ICB FINANCIAL GROUP HOLDINGS AG ("ICB")
2008 ANNUAL REPORT
Following is a copy of ICB's 2008 Annual Report dispatched to shareholders on
Tuesday, 14 April 2009.
A pdf version is available from the Company's website (www.icbankingroup.com).
The Company's AIM nominated adviser is RFC Corporate Finance Ltd. Contact
Stephen Allen or Trinity McIntyre on +61894802500.
CONTENTS
Group's Global Presence 02 - 03
Corporate Information 04
Board of Directors 05 - 06
Chairman's Statement 07 - 08
Corporate Governance Report 09 - 11
Financial Statements
- Statement by Directors 12
- Report of the Statutory Auditors 13 - 14
- Consolidated Income Statement 15
- Consolidated Balance Sheet 16
- Consolidated Cash Flow Statement 17 - 18
- Consolidated Statement of Changes in Equity 19 - 20
- Notes to the Consolidated Financial Statements 21 - 69
VISION
To be a globally-recognised international banking group with a primary focus
on emerging economies.
GROUP'S GLOBAL PRESENCE
(REFER TO THE COMPANY'S WEBSITE WWW.ICBANKINGROUP.COM FOR A LOCATION MAP OF
THE GROUP'S OPERATIONS)
HOLDING COMPANY
ICB Financial Group Holdings A.G.
(Incorporated in Switzerland)
EUROPE
International Commercial Bank SH.A.
(Incorporated in Albania)
100%
AFRICA
International Commercial Bank Ltd.
(Incorporated in Ghana)
100%
International Commercial Bank (Djibouti) S.A.
(Incorporated in Djibouti)
99.9%
International Commercial Bank (Sierra Leone) Ltd.
(Incorporated in Sierra Leone)
99.9%
International Commercial Bank (Gambia) Ltd.
(Incorporated in Gambia)
99.1%
International Commercial Bank (Mozambique) S.A.
(Incorporated in Mozambique)
99.9%
International Commercial Bank S.A.
(Incorporated in Guinea)
97%
International Commercial Bank Ltd.
(Incorporated in Malawi)
100%
International Commercial Bank (Tanzania) Ltd.
(Incorporated in Tanzania)
20%
International Commercial Bank Senegal S.A.
(Incorporated in Senegal)
20%
ASIA
ICB Global Management Sdn. Bhd.
(Incorporated in Malaysia)
100%
PT Bank Bumiputera Indonesia Tbk
(Incorporated in Indonesia)
67.1%
International Commercial Bank Lao Ltd.
(Incorporated in Lao)
100%
ICB Islamic Bank Ltd.
(Incorporated in Bangladesh)
50.1%
CORPORATE INFORMATION
D I R E C T O R S
MICHAEL ROBERT HANLON
Chairman/Independent Director
(Member of Audit and
Risk Management Committee)
JOSEPHINE PREMLA SIVARETNAM
Non-Independent Director
(Member of Nomination Committee
and Remuneration Committee)
RENÉ FRITSCHI
Independent Director
(Chairman of Nomination Committee)
KENNETH KWAMI KWAKU
Independent Director
(Chairman of Remuneration Committee)
PAUL ROBERT PHILIPPS
BRIDGES
Independent Director
(Chairman of Audit and
Risk Management Committee)
LIM TEONG LIAT
Independent Director
(Member of Audit and
Risk Management Committee)
OFFICES
Registered Office (Switzerland)
Schulhausstrasse I
CH-8834 Schindellegi
Switzerland
Tel: +41 44 687 4550
Fax: +41 44 687 4551
Management Office (Malaysia)
No. 3, Jalan Sri Hartamas 7
50480 Kuala Lumpur, Malaysia
Tel: +603 6201 6051
WEBSITE
www.icbankingroup.com
NOMINATED ADVISER
RFC Corporate Finance Limited
Level 14, 19-31 Pitt Street
Sydney NSW 2000
Australia
Level 15, QV1 Building
250 St Georges Terrace
Perth WA 6000, Australia
BROKER
Keith, Bayley, Rogers & Co. Limited
2nd Floor Finsbury Tower
103-105 Bunhill Row
London EC1Y 8LZ
COMPANY AUDITOR
BDO Visura,
Fabrikstrasse 50
8031 Zurich,
Switzerland
SHARE REGISTRAR
In Switzerland
(Shares)
ShareCommService AG
Europastrasse 29
CH-8152 Glattbrugg, Switzerland
Tel: +044 809 5858
Fax: +044 809 5859
In the UK
(CREST Depositary Interests)
Euroclear UK & Ireland Limited
33 Cannon Street
London EC4M 5SB, United Kingdom
LISTING
AIM Market, London Stock Exchange
Listed on 17th May 2007
STOCK CODE
ICB
BOARD OF DIRECTORS
MICHAEL ROBERT HANLON
Chairman/Independent Director
Michael Hanlon was appointed as the Chairman of ICB Financial Group Holdings
AG, the holding company of the ICB Banking Group since 7 March 2007. He is
also a member of the Audit and Risk Management Committee. He has a total of 44
years commercial banking experience, most of which was in the retail area. He
spent 34 years with Barclays Bank Plc in the UK where he held a number of
Senior Management and Senior Executive appointments, including Regional
Director for the Bank's retail banking in Central London. Later, he joined the
Raiffeisen Banking Group of Austria as Managing Director for retail banking at
the Bank's Polish subsidiary, Raiffeisen Bank Polksa SA, where he was
responsible for the creation and development of a retail banking capability.
Michael joined the Islamic Bank of Britain in April 2003 as Managing Director
where he had the responsibility of creating the very first Sharia compliant
retail banking business in the UK and Western Europe. He retired from the Bank
in 2006. An Associate of the Chartered Institute of Bankers, he regularly
speaks at international conferences. Michael is married with two adult
children. He enjoys travel, art, music, cycling and swimming.
JOSEPHINE PREMLA SIVARETNAM
Non-Independent Director
Josephine Sivaretnam was appointed as a Non-Independent Non-Executive Director
of ICB Financial Group Holdings AG on 7 March 2007. She is also a member of
both the Nomination and Remuneration Committees. Through Panhelligan
Investments Limited, she is a substantial shareholder in the Company. A lawyer
by profession, Josephine spent her early career in the Malaysian Judicial and
Legal Services as a Deputy Public Prosecutor until 1992 after which she
commenced private practice. Josephine was responsible for the early
establishment of the ICB Banks in Europe, Africa and for acquisitions made by
the Group. She is a Non-Executive Director of a Malaysian listed company, The
Nomad Group Bhd. Josephine graduated with a LLB (Hons) from University of
Malaya and a LLM from the London School of Economics and Political Science.
RENÉ FRITSCHI
Independent Director
René Fritschi was appointed as an Independent Non-Executive Director of ICB
Financial Group Holdings AG since 20 July 2006. He is also the Chairman of the
Nomination Committee. René started his career in 1973 as a trainee at the
Handelsbank NW Zurich, Switzerland and in 1978 moved to Manufacturers Hanover
Trust Co Zurich, Switzerland. He later worked for Bank Audi in Zurich before
joining Fundus Treuhand AG in 1989. René then joined Deutsche Bank in 1994.
Since 1998 he has been Chairman of Medio Consult where his experience as a
senior bank director in international trade, major commercial banking, private
banking, estate planning and asset management has been an advantage. René is a
Swiss resident and is fully conversant in English, German and French. He was
born in 1948 and is married with two adult daughters. He graduated in
economics in 1979. His hobbies include long distance running and cross country
skiing. He is familiar with Asia and Africa where he has travelled
extensively.
KENNETH KWAMI KWAKU
Independent Director
Ken Kwaku was appointed as an Independent Non-Executive Director of ICB
Financial Group Holdings AG since 7 March 2007. He is also the Chairman of the
Remuneration Committee. Ken, who hails from Ghana, speaks English, French,
Portuguese and Swahili; holds a PhD from University of Toronto and a First
Class in Economics and Political Science from McGill University. He has also
attended Harvard's Graduate School of Business. Since 2004 Ken has been
Special Advisor to President MKapa (now retired) of Tanzania, Special Advisor
Investment Climate Facility for Africa, Advisor to the Director General UNIDO,
Chairman DCDM Africa and Advisor Hifadhi Business Park, East Africa. Ken
served with the World Bank Group from 1976 to 2004 and held positions
including Chief MIGA Africa Representative 2002 - 2004 and Manager for Africa
1998 - 2002. Between 1995 and 1998, he was seconded from the World Bank Group
as Advisor to the Namibian Government. Ken, who has numerous academic and
professional awards and publications, regularly speaks at international conferences.
PAUL ROBERT PHILIPPS BRIDGES
Independent Director
Paul Bridges was appointed as an Independent Non-Executive Director of ICB
Financial Group Holdings AG since 7 March 2007. He is also the Chairman of the
Audit and Risk Management Committee. He is an experienced banker and was with
Standard Chartered Bank from 1962 to 1998. He held senior managerial roles in
Credit Risk Management and served in East and South East Asia, USA, Middle
East and Africa. Paul was also responsible for the Financial Analysis Expert
System, the creation of a global database and was actively involved in the
global credit reengineering programme. Since retiring from Standard Chartered,
Paul has focused on the development and facilitation of programmes on Credit
Risk Management, Total Risk Management, Credit Audit, Problem Loan Management,
Debt Recovery and Financial Risk Analysis for several banks. Paul's main
expertise is in risk management and he has been a consultant to banks where he
has carried out diagnostic studies and training programmes in credit risk and
debt recovery. His other projects include management of NPLs, analysis and
restructuring of assets. He is married and has two adult daughters. Paul also
speaks Bahasa Indonesia.
LIM TEONG LIAT
Independent Director
Lim Teong Liat was appointed as an Independent Non-Executive Director of ICB
Financial Group Holdings AG since 18 December 2007. He is also a member of the
Audit and Risk Management Committee. He is a Fellow member of The Institute Of
Chartered Accountants in England and Wales. Mr Lim started his banking career
in 1986 as a Management Accountant at Standard Chartered Bank, Malaysia,
working his way up to senior management roles in Internal Control and Audit.
He later worked from 1994 to 2001 for the Hong Leong Banking Group, a
Malaysian bank as General Manager Operations and subsequently General Manager
Consumer Division. He was then appointed as Independent Director of Alliance
Bank Berhad, Malaysia from 2004 to 2006 where he also served as a member of
the Risk Management and Audit Committee. Mr Lim is also presently a member of
the Board of Commissioners of PT Bank Bumiputera, Indonesia.
CHAIRMAN'S STATEMENT
Dear Shareholders,
2008 has been a year which has seen unprecedented turmoil in world financial
markets. The reach of the global economic decline has been such that trading
across the Group has not escaped impact, although I am pleased to say that the
influence of this has been limited as a consequence of the geographic spread
of business and the fact that operations are centred exclusively on the
provision of retail banking services.
Profit after tax amounted to US$13m, marginally down from the 2007 result of
US$14.8m. Trading in all the countries has been challenging, but most of the
operations in Africa did well, the region delivering a contribution of
US$6.3m, compared to US$4.1m in 2007. Elsewhere, Europe and Asia, results were
well down on the achievements of 2007. Performances by the Asian region were
seriously affected by poor results from ICB Islamic Bank, Bangladesh (formerly
the Oriental Bank in which the Group acquired a 50.1% interest in March 2008)
and Bank Bumiputera in Indonesia. Difficult trading conditions in Indonesia
resulted in lower loan growth in Bank Bumiputera leading to a much reduced
contribution for the year. Within ICB Islamic Bank, Bangladesh it was
necessary to make additional provisions of US$17m for loan loss impairment and
contingent liabilities. Overall the performance for Asia was that of a
negative result of US$16.4m. The European region, which is represented by
Albania, also delivered a negative result of US$2.1m. This was primarily due
to accounting adjustments required to achieve conformity with IFRS reporting
requirements.
Group net interest income amounted to US$48.8m (US$48.5m in 2007). With the
notable exception of Indonesia most countries within the Group reported
increased income in comparison to 2007. In addition, recent investments,
Bangladesh, Malawi and Laos provided added contributions.
In contrast, Group expenses increased by 41%, rising to US$63.7m (US$45.0 in
2007). Much of this increase reflects the cost of consolidating the Bangladesh
operation within the Group, which in turn has been primarily responsible for
the deterioration in the cost/income ratio for the Group to 84% (65% in 2007).
Impairment charges for loans amounted to US$14.4m (US$13.0m in 2007). In 2007
the figures were adversely affected by a high level of provisions arising
within Bank Bumiputera, Indonesia. I am pleased to report that the position
here has much improved during the past year with the charge being reduced from
US$12.2m in 2007 to US$3.4m for 2008. However, this improvement was off-set by
a new charge arising within ICB Islamic Bank, Bangladesh at US$10.1m.
As anticipated, the downturn in the world economies has resulted in loan
growth slowing in all the regions. I have mentioned above the difficulties
that were experienced in the Indonesian market which resulted in a reduction
of some US$39.4m in loans. Taking into consideration the contribution of
US$86.5m from recent investments in Bangladesh, Laos and Malawi, the year end
total for the Group is US$588.0m as at December 2008 compared to US$540.6m at
the end of 2007.
"Most of the operations in Africa did well, the region delivering a
contribution of US$6.3m, compared to US$4.1m in 2007."
Another feature of the economic uncertainty has been seen within deposit
growth with a more cautious market approach being adopted by consumers. The
Group results reflect an overall increase in deposits of 4.1%, although here
again the recent investments, Bangladesh, Laos and Malawi have added US$152.9m
new deposits for the year.
In June 2008, I reported to shareholders the successful sale of the Group's
investment in an associate, Sorak Financial Holdings Pte, which was completed
in March. This resulted in an extraordinary gain of US$77.5m, although the
benefit of this has been reduced through a charge of US$50m reflecting an
impairment of `goodwill' arising on the acquisition of the 50.1% stake in ICB
Islamic Bank. After consideration the Group Board concluded that the level of
goodwill at US$100.6m was unlikely to be adequately supported by future
expected cash flows and in recognition of this it was considered prudent to
make an impairment charge of US$50m.
The Group continues to develop and expand its delivery channel capability to
meet customer needs. The branch network remains the preferred customer point
of contact and in support of this the ATM network is being rapidly expanded.
During 2008 the network of branches has increased with additions in Ghana,
Mozambique, Djibouti, Guinea, Sierra Leone, Albania and Indonesia. These
together with the new investments have added further to the overall branch
network, taking the total Group operating network to 141 branches at the end
of 2008.
I am delighted to once again inform shareholders of the Group's success in the
Banker and Global Finance Awards for 2008. ICB Albania, ICB Djibouti and ICB
Guinea all received `Bank of the Year' awards; for ICB Guinea this was the 5th
consecutive year that such an award has been received and this represents a
truly remarkable achievement. Our congratulations go to the Management and
staff of each country for this success.
In March 2009 the Board appointed Mr. Prem Kumar as Group CEO. He takes over
from Mr. Harith Harun who has, for an extended period, held the responsibility
as Acting CEO of the Group. Mr. Kumar, who graduated from the Asia Pacific
Institute, New Zealand and is an Associate of the Australian Institute of
Bankers, is a banker of some 35 years experience. Prior to joining ICB he was
with the HSBC Group where he held Senior Management positions covering a wide
range of business disciplines. I take this opportunity to welcome him to the
Group and at the same time I extend to Mr. Harun our appreciation for his
services as Acting CEO. I am pleased to say that Mr. Harun remains as a senior
member of the Group's management team.
With unfavourable world economic conditions likely to continue, the year ahead
will remain one of uncertainty. However, I believe that the geographical
diversity of the Group coupled with the conservative nature of its business
model, position it well to respond to the challenges ahead. Whilst the
strategy of building a wider geographic presence in countries with emerging
economies remains, the immediate emphasis for the year ahead is to concentrate
efforts towards a strengthening of performances particularly in the Asian
region. The new investment in Bangladesh holds much potential and whilst there
remains much to be done towards achieving such a goal, good progress is being
made in both integrating ICB Islamic Bank within the Group and re-positioning
it within its domestic market.
In conclusion, I must extend gratitude on behalf of the Board to our
shareholders, customers, business associates and the various regulatory
authorities who have all provided sound support in a year of unprecedented
uncertainty. We are indeed most grateful for this. The Board's sincere
appreciation is also extended to the Management and staff employed across the
Group. Their commitment and dedication to satisfying customer needs is very
much reflected in the overall growth of the Group and its growing prominence
as an international retail banking business.
Michael R. Hanlon
Chairman
CORPORATE GOVERNANCE REPORT
ICB Financial Group Holdings AG ("the Company") has in place a Policy
Statement on Corporate Governance ("the Policy Statement") with the objective
of promoting a culture of accountability, transparency and practice of sound
judgment in the Company's pursuit of generating stakeholders' value amidst an
increasingly competitive global market.
The implementation of this Policy Statement is aimed at providing an
operational framework for good corporate governance in the following areas:
(a) provides guidance in defining the roles and responsibilities of the Board
of Directors ("the Board");
(b) implements the operational framework of the Board;
(c) establishment of appropriate committees to undertake the tasks and
responsibilities of Board;
(d) ensures strategic and business plans are developed;
(e) implements risk management framework to cultivate a risk awareness culture
within the organisation;
(f) provides transparency in disseminating financial and non-financial
information;
(g) provides transparency in managing conflict of interest involving both
internal and external parties;
(h) provides guidance in developing key control mechanisms to ensure that both
financial and non-financial information are accurate, adequate, complete and
timely.
This report describes how the Board has implemented the policies and
provisions as set out in the Policy Statement.
THE BOARD
1. Composition
1.1 As at the date of this report, the Board comprises six (6) members who are
all Non-Executive Directors. Members of the Board are appointed for a one-year
term until the next annual general meeting. Members may be re-elected.
1.2 The Board periodically reviews its composition in terms of the balance of
Independent and Non-Independent Directors and the professional qualifications,
experience and the necessary skills expected of its members to enable the
Board to carry out its roles and responsibilities effectively.
2. Duties and Responsibilities
2.1 The Board is principally responsible for the overall business performance
and corporate governance strategy of the Company. It provides stewardship in
the development of the Company's strategic and business plans.
2.2 The Board is led by the Chairman, Mr Michael Hanlon, Independent
Non-Executive Director.
3. Board Meetings
3.1 The Board meets at least twice a year (in 2008 the Board met eight (8)
times) to review business performance, strategies, business plans and
significant policies as well as to consider business and other proposals which
require the Board's approval.
3.2 The number of Board meetings and the attendance for the financial year in
review are set out below:
DIRECTORS HELD DURING TENURE IN OFFICE ATTENDED
Michael Hanlon 8 8
Josephine Sivaretnam 8 8
Paul Bridges 8 8
Ken Kwaku 8 3
René Fritschi 8 8
Lim Teong Liat 8 8
4. Delegation of Authority and Function
4.1. In order to support the effectiveness of the implementation of its roles
and responsibilities, the Board has set up the following committees:
(i) Audit and Risk Management Committee;
(ii) Nomination Committee; and
(iii) Remuneration Committee.
Audit and Risk Management Committee
The members of the Audit and Risk Management Committee are:
Paul Bridges (Chairman)
Michael Hanlon
Lim Teong Liat
The principal duties and responsibilities of the Audit and Risk Management
Committee include the following:
Audit
- Approve the appointments of the internal auditors; review the adequacy of
the scope of audits conducted by internal audit as well as its functions and resources, and
evaluate the performance of the audit staff;
- Assess and recommend the appointment of the external auditors; review their
audit plan, scope of their audits and their audit reports;
-Assess the performance of the external auditors and makes recommendations to
the Board on their re-appointment or removal;
- Review the internal and external audit reports to ensure that appropriate
and adequate remedial actions are taken by management on significant lapses
and controls and procedures that are identified;
- Review the financial statements of the Company for recommendation to the
Board for approval.
Risk
- Review the adequacy and effectiveness of risk management, internal control
and governance system;
- Review management's strategies and plans for mitigation of all types of
risks faced by the business units;
-Ensure risk management framework for various risks are set up and documented;
-Approve risk management policies, risk management measurements and
methodologies, risk exposures, tolerance limits and risk management processes.
Nomination Committee
The members of the Nomination Committee are:
René Fritschi (Chairman)
Josephine Sivaretnam
The principal duties and responsibilities of the Nomination Committee are as
follows:
- Establish the policy and guidelines in regard to the appointment and
re-appointment of members of the Board, appointments of chief executive
officer and senior management and determining the requirements on their
skills, experience, qualifications and other core competencies;
- Assess and recommend candidates to fill vacancies for directors, chief
executive officer and senior management;
- Review the overall composition of the Board, in terms of the appropriate
size and skills, and the balance between Independent and Non-Independent
Directors;
- Ensure that proper recruitment processes, training programmes as well as
performance appraisal systems are established for employees at all levels.
Remuneration Committee
Members of the Remuneration Committee comprise the following:
Ken Kwaku (Chairman)
Josephine Sivaretnam
The principal duties and responsibilities of the Remuneration Committee are:
- Establish the remuneration policy for directors, chief executive officer and
senior management;
- Periodically review the terms and conditions of employment of directors,
chief executive officer and senior management and when necessary, recommend
changes.
5. Financial Reporting and Internal Control
5.1 The Board is responsible for ensuring the proper maintenance of accounting
records of the Company. The Board is to ensure that the financial reports are
prepared in accordance with the accounting policies, standards and guidelines
of the relevant authorities.
5.2 The Board is to provide a balanced, clear and meaningful assessment of the
financial position and prospects of the Company in all disclosure to
shareholders, investors and the regulatory authorities.
5.3 The Board has the responsibility to develop, assess, review and maintain a
system of internal controls covering financial controls as well as controls
relating to operational, compliance and risk management.
5.4 The Board approves the annual business plans and budgets and periodically
reviews reports from the management covering financial performances and key
business indicators to monitor any significant variances of actual
performances and budgets.
6. Remuneration of Directors
The remuneration of Directors during the financial year is disclosed in Note
29 of the Audited Financial Statements.
7. Compliance Statement
The Board considers that it has complied with the Company's Policy Statement
on Corporate Governance for the financial year ended 31 December 2008.
Statement by Directors
We, Michael Robert Hanlon and Lim Teong Liat, being two of the
directors of ICB Financial Group Holdings AG, do hereby state that in the
opinion of the directors, the consolidated financial statements set out on
pages 4 to 68 are drawn up in accordance with applicable International
Financial Reporting Standards so as to give a true and fair view of the state
of affairs of the Group as at 31 December 2008 and of the results and the cash
flow of the Group for the financial year ended on that date.
Signed on behalf of the Board of Directors in accordance with a resolution of
the Directors
Michael Robert Hanlon
Lim Teong Liat
Date: 31 March 2009
Report of the Statutory Auditors
on the consolidated financial statements to the general meeting of
ICB Financial Group Holdings AG, Schindellegi
As statutory auditor, we have audited the accompanying consolidated
financial statements of ICB Financial Group Holdings AG, which comprise the
income statement, balance sheet, cash flow statement, statement of changes in
equity and notes (pages 4 to 68) for the year ended 31 December 2008.
BOARD OF DIRECTORS` RESPONSIBILITY
The Board of Directors is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of
Swiss law. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation and fair
presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. The Board of Directors is further
responsible for selecting and applying appropriate accounting policies and
making accounting estimates that are reasonable in the circumstances.
AUDITOR'S RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We conducted our audit in accordance
with Swiss law and Swiss Auditing Standards and International Standards on
Auditing. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments,
the auditor considers the internal control system relevant to the entity's
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control system. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of
accounting estimates made, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OPINION
In our opinion, the consolidated financial statements for the year
ended 31 December 2008 give a true and fair view of the financial position,
the results of operations and the cash flows in accordance with International
Financial Reporting Standards (IFRS) and comply with Swiss law.
Report of the Group Auditors
REPORT ON OTHER LEGAL REQUIREMENTS
We confirm that we meet the legal requirements on licensing
according to the Auditor Oversight Act (AOA) and independence (article 728 CO)
and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss
Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation and fair presentation of
consolidated financial statements according to the instructions of the Board
of Directors.
We recommend that the consolidated financial statements submitted to you be
approved.
Zurich, 31 March 2009.
BDO Visura
Markus Eugster
Auditor in Charge
Swiss Certified Accountant
Licensed Audit Expert
Markus Egli
Swiss Certified Accountant
Licensed Audit Expert
CONSOLIDATED INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
2008 2007
Notes USD'000 USD'000
Interest income 101,707 96,609
Interest expense (52,892) (48,044)
Net interest income 4 48,815 48,565
Fee and commission income 11,360 10,574
Fee and commission expense (163) (145)
Net fee and commission income 5 11,197 10,429
Foreign currency gain 6 3,593 3,078
Gains less losses from financial investments 1,247 1,552
Gain on disposal of associate 30 77,584 3,670
Other operating income 1,616 2,570
Impairment charges for loans and advances to 12 (14,422) (13,051)
customers
Impairment of goodwill 16 (50,000) -
Operating expenses 7 (63,752) (45,076)
Operating profit 15,878 11,737
Share of results of associates 15 (33) 5,823
Profit before taxation 15,845 17,560
Tax expense 9 (2,840) (2,702)
Profit for the period 13,005 14,858
Attributable to:
- Shareholders of the Company 21,282 13,988
- Minority interests (8,277) 870
13,005 14,858
Earnings per share attributable to shareholders
of the Company
- Basic and diluted (Expressed in USD per share) 10 0.12 0.09
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
2008 2007
Notes USD'000 USD'000
ASSETS
Cash and bank balances 11 276,738 239,769
Loans and advances to customers 12 588,058 540,683
Financial investments 13 122,539 93,221
Foreclosed properties 14 17,728 21,056
Investment in associates 15 1,846 74,364
Goodwill and other intangible assets 16 55,036 5,341
Prepaid lease payments 17 107 165
Property and equipment 18 17,083 9,251
Other assets 19 36,443 40,489
Deferred tax assets 20 4,537 1,945
Total assets 1,120,115 1,026,284
LIABILITIES
Deposits from other bank 133,470 39,157
Deposit from customers 21 777,652 746,734
Other liabilities 22 56,442 39,326
Tax liabilities 3,046 2,093
Deferred tax liabilities 20 303 192
Total liabilities 970,913 827,502
EQUITY
Paid up share capital 23 145,960 145,960
Share premium 782 782
Retained earnings 24 45,012 34,903
Other reserves 25 (2,655) (2,341)
Equity attributable to shareholders
of the Company 189,099 179,304
Minority interest (39,897) 19,478
149,202 198,782
Total equity and liabilities 1,120,115 1,026,284
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
2008 2007
USD'000 USD'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 15,845 17,560
Adjustment for :
Impairment charges for loans and advances to customers 14,422 13,051
Amortisation of prepaid lease rental 37 46
Amortisation of intangible assets 397 417
Depreciation of property and equipment 3,096 2,185
Loss on disposal of property and equipment 20 6
Gain on disposal of associate (77,584) (3,670)
Negative goodwill - (2)
Impairment of goodwill 50,000 -
Recovery of loan (601) (690)
Share of results of associates 33 (5,823)
Gain on foreign exchange translation (3,593) (3,078)
Cash flow from operations before working capital
changes 2,072 20,002
Increase in operating assets (21,778) (106,457)
(Decrease)/increase in operating liabilities (34,009) 150,004
Cash (used in)/generated from operations (53,715) 63,549
Tax paid (1,994) (2,263)
Net cash (used in)/from operating activities (55,709) 61,286
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of a subsidiary, net of cash acquired (38,474) -
Proceeds from sale of associate 142,006 6,068
Purchase of property and equipment (5,376) (4,570)
Purchase of intangible assets (489) (374)
Proceeds from sale of property and equipment 24 12
Dividend received 2,086 2,912
Increase in investment in associate - (982)
Decrease in financial investments 38,159 29,687
Increase in financial investments (30,998) (14,135)
Net cash from investing activities 106,938 18,618
CONSOLIDATED CASH FLOW STATEMENT - CONT'D
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
2008 2007
USD'000 USD'000
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of shareholder's advances - (13,866)
Dividend paid to minority interest (156) (79)
Net proceeds received from issuance of shares by Company - 9,017
Net cash used in financing activities (156) (4,928)
Net increase in cash and cash equivalents 51,073 74,976
Cash and cash equivalents at the beginning of the year 194,224 108,951
Effect of exchange rate changes on cash and cash (16,653) 10,297
equivalents
Cash and cash equivalents at the end of the year
(Note 26) 228,644 194,224
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
<--ATTRIBUTABLE TO SHAREHOLDERS-->
OF THE COMPANY
SHARE SHARE OTHER RETAINED MINORITY TOTAL
CAPITAL PREMIUM RESERVES EARNINGS INTEREST USD'000
USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2008 145,960 782 (2,341) 34,903 19,478 198,782
Currency translation
differences arising
from translation to - - (9,734) - (2,471) (12,205)
presentation currency
Loss in fair value on - - (1,753) - (861) (2,614)
available-for-sale
securities
Transfer of reserve to
retained earnings
arising from disposal - - 11,173 (11,173) - -
of associate
Net income and expenses - - (314) (11,173) (3,332) (14,819)
recognised directly in
equity
Profit for the year - - - 21,282 (8,277) 13,005
Total recognised income - - (314) 10,109 (11,609) (1,814)
and expense for the period
Minority interest from - - - - (47,610) (47,610)
business combination
Dividend paid to - - - - (156) (156)
minority interest
At 31 December 2008 145,960 782 (2,655) 45,012 (39,897) 149,202
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - CONT'D
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
<------Attributable to shareholders----->
of the Company
Share Share Shareholder's Other Retained Minority
Capital Premium Advances Reserves Earnings Interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
At 31 December 2006 59,549 - 91,618 (372) 24,212 19,508 194,515
Currency translation
differences arising
from translation - - 424 5,087 - (783) 4,728
to presentation
currency
Loss in fair value
on available-for-sale
securities - - - (62) - (30) (92)
Transfer of realised
translation reserve
to retained earnings
arising from
capitalisation and
repayment of
shareholder's advances - - - 3,187 (3,187) - -
Share of post-
acquisition reserves
of associates - - - (10,291) - - (10,291)
Transfer of reserve
to retained earnings
arising from - - - 110 (110) - -
disposal of associate
Net income and
expenses recognised
directly in equity - - 424 (1,969) (3,297) (813) (5,655)
Profit for the year - - - - 13,988 870 14,858
Total recognised
income and expense
for the year - - 424 (1,969) 10,691 57 9,203
Conversion of
shareholder's advances
to share capital 78,176 - (78,176) - - - -
Repayment of - - (13,866) - - - (13,866)
shareholder's advances
Acquisition of minority
interest in a
subsidiary - - - - - (15) (15)
Dividend paid to - - - - - (79) (79)
minority interest
Issue of shares 8,235 782 - - - 7 9,024
At 31 December 2007 145,960 782 - (2,341) 34,903 19,478 198,782
The accompanying notes form an integral part of the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
1. CORPORATE INFORMATION
ICB Financial Group Holdings AG (the "Company") is a limited
liability company and is incorporated and domiciled in Switzerland. The
address of its registered office is Schulhausstrasse 1, CH-8834 Schindellegi,
Switzerland.
The principal activity of the Company is that of an investment
holding company. The principal activities of the subsidiaries are stated in
Note 27.
These consolidated financial statements have been approved for
issue by the Board of Directors on 31 March 2009.
In conjunction with the implementation of the new provisions
governing control processes during the preparation of financial statements and
consolidated financial statements according to the Swiss Code of Obligations,
existing control processes that are performed as part of operational business
processes and in connection with the preparation of financial statements and
consolidated financial statements have been reviewed and further optimized. As
well as ensuring compliance with legal/regulatory requirements, the focus is
on ensuring the effectiveness, efficiency and reliability of business
processes as well as the adequacy of financial flows and financial
information. All controls are reviewed regularly, "key controls" on an annual
basis and are adjusted if necessary, the results reported to the Audit
Committee.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements of the Group have been prepared and
approved by the directors in accordance with International Financial Reporting
Standards ("IFRS"). The consolidated financial statements have been prepared
under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets, financial assets and financial
liabilities held at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in Note 3.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(a) Basis of Preparation - Cont'd
As of 1 January 2008 different new interpretations stepped into
force (Amendments to IAS 39 and IFRS 7, IFRIC 11 (International Financial
Reporting Interpretations Committee-IFRIC), IFRIC 12 and IFRIC 14). These did
not have any influence on the consolidated financial statements of the
Company.
The Company has chosen not to early adopt the following standards
and interpretations that were issued but not yet effective for accounting
periods beginning 1 January 2008:
- IAS 23 Borrowing Costs (Amendment)
- IFRS 2 Share-based Payment: Vesting Conditions and
Cancellations (Amendment)
- IAS 1 Presentation of Financial Statements: A Revised
Presentation (Amendment)
- IAS 27 IAS 27 Consolidated and Separate Financial
Statements (Amendment)
- IAS 32 & IAS 1 Puttable Financial Instruments and Obligations
Arising on Liquidation (Amendment)
- IFRS 1 and IAS 27 Cost of an Investment in a subsidiary, jointly-
controlled entity or association (Amendment)
- IAS 39 Financial Instruments: Recognition and Measurement:
Eligible Hedged Items (Amendment)
- IFRS 7 Improving Disclosures about Financial Instruments
(Amendment)
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- IFRIC 17 Distributions of Non-cash Assets to Owners
- IFRIC 18 Transfer of Assets from Customers
The Company has considered these amendments and does not expect
them to have a significant effect on the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(b) Basis of Consolidation
(i) Subsidiaries
Subsidiaries are all entities over which the Group has the power to
directly or indirectly govern the financial and operating policies, generally
accompanying a shareholding of more than one half of the voting rights.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired are fair valued
at the acquisition date, irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the Group's share
of the identifiable net assets acquired is recorded as goodwill. If the cost
of acquisition is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains or
transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of impairment of the
asset transferred.
(ii) Associates
Associates are entities over which the Group has significant
influence but not control, generally accompanying a shareholding between 20%
to 50% of the voting rights. Investment in associates is accounted for by the
equity method of accounting and are initially recognised at cost. The Group's
investment in associates includes goodwill (net of any accumulated impairment
loss) identifiable on acquisition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(b) Basis of Consolidation - cont'd
(ii) Associates - cont'd
The Group's share of its associates' post-acquisition profits or
losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount
of the investment. When the Group's share of losses in an associate equals or
exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in the
associates. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
(c) Segmental Reporting
A geographical segment is engaged in providing products or services
within a particular economic environment that are subject to risks and returns
that are different from those of segments operating in other economic
environments. A business segment is a group of assets and operations engaged
in providing products and services that are subject to risks and returns that
are different from those of other business segments.
(d) Foreign Currency Translation
(i) Functional and Presentation Currency
The consolidated financial statements are presented in US dollars
(USD), because the currency is more commonly used in international trade. All
values are rounded to the nearest thousand (USD'000) except when otherwise
indicated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(d) Foreign Currency Translation - cont'd
(i) Functional and Presentation Currency
The functional currency of the Company, subsidiaries and associates
are as follows:
The Company
ICB Financial Group Holdings AG Swiss Francs (CHF)
Subsidiaries
ICB-Banco Internacional De Comércio, S.A.R.L Mozambique Metical (MZN)
International Commercial Bank (Gambia) Ltd. Gambian Dalasi (GMD)
International Commercial Bank (Sierra Leone) Limited Sierra Leone Leones (SLL)
International Commercial Bank SH.A. Albanian Lek (ALL)
International Commercial Bank S.A. Guinea Francs (GNF)
PT Bank Bumiputera Indonesia Tbk Indonesian Rupiah (IDR)
International Commercial Bank Limited Ghana Cedis (GHS)
ICB Global Management Sdn. Bhd. Malaysian Ringgit (MYR)
International Commercial Bank (Djibouti) S.A. Djibouti Franc (DJF)
ICB Islamic Bank Ltd Bangladeshi Taka (BDT)
International Commercial Bank Ltd-Malawi Malawi Kwacha (MWK)
International Commercial Bank (Lao) Ltd Lao Kip (LAK)
Associates
International Commercial Bank Senegal S.A. Communauté Financière
Africaine Francs BCEAO (XOF)
International Commercial Bank (Tanzania) Limited Tanzanian Schilings (TZS)
Sorak Financial Holdings Pte. Ltd. Singapore Dollar (SGD)
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the prevailing exchange rates at the date of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the
income statement. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated into the
functional currency using the rate of exchange at the date of initial
transaction.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(d) Foreign Currency Translation - cont'd
(iii) Group Companies
The results and financial position of the holding company,
subsidiaries and associates (none of which has the currency of a
hyperinflationary economy) that have different functional currencies compared
to the presentation currency are translated into the presentation currency as
follows:
i. assets and liabilities for each balance sheet presented are
translated at the closing rate at the balance sheet date;
ii. income and expenses for each income statement are translated at
average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the
transactions); and
iii. all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the translation
of the net investment in foreign entities, and of borrowings, are taken into
shareholders' equity. When a foreign operation is sold, such exchange
differences are recognised in the income statement as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising from the acquisition of
a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(d) Foreign Currency Translation - cont'd
(iii) Group Companies - cont'd
The average and closing rates used in the translation of financial
statements from functional currency to presentation currency are as follows :
Average rate Closing rate
2008 2007 2008 2007
1 CHF 0.9235 0.8403 0.8724 0.8850
1 SGD - 0.6641 - 0.6917
1 MYR 0.2997 0.2916 0.2887 0.3021
1 GMD 0.0450 0.0402 0.0373 0.0469
1 MZN 0.0411 0.0388 0.0416 0.0420
1 GHS 0.9416 1.0741 0.8241 1.0447
1000 SLL 0.3376 0.3407 0.3333 0.3378
1000 ALL 11.9366 11.1200 11.3753 12.0600
1000 GNF 0.2155 0.2418 0.1938 0.2400
1000 IDR 0.1027 0.1091 0.0917 0.1065
1000 DJF 5.6268 5.6268 5.6268 5.6268
1000 XOF 2.2239 2.0998 2.1216 2.2442
1000 TZS 0.8321 0.8081 0.7811 0.8834
1000 BDT 14.5499 - 14.5191 -
1000 LAK 0.1170 - 0.1175 -
1000 MWK 7.1429 - 7.1429 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(e) Interest Income and Expense
Interest income and expenses for all interest-bearing financial
instruments except for those classified as held-for-trading or designated at
fair value (other than debt issued by the Group) are recognised in the income
statement using the effective interest rates of the financial assets or
financial liabilities to which they relate.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments earned or paid on a financial asset
or financial liability through its expected life or, where appropriate, a
shorter period, to the net carrying amount of the financial asset or financial
liability. When calculating the effective interest rate, the Group estimates
cash flows considering all contractual terms of the financial instrument but
not future credit losses. The calculation includes all amounts paid or
received by the Group that are an integral part of the effective interest
rate, including transaction costs and all other premiums or discounts.
Interest on impaired financial assets is calculated by applying the
original effective interest rate of the financial asset to the carrying amount
as reduced by any allowance for impairment.
(f) Non-interest income
(i) Fees and Commissions
Fees and commissions are accounted for as follows:
- income earned from the provision of services over a period of
time is recognised over the service period during which the related service is
provided or credit risk is undertaken; and
- income which forms an integral part of the effective interest
rate of a financial instrument is recognised and recorded as interest income.
(ii) Dividend income
Dividend income is recognised when the right to receive payment is
established.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(g) Financial Assets
The Group determines the classification of its investments at
initial recognition and classifies its financial assets as follows:
(a) Classification
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for
trading, and those designated at fair value through profit or loss at
inception. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term if so designated by
management.
Financial assets may be designated at fair value through profit or
loss when:
a) the designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise arise from
measuring assets on a different basis, or
b) a group of financial assets are managed and its performance
evaluated on a fair value basis.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise when the Group provides money or services directly to a debtor with no
intention of trading the receivables.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the Group's
management has the positive intention and ability to hold to maturity. If the
Group sells other than an insignificant amount of held-to-maturity assets, the
entire category would be tainted and reclassified as available-for-sale.
(iv) Available-for-sale investments
Available-for-sale investments are those intended to be held for an
indefinite period of time, which may be sold in response to needs for
liquidity or changes in interest rates, exchange rates or equity prices.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(g) Financial Assets - Cont'd
(b) Recognition and Derecognition
(i) Initial Recognition
Purchases and sales of financial assets at fair value through
profit or loss, held-to-maturity and available-for-sale are recognised on
trade-date (the date on which the Group commits to purchase or sell the
asset). Loans are recognised when cash is advanced to the borrowers. Financial
assets are initially recognised at fair value plus, for those financial assets
not carried at fair value through profit or loss, directly attributable
transaction costs.
(ii) Subsequent measurement
Financial assets held at fair value through profit or loss are
subsequently carried at fair value, with gains and losses arising from changes
in fair value taken directly to the income statement.
Available-for sale financial investments are subsequently carried
at fair value, with gains and losses arising from changes in fair value taken
to a separate component of equity until the asset is sold or is impaired, when
the cumulative gain or loss is transferred to the income statement.
Loans and receivables and held to maturity financial assets are
subsequently carried at amortised cost using the effective interest method.
The fair values of quoted financial assets in active markets are
based on current prices. If the market for a financial asset is not active and
for unlisted securities, the Group establishes fair value by using valuation
techniques. These include the use of recent arm's length transactions,
discounted cash flow analysis, option pricing models and other valuation
techniques commonly used by market participants.
(iii) Reclassifications
Reclassification of financial assets other than as disclosed below
between categories are not permitted following their initial recognition.
Held-to-maturity assets are reclassified to the available-for-sale
category if the portfolio becomes tainted following the sale of other than and
insignificant amount of held-to-maturity assets prior to their maturity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(g) Financial Assets - Cont'd
(b) Recognition and Derecognition - Cont'd
(iv) Renegotiated loans
Loans whose original terms have been modified are considered
renegotiated loans. If the renegotiation occurs before a customer is either
past due or impaired and the revised terms are consistent with those readily
available on the market, the account will not be considered past due. If the
renegotiations are on terms that are not consistent with those readily
available on the market, this provides objective evidence of impairment and
the loan will remain past due until the customer complies with the revised
terms.
(v) Derecognition
Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or where the Group has
transferred substantially all risks and rewards of ownership. If substantially
all the risks and rewards have been neither retained nor transferred and the
Group has retained control, the assets continue to be recognised to the extent
of the Group's continuing involvement.
(vi) Income recognition
For available-for-sale investments and financial assets held at
amortised cost, interest income and interest expense is recognised in the
income statement using the effective interest method. Gains and losses arising
from changes in fair value of financial assets at fair value through profit or
loss are included in the income statement in the period which they arise.
Contractual interest income and expense on financial assets designated at fair
value through profit or loss is recognised within net interest income.
Gains and losses arising form changes in the fair value of
available-for sale financial investments, other than foreign exchange gains
and losses from monetary items, are recognised directly in equity, until the
financial asset is derecognised or impaired at which time the cumulative gain
or loss previously recognised in equity is recognised in profit or loss.
Dividends on equity instruments are recognised in the income statement when
the Group's right to receive payment is established.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(h) Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net
basis, or realise the asset and settle the liability simultaneously.
(i) Impairments of financial assets
(i) Assets Carried at Amortised Cost
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the asset (a 'loss event') and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group
assets that can be reliably estimated. Objective evidence that a financial
asset or group of assets is impaired includes observable data that comes to
the attention of the Group about the following loss events:
- significant financial difficulty of the issuer or obligor;
- a breach of contract, such as a default or delinquency in
interest or principal payments;
- the Group granting to the borrower, for economic or legal reasons
relating to the borrower's financial difficulty, a concession that the lender
would not otherwise consider;
- it becoming probable that the borrower will enter bankruptcy or
other financial reorganisation;
- the disappearance of an active market for that financial asset
because of financial difficulties; or
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(i) Impairments of Financial Assets - cont'd
(i) Assets Carried at Amortised Cost - cont'd
- observable data indicating that there is a measurable decrease in
the estimated future cash flows from a group of financial assets since the
initial recognition of those assets, although the decrease cannot yet be
identified with the individual financial assets in the Group, including:
- adverse changes in the payment status of borrowers in the Group;
or
- national or local economic conditions that correlate with
defaults on the assets in the Group.
The Group first assesses whether objective evidence of impairment
exists individually for financial assets that are individually significant, or
collectively for financial assets that are not individually significant. If
the Group determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which
an impairment loss is or continues to be recognised are not included in a
collective assessment of impairment if there is objective evidence that an
impairment loss on loans and receivables or held-to-maturity investments
carried at amortised cost has been incurred, the amount of the loss is
measured as the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have
not been incurred) discounted at the financial asset's original effective
interest rate. The carrying amount of the asset is reduced through the use of
an allowance account and the amount of the loss is recognised in the income
statement.
If a loan or held-to-maturity investment has a variable interest
rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a practical
expedient, the Group may measure impairment on the basis of an instrument's
fair value using an observable market price.
The calculation of the present value of the estimated future cash
flows of a collateralised financial asset reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral,
whether or not foreclosure is probable.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(i) Impairments of Financial Assets - cont'd
(i) Assets carried at amortised cost - cont'd
For the purposes of a collective evaluation of impairment,
financial assets are grouped on the basis of similar credit risk
characteristics (i.e., on the basis of the Group's grading process that
considers asset type, industry, geographical location, collateral type,
past-due status and other relevant factors). These characteristics are
relevant to the estimation of future cash flows for groups of such assets by
being indicative of the debtors' ability to pay all amounts due according to
the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are
collectively evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the Group and historical loss
experience for assets with credit risk characteristics similar to those in the
Group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not
affect the period on which the historical loss experience is based and to
remove the effects of conditions in the historical period that do not exist
currently.
Estimates of changes in future cash flows for groups of assets
should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment
rates, property prices, payment status or other factors indicative of changes
in the probability of losses in the group and their magnitude). The
methodology and assumptions used for estimating future cash flows are reviewed
regularly by the Group to reduce any differences between loss estimates and
actual loss experience.
When a loan is uncollectable, it is written off against the related
provision for loan impairment. Such loans are written off after all the
necessary procedures have been completed and the amount of the loss has been
determined. Subsequent recoveries of amounts previously written off decrease
the amount of the provision for loan impairment in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(i) Impairments of Financial Assets - cont'd
(i) Assets carried at amortised cost - cont'd
If in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor's
credit rating), the previously recognised impairment loss is reversed by
adjusting the allowance account. The amount of the reversal is recognised in
the income statement.
(ii) Assets carried at fair value
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset or a group of financial assets is
impaired.
In the case of equity investments classified as available-for-sale,
a significant or prolonged decline in the fair value of the security below its
cost is considered in determining whether the assets are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss
(measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously recognised
in profit or loss) is removed from equity and recognised in the income
statement. Impairment losses recognised in the income statement on equity
instruments are not reversed through the income statement until the
investments are sold.
If in a subsequent period, the fair value of a debt instrument
classified as available for sale increases and the increase can be objectively
related to an event occurring after the impairment loss was recognised in
profit or loss, the impairment loss is reversed through the income statement.
Restructured loans, whose terms have been renegotiated and
modified, are accounted for prospectively from the restructuring date. The
carrying amount of the loan is not changed, except when the carrying amount
exceeds the future cash receipts based on the new terms of the loan, which is,
recognised as loss on restructuring. Thereafter, all cash receipts under the
new term shall be accounted for as recovery of principal and the related
interest revenue is recognized proportionately.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(j) Acceptance Receivables and Payables
Acceptance receivables and payables are stated at the value of the
Letter of Credit or realised value of the Letter of Credit accepted by
accepting banks. The acceptance receivables are presented net of allowance for
possible losses.
(k) Foreclosed Properties
Foreclosed properties are recorded at the lower of its fair value
(less costs to sell) and the carrying amount of the loan (net of impairment
allowance) at the date of foreclosure. No depreciation is provided in respect
of foreclosed properties. Any subsequent write down of foreclosed properties
to fair value (less cost to sell) is recorded as a fair value change and
included in the income statement. Any subsequent increase of the fair value
(less cost to sell), to the extent this does not exceed the cumulative fair
value change, is recognised in the income statement.
(l) Prepaid Lease Payments
Leasehold land that normally has an indefinite economic life and
title is not expected to pass to the lessee by the end of the lease term is
treated as an operating lease. The payment made on entering into or acquiring
a leasehold land is accounted as prepaid lease payments that are amortised
over the lease term in accordance with the pattern of benefits provided.
(m) Goodwill and Other Intangible Assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group's share of the net identifiable assets of the
acquired subsidiary/associate at the date of acquisition. Goodwill on
acquisitions of subsidiaries is included in 'goodwill and other intangible
assets'. Goodwill on acquisitions of associates is included in 'investments in
associates'. By contrast, if the interest in the fair value of the net
identifiable assets of an acquired business is greater than the cost to
acquire, the excess (negative goodwill) is recognised immediately in the
income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(m) Intangible Assets
(i) Goodwill - cont'd
Goodwill is allocated to cash-generating units and is tested
annually for impairment. Goodwill is carried at cost less accumulated
impairment losses, if any. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
(ii) Computer Software
Acquired computer software licenses are capitalised on the basis of
the costs incurred to acquire and bring to use the specific software. These
costs are amortised on straight-line basis over the expected useful lives of
three to five years.
Costs associated with developing or maintaining computer software
programmes are recognised as an expense as incurred. Costs that are directly
associated with the production of identifiable and unique software products
controlled by the Group and that will probably generate economic benefits
exceeding costs beyond one year are recognised as intangible assets.
(n) Property and Equipment
Buildings comprise mainly of bank branches and offices. All
property and equipment are stated at historical cost less any impairment
losses and depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. 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 items will flow to the Group and the cost of the items can be
measured reliably. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Construction in progress is not depreciated. The accumulated costs
will be reclassified to the appropriate category at the time the construction
is completed and ready for its intended use. Depreciation on other assets is
calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(n) Property and Equipment - cont'd
Buildings 5 to 20 years
Furniture and fittings, office equipment 3 to 15 years
Motor vehicles 4 to 5 years
Computer hardware 5 years
Renovation 5 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
Property and equipment is subject to an impairment review if there
are events or changes in circumstances which indicate that the carrying amount
may not be recoverable.
(o) Income Tax
Income tax on the profit or loss for the year comprises current tax
and deferred tax. Income tax is recognised in the income statement except to
the extent that it relates to items recognised directly in shareholders'
equity, in which case it is recognised in equity.
Current tax is the tax expected to be payable on the taxable profit
for the year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised, using the liability method, on
temporary differences between the carrying amounts of assets and liabilities
in the balance sheet and the amounts attributed to such assets and liabilities
for tax purposes. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent it is probable that future taxable profits will be available against
which deductible temporary differences can be utilised.
Deferred tax is calculated using the tax rates expected to apply in
the periods in which the assets will be realised or the liabilities settled.
Deferred tax related to fair value re-measurement of
available-for-sale investments, which are charged or credited to equity, is
also credited or charged directly to equity and is subsequently recognised in
the income statement together with the deferred gain or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(p) Cash and Cash Equivalents
For the purposes of the cash flow statement, cash and cash
equivalents include highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of change
in value. Such investments include cash and non-restricted balances with the
central banks, loans and advances to banks and amounts due from other banks.
(q) Employee Benefits
The Group has both defined benefit and defined contribution plans.
A defined benefit plan is a pension plan that defines an amount of pension
benefit that an employee will receive on retirement, usually dependent on one
or more factors such as age, years of service and compensation. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior periods.
For defined benefit plans, the liability recognised in the balance
sheet is the present value of the defined benefit obligation at the balance
sheet date, together with adjustments for unrecognised actuarial gains or
losses and past service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The
present value of the defined benefit obligation is determined by discounting
the estimated future cash outflows using interest rates of high-quality
corporate bonds that are denominated in the currency in which the benefits
will be paid, and that have terms to maturity approximating the terms of the
related pension liability.
Accumulated unrecognised actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions that exceed 10% of
the defined benefit obligations are charged or credited to income on a
straight-line basis over the expected average remaining working lives of the
participating employees. Past-service costs are recognised immediately in
income, unless the changes to the pension plan are conditional on the
employees remaining in service for a specified period of time (the vesting
period). In this case, the past-service costs are amortised on a straight-line
basis over the vesting period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(q) Employee Benefits - Cont'd
For defined contribution plans, the Group pays contributions to
publicly or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
(r) Share Capital
(i) Capital
The primary objectives of the Group's capital management are to
ensure that the Group complies with externally imposed capital requirements
and that the Group maintains strong credit ratings and healthy capital ratios
in order to support its business and to maximise shareholders' value. The
Group's ordinary shares are classified as equity instruments. The Group
considers its capital to comprise its ordinary share capital, share premium,
accumulated retained earnings, shareholder's advances and other reserves.
There have been no changes in what the Group considers to be capital since the
previous period. The Group's subsidiaries are subject to their respective
countries capital regulatory requirements imposed by the Central Banks and as
such must ensure that it has sufficient capital as defined by the Central
Banks, to meet its requirements as set out by the Central Banks.
(ii) Share Issue Costs
Incremental costs directly attributable to the issue of new shares
or options or to the acquisition of a business are shown in equity as a
deduction, net of tax, from the proceeds.
(iii) Dividends on Shares
Dividends on shares are recognised in equity in the period in which
they are approved by the Company's shareholders.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the reported
amounts of assets and liabilities within the next financial year. Estimates
and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
(a) Impairment Losses on Loans and Advances
The Group's accounting policy for losses in relation to the
impairment of customer loans and advances is described in Note 2(i). Where
there is an impairment, the recoverable amount of the loan is estimated by
discounting the projected cash flows (including the realisable value of the
collateral) at the loan's original effective interest rate. The determination
of both the timing and quantum of the projected cash flows including the
realisable value of the collateral requires considerable judgement, and the
actual outcome may differ from the estimates.
(b) Goodwill Impairment
The Group's accounting policy for goodwill is described in Note
2(m). The recoverable amounts of cash-generating units have been determined
based on value-in-use calculations. These calculations require the use of
estimates. Further detail is discussed in Note 16 'Impairment testing for
cash-generating unit containing goodwill'.
(c) Valuation of Financial Instruments
The Group's accounting policy for valuation of financial instruments is included in Note 2(g).
(d) Pensions
The assumptions used are disclosed in Note 32 'Defined Benefit Plan'.
(e) Income Taxes
The Group is subject to income taxes in various jurisdictions.
Determining income tax provisions involves judgement in determining the tax
depreciation and deductibility of certain expenses during the estimation of
the provision for income taxes. Deferred tax asset is recognised on unutilised
tax losses and temporary differences where it is probable that there will be
taxable revenue against which it can be offset. Management has made judgements
as to the probability of tax losses being available for offset at a later
date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
4. NET INTEREST INCOME 2008 2007
USD'000 USD'000
Interest Income
Loans and advances to customers 82,044 80,496
Investment securities 12,685 10,484
Cash and short term funds 6,967 5,591
Others 11 38
101,707 96,609
Interest Expense
Banks and customers deposits 48,019 45,440
Debt securities in issue 3,397 870
Others 1,476 1,734
52,892 48,044
Net Interest Income 48,815 48,565
5. NET FEE AND COMMISSION INCOME 2008 2007
USD'000 USD'000
Fee and Commission Income
Account maintenance and other management fees 3,678 4,299
Credit related fees and commissions 6,061 6,124
Others 1,621 151
11,360 10,574
Fee and Commission Expense
Treasury operation and inter-bank transactions 117 102
Others 46 43
163 145
Net Fee and Commission Income 11,197 10,429
6. FOREIGN CURRENCY GAINS
Foreign currency gains relate to net transaction and translation gains of
subsidiaries.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
7. OPERATING EXPENSES 2008 2007
USD'000 USD'000
Auditors' remuneration 555 398
Amortisation of intangible assets (Note 16) 397 417
Depreciation (Note 18) 3,096 2,185
Employee compensation and benefits (Note 8) 22,504 17,163
Amortisation of prepaid lease rental (Note 17) 37 46
Loss on disposal of foreclosed properties 1,670 352
Data communication, rental and related
maintenance expense 6,506 8,444
Provision for contingent liability 1,964 -
Other provisions 5,598 -
Other general and administrative expenses 21,425 16,071
63,752 45,076
8. EMPLOYEE COMPENSATION AND BENEFITS 2008 2007
USD'000 USD'000
Salaries and wages 15,941 10,258
Bonus 1,054 1,669
Social security costs - 78
Pension costs
- Defined contribution plan 670 547
- Defined benefit plan (Note 32) 510 442
Other staff related expenses 4,329 4,169
22,504 17,163
9. TAX EXPENSE 2008 2007
USD'000 USD'000
Current year's provision (3,137) (2,833)
Deferred taxation (Note 20) 297 129
Over provision of taxation in prior year - 2
(2,840) (2,702)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
9. TAX EXPENSE (CONT'D)
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the basic tax rate of the Company as follows:
2008 2007
USD'000 USD'000
Profit before taxation 15,845 17,560
Tax calculated at a rate of 16% (2007 : 16%) 2,535 2,810
Effect of different tax rates of subsidiaries
operating in other jurisdictions (17,734) 1,185
Impact of profits in associates - (932)
Expenses not deductible for tax purposes 10,487 192
Income not subject to tax (217) (551)
Deferred tax asset not recognised in respect
of current year tax losses 1,975 -
Deferred tax asset not recognised in respect
of temporary differences 5,794 -
Over provision of income tax - (2)
Tax expense for the year 2,840 2,702
10. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit
attributable to shareholders of the Company by the weighted average number of
shares in issue during the year. There are no options or other instruments in
issue that would dilute earnings per share.
2008 2007
Profit attributable to shareholders of
the Company (USD'000) 21,282 13,988
Weighted average number of shares in issue
('000) 180,000 148,589
Basic and diluted earnings per share
(expressed in USD per share) 0.12 0.09
11. CASH AND BANK BALANCES 2008 2007
USD'000 USD'000
Cash in hand 34,169 14,397
Placements with other banks 170,207 80,849
Deposits with central banks other than
mandatory reserves 23,600 97,757
Included in cash and cash equivalents
(Note 26) 227,976 193,003
Mandatory reserve deposits with central banks 48,762 46,766
276,738 239,769
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
11. CASH AND BANK BALANCES - CONT'D
The Group is required to maintain minimum deposits with central
banks of countries where the Group has operations as liquidity/mandatory
reserve. Deposits in mandatory reserves are not available for use in the
Group's day to day operations.
12. LOANS AND ADVANCES TO CUSTOMERS 2008 2007
USD'000 USD'000
Gross loans and advances 713,674 554,203
Less: Allowance for losses on loans
and advances (125,616)(13,520)
588,058 540,683
As at year end, loans classified according to collectability are as follows :
2008 2007
USD'000 USD'000
Current 481,364 478,276
Special mention 34,290 38,828
Substandard 9,114 3,938
Doubtful 15,674 3,612
Loss 173,232 29,549
713,674 554,203
Less: Allowance for losses on loans
and advances (125,616)(13,520)
588,058 540,683
Movement in allowance for losses on loans and advances:
At 1 January 13,520 8,746
Acquisition of subsidiary during the year 103,432 -
Impairment charges during the year
(included in the income statement) 14,422 13,051
Loans written off during the year (2,674) (7,367)
Recoveries of loans written off (601) (690)
Currency translation differences (2,483) (220)
At 31 December 125,616 13,520
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
13. FINANCIAL INVESTMENTS 2008 2007
USD'000 USD'000
Securities held-to-maturity
Treasury bills 47,781 28,016
Government debt securities 45,108 38,765
92,889 66,781
Less : Unamortised discount (106) (189)
92,783 66,592
Securities available-for-sale Securities
- at fair value:
Government debt securities 29,756 15,912
Private debt securities - 10,717
29,756 26,629
122,539 93,221
14. FORECLOSED PROPERTIES
Foreclosed properties are repossessed properties that were pledged as
collateral for loans and advances that have defaulted.
2008 2007
USD'000 USD'000
Carrying Value
At 1 January 23,983 16,731
Additions 3,244 12,755
Disposal (3,716) (4,312)
Reclassification - (497)
Currency translation differences (3,203) (694)
At 31 December 20,308 23,983
Changes in fair value
At 1 January 2,927 3,053
Reclassification 56 -
Currency translation differences (403) (126)
2,580 2,927
17,728 21,056
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
15. INVESTMENT IN ASSOCIATES 2008 2007
USD'000 USD'000
At 1 January 74,364 78,279
Dividend received (2,086) (2,912)
Additional investment in associate - 947
Disposal of an associate (Note 30a) (70,231) (2,398)
Share of profits (33) 5,823
Share of other reserves -(10,291)
Currency translation differences (168) 4,916
At 31 December 1,846 74,364
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
15. INVESTMENT IN ASSOCIATES - CONT'D
The Group's share of the results of its associates, all of which are unlisted,
and its share of the assets (including goodwill and liabilities) are as
follows:
Profit
Country % effective Assets Liabilities Revenue /(Loss)
of incor- interest USD'000 USD'000 USD'000 USD'000
Name poration Held
2008
International Commercial
Bank (Tanzania) Limited
Tanzania 20% 6,603 5,594 657 83
International Commercial
Bank Senegal S.A.
Senegal 20% 6,316 5,483 351 (116)
12,919 11,077 1,008 (33)
2007
International Commercial
Bank (Tanzania) Limited
Tanzania 20% 6,628 5,575 432 106
International Commercial
Bank Senegal S.A.
Senegal 20% 4,558 3,564 161 (250)
IC Bank ZRT Hungary 20.96% - - - (36)
Sorak Financial Holdings Singapore 20% 1,172,320 1,045,346 76,451 6,003
Pte. Ltd.
1,183,506 1,054,485 77,044 5,823
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
16. GOODWILL AND OTHER INTANGIBLE ASSETS
2008 2007
USD'000 USD'000
(a) Goodwill arising on business combination
Cost
At 1 January 4,370 4,410
Acquisition of subsidiary 100,698 -
Currency translation differences (1,013) (40)
At 31 December 104,055 4,370
Impairment (50,000) -
Net Book Value 54,055 4,370
(b) Purchased software
Cost
At 1 January 2,679 2,188
Additions 489 374
Acquisition of subsidiary 5 -
Disposal - (7)
Reclassification - 105
Currency translation differences (329) 19
At 31 December 2,844 2,679
Accumulated amortisation
At 1 January 1,708 1,219
Amortisation charge for the year (Note 7) 397 417
Disposal - (2)
Reclassification - 60
Currency translation differences (242) 14
At 31 December 1,863 1,708
Net Book Value 981 971
Total 55,036 5,341
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
16. GOODWILL AND OTHER INTANGIBLE ASSETS - CONT'D
Impairment test for goodwill.
Goodwill is allocated to the Group's Cash Generating Units ("CGU")
for impairment testing purposes. The Group considers each individual
investment as a separate CGU and measures its recoverable value based either
on fair values less costs to sell, which is determined using an observable
market price for each CGU, or value-in-use calculations from a discounted cash
flow model using cash flow projections based on financial budgets and
forecasts.
Goodwill has been allocated to the Group's CGU as follows:
2008 2007
USD'000 USD'000
PT Bank Bumiputera Indonesia TBK 3,092 3,587
ICB-Banco Internacional De Comércio, S.A.R.L 389 384
International Commercial Bank S.A 247 304
ICB Islamic Bank Ltd 50,238 -
Others 89 95
54,055 4,370
For impairment testing of goodwill for the year, the Group measures
the recoverable value of the CGU based on value-in-use ("VIU") calculations
from a discounted cash flow model using cash flow projections based on
financial budgets and forecasts.
During the year, the Group carried out a review of the recoverable
amount of goodwill. The review has led to the recognition of an impairment
loss of USD50,000,000 in relation to ICB Islamic Bank Ltd CGU as the goodwill
was not sufficiently supported by future expected cash flows.
For each significant CGU, the VIU is calculated by discounting
management's cash flow projections for each CGU based on the 2009 financial
budget and projected cash flow for the next 10 years based on country and
industry specific growth rates covering a 10 year period. Estimated growth
rate is used to extrapolate the cash flows in perpetuity beyond the 10 year
period and discounted using discount rate which reflect the specific risks
relating to the CGU, because of the long-term perspective within the Group of
the business units making up the CGUs.
The following describes each key assumption on which management has
based its cash flow projections for VIU calculations of ICB Islamic Bank Ltd
CGU:
(i) Growth rate used to extrapolate cash flow projections is estimated to be
0%; and
(ii) The discount rate applied to the cash flow projections is estimated to be
at 18% per annum.
Changes to the assumptions used by management, particularly the
discount rate and the growth rate, may not significantly affect the results of
the impairment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
17. PREPAID LEASE PAYMENTS
2008 2007
USD'000 USD'000
Cost
At 1 January 286 298
Currency translation differences (42) (12)
At 31 December 244 286
Accumulated amortisation
At 1 January 121 99
Amortisation for the year (Note 7) 37 46
Reclassification - (18)
Currency translation differences (21) (6)
At 31 December 137 121
Net Book Value 107 165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
18. PROPERTY AND EQUIPMENT
Furniture
and
fittings,
Computer Office Motor Construction Total
Land Buildings hardware equipment vehicles Renovation in progress
USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 000 '000
Cost
At 1 January 2008 - 1,604 2,832 5,962 2,079 6,037 1,718 20,232
Additions - 416 497 2,411 458 1,315 279 5,376
Acquisition of subsidiary 4,667 1,094 - 2,916 417 - - 9,094
Disposals - - (1) (33) (67) (2) (461) (564)
Reclassification - 837 78 38 (4) 12 (981) (20)
Currency translation
differences (21) (17) (305) (818) (303) (768) (59) (2,291)
At 31 December 2008 4,646 3,934 3,101 10,476 2,580 6,594 496 31,827
Accumulated depreciation
At 1 January 2008 - 176 1,931 3,591 1,267 4,016 - 10,981
Charge for the year - 175 375 1,409 346 791 - 3,096
Acquisition of subsidiary - - - 2,018 365 - - 2,383
Disposals - - - (22) (63) (2) - (87)
Reclassification - - 9 (14) 5 (14) - (14)
Currency translation
differences - (18) (230) (569) (217) (581) - (1,615)
At 31 December 2008 - 333 2,085 6,413 1,703 4,210 - 14,744
Net Book Value
At 31 December 2008 4,646 3,601 1,016 4,063 877 2,384 496 17,083
At 31 December 2007 - 1,428 901 2,371 812 2,021 1,718 9,251
Depreciation charge - 75 245 750 293 822 - 2,185
for 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
18. PROPERTY AND EQUIPMENT - CONT'D
Furniture
and fittings,
Computer Office Motor Construction Total
Buildings hardware equipment vehicles Renovation in progress
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January 2007 1,379 2,210 4,738 1,926 5,362 367 15,982
Additions 1 596 1,195 243 940 1,595 4,570
Disposals - (2) (68) (76) (10) - (156)
Reclassification 168 56 61 - (149) (241) (105)
Currency translation 56 (28) 36 (14) (106) (3) (59)
differences
At 31 December 2007 1,604 2,832 5,962 2,079 6,037 1,718 20,232
Accumulated
depreciation
At 1 January 2007 103 1,713 2,974 1,060 3,296 - 9,146
Charge for the year 75 245 750 293 822 - 2,185
Disposals - - (59) (68) (7) - (134)
Reclassification - - (60) - - - (60)
Currency translation (2) (27) (14) (18) (95) - (156)
differences
At 31 December 2007 176 1,931 3,591 1,267 4,016 - 10,981
Net Book Value
At 31 December 2007 1,428 901 2,371 812 2,021 1,718 9,251
At 31 December 2006 1,276 497 1,764 866 2,066 367 6,836
Depreciation charge 64 193 595 378 779 - 2,009
for 2006
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
19. OTHER ASSETS
2008 2007
USD'000 USD'000
Acceptance receivables 3,448 3,804
Accrued interest receivables 6,439 9,149
Prepayments 3,891 4,380
Items in the course of collection (Note 26) 668 1,221
Others 21,997 21,935
36,443 40,489
20. DEFERRED TAXATION
2008 2007
USD'000 USD'000
At 1 January 1,753 1,659
Acquisition of subsidiary 1,621 -
Transfer from/(to) tax charge for the year (Note 9) 297 129
Transfer from/(to) equity for the year 841 39
Currency translation differences (278) (74)
At 31 December 4,234 1,753
Deferred tax assets 4,537 1,945
Deferred tax liabilities (303) (192)
4,234 1,753
Deferred tax assets and liabilities are attributable to the following items:
2008 2007
USD'000 USD'000
Deferred tax assets
Allowance for losses on loans and advances 1,171 1,096
Decelerated tax depreciation 405 454
Tax losses carried forward 1,674 -
Defined benefit plan 393 363
Unrealised loss on fair value of financial investments 894 32
4,537 1,945
Deferred tax liabilities
Accelerated tax depreciation 295 183
Other temporary differences 8 9
303 192
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
21. DEPOSIT FROM CUSTOMERS
2008 2007
USD'000 USD'000
Current accounts 103,771 155,299
Savings accounts 106,367 96,430
Time deposits 522,583 489,984
Others 44,931 5,021
777,652 746,734
22. OTHER LIABILITIES
2008 2007
USD'000 USD'000
Acceptance payables 4,355 4,066
Accrued interest payables 3,021 3,034
Accruals 985 2,480
Items in the course of transmission 1,400 550
Guarantee deposits 501 1,081
Defined benefit plan obligation (Note 32) 1,405 1,211
Others 44,775 26,904
56,442 39,326
23. PAID-UP SHARE CAPITAL
No. of Shares Amount
2008 2007 2008 2007
' 000 ' 000 USD'000 USD'000
At 1 January
Shares of CHF1 each 180,000 - 145,960 -
Shares of CHF1,000 each - 75 - 59,549
Change in nominal value from
CHF1,000 each to CHF1 each - 75,000 - 59,549
Conversion of shareholder's
advances - 95,000 - 78,176
Issues of shares - 10,000 - 8,235
At 31 December 180,000 180,000 145,960 145,960
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
24. RETAINED EARNINGS
2008 2007
USD'000 USD'000
Movements in retained earnings were as follows:
At 1 January 34,903 24,212
Profit attributable to the shareholders
of the Company 21,282 13,988
Realisation of translation reserve arising
from capitalisation and repayment of
shareholder's advances
- (3,187)
Transfer of reserve arising from disposal
of associate (11,173) (110)
At 31 December 45,012 34,903
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
25. OTHER RESERVES
Share
Capital Translation Fair Value Option
Reserves Reserves Reserves Reserves Total
USD'000 USD'000 USD'000 USD'000 USD'000
2008
At 1 January 2,415 (2,527) (3,155) 926 (2,341)
Loss in fair value of
available-for-sale - - (1,753) - (1,753)
securities
Currency translation
differences
arising from translation to
presentation currency - (9,734) - - (9,734)
Disposal of associate - 8,811 3,288 (926) 11,173
At 31 December 2,415 (3,450) (1,620) - (2,655)
2007
At 1 January 2,170 (3,914) 579 793 (372)
Shares of post-acquisition
Reserves of associates - (6,752) (3,672) 133 (10,291)
Loss in fair value of
available-for-sale - - (62) - (62)
securities
Currency translation
differences
arising from translation to
presentation currency - 5,087 - - 5,087
Transfer of realised
translation
reserve to retained earnings
arising from capitalisation
and
repayment of shareholder's
advances - 3,187 - - 3,187
Transfer of reserve to
retained
earnings arising from
disposal
of associate - (135) - - (135)
Disposal of associate 245 - - - 245
At 31 December 2,415 (2,527) (3,155) 926 (2,341)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
26. CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents
comprise the following balances:
2008 2007
USD'000 USD'000
Cash and bank balances (Note 11) 227,976 193,003
Items in the course of collection (Note 19) 668 1,221
228,644 194,224
27. SUBSIDIARIES
Details of subsidiaries are as follows:
Country of % effective
interest held
Name of subsidiaries Incorporation 2008 2007 Principal Activities
International Commercial
Bank (Gambia) Ltd. Gambia 99.10 99.10 Commercial bank
International Commercial
Bank S. A. Guinea 97.00 97.00 Commercial bank
International Commercial
Bank (Sierra Leone) Ltd. Sierra Leone 99.98 99.98 Commercial bank
International Commercial
Bank SH. A Albania 100.00 100.00 Commercial bank
ICB-Banco Internacional
De Comércio, S.A.R.L Mozambique 99.99 99.99 Commercial bank
International Commercial
Bank Limited Ghana 100.00 100.00 Commercial bank
PT Bank Bumiputera
Indonesia Tbk Indonesia 67.07 67.07 Commercial bank
International Commercial
Bank
(Djibouti) S.A. Djibouti 99.90 99.90 Commercial bank
ICB Global Management Providing technical
and
Sdn. Bhd. Malaysia 100.00 100.00 management services
ICB Islamic Bank Ltd Bangladesh 50.1 - Islamic bank
International Commercial Laos 100 - Commercial bank
Bank Lao Ltd
International Commercial Malawi 100 - Commercial bank
Bank Ltd - Malawi
* All subsidiaries are audited by firms of auditors other than BDO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
27. SUBSIDIARIES - CONT'D
On 28 February 2008, the Company entered into a share sale and
purchase agreement ("SSPA") to acquire a 50.1% equity interest in ICB Islamic
Bank Ltd (formerly The Oriental Bank Limited), a bank incorporated in
Bangladesh by way of subscription of new ordinary shares amounting to
3,506,743 for a total cash consideration of BDT3,506,743,888 (USD51,148,000).
The acquisition was completed on 27 March 2008. The goodwill recognised on the
subscription amounted to USD100,698,000.
For the year ending 31 December 2008 the acquired subsidiary
contributed a loss for the year of USD16.8 million in the Group's consolidated
financial statements. If the acquisition have occurred on 1 January 2008 the
acquired subsidiary would have contributed USD9.2 million and USD89.2 million
of revenue and loss for the year respectively to the Group's consolidated
financial statements.
Details of the fair value of the assets and liabilities acquired
are as follows:
2008
USD'000
Cash and bank balances 12,674
Financial investments held to 51,043
maturity
Loans and advances to customers 104,162
Property and equipment 6,711
Other assets 1,309
Deferred tax assets 1,621
Deposit from customers (272,753)
Other liabilities (3,670)
Fair value of net assets (98,903)
Minority interest 49,353
Group's share of net assets (49,550)
Goodwill on acquisition (Note 16) 100,698
Purchase consideration 51,148
The goodwill recognised on the acquisitions is mainly attributable
to the synergies expected to arise from the acquired business. The fair value
of the assets and liabilities recognised on acquisition are based on
management's estimates.
The following are the effects on cash flows arising from the
acquisition:
2008
USD'000
Purchase consideration settled in cash 51,148
Cash and cash equivalents in subsidiaries acquired (12,674)
Cash inflow on acquisition 38,474
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
28. SEGMENT INFORMATION
The primary segment reporting format is determined to be the
geographical segments as the Group's risks and return varies in different
economic environment, and the operating business is organised according to the
location of the Group's assets in three continents, Europe, Africa and Asia.
Hence, the geographical segment information is presented based on the location
of the Group's assets. The Company is not an operational unit and has no
significant assets.
The Group's business segments mainly comprise commercial banking
operation. Business segmental information has therefore not been prepared as
all the Group's operating income, operating profit, assets employed,
liabilities, depreciation and amortisation and non-cash expenses are mainly
confined to one business segment.
Europe Africa Asia Group
2008 USD'000 USD'000 USD'000 USD'000
Net interest income 4,021 11,371 33,423 48,815
Net fee and commission 373 4,282 6,542 11,197
income
Foreign currency gains (997) 4,631 (41) 3,593
Gain on disposal of 77,584 - - 77,584
associate
Other operating income 8,116 591 (5,844) 2,863
Total operating income 89,097 20,875 34,080 144,052
Segment results 84,191 6,308 (24,621) 65,878
Share of results of (33) - - (33)
associate
Impairment of goodwill - - - (50,000)
Profit before taxation 15,845
Tax expense (2,840)
Profit for the year 13,005
Segment Assets 306,433 163,974 647,862 1,118,269
Associates - 1,846 - 1,846
Total Assets 1,120,115
Segment liabilities 43,495 152,151 775,267 970,913
Other segment items
Capital expenditure 371 2,063 2,942 5,376
Depreciation and amortisation 190 1,256 2,047 3,493
Loan impairment charges 148 660 13,614 14,422
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
28. SEGMENT INFORMATION - CONT'D
Capital expenditure comprises additions to Property and Equipment (Note 18)
and Goodwill and Other Intangible Assets (Note 16).
Europe Africa Asia Group
2007 USD'000 USD'000 USD'000 USD'000
Net interest income 2,875 9,787 35,903 48,565
Net fee and commission 353 3,472 6,604 10,429
income
Foreign currency gains 535 2,529 14 3,078
Gain on disposal of 3,670 - - 3,670
associate
Other operating income 609 429 3,084 4,122
Total operating income 8,042 16,217 45,605 69,864
Segment results 3,826 4,126 3,785 11,737
Share of results of (36) (144) 6,003 5,823
associate
Profit before taxation 17,560
Tax expense (2,702)
Profit for the year 14,858
Segment Assets 158,159 177,814 615,947 951,920
Associates (88) 2,133 72,319 74,364
Total Assets 1,026,284
Segment liabilities 44,187 164,985 618,330 827,502
Other segment items
Capital expenditure 818 2,250 1,876 4,944
Depreciation and 183 990 1,429 2,602
amortisation
Loan impairment charges 28 818 12,205 13,051
Capital expenditure comprises additions to Property and Equipment
(Note 18) and Goodwill and Other Intangible Assets (Note 16) including
additions resulting from acquisitions through business combinations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
29. RELATED PARTY TRANSACTIONS
A party is related to an entity if:
(a) directly, or indirectly through one or more intermediaries, the party:
(i) controls, is controlled by, or is under common control with, the entity
(this includes parents, subsidiaries and fellow subsidiaries);
(ii) has an interest in the entity that gives it significant influence over
the entity; or
(iii) has joint control over the entity;
(b) the party is an associate of the entity;
(c) the party is a joint venture in which the entity is a venturer
(d) the party is a member of the key management personnel of the entity or its
parent;
(e) the party is a close member of the family of any individual referred to in
(a) or (d);
(f) the party is an entity that is controlled, jointly controlled
or significantly influenced by, or for which significant voting power in such
entity resides with, directly or indirectly, any individual referred to in (d)
or (e); or
(g) the party is a post-employment benefit plan for the benefit of employees
of the entity, or of any entity that is a related party of the entity.
Parties related to the Group are as follows:
(a) Party that directly controls the Company is Tun Daim Zainuddin,
the founder and principal shareholder of ICB Financial Group Holdings AG, who
owned 71.3% of equity interest in ICB Financial Group Holdings AG, as of 31
December 2008. The remaining 28.7% interest is held by individual shareholders
of which, 13.1% is held by a director related company. By virtue of his
interest in shares in the Company, he is also deemed interested in shares of
all the Company's subsidiaries to the extent the Company has an interest. As
of 31 December 2008, he also has an equity interest of 79.95% in one of the
Company's associates, International Commercial Bank Senegal S.A ("ICB
Senegal").
(b) Details relationship of the associates of the Group is disclosed in Note
15.
(c) Key management personnel are those persons having authority and
responsibility for planning, directing and controlling activities of the
entity, directly or indirectly, including any director (whether executive or
otherwise). The Group refers key management personnel to the members of the
Board of Directors and the CEOs of the Company and its subsidiaries.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
29. RELATED PARTY TRANSACTIONS- CONT'D
The following transactions were carried out with related parties:
(a) Key management compensations 2008 2007
USD'000 USD'000
Directors
- Fee 190 169
Directors of the subsidiaries
- Fee 282 290
- Salaries and other short term employee benefits 986 756
Key management personnel other than
Directors - Salaries and other short term
employee benefits 827 495
2,285 1,710
(b) Transactions with principal shareholder
Advances from and repayment to the principal shareholder during the year is
disclosed in the Consolidated Statements of Changes in Equity
(c) Transactions with an associate in which the principal shareholder also has
a majority shareholding, ICB Senegal
2008 2007
USD'000 USD'000
Support service fee received from ICB Senegal 24 12
(d) Transactions with other associates
Support service fee received from associates 120 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
29. RELATED PARTY TRANSACTIONS - CONT'D
The following are related party balances as at year end:
(a) Amount due from an associate in which the principal shareholder also has a
majority shareholding, ICB Senegal.
2008 2007
USD'000 USD'000
Amount due from ICB Senegal 2 4
The amount is unsecured, interest free and has no fixed term of repayment.
(b) Amounts due from other associates
2008 2007
USD'000 USD'000
Amounts due from other associates 33 3
The amounts are unsecured, interest free and have no fixed term of repayment.
30. SIGNIFICANT EVENTS AND EVENTS SUBSEQUENT TO YEAR END
Significant Events
(a) On 5 December 2007, the Company entered into a sale and
purchase agreement ("SPA") to dispose of its entire equity interest in Sorak
Financial Holdings Pte. Ltd. (Sorak), for a total cash consideration of
SGD211,625,592. The disposal has resulted in a gain of USD77,584,000. The
disposal was completed on 8 January 2008.
(b) On 28 February 2008, the Company entered into a share sale and
purchase agreement ("SSPA") to acquire a 50.1% equity interest in ICB Islamic
Bank Ltd (formerly The Oriental Bank Limited), a bank incorporated in
Bangladesh by way of subscription of new ordinary shares amounting to
3,506,743 for a total cash consideration of BDT3,506,743,888. The acquisition
was completed on 27 March 2008.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
30. SIGNIFICANT EVENTS AND EVENTS SUBSEQUENT TO YEAR END - CONT'D
Significant Events - Cont'd
(c) On 2 October 2008 , the Company incorporated International
Commercial Bank Lao Ltd ("ICB Laos") in Laos with an equity interest of 100%
at USD11,593,144 in cash. ICB Laos commenced operations as a bank in October
2008.
(d) On 26 October 2007, the Company incorporated International
Commercial Bank Ltd - Malawi ("ICB Malawi") in Malawi with an equity interest
of 100%. On 7 July 2008, an amount of USD3,000,000 in cash was transferred as
share capital. ICB Malawi commenced operations as a bank in December 2008.
(e) On 12 September 2008, the Company provided a Corporate
Guarantee to INTL Global Currencies Ltd for the purpose of providing fund
transfer facilities to certain of its subsidiaries and associated companies.
The aggregate amount of the claims shall not exceed USD2,000,000.
There are no significant events subsequent to year end.
31. CONTINGENT LIABILITIES AND COMMITMENTS
In the normal course of business, the Group makes various commitments and
incur certain contingent liabilities with legal recourse to its customers.
The exposures of the Group as at the end of financial year are as follows:
2008 2007
USD'000 USD'000
Commitment receivables
Forward foreign currency purchased 6,568 4,951
Commitment liabilities
Unused loan commitments granted to customers 43,899 22,721
Outstanding irrevocable foreign letters of credit (LC) 2,011 1,539
Outstanding irrevocable local letters of credit (LC) 73 1,532
Unsettled spot foreign currencies 1,761 1,963
Total Commitment Liabilities 47,744 27,755
Contingent liabilities
Guarantees, indemnities and bonds 13,517 16,875
Letters of credit 2,051 903
Total Contingent liabilities 15,568 17,778
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
32. DEFINED BENEFIT PLAN
Bank Bumiputera, a subsidiary, records its defined benefit plan based on
labour law of the country. No funding of benefits has been made to date. The
number of employees entitled to the benefits in 2008 is 1,249 (2007 : 1,138).
The amounts recognised in income statement is as follows:
2008 2007
USD'000 USD'000
Current service cost 366 332
Interest cost 133 103
Past service cost 11 7
Total 510 442
Movement in the net liabilities recognised in the balance sheet is as follows:
2008 2007
USD'000 USD'000
At 1 January 1,211 1,014
Charges for the year (Note 8) 510 442
Benefits payment (105) (197)
Currency translation differences (211) (48)
Total 1,405 1,211
2008 2007
Discount rate 12% 11%
Future salary increment rate 7.75% 6%
2008 2007 2006 2005
USD'000 USD'000 USD'000 USD'000
Present value of obligations 1,472 1,304 935 676
Unrecognised actuarial cost (67) (229) (43) (56)
Present value of other - 136 122 -
liabilities
Total 1,405 1,211 1,014 620
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT
(a) Strategy in using financial instruments
By their nature, the Group's activities are principally related to
the use of financial instruments. The Group accepts deposits from customers at
both fixed and floating rates and for various periods and seeks to earn
above-average interest margins by investing these funds in high-quality
assets. The Group seeks to increase these margins by consolidating short-term
funds and lending for longer periods at higher rates while maintaining
sufficient liquidity to meet all claims that might fall due.
The Group also seeks to raise its interest margins by obtaining
above-average margins, net of allowances, through lending to commercial and
consumer borrowers with a range of credit standing. Such exposures involve not
just on-balance sheet loans and advances; the Group also enters into
guarantees and other commitments such as letters of credit and performance and
other bonds.
(b) Credit risk
The Group takes on exposure to credit risk, which is the risk that
a counter party will be unable to pay as per the agreed terms. Impairment
provisions are provided for losses that have been incurred at the balance
sheet date. Significant changes in the economy or in the health of a
particular industry segment that represents a concentration in the Group's
portfolio, could result in losses that are different from those provided for
at the balance sheet date. Management therefore carefully manages its exposure
to credit risk.
The Group structures the levels of credit risk it undertakes by
placing limits on the amount of risk accepted in relation to single borrower
or group of borrowers and to geographical and industry segments.
The Group's lending activities are guided by the credit policy
manual and all personnel involved in the extension of credit are expected to
strictly observe the policy. A Loan Committee is established to formulate,
implement and review the credit policy including approving credit proposal.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(b) Credit risk - cont'd
Exposure to credit risk is managed through regular analysis of the
ability of borrowers and potential borrowers to meet interest and capital
repayment obligations and by changing these lending limits where appropriate.
Exposure to credit risk is also managed in part by obtaining collateral and
corporate and personal guarantees. The policy outlines the criteria for
acceptable collateral and margin of advances.
The Group also provides guarantees and standby letters of credit -
which represent irrevocable assurances that the Group will make payments in
the event that a customer cannot meet its obligations to third parties. Such
instruments carry the same credit risk as loans. Documentary and commercial
letters of credit - which are written undertakings by the Group on behalf of a
customer authorising a third party to draw drafts on the Group up to a
stipulated amount under specific terms and conditions - are collateralised by
the underlying shipments of goods to which they relate and therefore carry
less risk than a direct borrowing. Commitments to extend credit represent
unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to
extend credit, the Group is potentially exposed to loss in an amount equal to
the total unused commitments. However, the likely amount of loss is less than
the total unused commitments, as most commitments to extend credit are
contingent upon customers maintaining specific credit standards. The Group
monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term
commitments.
The Group has developed an internal rating system used as a basis
of classifying the relative risk of exposure to a counterparty. The system
assesses the probability of default by considering external market information
past experience and financial information provided as part of the loan
application process. After the initial grading, the Credit Committee
constantly monitors the exposure by considering market conditions, repayment
patterns, financial information and other relevant information. The Group is
constantly reviewing its exposure and the classification of loans may change
subject to conditions arising that would affect the recoverability of a
receivable.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(b) Credit risk - cont'd
The rating system used to analyse loans also considers the overdue
aging pattern as follows:
Current 1 month or less
Special mention > 1 month < 3 months
-
Substandard > 3 months < 6 months
-
Doubtful > 6 months < 1 year
-
Loss > 1 year
(i) Exposure to credit risk
Exposure to credit risk as at 31 December is as follows:
Loans and Financial
advances Investments
to customers
2008 2007 2008 2007
USD'000 USD'000 USD'000 USD'000
Total Gross 713,674 554,203 122,539 93,221
Specific allowances (122,353) (9,082) - -
for impairment
Collective allowances (3,263) (4,438) - -
for impairment
588,058 540,683 122,539 93,221
As at 31 December 2008, the amount of unimpaired balances stood at
USD 481 million (2007: USD 473 million). The maximum exposure to credit risk
is the carrying amount of the financial asset receivable balances as at 31
December 2008 and 31 December 2007.
(ii) Write-off policy
The Group writes off a loan (and any related allowances for
impairment) when the balance is uncollectible. This determination is reached
after considering information such as the occurrence of significant changes in
the counterparty's financial position such that the counterparty can no longer
pay the obligation, or that the proceeds from collateral will not be
sufficient to pay back their entire exposure.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(b) Credit risk - cont'd
(iii) Collateral
The Group holds collateral against secured advances made to
businesses and consumers, in the form of charges over properties, other
registered securities over assets and sovereign/other bank's guarantees.
Estimates of fair value are based on the value of collateral assessed at the
time of financing and are updated on a periodic basis. The estimated fair
value of collateral held against financial assets as at 31 December 2008 is
USD 678 million (2007: USD525 million).
(iv) Concentration of credit risk
The Group monitors concentrations of credit risk by sector and
geographical location. An analysis of concentrations of credit risk at the
reporting date is shown below:
Concentration by sector:
Loans and advances
to customers
2008 2007
USD'000 USD'000
Business loan 232,786 178,205
Consumer 355,272 362,478
588,058 540,683
Concentration by location:
Loans and advances Financial
to customers Investments
2008 2007 2008 2007
USD'000 USD'000 USD'000 USD'000
Asia 515,892 468,808 49,235 30,876
Europe 19,330 15,008 17,199 12,562
Africa 52,836 56,867 56,105 49,783
588,058 540,683 122,539 93,221
(c) Market risk
The Group takes on exposure to market risk. Market risks arise from
open positions in interest rate, currency and equity products, all of which
are exposed to general and specific market movements. The Assets and
Liabilities Committee of each country is responsible to manage risk on
interest rate and foreign exchange.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(i) Currency risk
The Group takes on exposure to effects of fluctuations in the
prevailing foreign currency exchange rates on its financial position and cash
flow. The banks treasury division will monitor their exchange rate risk based
on the regulation of the central bank in their respective countries.
The table below summarises the Group's exposure to foreign currency
exchange rate risk at 31 December. Included in the table are the Group's
financial instruments at carrying amounts, categorised by currency.
USD IDR GHS ALL MZN GNF BDT OTHERS TOTAL
USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000
Assets
Cash and bank 102,278 37,886 8,843 2,289 2,113 9,194 41,226 72,909 276,738
balances
Loans and
advances
to customers 50,780 392,723 23,241 3,652 2,038 12,840 85,381 17,403 588,058
Financial investments 20,070 17,684 31,413 17,200 6,712 - 15,199 14,261 122,539
Other assets 9,437 11,484 6,811 138 355 1,828 9,909 (3,519) 36,443
Total financial assets 182,565 459,777 70,308 23,279 11,218 23,862 151,715 101,054 1,023,778
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(i) Currency risk
USD IDR GHS ALL MZN GNF BDT OTHERS TOTAL
USD USD USD USD USD USD USD USD USD
'000 '000 '000 '000 '000 '000 '000 '000 '000
Liabilities
Deposit from
other banks - 26,265 - - - - 107,205 - 133,470
Customers'
accounts 98,746 392,565 51,595 18,989 6,525 17,399 151,376 40,457 777,652
Other liabilities 900 12,023 2,392 132 1,617 222 37,229 1,927 56,442
Total financial
liabilities 99,646 430,853 53,987 19,121 8,142 17,621 295,810 42,384 967,564
82,919 28,924 16,321 4,158 3,076 6,241(144,095) 58,670 56,214
At 31 December 2007
Total financial
assets 156,160 557,845 66,120 18,443 16,637 28,293 - 70,657 914,155
Total financial
liabilities 129,019 533,530 66,202 19,797 13,926 21,712 - 41,031 825,217
27,141 24,315 (82)(1,354) 2,711 6,581 - 29,626 88,938
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(i) Currency risk- Cont'd
There are material exposures in IDR, GHS and BDT in the balance
sheet so standard scenarios that are considered on a regular basis include a
10.00% rise or fall of these rates against the USD. An analysis at the balance
sheet date of the components of the shareholder's equity sensitivity to an
increase or decrease in these rates, all other variables constant, is as
follows:
IDR +10% IDR -10% GHS +10% GHS -10% BDT +10% BDT -10%
31 December 2008 2,662 (2,662) 812 (812) 14,410 (14,410)
31 December 2007 2,978 (2,978) 204 (204) n/a n/a
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(ii) Cash flow and fair value interest rate risk
The Group is exposed to various risks associated with the effects
of fluctuations in the prevailing levels of market interest rates on the
financial position and cash flows.
NON
UP TO 1-3 3-12 1-5 YEARS OVER INTEREST
BEARING
1 MONTH MONTHS MONTHS 5 YEARS TOTAL
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Assets
Cash and bank 178,301 28,556 10,991 - - 58,890 276,738
balances
Loans and
advances
25,740 29,425 92,157 217,922 222,814 - 588,058
to customers
Financial 24,879 18,079 26,288 27,780 24,505 1,008 122,539
investments
Other assets 4,381 60 901 6,611 7,642 16,848 36,443
Total financial 233,301 76,120 130,337 252,313 254,961 76,746 1,023,778
assets
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(ii) Cash flow and fair value interest rate risk - cont'd
NON
UP TO 1-3 3-12 1-5 YEARS OVER INTEREST
BEARING
1 MONTH MONTHS MONTHS 5 YEARS TOTAL
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Liabilities
Deposit from other
banks 24,863 328 887 75,187 - 32,205 133,470
Customers' 236,539 68,003 150,028 131,787 292 191,003 777,652
accounts
Other liabilities 9,729 119 4,991 22,376 29 19,198 56,442
Total financial
liabilities 271,131 68,450 155,906 229,350 321 242,406 967,564
(37,830) 7,670 (25,569) 22,963 254,640 (165,660) 56,214
At 31 December
2007
Total financial 277,528 42,459 147,730 318,694 76,645 51,099 914,155
assets
Total financial
liabilities 409,005 121,365 110,865 158,100 - 25,882 825,217
(131,477)(78,906) 36,865 160,594 76,645 25,217 88,938
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(c) Market risk - Cont'd
(ii) Cash flow and fair value interest rate risk - cont'd
Standard scenarios that are considered on a regular basis include a
1.00% rise or fall in effective average rates. An analysis of the Company's
income statement sensitivity to an increase or decrease in effective rates
(assuming no asymmetrical movement and a constant balance sheet position) is
as follows:
1% parallel 1% parallel
increase decrease
31 December 2008 1,428 (1,428)
31 December 2007 632 (632)
(d) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
payment obligations associated with its financial liabilities when they fall
due and to replace funds when they are withdrawn. The consequence may be the
failure to meet obligations to repay depositors and fulfill commitments to
lend.
The Group's liquidity management process, as carried out within the
Group and monitored by the respective bank's Treasury team, includes:
- Day-to-day funding, managed by monitoring future cash flow to
ensure that requirements can be met. This includes replenishment of funds as
they mature or are borrowed by customers;
- Monitoring balance sheet liquidity ratios against internal and
regulatory requirements; and
- Managing the concentration and profile of deposit and debt
maturities.
The table below analyses the Group's financial instruments into
relevant maturity groupings based on the remaining period of balance sheet
date to the contractual maturity date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(d) Liquidity risk - Cont'd
UP TO 1-3 3-12 1-5 YEARS OVER
1 MONTH MONTHS MONTHS 5 YEARS TOTAL
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Assets
Cash and bank balances 117,712 39,059 8,893 110,827 247 276,738
Loans and advances
to customers 23,159 40,342 138,196 198,463 187,898 588,058
Financial investments 18,408 25,406 26,255 27,965 24,505 122,539
Other assets 10,707 3,448 5,613 8,826 7,849 36,443
Total financial assets 169,986 108,255 178,957 346,081 220,499 1,023,778
Liabilities
Deposit form other banks 24,863 328 914 75,318 32,047 133,470
Customers' accounts 278,838 72,149 179,084 167,267 80,314 777,652
Other liabilities 10,439 2,375 7,209 32,818 3,601 56,442
Total financial
liabilities 314,140 74,852 187,207 275,403 115,962 967,564
(144,154) 33,403 (8,250) 70,678 104,537 56,215
At 31 December 2007
Total financial assets 289,165 67,453 151,219 333,464 72,854 914,155
Total financial liabilities 426,917 126,466 115,260 155,112 1,462 825,217
(137,752) (59,013) 35,959 178,352 71,392 88,938
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(e) Operational risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Group's processes,
personnel, technology and infrastructure, and from external factors other than
credit, market and liquidity risks.
The Group's objective in managing operational risk is to implement
an integrated internal control structure that supports process efficiency and
customer needs, whilst effectively reducing the risk of error and financial
loss in a cost effective manner. The overall operational risk framework is set
by the Board of Directors. Primary responsibility for the development and
implementation of internal controls is assigned to senior management within
each business department. Adherence to overall operational risk policies and
procedures is regularly reviewed by Internal Audit and findings are reported
to the Audit Committee.
(f) Fair value of financial assets and liabilities
The fair value of financial instruments is the amount at which the
financial asset could be exchanged or financial liability could be settled.
The fair value of financial instruments approximates their carrying value. The
following methods and assumptions are used to estimate the fair values of the
following classes of financial instruments:
(i) Cash and bank balances
The carrying amount approximates fair value due to the relatively
short maturity of the financial instruments.
(ii) Loans and advances to customers
Loans and advances are net of provisions for impairment. The
estimated fair value of loans and advances represents the discounted amount of
estimated future cash flow expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 December 2008
33. FINANCIAL RISK MANAGEMENT - CONT'D
(f) Fair value of financial assets and liabilities - Cont'd
(iii) Trading securities and financial investments
Fair value is based on market prices. Where this information is
not available, fair value has been estimated using quoted market prices for
securities with similar credit, maturity and yield characteristics or pricing
models or discounted cash flow techniques.
(iv) Deposits and borrowings
The estimated fair value of deposits with no stated maturity, which
includes non-interest-bearing deposits, is the amount repayable on demand. The
estimated fair value of fixed interest-bearing deposits and other borrowings
without quoted market price is based on discounted cash flow using interest
rates for new debts with similar remaining maturity.
(v) Debt securities in issue
The aggregate fair values are calculated based on quoted market
price. For those notes where quoted market prices are not available, a
discounted cash flow model is used based on a current yield curve appropriate
for the remaining term to maturity.
GROUP DIRECTORY
SWITZERLAND
ICB Financial Group Holdings AG
Schulhausstrasse 1
CH-8834 Schindellegi
Switzerland
Tel: +41 44 687 4550
Fax: +41 44 687 4551
Email: icbhq@icbankingroup.com
Website: www.icbankingroup.com
ALBANIA
International Commercial Bank Sh.A.
Rruga Murat Toptani
(next to Gjergji Centre)
Tirana, Albania
Tel: +355 42 256254/254372
Fax: +355 42 254368
Email: info@icbank-albania.com
Website: www.icbank-albania.com
BANGLADESH
ICB Islamic Bank Ltd.
T. K. Bhaban (14th, 15th, 16th Floor)
13, Kazi Nazrul Islam Avenue
Kawran Bazar
Dhaka 1215, Bangladesh
Tel: +880 2 914 3361-5
Fax: +880 2 911 1994
Email: info@icbislamic-bd.com
Website: www.icbislamic-bd.com
DJIBOUTI
International Commercial Bank (Djibouti) S.A.
Immeuble No. 15, Place Du 27 Juin
Rue D'Ethiopie, Djibouti
Tel: +253 355 006/011/012
Fax: +253 355 003
Email: info@icbank-djibouti.com
Website: www.icbank-djibouti.com
GHANA
International Commercial Bank Limited
Meridian House, Ring Road Central
Private Mail Bag No. 16
Accra North, Accra, Ghana
Tel: +233 21 236 136/235 819
Fax: +233 21 238 228
Email: icb@icbank-gh.com
Website: www.icbank-gh.com
GUINEA
International Commercial Bank S.A.
Ex-cité Chemins de Fer
Immeuble Mamou
Conakry, Republic of Guinea
Tel: +224 30 412 590/591/592
Fax: +224 30 412 450
Email: arukappalliap@icb-guinea.com
Website: www.icbank-guinea.com
INDONESIA
PT Bank Bumiputera Indonesia Tbk
Wisma Bumiputera Lt 14
Jalan Jenderal Sudirman Kav 75
Jakarta 12910, Indonesia
Tel: +62 21 570 1626
Fax: +62 21 525 5244
Email: bank@bumiputera.co.id
Website: www.bumiputera.co.id
LAO
International Commercial Bank Lao Limited
127/07, Hatsady Road
Hatsady Tai Village
Chanthaboury
Vientiane Capital, Lao PDR
Tel: +856 21 250 420
Fax: +856 21 250 479
Email: enquiry@icb-lao.com
MALAYSIA
ICB Global Management Sdn Bhd
No. 3, Jalan Sri Hartamas 7
Sri Hartamas
50480 Kuala Lumpur, Malaysia
Tel: +6 03 6201 6051
Fax: +6 03 6201 6053
Email: icbhq@icbglobal.com.my
MALAWI
International Commercial Bank Limited
Plot BC 92-93
Stansfield House
Halle Sellasie Road
Blantyre, Malawi
Tel: +265 1 847 901/2/3/4
Fax: +265 1 847 905
Email: enquiry@icb-malawi.com
MOZAMBIQUE
ICB-Banco Internacional de Comércio S.A.R.L.
25 de Setembro Avenue
No. 1915, 1st Floor, Maputo
Mozambique
Tel: +258 21 311 111/314 801
Fax: +258 21 314 797
Email: icbm@icbank-mz.com
Website: www.icbank-mz.com
SENEGAL
International Commercial Bank Senegal S.A.
18, Avenue Leopold S. Senghor
B. P. 32310 Dakar, Ponty
Senegal
Tel: +221 338 420742/235647
Fax: +221 338 422585
Email: info@icbank-senegal.com
Website: www.icbank-senegal.com
SIERRA LEONE
International Commercial Bank (Sierra Leone) Limited
22 Rawdon Street
Freetown
Sierra Leone
Tel: +232 22 222 877/273/814
Fax: +232 22 290 002
Email: icb@icbank-sl.com
TANZANIA
International Commercial Bank (Tanzania) Limited
1st Floor, Jamhuri Street/Morogoro Road
Dar es Salaam, Tanzania
Tel: +255 22 2133 766/767/769
Fax: +255 22 2134 286
Email: enquiry@icbank-tz.com
Website: www.icbank-tz.com
THE GAMBIA
International Commercial Bank (Gambia) Limited
Ground Floor, GIPFZA House
48, Kairaba Avenue, Serrekunda KSMD
Banjul, The Gambia
Tel: +220 437 7878/7877
Fax: +220 437 7880
Email: icbank@icbank-gambia.com