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34 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
DIRECTORS, OFFICERS AND ADVISORS
Mr. Olayemi Cardoso Chairman
Mr. Emeka Emuwa Managing Director
Mrs. Funmi Ogunlesi Executive Director
Mr. Fatai Karim Executive Director
Mr. Ade Adeyemi Non Executive Director
Mr. Khalid Qurashi Non Executive Director
Mr. Naveed Riaz Non Executive Director
Chief Arthur Mbanefo Independent Director
Prof. Yemi Osinbajo S.A.N. Independent Director
Mr. Michael Murray-Bruce Non Executive Director
Dr. Hilary Onyiuke Non Executive Director
Mr. Tariq Masaud Executive Director
Mr. Omar Hafeez Executive Director
Mrs. Olusola Fagbure Company Secretary
CORPORATE HEAD OFFICE
Citibank Nigeria Limited
Charles S. Sankey House
27, Kofo Abayomi Street
Victoria Island, Lagos.
Telephone: +234 (1) 2798400
+234 (1) 4638400
Website: www.citigroup.com/nigeria
AUDITORS
PricewaterhouseCoopers
252E, Muri Okunola Street,
Victoria Island, Lagos
Telephone: +234 (1) 271 1700
Website: www.pwc.com/ng
35ANNUAL REPORT
DIRECTORS’ REPORTFOR THE YEAR ENDED 31 DECEMBER 2011
The directors have pleasure in presenting their annual report on the affairs of Citibank Nigeria Limited (“the Bank”) together
with the financial statements and auditors’ report for the year ended 31 December 2011.
LEGAL FORM
The Bank was incorporated in Nigeria under the Companies Act as a private limited liability company on 2 May 1984. It was
granted a license on 14 September 1984 to carry on the business of commercial banking and commenced business on 14
September 1984.
PRINCIPAL ACTIVITY AND BUSINESS REVIEW
The principal activity of the Bank is the provision of banking services to corporate and individual customers. Such services
include transactional services, corporate finance, provision of finance, custodial business and money market and trading
activities.
The Bank has a subsidiary, Nigeria International Bank Nominees Limited. The company is a nominee company that acts as the
registered holder of securities purchased for customers of the Bank’s Custodial business.
OPERATING RESULTS
Gross earnings increased by 19% and profit before tax of the Bank also increased by 7%. The directors recommend the
approval of a final dividend of N8,241,642,825.55 (N2.95k per share) (2010: N7,682,887,379.75 (N2.75k per share)) from
the outstanding balance in the retained earnings account as at 31 December 2011. The dividends are subject to deduction of
withholding tax.
Highlights of the Bank’s operating results for the year under review are as follows:
2011 2010
N’000 N’000
Gross earnings 24,791,081 20,918,450
Profit before taxation 12,192,183 11,728,301
Taxation (2,460,228) (2,674,075)
Profit after taxation 9,731,955 9,054,226
APPROPRIATIONS
Transfer to statutory reserve (1,459,793) (1,358,134)
Transfer to retained earnings (8,272,162) (7,696,092)
- -
36 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
DIRECTORS’ SHAREHOLDING
The following directors of the Bank held office during the year and had direct and indirect interests in the issued share capital
of the Bank as recorded in the register of directors’ shareholding and/or as notified by the directors for the purposes of
sections 275 and 276 of the Companies and Allied Matters Act, as noted below:
Shareholding
Director Position Date of appointment/ Number of Number of
Resignation Ordinary Shares Ordinary Shares
held held
2011 2010
Mr. Olayemi Cardoso Chairman - -
Mr. Emeka Emuwa Managing Director - -
Mrs. Funmi Ogunlesi Executive Director - -
Mr. Fatai Karim Executive Director - -
Mr. Ade Ayeyemi Non-Executive Director - -
Mr. Khalid Qurashi
(British) Non-Executive Director - -
Mr. Naveed Riaz
(American) Non-Executive Director - -
Chief Arthur Mbanefo Independent Director - -
Prof. Yemi
Osinbajo S.A.N. Independent Director - -
Mr. Michael
Murray-Bruce Non-Executive Director - -
Dr. Hilary Onyiuke Non-Executive Director - 33,445,769
Mr. Emeka Okonkwo Executive Director Resigned WEF September 30 2011 - -
Mr. Tariq Masaud
(Pakistani) Executive Director - -
Mr. Omar Hafeez
(Pakistani) Executive Director - -
Dr. Hilary Onyiuke’s shareholding of 33,445,769 ordinary shares is now held through Gauthier Investments Ltd.
Mr. Olayemi Cardoso is a representative of the Estate of F.B. Cardoso which has a shareholding of 30,196,109 ordinary shares.
Mr. Michael Murray-Bruce is a representative of Manilla Properties Limited which has a shareholding of 6,490,360 ordinary
shares.
Since the last Annual General Meeting, Mr. Emeka Okonkwo resigned from the board.
The directors to retire by rotation at the next Annual General Meeting (AGM) are Mr Yemi Cardoso, Mr. Naveed Riaz, Mr Khalid
Qurashi and Mr Ade Ayeyemi, who being eligible, offer themselves for re-election.
PROPERTY AND EQUIPMENT
Information relating to changes in property and equipment is given in Note 17 to the financial statements. In the directors’
opinion, the market value of the Bank’s properties is not less than the value shown in the financial statements.
37ANNUAL REPORT
SHAREHOLDING ANALYSIS
The shareholding pattern of the Bank as at 31 December 2011 is as stated below:
Share Range No. of Percentage of No. of Holdings Percentage
Shareholders Shareholders (%) Holdings
500,001 – 1,000,000 1 3.85% 950,011 0.03%
1,000,001 – 5,000,000 - - - -
5,000,001 – 10,000,000 5 19.23% 34,365,234 1.23%
10,000,001 – 50,000,000 18 69.22% 409,856,643 14.68%
50,000,001 – 100,000,000 1 3.85% 60,416,666 2.16%
100,000,001 – 500,000,000 - - - -
500,000,001 – 1,000,000,000 - - - -
Foreign Shareholders
Above 1,000,000,000 1 3.85% 2,288,188,675 81.90%
TOTAL 26 100% 2,793,777,229 100%
SUBSTANTIAL INTEREST IN SHARES
According to the register of members as at 31 December 2011, no shareholder held more than 5% of the issued share capital
of the Bank, except the following:
Shareholder No. of shares held Percentage of shareholding
Citibank Overseas Investment Corporation 2,288,188,675 81.90%
DIRECTORS
Directors’ remuneration was paid as follows
2011 2010
N’000 N’000
Fees and sitting allowances 36,600 29,050
Other emoluments 223,300 224,783
259,900 253,833
38 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
DONATIONS AND CHARITABLE GIFTS
The Bank and Citigroup Foundation made contributions to charitable and non-political organizations amounting to N62,910,000
(2010:N42,350,000) during the year as analyzed below:
Citibank Nigeria Limited Donations N
1 Abuja Children’s Home 400,000
2 Arrow of God Orphanage 500,000
3 Atunda Olu School 750,000
4 Care Organization Public Enlightenment (COPE) 500,000
5 CCWA International 400,000
6 Chesire Home (Borokiri) 500,000
7 Child Life Line (Yaba & Ikorodu) 700,000
8 Children Emergency Relief Foundation 500,000
9 City of Refuge 400,000
10 Compassion Home 500,000
11 Down Syndrome Association of Nigeria 500,000
12 Green Pasture and Home Initiative 500,000
13 Heart of Gold Children’s Hospice 1,000,000
14 Medical Missionaries of Mary Hospital (Lugbe) 400,000
15 Modupe Cole Memorial Child Care and Treatment Home 1,000,000
16 National Orthopedic Special School (Igbobi) 500,000
17 Ngwa Road Motherless Babies Home 400,000
18 Nigerian Red Cross 500,000
19 Our Lady of Mercy Orphanage 400,000
20 Pacelli School (For the Blind) 500,000
21 Port-Harcourt Children’s Home (formerly Motherless Babies Home, Borokiri) 500,000
22 Right Steps Incorporated 400,000
23 Rosali Home Rehabilitation Centre (Eleme, PH) 500,000
24 Seventh Day Adventist Motherless Babies Home 400,000
25 Sickle Cell Club 500,000
26 SOS Children’s Village 500,000
27 St. Anne’s Orphanage 400,000
28 Start Right Consulting 400,000
29 The Book Trust 400,000
30 The Child 500,000
31 Wesley School 1 (For Deaf Children) 500,000
32 Wesley School 2 (For Deaf Children) 500,000
Sub Total 16,350,000
Citi Foundation Grants N
1 Fate Foundation 4,800,000
2 Growing Business Foundation 8.000,000
3 Hope Worldwide 6,560,000
4 Junior Achievement 8,000,000
5 Leadership, Effectiveness, Accountability and Professionalism (LEAP) Africa 4,800,000
6 Citi Microenterprise Development for Rural Farmers Initiative 14,400,000
Sub Total 46,560,000
Total 62,910,000
39ANNUAL REPORT
POST BALANCE SHEET EVENTS
There were no post balance sheet events which could have a material effect on the financial position of the Bank as at 31
December 2011 or the profit for the year ended on that date that have not been adequately provided for or disclosed.
EMPLOYMENT OF DISABLED PERSONS
The Bank continues to maintain a policy of giving fair consideration to application for employment made by disabled persons
with due regard to their abilities and aptitudes. The Bank’s policies prohibit discrimination against disabled persons in the
recruitment, training and career development of employees. In the event of members of staff becoming disabled, efforts will
be made to ensure that their employment with the Bank continues and appropriate training arranged to ensure that they fit
into the Bank’s working environment.
HEALTH, SAFETY AND WELFARE AT WORK
The Bank enforces strict health and safety rules and practices at the work environment, which are reviewed and tested
regularly. In addition, medical facilities are provided for staff and their immediate families at the Bank’s expense.
Fire prevention and fire-fighting equipment are installed in strategic locations within the Bank’s premises.
The Bank operates both Group Personal Accident and Workmen’s Compensation Insurance cover for the benefit of its
employees. It also operates a contributory pension plan in line with the Pension Reform Act, 2004.
EMPLOYEE INVOLVEMENT AND TRAINING
The Bank ensures, through various fora, that employees are informed on matters concerning them. Formal and informal
channels are also employed in communication with employees with an appropriate two-way feedback mechanism.
In accordance with the Bank’s policy of continuous development, the Bank draws extensively on Citigroup’s training
programmes around the world. The programmes include on the job training, classroom sessions and web-based training
programmes which are available to all staff. In addition, employees of the Bank are nominated to attend both locally and
internationally organized courses.
DIVERSITY IN EMPLOYMENT
The bank recognises that the recruitment, involvement and advancement of women and a diverse workforce are business
imperatives. During the financial year ended 31 December 2011:
• There were 89 women out of 253 employees comprising 35% of the total number of employees;
• There was 1 woman out of 13 Directors on the Board of Directors;
• There were 30 women out of 99 top management staff;
• There were 29 women out of 94 top management staff between Assistant General Manager to General Manager grade;
• There was 1 woman out of 5 top management staff between Executive Director to Chief Executive Officer;
• The bank had no persons with disabilities in its employment.
The bank is committed to maintaining a positive work environment and to conducting business in a positive, professional
manner by consistently ensuring equal employment opportunity. The bank has programs aimed at achieving gender balance
which include developmental programs targeted for women; mentoring; and policies that support Work-Life balance.
AUDITORS
PricewaterhouseCoopers have indicated their willingness to continue in office as auditors in accordance with Section 357(2)
of the Companies and Allied Matters Act.
Charles S. Sankey House BY ORDER OF THE BOARD
27, Kofo Abayomi Street
Victoria Island, Lagos
1 March, 2012 OLUSOLA FAGBURE, Company Secretary
40 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
CORPORATE GOVERNANCE REPORTFOR THE YEAR ENDED 31 DECEMBER 2011
Citibank Nigeria Limited is committed to ensuring the implementation of good corporate governance principles in all its
activities. Citibank Nigeria adheres to Citigroup corporate governance principles and to the provisions of the Central Bank
of Nigeria Code on Corporate Governance for Banks in Nigeria- Post Consolidation (‘the Code’). Corporate governance
compliance is monitored and a monthly report on the Bank’s compliance with the Code is submitted to the Central Bank of
Nigeria. The Bank’s Board of Directors undergoes training in corporate governance best practices.
THE BOARD OF DIRECTORS
The Board of Directors consists of thirteen members comprising the Chairman, the Managing Director, seven Non-Executive
Directors and four Executive Directors. Two of the Non-Executive Directors are Independent Directors, appointed based on
criteria laid down by the CBN. Neither of the Independent Directors has any shareholding interest or business relationship
with the Bank. The Directors and their shareholdings are listed in the Directors’ report.
The Board is responsible for the oversight of executive management, ensuring that the Bank’s operations are conducted in
accordance with legal and regulatory requirements, approving and reviewing corporate strategy and performance, and for
ensuring that the rights of the shareholders are protected at all times. The members of the Board possess the necessary
experience and expertise to exercise their oversight functions.
In accordance with the provisions of the Code, the office and responsibilities of the Chairman and the Managing Director/Chief
Executive are separate.
The Board meets quarterly and additional meetings are convened as required. The Board may take decisions between
meetings by way of written resolution, as provided for in the Articles of Association of the Bank. In 2011 the Board met five
times.
The Board has delegated some of its responsibilities to the following standing board committees: Risk Management Committee,
Audit Committee, Credit Committee and the Board Remuneration Committee. Each of these committees reports to the Board
on its activities. The Chairman of the Board is not a member of any of the board committees.
BOARD COMMITTEES
a) The Risk Management Committee
The Risk Management Committee consists of six directors, two of whom, including the Chairman of the Committee, are Non-
Executive Directors. The Committee is responsible for overseeing the Bank’s Risk Management policies and procedures in the
areas of franchise, operational, credit and market risk. The Committee meets quarterly and met four times during the year.
b) The Credit Committee
The Credit Committee consists of six directors, two of whom, including the Chairman of the Committee are Non- Executive
Directors. The Committee is responsible for approving credits above such limits as may be prescribed by the Board of Directors
from time to time. The Committee meets quarterly and met four times during the year.
c) The Audit Committee
The Audit Committee consists of two shareholders and two non-executive directors. The Chairman of the Committee is a
shareholder.
The Committee’s responsibilities include the review of the integrity of the Bank’s financial reporting, oversight of the
independence and objectivity of the external auditors, the review of the reports of external auditors and regulatory agencies
41ANNUAL REPORT
and management responses thereto, and the review of the effectiveness of the Bank’s system of accounting and internal
control.
During the year the Committee approved the external auditors’ terms of engagement and scope of work and also reviewed the
internal auditor’s audit plan. The Committee received regular internal audit reports from the Bank’s internal auditor. Members
of the Committee have unrestricted access to the Bank’s external auditors.
The Committee meets quarterly and met four times during the year.
d) Executive Directors Remuneration Committee
The Committee is made up of three non-executive directors and is responsible for determining the remuneration of Executive
Directors.
GENERAL MEETINGS
The last Annual General Meeting was held on April 6, 2011. A quorum of shareholders was present at the meeting.
RISK AND CONTROLS
In line with Citigroup policies, the Bank maintains a strong control environment. The internal control system is designed to
achieve efficiency and effectiveness of operations, reliability of financial reporting and compliance with applicable laws and
regulations at all levels of the bank as required by the Code.
Robust risk management policies and mechanisms have been put in place to ensure identification of risk and effective control.
The Board, through the Board Risk Management Committee, oversees the Bank’s risk management policies.
WHISTLE BLOWING PROCEDURES
In line with the Bank’s commitment to instill best corporate governance practices, the Bank has established a whistle
blowing procedure that ensures anonymity. The Bank has a dedicated whistle blowing hotline and e-mail address. The Chief
Compliance Officer forwards monthly returns to the Central Bank of Nigeria on all whistle-blowing reports and corporate
governance breaches.
CODE OF CONDUCT
The Bank has a Code of Conduct which all officers of the Bank are expected to adhere to. All staff are expected to strive to
maintain the highest standards of ethical conduct and integrity in all aspects of their professional life as prescribed in the
Code of Conduct.
MANAGEMENT SUCCESSION
The Bank has a strong management team and a documented succession plan for every executive role within the Bank.
42 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
STATEMENT OF RESPONSIBILITY AND APPROVALFOR THE YEAR ENDED 31 DECEMBER 2011
Responsibility for Annual Financial Statements
In accordance with the provisions of the Companies and Allied Matters Act and the Banks and Other Financial Institutions
Act, the directors are responsible for the preparation of the annual financial statements which give a true and fair view of the
state of affairs of the Bank at the end of the year and of the profit or loss for the year then ended. The responsibilities include
ensuring that:
i. the Bank keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Bank and
comply with the requirements of the Companies and Allied Matters Act and the Banks and Other Financial Institutions Act;
ii. appropriate and adequate internal controls are established to safeguard its assets and to prevent and detect fraud and
other irregularities;
iii. the Bank prepares its financial statements using suitable accounting policies supported by reasonable and prudent
judgements and estimates, that are consistently applied; and
iv. it is appropriate for the financial statements to be prepared on a going concern basis.
The directors accept responsibility for the annual financial statements, which have been prepared using appropriate
accounting policies supported by reasonable and prudent judgements and estimates, in conformity with,
- Nigerian Accounting Standards;
- Prudential Guidelines for Licensed Banks;
- relevant circulars issued by the Central Bank of Nigeria;
- the requirements of the Banks and Other Financial Institutions Act; and
- the requirements of the Companies and Allied Matters Act.
The directors are of the opinion that the financial statements give a true and fair view of the state of the financial position of
the Bank and of its financial performance and cash flows for the year.
The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the
preparation of financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the directors to indicate that the Bank will not remain a going concern for at least twelve
months from the date of this statement.
SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:
OLAYEMI CARDOSO EMEKA EMUWA
Chairman Managing Director
1 March 2012
43ANNUAL REPORT
REPORT OF THE AUDIT COMMITTEEFOR THE YEAR ENDED 31 DECEMBER 2011
To the members of Citibank Nigeria Limited.
The members of the Board Audit Committee of Citibank Nigeria Limited hereby report as follows:
• We have exercised the responsibilities assigned to the Board Audit Committee by the Central Bank of Nigeria’s Code
of Corporate Governance for Banks and acknowledge the co-operation of management and staff in the conduct of
these responsibilities. We are of the opinion that the accounting and reporting policies of the Bank are in accordance
with legal requirements and agreed ethical practices and that the scope and planning of both the external and inter-
nal audits for the year ended 31 December 2011 were satisfactory and reinforce the Bank’s internal control systems.
• We are satisfied that the Bank has complied with the provisions of Central Bank of Nigeria circular BSD/1/2004
dated 18 February 2004 on “Disclosure of insider related credits in the financial statements of banks”, and hereby
confirm that there is no outstanding credit exposure as at 31 December 2011 (31 December 2010: Nil).
• We have deliberated with the External Auditors, who have confirmed that necessary cooperation was received from
Management in the course of their statutory audit and we are satisfied with management’s responses to the Exter-
nal Auditor’s recommendation for improvement and with the effectiveness of the Bank’s system of accounting and
internal control.
• We are satisfied that the Bank has put in place strong internal control structures and the level of compliance is
considered satisfactory.
CHIEF EDET JAMES AMANA
Chairman, Audit Committee
1 March 2012
Members of the Audit Committee are:
1. Chief Edet James Amana - Chairman
2. Mr. Michael Murray-Bruce
3. Chief Arthur C.I. Mbanefo
4. Chief Abel Ubeku
46 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER 2011
A summary of the principal accounting policies, applied consistently throughout the current and prior year is set out below.
(a) Basis of accounting
The financial statements are prepared under the historical cost convention, modified by the revaluation of certain investment
securities and comply with the Statements of Accounting Standards issued by the Financial Reporting Council. They have
also been prepared in the manner required by the Companies and Allied Matters Act of Nigeria, Banks and Other Financial
Institutions Act of Nigeria and relevant Central Bank of Nigeria circulars.
The results of Nigeria International Bank Nominees Limited have not been consolidated in these separate financial statements
of the Bank. In addition, the Bank has prepared consolidated financial statements for the Group for the year ended 31 December
2011 that provides full information on Group as a whole.
(b) Cash and short-term funds
Cash and short-term funds comprise cash balances on hand, cash deposited with the Central Bank of Nigeria (CBN), cash
deposited with other banks (local and foreign), placements with local and foreign banks, which are subject to insignificant risk
of changes in their carrying value.
(c) Investment securities
Investment securities are classified as either short-term or long-term. Investment securities are initially recognised at cost
and management determines the classification at initial investment.
Short term investments
Short-term investments comprise investments in marketable securities like bonds and treasury bills issued by the Federal
Government of Nigeria. In addition, Management intends to hold such securities for not more than one year. Short-term
investments are carried at lower of cost and market value. Gains or losses resulting from market valuation are recognised in
the profit and loss account.
Treasury bills not held for trading are presented net of unearned discount. Unearned discount is deferred and amortised as
earned. Interest earned while holding short term securities is recognised as interest income.
Long term investments
Long-term investments are investments securities other than short-term investments and may include debt and equity
securities.
Long-term debt securities are carried at cost, with disclosures made in the financial statements of their market valuation,
unless a permanent decline in value occurs, when the carrying amount is written down to recognise the loss.
Long-term equity instruments are carried at cost, with disclosures of market value, unless a permanent decline in value
occurs, when the carrying amount is written down to recognise the loss.
Such loss is charged to the profit and loss account. Subsequent gains on a long-term investment against which previous
provisions had been made is credited to the profit and loss account to the extent of such provisions previously charged in
order to restore the carrying amount to the original cost. A decline in the market value of investment securities is not taken
into account unless it is considered to be permanent.
Interest earned on investment securities are reported as interest income, while dividend received is reported as dividend
income.
47ANNUAL REPORT
Any discount or premium arising on acquisition of bonds is included in the original cost of the investment and is amortised
over the period of purchase to maturity.
(d) Loans and advances
Loans and advances are stated net of provision for bad and doubtful loans.
Classification and Provisioning of non performing accounts is made in accordance with the Prudential Guidelines for Deposit
Money Banks in Nigeria issued by the Central Bank of Nigeria from a specific assessment of each customer’s account as
stated below:
Period Interest and / or Principal has been outstanding Classification % Provision required
90 days but less than 180 days Substandard 10%
180 days but less than 360 days Doubtful 50%
Over 360 days Lost 100%
Bad debts are written off against the related provision for bad and doubtful debts when it is determined that they are
uncollectible. Subsequent recoveries on bad debts written off are credited to the profit and loss account.
Unrealized mark-up/interest in respect of non-performing loans and advances are reversed from revenue account and
recognised in the interest in suspense account where they are deferred until they are realised in cash. Suspended interest
is recognised in the profit and loss account in the year in which cash is received. Future interest charged on the accounts is
credited to the interest in suspense account until such facilities become performing.
General Provision
In accordance with Statement of Accounting Standards for Banks and Non-Bank Financial Institutions (SAS 10), a minimum of
1% general allowance is made on all loans and advances, which have not been specifically provided for.
(e) Advances under finance lease
Advances under finance lease are stated net of unearned lease finance income. Lease finance income is recognised in a
manner, which provides a constant yield on the outstanding net investment over the lease period.
In accordance with Statement of Accounting Standards for Banks and Non-Bank Financial Institutions (SAS 10) issued by the
Nigerian Accounting Standards Board, a minimum of 1% general provision is made on the aggregate net investment in finance
lease. Specific provision is made on lease rentals that are doubtful of collection in line with the CBN Prudential Guidelines for
licensed banks and the Bank’s standard policy on loans.
(f) Property, plant and equipment
All property, plant and equipment is initially recorded at cost. They are subsequently stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the asset will flow to the Bank and the cost of the asset can
be measured reliably. All other repairs and maintenance are charged to the profit and loss account during the financial period
in which they are incurred.
Construction costs in respect of offices are carried at cost as work-in-progress. On completion of construction, the related
amounts are transferred to the appropriate category of property, plant and equipment. Payments in advance for items of
property, plant and equipment are included as prepayments in other assets and upon delivery are reclassified as additions
in the appropriate category of property, plant and equipment. No depreciation is charged until the assets are put into use.
48 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(g) Deposit liabilities
Deposit liabilities are the Bank’s sources of debt funding. Deposit liabilities are carried at cost.
(h) Provisions
A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be
estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.
(i) Taxation
Income tax expenses/credits are recognised in the profit and loss account. Current income tax is the expected tax payable on
the taxable income for the year, using statutory tax rates at the balance sheet date.
(j) Deferred taxation
Deferred taxation, which arises from temporary differences in the recognition of items for accounting and tax purposes, is
calculated using the liability method. Deferred tax is provided on timing differences, which are expected to reverse in the
foreseeable future at the rates of tax likely to be in force at the time of reversal.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which
the associated unutilised tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.
(k) Off balance sheet transactions
Transactions to which there are no direct balance sheet risks to the Bank are reported and accounted for as off balance sheet
transactions and comprise:
Acceptance/direct credit substitutes:
Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most
acceptances to be settled simultaneously with the reimbursement from customers.
Acceptances, which meet the conditions set out in Central Bank of Nigeria (CBN) Guidelines on the treatment of Bankers
Acceptances and Commercial Papers, are accounted for and disclosed as contingent liabilities. The income and expense
relating to these acceptances are reported net in the financial statements.
Guarantees and performance bonds:
The Bank provides financial guarantees and bonds to third parties on the request of customers in form of bid and performance
bonds or advance payment guarantees. These agreements have fixed limits and generally do not extend beyond the period
stated in each contract.
The amounts reflected in the financial statements for bonds and guarantees represent the maximum financial loss that would
be recognised at the balance sheet dates if counterparties failed completely to perform as contracted.
Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual values
over their estimated useful lives as follows:
Leasehold improvements Over the lease period
Building 50 years
Furniture and equipment 5 years
Computers and computer equipment 3 years
Motor vehicles 4 years
• Capital work-in-progress is not depreciated.
• Gains or losses on the disposal of fixed assets are included in the profit and loss account.
49ANNUAL REPORT
Transaction-related off-balance sheet engagements:
Transaction related contingencies comprise letters of credit and commitments to deliver on sales and/or purchase of foreign
exchange in the future.
(i) Letters of credit
The Bank provides letters of credit to guarantee the performance of customers to third parties. Confirmed letters of
credit for which the customer has not provided cash cover are reported as off balance sheet.
(ii) Commitments to deliver on sales or purchase of foreign exchange in the future:
Commitments to deliver on sales and/or purchases of foreign exchange transactions in future at contracted rates are
recognised as off balance sheet engagements. Foreign exchange commitments are converted at contracted rates at
the balance sheet date. The spot foreign exchange contracts are recognized as off balance sheet engagements on the
contract date and accounted for at the settlement date.
(l) Income recognition
Income in the profit and loss account is recognised as follows:
• Interest is accrued daily on all interest-bearing assets. Risk assets are classified as non-performing when matured
obligations are overdue for more than 90 days. Interest income arising there from is recognised only to the extent that
cash is received. The income and expense relating to acceptances disclosed as contingent liabilities are reported net in
the financial statements.
• Credit-related fee income is systematically spread over the life of the credit facility.
• Commissions and fees charged to customers for services rendered are recognised at the time the service or transaction
is effected, except for commissions earned on letters of credit, bonds and guarantees, which are amortised over the
life of the letters of credit.
• Dividend income is recognised in profit and loss account when the Bank becomes entitled to the dividend.
• Recoveries of previously written-off loans and advances are written back to profit and loss account on a cash basis.
(m) Foreign currency items
Reporting currency
The financial statements are presented in Nigerian Naira which is the Bank’s reporting currency.
Transactions and balances
Transactions in foreign currencies are translated into Naira at the rates of exchange ruling at the date of each transaction
(or where appropriate the rate of the related forward contracts). Monetary assets and liabilities denominated in foreign
currencies are reported at the rates of exchange prevailing at the balance sheet date. Any gain or loss arising from a change
in exchange rates subsequent to the date of the transaction is included in the profit and loss account.
(n) Pension scheme
The Bank operates a defined contributory pension scheme. The scheme is fully funded and is managed by licensed Pension
Fund Administrators. Membership of the scheme is automatic upon commencement of duties at the Bank. The employee
and the Bank contribute 7.5% each of the employee’s annual basic salary as well as housing and transport allowances to the
scheme. The Bank’s contributions to this scheme are charged to profit and loss account in the period to which they relate.
(o) Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by
the weighted average number of ordinary shares outstanding during the year.
(p) Segment reporting
The Bank defines a segment as a distinct or distinguishable unit of the Bank that is engaged in providing financial products or
services subject to risks and rewards that are different from those of other segments. The Bank’s primary format for segment
reporting is based on business segments. The Bank currently operates in one geographical segment, which is Nigeria and, as
such, does not have a secondary segment reporting format.
50 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(q) Dividend on ordinary shares
Dividend on ordinary shares is appropriated from retained earnings in the year they are approved by the Bank’s shareholders.
Dividend per share is calculated based on the declared dividend during the year and the number of shares in issue at the date
of the declaration and qualifying for dividend.
Dividend for the current year that is approved by the Directors after the balance sheet date are disclosed in the subsequent
events note to the financial statements.
Dividend proposed by the Directors’ but not yet approved by members is disclosed in the financial statements in accordance
with the requirements of the Companies and Allied Matters Act of Nigeria.
(r) Contingent assets and contingent liabilities
i. Contingent assets
Contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank.
Contingent assets are disclosed in the financial statements when they arise.
ii. Contingent liabilities
Contingent liability is a probable obligation that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank.
Contingent liabilities are disclosed in the financial statements. However they are recognized, if it is probable that an
outflow of economic resources will be required to settle the obligation and the amount can be reliably estimated.
51ANNUAL REPORT
The directors have proposed a dividend of N8,241,642,825.55 (N2.95k per share) (2010: N7,682,887,379.75 (N2.75k per
share)) from the outstanding balance in the retained earnings account as at 31 December 2011.
The statement of significant accounting policies and accompanying notes form an integral part of these financial statements.
PROFIT AND LOSS ACCOUNTSFOR THE YEAR ENDED 31 DECEMBER 2011 Notes 2011 2010
N’000 N’000
Gross earnings 24,791,081 20,918,450
Interest and similar income 3 15,933,715 11,613,948
Interest and similar expense 4 (2,880,533) (2,421,609)
Net interest income 13,053,182 9,192,339
Fees and commission income 5 4,536,374 4,337,629
Foreign exchange income 2,962,327 2,702,381
Income from investments 6 1,240,470 2,147,852
Other income 118,195 116,640
Operating income 21,910,548 18,496,841
Operating expenses 7(b) (9,340,903) (7,872,421)
(Allowance)/Write-back on risk assets 12(h) (377,462) 1,103,881
PROFIT BEFORE TAXATION 7(a) 12,192,183 11,728,301
Taxation 8(b) (2,460,228) (2,674,075)
PROFIT AFTER TAXATION 9,731,955 9,054,226
APPROPRIATIONS:
Transfer to statutory reserve 26 1,459,793 1,358,134
Transfer to retained earnings 26 8,272,162 7,696,092
9,731,955 9,054,226
Earnings per share 33 348K 324k
Declared dividend per share 32(a) 275k 350k
52 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
BALANCE SHEETAS AT 31 DECEMBER 2011
Notes 2011 2010
N’000 N’000
ASSETS
Cash and balances with central banks 9 13,420,668 2,983,740
Treasury bills 10 13,056,586 3,012,113
Due from other banks 11 212,273,652 144,998,390
Loans and advances to customers 12 56,904,102 43,833,016
On-lending facilities 13 1,735,265 322,500
Advances under finance lease 14 99,492 62,376
Investment securities 15 70,762,197 55,654,073
Other assets 16 447,076 4,939,766
Property, plant and equipment 17 2,656,924 3,106,370
371,355,962 258,912,344
LIABILITIES
Customer deposits 18 309,646,558 206,134,576
Due to other banks 19 248,008 378,104
On-lending liabilities 20 2,486,000 344,000
Provisions 21 58,488 8,488
Current income tax 8(a) 2,669,074 2,525,410
Other liabilities 22 12,156,168 7,208,701
Deferred taxation 23 293,972 537,740
Retirement benefit obligations 24 10,894 37,592
327,569,162 217,174,611
EQUITY
Share capital 25 2,793,777 2,793,777
Share premium 11,643,995 11,643,995
Statutory reserves 26 12,555,274 11,095,481
Retained earnings 26 13,452,846 12,863,572
SMEIS reserve 26 3,340,908 3,340,908
43,786,800 41,737,733
TOTAL EQUITY AND LIABILITIES 371,355,962 258,912,344
Acceptances, bonds, guarantees and other obligations
for the account of customers 27(b) 95,781,599 53,150,071
The accounting policies on pages 46 to 50 and financial statements and notes on pages 54 to 92 were approved by the Board
of Directors on 1 March 2012 and signed on its behalf by:
OLAYEMI CARDOSO EMEKA EMUWA
Chairman Managing Director
53ANNUAL REPORT
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011
Notes 2011 2010
N’000 N’000
OPERATING ACTIVITIES
Net cash flow from operating activities
before changes in operating assets 30 13,195,365 11,062,367
Changes in operating assets 31 90,403,692 73,388,228
Income tax paid 8(a) (2,560,332) (3,612,318)
Value added tax paid 31 (276,814) (194,638)
Net cash generated from operating activities 100,761,911 80,643,639
FINANCING ACTIVITIES
Dividend paid 26 (7,682,888) (9,778,220)
Net cash from financing activities (7,682,888) (9,778,220)
INVESTING ACTIVITIES
Purchase of property and equipment 17 (286,240) (697,211)
Purchase of long-term investments 15(d) (22,033,713) (35,064,547)
Redemption of long-term bonds 15(d) 9,466,000 1,221,026
Dividend received 6 41,924 32,630
Proceeds from sale of long-term investments 11,549 27,914
Proceeds from sale of property and equipment 68,042 282,155
Net cash from investing activities (12,732,438) (34,198,033)
Net increase in cash and cash equivalents 80,346,585 36,667,386
Cash and cash equivalents, beginning of year 34 150,133,596 113,466,210
Cash and cash equivalents, end of year 34 230,480,181 150,133,596
The statement of significant accounting policies and accompanying notes form an integral part of these financial statements.
54 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011
1. GENERAL INFORMATION
Citibank Nigeria Limited (“the Bank”) was incorporated in Nigeria on 2 May 1984 under the Companies & Allied Matters Act of
Nigeria as a private limited liability company. The Bank was granted its banking license on 14 September 1984.
The Bank has one subsidiary company, Nigeria International Bank Nominees Limited.
2. SEGMENT ANALYSIS
The segment information is presented in respect of the Bank’s business segments. The Bank operates the following main
business segments:
Corporate Banking - Includes loans, deposits and other transactions and balances with corporate customers.
Commercial Banking - Includes loans, deposits and other transactions and balances with medium sized customers.
Financial Institutions - Includes transactions in investment and trading securities, interbank placements and takings,
loans, deposits and other transactions and balances majorly with other financial institutions.
The bank’s business reporting information comprises:
Corporate banking Commercial banking Financial institutions Total
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
2011 2010 2011 2010 2011 2010 2011 2010
REVENUE
Gross revenue
5,648,537 7,035,785 6,140,879 5,215,680 13,001,665 8,666,985 24,791,081 20,918,450
Total revenue
5,648,537 7,035,785 6,140,879 5,215,680 13,001,665 8,666,985 24,791,081 20,918,450
Operating Income
4,934,730 6,596,422 4,701,730 4,201,630 12,274,088 7,698,789 21,910,548 18,496,841
Profit before tax
2,861,613 4,780,468 1,568,544 2,150,857 7,762,026 4,680,854 12,192,183 11,728,301
Income tax expense
(2,460,228) (2,674,075)
Profit for the year
2,298,308 3,727,418 1,259,778 1,677,062 6,173,869 3,649,746 9,731,955 9,054,226
ASSETS AND LIABILITIES
Segment assets
19,973,033 29,483,265 35,101,407 14,816,608 316,281,522 214,612,471 371,355,962 258,912,344
Segment liabilities
91,308,960 52,233,868 228,210,739 164,151,297 8,049,462 789,446 327,569,162 217,174,611
OTHER SEGMENT INFORMATION
Depreciation 159,878 239,241 173,813 187,746 359,643 281,156 693,334 708,143
55ANNUAL REPORT
3. INTEREST AND SIMILAR INCOME
Interest and similar income comprises:
2011 2010
N’000 N’000
TYPE:
Placements 4,093,878 2,090,677
Treasury bills and investment securities 6,392,965 3,867,796
Loans and advances 5,436,852 5,648,331
Advances under finance leases 10,020 7,144
15,933,715 11,613,948
SOURCE:
Interest income earned from Banks 10,486,843 5,958,473
Interest income earned from Non-Banks 5,446,872 5,655,475
15,933,715 11,613,948
GEOGRAPHICAL LOCATION:
Interest income earned in Nigeria 15,380,210 11,417,884
Interest income earned outside Nigeria 553,505 196,064
15,933,715 11,613,948
4. INTEREST AND SIMILAR EXPENSE
Interest expense comprises:
2011 2010
N’000 N’000
Current accounts 812,443 644,002
Savings accounts 1,018 1,031
Time deposits 1,352,875 836,428
Inter-bank takings 188,799 243,700
Borrowed funds 9,523 893
Cash call deposit 16,529 18,028
Net premium on investment securities 499,346 677,527
2,880,533 2,421,609
SOURCE:
Interest expense paid to Banks 786,022 949,214
Interest expense paid to Non-Banks 2,094,512 1,472,395
2,880,533 2,421,609
2011 2010
N’000 N’000
GEOGRAPHICAL LOCATION:
Paid in Nigeria 2,815,355 2,377,308
Paid outside Nigeria 65,178 44,301
2,880,533 2,421,609
56 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
5. FEES AND COMMISSION INCOME
2011 2010
N’000 N’000
Credit related fees 762,727 816,115
Commission on turnover 1,072,340 967,739
Commission on off-balance sheet transactions 180,462 127,894
Remittance fees 327,723 313,570
Letters of credit commissions and fees 1,049,893 1,040,192
Other fees and commissions 1,143,229 1,072,119
4,536,374 4,337,629
6. INCOME FROM INVESTMENTS
2011 2010
N’000 N’000
Dividend income 41,924 32,630
Profit on sale of securities 1,198,546 2,115,222
1,240,470 2,147,852
7. PROFIT BEFORE TAXATION
(a) Profit before taxation was arrived at after charging/ (crediting) the following:
2011 2010
N’000 N’000
Depreciation on property and equipment 693,334 708,143
Auditor’s remuneration 45,000 47,900
Gain on disposal of property and equipment (25,690) (261,455)
(b) Analysis of operating expenses:
2011 2010
N’000 N’000
Staff costs (see note (29(a)) 4,436,224 4,225,201
Directors’ emoluments (see note (29(b)) 259,900 253,833
Deposit insurance premium 1,001,522 738,631
Depreciation (see note 17) 693,334 708,143
Outsourced services 585,250 505,464
Communications 91,010 129,520
Transport and travel 160,164 113,419
Rentals 57,887 62,264
Auditor’s remuneration 45,000 47,900
Repairs and maintenance 143,907 136,637
Utilities 189,684 154,230
Postages and Supplies 131,909 120,793
Banking sector resolution cost (see note 22 (b)) 776,737 -
Other administrative expenses 768,375 676,386
9,340,903 7,872,421
57ANNUAL REPORT
8. TAXATION
(a) The movement in taxation payable during the year was as follows:
2011 2010
N’000 N’000
At 1 January 2,525,410 3,600,987
Payments during the year (2,560,332) (3,612,318)
Current year charge (see note (b) below) 2,703,996 2,536,741
At 31 December 2,669,074 2,525,410
(b) The tax charge for the year comprises:
2011 2010
N’000 N’000
Current tax charge 2,437,229 2,271,297
Education tax 168,959 137,991
Technology levy 118,395 116,122
Prior year under/(over) provision (20,587) 11,331
2,703,996 2,536,741
Deferred taxation (see note 23) (243,768) 137,334
2,460,228 2,674,075
The current tax charge has been computed at the rate of 30% on the profit for the year after adjusting for certain items of
income and expenditure, which are not deductible or chargeable for tax purposes. In addition, it includes 2% education levy
and 1% technology levy for the year.
9. CASH AND BALANCES WITH CENTRAL BANKS
(a) Cash and balances with central bank:
2011 2010
N’000 N’000
Cash 1,513,852 1,235,889
Balances held with Central Bank of Nigeria:
- Current accounts 1,136,091 887,204
- Mandatory reserve deposit (see (b) below) 8,270,725 860,648
- Placement 2,500,000 -
13,420,668 2,983,740
(b) This represents 8% of monthly average daily balances of deposit liabilities (2010: 1% of two weeks average daily balances
of deposit liabilities). Mandatory reserve deposits are not available for use in the Bank’s day to day operations.
58 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
10. TREASURY BILLS
(a) These comprise:
2011 2010
N’000 N’000
Treasury bills – trading 3,863,588 120,940
Treasury bills – non-trading (see (b) below) 9,192,998 2,891,173
13,056,586 3,012,113
(b) Treasury bills – non-trading are stated as follows:
2011 2010
N’000 N’000
Face value (see (c) below) 10,407,910 3,093,206
Unearned income (1,177,371) (164,474)
Revaluation gain/(loss) (37,541) (37,559)
Net investments 9,192,998 2,891,173
(c) Included in the treasury bills are bills amounting to N4,930,000,000 (2010: N1,000,000,000) held by third parties as
collateral for various transactions.
11. DUE FROM OTHER BANKS
2011 2010
N’000 N’000
In Nigeria:
- Current accounts 1,071,053 232,747
- Secured placements (see (a) below) 8,000,000 18,070,504
- Unsecured placements - 12,000,000
Outside Nigeria:
- Current accounts 196,722,782 36,432,815
- Placements with other Citigroup branches 1,149,296 76,058,350
- Placements held on account of customers’ obligations (see (b) below) 5,330,521 2,203,974
212,273,652 144,998,390
(a) This represents placements that have been secured with Federal Government of Nigeria (FGN) bonds.
(b) This represents the Naira value of foreign currencies held on behalf of customers in respect of letter of credit transactions.
The corresponding liability for this amount is included in other liabilities (see note 22).
59ANNUAL REPORT
12. LOANS AND ADVANCES TO CUSTOMERS
(a) The classification of loans and advances is as follows:
2011 2010
N’000 N’000
Overdrafts 22,011,818 18,036,229
Term loans 18,308,750 18,933,337
Others 17,173,859 7,916,884
57,494,427 44,886,450
Loan loss allowance
- Specific (see (f) below) (15,536) (635,360)
- General (see (e) below) (574,789) -
(590,325) (635,360)
Interest in suspense (see (g) below) - (418,074)
(590,325) (1,053,434)
56,904,102 43,833,016
(b) Analysis by security:
- Otherwise secured 10,440,719 3,594,925
- Unsecured 47,053,708 41,291,525
57,494,427 44,886,450
No loans were secured against real estate or shares of quoted companies (2010:Nil).
(c) Analysis by performance:
2011 2010
N’000 N’000
Performing
57,478,891 43,441,370
Non-performing
- substandard - 19,156
- doubtful - 748,812
- lost 15,536 677,112
57,494,427 44,886,450
(d) The maturity profile of loans and advances is as follows:
2011 2010
N’000 N’000
Under 1 month 17,368,649 1,112,119
1 - 3 months 6,747,734 10,360,528
3 - 6 months 10,933,276 4,473,453
6 - 12 months 16,078,307 28,918,258
Over 12 months 6,366,461 22,092
57,494,427 44,886,450
60 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(e) The movement on the general loan loss allowance account during the year was as follows:
2011 2010
N’000 N’000
At 1 January - 432,250
Allowance/(Writeback) during the year (See (h) below) 574,789 (432,250)
At 31 December 574,789 -
(f) The movement on the specific loan loss allowance account during the year was as follows:
2011 2010
N’000 N’000
At 1 January 635,360 1,565,967
Write-back on specific provision (588,005) (901,866)
Allowance during the year 373,698 232,918
Allowance written-off during the year (405,517) (261,659)
At 31 December 15,536 635,360
(g) The movement on the interest in suspense account during the year was as follows:
2011 2010
N’000 N’000
At 1 January 418,074 990,380
Interest suspended during the year - 196,141
Interest recovered (20,075) (187)
Interest written-off (397,999) (768,260)
At 31 December - 418,074
(h) Write-back/ (allowance) on risk assets comprise:
2011 2010
N’000 N’000
Write-back on loans and advances - specific 588,005 901,866
Write-back on loans and advances - general - 432,250
Allowance on loans and advances - specific (373,698) (232,919)
Allowance on loans and advances – general (574,789) -
Allowance on other facilities (see note 13 (b)) (17,528) -
Allowance on advances under finance lease (see note 14(c)) (1,005) 684
Recoveries on loans written off 1,553 2,000
(377,462) 1,103,881
(i) The analysis of non-performing loans and advances and related provisions is as follows:
Number of days past due 2011 2010
N’000 N’000 N’000 N’000
Balance Allowance % Balance Allowance %
90-180 - - 19,156 1,916 10
180-360 15,536 15,536 100 748,812 374,406 50
Over 360 - - 677,112 677,112 100
15,536 15,536 1,445,080 1,053,434
61ANNUAL REPORT
2011 2010
N’000 N’000
Performing 574,789 -
Non-performing 15,536 1,053,434
590,325 1,053,434
(j) The analysis of loan loss allowance and interest in suspense on performing and non-performing loans and advances is as
follows
2011 2010
N’000 N’000
Unsecured 1,752,793 322,500
General allowance (see (b) below) (17,528) -
1,735,265 322,500
13. ON-LENDING FACILITIES
(a) The Bank acted as an intermediary for Bank of Industry (BOI) and Central Bank of Nigeria under the Commercial
Agricultural Credit Scheme (CACS) in respect of loans and advances, the classification of the outstanding balance as at year
end is as follows
(b) The movement on the general loan loss allowance for on-lending facilities during the year was as follows:
2011 2010
N’000 N’000
At 1 January - -
Allowance during the year (see note 12(h)) 17,528 -
At 31 December 17,528 -
(c) The maturity profile of on-lending facilities is as follows:
2011 2010
N’000 N’000
Under 1 month 16,865 21,500
1-3 months 1,064,500 64,500
3-6 months 28,571 64,500
6-12 months 557,143 129,000
Over12 months 85,714 43,000
1,752,793 322,500
(d) All on-lending facilities were performing as at year end.
14. ADVANCES UNDER FINANCE LEASE
(a) The classification of advances under finance lease is as follows:
2011 2010
N’000 N’000
Otherwise secured 100,497 62,376
General allowance (see (c) below) (1,005) -
99,492 62,376
62 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(b) Advances under finance lease are stated as follows:
2011 2010
N’000 N’000
Gross investment 117,873 72,024
Unearned income (17,376) (9,648)
Net investment 100,497 62,376
(c) The movement on allowance for advances under finance lease during the year was as follows:
2011 2010
N’000 N’000
At 1 January - 684
Allowance/ (Write-back) during the year (see note 12(h)) 1,005 (684)
At 31 December 1,005 -
(d) The maturity profile of advances under finance lease is as follows:
2011 2010
N’000 N’000
Under 1 month 758 -
1-3 months 456 -
3-6 months - -
6 - 12 months 2,688 741
Over 12 months 96,595 61,635
100,497 62,376
(e) All advances under finance lease were performing as at year end.
63ANNUAL REPORT
15. INVESTMENT SECURITIES
(a) Long-term investments:
2011 2010
N’000 N’000
UNLISTED EQUITY SECURITIES AT COST:
Nigeria International Debt Fund (NIDF) Notes (see note (e) below) 298,700 298,700
SME companies (See note (f) below) 566,498 578,047
Nigeria Interbank Settlement System (NIBSS) (see note (g) below) 47,548 47,548
Valucard Nigeria Plc (See note (h) below) 23,019 23,019
Central Securities Clearing System Limited (See note (i) below) 6,000 6,000
Nigeria International Bank Nominee Limited (see (k) below) 1,000 1,000
942,765 954,314
Allowance for impaired investments (see (c) below) (92,419) (92,419)
850,346 861,895
DEBT SECURITIES AT COST:
Investments in Federal Government of Nigeria (FGN) bonds (see (l) below) 58,958,661 46,390,948
59,809,007 47,252,843
(b) Short-term investments:
FGN bonds - trading 3,363,102 481,020
Government of Ghana bonds - trading - 2,445,994
FGN bonds – Non-trading 7,590,088 5,474,216
10,953,190 8,401,230
Total investment securities 70,762,197 55,654,073
(c) The movement on the allowance for impaired investments during the year was as follows:
2011 2010
N’000 N’000
At 1 January 92,419 92,419
Allowance during the year - -
Write-back during the year - -
At 31 December 92,419 92,419
(d) Movement in long-term investments
At 1 January 47,252,843 13,467,126
Additions 22,033,713 35,064,547
Disposals (11,549) (22,179)
Redemption of long term bonds (9,466,000) (1,221,026)
Investment written off - (35,625)
At 31 December 59,809,007 47,252,843
64 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(e) The market and net asset values of the investment in NIDF notes at the balance sheet date were N567,394,025.14 (2010:
N134,712,251) and N596,388,024.81 (2010: N535,069,110) respectively.
(f) This represents the Bank’s direct equity investment and convertible loan stock in Accion Microfinance of N398.020million
(2010: N397.998million) and indirect equity investment in Falcongaz Limited, Alvac Company Limited, Freezone Plant
Fabrication International, Impex Worldwide, Nigerian Starch Mills Limited, Orbital Track & Fleet Management, and Weltek
Limited through SME II Partnership. Net investments of N11.57million (2010: N22.179 million added) were exited during the year.
(g) This represents the Bank’s 4.00% equity participation in Nigerian Interbank Settlement System Plc.
(h) This represents the Bank’s 3.27 % equity investment in Valucard Nigeria Plc.
(i) This represents the Bank’s 1.06% equity investment in Central Securities Clearing System Limited.
(j) There was no movement on the provision on long-term investments during the year.
(k) There was no additional commitment paid to Nigeria International Bank Nominees Limited during the year. Nigeria
International Bank Nominees Limited commenced business in August 2008 to hold in its name securities purchased for the
Bank’s custody business clients.
The results of Nigeria International Bank Nominees Limited have not been consolidated in these separate financial statements
of the Bank.
(l) This represents investments in Federal Government of Nigeria bonds with outstanding tenor to maturity exceeding one
year and not held for trading. The maturity date of these bonds range from January 2013 to July 2017 with interest rates
ranging from 4.22% to 15.3%. The market value of the bonds is N51,672,157,300 (2010: N43,315,578,590).
(m) The directors are of the opinion that adequate allowance has been made for the diminution in the value of long-term
investments at the balance sheet date.
16. OTHER ASSETS
(a) Other assets comprise:
2011 2010
N’000 N’000
FGN bonds sold under open buy-back transactions - 4,500,000
Interest receivable on placements 7,438 101,826
Prepayments 371,233 204,258
Receivables 1,944 84,831
Fees and commissions receivable 62,935 45,659
Prepaid interest and discounts 3,526 3,192
447,076 4,939,766
65ANNUAL REPORT
17. PROPERTY, PLANT AND EQUIPMENT
(a) The movement on these accounts during the year was as follows:
Leasehold Computer
Improvements, Equipment,
Land & Furniture & Motor
Buildings Equipment Vehicles Total
N’000 N’000 N’000 N’000
COST:
At 1 January 1,911,082 3,198,802 779,734 5,889,618
Additions - 106,111 180,129 286,240
Disposals - (119,661) (230,949) (350,610)
At 31 December 1,911,082 3,185,252 728,914 5,825,248
ACCUMULATED DEPRECIATION:
At 1 January 162,998 2,190,713 429,537 2,783,248
Charge for the year 38,222 473,685 181,427 693,334
Disposals - (103,456) (204,802) (308,258)
At 31 December 201,220 2,560,942 406,162 3,168,324
NET BOOK VALUE:
At 31 December 1,709,862 624,310 322,752 2,656,924
At 1 January 1,748,084 1,008,089 350,197 3,106,370
(b) As at 31 December 2011, there were no authorised and committed contracts (2010: Nil).
18. CUSTOMER DEPOSITS
(a) Deposits and other accounts comprise:
2011 2010
N’000 N’000
Demand 82,972,342 63,863,729
Savings 50,466 135,704
Term 28,206,127 30,105,652
Domiciliary 198,392,708 111,993,253
Electronic purse 24,915 36,238
309,646,558 206,134,576
(b) The maturity profile of deposits and other accounts is as follows:
Under 1 month 306,619,444 198,326,400
1 - 3 months 2,374,556 1,816,717
3 - 6 months 135,000 197,119
6 - 12 months 517,558 4,991,069
1 - 5 years - 5,563
Over 5 years - 797,708
309,646,558 206,134,576
66 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
19. DUE TO OTHER BANKS
2011 2010
N’000 N’000
Current balances with banks 248,008 378,104
248,008 378,104
20. ON-LENDING LIABILITIES
(a) On-lending liabilities comprise:
2011 2010
N’000 N’000
Bank of Industry 986,000 344,000
Central Bank of Nigeria (CACS) 1,500,000 -
2,486,000 344,000
(b) i. On-lending liability from Bank of Industry (BOI) for which a management fee of 1% is charged and is secured with
Nigerian Treasury bills with face value not less than 100% of the facility and is repayable quarterly expiring in July 2013.
ii. On-lending liabilities from Central Bank of Nigeria under the Commercial Agricultural Credit Scheme (CACS) are
repayable after one year and expiring in September 2012.
(c) The maturity profile of on-lending liabilities is as follows:
2011 2010
N’000 N’000
Under 1 month 750,071 43,000
1-3 months 1,064,500 64,500
3-6 months 28,571 64,500
6-12 months 557,144 129,000
Over 12 months 85,714 43,000
2,486,000 344,000
21. PROVISIONS
(a) Provisions comprise:
2011 2010
N’000 N’000
Legal reserves (see note 21 (b)) 58,488 8,488
58,488 8,488
b) Increase in legal reserve due to additional litigation claim against the bank.
67ANNUAL REPORT
22. OTHER LIABILITIES
Other liabilities comprise:
2011 2010
N’000 N’000
Customers’ deposits for letters of credit (see Note 11 (b)) 5,330,521 2,203,974
Deposits for foreign exchange 378,433 10,335
Managers’ cheques 3,139,690 3,118,433
Accrued expenses 940,725 1,119,221
Banking sector resolution cost 776,737 -
Unearned income 235,447 267,953
Interest payable 241,648 134,550
Gratuity payable (see note 22(b) below) 112,897 126,317
Collections 121,186 32,170
Others 878,884 195,748
12,156,168 7,208,701
a) Gratuity payable
Effective from 1 July 2005, the gratuity scheme was terminated and replaced by a pension plan. Under the terms of the
termination, amounts payable to employees will be paid when such employees leave the service of the Bank and the amount
payable is calculated on a pro-rata basis.
(b) Banking sector resolution cost
The provision for the banking sector resolution cost is based on 0.3% of the bank’s total assets as of 31 December 2010. The
provision is made in compliance with the Memorandum of Understanding in relation to the Establishment and funding of the
Banking Sector resolution cost sinking fund.
23. DEFERRED TAXATION
(a) Movement on deferred tax account during the year was as follows:
2011 2010
N’000 N’000
At 1 January 537,740 400,406
(Credit)/Charge during the year (note 8 (b)) (243,768) 137,334
At 31 December 293,972 537,740
(b) The Bank’s exposure to deferred tax has been fully provided for in the financial statements. Deferred taxes are attributable
to timing differences arising between the tax bases of assets and liabilities and their carrying values largely due to property
and equipment. The directors are of the opinion that these timing differences are likely to reverse in the foreseeable future.
68 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
24. RETIREMENT BENEFIT OBLIGATIONS
(a) The balance on retirement benefit obligations at the end of the year comprise:
2011 2010
N’000 N’000
Defined contribution 10,894 37,592
10,894 37,592
(b) The Bank and its employees make a joint contribution of 15% (7.5% each) of basic salary, housing and transport allowance
to each employee’s retirement savings account maintained with their respective nominated pension fund administrators.
The movement on retirement benefit obligation account during the year was as follows:
2011 2010
N’000 N’000
At 1 January 37,592 45,384
Employee contribution 169,101 159,999
Charge to profit and loss 169,536 114,615
Remittances during the year (365,335) (282,406)
At 31 December 10,894 37,592
25. SHARE CAPITAL
(a) Share capital comprises:
2011 2010
N’000 N’000
AUTHORISED:
3.0 billion Ordinary shares of N1.00 each 3,000,000 3,000,000
ISSUED AND FULLY PAID:
2.794 billion Ordinary shares of N1.00 each 2,793,777 2,793,777
26. RESERVES
The movements on these accounts during the year were as follows:
Statutory Retained SMEIS
2011 reserve earnings reserve Total
N’000 N’000 N’000 N’000
At 1 January 11,095,481 12,863,572 3,340,908 27,299,961
Transfer from profit and loss account 1,459,793 8,272,162 - 9,731,955
Dividend paid - (7,682,888) - (7,682,888)
At 31 December 12,555,274 13,452,846 3,340,908 29,349,028
Statutory Retained SMEIS
2010 reserve earnings reserve Total
N’000 N’000 N’000 N’000
At 1 January 9,737,347 14,945,700 3,340,908 28,023,955
Transfer from profit and loss account 1,358,134 7,696,092 - 9,054,226
Dividend paid - (9,778,220) - (9,778,220)
At 31 December 11,095,481 12,863,572 3,340,908 27,299,961
69ANNUAL REPORT
Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by s16(1)
of the Bank and Other Financial Institutions Act of 1991 (amended), an appropriation of 30% of profit after tax is made if the
statutory reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the
paid up share capital. The statutory reserve is non distributable.
The SMEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set
aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium scale
enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of
profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after
tax. However, this is no longer mandatory based on the resolution of the Bankers’ Committee meeting and approved by the
Central Bank of Nigeria in 2007. The small and medium scale industries equity investment scheme (SMEIS) reserves are non-
distributable.
27. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Litigations and claims
There were litigations and claims against the Bank as at 31 December 2011 amounting to N598,051,479 (2010: N1,026,508,686).
These litigations and claims arose in the normal course of business and are being contested by the Bank. The directors, having
sought professional legal counsel are of the opinion that no significant liability will crystallize from these litigations and
therefore no provisions are deemed necessary to be made in the financial statements.
(b) Off-balance sheet engagements
2011 2010
N’000 N’000
Acceptances/direct credit substitutes 1,032,738 965,189
Foreign exchange commitments 44,449,226 19,445,253
Letters of credit 14,683,399 15,413,912
Bonds and guarantees 35,616,236 17,325,717
95,781,599 53,150,071
(i) Included in the bonds and guarantees are cash collateralized and secured guarantees with a total sum of N3,251,374,236
(2010: N5,371,432,244).
28. RELATED PARTY TRANSACTIONS
A number of banking transactions are entered into with related parties in the normal course of business. These include loans,
deposits and foreign currency transactions. The volumes of related-party transactions, outstanding balances at the year-end,
and related expense and income for the year are as follows:
(a) 81.9% of the Bank’s share capital is held by Citibank Overseas Investment Corporation. (2010: 81.9%)
(b) In the normal course of the Bank’s business, the Bank enters into business transactions with other Citigroup offices at
commercial rates.
(c) There was no director related loan outstanding as at year end. (2010: Nil).
70 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(d) Deposits outstanding as at 31 December 2011
Name of company/Individual Relationship Type of deposit 2011 2010
N’000 N’000
Nigeria International
Bank Nominees Limited Subsidiary Deposit 1,182 1,035
1,182 1,035
(e) Director’s remuneration is disclosed at note 29 (b).
(f) There were no transactions in which a director had an interest as at reporting date in 2011.
29. EMPLOYEES AND DIRECTORS
(a) Employees
(i) The number of persons employed as at the end of the year is as follows:
2011 2010
Number Number
Executive directors 5 6
Management 191 182
Non management 57 58
253 246
(ii) Cost of employees, excluding executive directors, during the year amounted to:
2011 2010
Number Number
Wages and salaries 3,257,503 3,234,921
Pension costs 169,536 114,615
3,427,039 3,349,536
Other indirect employee costs 1,232,485 1,100,448
4,659,524 4,449,984
Executive Compensation (223,300) (224,783)
4,436,224 4,225,201
(iii) The number of persons employed by the Bank, who received emoluments in the following ranges (excluding pension
contribution), were:
2011 2010
N’000 N’000
N2,000,001 - N3,000,000 10 22
N3,000,001 - N4,000,000 20 -
N4,000,001 - N5,000,000 7 15
N5,000,001 - N6,000,000 16 20
N6,000,001 - N7,000,000 22 32
Above N7,000,000 178 151
253 240
71ANNUAL REPORT
(b) Directors
Directors’ remuneration was paid as follows:
2011 2010
N’000 N’000
Fees and sitting allowances 36,600 29,050
Executive Compensation 223,300 224,783
259,900 253,833
The directors’ remuneration shown above includes:
2011 2010
N’000 N’000
Chairman 8,200 7,625
Highest paid director 57,800 57,800
The number of other directors who received fees and other emoluments (excluding pension contributions) in the following
ranges were:
2011 2010
Number Number
Nil (Foreign non-executive directors) 2 2
Nil (Local non- executive director) 1 1
Above N2, 000,000 10 11
30. NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN OPERATING ASSETS
This comprises:
2011 2010
N’000 N’000
Profit after taxation 9,731,955 9,054,226
Add back: taxation charge 2,460,228 2,674,075
Profit before taxation 12,192,183 11,728,301
Adjustments to reconcile profit before taxation to net cash flow from operations:
- depreciation 693,334 708,143
- gain on disposal of fixed assets (25,690) (261,455)
- allowance/(write back) on risk assets 377,462 (1,103,881)
- dividend income (41,924) (32,630)
- provision for other assets - (6,001)
- write-off on long-term investments - 35,625
- Gain on sale of investments, (net) - (5,735)
Net cash flow from operating activities 13,195,365 11,062,367
72 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
31. CHANGES IN OPERATING ASSETS
This comprises:
2011 2010
N’000 N’000
(Increase)/decrease in operating assets:
- Cash reserve balance (7,410,078) 600,458
- Short term investments (2,551,960) (3,845,399)
- Loans and advances (13,011,941) 2,698,807
- Interest in suspense (418,074) (572,306)
- Other facilities (1,430,293) (322,500)
- Other assets 4,492,690 (4,079,721)
- Advances under finance lease (38,121) 6,070
Increase/ (decrease) in operating liabilities:
- Customer deposits 103,511,982 81,021,555
- Due to other banks (130,096) 378,090
- Other facilities 2,142,000 344,000
- Other liabilities 5,224,280 (2,830,787)
- Provisions 50,000 (2,246)
- Retirement benefit obligations (26,697) (7,793)
90,403,692 73,388,228
32. DIVIDENDS
(a) Declared dividend per share
2011 2010
N’000 N’000
Declared dividend (N’000) 7,682,888 9,778,220
No. of shares ranking for dividend (thousands) 2,793,777 2,793,777
Declared dividend per share 275k 350k
Payment of dividends is subject to withholding tax at a rate of 10%.
(b) Proposed dividend
Subsequent to the balance sheet date, the directors have proposed a dividend of N2.95k per share (2010: N2.75k per share)
amounting to N8,241,642,825.55 (2010:N7,682,887,379.75) from the outstanding balance in the retained earnings account
as at 31 December 2011.
(c) Dividend payable
2011 2010
N’000 N’000
At 1 January - -
Declared during the year 7,682,888 9,778,220
Paid during the year (7,682,888) (9,778,220)
At 31 December - -
73ANNUAL REPORT
33. EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average
number of Ordinary shares in issue during the year. The basic earnings per share (EPS) for the year is calculated as follows:
2011 2010
Net profit attributable to shareholders (N’000) 9,731,955 9,054,226
Number of Ordinary shares in issue at year end (thousands) 2,793,777 2,793,777
Time weighted average number of ordinary shares in issue (thousands) 2,793,777 2,793,777
Basic earnings per share 348k 324k
Diluted earnings per share 348k 324k
34. CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents include cash and non restricted balances with the
Central Bank, treasury bills and other eligible bills, operating account balances with other banks, amount due from other
banks:
2011 2010
N’000 N’000
Cash and balances with central banks 5,149,943 2,123,093
Treasury bills and eligible bills 13,056,586 3,012,113
Due from other banks 212,273,652 144,998,390
230,480,181 150,133,596
35. COMPLIANCE WITH BANKING REGULATIONS
The Bank did not contravene any regulations of the Banks and Other Financial Institutions Act (BOFIA) and CBN circulars
considered to have a significant impact for the financial year 2011.
In December 2011, the bank however paid N8,000,000 as penalty for the contravention of sections 2,7,9 & 10 of the Money
Laundering Prohibition Act 2004, for the financial year 2009.
36. POST BALANCE SHEET EVENTS
There were no post balance sheet events which could have a material effect on the financial position of the Bank as at 31
December 2011 or the profit for the year ended on that date that have not been adequately provided for or disclosed.
37. COMPARABILITY
When necessary, comparative figures have been adjusted to conform to changes in presentation in the current period.
74 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
FINANCIAL RISK ANALYSISFOR THE YEAR ENDED 31 DECEMBER 2011
(a) Principal credit policies
The bedrock of our corporate strategy remains sustaining and maximizing its risk-adjusted earnings objective, providing
appropriate financial solutions to meet customers’ needs while maintaining a sound credit portfolio. Credit policies help us to
achieve this balance. They define credit management issues from a strategic perspective. Credit procedures have a tactical
perspective, and change as frequently as our business changes.
The credit policy is predicated on the Bank’s business strategy and return objective through well pre-defined target markets,
risk acceptance criteria and stress testing.
• Business strategy: the Bank’s objective is to build strong customer relationships and diversified product portfolios. We
target industry sectors in which we can achieve a strong market position and adequate returns on capital. Strategic
business planning begins with an assessment of external (global, national, and local economic trends) and internal
factors (capital, staffing, and portfolio mix/quality). The external environment and the internal resources combined
will determine the business strategy, which includes: financial targets, growth, market share, geographic coverage
(positioning), segment focus (public sector, multinationals, local corporations and other financial institutions) and
Target Market (TM) and Risk Acceptance Criteria (RAC).
• Target market refers to the pre-defined acceptable profile of customers and the products we propose to offer them.
Our TM identifies potential markets, its opportunities and the Bank’s capacity to objectively exploit its potential with
available resources and potential risk.
• RAC specifies the terms and conditions for extending to an obligor in the target market. It defines items such as product
eligibility, tenor limits, security or support required for the financing and required documentation.
• Stress testing: in view of the dynamic nature of our market, the bank’s portfolio is subjected to stress testing, based
on emerging issues. Stress testing is a process whereby the Bank will systematically change one or more risk events or
risk factors within a portfolio to determine how the whole portfolio or key segments within the portfolio will respond.
It provides an opportunity for the Bank to dimension the potential impact of an adverse event and define proactive
solutions for such an adverse before it actually occurs.
(b) Methodology for risk rating
The Risk Rating Process is the end-to-end process for deriving Obligor Risk Rating (ORR’s) and Facility Risk Rating (FRR’s).
It involves the use of risk rating models, supplemental guidelines, support adjustments, collateral adjustments, process
controls, as well as any other defined processes that the Bank undertakes in order to arrive at ORR’s and FRR’s. The models
are statistical models, which are revalidated periodically by the Credit and Operational Risk Analytics Group of Citigroup –
which is based in New York.
The Obligor Risk Rating (ORR) represents the probability that an obligor will default within a one-year time horizon. Risk
ratings for obligors are assigned on a scale of 1 to 10, with sub-grades, where ‘1’ is the best quality risk and ‘6-’ is the worst for
obligors that are not in default. ORR “7” is assigned to substandard-classified performing or accruing obligors whilst “9” and
“10” rating categories indicate that the obligor is in default (ORR “8” is applicable only to adverse classifications resulting
solely from cross-border events)
The Facility Risk Rating (FRR) approximates a ‘Loss Norm’ for each facility, and is the product of two components: The Default
Probability of the Obligor, i.e. the Final ORR, and The Loss Given Default (‘LGD’). FRR’s are assigned on a scale of 1 to 10, with
sub-grades, where ‘1’ is the best quality risk and ‘7’ is the worst for performing or accruing facilities. The 9 and 10 rating
categories indicate facilities that have been placed on non-accrual status.
The Obligor Limit Rating (OLR) represents a longer-term (beyond one year) view of an obligor’s credit quality. The OLR is
derived from the Final ORR and considers a range of factors, such as quality of management and strategy, nature of industry,
and regulatory environment, among others.
75ANNUAL REPORT
(c) Enterprise risk review
The diversity of customers, products, and business strategies at Citibank Nigeria Limited requires that we have a well-defined,
integrated risk management structure to identify, analyze, originate, monitor and report on acceptable risk taking activities
within pre-defined thresholds.
The Bank’s risk management function works with the business groups with the goal of taking intelligent risk with shared
responsibility, without forsaking individual accountability and mitigating the potential of losses in risk activities under 3
broad categories: Operational risk, Credit risk and Market risk. Senior Business Management‘s objectives (budgets, portfolios
and investments) must be prudent, reflecting their view of risks and rewards arising from market conditions and should
dynamically adjust these strategies and budgets to fit changing environments.
Appropriate controls have been established to mitigate the risks and support business activities. There are checks and
balances as independent risk management set and monitor limits and other requisite conditions. Risks are measured and
managed pro-actively.
The governance structure includes the Board Risk Management Committee and Board of Directors which specifically focus on
each of the three broad risk categories stated above.
(d) Credit risk
Citibank Nigeria Limited’s credit facilities reflect the potential maximum credit exposure or loss to counter-party for a
particular product and exposure type. In furtherance of this objective, we consistently ensure the Bank’s business strategy
and exposure appetite are aligned. The key attributes of our credit policy are also consistent with the Citigroup Institutional
Clients Group (ICG) Principles and Policy Framework. This policy framework dictates best international practices in Risk
Management, including credit risk.
To enable consistent monitoring of exposure and risk:
• All credit exposures must be captured in the credit systems - irrespective of absolute size of exposure, duration,
location, counterparty, authorization level obtained or perceived economic risk.
• Credit facility amounts must capture exposure (the maximum potential for loss to an obligor or counterparty). Risk
adjustments are reflected for obligor limits and in other reporting.
• All potential credit relationships should have a proper account opened in the name of the obligor. For current credit
system integration, the client should have a Global Finance Customer Identifier (GFCID) created.
• Every business unit must maintain adequate controls to ensure compliance with all facility terms and conditions
established in conjunction with risk.
• Single name triggers prevent excessive concentrations of loss to a single name, and together form the basis for
compliance with regulatory rules such as legal lending limits.
• Obligor limits are the basis for credit portfolio managers to prevent concentrations of loss to any one obligor or
relationship. Business units must escalate any potential breach of a limit as provided for in the Citigroup ICG Risk
Manual.
• Credit facilities and the ability to manage the exposure should be in place prior to executing any new business.
• All credit relationships should be reviewed at a minimum annually, unless otherwise duly extended, where appropriate.
• Risk ratings must be established for all obligors and facilities using a Citi approved risk rating methodology.
(e) Credit risk measurement
(i) Loans and advances
Loans and advances form the primary offering of the Bank and are primarily short term in nature consisting of mostly
trade and overdraft lines. The offering is based on a detailed credit review process which involves analysis of both
quantitative and qualitative factors. This includes risk rating of the obligor and matching of the obligor’s qualitative
and quantitative attributes to pre-defined Target Market and Risk Acceptance Criteria to determine the optimal credit
exposure and product.
76 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
Bank rating Description of the grade External rating: External rating:
Standard & Poor’s Moody’s Equivalent
Equivalent
1 - 4 Investment Grade AAA to BBB- Aaa to Baa3
5 - 6 Non Investment Grade BB+ to B- Ba1 to B3
7 Speculative Grade CCC+ to CCC- Caa1 to Caa3
9 - 10 Default Unrated* Unrated
* Note that included in the unrated are the lost facilities, IENC and staff loans.
(ii) Debt securities and other bills
For debt securities and other bills, internal ratings for the counterparty and external ratings as specified in the Central
Bank circular on guidelines for treatment of commercial papers and bankers acceptances dated 18 November 2009 was
adopted by the Bank as part of its primary tools in managing its investment and liquidity risk exposures.
(f) Risk limit control and mitigation policies
The Bank as part of its portfolio monitoring functions routinely defines concentration limits, with the goal of establishing a
well-diversified portfolio where expected return on risk capital should be commensurate with the inherent risk therein. Single
name triggers prevent excessive concentrations of loss to a single name, and together form the basis for compliance with
regulatory rules such as legal lending limits. Concentration limits are monitored on a monthly basis.
(g) Authorizing level approval limit
The Bank’s internal credit approval limits are a function of experience and credit exposure in line with the ICG Risk Manual
requirement and the authorities delegated by the board. However, the board approved limits are listed below:
Authorising Level Approval Limit
Board N5billion and above for non cash collateralized facilities (for ratification)
Board Credit Committee1 1. N800million – N2.2billion for non cash-collateralised facilities (for noting).
2. N2.2billion - N5billion for non cash-collateralised facilities.
3. Over N5billion subject to final ratification by the Board, after board review
of the full credit approval packages.
Management Credit Committee 1. All fully cash-collateralised facilities.
2. Up to N2.2billion for non cash collateralized facilities.
The key feature of credit approval in the Bank is the fact that no one person can singly approve a credit, irrespective of
the limit.
1 Where the Board Credit Committee’s approval for a non cash-collateralised facility is required, which is over and above any cash collateralised facilities to the same obligor, the Board Credit Committee must be informed of the total facilities granted, i.e. inclusive of cash collateralised facilities
Current and potential market conditions, collateral considerations as well as credit history checkings are important integral
parts of our credit process.
The Bank’s internal ratings scale and mapping to external ratings are listed below:
77ANNUAL REPORT
Exposure to credit risk is also managed through periodic calls on the borrowers to ascertain operating performance and
determine their continued ability to meet all obligations as and when due.
Some other specific control and mitigation measures are outlined below.
(i) Collateral
The Bank focuses primarily on the cash-flows of the borrower for its repayments. The general principle is that repayment
should come from the transactions financed or other operating cash-flows. The Bank maintains a policy of not lending in an
inferior position, without proper approvals (and only in exceptional circumstances), or where it is at a disadvantage to other
lenders as regards seniority of claim in a default scenario.
During the annual credit review process, searches are conducted to verify that the Bank is not lending in an inferior position.
In instances where pre-existing charges exist on the customer’s assets, the Bank generally demands a pari-passu ranking with
other lenders. However, based on the credit profile assessment on a case by case basis, the Bank’s Credit Committee may also
request for additional collateral for credit enhancement.
For term loans for the acquisition of specific assets, the Bank generally takes a charge over the assets financed by the term
loan.
As a general principle, all credits are reviewed and approved based broadly on the under-listed key factors:
• The operations of the Borrower/Obligor falling within the approved target market.
• Strong financial profile with emphasis on present and future cash flow which determines the capacity of the operations
to meet debt obligations.
• Review and assessment of Borrower/Obligor management and sponsors.
• Credit history track record.
• Economic/industry trends.
• For an international company where the Bank has recourse to branches or subsidiaries of Citibank outside Nigeria, or
where the exposure is secured against guarantees, cash or other types of collateral, the Bank may reserve the right
not to insist on obtaining a local security ranking pari-passu with other local lenders, in view of the superior access it
maintains through its global affiliates to the parent company seniors.
The Bank implements the above guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The
principal collateral types for loans and advances are:
• Charges over business assets such as premises inventory and accounts receivable.
• Cash deposits.
• Mortgages to a very limited extent.
• Charges over financial instruments such as debt securities.
The Bank does not accept charges over equities as collateral for loans and advances.
(ii) Master netting arrangements
The Bank restricts its exposure to credit losses by entering into Master netting arrangements with counterparties with which
it undertakes a significant volume of transactions. Master netting arrangements do not generally result in an offset of balance
sheet assets and liabilities, as transactions are usually settled on a gross basis. However, the credit risk associated with
favourable contracts is reduced by a master netting arrangement to the extent that if a default occurs, all amounts with the
counterparty are terminated and settled on a net basis.
(h) Provisioning policies
The internal and external rating systems described above focus more on credit-quality mapping from the inception of the lending
and investment activities. In contrast, loan loss provisions are recognised for financial reporting purposes only for losses that
have been incurred at the balance sheet date based on criteria set out in the Prudential Guidelines for licensed banks.
78 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
Analysis by performance:
2011 2010
N’000 N’000
Performing 57,478,891 43,441,370
Non-performing
- substandard - 19,156
- doubtful - 748,812
- lost 15,536 677,112
57,494,427 44,886,450
(i) Performing but past due loans
Loans and advances less than 90 days past due are considered performing, unless other information is available to indicate the
contrary. The gross amount of loans and advances by class to customers that were past due but performing were as follows:
At 31 December Retail Corporate SME Financial Total
2011 Institutions
N’000 N’000 N’000 N’000 N’000
Past due up to 30 days - - - - -
Past due 30 - 60 days - - - - -
Past due 60-90 days - - - - -
- - - - -
At 31 December Retail Corporate SME Financial Total
2010 Institutions
N’000 N’000 N’000 N’000 N’000
Past due up to 30 days - 2,560,987 - - 2,560,987
Past due 30 - 60 days - - - - -
Past due 60-90 days - - - - -
- 2,560,987 - - 2,560,987
(j) Non-performing loans
(i) By industry
2011 2010
N’000 N’000
Oil and gas - 430
Manufacturing - 911,153
Real Estate and Construction - 268,464
Finance and Insurance - 3,356
Transportation - 9,978
Consumer - 211,205
Others 15,536 40,494
15,536 1,445,080
79ANNUAL REPORT
(i) By geography
2011 2010
N’000 N’000
South South - 79
South West 15,536 1,380,577
South East - 38,359
North Central - 26,065
North East - -
North West - -
15,536 1,445,080
At 31 December Due from Loans and On lending Adv under Debt Total
2011 banks advances facilities finance lease instruments
(Gross) (Gross) (Gross)
N’000 N’000 N’000 N’000 N’000 N’000
South South - 4,714,920 - - - 4,714,920
South West 9,071,053 51,451,866 1,752,793 100,497 - 62,376,209
South East - 54,747 - - - 54,747
North West - 1,265,264 - - - 1,265,264
North Central - 7,630 - - 69,911,851 69,919,481
North East - - - - - -
Outside Nigeria 203,202,599 - - - - 203,202,599
212,273,652 57,494,427 1,752,793 100,497 69,911,851 341,533,220
At 31 December Due from Loans and On lending Adv under Debt Total
2010 banks advances facilities finance lease instruments
(Gross) (Gross) (Gross)
N’000 N’000 N’000 N’000 N’000 N’000
South South - 1,521,246 - - - 1,521,246
South West 30,303,251 42,421,771 322,500 62,376 - 73,109,898
South East - 90,218 - - - 90,218
North West - - - - - -
North Central - 26,065 - - 52,346,184 52,372,249
North East - 827,150 - - - 827,150
Outside Nigeria 114,695,139 - - - 2,445,994 117,141,133
144,998,390 44,886,450 322,500 62,376 54,792,178 245,061,894
(k) Concentration of risks of financial assets with credit risk exposure
(i) Geographical sectors
The following table analyses the Bank’s main credit exposure at their carrying amounts, as categorised by geographical
region as of 31 December 2011. For this table, the Bank has allocated exposures to regions based on the region of domicile
of our counterparties.
80 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(ii) Industry sectors
At 31 December Due from Loans and On lending Adv under Debt Total
2011 banks advances facilities finance lease instruments
(Gross) (Gross) (Gross)
N’000 N’000 N’000 N’000 N’000 N’000
Agriculture - 450,873 1,488,293 - - 1,939,166
Oil and gas - 4,553,589 - - - 4,553,589
Manufacturing - 28,618,549 264,500 100,497 - 28,983,546
Mining and Quarrying - - - - - -
Real estate & construction - 7,630 - - - 7,630
Finance & Insurance 212,273,652 3,032,720 - - - 215,306,372
Government - - - - 69,911,851 69,911,851
Transportation - 3,015,494 - - - 3,015,494
Communication - 8,427,540 - - - 8,427,540
Education - 630,145 - - - 630,145
Consumer - 6,051,589 - - - 6,051,589
Others - 2,706,298 - - - 2,706,298
212,273,652 57,494,427 1,752,793 100,497 69,911,851 341,533,220
At 31 December Due from Loans and On lending Adv under Debt Total
2010 banks advances facilities finance lease instruments
(Gross) (Gross) (Gross)
N’000 N’000 N’000 N’000 N’000 N’000
Agriculture - 261,390 - - - 261,390
Oil and gas - 7,647,893 - - - 7,647,893
Manufacturing - 26,785,652 322,500 62,376 - 27,170,528
Mining and Quarrying - - - - - -
Real estate & construction - 509,693 - - - 509,693
Finance & Insurance 144,998,390 377,819 - - - 145,376,209
Government - - - - 54,792,178 54,792,178
Power - 53,672 - - - 53,672
Transportation - 5,133,689 - - - 5,133,689
Communication - 695,629 - - - 695,629
Consumer - 2,729,958 - - - 2,729,958
Others - 691,055 - - - 691,055
144,998,390 44,886,450 322,500 62,376 54,792,178 245,061,894
81ANNUAL REPORT
(iii) Analysis by portfolio distribution and risk rating
At 31 December AAA to AA- A+ to A- BBB+ to BB- Below BB- Unrated Total
2011
Due from banks 203,202,599 - 9,071,053 - - 212,273,652
Loans 3,368,467 8,729,335 34,473,593 10,747,770 175,262 57,494,427
On-lending facilities - - 1,488,293 264,500 - 1,752,793
Advances under finance lease - - 100,497 - - 100,497
Debt instruments - - 69,911,851 - - 69,911,851
206,571,066 8,729,335 115,045,287 11,012,270 175,262 341,533,220
At 31 December AAA to AA- A+ to A- BBB+ to BB- Below BB- Unrated Total
2010
Due from banks 114,695,139 - 30,303,251 - - 144,998,390
Loans 7,644,846 2,036,395 32,014,446 3,151,218 39,545 44,886,450
On-lending facilities - - 322,500 - - 322,500
Advances under finance lease - 62,376 - - - 62,376
Debt instruments - - 54,792,178 - - 54,792,178
122,339,985 2,098,771 117,432,375 3,151,218 39,545 245,061,894
(l) Foreign exchange risk
The Bank has a robust risk management system that identifies, measures and mitigates the foreign currency exchange rate
risk on its financial position and cash flows. Apart from regulatory imposed limits such as the net open position limit (OPL)
that helps to limit these exposures, the Bank has market risk limits such as:
1. Individual overnight position limits for individual currency positions, which limits exchange rate risk in all currencies
that the Bank has exposures.
2. Cross currency funding limits (CCFL); The CCFL restricts the proportion of local currency assets funded by foreign
currency liabilities.
3. Daily mark-to-market mechanism that revalues all currency positions daily, ensuring that foreign currency positions
are valued at current market price and not at cost.
4. Trading Management Action Trigger (MAT): This limits, on a realized or mark–to-market basis, the maximum loss
that your total currency position can make before escalation is made to the Bank’s management and the positions
liquidated or effectively hedged.
Where there are available-for-sale securities denominated in currencies other than the local currency (Naira), the Bank
hedges the change in fair value attributable to foreign-exchange rate movements in these securities. Typically, the hedging
instrument employed is a forward foreign-exchange contract.
82 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December. Included in the table
are the Bank’s assets and liabilities at carrying amounts, categorised by currency.
Concentrations of currency risk – on- and off-balance sheet assets and liabilities
At 31 December Naira Dollar GBP Euro Others Total
2011
Assets N’000 N’000 N’000 N’000 N’000 N’000
Cash and balances
with central banks 13,184,201 184,217 31,352 20,898 - 13,420,668
Treasury bills 13,056,586 - - - - 13,056,586
Due from other banks 9,055,417 198,852,596 817,540 3,093,239 454,860 212,273,652
Loans and advances
to customers 42,576,436 13,116,619 23,823 1,125,856 61,368 56,904,102
On-lending facilities 1,735,265 - - - - 1,735,265
Advances under finance lease 99,492 - - - - 99,492
Investment securities 69,907,555 854,642 - - - 70,762,197
Other assets 390,495 27,880 1,264 25,558 1,879 447,076
Property and equipment 2,656,924 - - - - 2,656,924
Total financial assets 152,662,371 213,035,954 873,979 4,265,551 518,107 371,355,962
Liabilities
Customer deposits 104,265,009 204,306,090 419,952 655,507 - 309,646,558
Due to other banks 126,926 114,349 6,491 - 242 248,008
On-lending liabilities 2,486,000 - - - - 2,486,000
Provisions 58,488 - - - - 58,488
Current income tax 2,669,074 - - - - 2,669,074
Other liabilities 6,096,800 2,774,173 483,880 2,693,720 107,595 12,156,168
Deferred taxation 293,972 - - - - 293,972
Retirement benefit obligations 10,894 - - - - 10,894
116,007,163 207,194,612 910,323 3,349,227 107,837 327,569,162
Net on-balance sheet
financial position 36,655,208 5,841,342 (36,344) 916,324 410,270 43,786,800
Off balance sheet 35,992,366 46,300,332 1,631,717 11,252,928 604,256 95,781,599
83ANNUAL REPORT
At 31 December Naira Dollar GBP Euro Others Total
2010
Assets N’000 N’000 N’000 N’000 N’000 N’000
Cash and balances
with central banks 2,745,836 121,745 48,371 67,788 - 2,983,740
Treasury bills 3,012,113 - - - - 3,012,113
Due from other banks 30,278,838 112,665,057 536,593 1,164,696 353,206 144,998,390
Loans and advances
to customers 35,374,622 7,816,530 - 624,591 17,273 43,833,016
On-lending facilities 322,500 - - - - 322,500
Advances under finance lease 62,376 - - - - 62,376
Investment securities 53,208,079 - - - 2,445,994 55,654,073
Other assets 4,766, 325 165,842 359 7,240 - 4,939,766
Property and equipment 3,106,370 - - - - 3,106,370
Total financial assets 132,877,059 120,769,174 585,323 1,864,315 2,816,473 258,912,344
Liabilities
Customer deposits 88,299,356 116,622,995 235,702 976,523 - 206,134,576
Due to other banks 255,289 122,815 - - - 378,104
On-lending liabilities 344,000 - - - - 344,000
Provisions 8,488 - - - - 8,488
Current income tax 2,525,410 - - - - 2,525,410
Other liabilities 4,748,372 1,708,373 345,808 354,562 51,586 7,208,701
Deferred taxation 537,740 - - - - 537,740
Retirement benefit obligations 37,592 - - - - 37,592
96,756,247 118,454,183 581,510 1,331,085 51,586 217,174,611
Net on-balance sheet
financial position 36,120,812 2,314,991 3,813 533,230 2,764,887 41,737,733
Off balance sheet 15,268,420 28,082,567 1,119,203 7,764,022 915,859 53,150,071
(m) Market Risk Management Process
Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a financial
intermediary. Liquidity risk is the risk that an entity may be unable to meet its financial obligations when they come due. Price
risk is the earnings risk from changes in interest rates, foreign exchange rates, and equity and commodity prices. Price risk
arises in non-trading portfolios, as well as in trading portfolios.
Market risks are measured in accordance with established standards to ensure consistency across businesses and the ability
to aggregate risk. The Bank is required to establish, with approval from independent market risk management, a market
risk limit framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of
Citigroup’s overall risk appetite. In all cases, the Bank’s Treasury department is ultimately responsible for the market risk of
the Bank and for remaining within its defined limits.
(n) Liquidity Risk Management
Management of liquidity at the Bank is the responsibility of the Risk Treasurer. A uniform liquidity risk management
policy exists for Citigroup and its major operating subsidiaries. Under this policy, there is a single set of standards for the
measurement of liquidity risk in order to ensure consistency across businesses, stability in methodologies and transparency
of risk. Management of liquidity risk is performed on a daily basis and is monitored by the Country Treasurer and independent
risk management, combined with an active corporate oversight function.
84 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
The Bank’s Asset and Liabilities Committee (ALCO) undertakes this oversight responsibility along with the Country Treasurer.
One of the objectives of ALCO is to monitor and review the overall liquidity and balance sheet positions of the bank. The Risk
Treasurer must prepare an annual funding and liquidity plan for review by the Country Treasurer and approval by independent
risk management. The funding and liquidity plan includes analysis of the balance sheet, as well as the economic and business
conditions impacting the liquidity of the Bank. As part of the funding and liquidity plan, liquidity limits, liquidity ratios, market
triggers, and assumptions for periodic stress tests are established and approved. At a minimum, these parameters are
reviewed on an annual basis.
(i) Liquidity limits
Liquidity limits establish boundaries for market access in business-as-usual conditions and are monitored against the liquidity
position on a daily basis. These limits are established based on the size of the balance sheet, depth of the market, experience
level of local management, stability of the liabilities and liquidity of the assets. Finally, the limits are subject to the evaluation
of the entities’ stress test results. Generally, limits are established such that in stress scenarios, entities are self-funded or net
providers of liquidity. Thus, the risk tolerance of the liquidity position is limited based on the capacity to cover the position in
a stressed environment. These limits are the key daily risk-management tool for the Treasury management.
(ii) Liquidity sources
The Bank maintains cash and a portfolio of highly liquid government securities that could be sold or financed on a secured
basis.
(iii) Liquidity ratios
A series of standard corporate-wide liquidity ratios has been established to monitor the structural elements of the Bank’s
liquidity. Ratios are established for liquid assets against short-term obligations. Key liquidity ratios include cash capital
(defined as core deposits, long-term debt, and capital compared with illiquid assets), liquid assets against liquidity gaps, core
deposits to loans, and deposits to loans. Several measures exist to review potential concentrations of funding by individual
name, product, industry, or geography. Triggers for management discussion, which may result in other actions, have been
established against these ratios.
The Central Bank of Nigeria requires banks to maintain a statutory minimum liquidity ratio of 30% of liquid assets to all its
deposit liabilities. For this purpose, liquid assets comprise cash and balances with Central Bank of Nigeria and other local
banks, treasury bills, FGN Bonds, placement and money at call with other banks. Deposit liabilities comprise deposits from
customers, deposits due to other banks,. The liquidity ratio at the reporting date December 31 2011 stood at 97.6% (2010:
93%).
Market triggers:
Market triggers are internal, external market or economic factors that may imply a change to market liquidity or Citigroup’s
access to the markets. Citibank Nigeria’s market triggers are monitored on a weekly basis by the Country Treasurer and the
head of Risk and are presented to the ALCO at the monthly meeting.
Stress testing:
Simulated liquidity stress testing is periodically performed by the Bank. A variety of firm-specific and market related scenarios
are used at the consolidated level and in individual businesses. These scenarios include assumptions about significant changes
in key funding sources, credit ratings, contingent uses of funding, and political and economic conditions in certain countries.
The results of stress tests are reviewed to ensure that the bank is either a self-funded or net provider of liquidity. In addition,
a Contingency Funding Plan is prepared on a periodic basis for Citigroup. The plan includes detailed policies, procedures, roles
and responsibilities, and the results of corporate stress tests. The product of these stress tests is a series of alternatives that
can be used by the Treasurer in a liquidity event.
85ANNUAL REPORT
(o) Price Risk Management
(i) Non Trading Portfolios
Interest Rate Risk
One of Citibank’s primary business functions is providing financial products that meet the needs of its customers. Loans and
deposits are tailored to the customers’ requirements with regard to tenor, index, and rate type. Net interest revenue (NIR) is
the difference between the yield earned on the non-trading portfolio assets (including customer loans) and the rate paid on
the liabilities (including customer deposits or wholesale borrowings). NIR is affected by changes in the level of interest rates.
For example:
• At any given time, there may be an unequal amount of assets and liabilities which are subject to market rates due to
maturation or repricing. Whenever the amount of liabilities subject to repricing exceeds the amount of assets subject
to repricing, a company is considered “liability sensitive.” In this case, a company’s NIR will deteriorate in a rising rate
environment.
• The assets and liabilities of a company may reprice at different speeds or mature at different times, subjecting both
“liability-sensitive” and “asset sensitive” companies to NIR sensitivity from changing interest rates. For example, a
company may have a large amount of loans that are subject to repricing at a particular period, but the majority of
deposits are not scheduled for repricing until the following period. That company would suffer from NIR deterioration
if interest rates were to fall.
NIR in the current period is the result of customer transactions and the related contractual rates originated in prior periods
as well as new transactions in the current period; those prior-period transactions will be impacted by changes in rates on
floating-rate assets and liabilities in the current period.
Due to the long-term nature of the portfolios, NIR will vary from quarter to quarter even assuming no change in the shape or
level of the yield curve as the assets and liabilities reprice. These repricings are a function of implied forward interest rates,
which represent the overall market’s unbiased estimate of future interest rates and incorporate possible changes in the
NIBOR rate as well as the shape of the yield curve.
(ii) Interest Rate Risk Governance
The risks in the Bank’s non-traded portfolios are estimated using a common set of standards that define, measure, limit and
report the market risk. Each business is required to establish, with approval from independent market risk management, a
market risk limit framework that clearly defines approved risk profiles and is within the parameters of the Bank’s overall risk
appetite.
In all cases, the businesses are ultimately responsible for the market risks they take and for remaining within their defined
limits. These limits are monitored by independent market risk, country and business Asset and Liability Committees (ALCOs)
and financial control.
(iii) Interest Rate Risk Measurement
The Bank’s principal measure of risk to NIR is interest rate exposure (IRE). IRE measures the change in expected NIR in each
currency resulting solely from unanticipated changes in forward interest rates. Factors such as changes in volumes, spreads,
margins and the impact of prior-period pricing decisions are not captured by IRE. IRE assumes that businesses make no
additional changes in pricing or balances in response to the unanticipated rate changes.
IRE tests the impact on NIR resulting from unanticipated changes in forward interest rates. For example, if the current 90-day
NIBOR rate is 15% and the one-year-forward rate is 16.5% (i.e., the estimated 90-day NIBOR rate in one year), the +100 bps
IRE scenario measures the impact on the company’s NIR of a 100 bps instantaneous change in the 90-day NIBOR to 17.5% in
one year.
86 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
The impact of changing prepayment rates on loan portfolios is incorporated into the results. For example, in the declining
interest rate scenarios, it is assumed that mortgage portfolios prepay faster and income is reduced. In addition, in a
rising interest rate scenario, portions of the deposit portfolio are assumed to experience rate increases that may be less
than the change in market interest rates.
(iv) Mitigation of Risk
All financial institutions’ financial performances are subject to some degree of risk due to changes in interest rates. In
order to manage these risks effectively, the Bank may modify pricing on new customer loans and deposits, enter into
transactions with other institutions or enter into off-balance-sheet derivative transactions that have the opposite risk
exposures. Therefore, the Bank regularly assesses the viability of strategies to reduce unacceptable risks to earnings and
implements such strategies when the Bank believes those actions are prudent. As information becomes available, the
Bank formulates strategies aimed at protecting earnings from the potential negative effects of changes in interest rates.
The Bank employs additional measurements, including stress testing on the impact of non-linear interest rate movements
on the value of the balance sheet; the analysis of portfolio duration, volatility and the potential impact of the change in
the spread between different market indices.
(v) Trading Portfolios
Price risk in trading portfolios is monitored using a series of measures, including:
• Factor sensitivities;
• Value-at-Risk (VAR); and
• Stress testing.
Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor,
such as a change in the price of a treasury bill for a one-basis-point change in interest rates. The Bank’s independent
market risk management ensures that factor sensitivities are calculated, monitored and, in most cases, limited, for all
relevant risks taken in a trading portfolio.
VAR estimates the potential decline in the value of a position or a portfolio under normal market conditions. The VAR
method incorporates the factor sensitivities of the trading portfolio with the volatilities and correlations of those factors
and is expressed as the risk to the company over a one-day holding period, at a 99% confidence level. The Bank’s VAR
is based on the volatilities of and correlations among a multitude of market risk factors as well as factors that track the
specific issuer risk in debt and equity securities.
Stress testing is performed on trading portfolios on a regular basis to estimate the impact of extreme market movements.
It is performed on both individual trading portfolios, and on aggregations of portfolios and businesses. Independent
market risk management, in conjunction with the businesses, develops stress scenarios, reviews the output of periodic
stress testing exercises, and uses the information to make judgments as to the ongoing appropriateness of exposure
levels and limits.
Each trading portfolio has its own market risk limit framework encompassing these measures and other controls,
including permitted product lists and a new product approval process for complex products.
Total revenues of the trading business consist of:
• Customer revenue, which includes spreads from customer flow and positions taken to facilitate customer orders;
• Proprietary trading activities in cash transactions; and
• Net interest revenue.
All trading positions are marked to market, with the result reflected in the profit and loss account.
87ANNUAL REPORT
The Bank periodically performs extensive back-testing of many hypothetical test portfolios as one check of the accuracy
of its VAR. Back-testing is the process in which the daily VAR of a portfolio is compared to the actual daily change in the
market value of its transactions. Back-testing is conducted to confirm that the daily market value losses in excess of a
99% confidence level occur, on average, only 1% of the time. The VAR calculation for the hypothetical test portfolios,
with different degrees of risk concentration, meets these statistical criteria.
The level of price risk exposure at any given point in time depends on the market environment and expectations of future
price and market movements, and will vary from period to period.
(p) Maturity profile – on Balance Sheet
31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Gross Carrying
2011 month months months months years years nominal amount
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Liabilities:
Customer
deposits 306,619,444 2,374,556 135,000 517,558 - - 309,646,558 309,646,558
Due to other banks 248,008 - - - - - 248,008 248,008
On-lending liabilities 750,071 1,064,500 28,571 557,144 85,714 - 2,486,000 2,486,000
Current income tax - - - 2,669,074 - - 2,669,074 2,669,074
Other liabilities 5,152,981 4,828,196 2,004,892 146,350 23,749 - 12,156,168 12,156,168
Provisions - - - 58,488 - - 58,488 58,488
Deferred income tax liabilities - - - - 293,972 - 293,972 293,972
Retirement benefit
obligations 10,894 - - - - - 10,894 10,894
Total liabilities 312,781,398 8,267,252 2,168,463 3,948,614 403,435 - 327,569,162 327,569,162
Assets:
Cash and balances
with central banks 13,420,668 - - - - - 13,420,668 13,420,668
Treasury bills and
other eligible bills 3,915 2,293,935 952,258 9,806,478 - - 13,056,586 13,056,586
Due from
other banks 212,273,652 - - - - - 212,273,652 212,273,652
Loans and advances
to customers 17,368,649 6,747,734 10,933,276 16,078,307 5,736,320 630,141 57,494,427 56,904,102
Advances under
finance lease 750 451 - 2,661 95,630 - 99,492 99,492
On-lending facilities 16,696 1,053,855 28,285 551,572 84,857 - 1,735,265 1,735,265
Investment securities - - 7,619,161 6 4,020 59,109,616 3,969,400 70,622,016 70,762,197
Other assets 14,372 90,869 57,013 109,737 175,085 - 447,076 447,076
Property and equipment - - - - 947,425 1,709,499 2,656,924 2,656,924
Total assets 243,098,702 10,186,844 19,589,993 26,612,775 66,148,933 6,309,040 371,806,106 371,355,962
(Gap)/surplus (69,682,696) 1,919,592 17,421,530 22,664,161 65,745,498 6,309,040 44,236,944 43,786,800
88 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Gross Carrying
2010 month months months months years years nominal amount
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Liabilities:
Customer
deposits 198,326,400 1,816,717 197,119 4,991,069 5,563 797,708 206,134,576 206,134,576
Due to other banks 378,104 - - - - - 378,104 378,104
On-lending liabilities 43,000 64,500 64,500 129,000 43,000 - 344,000 344,000
Current income tax - - - 2,525,410 - - 2,525,410 2,525,410
Other liabilities 5,214,689 1,466,371 412,853 22,148 90,930 1,710 7,208,701 7,208,701
Provisions - - - 8,488 - 8,488 8,488
Deferred income tax liabilities - - - - 537,740 - 537,740 537,740
Retirement benefit
obligations 37,592 - - - - - 37,592 37,592
Total liabilities 203,999,785 3,347,588 674,472 7,676,115 677,233 799,418 217,174,611 217,174,611
Assets:
Cash and balances
with central banks 2,983,740 - - - - - 2,983,740 2,983,740
Treasury bills and
other eligible bills 187,858 26,125 958,730 1,839,400 - - 3,012,113 3,012,113
Due from
other banks 144,998,390 - - - - - 144,998,390 144,998,390
Loans and advances
to customers 1,112,119 10,360,528 4,473,453 28,918,258 22,092 - 44,886,450 43,833,016
On-lending facilities 21,500 64,500 64,500 129,000 43,000 - 322,500 322,500
Advances under
finance lease - - - 741 61,635 - 62,376 62,376
Investment securities - 4,019,916 - 6,103,991 44,559,975 1,062,610 55,746,492 55,654,072
Other assets 272,417 15,096 4,519,620 24,872 107,761 - 4,939,766 4,939,766
Property and equipment - - - - 1,358,287 1,748,083 3,106,370 3,106,370
Total assets 149,576,024 14,486,165 10,016,303 37,016,262 46,152,750 2,810,693 260,058,197 258,912,344
(Gap)/surplus (54,423,761) 11,138,577 9,225,708 29,456,270 45,475,517 2,011,275 42,883,586 41,737,733
89ANNUAL REPORT
Maturity profile – Off Balance Sheet
(a) Financial guarantees and other financial facilities
Performance bonds and financial guarantees (Note 27) are also included below based on the earliest contractual maturity
date.
(b) Contingent letters of credits
Unfunded letters of credit (Note 27) are also included below based on the earliest contractual payment date.
31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Total
2011 month months months months years years
N’000 N’000 N’000 N’000 N’000 N’000 N’000
Performance bonds
and financial guarantees 425,673 279,992 414,394 5,799,586 2,657,657 26,038,933 35,616,235
Contingent Letters of credits 797,114 4,175,848 8,735,742 974,695 - - 14,683,399
Bankers acceptances - - - - - - -
Guaranteed commercial papers - - - - - - -
Foreign exchange
commitments 5,844,216 16,280,676 6,786,302 15,538,038 - - 44,449,232
Acceptances/direct
credit substitutes 581,251 451,482 - - - - 1,032,733
7,648,254 21,187,998 15,936,438 22,312,319 2,657,657 26,038,933 95,781,599
31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Total
2010 month months months months years years
N’000 N’000 N’000 N’000 N’000 N’000 N’000
Performance bonds
and financial guarantees 288,593 259,724 1,571,154 1,515,063 2,151,879 11,539,304 17,325,717
Contingent Letters of credits 2,259,227 5,933,486 6,870,509 350,690 - - 15,413,912
Bankers acceptances - - - - - - -
Guaranteed commercial papers - - - - - - -
Foreign exchange
commitments 15,719,069 1,433,612 866,074 1,426,500 - - 19,445,253
Acceptances/direct
credit substitutes 391,464 573,725 - - - - 965,189
18,658,353 8,200,547 9,307,735 3,292,253 2,151,879 11,539,304 53,150,071
90 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
(q) Capital Management
Capital is generally generated through issuance of common stock to the shareholders. This is augmented via earnings from
the operating business. Capital is used primarily to support assets in the Bank’s businesses and to absorb unexpected market,
credit or operational losses. Net earnings generated from operating business are used to pay dividends. The Bank’s capital
management framework is designed to ensure maintenance of sufficient capital consistent with the Bank’s risk profile, all
applicable regulatory standards and guidelines, and external rating agency considerations. The capital management process
is centrally overseen by senior management and is reviewed at the consolidated, legal entity, and country level.
The Board of Directors oversees the capital management process mainly through Citigroup’s Finance and Asset and Liability
Committee (ALCO). The Committee is composed of the senior-most management officials of the Bank in Nigeria for the
purpose of engaging management in decision-making and related discussions on capital and liquidity items. Among other
things, the Committee’s responsibilities include: determining the financial structure of the Bank and its subsidiary; ensuring
that the Bank and is adequately capitalized; determining appropriate asset levels and return hurdles for the Bank and individual
businesses; reviewing the funding and capital markets plan for the Bank; and monitoring interest-rate risk, corporate and
Bank liquidity, the impact of currency translation on non-U.S. earnings and capital.
The ALCO monitors the Regulatory and Citigroup capital ratio requirements to ensure compliance. As at 31 December 2011,
the Bank was in compliance with all the applicable capital ratios.
The table below summarises the composition of regulatory capital and the ratios of the Bank for the years ended 31 December
2011 and 2010. During those two years, the Bank complied with all of the externally imposed capital requirements.
2011 2010
N’000 N’000
Tier 1 capital
Share capital 2,793,777 2,793,777
Share premium 11,643,995 11,643,995
Statutory reserves 12,555,274 11,095,481
SMIEIS reserve 3,340,908 3,340,908
Retained earnings 13,452,846 12,863,572
Less: goodwill and intangible assets - -
Total qualifying Tier 1 capital 43,786,800 41,737,733
Tier 2 capital
General provision 593,322 -
Loan stock
Total qualifying Tier 2 capital 593,322 -
Total regulatory capital 44,380,122 41,737,733
Less: investment in unconsolidated subsidiary (1,000) (1,000)
Total qualifying capital 44,379,122 41,736,733
2011 2010
N’000 N’000
On-balance sheet 109,838,778 79,768,842
Off-balance sheet 68,335,804 36,780,257
Total risk-weighted assets 178,174,582 116,549,099
Risk weighted Capital Adequacy Ratio (CAR – minimum 10%) 25% 36%
91ANNUAL REPORT
STATEMENT OF VALUE ADDEDFOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
N’000 % N’000 %
Gross earnings 24,791,081 20,918,450
Interest expense
- Foreign (65,178) (44,301)
- Local (2,815,355) (2,377,308)
21,910,548 18,496,841
Loan loss write-back/ (allowance) (377,462) 1,103,881
Administrative overheads (3,988,045) (2,714,294)
17,545,041 100 16,886,428 100
Distribution:
Employees
- Salaries and benefits 4,659,524 4,449,984 27
Government
- Taxation 2,460,228 2,674,075 15
Future
- Asset replacement (depreciation) 693,334 708,143 4
- Expansion (transfers to retained earnings and statutory reserves) 9,731,955 9,054,226 54
17,545,041 100 16,886,428 100
92 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS
FIVE YEAR FINANCIAL SUMMARYFOR THE YEAR ENDED 31 DECEMBER 2011
Balance Sheet
2011 2010 2009 2008 2007
N’000 N’000 N’000 N’000 N’000
ASSETS:
Cash and balances with Central Bank 13,420,668 2,983,740 24,539,219 16,462,300 13,794,592
Treasury bills and other eligible bills 13,056,586 3,012,113 5,894,955 8,378,803 19,615,058
Due from other banks 212,273,652 144,998,390 84,493,142 50,673,765 31,642,520
Loans and advances 56,904,102 43,833,016 44,856,319 58,302,699 42,386,004
On-lending facilities 1,735,265 322,500 - 330,784 560,936
Advances under finance lease 99,492 62,376 67,761 76,532 97,246
Investment securities 70,762,197 55,654,073 18,022,956 18,873,819 20,102,627
Other assets 447,076 4,939,766 854,044 917,167 4,033,018
Property and equipment 2,656,924 3,106,370 3,138,001 3,511,277 3,646,988
371,355,962 258,912,344 181,866,397 157,527,146 135,878,989
FINANCED BY:
Share capital 2,793,777 2,793,777 2,793,777 2,793,777 2,793,777
Share premium 11,643,995 11,643,995 11,643,995 11,643,995 11,643,995
Reserves 29,349,028 27,299,961 28,023,955 23,256,587 20,594,036
Customer deposits 309,646,558 206,134,576 125,113,021 96,263,317 79,134,721
Due to other banks 248,008 378,104 14 1,372,137 -
On-lending liabilities 2,486,000 344,000 - 334,125 566,602
Provisions 58,488 8,488 10,734 292,655 331,325
Current income tax 2,669,074 2,525,410 3,600,987 3,543,263 1,813,365
Other liabilities 12,156,168 7,208,701 10,234,124 17,791,315 18,570,906
Retirement benefit obligations 10,894 37,592 45,384 18,013 -
Deferred tax 293,972 537,740 400,406 217,962 430,262
371,355,962 258,912,344 181,866,397 157,527,146 135,878,989
Acceptances, bonds, guarantees
And other obligations 95,781,599 53,150,071 59,949,539 95,585,572 58,856,226
PROFIT AND LOSS ACCOUNT
Gross earnings 24,791,081 20,918,450 25,714,405 20,069,477 17,344,949
Net operating income 21,910,548 18,496,841 23,105,344 17,259,447 15,248,853
Operating expenses (9,340,903) (7,872,421) (7,454,962) (6,018,732) (6,206,721)
Write-back/ (allowance) on risk assets (377,462) 1,103,881 18,890 (443,279) (628,721)
Profit before taxation 12,192,183 11,728,301 15,669,272 10,797,436 8,413,411
Taxation 2,460,228 (2,674,075) (3,778,797) (2,267,953) (1,467,313)
Profit after taxation 9,731,955 9,054,226 11,890,475 8,529,483 6,946,098
Profit attributable to shareholders 9,731,955 9,054,226 11,890,475 8,529,483 6,946,098
Earnings per share 348K 324k 426k 305k 249k
Declared dividend per share 275K 350k 255k 210k 205k
Number of Ordinary shares of N1.00 (million) 2,794 2,794 2,794 2,794 2,794