annual report and financial statements 31 december 2017 international bank plc... · annual report...
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Company Registration No. 03468216
Ghana International Bank plc
Annual Report and Financial Statements
31 December 2017
Ghana International Bank plc
Annual Report and financial statements 2017
Contents Page
Officers and professional advisers 1
Chairman’s report 2
Strategic report 4
Directors' report 10
Corporate governance statement 12
Directors’ responsibilities statement 15
Independent auditor’s report 16
Statement of comprehensive income 22
Statement of financial position 23
Statement of changes in equity 24
Statement of cash flow 25
Notes to the financial statements 26
Ghana International Bank plc
Annual Report and financial statements 2017
Officers and professional advisers
1
Directors
Dr E. K. Y. Addison Chairman – Appointed 31 May 2017
Dr Abdul-Nashiru Issahaku Chairman - Resigned 31 March 2017
Mr J R Mensah Chief Executive Officer
Mr R J B Sambou Executive Director
Lord P Boateng Appointed 21 February 2017
Mr H. C. G Marr Appointed 5 December 2017
Mr J. K. Arthur Appointed 31 May 2017
Dr J. Ofori-Tenkorang Appointed 31 May 2017
Dr M. O. Afari Appointed 5 December 2017
Dr J. K. Mensah Appointed 5 December 2017
Company Secretary
Beatrice Mettle-Nunoo, FCCA
Registered office
1st Regina House
67 Cheapside
1st Floor
London
EC2V 6AZ
Company Registration No. 03468216
Registered in England and Wales
Ghana International Bank plc is a public limited company and is limited by shares.
Auditor
Deloitte LLP
Statutory Auditor
London
United Kingdom
2
Ghana International Bank plc
Chairman’s report
I am pleased to make my first chairman’s report to members of Ghana International Bank plc (“GHIB” / the “Bank”).
Your Bank has a long and proud heritage, going back over 19 years within which, the Bank has gradually grown its
footprints across the Africa space to include Kenya, Nigeria Tanzania, Egypt, Gabon, Ghana and other west African
countries. Despite an extraordinarily eventful 2017, in which the Bank was faced with significant but surmountable
regulatory requirements, the death of a senior staff member (Head of Compliance and MLRO), challenging market
conditions including much increased competition as well as a legal challenge involving a former Executive Director,
the Bank remained steadfast in its dedication to our customers and resilience in overcoming the challenges to deliver
a satisfactory return of 9.1 percent (9.9 percent) to our shareholders.
The Global Economy Over 2017
Global economic growth was robust over 2017, supported by increased investments, manufacturing activity and trade,
alongside general accommodative monetary policies. OECD economies, which collectively generate nearly 82
percent of global output, registered good performances with China, India, the United States of America (USA) and
Eurozone registering improvements in real output growth. Economic activity in emerging market economies was
however subdued and expanded at a much slower pace. Sustainability of the rebound in global output will however,
hinge on the effectiveness of governments managing the menace of high indebtedness and lower investment
spending, which currently confronts many economies. Increased talk of protectionism as well as trade re-alignment
were a notable presence in 2017 with the USA, particularly vociferous and fuelling the likelihood of retaliatory trade
wars, and raising the risk of a dysfunctional global economy in the medium term. In spite of the foregoing, the upturn
in the global economy paints an encouraging picture following years of feeble growth.
The return to growth in the Eurozone was underpinned by sturdier improvements in consumer and business
confidence as well as relatively low borrowing costs and contributed to the lowering of unemployment across the
zone. Growth in the United Kingdom (UK) however moderated as the complexities of negotiating and implementing
Brexit impacted on long-term outlook. In the United States of America, there was sustained impetus, buoyed by
soaring business and consumer confidence as well as buoyant asset prices, which continue to drive investment
growth. China’s transformation from an export-reliant, heavy manufacturing economy to a value-added, consumer
and services-driven economy, also gathered momentum as the world’s second largest economy delivered remarkably
strong growth on the back of infrastructure investment drive.
Sub-Saharan Africa (SSA) fared less well although growth outlook was much improved from previously. A rebound
in hydrocarbon and agricultural output contributed to a nascent recovery but policy uncertainties as well as political
risks continue to pose a downside risk. Notably, the region’s largest economies, Nigeria and South Africa, made
modest recoveries from economic recession during 2017. Nigeria saw increased economic activity, underpinned by
increased manufacturing orders as well as raised oil production, as the credit squeeze that had engulfed the country
for nearly 18 months finally eased. In South Africa, upside risk to inflation was elevated, despite a widening trade
surplus. However, policy and political uncertainties combined to threaten a downgrade to the country’s sovereign
ratings. Other economies in the region also registered signs of emerging stability. Senegal and Rwanda benefited from
business friendly reforms while Ethiopia benefited from continued infrastructure investment.
In Ghana, the uptick in growth was attributed to rising industrial and energy output on the back of much increased
upstream oil production, and also coincided with inflation and debt levels subsiding over the period. The new
government, also committed to the ongoing IMF program, designed to improve fiscal management by containing
expenditure while implementing structural reforms to strengthen public finances. The country remains on target to
lower public debt from 73.4 percent in 2016 to 66.1 percent by the end of 2018. As at November 2017, the ratio had
lowered to 68.7 percent of GDP. Improvement in the country’s macroeconomic dynamics also directly led to the
narrowing in interest rates and ultimately spurred business investment as credit availability, particularly to the private
sector steadily increased over the period. The banking sector remained liquid, profitable and solvent, as asset growth
for banks expanded by 12.8 percent in 2017, funded from deposits which increased by 10.6 percent on a year-on-year
basis.
Financial Performance
Against the backdrop of the challenges alluded to above, coupled with the Bank’s internal constraints, Profit before
Tax for the year fell 3.7% to £12.5m from £12.9m in 2016. We have seen a significant increase in costs, particularly
in personnel (as we build our compliance and regulatory teams), consultancy costs, as well as legal costs. Despite this
total Operating Income for the year has grown 14% to £26.1m (2016: 22.9m), demonstrating the Banks success in its
core operations and focus on client relationships.
Ghana International Bank plc
Chairman’s report (continued)
3
On the strength of these results and based on existing policy, the Board is proposing a total final dividend of
£5,023,441 (2016: £5,165,892) yielding a dividend per share of 11.16 pence (2016: 11.48 pence).
Governance
The Board in October 2016 approved a three-year business plan to run from 2017 to 2019 which continues to be
reviewed in the changing light of our business environment. The plan recognises the over reliance on Ghana based
businesses, thus exposure to systemic risks posed by the Ghanaian economy. In recognition of this, the Bank’s
continuing diversification strategy emphasises developing new markets within Francophone West Africa and in North
Africa, mainly Egypt, Tunisia, Morocco; and also in East and Central Africa.
The Bank takes risk management – liquidity, credit and operational risks – very seriously and will continue to deploy
best practice methods and procedures to cope with a very dynamic regulatory environment.
Corporate Social Responsibility
We take our Corporate Social Responsibility (CSR) seriously and will endeavour to continue supporting justifiable
causes. In line with our CSR policy, 1% of our pre-tax profits amounting to £126k (2016: £131k) will be allocated to
the Ghana International Foundation for its charitable activities in the area of education, poverty alleviation and health.
GHIB makes appropriate periodic tax payments including corporation tax, value added tax, PAYE and NI
contributions, to the tax authorities in the UK.
Outlook for 2018
A stronger than expected growth momentum in 2017 is expected to carryover into 2018 and benefit from a benign
environment in which global inflation is expected to remain contained while monetary policy stance stays broadly
accommodating across advanced economies. The benign environment should spur overdue recoveries in productivity
through increased investment spending, manufacturing and trade, while also benefit commodity-exporting economies
through the firming of commodity prices. While a pullback by central banks from their post-crisis accommodation,
through Quantitative Easing, could tighten funding availability and limit investment expenditure in advanced
economies, a severe moderation in growth is not anticipated.
In the SSA region, modest growth pickup is anticipated, even on the back of Nigeria and other oil producers regaining
some traction, following several years of challenges. While rising from a very low base, firming commodity prices
will improve the capacity to attract foreign investment as well as help rebuild fiscal and trade positions.
In Ghana, the reducing trend in inflation is likely to be sustained despite a reversal in trend in December 2017,
buoyed by strengthening revenue flows from exports and moderate currency depreciation. Against this view, the
central bank’s policy rate over 2018 is likely to lower by several basis points and provide a much needed stimulant to
the economy, particularly, the non-oil economy. While credit availability in the economy has gradually been
expanding, borrowing costs remain elevated and a reduction in base rates would provide a necessary boon to
investment. Secondly, capital adequacy within the banking sector is set to strengthen significantly, following a new
requirement from the regulator for all bank’s to raise stated capital to Cedis 400 Million (Cedis 125 Million) by
December 2018. The much increased capital requirement will provide the means to better absorb adverse shocks and
reduce the likelihood of financial distress and strengthen the banking sectors ability to underwrite transactions, thus,
boosting economic growth.
Signed
Dr E. K. Y. Addison
Chairman
20 February 2018
4
Ghana International Bank plc
Strategic report
Strategic Overview
GHIB’s vision is to become the Bank of choice for providing creative and tailor made solutions to our customers
driven by our knowledge of the market and strong relationships.
GHIB’s mission is to leverage its relationships and presence in one of the world’s leading financial centres to provide
creative banking solutions and services to our customer base in select African countries whilst remaining the bank of
choice for Ghanaian Banks and parastatals for their international business. We are committed to achieving sustainable
performance and delivering value and fair outcomes to our customers, the communities in which we serve, and our
shareholders.
Business Model
GHIB is a single legal entity registered in the United Kingdom. The Bank has been present for over 50 years in the of
the city of London, the world’s leading financial centre serving Financial Institutions, Sovereign States, Corporates,
SME’s and the diaspora.
GHIB’s unique status as a Ghanaian owned bank authorised by the UK Prudential Regulatory Authority (PRA) and
regulated by the Financial Conduct Authority (FCA) allows the Bank to create synergies between International and
Africa specific markets by combining knowledge of the African continent with international correspondent banking
links, to bring bespoke solutions to its clients and partners.
GHIB focuses on four key areas: International Trade Finance, Correspondent and Corporate Banking, Treasury and
Transactional Banking Services. For corporates and institutions doing business in Africa the bank provides a gateway
to the global financial system, providing access, expertise, capital and extensive cross border capabilities.
GHIB operates from its Head Office in London and representative offices in Accra and Nairobi.
Key Performance Indicators (KPI’s) and business review of the year 2017
KPI
2017
Performance
2016
Performance 2016 %
Variance
2017
Strategic Plan
2017 %
Variance
Profit before Tax £12.5m £12.9m -4% £13.5m -8.1%
Pre-tax Return on Equity 9.1% 9.9% -8.1% 9.9% -8.1%
Pre-tax Return on Assets 1.6% 1.8% -11.1% 1.9% -15.8%
Cost / Income Ratio 51.8% 43.5% 19.1% 44.5% -16.4%
Total Assets £781.6m £833.1m -6.2% £732.7m 6.7%
Loan to deposit ratio 49% 40% +22.5% 55% -10.9%
GHIB’s key measurements of effectiveness of its operation are profitability, return on assets, return on equity, cost to
income and loan to deposit ratios. There are no non-financial KPI’s.
Profit before Tax is total operating income less total operating expenses less loan impairment losses. It excludes any
corporation tax expenses for the year. This is considered the Bank’s key KPI and is used to measure performance
against budget and strategy. As shown in the Bank's Statement of Comprehensive Income, net interest income and
total non-interest income increased by 13.3% and 15.2% respectively over the year. Net interest income was driven
by an increase in interest income of 11.0%, whilst interest expense rose by 2.0%. Interest from debt securities
decreased by £0.9m as the portfolio edged towards a lower risk and return asset base.
The pound fell against the US Dollar from an average rate of 1.356 in 2016 to 1.287 in 2017, a decline of 5%. This
had a positive “translation” effect on revenue. The 15.2% increase in non-interest income was driven by an increase
in letters of credit commission of 21% and a 10% upturn in Foreign Exchange income.
Pre-tax Return on Equity is Profit before Tax divided by average Equity for the year. Average equity is calculated
using month end balances during the year. This shows shareholders how well their funds are being utilised. The
Available For Sale (AFS) revaluation reserve recovered from a loss of £1.3m to a gain of £0.9m as bond prices
recovered, particularly in Ghana, during the year.
Ghana International Bank plc
Strategic report (continued)
5
Pre-tax Return on Assets is Profit before Tax divided by average assets on a monthly basis for the year. This shows
the percentage of profit the Bank earns in relation to its overall resources and how well those assets have been put to
use. Average assets were £770m, up 6.5% from an average of £723m in 2016. At 1.6%, return on average assets was
down on the strategy and 2016.
Cost / Income Ratio is Operating expenses divided by operating income. The ratio shows the percentage of our
income that is used to cover our expenses. An increasing ratio means that costs are growing faster than income.
Operating expenses rose 35% to £13.5m in 2017 from £10.0m in 2016. This was predominately driven by staff costs
and other administrative expenses which rose 28.5% and 49.6%.respectively. We have seen a significant increase in
costs, particularly in personnel (as we build our compliance and regulatory teams), consultancy costs, as well as legal
costs. The cost to income ratio for 2017 of 51.8% was above that in 2016 of 43.5%, but remains competitive against
peers. The Bank has continued to face a demanding regulatory agenda and is in the process of remediating and
thereby strengthening its internal systems and controls in respect of Money Laundering and Financial Crime.
Total Assets is the total balance of assets in pounds at the financial year end. Closing total assets were 6.7% up on the
Strategic Plan but 6.2% down on the position at 31 December 2016. The decrease year-on-year has been driven by the
timing of short-term Placements with and Loans and advances to Banks. Placements with and Loans and advances to
Banks repayable on demand or in three months has reduced £43m to £424.3m. This has been driven by the liability
side where Deposits from Banks repayable on demand reduced £27.0m to £130.2m and Amounts owed to Depositors
repayable on demand reduced £36.9m to £170.8m.
Loan to deposit ratio is the ratio between total loans to total deposits and assesses the Bank’s ability to balance its
lending with liquidity. Total loans is defined as Loans and Advances to Customers (not including deferred letters of
credit) and Placements with and loans and advances to Banks (not including placements which are interbank money
market). This shows how we are investing our depositor’s funds and is up against 2016 of 40% to 49% but behind
Strategic plan of 55%. A lower ratio suggests the Bank is not earning an optimal return but a higher ratio also requires
strong management of the Bank’s liquidity.
The Bank has continued to face a demanding regulatory agenda and is in the process of remediating and thereby
strengthening its internal systems and controls in respect of Money Laundering and Financial Crime.
Future Prospects
The Board in October 2016 approved a three-year
business plan to run from 2017 to 2019. The plan
recognises the over reliance on Ghana based
businesses, thus to systemic risks posed by the
Ghanaian economy. In recognition of this, the strategy
emphasises on diversification by developing in new
markets across Eastern and Central Africa.
The Bank’s strategy continues to be in line with the
three year business plan approved by the board in
October 2016 with a focus to grow new business
outside Ghana while consolidating its Ghana business.
The Bank has taken a considered and measured
approach to the diversification strategy whilst it
develops its systems and controls in line with
regulatory standards and best practice. The
development in other markets across East and Central
Africa continues to be a focus. Establishment of a
representative office in Nairobi is high on the agenda
as the Bank sees Kenya as the focus of its regional
diversification strategy.
The Bank continues to successfully deepen its
relationships in its main market, Ghana.
The Bank plans to implement a fully integrated
treasury management system in 2018 and 2019. The
system will help develop products to serve our ever
increasing customer base, thus becoming more
competitive.
The Board in October 2016 approved a three-year
business plan to run from 2017 to 2019. The plan
recognises the over reliance on Ghana based
businesses, thus to systemic risks posed by the
Ghanaian economy. In recognition of this, the strategy
emphasises on diversification by developing in new
markets across Eastern and Central Africa.
Ghana International Bank plc
Strategic report (continued)
6
Future Prospects (continued)
Overview of Risk
The Board is responsible for risk management. Management is responsible for the implementation of risk
management policies. Risk appetite is reviewed and approved by the Board of Directors, who takes a conservative
approach to risk, which is assessed by reference to the strategic business plan, budget, capital, historic loss experience
and stress testing.
The Bank has an established Risk Management Framework that is subject to regular review and is approved by the
Board. Within the framework, the Bank has identified key risks facing the business for which the Bank has
developed policies and procedures for the effective management of these risks. Senior management have also
considered the implication of Brexit and due to location and nature of business, impact is not considered significant.
The Bank seeks to mitigate these risks within its strategy and business model, by ensuring that a rigorous regime of
systems and controls is in place and are embedded at all levels within the organisation. The systems and controls are
regularly tested through a risk-based internal audit process as part of GHIB’s annual internal audit plan.
It is Bank policy to undertake regular assessment and stress-testing within the ICAAP (Internal Capital Adequacy
Assessment Process), and ILAAP (Internal Liquidity Adequacy Assessment Process). Within its Risk Management
Framework, the Bank has identified the following as the key risks facing the business and has developed suitable
policies and procedures for the effective management of these risks:
Credit Risk
Credit Risk is the risk that obligors will not be able to meet repayment commitments as and when due. The Bank`s
Credit Risk philosophy is to accept only risks that it understands, has the ability to measure, monitor, control and to
ensure that risk is appropriately priced.
Non-receipt of payments may be caused by factors specific to an obligor e.g. failure of their business model, external
conditions including economic downturn, political unrest and liquidity constraints. The Bank recognises the fact that
it is primarily an emerging market focused institution with significant concentration in countries such as Ghana,
Nigeria and Kenya. Lending into emerging economies has other challenges in addition to the above. These include,
but are not limited to, legal constraints related to documenting and enforcing security, prevention of money
laundering, Know Your Customer (KYC) diligence, adequate data collation and storage and to obtain quality
management and business information. The Bank takes legal advice from reputable legal counsel (overseas and local)
for documentation and other credit matters, as well as developing an in-house knowledge pool with frequent visits to
target markets and developing strategic alliances with local agencies all of which provide invaluable risk mitigants.
The Board of Directors reviews and approves the Credit Policy and receives Credit Risk reports at each of its regular
meetings. The Board delegates sanctioning powers to the Board Credit Committee (BCC), Management Credit
Committee (MCC) and to the Chief Executive Officer (CEO).
The Bank continues to successfully deepen its
relationships in its main market, Ghana.
The Bank plans to implement a fully integrated
treasury management system in 2018 and 2019. The
system will help develop products to serve our ever
increasing customer base, thus becoming more
competitive.
The Bank projects a further decline in Profit before
tax in 2018 as increasing costs outpace income
growth. Growing staff costs are the main driver as we
continue to build our compliance and regulatory
teams. Profit is expected to recover to the highest level
in three years in 2019, with costs forecast to stabilise
and operating income growing 9% on 2018.
Changing market dynamics have brought about
challenges in the form of an uncertain Ghanaian
economic environment, competition and regulatory
changes, which have the potential of constricting our
business
Ghana International Bank plc
Strategic report (continued)
7
Credit Risk (continued)
Client Credit Analysis is performed whenever there is a material change in circumstance, either for the client or the
facility. Formal review and renewal of all client credit facilities are carried out on an annual basis and includes
countries.
The Credit monitoring procedures provides for the daily monitoring and control of all exposures, reporting of
excesses, overdrawn accounts, and verification against delegated sanctioning authorities. The Bank uses a 9-point
grading system. For treasury counterparty placements, exposures are restricted to high quality names having credit
ratings in line with the Bank’s risk appetite. For all other lending, new exposure is restricted to the top 5 grades
(Investment, Prime, Good, Adequate and Vulnerable), with the majority in the top 3. The bottom 4 grades relate to
exposure in the Watch List, Sub-Standard, Doubtful and Loss categories and result from existing exposures
downgraded according to circumstance. If an exposure falls into one of the bottom 4 grades, a provision will be raised
based on a conservative estimate of expected discounted cash flows, and reviewed at least quarterly. Whilst this
system has proved successful in highlighting problems at an early stage and ensuring corrective action is taken to
prevent credit losses, the Bank is on track to implement from January 2018, the new IFRS9 regime which essentially
estimates Expected Credit Losses (ECL) and is forward looking. 60% of loan assets represent participation in well
structured syndicated loans and 40% are bilateral loans to banks and corporates.
Large exposures are controlled in accordance with guidelines from the Prudential Regulation Authority (PRA), the
Bank`s regulator. Country and Sector limits are in place to assess risk according to economic and political conditions
for each country and sector, and reviewed regularly by the Board. Stress tests of the portfolio are undertaken on the
basis of historic and hypothetical scenarios.
Operational Risk
Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from
external events.
The Bank has a Board approved Operational Risk Management Framework to ensure that suitable systems, processes,
policies and procedures are in place to help prevent Operational Losses.
Risks are identified and managed by each business area in the First Line of Defence against their controls and
procedures, through a Risk and Control Self Assessment (RCSA) process. GHIB has adopted a standardised Risk
Type Taxonomy to which the different risk types can be mapped. A consolidated picture of the Banks’ risks is
reflected in its Risk Register.
Operational Incident Reports are used to record and track operational events and to ensure appropriate action is taken
to mitigate the risk and to enhance the control processes with oversight from Risk Management in the Second Line of
Defence.
The Bank`s objective is to keep Operational Risk to a minimum by promoting measures to reduce Operational Losses
including but not limited to the following:-
• Clearly articulated policies, procedures and manuals which are understood by all staff;
• Clear segregation of duties;
• Systems and processes deployed to ensure authorised limits are not breached;
• Training and education of all staff on Operational Risks; and
• Risks are well articulated in the ICAAP and reviewed regularly.
Operational Losses are reviewed, reconciled and reported on a monthly basis against GHIB’s Operational Risk
Appetite.
The Third Line of Defence is the Banks independent Internal Audit function which is currently outsourced to Grant
Thornton. Audit findings by both GHIB’s internal and external auditors are reported to senior management and both
sets of auditors report to the Audit Risk and Compliance Committee (ARCC)
A Disaster Recovery and Business Continuity Plan is in place to ensure that potential threats to business operations
are identified and the Bank has the capability for an effective response to safeguard the interest of its key
stakeholders, reputation, brand and value-creating activities.
Ghana International Bank plc
Strategic report (continued)
8
Liquidity Risk
This is the risk that the Bank will not be able to meet short-term financial demands due to its inability to convert its
assets into cash without loss of capital and /or income. The Bank is primarily funded by customers` deposits which
are of various maturities enabling the Bank to meet such demands. A substantial element of deposits is of a wholesale
and therefore short-tenured in nature, and this restricts the level of lending the Bank can undertake to mainly short-
term. The Bank is exploring a resolution to this problem by improving its funding profile.
The Board of Directors reviews and approves the Liquidity Policy taking into consideration historic experience,
counterparty risk, gap analysis, stress testing and other factors that may have a bearing on liquidity. The Bank seeks
to maintain a broadly matched position, with a high degree of liquidity in the form of cash and high-quality liquid
assets in major currencies in order to be able to repay all depositors from short-term liquid investments as they fall
due. There are contingency plans in place should the Bank experience unusual market conditions or short-term
pressures to break deposits. A liquid asset buffer (LAB) is maintained in accordance with the requirements of the
PRA.
Market Risk
Market risk is the risk of a change in the actual market value or earnings of the bond portfolio and other financial
instruments caused by adverse movements in market prices or interest rates. The main areas the Bank faces in Market
Risk are price risk, interest rate risk and foreign exchange risk. The principal currencies held are those required to
meet liquidity and funding needs, being US Dollars, Sterling and the Euro’s. The Bank controls these risks by a
range of methods including liquidity limit monitoring and regular reviews.
The Board of Directors reviews and approves the Treasury Policy, including position and interest rate limits, taking
into consideration historic experience and more severe, hypothetical stress testing. The Bank does not have an active
Trading Book, and the objective of the Treasury Policy is to manage Market Risk exposures in order to maintain
liquidity and optimise return on short-term assets within the risk appetite agreed by the Board. The Bank does not
engage in Proprietary Trading. The Bank has a portfolio of commercial paper and bond assets, selected in accordance
with the Bank’s stringent Credit Risk criteria and as appropriate for Treasury management or consistent with the
Bank’s marketing strategy. The Asset and Liability Committee (ALCO) is responsible for identifying, managing and
controlling the Bank`s Balance Sheet risks and capital management, by setting limits to monitor exposures and
implement controls in respect of capital, funding, liquidity and interest rate risk.
Regulatory and Conduct Risk
Regulatory Risk arises from failure or inability to comply fully with laws, regulations or codes applicable specifically
to the financial services industry which are currently subject to significant changes. Non compliance could result in
fines, public reprimands, damage to reputation, increased prudential requirements, enforced suspension of operations
or, in extreme cases, withdrawal of authorisations to operate. The banking industry faces a major challenge in meeting
new directives covering various activities including capital and liquidity. The Bank has a dedicated regulatory
reporting team and a compliance function.
The Board sets high ethical standards through its review of policies, whilst rigorous new product approval guidelines
are in place. The staff handbook sets out expected standards of behaviour for staff. This is complemented by the
Bank`s whistle-blowing policy. The various aspects of conduct and reputational risk are encapsulated in a Conduct
Risk framework and there is regular monitoring of conduct risk by the compliance department as part of its ongoing
compliance monitoring programme.
Legal Risk
The Bank is exposed to a range of legal risks including:
Breach of applicable laws in the countries in which it operates including data protection and human
resources;
Breach of global sanction regimes;
Tax-evasion regulations
Ghana International Bank plc
Strategic report (continued)
9
Reputational Risk
Reputational Risk arises where damage has been inflicted upon the Bank such that it may experience difficulty in
retaining customer and others confidence in the Bank. Confidence in the Bank`s ability to conduct business is
paramount, and negative publicity, regulatory impositions, poor conduct etc. may have a dilatory effect on the Bank`s
ability to conduct business. The Bank`s focus on Africa results in the need for a high level of monitoring related to
money laundering and financial crime. The Bank is continually upgrading its processes in this area, and staff training
is ongoing.
Approval
This report was approved by the Board of Directors on 20 February 2018 and signed on its behalf by:
Signed
Dr E. K. Y. Addison
Chairman
20 February 2018
10
Ghana International Bank plc
Directors’ report
The directors present their annual report, together with the financial statements and auditor’s report. Directors who
served throughout 2017 and up until 20 February 2018, except as noted, were as follows:
Directors
Dr E. K. Y. Addison Chairman – Appointed 31 May 2017
Dr Abdul-Nashiru Issahaku Chairman - Resigned 31 March 2017
Mr J R Mensah Chief Executive Officer
Mr R J B Sambou Executive Director
Lord P Boateng Appointed 21 February 2017
Mr H. C. G Marr Appointed 5 December 2017
Mr J. K. Arthur Appointed 31 May 2017
Dr J. Ofori-Tenkorang Appointed 31 May 2017
Dr M. O. Afari Appointed 5 December 2017
Dr J. K. Mensah Appointed 5 December 2017
Mr M. Choudhry Appointed 21 February 2017
Mr M. Choudhry Resigned 28 September 2017
Mr M Arthur
Mr D Colgan Resigned 21 February 2017
Mr P Haines Resigned 21 February 2017
Mr E Thompson Resigned 21 February 2017
Mr F Belnye Resigned 1 July 2017
Mr Sarpong Resigned 31 May 2017
Mr N Addo Resigned 5 April 2017
Mr D Asiedu Resigned 1 August 2017
Mr M Narh Resigned 22 August 2017
Mr E Agbesi Resigned 6 April 2017
Changes in Directors during the period have largely been driven by the change in government in Ghana at the
beginning of the year.
Results and review of the business
The profit on ordinary activities before taxation was £12,464,889 (2016: £ 12,947,736). The directors recommend a
final dividend of 11.16p per ordinary share amounting to £5,023,441 in total (2016: 11.48p per share amounting to
£5,165,892).
GHIB operates from its Head Office in London and representative offices in Accra and Nairobi. A review of the
business and its future developments and prospects is contained in the Chairman's report and the Strategic report.
Charitable contributions
In line with its policy, the Bank has made a charitable contribution of 1% of its profit before tax in the amount of
£125,909 (2016: £130,785). The total donation is in favour of Ghana International Foundation.
Human Resources
The Bank continues to make significant investment in human capital and technology, particularly as we build our
compliance and regulatory teams, resulting in improved systems and controls. Average staff headcount increased by
25% to 71 (2016:57).
Directors’ and officers’ liability insurance
The Bank maintains directors’ and officers’ liability insurance for its directors and officers.
Ghana International Bank plc
Directors’ report (continued)
11
Going concern
The Bank has a strong capital and liquidity position and its business remains profitable with a competitive return on
equity and good business franchise. The directors therefore have a reasonable expectation that the Bank has adequate
resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going
concern basis in preparing the annual report and financial statements.
Further details regarding the adoption of the going concern basis can be found in Note 1 of the accounting policies in
the financial statements.
Post-Balance Sheet Events
There were no material post-balance sheet events.
Financial Risk Management
The Bank has procedures in place to identify, monitor and evaluate the risks it faces. An overview of the Bank’s
objectives and policies to key risks are described in the Strategic Report.
Capital Structure
There was no increase in the Bank’s authorised share capital during the year. Further information regarding the
Bank’s approach to risk management and its capital adequacy are contained in the unaudited disclosures made under
the current regulatory capital requirements (the Pillar 3 disclosures). These disclosures are published on GHIB’s
website shortly after the approval of these financial statements at http://www.ghanabank.co.uk/.
Auditor
Each director at the date of approval of this annual report confirms that:
so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware;
and
the director has taken all the steps that he ought to have taken as a director in order to make himself aware of
any relevant audit information and to establish that the company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act
2006.
Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will
be proposed at the forthcoming Annual General Meeting.
Signed by order of the board
Signed
Beatrice Mettle-Nunoo
Company Secretary
20 February 2018
12
Ghana International Bank plc
Corporate governance statement
Ghana International Bank plc is not required to comply with the UK Corporate Governance Code (“the code”) and the
Proposed Revision to UK Corporate Governance Code December 2017. Whilst the Bank does not fully comply with
the code, the directors have decided to make a number of disclosures to provide corporate governance information.
“The code is part of a framework of legislation, regulation and best practice standards which aims to deliver high
quality corporate governance with in-built flexibility for companies to adapt their practices to take account their
particular circumstances.” (Financial Reporting Council).
The Bank’s governance framework plays a key role in supporting the Bank’s operations and is critical in achieving its
objectives. It provides clear guidance on how effective decisions are made through:
leadership and purpose by way of strategy;
division and responsibilities;
risk management and compliance;
financial management;
succession planning; and
culture of the organisation.
The Board of Directors
Chaired by the Chairman of the Board and comprising the Chief Executive Officer, executive director, two UK based
independent non-executive directors and four Ghanaian based non-executive directors The Board meets four times a
year. Inter alia, it reviews the Bank's trading performance, legal and regulatory compliance, liquidity, interest rate and
foreign exchange exposures, business strategy, policies, lending decisions, diversification opportunities and other
matters of significance to the Bank.
A key role of the Board is to set the Bank’s strategy, to ensure that the goals in that strategy are within the agreed risk
appetite and to oversee executive implementation. The Board ensures that the business strategy is supported by a
well-articulated and measurable statement of risk appetite, which is used by the Board to monitor and control actual
and prospective risks.
It is the responsibility of the Board to ensure that the effectiveness of the risk control framework is kept actively
under review, that it remains aligned with the Board’s risk appetite, and that the Board has the management
information it needs.
To facilitate the day-to-day business of the Bank and to ensure the Bank has a robust system for maintaining internal
control, the Board has appointed a number of committees with terms of reference and delegated powers. The key
committees are:
Audit, Risk and Compliance Committee (ARCC)
The Committee comprises and is chaired by a UK based independent non-executive director, a second UK based
independent non-executive director, and three other Ghana based non-executive directors. All of whom have no direct
role in the management of the Bank. It reviews accounting policies and the contents of financial reports, monitors
internal controls and procedures and the internal control environment. It oversees the relationship with the external
auditor and considers the adequacy and scope of the external and internal audits.
The Committee recommends to the Board and monitors the risk appetite of the Bank. It also reviews and monitors
individual types of risk and ensures that the Bank’s operations are adequately supported by a comprehensive Risk
Management Framework. It considers the Bank’s reputational risk issues and exposures and the effectiveness of the
process and controls in place to ensure fair customer outcomes.
Remuneration and Nominations Committee (REMCO)
The Committee comprises and is chaired by a UK based independent non-executive director, a second UK based
independent non-executive director, and three other Ghana based non-executive directors. All of whom have no direct
role in the management of the Bank. It is empowered to conduct the process, and make recommendations, for Board
appointments, to develop personnel policy for the Bank, to recommend levels of remuneration of non-executive
directors, management and staff to the Board and to provide support and recommendations to the Board from time to
time on succession planning.
Ghana International Bank plc
Corporate governance statement (continued)
13
Board Credit Committee
The Board Credit Committee membership comprise: three Ghana based non-executive directors (including one from
Bank of Ghana); two UK based independent non-executive directors, the Chief Executive Officer, and an Executive
Director.
The Non-Executive Director from Bank of Ghana acts as Chairman.
The committee, through its delegated authority is authorised to sanction all credit proposals exceeding £15 million. In
the interest of efficiency, the credit approval may be sought by way of electronic mail and the Bank’s Credit Risk
Department will solicit responses. Responses are collated by the Head of Credit Administration who will
communicate the Committee’s decision to the Chief Executive Officer. All credit approval decisions shall be
communicated and noted by the Board at its next meeting.
Executive Management Committee (EXCO)
The Executive Management Committee comprises the Chief Executive Officer (Chairman), Executive Director of
Finance & Operations, Chief Risk Officer, Head of Compliance, General Manager Business Development, and
General Manager Banking Services. The Committee meets once a week. Its primary responsibility is to ensure that
the Bank’s operations and activities, financial and general management are aligned to the Board’s stated strategic
direction and Risk Management Framework. It also has delegated credit sanction authority.
Asset and Liability Committee (ALCO)
The ALCO comprising the Chief Executive Officer, Executive Director of Finance & Operations, Chief Risk Officer,
General Manager Business Development, General Manager Banking Services, the Head of Finance, the Head of
Treasury and Head of Credit Risk meet once every month.
The ALCO is responsible for identifying, managing and controlling the Bank’s balance sheet risks and capital
management in executing its chosen business strategy. Balance sheet risks are managed by setting limits monitoring
exposures and implementing controls across the dimensions of capital, funding, liquidity and non-trading interest rate
risk. This Committee is responsible for the implementation of assets and liability strategy and policy for the Bank’s
balance sheet.
Banking Services Committee (BSC)
The BSC is a committee of the Bank and is accountable to EXCO. The Committee is authorised by the Board to
manage the day to day activities of banking services including operational and customer issues, implementation of
strategy and policy, compliance and risk management. Banking services include the following departments: Trade
Finance; Global Transfers; Customer services; and Treasury.
The committee is constituted by the following members; The General Manager Banking Services (Chairman of the
Committee), The Head of Trade Finance, The Head of Global Transfers, The Head of Customer Services, The Head
of Treasury, The General Manager, Business Development. The Committee meet monthly and otherwise as required.
Operations Committee (OPC)
This Committee comprises the Executive Director of Finance & Operations (Chairman of the Committee), Head of
Finance, Head of Credit Admin, Head of IT, Head of Regulatory Reporting, Head of Compliance, Head of Treasury
Operations, Senior Information and Cyber Security Manager, Human Resource Manager, and Heads of Client On-
Boarding and Transaction Monitoring.
The purpose of the Committee is to provide a forum for continuous creative discussion and constructive challenge
between executive management and senior direct reports of management team. The Committee routinely reviews the
Bank’s IT platform and cyber risk, regulatory reporting and financial management risk to recommend decisions
within its delegated authority on matters relating to strategy implementation, credit, treasury, legal and regulatory
compliance and administration for Board approval (through EXCO).
Ghana International Bank plc
Corporate governance statement (continued)
14
Risk Oversight Committee (ROC)
ROC provides the GHIB’s Management (EXCO) and Board members with assurance that operational risk in
Businesses and Functions across the Bank is being managed on an end-to-end basis, commensurate with GHIB’s risk
appetite. All risks are covered including Finance Risk, Technology Risk, Compliance Risk, People Risk, Regulatory
Reporting Risk, and Reputational Risks. ROC also has oversight of strategies for capital and liquidity management as
well as the operational risk dimensions of credit Risk and market risk. Membership comprises the following: The
Chief Executive Officer; The Executive Director Finance & Operations; General Manager, Business Development;
General Manager, Banking Services; Head of Compliance; and Chief Risk Officer.
Business Development Committee (BDC)
BDC is a committee of the Bank and is accountable to EXCO. The Committee is authorised by the Board to facilitate
the attainment of strategic objectives inter alia, oversee the development of new products, new business and revenue
streams, develop and nurture client relationship and refer lending opportunities to the bank’s Credit Committee for
assessment
The committee comprises the following: The General Manager, Business Development (who acts as the Chairman of
the Committee) The Executive Director, Finance & Operations, The General Manager, Banking Services, The Head
of IT, The Chief Risk Officer, The Head of Compliance, The Head of Treasury and Head of Finance. The Committee
meets monthly and otherwise as required by the Chairman.
Management Credit Committee (MCC)
This Committee is the main Executive Credit Committee of the Bank with its main purpose to assist the EXCO in
fulfilling its responsibilities by providing oversight of policies and management activities relating to the
identification, assessment, measurement, approving loans and advances, monitoring performance, and the
management of the Company’s credit risk.
The MCC has a delegated credit sanction authority for proposals up to £15 million from the Board. Membership of
the Management Committee comprises: The Chief Executive Officer; The Executive Director, Finance & Operations;
Head of Finance; The General Manager, Business Development; The General Manager, Banking Services; Chief Risk
Officer and The Deputy Chief Risk Officer.
Project Steering Committee (PSC)
The PSC’s role is to provide GHIB’s Management, EXCO and Board members with assurance that all the Bank’s
Projects are being managed on an end-to-end basis, commensurate with the Bank’s risk appetite. In addition, to
ensure an appropriate Project Organisational Structures, processes and tolls that enable effective projects financial
controls management with common minimum controls standards for all projects in the Bank. The PSC comprises this
membership: Executive Director, Finance & Operations (Chair), Head of Finance, General Manager, Business
Development, General Manager, Banking Services, Head of IT. Meetings are held on a monthly basis.
Our Code of Conduct
We are committed to achieving sustainable performance and delivering value and fair outcomes to our customers, the
communities we serve in and our shareholders. Our culture aims to promote openness, integrity and respect, trust and
diversity for the mutual benefit and the wider stakeholders.
Ghana International Bank plc
Directors’ responsibilities statement
15
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare the annual report and financial statements for each financial year.
Under that law the directors have elected to prepare the annual report and financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the
directors must not approve the annual report and the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In
preparing these annual report and financial statements, International Accounting Standard 1 requires that directors:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the entity's financial
position and financial performance; and
make an assessment of the company's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the annual report and financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of annual
report and financial statements may differ from legislation in other jurisdictions.
16
Independent auditor’s report to the members of
Ghana International Bank plc
Report on the audit of the financial statements
Opinion
In our opinion the financial statements: give a true and fair view of the state of the company’s affairs as at 31 December
2017 and of its profit for the year then ended; have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act
2006.
We have audited the financial statements of Ghana International Bank plc (the ‘company’) which
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 1 to 34 of the financial statements The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were: Loan provisioning Revenue recognition of fee and commission income
Materiality The materiality that we used in the current year was £706,000 which was
determined on the basis of 5% of profit before tax. Please see further details of our materiality below in this audit report.
Scoping
Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
Independent auditor’s report to the members of
Ghana International Bank plc (continued)
17
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the following matters where: • the directors’ use of the going concern basis of accounting
in preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
We have nothing to report in respect of these matters.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Loan provisioning
Key audit matter
description
Loan provisioning is an area where a high level of management judgement
is applied in determining the necessity for, and estimation of, a provision for non-performing loans. The level of loan impairment for the company has historically remained low. As at 31 December 2017, the total provisions against loans and credit were £148k (2016: £0k).
We have presumed a risk of fraud lies within loan provisioning, due to the
inherent potential for management bias and significant judgement involved.
Management have disclosed information about Credit Risk within Note 29 of this report. The accounting policy and information about judgements and estimation can be found within Note 1.
How the scope of
our audit responded to the key audit matter
We assessed the design and implementation of key controls over
the loan provisioning cycles. We tested these controls for operating effectiveness. We have also assessed the design, implementation, and operating effectiveness of general IT controls.
We assessed the completeness of both the specific and IBNR provisions balance by reviewing a list of all loans held by the
company where no specific provision was made. We sampled this population and reviewed key loan characteristics such as contracts, collateral valuations and coverage, payment delinquencies, customer financials and loan covenant compliance to assess for potential impairment indicators under IAS 39.
We assessed the existence of loans through external confirmations and review of customer statements.
We tested the valuation of all loans against which specific provisions have been made, including reviewing impairment triggers and challenging evidence supporting the forecast recoverability.
We reviewed the financial statement disclosures to assess complicity with the requirements of the IFRS’s.
Independent auditor’s report to the members of
Ghana International Bank plc (continued)
18
Key observations
Overall, we concluded that the provisioning level was appropriate and free
from material misstatement.
Revenue recognition of fee and commission income
Key audit matter
description
The company earns fees from trade finance and loan arrangements which
are often received upfront. The nature of these transactions and markets means there is often an element of manual calculation of these fees and commissions, and whether they are taken upfront or spread using the Effective Interest Rate method. In the year to 31 December 2017, fee and
commission income of £6,498k (2016: £6,327k) was recorded in the profit and loss.
Management have disclosed information about fee and commission income within Note 3. The accounting policy can be found in Note 1.
How the scope of our audit
responded to the key audit matter
We assessed the design and implementation of key controls over the fee and commission cycle. We tested these controls for
operating effectiveness. We have performed analytical procedures to understand the year-
on-year movements of the fee and commission balance. We have performed substantive procedures on the fee and
commissions income balance, including recalculating fees/commissions and verifying income to supporting documents, to assess whether the recognition is in line with accounting
standards.
Key observations
Overall, we concluded that the fee and commission income balance was appropriate and free from material misstatement.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a
whole as follows:
Materiality
£706,000 (2016: £625,000)
Basis for determining materiality
5% of profit before tax. Our materiality was set at the interim stage of our audit and has not been revised. We reassessed materiality at year-end to check for
appropriateness, and noted that the set materiality did not require revision. Materiality was set at 5% of extrapolated profit before tax. The profit for the period to 30 September 2017 was extrapolated to a full year, and this was used as the basis for our materiality determination.
Independent auditor’s report to the members of
Ghana International Bank plc (continued)
19
Rationale for the benchmark applied
Materiality has been based on profit before tax given our assessment of this being the most reliable metric and the most applicable to the operation of the company.
We agreed with the Audit, Risk and Compliance Committee that we would report to the Committee all audit differences in excess of £35,000 (2016: £31,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment,
including internal control, and assessing risks of material misstatements. Audit work to respond to the risks of material missatatement was performed directly by the audit engagement team.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report (including the Chairman’s report, Strategic report, Directors’ report and Corporate governance statement) other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to
report in respect of these matters.
£14.1m £706k
£35k PBT Materiality
Independent auditor’s report to the members of
Ghana International Bank plc (continued)
20
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error. In preparing the financial statements, the directors are responsible for assessing the company’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 company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements. In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report
or the directors’ report.
Independent auditor’s report to the members of
Ghana International Bank plc (continued)
21
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made.
We have nothing to report in respect of this matter.
Other matters
Auditor tenure Following the recommendation of the Audit, Risk and Compliance Committee, we were appointed by the Ghana International Bank plc Board on 30 September 2010 to audit the financial statements for the year ending 31 December 2010 and subsequent financial periods. The period
of total uninterrupted engagement including previous renewals and reappointments of the firm is 7 years, covering the years ending 31 December 2010 to 31 December 2017.
Consistency of the audit report with the additional report to the audit committee Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
Signed
Christopher Brough ACA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
20 February 2018
Ghana International Bank plc
Statement of comprehensive income
For the year ended 31 December 2017
22
Notes
2017
£
2016
£
Continuing operations
Interest receivable and similar income 2
18,310,009 15,349,509
Other interest income arising from debt and other fixed income
securities
2 2,071,818 3,016,521
Total interest income
20,381,827 18,366,030
Interest expense and similar charges 5
(3,822,436)3 (3,746,472) 3
Net interest income
16,559,391 14,619,558
Fees and commission income 3
5,311,824 4,466,996
Foreign currency gains 4
4,080,252 3,721,056
Investment income 121,988 44,107
Other income
65,015 80,225
Total non-interest income
9,579,079 8,312,384
Operating income
26,138,470 22,931,942
Staff costs 7
(7,652,075) 3 (5,955,333) 3
Other administrative expenses
(5,393,477) 3 (3,605,130) 3
Depreciation and amortisation 15
(473,484) 3 (423,743) 3
Total Operating expenses
(13,519,036) 3 (9,984,206) 3
Loan impairment losses 12
(154,545) 3 -
Profit before taxation 6
12,464,889 12,947,736
Taxation 9
(2,418,008) 3 (2,615,953) 3
Profit for the year
10,046,881 10,331,783
Other comprehensive income
Will be reclassified subsequently to profit or loss:
Gains on available-for-sale (AFS) financial instruments 22 2,324,541 1,834,040
Current taxation on AFS financial instruments 22 (162,639) 3 (270,334) 3
Deferred taxation credit/ (charge) on AFS financial instruments 22 34,326 (120,525) 3
Total other comprehensive income 2,196,228 1,443,181
Total comprehensive income for the year attributable to
equity holders 12,243,109 11,774,964
Ghana International Bank plc
Statement of financial position
As at 31 December 2017
23
Notes 2017 2016
£ £
Assets
Cash and balances at banks including
items in course of collection 25
61,058,049 114,276,571
Placements with and loans and advances to banks 10
567,199,567 543,677,280
Loans and advances to customers 11
130,137,829 118,807,740
Unlisted certificates of deposit 13
- 20,023,195
Government and other securities 14
20,810,637 34,851,967
Prepayments and accrued income
1,059,500 736,183
Property, plant and equipment 15
1,302,422 756,293
Deferred tax asset 16
9,948 -
Total assets
781,577,952 833,129,229
Liabilities
Deposits by banks 17
364,516,914 387,562,978
Amounts owed to depositors 18
258,432,357 292,652,687
Provision for corporation tax 9
1,136,392 1,485,006
Other liabilities 19
14,627,137 16,324,431
Accruals and deferred income
2,905,328 2,157,881
Deferred tax liability 16 - 63,639
Total liabilities
641,618,128 700,246,622
Equity
Ordinary shares 20
45,000,000 45,000,000
Share premium 20
30,000,000 30,000,000
AFS revaluation reserve 22 912,842 (1,283,386)
Profit and loss account 21
64,046,982 59,165,993
Total Equity
139,959,824 132,882,607
Total liabilities and equity
781,577,952 833,129,229
The annual report and financial statements of Ghana International Bank plc, registered number 03468216 were
approved and authorised for issue by the Board of Directors on 20 February 2018.
Signed on behalf of the Board of Directors
Signed Signed
Dr E. K. Y. Addison J R Mensah
Chairman Director
Ghana International Bank plc
Statement of changes in equity
For the year ended 31 December 2017
24
Notes
Ordinary
shares
Share
Premium
Profit
and Loss
AFS
Reserves Total
£ £ £ £ £
Balance at 31 December 2015 45,000,000 30,000,000 54,917,530 (2,677,867) 127,239,663
Profit for the year 21 - - 10,331,783 - 10,331,783
Other comprehensive income - - 48,700 1,394,481 1,443,181
Total comprehensive
income for the year
-
-
10,331,783
1,394,481
11,774,964
Dividend paid 23 - - (6,132,020) - (6,132,020)
Balance at 31 December 2016 45,000,000 30,000,000 59,165,993 (1,283,386) 132,882,607
Profit for the year 21 - - 10,046,881 - 10,046,881
Other comprehensive income - - - 2,196,228 2,196,228
Total comprehensive
income for the year
-
-
10,046,881
2,196,228
12,243,109
Dividend paid 23 - - (5,165,892) - (5,165,892)
Balance at 31 December 2017 45,000,000 30,000,000 64,046,982 912,842 139,959,824
Ghana International Bank plc
Statement of cash flow
For the year ended 31 December 2017
25
2017 2016
Notes £ £
Cash flows from operating activities
Net profit before taxation
12,464,889 12,947,736
Adjustments for:
Foreign currency gains - Translation of assets and liabilities 4 (503,076) (488,600)
Depreciation and amortisation
473,484 423,743
Profit on disposal of fixed assets - (6,325)
Net cash inflow from trading activities 12,435,296 12,876,554
Decrease/(increase) in:
Loans and advances to banks and customers
(20,943,093) (72,362,990)
Unlisted certificates of deposits 20,026,927 (9,989,314)
Government and other securities 16,376,246 24,504,831
Prepayments and other receivables
(322,982) (82,887)
(Decrease)/increase in:
Deposits by banks and customers (57,023,500) 130,770,995
Other liabilities (1,691,525) 7,127,547
Accruals and deferred income
748,391 147,833
Cash (used in)/generated from operations
(30,394,240) 92,992,568
Income taxes paid 9 (2,968,522) (2,343,865)
Net cash (used in)/from operating activities
(33,362,762) 90,648,704
Cash flows from investing activities:
Purchase of property, plant and equipment
(1,019,613) (245,291)
Proceeds from sale of fixed assets
- 6,325
Net cash used in investing activities
(1,019,613) (238,966)
Cash flows from financing activities:
Dividends paid 23 (5,165,892) (6,132,020)
Net cash used in financing activities
(5,165,892) (6,132,020)
Increase/(decrease) in cash and cash equivalents 25 (39,548,267) 84,277,718
Effect of exchange rate changes on cash and cash equivalents 25 120,997 123,358
Net (decrease)/increase in cash and cash equivalents (39,427,270) 84,401,075
Cash and cash equivalents at the beginning of the year 25 470,660,619 386,259,805
Cash and cash equivalents at the end of the year 25 431,233,349 470,660,619
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
26
1. Accounting policies
General Information
Ghana International Bank plc (“GHIB” / the “Bank”) is a company incorporated in England and Wales under
the Companies Act 2006. The address of the registered office is given on page 2. The nature of the Bank’s
operations and its principal activities are set out in the Chairman's report and the Strategic report.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) as adopted by the European Union.
The financial statements are prepared under the historical cost convention as modified by financial instruments
recognised at fair value through other comprehensive income.
At the date of authorisation of these financial statements the following standards and interpretations which
have not been applied in these financial statements were in issue but not yet effective:
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Amendments to IFRS 2 Classification of Share-based Payment Transactions
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture
IFRIC 22 Foreign Currency Transactions and Advanced Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
The directors do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the bank in future except as noted below:
IFRS 9 Financial Instruments
The Bank has been preparing for changes under the new accounting standard in 2016 and 2017 and will apply
IFRS 9 from 1 January 2018, replacing IAS 39. The Bank does not intend to restate comparatives on initial
application of IFRS 9, but transitional disclosures will be provided in accordance with IFRS 7: Financial
Instruments Disclosures. The full impact of adopting IFRS 9 on the Bank’s financial statements will depend on
the financial instruments that the Bank has during 2018 as well as on economic conditions and judgements
made as at the year end. The Bank has performed a preliminary assessment of the potential impact of adopting
IFRS 9 based on the financial instruments as at the date of initial application of IFRS 9 (1 January 2018).
Classification and measurement
With respect to the classification and measurement of financial assets, the number of categories of financial
assets under IFRS 9 has been reduced compared to IAS 39. Under IFRS 9 the classification of financial assets
is based both on the business model within which the asset is held and the contractual cash flow characteristics
of the asset. There are three principal classification categories for financial assets that are debt instruments:
(i) amortised cost,
(ii) fair value through other comprehensive income (FVTOCI); and
(iii) fair value through profit or loss (FVTPL).
Based on the Bank’s preliminary assessment, there will be little change and no significant impact to the
classification and measurement of the Banks financial instruments.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
27
1. Accounting policies (continued)
Government and other securities of £20.8m (2016: £34.9m) currently measured at fair value with gains and
losses recognised through other comprehensive income, under IAS 39: Available-for-sale (AFS), will continue
to be measured at fair value with gains and losses recognised through other comprehensive income, under
FVTOCI. The rest of the Banks financial instruments all measured at amortised cost under IAS 39: Loans and
Receivables will continue to be measured as such under IFRS 9: amortised cost.
Impairment
The impairment model under IFRS 9 reflects expected credit losses, as opposed to only incurred credit losses
under IAS 39. Under the impairment approach in IFRS 9, it is not necessary for a credit event to have occurred
before credit losses are recognised. Instead, an entity always accounts for expected credit losses and changes in
those expected credit losses. The amount of expected credit losses should be updated at each reporting date.
The new impairment model will apply all of the Bank’s financial assets measured at amortised cost or
FVTOCI.
The Bank’s preliminary calculation of the loss allowance for these assets as at 1 January 2018 is £1.0m-£1.2m.
This is an increase of £0.9m-£1.1m compared to IAS 39 (£148k). This increase on transition will be charged
directly to the Banks Profit and Loss Account in Equity as at 1 January 2018 and represents 0.6%-0.8% of
Equity. Thereafter movements in the loss allowance will be recorded against Profit before taxation in the
Statement of comprehensive income.
Hedge accounting
IFRS 9 contains revised requirements which aim to simplify hedge accounting. The Bank does not apply
hedge accounting and does not have a view to in the near future.
Going concern
The Bank’s business activities, together with the factors likely to affect its future development, performance
and position are set out in the Chairman’s Statement and the Strategic Report. The Bank’s forecasts and
projections, taking account of reasonably possible changes in trading performance, show that the Bank should
be able to operate within the level of its current capacity. Based on the above, the directors have a reasonable
expectation that the company has adequate resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
Foreign currencies
The functional and reporting currency is sterling. Transactions in currencies other than sterling are recorded at
the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and
losses on retranslation are included in the profit or loss for the year.
Property, plant and equipment
Fixed assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line
method so as to write off the cost over the estimated useful lives at the following rates:
Computer equipment 25% per annum on cost
Computer software 10% to 33.33% per annum on cost
Furniture and equipment 33.33% per annum on cost
Motor vehicles 25% per annum on cost
Safes and strong room doors 20% per annum on cost
Leasehold improvements 10% per annum on cost (or lease period if shorter)
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
28
1. Accounting policies (continued)
At each balance sheet date, property and equipment are assessed for indications of impairment. If indications
are present, these assets are subject to an impairment review. The impairment review comprises a comparison
of the carrying amount of the asset with its recoverable amount: the higher of the asset’s net selling price and
its value in use. Net selling price is calculated by reference to the amount at which the asset could be disposed
of in a binding sale agreement in an arm’s length transaction evidenced by an active market or recent
transactions for similar assets. Value in use is calculated by discounting the expected future cash flows
obtainable as a result of the assets continued use, including those resulting from its ultimate disposal, at a
market-based discount rate on a pre-tax basis.
The carrying values of fixed assets are written down by the amount of any impairment and this loss is
recognised in the income statement in the period in which it occurs. A previously recognised impairment loss
relating to a fixed asset may be reversed in part or in full when a change in circumstances leads to a change in
the estimates used to determine the fixed asset’s recoverable amount. The carrying amount of the fixed asset
will only be increased up to the amount that it would have been had the original impairment not been
recognised.
Income recognition
Interest income on loans and advances and interest-bearing securities are accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the effective life of the asset to the asset’s net carrying amount.
Interest income from government stock and similar investments are also recognised on the effective interest
basis including any premium or discount to redemption.
Loan origination fees are in all material respects recognised as an adjustment to the effective interest rate on
the related loan.
Income from Guarantees and Letters of Credit commitments is recognised over the period of commitment.
Other fees and commissions are recognised as the related services are rendered.
Effective interest method
The effective interest rate is the rate that exactly discounts estimated future cash payments, or receipts,
(including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Financial instruments
Financial assets and financial liabilities are recognised in the Bank’s statement of financial position when the
Bank becomes a party to the contractual provisions of the instrument.
Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial
asset is under a contract whose terms require delivery of the financial asset within the timeframe established
by the market concerned, and are initially measured at fair value, plus transaction costs, except for those
financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets ‘at fair value through
profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans
and receivables’. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
29
1. Accounting policies (continued)
Financial assets available-for-sale
Available-for-sale investments are those intended to be held for an indefinite period of time, which may be
sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.
Available-for-sale financial assets are recognised on trade date and are subsequently carried at fair value.
Gains and losses arising from changes in the fair value of available-for-sale financial assets are generally
recognised directly in equity until the financial assets are derecognised or impaired, at which time the
cumulative gain or loss previously recognised in equity is recognised in profit and loss.
Loans and advances
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in
an active market are classified as ‘loans and advances’. Loans and advances are measured at amortised cost
using the effective interest method, less any impairment.
Consideration of possible impairment is made at each balance sheet date and factors considered include the
financial condition and performance of obligors and is an estimation of the incurred loss on the basis of future
cash flows expected to be realised.
Where impairment is recognised this is charged against profit or loss for the year.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
Leases
A lease is classified as a finance lease when the risks and rewards of ownership are substantially transferred to
the lessee. All other leases are classified as operating leases (operating lease rentals payable are recognised as
an expense in the income statement on a straight-line basis over the lease term). At 31 December 2017 all of
the Banks leases were classified as operating leases relating to the Bank’s main banking premises.
Current taxation
The tax currently payable is based on taxable profit for the year. Taxable profit differs from the profit before
tax as reported in the income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Bank’s liability
for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow part or all of the assets to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset realised and is charged in the Income Statement.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
30
1. Accounting policies (continued)
Pension costs
The company operates an occupational money purchase pension scheme. An occupational money purchase
pension scheme is one where the company pays fixed contributions into a separate entity for the benefit of its
employees. These contributions are expensed in the period in which they accrue.
Cash and cash equivalents
For the purposes of IAS 7 cash and cash equivalents within the cash flow statement are deemed to comprise
cash in hand, and cash and other short-term investments at other banks repayable in one day or on demand.
Sources of estimation uncertainty/judgements concerning accounting policies
In the application of the Bank’s accounting policies, the Directors are required to make judgements, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other
sources and may make necessary provisions in accordance with their assumptions. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant.
The estimates and underlying assumptions are reviewed on an ongoing basis and actual results may differ from
these estimates.
Loan Provisioning
A key assumption and other source of uncertainty is the risk of causing material adjustment to the carrying
amounts of assets concerning the recoverability of doubtful loans and commitments in future periods. Loan
impairment provisions represent management’s estimate of the losses incurred on all financial assets.
Estimating the amount and timing of future recoveries involves significant judgement, and considers the level
of arrears as well as the assessment of matters such as future economic conditions, value of collateral and type
of entity, industry and the country of the counterparty. As at 31 December 2017, specific provisions of £148k
(2016: £nil) were recognised against gross specific exposures of £3.0m (2016: £nil). A movement up or down
by 20% in respect of these specific exposures would increase or decrease provisions by £30k.
2. Interest income
2017
£
2016
£
Interest receivable and similar income:
Loans and advances to banks
9,998,481 9,713,074
Loans and advances to customers
8,311,528 5,636,435
18,310,009 15,349,509
Other interest income arising from debt and other fixed income
securities:
Debt securities and other fixed income securities
2,035,675 2,951,063
Certificates of deposit
36,143 65,458
2,071,818 3,016,521
Fees from loans and risk participations of £1,186,560 (2016: £1,860,208) have been presented in Interest income.
Prior period comparatives which disclosed these fees in Fee and commission income have been represented.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
31
3. Fees and commission income
2017
£
2016
£
Letters of credit
2,681,061 2,188,732
Bills for collection
636,090 573,064
Transfers and payments
1,994,673 1,705,200
5,311,824 4,466,996
Fees from loans and risk participations of £1,186,560 (2016: £1,860,208) have been presented in Interest income.
Prior period comparatives which disclosed these fees in Fee and commission income have been represented.
4. Foreign currency gains
2017
£
2016
£
Customer transactions 3,577,176 3,232,456
Translation of assets and liabilities 503,076 488,600
4,080,252 3,721,056
5. Interest expense and similar charges
2017
£
2016
£
Deposits by banks:
Call and notice deposits 338,162 161,185
Time deposits 2,745,161 2,951,564
Deposits by other customers:
Call and notice deposits 3,160 4,211
Time deposits 735,953 629,512
3,822,436 3,746,472
6. Profit before taxation
Profit on ordinary activities before taxation is stated after charging: 2017
£
2016
£
Auditor’s remuneration:
Audit of the financial statements 92,500 92,500
Taxation compliance services - 10,000
Other taxation advisory services - 750
Rentals payable in respect of operating leases – land and buildings 325,674 295,491
Depreciation of property, plant and equipment 473,484 423,743
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
32
7. Staff costs
2017
£
2016
£
Wages and salaries 5,998,736 4,789,889
Compensation for loss of office 87,370 -
Social security costs 783,067 469,169
Other pension costs 463,953 383,993
Other staff Costs 318,949 312,282
7,652,075 5,955,333
The monthly average number of persons employed by the company during the year was:
2017
No.
2016
No.
Directors 9 12
Staff 71 57
8. Directors’ remuneration
2017
£
2016
£
Emoluments 1,076,240 1,012,533
Contributions to money purchase pension schemes 51,094 47,198
1,127,334 1,059,731
The emolument of the highest paid director was £426,789 (2016: £428,172) who also received pension
contributions of £31,406 (2016: £29,777) Pension contributions were made by the company for two directors
under the money purchase pension scheme.
9. Taxation
Analysis of charge in the period 2017
£
2016
£
Current tax charge
Current year 2,432,079 2,602,450
Prior year adjustment 25,191 (269)
Total current tax charge 2,457,270 2,602,181
Deferred tax (credit)/charge
Current year (8,932) 9,511
Effect on change in tax rate - 6,217
Prior year adjustment (30,330) (1,956)
Total deferred tax (credit)/charge (Note 16) (39,262) 13,772
Overall tax charge 2,418,008 2,615,953
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
33
9. Taxation (continued)
The standard rate of current tax applied for the year is 19.25% (2016: 20%).The effective tax rate for the year
is higher than the standard UK corporation tax rate of 19.25%. The differences are explained below. As at 20
February 2017 the UK Government has laid plans to reduce UK corporation tax to 19% commencing 1 April
2018 and 17% commencing 1 April 2020.
Factors affecting the tax charge for the period
2017
£
2016
£
Profit before tax 12,464,889 12,947,736
Tax charge at average UK Corp tax rate of 19.25% (2016: 20%) 2,399,491 2,589,547
Depreciation on non-qualifying assets 22,325 19,868
Non-deductible expenses 629 2,547
Effect of change in tax rate 702 6,217
Prior year adjustment – Current tax 25,191 (269)
Prior year adjustment – Deferred tax (30,330) (1,956)
Total tax charge 2,418,008 2,615,953
Provision for corporation tax
2017
£
2016
£
Provision for corporation tax at 1 January 1,485,006 956,617
Tax paid during the year (2,968,523) (2,344,126)
Total current tax charge for the year 2,457,270 2,602,181
Current taxation on AFS financial instruments 162,639 270,334
Provision for corporation tax at 31 December 1,136,392 1,485,006
10. Placements with and loans and advances to banks
2017
£
2016
£
Short-term interbank placements:
Repayable in one day or on demand 370,175,300 356,384,048
Repayable in three months or less 54,115,954 110,909,490
Repayable in > three months to one year 66,549,887 42,000,515
Repayable in one year to five years 12,448,298 3,545,935
503,289,439 512,839,988
Advances under syndicated loan agreements:
Repayable in three months or less - 907,633
Repayable in > three months to one year 55,031,846 17,745,470
Repayable in one year to five years 8,878,282 12,184,188
Loans and advances to banks 567,199,567 543,677,280
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
34
11. Loans and advances to customers
2017
£
2016
£
Gross banking advances 130,285,771 118,807,740
Provisions for doubtful debts (see note 12) (147,942) -
130,137,829 118,807,740
Repayable on demand 7,505 519,179
In three months or less 3,326,711 7,960,658
Between > three months and one year 55,779,942 46,279,416
Between one year and five years 71,014,916 54,073,760
After five years 8,755 9,974,727
130,137,829 118,807,740
Analysis by geographic location:
Ghanaian entities 59,698,172 61,218,829
Nigerian entities 3,930,182 4,294,259
Other African countries 66,418,211 53,034,015
OECD countries 91,264 260,637
130,137,829 118,807,740
The gross lending exposure is analysed below:
2017
£
2016
£
Agriculture, forestry and fishing 7,344,333 8,047,954
Commerce and finance 15,379,412 13,213,390
Transport, storage, communication and energy 65,312,321 57,377,780
Sovereign 33,944,202 39,878,045
Food and beverages 8,040,197 -
Miscellaneous 117,364 290,571
130,137,829 118,807,740
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
35
12. Provisions for doubtful debts
2017
£
2016
£
Balance as at 1 January - -
Increase in specific provisions 182,155 -
Recovery of loan impairment losses (27,610)l -
Loan impairment losses (Statement of comprehensive income) 154,545 -
Exchange difference (6,603)l -
Balance as at 31 December 147,942 l -
13. Unlisted certificates of deposit
2017
£
2016
£
Unlisted certificates of deposit issued by banks/ building societies - 20,023,195
Maturity:
In three months or less - 20,023,195
- 20,023,195
14. Government and other securities
2017
£
2016
£
Sovereign bonds – Africa 16,532,180 23,106,362
Other corporate bonds and treasury bills 4,278,457 11,745,605
20,810,637 34,851,967
Maturity:
In three months or less - -
Between >three months and one year 1,529,406 8,347,378
Between > one year and five years 8,696,707 10,036,977
After five years 10,584,524 16,467,612
20,810,637 34,851,967
As at 31 December 2017 the Bank held no unlisted certificates of deposit (£20,023,195). All unlisted
certificates of deposit’s had matured by July 2017. The Bank uses this asset class to place sterling funds in the
short-term.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
36
15. Property, plant and equipment
Computers
Office
furniture
and
equipment
Safe and
strong
room Motor
vehicles Leasehold
improvements Total
Cost £ £ £ £ £ £
At 1 January 2017 3,103,183 389,284 11,994 121,399 843,435 4,469,295
Additions 697,864 22,683 - - 299,066 1,019,613
Disposals (112,200) - - - - (112,200)
At 31 December 2017 3,688,847 411,967 11,994 121,399 1,142,501 5,376,708
Depreciation
At 1 January 2017 2,652,182 387,274 11,994 48,482 613,070 3,713,002
Current 319,829 7,332 - 30,350 115,973 473,484
Disposals (112,200) - - - - (112,200)
At 31 December 2017 2,859,811 394,606 11,994 78,832 729,043 4,074,286
Net book value
At 31 December 2017 829,036 17,361 - 42,567 413,458 1,302,422
At 31 December 2016 451,001 2,010 - 72,917 230,365 756,293
Computers
Office
furniture
and
equipment
Safe and
strong
room Motor
vehicles Leasehold
improvements Total
Cost £ £ £ £ £ £
At 1 January 2016 2,887,557 389,284 11,994 111,229 843,435 4,243,499
Additions 215,626 - - 29,665 - 245,291
Disposals - - - (19,495) -
At 31 December 2016 3,103,183 389,284 11,994 121,399 843,435 4,469,295
Depreciation
At 1 January 2016 2,349,093 382,917 11,994 37,856 526,894 3,309,366
Current 303,089 4,357 - 30,121 86,176 423,743
Disposals - - - (19,495) - (19,495)
At 31 December 2016 2,652,182 387,274 11,994 48,482 613,070 3,713,002
Net book value
At 31 December 2016 451,001 2,010 - 72,917 230,365 756,293
At 31 December 2015 538,464 6,367 - 73,373 316,541 934,745
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
37
16. Deferred taxes
As at 31 December 2017 deferred tax asset arises from temporary timing differences and has been recognised
to the full extent in the context of the size the asset and recoverability of the asset through future profits of the
business. The movement on the deferred tax account is as follows:
2017
£
2016
£
Deferred tax asset at 1 January (63,639) 70,658
Income statement charge 8,932 (9,511)
Effect of change in tax rate - (6,217)
Adjustment in respect of prior year 30,330 1,956
Other comprehensive income charge on AFS reserve 34,325 (120,525)
Deferred tax asset /(liability) at 31 December 9,948 (63,639)
The deferred tax asset / (liability) on the balance sheet is held in respect of the following:
2017
£
2016
£
Accelerated tax depreciation 52,997 56,886
Other short term timing differences 43,151 -
Timing differences on AFS (86,200) (120,525)
Deferred tax asset /(liability) at 31 December 9,948 (63,639)
17. Deposits by banks
2017
£
2016
£
Bank of Ghana (see note 31) 166,322,723 194,765,925
Other banks 198,194,191 192,797,053
364,516,914 387,562,978
Of which:
Repayable on demand 130,193,388 157,224,984
Repayable:
In three months or less 104,440,648 52,150,725
Between > three months and one year 129,882,878 172,507,268
Between one year and five years - 5,680,001
364,516,914 387,562,978
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
38
18. Amounts owed to depositors
2017
£
2016
£
Repayable on demand 170,747,439 207,627,962
Repayable:
In three months or less 53,586,730 22,499,460
Between > three months and one year 27,547,367 55,991,172
Between > one year and five years 6,550,821 6,534,093
258,432,357 292,652,687
19. Other liabilities
2017
£
2016
£
Deferred letters of credit 14,261,750 16,072,060
Trade and other payables 365,387 252,371
14,627,137 16,324,431
20. Share capital
2017
£
2016
£
Authorised
50,000,000 ordinary shares of £1 each 50,000,000 50,000,000
Total Issued shares
45,000,000 ordinary shares of £1 each 75,000,000 75,000,000
Of which:
Issued and fully paid
45,000,000 ordinary shares of £1 each 45,000,000 45,000,000
Issued and fully paid at premium
20,000,000 ordinary shares issued at premium of £1.50 30,000,000 30,000,000
21. Profit and loss account
2017
£
2016
£
Profit and loss account at 1 January 59,165,993 54,917,530
Dividend Paid (5,165,892) (6,132,020)
Transfer of current taxation on fair value losses - 48,700
Profit for the year after tax 10,046,881 10,331,783
Profit and loss account at 31 December 64,046,982 59,165,993
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
39
22. AFS revaluation reserve
2017
£
2016
£
Losses on available-for-sale investments - 1 January (1,283,386) (2,677,867)
Fair value gain on AFS financial instruments during the year 2,324,541 1,834,040
Transfer of current taxation on fair value losses - (48,700)
Current tax on AFS financial instruments (162,639) (270,334)
Deferred taxation on AFS financial instruments 34,326 (120,525)
Net gain/ (loss) on available-for-sale investments as at 31 December 912,842 (1,283,386)
23. Dividends
2017
£
2016
£
Dividends paid not previously accrued 5,165,892 6,132,020
Proposed dividends not accrued in these accounts 5,023,441 5,165,892
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements.
The proposed final dividend is payable to all shareholders on the Register of Members on 20 February 2018.
The total proposed final dividend is 11.16p per share amounting to £5,023,441 (2016: 11.48p per share
amounting to £5,165,892).
24. Lease Commitments
2017
£
2016
£
Minimum lease payments under operating lease 519,780 301,500
At the balance sheet date, the entity had outstanding commitments for future minimum lease payments under a
non-cancellable operating lease, which fall due as follows:
2017
£
2016
£
Operating lease
less than one year 519,780 301,500
Between one and five years 673,940 409,710
More than five years - -
Operating lease commitments all relate to the ongoing lease of the main banking premises.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
40
24. Lease Commitments (continued)
During the year the Bank leased an additional floor of the main banking premises under operating lease
arrangement. Part of this floor has been sub-let where the outstanding receivable for future minimum lease
payments under a non-cancellable operating lease, fall due as follows:
2017
£
2016
£
Operating lease
less than one year 73,135 -
Between one and five years 158,459 -
More than five years - -
2017
£
2016
£
Minimum lease payments under finance lease - 21,320
Finance lease commitments all relate to computer equipment purchased in 2016. The minimum lease payment
was due, and paid, on 4 January 2017 and considered equal to the present value of the minimum lease
payment.
25. Analysis of the balance of cash and cash equivalents
31 December
2016
Cash Flow Exchange
Movement
31 December
2017 £ £ £ £
Cash and balances at banks 114,276,571 (53,254,009) 35,487 61,058,049
Loans and advances to other banks
repayable in one day or on demand 356,384,048 13,705,742 85,510 370,175,300
470,660,619 (39,548,267) 120,997 431,233,349
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
41
26. Currency analysis of assets and liabilities
2017
£
2016
£
Assets
Denominated in sterling 216,670,798 211,473,466
Denominated in US Dollars 521,020,430 557,734,293
Denominated in euro 43,743,096 63,725,103
Denominated in currencies other than stated above 143,628 196,367
781,577,952 833,129,229
Liabilities and Equity
Denominated in sterling 216,665,659 211,450,373
Denominated in US Dollars 520,996,569 557,903,611
Denominated in euro 43,778,573 63,619,524
Denominated in currencies other than stated above 137,151 155,721
781,577,952 833,129,229
Net financial position
Denominated in sterling 5,139 23,093
Denominated in US Dollars 23,861 (169,318)
Denominated in euro (35,477) 105,579
Denominated in currencies other than stated above 6,477 40,646
- -
27. Geographical analysis
The geographical analysis is based on location of customer. Operating expenses have not been analysed over
geographical area.
Total
£
UK
£
EEA
£
Africa
£
Other
Countries
For the year ended 31 December 2017
Interest received 20,381,827 1,846,943 974,744 17,389,614 170,526
Interest expense (3,822,436) (35,736) (126) (3,721,473) (65,101)
Net interest income 16,559,391 1,811,207 974,618 13,668,141 105,425
Fees and commissions 5,311,824 538,355 6,220 4,258,381 508,868
Foreign currency gains 4,080,252 642,405 157 2,915,767 521,923
Investment income 121,988 - - 121,988 -
Other income 65,015 - - 65,015 -
Total operating income 26,138,470 2,991,968 980,995 21,029,292 1,136,216
Operating expenses (13,519,036)
Loan impairment losses (154,545)
Profit before taxation 12,464,889
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
42
27. Geographical analysis (continued)
Total
£
UK
£
EEA
£
Africa
£
Other
Countries
For the year ended 31 December 2016
Interest received 18,366,030 1,171,587 538,443 16,473,615 182,385
Interest expense (3,746,472) (40,400) - (3,572,153) (133,919)
Net interest income 14,619,558 1,131,187 538,443 12,901,462 48,466
Fees and commissions 4,466,996 804,779 5,248 3,399,616 257,353
Foreign currency gains 3,721,056 426,888 90 2,775,619 518,459
Investment income 80,225 - - 80,225 -
Other income 44,107 - - 44,107 -
Total operating income 22,931,942 2,362,854 543,781 19,156,790 868,517
Operating expenses (9,984,206)
Profit before taxation 12,947,736
28. Financial instruments
The categorisation of financial instruments over the categories defined in IAS 39 is as follows:
2017
£
2016
£
Financial Assets:
Cash 61,058,049 114,276,571
Loans and receivables 697,337,396 662,485,020
Available for sale 20,810,637 54,875,162
Financial Liabilities:
Financial liabilities measured at amortised cost 637,211,021 680,215,665
Interest receivable and payable is analysed in notes 2 and 5 respectively.
The financial instruments used by the Bank and the risks in relation to those are described below.
Management have policies and procedures to manage risk in relation to financial instruments and to produce
financial information to measure such risks. These policies and procedures and relevant summarised financial
information are dealt with below.
The Bank’s activities can be divided into two broad categories: banking and treasury. It has no trading book
activity.
The Banking activity principally comprises of lending and deposit taking with the objective of securing a
margin between interest paid to customers on their deposits and interest received on amounts lent.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
43
28. Financial instruments (continued)
Deposits are raised from personal, corporate and institutional customers in the form of current, call and fixed
deposit accounts. Lending activities are confined to governments, corporations and institutions and take the
form of overdrafts, loans, letters of credit discounts and fixed income securities.
The treasury activity is responsible for raising fixed and call customer deposits and investing the Bank's
surplus funds with A1, A2 rated financial institutions in the interbank market, certificates of deposit, treasury
bills, bonds and similar funds to provide a source of liquidity. The Bank also deals in foreign exchange
transactions on behalf of customers. The Bank does not use hedging or deal in derivative products.
The carrying value of financial assets and liabilities differs from fair value as stated in the following table:
2017 2016
Carrying
value
£’000
Fair value
£’000
Carrying
value
£’000
Fair value
£’000
Financial Assets:
Cash 61,058 61,058 114,277 114,277
Loans and receivables 697,337 697,335 662,485 662,492
Available for sale 20,811 20,811 54,875 54,875
Financial Liabilities:
Financial liabilities measured
at amortised cost 637,211 637,210 680,216 680,217
Fair value measurements
The information set out below provides information about how the Bank determines fair values of various
financial assets and financial liabilities.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the
asset or liability that are not based on observable market data (unobservable inputs).
Fair value measurements recognised in the statement of financial position comprises of Government and other
securities. The Bank classifies these assets as AFS. The fair value of the AFS financial instruments of the Bank
all fall into category level 2 of the fair value measurement hierarchy (2016: all in category level 2).
Fair values are based upon market prices where there is a market or on the effects on fair values of fixed rate
assets and liabilities in changes of interest rates and credit risk.
The Board is responsible for determining the long-term strategy of the Bank, the markets in which it operates
and the level of risk undertaken.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
44
28. Financial instruments (continued)
Responsibility for implementing the risk policy of the Bank is delegated to the Managing Director. He is
responsible for ensuring that the risks within the business are identified, assessed, controlled and monitored
and that controls and procedures comply with policies approved by the Board and which are documented in
various manuals and handbooks.
Credit risk
Credit risk arises from extending credit in all forms in the Bank’s banking and treasury activities, where there
is a possibility that counterparty may default. The credit policy and credit manual provide for the control and
daily monitoring of all exposures, delegated sanctioning authorities and periodic credit appraisals.
Operational risk
Operational risk is the exposure to financial or other damage arising through unforeseen events or failure in
operational processes and systems. Examples include inadequate controls and procedures, human error,
deliberate malicious acts including fraud and business interruption.
These risks are controlled and monitored through system controls, segregation of duties, exception and
exposure reporting, business continuity planning, reconciliations, Internal Audit and timely and reliable
management reporting. Operational procedures are documented in an Operations Manual.
Liquidity risk
Liquidity risk arises from the mismatch of the timing of cash flows relating to assets and liabilities. The
liquidity policy of the Bank is approved by the Board under guidelines issued by the FCA and monitored daily
to ensure that its funding requirements can be met at all times and that a stock of high quality liquid assets is
maintained. Management use a daily liquidity gap analysis by currency for banking assets and liabilities to
monitor liquidity risk based on remaining contractual maturities and summarised information as at
31 December 2017 and 31 December 2016 is set out below. The sources and maturities of assets and liabilities
are closely monitored to avoid any undue concentration. A substantial portion of deposits is made up of
current, savings and call accounts. The table below is based on contractual maturities of assets and liabilities,
which includes shareholders’ funds and non-financial assets and liabilities.
Summarised liquidity gap analysis – 31 December 2017
Next day
£’000
2-8 days
£’000
<1 Month
£’000
<3 Months
£’000
<1 Year
£’000
> 1 Year
£’000
Undated
£’000
Assets 431,256 4,694 9,751 43,238 178,917 111,631 2,091
Liabilities (317,964) (5,246) (48,994) (74,005) (188,697) (6,589) (140,083)
Gap 113,292 (552) (39,243) (30,767) (9,780) 105,042 (137,992)
Cumulative gap 113,292 112,740 73,497 42,730 32,950 137,992 -
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
45
28. Financial instruments (continued)
Summarised liquidity gap analysis – 31 December 2016
Next day
£’000
2-8 days
£’000
<1 Month
£’000
<3 Months
£’000
<1 Year
£’000
> 1 Year
£’000
Undated
£’000
Assets 298,255 187,216 42,112 61,971 134,396 109,187 (7)
Liabilities (364,852) (8,197) (19,370) (63,569) (229,186) (12,214) (135,741)
Gap (66,598) 179,019 22,742 (1,598) (94,790) 96,973 (135,748)
Cumulative gap (66,598) 112,421 135,163 133,565 38,775 135,748 -
Market risk
Market risk is the risk of losses being incurred as a result of adverse movements in market prices, interest or
exchange rates and which may arise in the Bank’s treasury activities.
Market risk is controlled by interest mismatch and foreign currency open position limits approved by the
Operational committee of the Bank and monitored daily.
Management use an interest rate re-pricing gap analysis in major currencies to monitor interest rate risk and
foreign currency open position limits to monitor exchange rate risks on the Bank’s own foreign currency
transactions.
The table below is based on the earlier of the periods to the next interest rate pricing date or the contractual
maturities of assets and liabilities. This includes shareholders funds and non-financial assets and liabilities.
Interest rate re-pricing gap analysis – as at 31 December 2017
Not more
than
3 months £’000
Over
3 months
but not over
6 months £’000
Over
6 months
but not over
1 year £’000
Over 1 year
but not over
5 years £’000
Over
5 years £’000
Non-
interest
bearing £’000
Total £’000
Assets
Cash at bank - - - - - 61,058 61,058
Loans and advances to banks 410,030 53,964 67,617 21,486 - 14,102 567,200
Loans and advances to
Customers
3,330 22,222 33,558 71,019 9 - 130,138
Certificates of deposit and
government securities
- - 1,529 8,697 10,585 - 20,811
Other assets - - - - - 2,372 2,372
Total assets 413,360 76,186 102,704 101,202 10,594 77,532 781,578
Liabilities
Deposits by banks 97,433 58,567 71,316 - - 137,201 364,517
Customer deposits 46,528 15,665 11,882 6,551 - 177,806 258,432
Other liabilities - - - - - 18,669 18,669
Shareholders’ funds - - - - - 139,934 139,934
Total liabilities and
shareholders’ funds 143,962 74,232 83,198 6,551 - 473,635 781,578
On – balance sheet gap 269,398 1,954 19,506 94,651 10,594 (396,103) -
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
46
28. Financial instruments (continued)
Interest rate re-pricing gap analysis – as at 31 December 2016
Not more
than
3 months £’000
Over
3 months
but not over
6 months £’000
Over
6 months
but not over
1 year £’000
Over 1 year
but not over
5 years £’000
Over
5 years £’000
Non-
interest
bearing £’000
Total £’000
Assets
Cash at bank - - - - - 114,277 114,277
Loans and advances to banks 452,129 18,106 41,640 15,984 - 15,818 543,677
Loans and advances to
Customers 8,479 5,856 40,423 55,224 9,975 (1,150) 118,807
Certificates of deposit and
government securities - 20,024 8,347 11,537 16,467 (1,500) 54,875
Other assets - - - - - 1,492 1,492
Total assets 460,608 43,986 90,410 82,745 26,442 128,937 833,129
Liabilities
Deposits by banks 208,568 7,278 165,229 5,680 - 808 387,563
Customer deposits 76,440 48,693 7,298 6,534 - 153,686 292,652
Other liabilities - - - - - 20,031 20,031
Shareholders’ funds - - - - - 132,883 132,883
Total liabilities and
shareholders’ funds 285,008 55,971 172,527 12,214 - 307,408 833,129
On – balance sheet gap 175,600 (11,985) (82,117) 70,530 26,442 (178,470) -
A sensitivity analysis showing how profit and equity would be affected by reasonably possible changes in
interest rate and foreign currency risk variables as at both 31 December 2017 and 31 December 2016 is set out
below.
The directors have concluded that as at 31 December 2017 reasonably possible variations in such risks were as
follows:
Interest rate risk – plus 2% or minus 0.5% in all base currencies in floating rate assets and liabilities
Foreign exchange risk – plus or minus 10% in US Dollar, 10% in Euro currencies, and 15% in all other
currencies.
For the purposes of this analysis the directors have concluded the principal currencies the Bank has exposure
to in its financial assets and liabilities other than its functional currency are US Dollars and Euros.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
47
28. Financial instruments (continued)
Sensitivity analysis – as at 31 December 2017
Foreign exchange rate risk
Interest rate risk US Dollar Euro Other currencies
Financial assets
-0.5%
£’000
+2%
£’000
-10%
£’000
+10%
£’000
-10%
£’000
+10%
£’000
-15%
£’000
+15%
£’000
Cash at bank - - (2,429) 2,429 (3,496) 3,496 (22) 22
Loans to other banks (2,765) 11,062 (35,179) 35,179 (888) 888 - -
Loans and advances to
customers
(654) 2,614 (12,413) 12,413 9 (9) - -
Government and other
securities
- - (2,081) 2,081 - - - -
Financial Liabilities
Deposits from other
banks
1,137 (4,546) 30,775 (30,775) 2,099 (2,099) 21 (21)
Customer deposits 403 (1,613) 19,806 (19,806) 2,279 (2,279) - -
Other liabilities - - 1,435 (1,435) - - - -
Total net position (1,979) 7,918 (86) 86 4 (4) (1) 1
Sensitivity analysis – as at 31 December 2016
Foreign exchange rate risk
Interest rate risk US Dollar Euro Other currencies
Financial assets
-0.5%
£’000
+2%
£’000
-10%
£’000
+10%
£’000
-10%
£’000
+10%
£’000
-15%
£’000
+15%
£’000
Cash at bank - - (4,486) 4,486 (6,319) 6,319 (29) 29
Loans to other banks (5,279) 10,556 (37,013) 37,013 (54) 54 - -
Loans and advances to
customers (1,100) 2,200 (10,790) 10,790 - - - -
Certificates of deposit - - - - - - - -
Government and other
securities - - (3,485) 3,485 -
- -
Financial Liabilities
Deposits from other
banks 3,868 (7,735) 31,374 (31,374) 3,766 (3,766) 23 (23)
Customer deposits 1,390 (2,779) 23,063 (23,063) 2,542 (2,542) - -
Other liabilities - - 1,508 (1,508) 54 (54) - -
Total net position (1,121) 2,242 171 (171) (11) 11 (6) 6
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
48
29. Credit risk
The Bank is exposed to credit risk in relation to loans and advances to customers, loans and advances to other
banks including deposits in cash (Nostro) account balances, interbank market, certificates of deposit,
government stocks and bonds, investments in money market funds, letters of credit, and guarantees. The
maximum credit risk at the balance sheet date is set out below:
2017
£
2016
£
Cash held at banks 61,058,049 114,276,571
Loans and advances to customers 130,137,829 118,807,740
Loans and advances to other banks 567,199,567 543,677,280
Certificates of deposit - 20,023,195
Government and other securities 20,810,637 34,851,967
Guarantees and irrevocable letters of credit 54,933,613 89,370,603
Undrawn Commitments 2,960,459 -
The Bank categorises counterparties by grade, this drives decision-making in relation to credit risk. The need
for impairment provisions against exposures is considered on an individual case by case basis. Individual
exposures are categorised as one of:
Current:
i. Investment grade
ii. Prime
iii. Good
iv. Adequate
Vulnerable
Watch
Substandard
Doubtful
Loss
Impairment provisions as necessary are made on the basis of the Bank’s estimation of future cash flows and
the realisable value of any collateral held. In 2017 there were loan provisions made for £182,155, of this
£27,610 was recovered due to repayments. With foreign exchange movements of £6,603, net loan impairment
losses for the year were £154,545. There was no impairment of assets in 2016.
A new accounting standard, IFRS 9 Financial Instruments, is effective from 1 January 2018. The impact of this
new standard on provisions has been assessed in Note 1 to the financial statements.
The Bank monitors concentrations of credit risk in relation to loans and advances to customers in relation to
the type of entity, industry and the country of the counterparty. An analysis of such concentrations is set out in
Note 11.
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
49
30. Contingent liabilities and other commitments
Contingent liabilities
a) One of the key areas of business for the Bank is international trade finance, where, amongst other products
offered classified as on balance sheet assets and liabilities, guarantees and irrevocable letters of credit are
classified as off-balance sheet contingent liabilities. They have been classified as such due to being
possible obligations whose existence depends on the outcome of uncertain future events.
2017
£
2016
£
Guarantees and Irrevocable letters of credit:
- Bank of Ghana 2,240,441 30,448,807
- Others 52,693,172 58,921,796
b) The Bank is currently subject to certain regulatory investigations. It is not currently possible for the
Directors to estimate whether any losses will be incurred as a result of these investigations and therefore
no provision has been recognised within these financial statements.
Other commitments
a) Lease commitments are disclosed separately in Note 24.
b) In the normal course of its banking business, GHIB enters into lending commitments where the client has
not yet drawn funds at the financial reporting date. Lending commitments made to clients but not yet
drawn are disclosed below.
2017
£
2016
£
Undrawn lending commitments 2,960,459 -
31. Related party transactions
2017 2016
Interest
paid
£
Interest
received
£
Interest
paid
£
Interest
received
£
Bank of Ghana 2,418,253 - 2,384,186 -
Ghana government controlled entities 512,988 5,047,391 542,555 5,791,631
As at the year end the following deposit liabilities were held by related parties:
2017
£
2016
£
Bank of Ghana 166,322,723 194,765,925
Ghana government controlled entities 260,620,839 291,933,414
During the year the following transactions were performed with related parties:
Ghana International Bank plc
Notes to the financial statements
Year ended 31 December 2017
50
31. Related party transactions (continued)
Ghana government controlled entities had loans and advances totalling £66.0m at 31 December 2017 (2016:
£83.0m). Deferred Letters of Credit liabilities amounted to £1.1m 2017 (2016:£1.9m). Fees and commission
income earned £3.4m for the year ending 31 December 2017 (2016:£0.9m), whilst the contribution to foreign
exchange income was £2.4m (2016: £1.8m).
All parties reported here as related were related by virtue of being owned or having a significant shareholding
owned by the Government of Ghana who also own indirectly a significant shareholding in Ghana International
Bank plc. Transactions occurring with related parties are on normal banking terms and are performed on an
arm’s length basis.
32. Related party transactions with directors and key management
Director’s remuneration is disclosed in note 8 to the financial statements. Total remuneration for other key
management personnel was awarded as follows and increased year-on-year mainly due to investment in new
senior management roles in 2017 as the Bank continues to improve its governance structure.
2017 2016
Short-term
employee
benefits
£
Post-
employment
benefits
£
Short-term
employee
benefits
£
Post-
employment
benefits
£
Other key management personnel 431,041 34,474 237,532 23,731
The Bank also provides short-term interest free annual loans for travel to and from work and personal loans
subject to a limit of £10,000 per person at the prevailing base rate to directors and staff.
Loans outstanding as at 31 December 2017 were loans totalling £28,576 (2016: £15,365).
2017 2016
Base Rate
£
Interest free
£
Base Rate
£
Interest free
£
Directors 12,724 - 6,342 -
Other key management personnel 14,325 1,527 8,137 885
33. Capital management
The directors regard its Common Equity Tier 1 (CET1) ratio for capital management purposes. Its principal
objectives in managing capital are to ensure it is sufficient to participate in lines of business and to meet
capital adequacy requirements of the Prudential Regulatory Authority. Common Equity Tier 1 (CET1) is
measured as share capital and reserves which totalled £140.0m at 31 December 2017 (2016: £132.9m). As at
31 December 2017, GHIB recorded a capital adequacy ratio of 24.0% (2016: 23.6%) with a core tier 1 capital
ratio of 24.0% (2016: 23.6%). Regulatory capital adequacy requirements were met during the year.
34. Controlling party
The ultimate controlling party is the Bank of Ghana, who is the Central Bank of Ghana and is registered at 1
Thorpe Road, P.O. Box GP 2674, Accra. The only group accounts, that Ghana International Bank plc is a
subsidiary undertaking to, are prepared by the Bank of Ghana. Group accounts may be obtained from
https://www.bog.gov.gh.