NMB Unaudited Results for HY Ended 30 Jun 13

7/30/2019 NMB Unaudited Results for HY Ended 30 Jun 13

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Holding company ofNMB BANK LIMITED (Registered Commercial Bank)

CONDENSED RESULTSFOR THE SIX MONTHS ENDED 30 JUNE 2013

HIGHLIGHTS

30 June 31 December 30 June2013 2012 2012

Reviewed Audited Reviewed

Attributable profit (US$) 2 672 911 7 570 502 2 564 350Basic earnings per share (US cents) 0.95 2.69 0.91Total deposits (US$) 210 673 789 191 422 066 149 889 217Loans and advances (US$) 183 454 912 152 417 375 127 870 654Total Equity (US$) 47 950 247 30 942 083 25 935 931

Enquiries:

NMBZ HOLDINGS LIMITED Tel: +263-4-759 651/9

James A Mushore, Group Chief Executive Officer, NMBZ Holdings Limited [email protected]

Francis Zimuto, Deputy Group Chief Executive Officer, NMBZ Holdings Limited [email protected]

Benefit P Washaya, Managing Director, NMB Bank Limited [email protected]

Benson Ndachena, Chief Financial Officer, NMBZ Holdings Limited [email protected]

Website: http://www.nmbz.co.zw

Email: [email protected]


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NMBZ HOLDINGS LIMITED

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CHAIRMANS STATEMENT

INTRODUCTION

These results were achieved under a relatively subdued economic and operating environment whichwas characterised by an illiquid market and a general tightening in the economy in light of thenational elections on 31 July 2013. The banking sector financial performance was adversely affectedby the Memorandum of Understanding (MOU) on interest rates and bank charges.

GROUP RESULTS

Compliance with International Financial Reporting Standards

The condensed consolidated interim financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS). The condensed financial statements have beenprepared in accordance with IAS 34,Interim Financial Reporting.

Commentary on operating results

The profit before taxation was US$3 812 214 during the period under review and this gave rise to anattributable profit of US$2 672 911. Net interest income was US$9 488 623 for the period. Non-interest income amounted to US$8 152 494 and this was mainly as a result of commissions and feeincome which amounted to US$7 590 765.

Operating expenses amounted to US$13 025 587 and these were driven largely by administration andstaff related expenditure.

Impairment losses on loans and advances amounted to US$1 887 537 for the current period from aprior year amount of US$688 020 and the increase was mainly due to the liquidity and marketchallenges being faced by businesses.

Dividend

In view of the need to retain cash in the business and to strengthen the statutory capital requirementsfor the banking subsidiary, the Board has proposed not to declare a dividend.

Statement of financial position

The Groups total assets grew by 17% from US$226 533 682 as at 31 December 2012 to US$264 784407 as at 30 June 2013. The assets comprised mainly loans, advances and other accounts (US$177740 224), non-current assets held for sale (US$2 216 500), investment securities held to maturity(US$5 578 070), investments in debentures (US$3 984 723), cash and short term funds (US$61 029068), investment properties (US$3 020 300) and property and equipment (US$8 483 963).

Gross loans and advances increased by 20% from US$152 417 375 as at 31 December 2012 to

US$183 454 912 as at 30 June 2013.

Total deposits increased by 10% from US$191 422 066 as at 31 December 2012 to US$210 673 789as at 30 June 2013 in the midst of a declining market deposit base.

The Banks liquidity ratio closed the period at 40.76% and this was above the statutory requirement of30%.


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Capital

The banking subsidiarys capital adequacy ratio at 30 June 2013 calculated in accordance with theguidelines of the Reserve Bank of Zimbabwe (RBZ) was 18.4% (31 December 2012 15.5%). Theminimum required by the RBZ is 12%.

The Groups equity increased by 55% from US$30 942 083 as at 31 December 2012 to US$47 950247 as at 30 June 2013 as a result of an increase in retained earnings and US$14.8 million capitalinjected through a private placement by three strategic foreign investors.

OUTLOOK AND STRATEGY

We eagerly wait to see whether the economic environment will now become more certain andpredictable post the recent harmonised elections, whatever the case, the Group will continue to scoutfor more international lines of credit. The Group will also explore growth opportunities in othermarket segments.

APPRECIATION

I would like to pay tribute to our valued clients, shareholders and regulatory authorities for theircontinued support in the period under review. I would also like to thank my fellow board members,management and staff for their profound commitment and dedication which has made theachievement of these results possible in the face of a subdued economic environment.

T N MUNDAWARARACHAIRMAN

21 August 2013


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INDEPENDENT REVIEW BY THE AUDITORSThese interim condensed consolidated financial statements for the six months ended 30 June 2013

have been reviewed by the companys auditor, KPMG Chartered Accountants (Zimbabwe). In their

review report dated 21 August 2013, which is available for inspection at the companys registered

office, KPMG Chartered Accountants (Zimbabwe) state that their review was conducted in

accordance with the International Standard on Review Engagements 2410, Review of interim

information performed by the independent auditor of the entity, and have expressed an unmodifiedconclusion on the interim condensed consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 June 2013

30 June 30 June2013 2012

Note US$ US$Reviewed Reviewed

Interest income 4 16 099 196 11 658 274Interest expense (6 610 573) (4 854 771)

--------------- ---------------Net interest income 9 488 623 6 803 503

Net foreign exchange gains 866 453 905 133Non-interest income 5 8 152 494 6 685 240

--------------- ---------------

Net operating income 18 507 570 14 393 876

Operating expenditure 6 (13 025 587) (10 490 395)Impairment losses on loans, advances and debentures (1 887 537) (688 020)Share of profits of associate 217 768 204 327

---------------- ----------------Profit before taxation 3 812 214 3 419 788Taxation 7 (1 139 303) (855 438)

------------- --------------------Profit for the period 2 672 911 2 564 350Other comprehensive income, net of tax - -

---------------- ----------------Total comprehensive income for the period 2 672 911 2 564 350

========= =========

Attributable to:-Owners of the parent 2 672 911 2 564 350-Non controlling interest - -

-------------- -------------2 672 911 2 564 350======== ========

Earnings per share (US cents)-Basic 9.3 0.95 0.91*-Diluted basic 9.3 0.65 0.91*

* - the amounts were restated after the consolidation of shares referred to in note 10.


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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2013

30 June 31 DecemberNote 2013 2012

US$ US$Reviewed Audited

EQUITY

Share capital 10 81 502 78 598Capital reserves 34 531 257 18 084 902Retained earnings 13 337 488 12 778 583

-------------- -------------Total equity 47 950 247 30 942 083

LIABILITIES

Deposits and other accounts 11 216 509 737 195 002 633Current tax liabilities 324 423 588 966

---------------- ---------------Total liabilities 216 834 160 195 591 599

---------------- ---------------Total equity and liabilities 264 784 407 226 533 682

========= =========

ASSETS

Cash and cash equivalents 13 61 029 068 58 171 045Investment securities held to

maturity 12 5 578 070 5 501 963Investment in debentures 14 3 984 723 -Loans, advances and other

accounts 15 177 740 224 146 599 994

Non - current assets held for sale 2 216 500 2 225 300Quoted and other investments 363 599 326 106Deferred tax assets 2 367 960 1 380 596Investment in associate 19 - 1 025 919Investment properties 3 020 300 3 115 300Property and equipment 16 8 483 963 8 187 459

----------------- --------------Total assets 264 784 407 226 533 682

========== =========


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2013Capital Reserve

ShareShare Share Option RegulatoryCapital Premium Reserve Reserve

US$ US$ US$ US$

Balances at 1 January 2012 78 598 15 737 548 45 671 1 023 431Total comprehensive income for

the six months - - - -Impairment allowance for loans and advances - - - 254 707

---------- ------------- --------- -----------Balances at 30 June 2012 78 598 15 737 548 45 671 1 278 138Total comprehensive income for the six months - - - -Impairment allowance for loans and advances - - - 1 023 545

---------- ------------- ----------- -------------Balances at 31 December 2012 78 598 15 737 548 45 671 2 301 683Total comprehensive income for

the six months - - - -Impairment allowance for loans

and advances - - - 2 114 006Shares issued- private placement 2 904 14 828 241 - -Share issue expenses - (495 892) - -

----------- ------------- ---------- ------------Balances at 30 June 2013 81 502 30 069 897 45 671 4 415 689

======= ======== ====== =======


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CONSOLIDATED STATEMENT OF CASH FLOWSfor the six months ended 30 June 2013

30 June 30 JuneCASH FLOWS FROM OPERATING ACTIVITIES 2013 2012

US$ US$Reviewed Reviewed

Profit before taxation 3 812 214 3 419 788Non-cash items:-Depreciation 865 224 634 736-Impairment losses on loans, advances and debentures 1 887 537 688 020-Investment properties fair value adjustment - (122 500)-Non - current assets held for sale fair value adjustment 75 300 --Quoted and other investments fair value adjustment (37 494) 3 919-Profit on disposal of associate (580 137) --Profit on disposal of property and equipment - (725)-Impairment reversal on land and buildings - (70 000)-Share of associate profit (217 768) (204 327)

------------- --------------Operating cash flows before changes in operating

assets and liabilities 5 804 876 4 348 911

Changes in operating assets and liabilitiesDeposits and other liabilities 21 507 104 11 348 739Loans, advances and other accounts (33 027 768) (4 315 784)Investment securities held to maturity (76 107) (5 425 534)Investment in debentures (3 984 723) -

-------------- -------------(9 776 618) 5 956 332

--------------- --------------TaxationCapital gains tax paid (264 024) -Corporate tax paid (2 127 185) (1 758 006)

----------------- --------------Net cash (outflow)/inflow from operating activities (12 167 827) 4 198 326

----------------- ---------------CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment (1 161 728) (1 228 446)Proceeds on disposal of property and equipment - 9 003Proceeds on disposal of non - current assets held for sale 28 500 -Proceeds on disposal of associate 1 850 000 -Expenses on disposal of associate (26 175) -

--------------- ---------------Net cash inflow/(outflow) from investing activities 690 597 (1 219 443)

-------------- ---------------Net cash (outflow) / inflow before financing activities (11 477 230) 2 978 883

-------------- ---------------CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 14 831 145 -Share issue expenses (495 892) -

------------- ---------------Net cash inflow from financing activities 14 335 253 -

--------------- --------------Net increase in cash and cash equivalents 2 858 023 2 978 883Cash and cash equivalents at beginning of the period 58 171 045 32 265 953

--------------- --------------Cash and cash equivalents at the end of the period (note 13) 61 029 068 35 244 836

========= ========


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NOTES TO THE CONDENSED FINANCIAL STATEMENTSfor the six months ended 30 June 2013

1. REPORTING ENTITY

The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holdingcompany. Its registered office is 64 Kwame Nkrumah Avenue, Harare. Its principal operatingsubsidiary is engaged in banking and other companies hold investments.

2. ACCOUNTING CONVENTIONStatement of compliance

This condensed consolidated interim financial report has been prepared in accordance with IAS34,Interim Financial Reporting. Selected explanatory notes are included to explain events andtransactions that are significant to an understanding of the changes in financial position of theGroup since the last annual consolidated interim financial statements as at and for the yearended 31 December 2012. This condensed financial report does not include all the informationrequired for the full annual financial statements prepared in accordance with InternationalFinancial Reporting Standards.

This condensed interim financial report was approved by the Board of Directors on 21 August2013.

2.1 Basis of preparation

The condensed consolidated interim financial statements have been prepared under thehistorical cost convention except for quoted and other investments, investment properties andfinancial instruments which are carried at fair value and land and buildings which are stated attheir revalued amounts. These condensed financial statements are reported in United States ofAmerica dollars and rounded to the nearest dollar.

2.2 Comparative financial information

The condensed consolidated interim financial statements comprise a consolidated statement offinancial position, a consolidated statement of comprehensive income, a consolidated statementof changes in equity and a consolidated statement of cash flows. The comparative statement ofcomprehensive income and the comparative statements of changes in equity and cash flows arefor six months.


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2.3 Use of estimates and judgements

The preparation of the condensed financial statements requires management to makejudgements, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets, liabilities, income and expenses. Actual results may differ fromthese estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised and in anyfuture periods affected.

In the process of applying the Groups accounting policies, management has made thefollowing judgements which have the most significant effect on the amounts recognised in thecondensed consolidated interim financial statements:

2.3.1 Deferred tax asset

Provision for deferred taxation is made using the liability method in respect of temporarydifferences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. Temporary differences arising out of theinitial recognition of assets or liabilities and temporary differences on initial recognition ofbusiness combinations that affect neither accounting nor taxable profit are not recognised. Theamount of deferred tax provided is based on the expected manner of realisation or settlement ofthe carrying amount of assets and liabilities, using tax rates enacted or substantively enacted atthe reporting date. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply in the year when the asset is realised or the liability is settled, based on taxrates (and tax laws) that have been enacted or substantively enacted at the reporting date.

In determining the amounts used for taxation purposes the directors referred to applicableeffective exchange rates at the date of acquisition of assets or incurring of liabilities. TheZimbabwe Revenue Authority (ZIMRA), announced methods to account for the deferred taxarising on assets purchased in ZWD. These methods require the preparer to first estimate theequivalent USD value of those assets at the time of purchase. Since the measurement oftransactions in Zimbabwe dollars in the periods prior to indicating 2008 was affected by severaleconomic variables such as mode of payment and hyperinflation, this is an area where thedirectors have had to apply their judgement and acknowledge there could be significantvariations in the results achieved depending on assumptions made.

2.3.2 Land and buildings

Land and buildings are stated at their revalued amounts based on valuations performed annually

by independent valuers, less subsequent accumulated depreciation and impairment losses.


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2.3.3 Investment properties

The fair value of the investment properties at 30 June 2013 has been arrived at on the basis ofdirectors valuation on an open market value method. The valuation was arrived at by referenceto market evidence of transaction prices for similar properties. No liabilities are guaranteed bythe investment properties.

2.3.4 Investment securities held to maturity

The RBZ Bond was valued at cost as there is currently no market information to facilitate theapplication of fair value principles. There is currently no active market for these bonds.

2.3.5 Impairment losses on loans and advances

The Group reviews all loans and advances at each reporting date to assess whether animpairment loss should be recorded in profit or loss. In particular, judgement by managementis required in the estimation of the amount and timing of future cash flows when determiningthe impairment loss. In estimating these cash flows, the Group makes judgements about theborrowers financial situation and the net realisable value of collateral. These estimates arebased on assumptions about a number of factors and actual results may differ, resulting in futurechanges to the allowance. Loans and advances that have been assessed individually and foundnot to be impaired and all individually insignificant loans and advances are then assessedcollectively, in groups of assets with similar risk characteristics, to determine whether provisionshould be made due to incurred loss events for which there is objective evidence but whoseeffects are not yet evident. The collective assessment takes account of data from the loanportfolio (such as credit quality, levels of arrears, credit utilisation, loan to collateral ratios etc.),concentrations of risks and economic data.

The impairment loss on loans and advances is disclosed in more detail under note 15.3.

2.3.6 Going concern

The Directors have assessed the ability of the Group to continue operating as a going concernand believe that the preparation of these condensed financial statements on a going concernbasis is still appropriate.


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3. ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these condensed financialstatements are set out below. These policies have been consistently applied unless otherwisestated.

3.1 Financial instruments

3.1.1Classification

Financial assets and liabilities at fair value through profit and loss include financialassetsand liabilities held for trading i.e. those that the Group principally holds for the purpose ofshort-term profit taking as well as those that were, upon initial recognition, designated by theentity asfinancial assetsor liabilitiesat fair value through profitand loss.

Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market other than those classified as held-for-trading and theGroup upon initial recognition designates as at fair value through profit or loss and those theGroup upon initial recognition designates as available-for-sale.

Held-to-maturity investmentsare non-derivative financial assets with fixed or determinablepayments and fixed maturity that the Group has the positive intention and ability to hold tomaturity.

Financial assets available-for-saleare non-derivative financial assets that are designated asavailable-forsale or are not classified as loans and receivables, held-to-maturity investmentsor financial assets at fair value through profit or loss.

3.1.2 Recognition

The Group recognises financial assets at fair value through profit andloss and available forsale assets on the date it commits to purchase the assets. From this date any gains and lossesarising from changes in fair value of the assets are recognised in the income statement andother comprehensive income respectively.

Held-to-maturity investments and loans and receivables are recognised at cost which is the fairvalue of the consideration given on the day that they are transferred to the Group.

3.1.3 Measurement

Financial assets and liabilities are measured initially at fair value. Subsequent to initialrecognition, financial assets and liabilities are measured at fair value through profit and loss

and available-for-sale financial assets are measured at fair value, except that any instrumentthat does not have a quoted market price in an active market and whose fair value cannot bereliably measured is stated at cost, less impairment losses.

Held-to-maturity investments and loans and receivables are measured at amortised cost lessimpairment losses. Amortised cost is calculated using the effective interest rate method.Premiums and discounts, including initial transaction costs, are included in the carryingamount of the related instrument and amortised based on the effective interest rate of theinstrument.


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3.1.4 Fair value measurement principles

The fair value of financial instruments is based on their quoted market price at the reportingdate without any deduction for transaction costs. If a quoted market price is not available, thefair value of the instrument is estimated using pricing models or discounted cash flowtechniques.

Where discounted cash flow techniques are used, estimated future cash flows are based onmanagements best estimates and the discount rate is a market related rate at the reporting datefor an instrument with similar terms and conditions. Where pricing models are used, inputs arebased on market related measures at the reporting date.

3.2 Investment properties

Investment properties are stated at fair value. Gains and losses arising from a change in fairvalue of investment properties are recognized in the income statement. The fair value isdetermined at the end of each reporting period.

3.3 Share - based paymentsThe Group issues share options to certain employees in terms of the Employee Share OptionScheme. Share options are measured at fair value at the date of grant. The fair valuedetermined at the date of grant of the options is expensed on a straight-line basis over thevesting period, based on the Groups estimate of shares that will eventually vest. Fair value ismeasured using the Black-Scholes option pricing model. The expected life used in the modelhas been adjusted, based on managements best estimate, for the effects of non-transferability,exercise restrictions and other behavioral considerations.

3.4 Property and equipmentInternational Accounting Standard 16 (IAS 16) stipulates that the residual value and the usefullife of an asset must be reviewed at least each financial year-end. If the residual value of an

asset increases by an amount equal to or greater than the assets carrying amount, then thedepreciation of the asset ceases. Depreciation will resume only when the residual valuedecreases to an amount below the assets carrying amount.

4. INTEREST INCOME30 June 30 June

2013 2012US$ US$

Loans and advances to banks 936 587 375 709

Loans and advances to customers 15 038 076 11 182 430Investment securities 124 426 72 121Other 107 28 014

--------------- -----------------16 099 196 11 658 274

========= ==========


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5. NON-INTEREST INCOME 30 June 30 June2013 2012US$ US$

Net gains/(losses) from quoted and otherinvestments 37 494 (3 919)

Commission and fee income 7 590 765 6 556 955Fair value adjustment on investment properties - 122 500Fair value adjustment on non - current assets held for sale (75 300) -Profit on disposal of property and equipment - 725Profit on disposal of associate 580 137 -Other net operating income 19 398 8 979

------------- --------------8 152 494 6 685 240

======== ========

6. OPERATING EXPENDITURE 30 June 30 June2013 2012US$ US$

The operating profit is aftercharging the following:

Administration costs 6 279 681 5 076 333Staff costs salaries, allowances and related costs 5 880 682 4 849 326Depreciation 865 224 634 736Impairment reversal on land and buildings - (70 000)

-------------- -------------13 025 587 10 490 395======== ========

7. TAXATIONIncome tax expense30 June 30 June

2013 2012

US$ US$

Current tax 1 808 389 1 050 982Aids levy 54 252 31 550Deferred tax (987 362) (227 094)Capital gains tax 264 024 -

------------ ------------1 139 303 855 438======= =======


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8. IMPAIRMENT LOSSES ON LOANS AND ADVANCES

Impairment losses are applied to write off advances in part or in whole when they areconsidered partly or wholly irrecoverable. The aggregate impairment losses which are raisedduring the period are dealt with as per paragraph 8.3.

8.1 Specific provisions

Specific provisions are made where the repayment of identified advances is in doubt andreflect estimates of the loss. Advances are written off against specific provisions once theprobability of recovering any significant amounts becomes remote.

8.2 Portfolio provisions

The portfolio provision relates to the inherent risk of losses which, although not separatelyidentified, is known to be present in any loan portfolio.

8.3 Regulatory Guidelines and International Financial Reporting Standards RequirementsThe Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulatescertain minimum percentages to be applied to the respective categories of the loan book.

International Accounting Standard 39, Financial Instruments Recognition and Measurement(IAS 39), prescribes the provisioning for impairment losses based on the actual loan lossesincurred in the past applied to the sectoral analysis of book debts and the discounting ofexpected cash flows on specific problem accounts.

The two prescriptions are likely to give different results. The Group has taken the view thatwhere the IAS 39 charge is less than the amount provided for in the Banking Regulations, the

difference is recognized directly in equity as a transfer from retained earnings to a regulatoryreserve and where it is more, the full amount will be charged to the profit or loss.

8.4 Non-performing loans

Interest on loans and advances is accrued to income until such time as reasonable doubt existsabout its collectability, thereafter and until all or part of the loan is written off, interest continuesto accrue on customers accounts, but is not included in income. Such suspended interest isdeducted from loans and advances in the statement of financial position. This policy meets therequirements of the Banking Regulations 2000 issued by the RBZ.

9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinaryequity holders of NMBZ Holdings Limited by the weighted average number of ordinary sharesoutstanding during the year.

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equityholders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends orother items related to dilutive potential ordinary shares deducted in arriving at profit or lossattributable to ordinary equity holders of the parent entity; (b) any interest recognised in theperiod related to dilute potential ordinary shares; (c) any other changes in income or expensethat would result from the conversion of the dilutive potential ordinary shares, by the weightedaverage number of ordinary shares outstanding during the year plus the weighted average


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number of ordinary shares that would be issued on the conversion of all the dilutive potentialordinary shares into ordinary shares.

9.1 Earnings30 June 30 June

2013 2012US$ US$

Basic 2 672 911 2 564 350

9.2 Number of shares30 June 30 June

2013 2012US$ US$

9.2.1 Basic earnings per shareWeighted average number of ordinary shares for

basic earnings per share 280 710 729 280 710 729*

9.2.2 Diluted earnings per shareNumber of share at beginning of period 280 710 729 280 710 729*Shares issued 103 716 672 -Shares issued- private placement 103 714 287 -Shares issued on consolidation 2 385 -Effect of dilution:Share options outstanding 1 074 287 1 074 287*Share options approved but not yet granted 28 071 073 -

----------------- -------------------413 572 761 281 785 016*

========== =========

9.3 Earnings per share (US cents)

30 June 30 June2013 2012US$ US$

Basic 0.95 0.91*Diluted basic 0.65 0.91*

* Restated after the consolidation of shares referred to in note 10 below.

10. SHARE CAPITAL

10.1 Authorised 30 June 31 December 30 June 31 December2013 2012 2013 2012

Shares Shares US$ US$

million millionOrdinary shares of US$0.00028

each 600 350 168 000 98 000====== ===== ===== ======

At an Extraordinary General Meeting held on 19 February 2013, the Company approved a shareconsolidation exercise at a ratio of 10 : 1 and consolidated 3 500 000 000 (3.5 billion) shareswith a nominal value of US$0.000028 per share to 350 000 000 (350 million) shares with anominal value of US$0.00028 per share. The Company also approved an increase in theauthorised share capital from 350 million shares with a nominal value of $0.00028 per share to600 million shares with a nominal value of $0.00028 per share.


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10.2 Issued and fully paid

30 June 31 December 30 June 31 December2013 2012 2013 2012

Shares Shares US$ US$million million

At 1 January 281 281 78 598 78 598Shares issued 104 - 2 904 -

----------- ----------- ---------- -----------385 281 81 502 78 598

======= ====== ====== =====

The Company received a total of US$14 831 145 equity capital from three strategic foreignpartners namely Norfund, FMO and AfricInvest who were allocated 34 571 429 shares eachfor individually investing US$4 943 715. This amount, net of share issue expenses, was usedto recapitalise the Bank in order to contribute towards the minimum capital requirements setby the Reserve Bank of Zimbabwe of US$50 million by 30 June 2013.

NMBZ Holdings Limited entered into a share buy-back agreement with NederlandseFinancierings-Maatschappij Voor Ontiwikkelingslanden N.V. (FMO), Norwegian InvestmentFund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings(AfricInvest) where these three strategic investors have a right on their own discretion at anytime after the 5th anniversary but before the 9th anniversary of its first subscription date, torequest NMBZ to buy back all or part of its NMBZ shares at a price to be determined usingthe agreed terms as entailed in the share buy-back agreement. It is a condition precedent that atany point when the share buy-back is being considered, the proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimumregulatory capital requirements. Further, no buy-back option can be exercised by any investorafter the 9th anniversary of the effective date.

Subject to the provisions of section 183 of the Companies Act (Chapter 24:03), the unissued

shares are under the control of the directors.

11. DEPOSITS AND OTHER ACCOUNTS

11.1 Deposits and other accounts` 30 June 30 June

2013 2012US$ US$

Deposits from banks and other financialinstitutions 47 992 182 38 969 071

Current and deposit accounts 162 681 607 152 452 995

--------------- ---------------Total deposits 210 673 789 191 422 066Trade and other payables 5 835 948 3 580 567

--------------- ----------------216 509 737 195 002 633========= =========


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11.2 Maturity analysis 30 June 31 December2013 2012US$ US$

Less than one month 169 304 967 159 048 0901 to 3 months 10 836 168 8 388 2103 to 6 months 20 220 081 5 686 6746 months to 1 year 1 769 715 1 675 2591 to 5 years 8 542 858 16 623 833Over 5 years - -

--------------- --------------210 673 789 191 422 066

======== ========

11.3 Sectoral analysis of deposits 30 June 31 December2013 2012US$ % US$ %

Banks and financial services 47 992 182 23 38 969 071 20Transport and telecommunications

companies 6 344 963 3 6 040 981 3Mining companies 4 171 466 2 3 221 341 2Municipalities and parastatals 16 266 626 8 18 768 175 10Manufacturing 25 123 778 12 23 888 559 12Distribution 19 842 897 9 17 912 925 9Services 30 184 949 14 28 199 595 15

Agriculture 6 659 542 3 9 085 971 5Individuals 33 320 712 16 29 115 145 15Other deposits 20 766 674 10 16 220 303 9

--------------- -------- --------------- --------210 673 789 100 191 422 066 100

========= ==== ======== =====

12. INVESTMENT SECURITIES HELD TO MATURITY30 June 31 December

2013 2012US$ US$

RBZ foreign currency bonds 5 578 070 5 501 963======== ========


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12.1 Maturity analysis of investment securities held to maturity30 June 31 December

2013 2012US$ US$

Less than 1 month - -1 to 3 months - -3 to 6 months 2 348 056 2 271 9496 months to 1 year 969 004 969 0041 to 5 years 2 261 010 2 261 010Over 5 years - -

-------------- --------------5 578 070 5 501 963

======== ========

13. CASH AND CASH EQUIVALENTS30 June 31 December

2013 2012US$ US$

Balances with Central Bank 6 988 836 22 671 712Current, nostro accounts and cash 18 040 232 14 999 333Interbank placements 36 000 000 20 500 000

-------------- --------------61 029 068 58 171 045

========= ========

14. INVESTMENT IN DEBENTURES30 June 31 December

2013 2012

US$ US$

Debentures 4 787 074 -Provision for impairment loss (802 351) -

-------------- --------------3 984 723 -

========= ========During the period under review a loan with a carrying amount of US$4 787 074 was convertedto convertible debentures of US$4 787 074 with a maturity period of 5 years. The debenturesare at an interest rate of 10% per annum. The Bank has an option to convert the debentures toequity or redeem the debentures at par on or before the maturity date, 9 March 2018.


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15. LOANS, ADVANCES AND OTHER ACCOUNTS

15. 1 Total loans, advances and other accounts

30 June 31 December2013 2012

15.1.1 Advances US$ US$

Fixed term loans 50 916 541 57 124 283Loans and overdrafts 122 639 517 86 823 914

----------------- ----------------173 556 058 143 948 197

Other accounts 4 184 166 2 651 797

-------------- -------------177 740 224 146 599 994========= =========

15.1.2 Maturity analysisLess than one month 88 639 551 92 386 3131 to three months 39 382 731 19 352 1343 to 6 months 3 840 001 3 271 1196 months to 1 year 7 208 722 4 968 6351 to 5 years 44 383 907 32 439 174Over 5 years - -

--------------- ---------------Total advances 183 454 912 152 417 375Provision for impairment losses

on loans and advances (8 351 528) (7 269 799)Suspended interest (1 547 326) (1 199 379)

--------------- ---------------

173 556 058 143 948 197Other accounts 4 184 166 2 651 797---------------- ---------------177 740 224 146 599 994

========== =========


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20


15.2 Sectoral analysis of utilizations

30 June 31 December2013 2012US$ % US$ %

Agriculture andhorticulture 14 407 057 8 9 894 729 6

Conglomerates 6 896 969 4 4 683 682 3Services 39 483 207 22 30 216 258 20Mining 1 467 763 1 1 347 402 1Food & beverages 236 761 - 214 163 -Individuals 40 457 048 22 30 379 234 20Manufacturing 25 754 814 14 29 008 475 19Distribution 54 751 293 30 46 673 432 31

--------------- ------- --------------- --------183 454 912 100 152 417 375 100========= ==== ========= =====

The material concentration of loans and advances are in the distribution sector at 30% (2012:31%).

15.3 Allowance for impairment losses on loans, advances and debentures

30 June 2013 31 December 2012Specific Portfolio Total Specific Portfolio Total

US$ US$ US$ US$ US$ US$At 1 January 7 164 064 105 735 7 269 799 3 354 088 - 3 354 088Charge against profits 1 841 017 46 520 1 887 537 3 879 327 105 735 3 985 062Bad debts written off (3 458) - (3 458) (69 351) - (69 351)

------------- ------------- ------------- ------------- ----------- ----------

Balance 9 001 623 152 255 9 153 878 7 164 064 105 735 7 269 799======== ======== ======== ======== ======= =======

15.4 Non-performing loans and advances30 June 31 December

2013 2012US$ US$

Total non-performing loans and advances 41 877 499 23 996 312Provision for impairment losses on loans and advances (9 001 623) (7 164 064)Provision for impairment losses on debentures (note 14) 802 351 -Suspended interest (1 547 326) (1 199 379)

--------------- ---------------Residue 32 130 901 15 632 869

========= =========

.


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16. PROPERTY AND EQUIPMENT

Land Furnitureand Computer and Motor

buildings equipment fittings vehicles TotalUS$ US$ US$ US$ US$

COST

Balance at 1 January 2012 2 738 252 1 524 271 2 478 701 1 766 515 8 507 739Additions - 920 559 268 028 1 556 092 2 744 679Revaluation gain 77 472 - - - 77 472Disposals - - (10 825) (250) (11 075)Reclassifications - 251 703 (251 703) - -

--------------- ------------ ----------- ---------- --------------Balance at 31 December 2012 2 815 724 2 696 533 2 484 201 3 322 357 11 318 815Additions 4 216 590 068 255 276 312 168 1 161 728

------------- ------------ ------------ ------------ ------------Balance at 30 June 2013 2 819 940 3 286 601 2 739 477 3 634 525 12 480 543

------------- ------------ ------------ ------------ ------------

DEPRECIATIONBalance at 1 January 2012 293 469 976 912 287 323 201 1 705 757Charge for the year 45 430 312 943 410 138 662 445 1 430 956Transfers - (2 562) - - (2 562)Reclassification - 65 826 (65 826) - -Disposals - - (2 545) (250) (2 795)

------------- ------------- ------------- ----------- ------------Balance at 31 December 2012 45 723 846 183 1 254 054 985 396 3 131 356

Charge for the period 20 525 198 236 208 637 437 826 865 224

-------------- -------------- -------------- ------------ -------------Balance at 30 June 2013 66 248 1 044 419 1 462 691 1 423 222 3 996 580-------------- -------------- -------------- ------------- --------------

NET BOOK VALUE

At 30 June 2013 2 753 692 2 242 182 1 276 786 2 211 303 8 483 963======= ======= ======= ======= ========

At 31 December 2012 2 770 001 1 850 350 1 230 147 2 336 961 8 187 459======= ======= ======= ======= =======

At 1 January 2012 2 737 959 1 054 295 1 566 414 1 443 314 6 801 982======= ======= ======= ======= =======


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17. CAPITAL COMMITMENTS30 June 31 December

2013 2012US$ US$

Capital expenditure contracted for 224 101 -Capital expenditure authorized but not yet 4 353 828 5 739 655

contracted for ------------- --------------4 577 929 5 739 655

======== ========The capital expenditure will be funded from internal resources.

18. CONTINGENT LIABILITIES

30 June 31 December2013 2012US$ US$

Guarantees 3 641 105 7 827 744Commitments to lend 38 582 928 29 326 528

-------------- ---------------42 224 033 37 154 272

========= ==========


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19. INVESTMENT IN ASSOCIATE

The Group had a 24.79% interest in African Century Limited, which is involved in theprovision of lease finance. The investment was disposed off on the 29 th of May 2013 fora consideration of US$1 850 000.

African Century Limited is a company that is not listed on any public exchange. Thefollowing table illustrates summarized unaudited and audited financial information ofthe Groups investment in African Century Limited.

Share of the associates statement of financial position:


Unaudited Audited

Current assets 5 876 431 5 036 603Non-current assets 49 722 56 750Current liabilities (700 609) (457 427)Non-current liabilities (3 981 857) (3 610 007)

---------------- ----------------Equity 1 243 687 1 025 919

========= =========Share of associates revenue and profit:Revenue 564 172 904 446

========= =========Profit 217 768 434 252

========= =========Disposal of investment (1 243 687) -Carrying amount of the investment - 1 025 919

========= =========

Reconciliation of carrying amount of investment in Associate:

Balance at 1 January 1 025 919 591 667Share of profits of associate 217 768 434 252Disposal of investment (1 243 687) -

------------ ------------Balance - 1 025 919

======== =======


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20. EXCHANGE RATES

The following exchange rates have been used to translate the foreign currency balancesto United States of America dollars (US$) at period end:-

Mid-rate Mid-rate30 June 2013 31 December 2012

British Pound Sterling GBP 1.5274 1.6156South African Rand ZAR 9.9279 8.4776European Euro EUR 1.3074 1.3200Botswana Pula BWP 8.5985 7.7721


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STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 June 2013

30 June 30 June2013 2012US$ US$

Reviewed Reviewed

Interest income Note 16 099 198 11 541 401Interest expense (6 610 712) (4 855 839)

----------------- --------------Net interest income 9 488 486 6 685 562Net foreign exchange gains 866 453 905 133Non-interest income a 7 536 120 6 695 141

----------------- --------------Net operating income 17 891 059 14 285 836Operating expenditure b (13 009 202) (10 490 395)Impairment losses on loans, advances and debentures (1 887 537) (688 020)

--------------- ---------------Profit before taxation 2 994 320 3 107 421Taxation (815 104) (787 981)

------------- ---------------Profit for the period 2 179 216 2 319 440Other comprehensive income net of tax - -

--------------- -------------Total comprehensive income for the period 2 179 216 2 319 440

======== =========Earnings per share (US cents)

-Basic c 13.21 14.06


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STATEMENT OF FINANCIAL POSITIONAs at 30 June 2013


Reviewed ReviewedEQUITY Note

Share capital d 16 506 16 502Capital reserves 35 890 190 17 879 615Retained earnings 12 552 758 12 487 547

---------------- --------------Total Equity 48 459 454 30 383 664

LIABILITIES

Deposits and other accounts 216 334 626 194 981 244Current tax liabilities 425 835 728 620

---------------- ---------------Total liabilities 216 760 461 195 709 864

--------------- --------------

Total equity and liabilities 265 219 915 226 093 528========= =========

ASSETS

Cash and cash equivalents e 61 029 068 58 171 045Investment securities held to maturity 5 578 070 5 501 963Amount owing from Holding Company 641 319 956 161Investment in debentures 3 984 723 -Loans, advances and other accounts 177 803 072 146 485 358Non - current asset held for sale g 2 216 500 2 225 300Unquoted investments 83 749 82 513

Deferred tax assets 2 379 151 1 368 429Investment properties f 3 020 300 3 115 300Property and equipment 8 483 963 8 187 459

---------------- -----------------Total assets 265 219 915 226 093 528

========== ==========


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STATEMENT OF CHANGES IN EQUITYfor the six months ended 30 June 2013

Capital Reserve

Share Share RegulatoryCapital Premium ReserveUS$ US$ US$

Balances at 1 January 2012 16 501 13 690 931 1 023 431Total comprehensive income for the six months - - -Impairment allowance for loans and advances - - 254 707

--------- ------------- ------------Balances at 30 June 2012 16 501 13 690 931 1 278 138Shares issued 1 1 887 001 -Total comprehensive income for the six months - - -Impairment allowance for loans and advances - - 1 023 545

--------- ------------- -----------

Balances at 31 December 2012 16 502 15 577 932 2 301 683Shares issued 4 15 896 570 -Total comprehensive income for the six months - - -Impairment allowance for loans and advances - - 2 114 005

--------- ------------- -----------Balances at 30 June 2013 16 506 31 474 502 4 415 688

===== ======== =======


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STATEMENT OF CASH FLOWSfor the six months ended 30 June 2013

CASH FLOWS FROM OPERATING ACTIVITIES 30 June 30 June2013 2012US$ US$

Reviewed Reviewed

Profit before taxation 2 994 320 3 107 421Non-cash items

-Impairment losses on loans, advances and debentures 1 887 537 688 020-Investment properties fair value adjustment - (122 500)-Non current assets held for sale fair value adjustment 75 300 --Profit on disposal of property and equipment - (725)-Quoted and other investments fair value adjustment (1 237) (2 406)-Impairment reversal on land and buildings - (70 000)-Depreciation 865 224 634 736

------------- --------------Operating cash flows before changes in operating

assets and liabilities 5 821 144 4 234 546

Changes in operating assets and liabilitiesDeposits and other liabilities 21 353 382 11 466 696Amount owing from holding company 314 842 -Loans, advances and other accounts (33 205 251) (4 319 372)Investment securities held to maturity (76 107) (5 425 534)Investment in debentures (3 984 723) -

-------------- ---------------(9 776 713) 5 956 336

-------------- ---------------TaxationCorporate tax paid (2 127 185) (1 758 010)Capital gains tax paid (1 425) -

-------------- ---------------Net cash (outflow)/inflow from operating activities (11 905 323) 4 198 326

-------------- ---------------CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds on disposal of property and equipment - 9 003Purchase of property and equipment (1 161 728) (1 228 446)Proceeds on disposal of non current assets held for sale 28 500 -

--------------- --------------Net cash outflow from investing activities (1 133 228) (1 219 443)

-------------- --------------Net cash (outflow)/inflow before financing activities (13 038 551) 2 978 883

-------------- --------------

CASHFLOWS FROM FINANCING ACTIVITIESIssue of shares 15 896 574 --------------- ---------------

Net cash inflow from financing activities 15 896 574 --------------- ----------------

Net increase in cash and cash equivalents 2 858 023 2 978 883Cash and cash equivalents at beginning of the period 58 171 045 32 265 953

--------------- ----------------Cash and cash equivalents at the end of the period (note e) 61 029 068 35 244 836

========= =========


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There are no material differences between the Bank and the Holding company as the Bank isthe principal operating subsidiary of the Group. The notes to the financial statements underNMBZ Holdings Limited are therefore the same as those of the Bank in every material respect.

a. NON-INTEREST INCOME30 June 30 June

2013 2012US$ US$

Investment properties fair value adjustment - 122 500Non - current assets held for sale fair value adjustments (75 300) -Unquoted investments fair value adjustments 1 237 2 406Commission and fee income 7 590 765 6 556 955Profit on disposal of property and equipment - 725Other net operating income 19 418 12 555

-------------- --------------7 536 120 6 695 141

========= =========b. OPERATING EXPENDITURE

The operating profit is aftercharging the following: 30 June 30 June

2013 2012US$ US$

Administration costs 6 637 891 5 076 333Staff costs salaries, allowances and related costs 5 506 087 4 849 326Depreciation 865 224 634 736Impairment reversal on land and buildings - (70 000)

-------------- -------------13 009 202 10 490 395

======== ========


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c. EARNINGS PER SHARE

The calculation of earnings per share is based on the following figures:

30 June 30 June2013 2012US$ US$

c.1 Earnings

Basic 2 179 216 2 319 440

c.2 Number of shares

Weighted average shares in issue 16 501 075 16 501 000

c.3 Earnings per share (US cents)Basic 13.21 14.06


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d. SHARE CAPITAL

d.1 AuthorisedThe authorised ordinary share capital at 30 June 2013 is at the historical costfigure of US$25 000 (2012 US$25 000) comprising 25 million ordinary sharesof US$0.001 each.

d.2 Issued and fully paidThe issued share capital at 30 June 2013 is at the historical cost figure of US$16 506 (2012 US$16 502) comprising 16.506 million ordinary shares of US$0.001 each

e. CASH AND CASH EQUIVALENTS30 June 31 December

2013 2012US$ US$

Balances with Central bank 6 988 836 22 671 712Current, nostro accounts and cash 18 040 232 14 999 333Interbank placements 36 000 000 20 500 000

-------------- ---------------61 029 068 58 171 045

========= =========f. INVESTMENT PROPERTIES


Balance at 1 January 3 115 300 2 510 000Additions - 291 890

Transfers to non current assets held for sale (95 000) (2 225 300)Fair value adjustments - 2 538 710-------------- ---------------

Balance 3 020 300 3 115 300========= =========

Rental income amounting to US$18 954 (2012 US$6 600) was received and no operatingexpenses were incurred on the investment properties in the current period due to the net leasingarrangements on the properties.

The Bank has no restrictions on the realisability of all investment properties and no contractualobligations to purchase, construct or develop the investment properties or for repairs,maintenance and enhancements.

Investment properties are stated at fair value, as at 30 June 2013. The fair value of theinvestment properties at 30 June 2013 was arrived at on the basis of directors valuation on anopen market value method.


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g. NON-CURRENT ASSETS HELD FOR SALE


Carrying amount as at 1 January 2 225 300 -Transfer from investment properties 95 000 2 225 300Fair value adjustments (75 300) -Disposals (28 500) -

-------------- --------------2 216 500 2 225 300

========== =========

Land with a fair value of US$95 000 was transferred to non current assets held for sale. Some of theland with a fair value of US$28 500 was disposed off during the period for a consideration ofUS$28 500. As at 30 June 2013 a directors valuation of an investment property resulted in a fairvaluation loss of US$75 300.


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h. CORPORATE GOVERNANCE AND RISK MANAGEMENT

1. RESPONSIBILITY

These condensed financial statements are the responsibility of the directors. This responsibilityincludes the setting up of internal control and risk management processes, which are monitoredindependently. The information contained in these condensed financial statements has beenprepared on the going concern basis and is in accordance with the provisions of the CompaniesAct (Chapter 24:03), the Banking Act (Chapter 24:20) and International Financial ReportingStandards.

2. CORPORATE GOVERNANCE

The Group adheres to principles of corporate governance derived from the King II Report, theUnited Kingdom Combined Code and RBZ Corporate Governance Guidelines. The Group iscognisant of its duty to conduct business with due care and in good faith in order to safeguardall stakeholders interests.

3. BOARD OF DIRECTORS

Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairmanof the Board is an independent non-executive director. The Board is supported by mandatorycommittees in executing its responsibilities. The Board meets at least quarterly to assess risk,review performance and provide guidance to management on both operational and policyissues.

The Board conducts an annual peer based evaluation on the effectiveness of its activities. Theprocess involves the members evaluating each other collectively as a board and individually as

members. The evaluation, as prescribed by the RBZ, takes into account the structure of theboard, effectiveness of committees, strategic leadership, corporate social responsibility,attendance and participation of members and weaknesses noted. Remedial plans are invoked toaddress identified weaknesses with a view to continually improve the performance andeffectiveness of the Board and its members.


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3.1 Directors attendance at NMB Bank Limited Board meetings

Board ofDirectors

AuditCommittee

RiskManagementCommittee

Asset and Liability

ManagementCommittee (ALCO)Finance & StrategyCommittee

LoansReviewCommittee

T N Mundawarara 2 2 2 2

A M T Mutsonziwa 2 2 2 2 2 2

J A Mushore 2 2 2 1 2 1

F Zimuto 2 2 2 2 2 2

B Ndachena 2 2 2 2 2 2 2 2

B W Madzivire 2 2 2 2

L Majonga (Ms) 2 2 2 2 2 2 2 2

J Chigwedere 2 2 2 2 2 2

J de la Fargue* 2 2 2 2

J Chenevix - Trench* 2 2 2 2 2 B P Washaya 2 2 2 2 2 2

F S Mangozho 2 2 2 2 2 2

L Chinyamutangira 2 2 2 2

KEY

*Mr J de la Fargue is an alternate director to Mr J Chenevix - Trench on the ALCO, Finance and Strategy Committee.

Meetings planned Meetings attended


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4. RISK MANAGEMENT

The Board of Directors has overall responsibility for the establishment and oversight of theGroups risk management framework. The Board has established the Board Asset and LiabilityManagement Committee (ALCO) and Board Risk Committee, which are responsible fordefining the Banks risk universe and risk appetite, developing policies and monitoringimplementation. The Bank has a Risk Management department, which reports to the Managing

Director and is responsible for the management of the Banks overall risk universe. The Bankhas complied with the implementation timelines for key Basel II implementation milestonescontained in the Reserve Bank of Zimbabwe Action Plan issued in July 2011.

Risk management is linked logically from the level of individual transactions to the Bank level.Risk management activities broadly take place simultaneously at the following differenthierarchy levels:

a) Strategic Level: This involves risk management functions performed by seniormanagement and the board of directors. It includes the definition of risk, ascertainingthe Banks risk appetite, formulating strategy and policy for managing risk andestablishes adequate systems and controls to ensure overall risk remains withinacceptable levels and is adequately compensated.

b) Macro Level: It encompasses risk management within a business area or acrossbusiness lines. These risk management functions are performed by middlemanagement.

c) Micro Level: This involves On-the-line risk management where risks are actuallycreated. These are the risk management activities performed by individuals whoassume risk on behalf of the organization such as Treasury Front Office, CorporateBanking, Retail Banking e.t.c. The risk management in these areas is confined tooperational procedures set by management.

Risk management is premised on four (4) mutually reinforcing pillars, namely:a) adequate board and senior management oversight;b) adequate strategy, policies, procedures and limits;c) adequate risk identification, measurement, monitoring and information systems; andd) comprehensive internal controls and independent reviews.

4.1 Credit risk

Credit risk is the risk that a financial contract will not be honoured according to the original setof terms. The risk arises when borrowers or counterparties to a financial instrument fail to meettheir contractual obligations. The Board has put in place sanctioning committees with specificcredit approval limits. The Credit Risk Management department does the initial review of allapplications before passing them on to the Executive Credit Committee and finally Board CreditCommittee depending on the loan amount. The Bank has in place a Board Loans ReviewCommittee responsible for reviewing the quality of the loan book.

The Credit Risk Management department is responsible for implementing the groups credit riskpolicies and standards and this includes:

Formulating credit policies in consultation with business units, covering collateralrequirements, credit assessment, risk grading and reporting, documentary and legalprocedures, and compliance with regulatory and statutory requirements ;

Establishing the authorization structure for the approval and renewal of creditfacilities. Facilities require authorization by the Risk Management Committee,Executive Committee or the Board Credit Committee depending on amount as per setlimits;

The Credit Risk Management department assesses all credit exposures in excess ofdesignated limits, prior to facilities being committed to clients by the business unitconcerned. Renewals and reviews of facilities are subject to the same review process;


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Limiting concentrations of exposure to counter parties and industry for loans andadvances;

Maintaining and monitoring the risk grading as per the RBZ requirement in order tocategorize exposures according to the degree of risk of financial loss faced and tofocus management on the attendant risks.

Reviewing compliance of business units with agreed exposure limits, including thosefor selected industries; and

Providing advice, guidance and specialist skills to business units to promote bestpractice throughout the Group in the management of credit risk.

4.2 Market risk

This is the exposure of the Banks on and off balance sheet positions to adverse movement inmarket prices resulting in a loss in earnings and capital. The market prices will range frominterest rates, foreign exchange and equity prices. The Bank has in place a Management Assetand Liability Committee (ALCO) which monitors market risk and recommends the appropriatelevels to which the Bank should be exposed at any time. The Net Interest Margin and InterestRate Repricing gaps form the primary measure of interest rate risk, supported by periodic stress

tests to assess the Banks ability to withstand stressed market conditions. On foreign exchangerisk, the Bank monitors currency mismatches and makes adjustments depending on exchangerate movement forecast. The mismatches are also contained within 10% of the Banks capital.

ALCO meets on a monthly basis and operates within the prudential guidelines and policiesestablished by the Board ALCO. The Board ALCO is responsible for setting exposurethresholds and limits, and meets on a quarterly basis.

4.3 Liquidity risk

Liquidity risk is the risk of financial loss arising from the inability of the Bank to fund assetincreases or meet obligations as they fall due without incurring unacceptable costs or losses.The Bank identifies this risk through maturity profiling of assets and liabilities and assessment

of expected cash flows and the availability of collateral which could be used if additionalfunding is required.

The Bank uses the following tools and techniques in the management of liquidity risk:a) Daily Cash flow Monitoring:b) Liquidity Gap Analysis;c) Benchmarks and Ratios; andd) Liquidity Stress Testing.

The daily liquidity position is monitored and regular liquidity stress testing is conducted undera variety of scenarios covering both normal and more severe market conditions. The Bank hasa Contingency Liquidity Plan which covers both a name specific crisis and market wide crisis.All liquidity policies and procedures are subject to review and approval by the Board.

Liquidity risk is monitored through a daily treasury strategy meeting. This is augmented by amonthly management ALCO and a quarterly board ALCO. The Bank monitors its liquidityratio in compliance with Banking Regulations to ensure that it is above the 30% threshold setby the regulatory authorities.


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4.4 Operational risk

This risk is inherent in all business activities and is the risk of loss arising from inadequate orfailed internal processes, people, systems or from external events. The Bank has anOperational Risk Loss Tracker System (OLTS) in which any incident with a potential loss tothe Bank or could affect the Banks reputation is recorded within 24 hours of occurrence. Thisforms the Banks operational loss database which is then used for operational risk modelingand improvement in controls. The Bank also uses Key Risk Indicator reports which arereceived by the Risk department from various operational units on a monthly basis and are usedto detect adverse trends in key indicators and are reported to the board on a quarterly basis

The risk department conducts periodic risk assessments on all the units within the Bank aimedat identifying the top risks and ways to minimise their impact. There is a Board RiskCommittee whose function is to ensure that this risk is minimized. The Risk Committee withthe assistance of the internal audit function and the Risk.

Management department assesses the adequacy of the internal controls and makes thenecessary recommendations to the Board.

4.5 Legal Risk

Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability orinterpretation of contracts, laws or regulations. Legal risk may entail such issues as contractformation, capacity and contract frustration.

The Legal and Corporate Affairs Department is responsible for managing litigation andanalysing emerging legal trends, statues and regulations that may impact on the operations ofthe Bank. The department is responsible for coordinating the flow of information with a legalbearing to all business units of the Bank. All business units are required to liaise with thedepartment on every legal matter or issues with a legal impact. Permanent relationships arealso maintained with firms of legal practitioners and access to legal advice is readily availableto all departments.

4.6 Compliance Risk

Compliance risk is the risk arising from non-compliance with laws and regulations. The Bankhas an independent compliance function which is responsible for identifying and monitoring allcompliance issues and ensures the Bank complies with regulatory and statutory requirements.

The compliance function conducts compliance monitoring activities such as compliance visits,reviews, snap checks, training and reporting compliance risk to senior management and theBoard.

4.7 Reputational risk

Reputation risk is the risk of loss of business as a result of negative publicity or negativeperceptions by the market with regards to the way the Bank conducts its business. To managethis risk, the Bank strictly monitors customers complaints, continuously train staff at all levels,conducts market surveys and periodic reviews of business practices through its internal auditdepartment. The Bank is active on the Social Responsibility front supporting various socialresponsibility programs.

The Bank maintains Complaints Registers at all the branches wherein all customer grievancesor concerns are recorded and date of resolution annotated. Monthly customer complaints


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returns are submitted to the Compliance Unit for monitoring and tracking of resolutionsrecommended. All incidents with a potential impact on the Banks reputation are reported tothe Risk & Compliance Department within 24 hours of occurrence and appropriate action istaken to protect the Banks reputation. All legal cases and litigations are reviewed and reportedto the Board Risk Committee, including the possible impact on the Banks reputation. Mediareports are monitored on a daily basis and any such reports with an adverse impact on theBanks reputation are responded to appropriately.

4.8 Strategic risk

This refers to current and prospective impact on a Banks earnings and capital arising fromadverse business decisions or implementing strategies that are not consistent with the internaland external environment. To manage this risk, the Bank always has a strategic plan that isadopted by the board of directors. Further, attainment of strategic objectives by the variousdepartments is monitored periodically at management level. Further, there is an ALCO,Finance and Strategy Committee at board level responsible for monitoring overall progresstowards attaining strategic objectives for the Bank.

The directors are satisfied with the risk management processes in the Bank as these havecontributed to the minimisation of losses arising from risky exposures.

4.9 External credit ratings

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agencyaccredited with the Reserve Bank of Zimbabwe.

Security class 2012Long term BBB-

5. REGULATORY COMPLIANCE

There were no instances of regulatory non compliance in the period under review. The Bankremains committed to complying with and adhering to all regulatory requirements .

6. CAPITAL MANAGEMENTThe primary objective of the Banks capital management is to ensure that the Bank complieswith the RBZ requirements. In implementing the current capital requirements, the RBZrequires the Bank to maintain a prescribed ratio of total capital to total risk weighted assets.

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium,retained earnings (including current year profit), statutory reserve and other equity reserves.

The other component of regulatory capital is Tier 2 capital, which includes subordinated term

debt, revaluation reserves and portfolio provisions.

Tier 3 capital relates to an allocation of capital to market and operational risk.

Various limits are applied to elements of the capital base. The core capital (Tier 1) shallcomprise not less than 50% of the capital base and portfolio provisions are limited to 1.25% oftotal risk weighted assets.


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6. CAPITAL MANAGEMENT (CONTINUED)

The Banks regulatory capital position at 30 June 2013 was as follows:


Share capital 16 506 16 502Share premium 31 474 502 15 577 932Retained earnings 12 552 758 12 487 547Fair value gain on investment property (2 340 240) (2 411 775)

--------------- --------------41 703 526 25 670 206

Less: capital allocated for marketand operational risk (1 118 388) (1 198 520)

Credit to insiders (5 591 608) (2 231 128)-------------- -------------

Tier 1 capital 34 993 530 22 240 558Tier 2 capital (subject to limit as per Banking Regulations) 6 452 577 4 819 193

Revaluation reserve 2 340 240 2 411 775Subordinated debt 1 400 000 -Regulatory reserve (limited to 1.25% of risk weighted assets) 2 712 337 2 301 683Portfolio provisions (limited to 1.25% of risk weighted assets) - 105 735

Total Tier 1 & 2 capital 41 446 107 27 059 751Tier 3 capital (sum of market and

operational risk capital) 1 118 388 1 198 520--------------- -------------

Total capital base 42 564 495 28 258 271

========= =========

Total risk weighted assets 231 452 058 182 361 802========= =========

Tier 1 ratio 15.12% 12.20%Tier 2 ratio 2.79% 2.64%Tier 3 ratio 0.48% 0.66%Total capital adequacy ratio 18.39% 15.50%

RBZ minimum required capital adequacy ratio 12.00% 12.00%


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7. SEGMENT INFORMATION

For management purposes, the Bank is organised into four operating segments based onproducts and services as follows:

Retail Banking - Individual customers deposits and consumer loans, overdrafts,credit card facilities and funds transfer facilities.

Corporate Banking - Loans and other credit facilities and deposit and current accountsfor corporate and institutional customers.

Treasury - Money market investment, securities trading, accepting anddiscounting of instruments and foreign currency trading.

International Banking - Handles the Banks foreign currency denominated bankingbusiness and manages relationships with correspondent banks

Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performanceis evaluated based on operating profit or loss which in certain respects is measured differentlyfrom operating profit or loss in the financial statements. Income taxes are managed on a bank -wide basis and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as aperformance measure not the gross income and expense.

Transfer prices between operating segments are on arms length basis in a manner similar totransactions with third parties.

No revenue from transactions with a single external customer or counterparty amounted to 10%or more of the Banks total revenue in 2013 and 2012.


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7. SEGMENT INFORMATION (CONTD)For the six months ended 30 June 2013

Retail Corporate InternationalBanking Banking Treasury Banking

US$ US$ US$ US$ Assets and liabilities

Capital expenditure 635 654 1 486 130 489 10 551 Total assets 45 890 760 149 825 238 61 718 631 158 111 2Total liabilities and capital 48 974 008 99 464 620 61 936 262 - 2


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7. SEGMENT INFORMATION (CONTD)

The following table presents income, profit and certain asset and liability information regarding the Bankunits:

For the six months ended 30 June 2012

Retail Corporate InternationaBanking Banking Treasury Banking

US$ US$ US$ US$Income

Third party 7 481 083 9 515 248 1 352 964 654 194Inter - segment - - - -

------------ -------------- ------------- ------------Total operating income 7 481 083 9 515 248 1 352 964 654 194

Impairment losses on loans and advances (87 064) (600 956) - ------------- ------------ ------------ ------------

Net operating income 7 394 019 8 914 292 1 352 964 654 194

------------ ------------ ------------ -----------ResultsInterest and similar income 2 319 785 8 989 529 447 830 Interest and similar expense (945 547) (3 612 876) (297 416)

------------ ------------ ------------ -----------Net interest income 1 374 238 5 376 653 150 414

------------- ------------ ------------ -----------Fee and commission income 4 995 567 787 536 - 654 194Fee and commission expense - - -

------------- ------------- ------ ------ ------------Net fees and commission income 4 995 567 787 536 - 654 194

------------- ------------- ------------ ------------Depreciation of property and equipment 273 360 45 871 10 611 6 198

Segment profit/ (loss) 2 117 064 4 031 864 975 342 154 699Income tax expense - - - ------------ ------------ ------------ ------------

Profit/(loss) for the period 2 117 064 4 031 864 975 342 154 699======= ======= ======= =======


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NMB BANK LIMITED

7. SEGMENT INFORMATION (CONTD)For the six months ended 30 June 2012

Retail Corporate Internationa

Banking Banking Treasury BankingUS$ US$ US$ US$

Assets and LiabilitiesCapital expenditure 313 916 105 930 9 553 40 699Total assets 40 466 863 111 121 307 14 849 230 40 699Total liabilities and capital 51 732 968 53 963 981 44 872 277

8. GEOGRAPHICAL INFORMATION

The group operates in one geographical market, Zimbabwe.


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NMB BANK LIMITED

Registered Offices

1st Floor NMB CentreUnity Court George Silundika Avenue/Cnr 1st Street/Kwame Nkrumah Avenue Leopold Takawira StreetHarare Bulawayo

Zimbabwe Zimbabwe

Telephone +263 4 759651 +263 9 70169Facsimile +263 4 759648 +263 9 68535

Website: http://www.nmbz.co.zw

Email: [email protected]

Transfer Secretaries

In Zimbabwe In UK

First Transfer Secretaries Computershare Services PLC1 Armagh Avenue 36 St Andrew Square(Off Enterprise Road) EdinburghEastlea EH2 2YBP O Box 11 UKHarare

Zimbabwe

Documents

NMB Unaudited Results for HY Ended 30 Jun 13