUBSEQUENTLY BEEN CLOSED.

CORPORATE DIRECTORY


182

CASH CENTRES

S/N STATE CASH CENTER ADDRESS

1 ABIA ABIA POLY CASH CENTRE ABIA POLYTECHNIC WITHIN THE SCHOOL PREMISES

2 ABIA CEMETRY CASH CENTRE 12 DURU STREET CEMETRY MARKET ABA

3 ABIA ELECTRICAL CASH CENTER ELECTRICAL MARKET OBOSI, ALONG ONITSHA-OWERRI RD EXPRESS WAY

4 ABIA JOHNSON STREET NO 9 JOHNSON STREET, GBO PLAZA, INSIDE MAIN MARKET, ONITSHA MAIN MARKET

5 ADA MAWA MODIBO ADAMA CASH CENTRE NO 70 MODIBO ADAMA WAY YOLA TOWN

6 ADAMAWA MONDAY MARKET CASH CENTRE AHMADU BELLO WAY, MONDAY MARKET MAIDUGURI

7 AKWA IBOM UNI UYO CASH CENTRE UNIVERSITY OG UYO ANNEX, IKPE ROAD, UYO

8 AKWA IBOM IKOT EKPENE CASH CENTRE IKOT EKPENE POST OFFICE BUILDING OLD STADIUM ROAD

9 BORNU UNI MAIDUGURI UNIVERSITY OF MAIDUGURI, PMB 1069, BAMA ROAD

10 DELTA NOVENA CASH CENTER NOVENA UNIVERSITY, AMAI

11 EBONYI FMC ABAKALIKI/ FETHA FEDERAL MEDICAL CENTRE - I, OFF EBONYI STATE GOVT HOUSE ROUND ABOUT, ABAKALIKI

12 EDO UPPER SAKPONBA CASH CENTRE 64, UPPER SAKPONBA ROAD, BENIN-CITY

13 ENUGU ENUGU NORTH ENUGU NORTH CASH CENTER

14 JIGAWA FMC CASH CENTRE BIRNIN KUDU FEDERAL MEDICAL CENTRE, BIRNIN KUDU

15 KWARA COLLEGE OF EDUCATION ILORIN KWARA STATEE COLLEGE OF EDUCATION ILORIN

16 LAGOS CAMPBELL 1/5 ODUNLAMI STREET, CMS BUS-STOP MARINA

17 LAGOS HERBERT MACAULAY 14 HUGHES AVENUE, ALAGOMEJI BUS STOP, ALAGOMEJI ,YABA

18 LAGOS IKEJA HIGH COURT IKEJA HIGH COURT PREMISES,OBA AKINJOBI STR IKEJA G.R.A

19 LAGOS LASPOTECH CC LAGOS STATE POLYTECHNIC, IKORODU CAMPUS

20 LAGOS AYOBO CC AYOBO IPAJA LOCAL COUNCIL DEV. AREA , IGBOGILA B/STOP, IPAJA

21 LAGOS ALABA CASH CENTER D329 ELECTRICAL SECTION, ALABA INTERNATIONAL MARKET, OJO

22 LAGOS MMIA STALL 007 ARRIVAL HALL, GROUND FLOOR MURITALA MUHAMMED INTERNATIONAL AIRPORT

23 LAGOS KAIRO BLOCK P FIRST FLOOR, KAIRO MARKET, ABIBATU MOGAJI, OSHODI

24 LAGOS ALUMINIUM CC 1, IFELODUN STREET; ALUMINIUM VILLAGE DOPEMU

25 LAGOS ARTICLES CASH CENTRE ARTICLES DEALERS ASSOCIATION MARKET, OPPOSITE TRADE FAIR COMPLEX, LAGOS BADAGRY EXPRESS WAY, OJO

26 LAGOS NAFBASE SAM ETHNAM (NIGERIA) AIRFORCE BASE, PWD BUS STOP, IKEJA

27 LAGOS NAHCO CASH CENTER 1ST FLOOR DOCUMENTATION HALL, NAHCO HEAD QUARTERS IKEJA

28 LAGOS OJOKORO CC 9/11 BOLA AHMED TINUBU ROAD, IJAIYE OJOKORO

29 LAGOS ONIRU BLOCK 8 OLD SECRETARIAT(MVAA) OBA AKINJOBI STR IKEJA

30 LAGOS NIGER HOUSE 62/64 CAMPBELL STREET, LAGOS ISLAND (LAGOS ISLAND MATERNITY)

31 LAGOS SAHCOL SAHCOL CARGO COMPLEX, NAHCO B/S, NAHCO IKEJA

32 LAGOS SATELLITE CASH CENTRE NO 3, NITEL ROAD , SATELLITE TOWN

33 LAGOS SEME NO 4, BANKS AVENUE SEME-BORDER PORT, SEME BORDER

34 LAGOS SIFAX CASH CENTER NO 1 DELE BAKARE STREET, SIFAX BONDED TERMINAL , OFF APAPA OSHODI EXPRESSWAY TRINITY BUS-STOP OLODI APAPA

35 LAGOS SURULERE LG CASH CENTRE SURULERE LOCAL GOVT SECRETARIAT, 14, JAMES ROBERTSON ROAD, ONILE-GOGORO, SURULERE

36 LAGOS YABATECH YABA COLLEGE OF TECHNOLOGY, YABA

37 LAGOS ODUNADE CASH CENTRE 100 MARKET STREET ODUNADE

38 LAGOS OTO AWORI KLM 25 BADAGRY EXPRESS WAY,IJANIKIN, ILEOBA BUS STOP

39 NASARAWA LAFIA MARKET CASH CENTER LAFIA MODERN MARKET, BESIDE LAFIA EAST PRIMARY SCHOOL,MAKURDI ROAD, LAFIA

40 OGUN BISHOP'S COURT/MAKUN 84, BISHOP'S COURT BUILDING, EWUSI STREET, MAKUN, SAGAMU

41 OGUN FEDERAL POLY, ILARO CASH CENTRE THE FEDERAL POLYTECHNIC ILARO, OPPOSITE PAVILION BUILDING

42 OGUN OOU MAIN CAMPUS, OLABISI ONABANJO UNIVERSITY, AGO IWOYE

43 OGUN TASUED 1 PROF OYESIKU SHOPPING MALL TAI SOLARIN UNIVERSITY OF EDUCATION, IJAGUN IJEBU ODE

44 OGUN ITORI OPPOSITE FORMER DIVISIONAL POLICE STATION, OLD ABEOKUTA-LAGOS ROAD, ITORI, EWEKORO L.G

45 ONDO ACE(ADEYEMI COLLEDGE OF EDU) ADEYEMI COLLEGE OF EDUCATION

46 ONDO IWARO OKA CASH CENTRE OWALUSI QUARTERS IWARO OKA

47 OSUN EDE POLY POLY EDE CAMPUS, EDE

48 OSUN OSCOED CASH CENTRE OSCOED ILESA

49 OSUN IFON OSUN ILOBU ROAD IFON-OSUN

50 OYO AGBENI AMUNIGUN MARKET, AGBENI IBADAN

51 OYO IGBOORA SAGANUN IGBOORA

52 OYO NEW GBAGI NEW GBAGI MARKET, IBADAN

53 OYO POLY IBADAN THE POLYTECHNIC IBADAN

54 RIVERS GARRISON BIR RIVERS BOARD OF INT. REVENUE

55 RIVERS NNPC 4-9 MOSCOW ROAD, PORT HARCOURT

56 RIVERS ELF CASH CENTRE TOTAL E&P PREMISES, PLOT 25 TRANS AMADI INDUSTRIAL LAYOUT, MOTHERCAT BUS STOP, OBIO AKPOR LGA

57 RIVERS ONNE CASH CENTER POLARIS BANK LTD NPA-FLT TERMINAL ROAD ONE, ONNE ROUND ABOUT ELEME LGA

58 RIVERS PHRC POLARIS BANK LTD PORT HARCOURT REFINING COMPANY LTD, REFINERY ROAD ALESA ELEME LGA

59 RIVERS PPMC POLARIS BANK LTD, PPMC DEPOT, ALONG REFINERY ROAD ALESA ELEME LGA

60 RIVERS RUST CASH CENTER(RIVERS STATE UNI POLARIS BANK LTD, RIVERS UNIVERSITY CAMPUS UST ROUND ABOUT MILE 4 OBIO/AKPOR LGA

61 RIVERS RVHA (RIVERS STATE HOUSE OF ASSEM RIVERS STATE HOUSE OF ASSEMBLY COMPLEX, #12 MOSCOW ROAD PORT HARCOURT CITY LGA

62 RIVERS TRANS AMADI CASH CENTRE 5 TRANS AMADI ROAD, PORT HARCOURT

63 SOKOTO SOKOTO HOUSE OF ASSEMBLY, SOKOTO SOKOTO STATE HOUSE OF ASSEMBLY COMPLEX,KADUNA ROAD

64 TARABA FCE (FED COLL. OF EDU) CASH CENTRE/ NO. 1, BALI ROAD, ARDO KOLA, SUNKANI JALINGO

65 ZAMFARA YERIMA BAKURA SPECIALIST HOSPITAL, YERIMA BAKURA SPECIALIST HOSPITAL, TUDUN WADA GUSAU

66 ZAMFARA FEDERAL MEDICAL CENTRE, GUSAU FEDERAL MEDICAL CENTRE, ALONG BYEPASS ROAD, GUSAU

CORPORATE DIRECTORY

S/N ORDINARY BUSINESS FOR AGAINST

1 To receive and consider the Audited Financial Statements for the period

September 21 to December 31, 2018 and the year ended December 31,

2019 together with the Reports of the Directors and Auditors, respectively.

2 . To re-elect Directors:

a. Muhammad K. Ahmad, OON

b. Alhaji Abdullahi M. Umar

c. Mr. Austin Jo-Madugu

d. Mr. Bata G. Wakawa

e. Mr. Olu Odugbemi

3. To appoint Messrs. PricewaterhouseCoopers as the Bank's Auditors

4. To authorize Directors to fix the remuneration of the Auditors

SPECIAL BUSINESS

5. To fix Directors' remuneration

PROXY FORMI, ………………………………………………………… of…………………………..................................

being a member of Polaris Bank Limited hereby appoint…………………………………………......

………………………………………………………..of……………………………………………….…

………………………………………………………….to act as my proxy, to vote for me and on my

behalf at the Annual General Meeting of the Bank to be held on …………………, and at

every adjournment thereof.

As Witness under my hand this ………………………day of……………………..2020

………………………………….

Signed

Please indicate with an “X” in the appropriate box how you wish your votes to be cast on the resolutions set out above. Unless otherwise instructed, the proxy will vote or abstain from voting at his / her discretion.

183