REG - EFG Holding S.A.E. - Final Results FY 2023
30/04/2024 11:30
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RNS Number : 6179M EFG Holding S.A.E. 30 April 2024
EFG Holding Company
(Previously EFG - Hermes Holding Company)
(Egyptian Joint Stock Company)
Consolidated financial statements.
For the year ended 31 December 2023
-
Table of contents
Page(s)
Independent auditor's report 1 - 4
Consolidated statement of financial position 5
Consolidated statement of profit or loss 6
Consolidated statement of comprehensive income 7
Consolidated statement of changes in equity 8 - 9
Consolidated statement of cash flows 10 - 11
Notes to the consolidated financial statements 12 - 93
Consolidated statement of financial position
As at 31 December 2023
2023 2022
EGP Thousand EGP Thousand
Assets Notes
Cash and cash equivalents 5 32,252,243 26,214,250
Funded facilities to customers 8 19,117,655 13,904,712
Banking loans and facilities (aiBank) 8.1 21,079,316 19,317,430
Accounts receivable 7 6,770,962 6,168,256
Investments at fair value through profit and loss 6 9,196,191 6,772,893
Investments at fair value through OCI 9 11,647,611 14,080,121
Investments at amortized cost 12 11,233,860 11,518,692
Assets held for sale 11 330,652 349,701
Equity accounted investees 10 844,793 606,433
Investment properties 13 98,701 118,985
Property and equipment 14 2,177,789 1,636,043
Goodwill and other intangible assets 15 2,315,613 1,947,231
Deferred tax assets 22 126,411 64,486
Other assets 16 4,716,177 3,401,911
Total assets 121,907,974 106,101,144
Liabilities
Due to banks and financial institutions 17 14,182,413 12,371,836
Customer deposits 18 50,634,207 48,130,172
Loan and borrowings 24 8,004,219 4,996,029
Creditors and other credit balances 21 6,148,445 4,982,665
Accounts payable - customers credit balances FVTPL 19 680,319 379,039
Accounts payable - customers credit balances 19.1 11,319,690 10,194,569
Issued bonds 20 749,003 500,000
Provisions 23 1,167,730 903,716
Current tax liability 638,583 473,873
Deferred tax liabilities 22 987,436 800,661
Total liabilities 94,512,045 83,732,560
Equity
Share capital 25 7,298,030 5,838,424
Legal reserve 972,344 867,455
Share premium 1,668,624 1,668,624
Other reserves 4,843,110 3,125,556
Retained earnings 8,538,917 7,423,239
Equity attributable to owners of the Group 23,321,025 18,923,298
Non - controlling interests 26 4,074,904 3,445,286
Total equity 27,395,929 22,368,584
Total liabilities and equity 121,907,974 106,101,144
These financial statements were approved and authorised for issue on 30 April
2024 and signed by:
Mona Zulficar Karim Awad
Chairperson Group Chief Executive Officer
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of profit or loss
For the year ended 31 December
Notes 2023 2022
EGP Thousand EGP Thousand
Interest income 32 13,484,814 9,295,889
Interest expense (8,863,833) (5,698,005)
Net interest income 4,620,981 3,597,884
Fee and commission income 32 7,161,919 4,804,816
Fee and commission expense (719,609) (508,240)
Net fee and commission income 6,442,310 4,296,576
Realized securities' Gain ( losses ) 2 171,671 (847,027)
Net changes in the fair value of investments at FVTPL 6 1,411,890 923,031
Dividend income 32 81,477 5,661
Other revenues 28 297,999 159,191
Net Gains on dereceognition of financial assets at amortized cost 32 432,931 222,310
Impairment loss on financial assets - net of recoveries 29 (1,030,333) (726,511)
Foreign currencies exchange differences 32 1,154,847 2,495,675
Gains on selling assets held for sale 32 9,797 5,487
Share of Gain from equity accounted investees 32 45,048 76,562
13,638,618 10,208,839
General and administrative expenses 31 (8,943,885) (6,541,864)
Financial guarantee provision 23 (38,055) (21,174)
Impairment loss on goodwill and intangible assets 32 (12,002) (10,239)
Provisions 23 (235,053) (156,890)
Depreciation and amortisation 31.2 (476,686) (335,734)
Profit before tax 3,932,937 3,142,938
Income tax expense 30 (1,093,997) (1,103,724)
Profit for the year 2,838,940 2,039,214
Attributable to:
Shareholders of the Holding Company 2,216,683 1,687,208
Non-controlling interests 622,257 352,006
2,838,940 2,039,214
Earnings per share:
Basic earning per share - EGP 34 1.52 1.16
Diluted earnings per share - EGP 34 1.52 1.16
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Notes 2023 2022
EGP Thousand EGP Thousand
Profit for the year 2,838,940 2,039,214
Other comprehensive income items:
Items that may be reclassified to the consolidated statement of profit or loss
Foreign operations - foreign currency translation differences 1,919,416 3,210,783
Foreign currency translation differences - reclassified to profit or loss (198,160) (852,752)
Net losses on investments in debt instruments at FVOCI- net change in fair (33,483) (157,787)
value
Investments at fair value through OCI-net change in fair value - reclassified 215,549 (3,016)
to profit or loss
Tax relating to such items 22 14,319 24,443
1,917,641 2,221,671
Items that will not be reclassified to the consolidated statement of profit or
loss
Investment at fair value through OCI - reclassified to retained Earnings (1,064) (547)
Net (losses) gains on investments in equity instruments designated at fair (222,270) 49,994
value through OCI - net change in fair value
Actuarial gain (loss) re-measurement of employees' benefits obligations 23 3,512 (4,505)
Share of other comprehensive income of equity accounted investees 1,310 206
Other comprehensive income, net of tax 1,699,129 2,266,819
Total comprehensive income for the year 4,538,069 4,306,033
Attributable to:
Shareholders of the Holding Company 3,829,283 3,805,108
Non-controlling interests 708,786 500,925
4,538,069 4,306,033
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity
For the year ended 31 December 2023
EGP Thousand Share Legal Share premium General reserve Translation reserve Fair value reserve Employee stock Ownership plan reserve Operational risk reserve Retained earnings Total Non-controlling interests Total Equity
Capital reserve
Balance as at 31 December 2021, as previously reported 4,865,353 840,273 1,668,624 158 1,810,570 (1,176,955) 149,647 - 6,390,395 14,548,065 2,758,225 17,306,290
Impact of Purchase price allocation of aiBank - - - - - - - - 96,524 96,524 201,674 298,198
Restated Balance as at 31 December 2021 4,865,353 840,273 1,668,624 158 1,810,570 (1,176,955) 149,647 - 6,486,919 14,644,589 2,959,899 17,604,488
Profit for the year - - - - - - - - 1,687,208 1,687,208 352,006 2,039,214
Other comprehensive income for the year - - - - 2,169,290 (47,433) - - (3,958) 2,117,899 148,920 2,266,819
Transactions with owners of the Group
Contributions and distributions
Dividends 973,071 - - - - - - - (973,071) - (95,657) (95,657)
Transferred to legal reserve - 27,182 - - - - - - (27,182) - - -
Employee stock ownership plan (ESOP) - - - - - - 139,364 - - 139,364 - 139,364
Operational risk reserve - - - - - - - 80,915 (80,915) - - -
Changes in ownership interests
Changes in ownership interests without loss of control - - - - - - - - 334,238 334,238 48,374 382,612
- - - - - - - - - - 31,744 31,744
PPA effect (note 37)
Balance as at 31 December 2022 5,838,424 867,455 1,668,624 158 3,979,860 (1,224,388) 289,011 80,915 7,423,239 18,923,298 3,445,286 22,368,584
The accompanying notes form an integral part
of these consolidated financial statements.
Consolidated statement of changes in equity (continued)
For the year ended 31 December 2023
EGP Thousand Share Legal Share premium General reserve Translation reserve Fair value reserve Employee stock Ownership plan reserve Operational risk reserve Retained earnings Total Non-controlling interests Total Equity
Capital reserve
Balance as at 1 January 2023 as previously stated 5,838,424 867,455 1,668,624 158 3,979,860 (1,224,388) 289,011 80,915 7,460,140 18,960,199 3,415,904 22,376,103
PPA effect (note 37) - - - - - - - - (36,901) (36,901) 29,382 (7,519)
Balance as at 1 January 2023 5,838,424 867,455 1,668,624 158 3,979,860 (1,224,388) 289,011 80,915 7,423,239 18,923,298 3,445,286 22,368,584
Profit for the year - - - - - - - - 2,216,683 2,216,683 622,257 2,838,940
Other comprehensive income for the year - - - - 1,670,159 (61,071) - - 4,576 1,613,664 86,529 1,700,193
Total comprehensive income for the year - - - - 1,670,159 (61,071) - - 2,221,259 3,830,347 708,786 4,539,133
Transactions with owners of the Group
Contributions and distributions
Dividends 1,459,606 - - - - - - - (1,460,450) (844) (135,421) (136,265)
Transferred to legal reserve - 104,889 - - - - - - (104,889) - - -
Employee stock ownership plan (ESOP) - - - - - - 130,939 - - 130,939 - 130,939
Operational risk reserve - - - - - - - (22,473) 22,473 - - -
Changes in ownership interests
Changes in ownership interests without loss of control - - - - - - - - 437,285 437,285 56,253 493,538
Balance as at 31 December 2023 7,298,030 972,344 1,668,624 158 5,650,019 (1,285,459) 419,950 58,442 8,538,917 23,321,025 4,074,904 27,395,929
The accompanying notes form an integral
part of these consolidated financial statements.
Consolidated statement of cash flows
For the year ended 31 December 2023
2023 2022
Notes EGP Thousand EGP Thousand
Cash flows from operating activities
Profit for the year before income tax 3,932,937 3,142,938
Adjustments for:
Depreciation and amortization 31.2 476,686 335,734
Provisions movements 23 156,400 60,348
Gains on sale of property, plant and equipment 28 (3,251) (4,200)
Gain from securitization (432,931) (242,336)
Gain on sale of Investment property (56,438) -
Loss on sale of investment at FVTOCI 9 6,382 682,067
Gains on sale of assets held for sale 11 (9,797) (5,487)
Amortization of premium / issue discount (1,270,786) (216,240)
Changes in the fair value of investments at fair value through 6-32 (1,411,890) (923,031)
profit and loss
Share of profit of equity-accounted investees 32 (45,048) (76,562)
Impairment loss on assets 1,042,335 736,750
Share-based payment 31 130,938 139,362
Foreign currency translation differences 790,711 3,756,861
Foreign currencies exchange differences 32 (1,154,847) (2,495,675)
Gains on selling of investments in subsidiaries and associates (116,059) -
Operating cash flows before changes in assets and liabilities 2,035,342 4,890,529
Changes in assets and liabilities:
Other assets (2,335,299) (566,072)
Creditors and other credit balances 1,551,020 1,957,131
Accounts receivables 1,854,893 7,187,678
Accounts payable (2,654,272) (12,374,159)
Accounts payable - customers credit balance at fair value through profit and 301,280 (3,089,258)
loss
Loans and facilities to customers (10,303,164) (17,537,399)
Due from banks (2,142,353) 17,615,468
Due to banks 1,890,134 (270,335)
Customers deposits 2,504,037 9,565,434
Investments at fair value through profit and loss (445,075) 5,095,985
Income tax paid (772,664) (586,295)
Net cash (used in)/from operating activities (8,516,121) 11,888,707
Cash flows from investing activities:
Payments to purchase property, plant and equipment and other intangible assets (736,314) (364,198)
Proceeds from sale of property, plant and equipment 28,763 7,378
Proceeds from Sale of Investment Property 70,176 -
Proceeds from sale of assets held for sale 60,419 -
Proceeds from sale of investment FVTOCI 25,559,674 17,958,373
Payments to purchase investment FVTOCI (17,781,236) (16,578,049)
Payments to purchase investment in subsidiaries 15 ( 69,682) (844,422)
Proceeds from sale investment in subsidiaries 179,259 383,229
Payments to purchase equity accounted investees - (88,619)
Proceeds from sale equity accounted investees - 8,127
Dividends collected 23,102 26 088
Net cash generated from investing activities 7,334,161 507,907
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of cash flows (continued)
For the year ended 31 December 2023
2023 2022
Notes EGP Thousand EGP Thousand
Cash flows from financing activities:
Dividends paid (495,060) (378,140)
Proceeds from securitization 5,035,109 3,374,067
Proceeds from Issued bonds 249,003 500,000
Payment for issued bonds - (550,000)
Payment for from financial institutions (13,515) (8,707,208)
Proceeds from loans and borrowings 3,571,284 2,186,367
Payment for loans and borrowings (1,076,418) (3,247,267)
Net cash generated from / (used in)financing activities 7,270,403 (6,822,181)
Net change in cash and cash equivalents 6,088,443 5,574,433
Cash and cash equivalents at 1 January 13,079,583 4,714,360
Effect of exchange rate changes 997,382 2,785,526
Cash from acquisition from subsidiaries 3,670 5,264
Cash and cash equivalents at 31 December 5 20,169,078 13,079,583
The accompanying notes form an integral part of these consolidated financial
statements.
1 Incorporation and principal activities
1.1 Incorporation
- EFG Holding Company (Previously EFG Hermes Holding Company)
(Egyptian Joint Stock Company) (the "Group" or "Holding Company") is an
Egyptian Joint Stock Company subject to the provisions of the Capital Market
Law No.95 of 1992 and its executive regulations. The Group's registered office
is located in Smart Village building No. B129, phase 3, KM 28 Cairo /
Alexandria Desert Road, 6 October 12577 Egypt.
- The name of the company has been changed to EFG Holding through the
approval the General Assembly dated May 24, 2023 and was reflected in the
commercial register on June 14, 2023.
- EFG Holding shares are listed on the Egyptian Ex-change (EGX) and
the London Stock Exchange (LSE) in the form of USD-denominated Global
Depository Receipts ("GDRs").
1.2 Purpose of the Group
EFG Holding Company (Previously EFG Hermes Holding Company) is a premiere
financial services corporation that offers diverse investment banking services
including securities brokerage, investment banking, asset management and
private equity. In addition the group also have non-bank finance products,
which include leasing and micro-finance, installment services, factoring,
securitization, collection and tasquek. The purpose of the Group also includes
participation in the establishment of companies which issue securities or in
increasing their share capital, custody activities, margin trading and
commercial bank activities.
2 Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) and
interpretations issued by the IFRS Interpretations Committee (IFRIC)
applicable to companies reporting under IFRS. The financial statements comply
with IFRS as issued by the International Accounting Standards Board (IASB).
Basis of measurement
These consolidated financial statements have been prepared under the
historical cost basis, except for the following:
· Financial assets measured at fair value through profit or loss;
· Financial assets at fair value through other comprehensive income;
· Assets held for sale at fair value at the lower of their carrying
amount and fair value less costs to sell; and
· Accounts payable - customers credit balance at fair value through
profit and loss.
Functional and presentation currency
The Group's consolidated financial statements are presented in Egyptian Pound
("EGP") because the EGP forms the major currency in which the Group transacts
and funds its business. The EGP is also the Group's functional currency
because it's the most significant currency relevant to the underlying
transactions, events and conditions of the Group and its subsidiaries, as well
as representing a significant proportion of its funds generated from financing
activities
Use of estimates and judgments
The preparation of consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised prospectively. Information about
significant areas of estimation uncertainty and critical judgements in
applying accounting policies that have the most significant effect on the
amounts recognised in these consolidated financial statements are described in
note 4.
3 Summary of material accounting policies
3.1 Basis of consolidation
Business combination
The Group accounts for business combinations using the acquisition method when
control is transferred to the Group.
The consideration transferred in the acquisition copmrises of:
· fair values of the assets transferred
· liabilities incurred to the former owners of the acquired business
· equity interests issued by the Group
· fair value of any asset or liability resulting from a contingent
consideration arrangement, and
· fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis either at fair value or at the
non-controlling interest's proportionate share of the acquired entity's net
identifiable assets.
Transaction costs are expensed as incurred, except if related to the issue of
debt or equity securities in which case those instruments are recognized at
fair value, net of transaction costs.
The excess of the consideration transferred, amount of any non-controlling
interest in the acquired entity and acquisition-date fair value of any
previous equity interest in the acquired entity, over the fair value of the
net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the business
acquired, the difference is recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are iscounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions. Contingent
consideration is classified either as equity or a financial liability. Amounts
classified as a financial liability are subsequently remeasured to fair value,
with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date
on which control ceases.
3 Summary of material accounting policies (continued)
3.1 Basis of consolidation (continued)
Subsidiaries (continued)
The consolidated financial statements comprise the financial statements of the
Group and those of its following subsidiaries:
Name of subsidiary Direct ownership % Indirect ownership %
EFG Hermes International Securities brokerage- 99.87 0.09
Financial Brokerage Group (Previously)
EFG Hermes Fund Management - 88.51 11.49
Egyptian Fund Management Group(Previously)
Hermes Portfolio and Fund Management 78.81 21.19
Hermes Securities Brokerage 97.58 2.42
Hermes Corporate Finance 99.42 0.48
EFG - Hermes Advisory Inc. 100 -
EFG- Hermes Financial Management (Egypt) Ltd. - 100
EFG - Hermes Promoting & Underwriting 99.88 -
Bayonne Enterprises Ltd. 100 -
EFG- Hermes Fixed Income 99 1
EFG- Hermes Private Equity 96.3 3.7
EFG- Hermes Private Equity-BVI - 100
EFG- Hermes UAE LLC. - 100
Flemming CIIC Holding 100 -
Flemming Mansour Securities - 99.33
Flemming CIIC Securities - 96
Flemming CIIC Corporate Finance - 74.92
EFG- Hermes UAE Ltd. 100 -
EFG- Hermes Holding - Lebanon 99 -
EFG- Hermes KSA 73.3 26.7
EFG- Hermes Lebanon 99 0.97
Mena Opportunities Management Limited - 95
Mena (BVI) Holding Ltd. - 95
EFG - Hermes Mena Securities Ltd. - 100
Middle East North Africa Financial Investments W.L.L - 100
EFG- Hermes Regional Investment Ltd. 100 -
Offset Holding KSC (ii) - 50
EFG- Hermes IFA Financial Brokerage - 63.084
IDEAVELOPERS - 81
EFG- Hermes CB Holding Limited - 100
EFG- Hermes Global CB Holding Limited 100 -
Mena Long-Term Value Feeder Holdings Ltd. - 50
(ii)
Mena Long-Term Value Master Holdings Ltd. - 45
(ii)
Mena Long-Term Value Management - 45
Ltd**
EFG - Hermes CL Holding - 100
SAL
EFG-Hermes IB 100 -
Limited
EFG Hermes Securitization- 100 -
Financial Group for Securitization
(previously)
Beaufort Investments - 100
Company
EFG Hermes-Direct Investment 64 -
Fund
Tanmeyah Micro Enterprise Services S.A.E - 93.983
EFG- Hermes Brokerage Holding LTD- 100 -
EFG - Hermes Frontier Holdings
LLC(previously)
EFG - Hermes USA 100 -
EFG Capital Partners III - 100
Health Management Company - 52.5
EFG - Hermes Kenya Ltd. - 100
EFG Finance Holding 99.82 0.18
EFG - Hermes Pakistan Limited - 51
EFG - Hermes UK Limited - 100
OLT Investment International Company (B.S.C) 99.9 -
Frontier Investment Management Partners LTD (ii) - 50
3 Summary of material accounting policies (continued)
3.1 Basis of consolidation (continued)
Subsidiaries (continued)
Name of subsidiary Direct ownership % Indirect ownership %
EFG-hermes SP Limited - 100
U Consumer Finance -Valu(previously) - 94.961
EFG Corp - Solutions- - 100
EFG Hermes Corp-Solutions(previously)
Beaufort Asset Managers LTD - 100
EFG Hermes Bangladesh Limited - 100
EFG Hermes FI Limited - 100
EFG Securitization- - 100
EFG Hermes Securitization(previously)
EFG Hermes PE Holding LLC 100 -
Etkan for Inquiry and Collection and Business Processes - 100
RX Healthcare Management - 52.5
FIM Partners KSA (ii) - 50
Egypt Education Fund GP Limited - 80
EFG Hermes Nigeria Limited - 100
EFG-Hermes Int. Fin Corp 100 -
FIM Partners UK Ltd - 50
EFG Hermes Sukuk 90 10
Beaufort Holding LTD. - 100
Beaufort Management LTD. - 100
Vortex IV GP LTD. - 100
Beaufort SLP Holding - 100
Beaufort Private Investment Holding LTD. - 100
Frontier Disruption Capital - 50
Arab Investment Bank 51 -
EFG VA Holdco Limited - 100
EFG VA Investco Limited - 100
Lighthouse Energy GP Limited - 100
Beaufort SLP II Limited - 100
Lighthouse Energy GP II - 100
Beaufort Management Spain - 100
EFG Singapore PTE LTD - 100
Fatura Netherlands B.V - 93.983
Fatura L.L.C - 93.983
ASASY FOR DIGITAL CONTENT - 93.983
EFG Payment - 100
FIM Partners Muscat SPC(ii) - 50
Noutah for electronic commerce - 93.983
EFG National Holding Limited - 100
VA ESOP Limited- - 100
EFG RMBV National Investco Limited(previously)
EFG IB Holdco Limited - 100
EFG IB Investco Limited - 100
EFG For SME Financing - 100
Beaufort Managers SLP Limited - 100
EFG Finance B.V - 100
EFG SMEs B.V - 100
Valu For Payments and Digital Solutions- - 94.961
Paynas ( Previously )
Paynas BV - 94.961
Vortex Energy IV Luxembourg GP S.A.R.L - 100
EFG Hermes PE Holdco Ltd - 100
EFG Hermes IB Holding Ltd 100 -
(i) Due to the political situation in Syria, the Group lost its control on
the Syrian entities. In 2016, the Group has deconsolidated the Syrian
companies and has fully impaired those investments.
(ii) Management has determined that they do control those companies even
though the Holding Company may own 50% or less of the issued capital of those
entities. This is because the Holding Company is exposed and has the right to
the variable returns of those companies and is able to use its power over
those companies to affect those returns.
3 Summary of material accounting policies (continued)
3.1 Basis of consolidation (continued)
Non-controlling interests
NCI are measured at their proportionate share of the acquiree's identifiable
net assets at the date of acquisition. Changes in the Group's interest in a
subsidiary that do not result in a loss of control are accounted for as equity
transactions.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related NCI and other components of
equity. Any resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair value when
control is lost.
Interests in equity-accounted investees
The Group's interests in equity-accounted investees comprise interests in
associates and a joint venture. Associates are those entities in which the
Group has significant influence, but not control or joint control, over the
financial and operating policies. A joint venture is an arrangement in which
the Group has joint control, where by the Group has rights to the net assets
of the arrangement. Rather than rights to its assets and obligations for its
liabilities. Interests in associates and the joint venture are accounted for
using the equity method. They are initially recognized at cost, which includes
transaction costs.
Subsequent to initial recognition, the consolidated financial statements
include the Group's share of the profit or loss and OCI of equity accounted
investees, until the date on which significant influence or joint control
ceases.
Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealised income and expenses
arising from intra-Group transactions, are eliminated. Unrealised gains
arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Group's interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
3.2 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into the respective
functional currencies of Group companies at the exchange rates at the dates of
the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate at the reporting
date. Non-monetary assets and liabilities that are measured at fair value in a
foreign currency are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Foreign currency differences are
recognised in consolidated statement of profit or loss.
However, foreign currency differences arising from the translation of the
following items are recognised in OCI:
- A financial liability designated as a hedge of the net investment in a
foreign operation to the extent that the hedge is effective; and
- Qualifying cash flow hedges to the extent that the hedges are
effective.
3 Summary of material accounting policies (continued)
3.2 Foreign currency (continued)
Foreign currency transactions (continued)
Exchange differences on a monetary item that is part of a net investment in a
foreign operation are recognised in other comprehensive income in consolidated
accounts. On disposal of a foreign operation, exchange differences previously
recognised in other comprehensive income are reclassified to the income
statement as a reclassification adjustment.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on acquisition, are translated at the exchange rates
at the reporting date. The income and expenses of foreign operations are
translated at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in OCI and accumulated in the
translation reserve, except to the extent that the translation difference is
allocated to Non Controlling Interest (the " NCI").
When a foreign operation is disposed off in its entirety or partially such
that control, significant influence or joint control is lost, the cumulative
amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal. If the
Group disposes of part of its interest in a subsidiary but retains control,
then the relevant proportion of the cumulative amount is reattributed to NCI.
When the Group disposes of only part of an associate or joint venture while
retaining significant influence or joint control, the relevant proportion of
the cumulative amount is reclassified to profit or loss.
3.3 Discontinued operation
A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group. Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets the criteria to be classified as
held-for-sale. When an operation is classified as a discontinued operation,
the comparative statement of profit or loss and OCI is re-presented as if the
operation had been discontinued from the start of the comparative period.
3.4 Revenue
Gain on sale of investments
Gain (loss) resulting from sale of investments are recognized on transaction
date and measured by the difference between cost and selling price less
selling commission and expenses.
In case of derecognizing of investments in associates, the difference between
the carrying amount and the sum of both the consideration received and
cumulative gain or loss that had been recognized in shareholders' equity is
recognized in the consolidated statement of profit or loss.
Dividend income
Dividend income is recognized when declared and the right to receive payment
is established.
Custody fee
Custody fees are recognized when the service is provided and the invoice is
issued. Assets held in a fiduciary capacity are not treated as assets of the
Group as they are only held in trust where the Group acts as a custodian on
customers' behalf. The Group has no liability or obligations towards the
customer on these assets held in trust. Accordingly, these assets are not
included in these consolidated financial statements.
3 Summary of material accounting policies (continued)
3.4 Revenue (continued)
Interest income and expenses
Interest income and expense for all interest-bearing financial instruments,
except for those classified as FVTPL or designated at fair value through
profit or loss, are recognized within 'interest income' and 'interest expense'
in the consolidated statement of profit or loss using the effective interest
method. Interest income and expense are recognized in the consolidated
statement of profit or loss using the effective interest method. The
'effective interest rate' is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial
instrument to:
Ø the gross carrying amount of the financial asset; or
Ø the amortized cost of the financial liability.
When calculating the effective interest rate for financial instruments other
than credit-impaired assets, the Groups estimate future cash flows considering
all contractual terms of the financial instrument, but not expected credit
losses.
The calculation of the effective interest rate includes transaction costs and
fees and points paid or received that are an integral part of the effective
interest rate. Transaction costs include incremental costs that are directly
attributable to the acquisition or issue of a financial asset or financial
liability.
Presentation
Interest income and expense presented in the consolidated statement of profit
or loss and OCI include:
Interest on financial assets and financial liabilities measured at amortized
cost calculated on an effective interest basis; and
Interest on financial investment is measured at FVOCI calculated on an
effective interest basis; Interest income and expense on other financial
assets and financial liabilities at FVTPL are presented in net income from
other financial instruments at FVTPL.
Amortized cost and gross carrying amount
The 'amortized cost' of a financial asset or financial liability is the amount
at which the financial asset or financial liability is measured on initial
recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between
that initial amount and the maturity amount and, for financial assets,
adjusted for any expected credit loss allowance.
The gross carrying amount of a financial asset is the amortized cost of a
financial asset before adjusting for any expected credit loss allowance.
For financial assets that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest
rate to the amortized cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross
basis.
For financial assets that were credit-impaired on initial recognition,
interest income is calculated by applying the credit-adjusted effective
interest rate to the amortized cost of the asset. The calculation of interest
income does not revert to a gross basis, even if the credit risk of the asset
improves.
In calculating interest income and expense, the effective interest rate is
applied to the gross carrying amount of the asset (when the asset is not
credit-impaired) or to the amortized cost of the liability.
3 Summary of material accounting policies (continued)
3.4 Revenue (continued)
Fee and commission income
Fee and commission income and expense that are integral to the effective
interest rate of a financial asset or liability are included in the
measurement of the effective interest rate.
Other fee and commission income, including account servicing fees, placement
fees and syndication fees, are recognised as the related services are
performed.
A contract with a customer that results in a recognised financial instrument
in the Group's financial statements may be partially in the scope of IFRS 9
and partially in the scope of IFRS 15. If this is the case, then the Group
first applies IFRS 9 to separate and measure the part of the contract that is
in the scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fees and commission expenses relates mainly to transaction and service
fees, which are expensed in the consolidated statement of profit or loss as
the services are received.
Brokerage commission
Brokerage commission resulting from purchase of and sale of securities in
favor of clients are recorded upon the execution of the transaction.
Management fee
Management fee is calculated as determined by the management contract of each
investment fund & portfolio and recorded on accrual basis.
Incentive fee
Incentive fee is calculated based on certain percentages of the annual return
realized by the fund and portfolio, however these incentive fee will not be
recognized until revenue realization conditions are satisfied and there is
adequate assurance of collection.
Investment property rental income
Rental income from investment property is recognized as revenue on a
straight-line basis over the term of the lease. Lease incentives granted are
recognized as an integral part of the total rental income, over the term of
the lease. Rental income from other property is recognized as other income.
Revenue from micro-finance services
- Revenue from micro-finance services is recognized based on time
proportion taking into consideration the rate of return on asset. Revenue
yield is recognized in the consolidated statement of profit or loss using the
effective interest method for all financial instruments that carry a yield,
the effective interest method is the method of measuring the amortized cost of
a financial asset and distributing the revenue over the life time of the
relevant instrument. The effective interest rate is the rate that discounts
estimated future cash receipts during the expected life of the financial
instrument to reach the book value of the financial asset.
- When classifying loans to customers as irregular, no income is
recognized on its return and it is recognized in marginal records outside the
financial statements and are recognized as revenue in accordance with the cash
basis when it is collected.
- The commission income is represented in the value of the
difference between the yield of the financing granted micro-enterprises and
the accruals of the Group's bank by deducting the services provided directly
from the amounts collected from the entrepreneurs.
- The benefits and commissions resulting from the performance of the
service are recognized, according to the accrual basis as soon as the service
is provided to the client unless those revenues cover more of the financial
period are recognized on a time proportion basis.
- The administrative commission of the loan granted to customers is
collected on contracting in exchange for the issuance of the loan service and
administrative commission revenue are proven in the consolidated statement of
profit or loss upon the issuance of the loan to the client.
3 Summary of material accounting policies (continued)
3.4 Revenue (continued)
Revenue from micro-finance services (continued)
- A commission delay in payments of premiums is collected at rates
agreed upon within the contracts and are recognized as soon as customers
delayed payment on the basis of the extended delay.
Gains from securitization
Gains from securitization is measured as the difference between the fair value
of the consideration received or is still due to the Group at the end of
securitization process and the carrying amount of the securitization
portfolios in the Group's books on the date of the transfer agreement.
3.5 Income tax
Income tax expense comprises current and deferred tax. It is recognized in
profit or loss except to the extent that it relates to a business combination,
or items recognized directly in equity or in OCI.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any. It is
measured using tax rates enacted or substantively enacted at the reporting
date. Current tax also includes any tax arising from dividends. Current tax
assets and liabilities are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is not recognized for:
- Temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
- Temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future.
- Taxable temporary differences arising on the initial recognition
of goodwill.
Deferred tax assets are recognized for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Future taxable profits are determined based on business plans for individual
subsidiaries in the Group. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realized; such reductions are reversed when the
probability of future taxable profits improves.
Unrecognized deferred tax assets are reassessed at each reporting date and
recognized to the extent that it has become probable that future taxable
profits will be available against which they can be used. Deferred tax is
measured at the tax rates that are expected to be applied to temporary
differences when they reverse, using tax rates enacted or substantively
enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities. For this
purpose, the carrying amount of investment property measured at fair value is
presumed to be recovered through sale, and the Group has not rebutted this
presumption.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
3 Summary of material accounting policies (continued)
3.6 Property and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses. The cost of certain items
of property, plant and equipment . If significant parts of an item of
property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and
equipment. Any gain or loss on disposal of an item of property, plant and
equipment is recognized in profit or loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the cost of items of property, plant
and equipment less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally recognized in
profit or loss. Leased assets are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably certain that the Group
will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives of property, plant and equipment for current and
comparative periods are as follows:
Estimated useful life (years)
Buildings 20 - 50
Office furniture, equipment & electrical appliances 2 - 16.67
Computer equipment 3.33 - 5
Transportation means 3.33 - 5
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Reclassification to investment property
When the use of a property changes from owner-occupied to investment property.
3.7 Projects under construction
Projects under construction are recognized initially at cost, the book value
is amended by any impairment concerning the value of these projects cost
includes all expenditures directly attributable to bringing the asset to a
working condition for its intended use. Property and equipment under
construction are transferred to property and equipment caption when they are
completed and are ready for their intended use.
3.8 Intangible assets and goodwill
Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less
accumulated impairment losses. Goodwill is initially measured at cost, being
the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests, and any previous interest held, over
the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration
transferred or in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or
loss.
3 Summary of material accounting policies (continued)
3.8 Intangible assets and goodwill (continued)
Goodwill (continued)
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the
Group's cash-generating units ("CGU") that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the
operation within that unit is disposed of, the goodwill associated with the
disposed operation is included in the carrying amount of the operation when
determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
Research and development
Expenditure on research activities is recognized in profit or loss as
incurred.
Development expenditure is capitalised only if the expenditure can be measured
reliably, the product or process is technically and commercially feasible,
future economic benefits are probable and the Group intends to and has
sufficient resources to complete development and to use or sell the asset.
Otherwise, it is recognized in profit or loss as incurred.
Subsequent to initial recognition, development expenditure is measured at cost
less accumulated amortisation and any accumulated impairment losses.
Other intangible assets
Other intangible assets, are measured at cost less accumulated amortisation
and any accumulated impairment losses.
3.9 Investment property
Investment properties are measured initially at cost, including transaction
costs. Transaction costs include transfer taxes, professional fees for legal
services and (only in case of investment property held under a lease) initial
leasing commissions to bring the properties to the condition necessary for
them to be capable of operating.
Subsequent to initial recognition investment property is measured at cost less
accumulated depreciation and impairment loss, if any. Investment property is
depreciated on a straight line basis over its useful life. The estimated
useful life of investment property is 33 years.
3.10 Assets held for sale
Non-current assets, or disposal Groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use.
Such assets, or disposal Groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Any impairment loss on a
disposal Group is allocated first to goodwill, and then to the remaining
assets and liabilities on a pro rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets, employee benefit
assets, investment property or biological assets, which continue to be
measured in accordance with the Group's accounting policies. Impairment losses
on initial classification as held-for-sale or held-for distribution and
subsequent gains and losses on remeasurement are recognised in profit or loss.
3 Summary of material accounting policies (continued)
3.10 Assets held for sale (continued)
Once classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortized or depreciated, and any equity-accounted
investee is no longer equity accounted.
3.11 Financial instruments
Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when
they are originated. All other financial assets and financial liabilities are
initially recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant
financing component) or financial liability is initially measured at fair
value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a
significant financing component is initially measured at the transaction
price.
Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at:
amortized cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition
unless the Group changes its business model for managing financial assets, in
which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the
following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
A debt investment is measured at FVOCI if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding
On initial recognition of an equity investment that is not held for trading,
the Group may irrevocably elect to present subsequent changes in the
investment's fair value in OCI. This election is made on an
instrument‑by‑instrument basis.
All financial assets not classified as measured at amortized cost or FVOCI as
described above are measured at FVTPL. This includes all derivative financial
assets. On initial recognition, the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be measured at
amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
3 Summary of material accounting policies (continued)
3.11 Financial instruments (continued)
Classification and subsequent measurement (continued)
Financial assets (continued)
Financial assets - Business model assessment
The Group makes an assessment of the objective of the business model in which
a financial asset is held at a portfolio level because this best reflects the
way the business is managed and information is provided to management. The
information considered includes:
- The stated policies and objectives for the portfolio and the
operation of those policies in practice. These include whether management's
strategy focuses on earning contractual interest income, maintaining a
particular interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected cash outflows or
realizing cash flows through the sale of the assets;
- How the performance of the portfolio is evaluated and reported to
the Group's management;
- The risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed;
- How managers of the business are compensated - e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cash flows collected; and
- The frequency, volume and timing of sales of financial assets in
prior periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Group's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets - Assessment whether contractual cash flows are solely
payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making this assessment,
the Group considers:
- Contingent events that would change the amount or timing of cash
flows;
- terms that may adjust the contractual coupon rate, including variable
rate‑ features;
- Prepayment and extension features; and
- Terms that limit the Group's claim to cash flows from specified assets
(e.g. non‑recourse features)
3 Summary of material accounting policies (continued)
3.11 Financial instruments (continued)
Financial assets - Assessment whether contractual cash flows are solely
payments of principal and interest (continued)
A prepayment feature is consistent with the solely payments of principal and
interest criterion if the prepayment amount substantially represents unpaid
amounts of principal and interest on the principal amount outstanding, which
may include reasonable compensation for early termination of the contract.
Additionally, for a financial asset acquired at a discount or premium to its
contractual par amount, a feature that permits or requires prepayment at an
amount that substantially represents the contractual par amount plus accrued
(but unpaid) contractual interest (which may also include reasonable
compensation for early termination) is treated as consistent with this
criterion if the fair value of the prepayment feature is insignificant at
initial recognition.
Financial assets - Subsequent measurement and gains and losses
Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective
interest method. The amortized cost is reduced by impairment losses. Interest
income, foreign exchange gains and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is recognised in profit or
loss.
Debt investments at FVOCI These assets are subsequently measured at fair value. Interest income
calculated using the effective interest method, foreign exchange gains and
losses and impairment are recognised in profit or loss. Other net gains and
losses are recognised in OCI. On derecognition, gains and losses accumulated
in OCI are reclassified to profit or loss.
Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised
as income in profit or loss unless the dividend clearly represents a recovery
of part of the cost of the investment. Other net gains and losses are
recognised in OCI and are never reclassified to profit or loss.
Financial liabilities - Classification, subsequent measurement and gains and
losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A
financial liability is classified as at FVTPL if it is classified as
held‑for‑trading, it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at fair value
and net gains and losses, including any interest expense, are recognised in
profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain
or loss on derecognition is also recognised in profit or loss.
Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains substantially all of the
risks and rewards of ownership and it does not retain control of the financial
asset.
3 Summary of material accounting policies (continued)
3.11 Financial instruments (continued)
Derecognition (continued)
Financial assets (continued)
The Group derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains substantially all of the
risks and rewards of ownership and it does not retain control of the financial
asset.
The Group enters into transactions whereby it transfers assets recognised in
its statement of financial position, but retains either all or substantially
all of the risks and rewards of the transferred assets. In these cases, the
transferred assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations
are discharged or cancelled, or expire. The Group also derecognises a
financial liability when its terms are modified and the cash flows of the
modified liability are substantially different, in which case a new financial
liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying
amount extinguished and the consideration paid (including any non‑cash
assets transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the
Group currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realise the asset and
settle the liability simultaneously.
3.12 Fair value measurement
The fair value of financial instruments are determined based on the market
value of the financial instrument or similar financial instruments at the date
of the financial statements without deducting any estimated future selling
costs.
3.13 Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are
recognized as a deduction from equity. Income tax relating to transaction
costs of an equity transaction are accounted for in accordance with IAS 12.
Repurchase and reissue of ordinary shares (treasury shares)
When shares recognized as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs is recognized
as a deduction from equity. Repurchased shares are classified as treasury
shares and are presented in the treasury share reserve. When treasury shares
are sold or reissued subsequently, the amount received is recognized as an
increase in equity and the resulting surplus or deficit on the transaction is
presented within share premium.
3 Summary of material accounting policies (continued)
3.14 Legal reserve
The Group's statutes provide for deduction of a sum equal to 5% of the annual
net profit for formation of the legal reserve. Such deduction will be ceased
when the total reserve reaches an amount equal to half of the Group's issued
capital and when the reserve falls below this limit, it shall be necessary to
resume.
3.15 Impairment
Non-derivative financial assets
Financial instruments and contract assets
The Group recognizes loss allowances for Expected Credit Loss (ECLs) on:
- Financial assets measured at amortized cost;
- Debt investments measured at FVOCI;
- Contract assets.
The Group also recognizes loss allowances for ECLs on loans receivables.
The Group measures loss allowances at an amount equal to lifetime ECLs, except
for the following, which are measured at 12‑month ECLs:
- Debt securities that are determined to have low credit risk at the
reporting date; and
- Other debt securities and bank balances for which credit risk (i.e.
the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group's historical
experience and informed credit assessment, that includes forward‑looking
information.
The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due. unless it can be rebutted.
The Group considers a financial asset to be in default when:
- The debtor is unlikely to pay its credit obligations to the Group in
full, without recourse by the Group to actions such as realising security (if
any is held); or
- The financial asset is more than 90 days past due unless it can be
rebutted.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12‑month ECLs are the portion
of ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the
instrument is less than 12 months). The maximum period considered when
estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk.
Measurement of ECLs
ECLs are an unbiased probability‑weighted estimate of credit losses. Credit
losses are measured as the present value of all cash shortfalls (i.e., the
difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
3 Summary of material accounting policies (continued)
3.15 Impairment (continued)
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at
amortized cost and debt securities at FVOCI are credit‑impaired. A financial
asset is 'credit‑impaired' when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have
occurred.
Evidence that a financial asset is credit‑impaired includes the following
observable data:
- Significant financial difficulty of the debtor;
- A breach of contract such as a default or being more than 90 days past
due;
- The restructuring of a loan or advance by the Group on terms that the
Group would not consider otherwise;
- It is probable that the debtor will enter bankruptcy or other
financial reorganisation; or
- The disappearance of an active market for a security because of
financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortized cost are deducted
from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss
and is recognized in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof. For individual customers, the Group has a policy of
writing off the gross carrying amount when the financial asset is 180 days
past due based on historical experience of recoveries of similar assets. For
corporate customers, the Group individually makes an assessment with respect
to the timing and amount of write‑off based on whether there is a reasonable
expectation of recovery. The Group expects no significant recovery from the
amount written off. However, financial assets that are written off could still
be subject to enforcement activities in order to comply with the Group's
procedures for recovery of amounts due.
Non-financial assets
- At each reporting date, the Group reviews the carrying amounts of its
non‑financial assets (other than, investment property, contract assets and
deferred tax assets) to determine whether there is any indication of
impairment. If any such indication exists, then the asset's recoverable amount
is estimated. Goodwill is tested annually for impairment.
- For impairment testing, assets are Grouped together into the smallest
Group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGUs. Goodwill
arising from a business combination is allocated to CGUs or Groups of CGUs
that are expected to benefit from the synergies of the combination.
- The recoverable amount of an asset or CGU is the greater of its value
in use and its fair value less costs to sell. Value in use is based on the
estimated future cash flows, discounted to their present value using a
pre‑tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
- An impairment loss is recognised if the carrying amount of an asset or
CGU exceeds its recoverable amount.
3 Summary of material accounting policies (continued)
3.15 Impairment (continued)
Non-financial assets (continued)
- Impairment losses are recognised in profit or loss. They are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU, and
then to reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
- An impairment loss in respect of goodwill is not reversed. For other
assets, an impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
3.16 Provisions
Provisions are recognized when the Group has a legal or constructive current
obligation as a result of a past event and it's probable that a flow of
economic benefits will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessment of the time
value of money and, where appropriate, the risks specific to the liability.
Provisions are reviewed at the financial position date and amended (when
necessary) to represent the best current estimate.
3.17 Treasury bills
Treasury bills are recorded at nominal value and the accrued revenues is
recorded under the item of "Other assets". Treasury bills are presented on
the financial position net of the accrued revenues.
3.18 Trade, and notes receivables, debtors and other debit balances
Trade, notes receivables, debtors and other debit balances are stated at
nominal value less impairment losses.
The Group's lessees and the leased assets are regularly classified &
evaluated and their obligations are reduced by the rent value paid in each
financial period, and with the assurance of the availability of adequate
guarantee to collect the client's rent values.
3.19 Cash and cash equivalents
For the purpose of preparing the statement of cash flows, cash and cash
equivalents includes the balances, whose maturity do not exceed three months
from the date of acquisition, cash on hand, cheques under collection and due
from banks and financial institutions.
3.20 Profit sharing to employees
The holding company pays 10% of its dividends as profit sharing to its
employees provided that it will not exceed total employees' annual salariesand
directly charged on the consolidated statement of profit or loss as per IFRS.
3.21 Employees benefits
Share based payments
Equity settled transactions
For equity-settled share-based payment transactions, the Group measure the
services received, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted. The fair value
of those equity instruments is measured at grant date.
Vesting conditions, other than market conditions, are taken into account by
adjusting the number of equity instruments included in the measurement of the
transaction amount so that, ultimately, the amount recognized for services
received as consideration for the equity instruments granted are based on the
number of equity instruments that eventually vest. Hence, on a cumulative
basis, no amount is recognized for services received if the equity instruments
granted do not vest because of failure to satisfy a vesting condition.
3 Summary of material accounting policies (continued)
3.21 Employees benefits (continued)
Share based payments (continued)
Equity settled transactions (continued)
For equity-settled share-based payment transactions, the Group measure the
services received, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted. The fair value
of those equity instruments is measured at grant date.
Vesting conditions, other than market conditions, are taken into account by
adjusting the number of equity instruments included in the measurement of the
transaction amount so that, ultimately, the amount recognized for services
received as consideration for the equity instruments granted are based on the
number of equity instruments that eventually vest. Hence, on a cumulative
basis, no amount is recognized for services received if the equity instruments
granted do not vest because of failure to satisfy a vesting condition.
The Group recognize an amount for the services received during the vesting
period based on the best available estimate of the number of equity
instruments expected to vest and revise that estimate, if necessary, if
subsequent information indicates that the number of equity instruments
expected to vest differs from previous estimates. On vesting date, the entity
shall revise the estimate to equal the number of equity instruments that
ultimately vested
3.22 Micro-enterprises receivables
Credit policy
Funding Consideration
- Funding are granted to clients who have previous experience not less
than one year in his current activity which is confirmed by the client with
adequate documentation and field inquiry.
- Funding are granted to the client which it's installment is suitable
according to his predictable income activity and this is done through
analyzing client's revenues and expenses and his foreseeable marginal income,
and this is done by the specialists of the Group on the prepared form for this
purpose(financial study form and credit decision).
- Before grant funding, a client activity field inquiry is done.
- Recording inquiries results about client and guarantor with inquiring
forms of the Group which reveal client's activity (visit form & Inquiry
form).
- The Group prohibit grant funding for new client unless the activity is
existing with previous one year experience where the granted funds be within a
minimum 1 000 EGP and maximum
30 000 EGP with loan duration of 12 months.
- Inquiries for clients are performed by I-Score Group before granting
and in case of approval on granting. The credit limit of the client is
considered when calculating the client's revenue and expenses.
Client's Life Insurance
The insurance process on the client is performed with the authorized companies
from insurance supervisory authority.
3 Summary of material accounting policies (continued)
3.22 Micro-enterprises Receivables (continued)
Impairment loss of micro financed loans
The Group at the date of the financial statements estimates the impairment
loss of micro financed loans, in the light of the basis and rules of granting
credit and forming the provisions according to the Board of Directors decision
of the Financial Supervisory Authority No. (173) issued on December 21, 2014,
to deal with the impairment loss.
The accounting policies relating to micro-enterprises receivables are detailed
under note 3.11.
3.23 Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
As a lessee
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand‑alone prices. However, for the
leases of property the Group has elected not to separate non‑lease
components and account for the lease and non‑lease components as a single
lease component.
The Group recognizes a right‑of‑use asset and a lease liability at the
lease commencement date. The right‑of‑use asset is initially measured at
cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right of use asset is subsequently depreciated using the straightline
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the rightofuse asset reflects that the Group
will exercise a purchase option. In that case the rightofuse asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
rightofuse asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
fixed payments, including in‑substance fixed payments; variable lease
payments that depend on an index or a rate, initially measured using the index
or rate as at the commencement date; amounts expected to be payable under a
residual value guarantee; and the exercise price under a purchase option that
the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
3 Summary of material accounting policies (continued)
3.23 Leases (continued)
As a lessee (continued)
The lease liability is measured at amortized cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension, or termination option or if there is a revised
in‑substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right‑of‑use asset or is recorded in
profit or loss if the carrying amount of the right‑of‑use asset has been
reduced to zero.
The Group presents right‑of‑use assets that do not meet the definition of
investment property in 'property, plant and equipment' and lease liabilities
in 'loans and borrowings' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognize right‑of‑use assets and lease
liabilities for leases of low - value assets and short‑term leases,
including IT equipment. The Group recognizes the lease payments associated
with these leases as an expense on a straight‑line basis over the lease
term.
As a lessor
At inception or on modification of a contract that contains a lease component,
the Group allocates the consideration in the contract to each lease component
on the basis of their relative stand- alone prices.
When the Group acts as a lessor, it determines at lease inception whether each
lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the
lease transfers substantially all the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a
finance lease; if not, then it is an operating lease. As part of this
assessment, the Group considers certain indicators such as whether the lease
is for a major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the
head lease and the sub-lease separately. It assesses the lease classification
of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset. If a head lease is a
short-term lease to which the Group applies the exemption described above,
then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group
applies IFRS 15 to allocate the consideration in the contract.
The Group applies the derecognition and impairment requirements of IFRS 9 to
the net investment in the lease. The Group further regularly reviews estimated
unguaranteed residual values used in calculating the gross investment in the
lease. The Group recognizes lease payments received under operating leases as
income on a straight- line basis over the lease term as part of 'other
revenue'.
Sale and leaseback transactions are tested under IFRS 15 at the date of the
transaction, and if the transaction qualifies as a sale, the underlying asset
is derecognised and a right-of-use asset with a corresponding liability is
recognised equal to the retained interest in the asset. Any gain or loss is
recognised immediately in the consolidated income statement for the interest
in the asset transferred to the lessor. If the transaction does not qualify as
a sale under IFRS 15, a financial liability equal to the sale value is
recognised in the consolidated financial statements
3 Summary of material accounting policies (continued)
3.24 Operating segment
A segment is a distinguishable component of the Group that is engaged either
in providing products or services (business segment) or in providing products
or services within a particular economic environment (geographical segment),
which is subject to risks and rewards that are different from those of other
segments. The Group's primary format for segment reporting is based on
business segment.
3.25 Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Group by the weighted average
number of ordinary shares outstanding during the year. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding
for the effects of all dilutive potential ordinary shares.
3.26 Standards, interpretations and amendments to existing standards
that are not yet effective and are not early adopted
Amendments effective for accounting periods beginning on or after 1 January
2024
• In January 2020 the IASB published 'Classification of Liabilities as
Current or Non-Current (Amendments to IAS 1)' which clarify the Standard's
guidance on whether a liability should be classified as either current or
noncurrent.
• In September 2022, the IASB issued amendments to IFRS 16, adding
requirements for accounting for a sale and leaseback after the date of the
transaction.
• In October 2022, the IASB issued some amendments to IAS 1 that aim to
improve disclosures about long-term debt with covenants.
• In May 2023, the IASB issued Supplier Finance Arrangements (Amendments to
IAS 7 and IFRS 7) to add
disclosure requirements regarding qualitative and quantitative information
about supplier finance arrangements.
• In June 2023, the IASB issued IFRS S1 General Requirements for Disclosure
of Sustainability-related
Financial Information which requires an entity to disclose information about
its sustainability-related risks and opportunities; and IFRS S2
Climate-related disclosures which requires an entity to disclose information
about its climate-related risks and opportunities. The disclosed information
as per these standards is useful to users of general purpose financial reports
in making decisions relating to providing resources to the entity
Amendments effective for accounting periods beginning on or after 1 January
2025
• In August 2023, the IASB issued Lack of Exchangeability (Amendments to IAS
21) to specify when a currency is exchangeable and how to determine the spot
exchange rate if it is not.
The Group intends to adopt these new and amended standards and
interpretations, if applicable, when they become effective.
4 Significant management judgements and estimates
The preparation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Information about significant areas of estimation and uncertainty and critical
judgements in applying accounting policies that have the most significant
effect on the amounts recognised in the financial statements are described
below:
Impairment charge on financial assets
Impairment losses are evaluated as described in accounting policy 3.15.
The measurement of impairment losses both under IFRS 9 across all categories
of financial assets requires judgement, in particular, the estimation of the
amount and timing of future cash flows and collateral values when determining
impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result
in different levels of allowances. The Group's ECL calculations are outputs of
complex models with a number of underlying assumptions regarding the choice of
variable inputs and their interdependencies. Elements of the ECL models that
are considered accounting judgements and estimates include:
· The Group's internal credit grading model, which assigns PDs to the individual grades
· The Group's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a lifetime ECL basis and the qualitative assessment
· The segmentation of financial assets when their ECL is assessed on a collective basis
· Development of ECL models, including the various formulas and the choice of inputs
· Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels, GDP and inflation rate and the effect on PDs, EADs and LGDs
Selection of forward-looking macroeconomic scenarios and their probability
weightings, to derive the economic inputs into the ECL models It is the
Group's policy to regularly review its models in the context of actual loss
experience and adjust when necessary.
Fair value measurement
The Group's determination of fair value hierarchy of financial instruments is
discussed in note 36.
The value of financial assets is determined by the the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
· In the absence of an active market to determine the fair value of financial instruments, the fair value is estimated using various valuation techniques, taking into consideration the prices of the transactions occurred recently, and guided by the current fair value of other similar tools substantially - discounted cash flow method - or any other evaluation method to get resulting values that can rely on.
· When using the discounted cash flow method to evaluate, the future cash flows are estimated based on the best estimates of management. The discount rate used is determined in the light of the prevailing market price at the date of the financial statements that are similar in nature and conditions.
4 Significant management judgements and estimates (continued)
The fair values of financial assets and financial liabilities that are traded
in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair
values using other valuation techniques.
For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of
judgment depending on liquidity, concentration, uncertainty of market factors,
pricing assumptions and other risks affecting the specific instrument.
Valuation of financial instruments
The valuation techniques of financial instruments may require certain
unobservable inputs to be estimated by the management. These are discussed in
detail in note 36.
The Group measures fair values using the fair value hierarchy outlined in note
36, which reflects the significance of the inputs used in making the
measurements. The Group has an established control framework with respect to
the measurement of fair values.
This includes a valuation team that has overall responsibility for overseeing
all significant fair value measurements, including level 3 fair values, and
reports directly to the CFO. The valuation team regularly reviews significant
unobservable inputs and valuation adjustments.
The Group recognizes transfers between levels of the fair value hierarchy at
the end of reporting period during which the change has occurred. Valuation
techniques include net present value and discounted cash flow models,
comparison with similar instruments for which market observable prices exist.
Assumptions and inputs used in valuation techniques include risk-free and
benchmark interest rates, credit spreads and other premia used in estimating
discount rates, bond and equity prices, foreign currency exchange rates,
equity and equity index prices and expected price volatilities and
correlations. The objective of valuation techniques is to arrive at a fair
value measurement that reflects the price that would be received to sell the
asset or paid to transfer the liability in an orderly transaction between
market participants at the measurement date.
The Group uses widely recognized valuation models for determining the fair
value of common and more simple financial instruments, like interest rate and
currency swaps that use only observable market data and require little
management judgment and estimation. Observable prices or model inputs are
usually available in the market for listed debt and equity securities,
exchange-traded derivatives and simple over the counter derivatives such as
interest rate swaps. Availability of observable market prices and model inputs
reduces the need for management judgment and estimation and also reduces the
uncertainty associated with determining fair values.
Availability of observable market prices and inputs varies depending on the
products and markets and is prone to changes based on specific events and
general conditions in the financial markets.
4 Significant management judgements and estimates (continued)
Determination of prelimianry values of assets and liabilities acquired in
business combinations
While the Group uses its best estimates and assumptions to accurately apply
preliminary values to assets acquired and liabilities assumed at the
acquisition date as well as contingent consideration, where applicable, these
estimates are inherently uncertain and subject to refinement. As a result,
during the measurement period, which may be up to one year from the
acquisition date, the Group records adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. Upon the
conclusion of the measurement period or final determination of the values of
the assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded in the consolidated statements of
operations. Accounting for business combinations requires management to make
significant estimates and assumptions, especially at the acquisition date,
including estimates for intangible assets, contractual obligations assumed,
pre-acquisition contingencies, and contingent consideration, where applicable.
Although the Company believes the assumptions and estimates it has made have
been reasonable and appropriate, they are based in part on historical
experience and information obtained from management of the acquired companies
and are inherently uncertain. Critical estimates in valuing certain of the
intangible assets acquired include; future expected cash flows, estimated
market royalty rates, customer attrition rates, cost of developed technology
and discount rates. Unanticipated events and circumstances may occur that may
affect the accuracy or validity of such assumptions, estimates, or actual
results. Acquisition-related expenses are recognized separately from the
business combination and are expensed as incurred.
5 Cash and cash equivalents
31 December 2023 31 December 2022
Cash on hand 255,811 209,095
Cheques under collection 141,951 140
Obligatory reserve balance with Central Bank of Egypt ( note 5.1) 4,030,033 1,906,215
Banks - current accounts 10,027,157 10,943,423
Banks - time deposits 17,801,324 13,158,396
Balance 32,256,276 26,217,269
Impairment loss (4,033) (3,019)
Total cash and time deposits (note 5.3) 32,252,243 26,214,250
5.1 Obligatory reserve balance with CBE relates to balances with the Central
Bank within the statutory reserve ratio.
5.2 The cash and cash equivalents disclosed above and in the statement of cash
flows include EGP 4,030,033 (31 December 2022: EGP 1,906,215) which are held
by CBE. These deposits are subject to regulatory restrictions and are
therefore not available for general use by the other entities within the
Group.
5.3 For the purposes of presenting the statement of cash flows, cash and cash
equivalents include balances whose maturity dates do not exceed three months
from the date of placement
5.4 The above figures reconcile to the amount of cash shown in the statement
of cash flows at the end of the financial year as follows:
31 December 2023 31 December 2022
Cash and time deposits as above 32,252,243 26,214,250
ECL For Cash and cash equivalents 4,033 3,019
Time Deposit - (Arab Investment Bank) (18,538) -
Obligatory reserve balance with CBE (4,030,033) (1,906,215)
Bank overdraft (11,474,569) (11,544,331)
Treasury bills maturing in less than 90 days from date of purchase 3,435,942 312,861
Cash and cash equivalents 20,169,078 13,079,584
6 Investments at fair value through profit or loss
31 December 2023 31 December 2022
Mutual fund certificates 7,355,442 5,231,021
Equity securities 108,293 165,787
Debt securities 832,915 660,607
Treasury bills 219,222 336,439
Structured notes 680,319 379,039
9,196,191 6,772,893
31 December 2023 31 December 2022
Listed 864,104 699,066
Unlisted 8,332,087 6,073,827
9,196,191 6,772,893
Amounts recognized in profit or loss
Net change in the fair value of investments at FVPL as at 31 December 2023
amounted to EGP Thousands 1,411,890 (year ended 31 December 2022: EGP
Thousands 923,031) being EGP Thousands 1,516,810 (31 Decemeber 2022: EGP
Thousands 940,515) gains and fair value losses of EGP Thousands 104,920 (31
Decemeber 2022: EGP Thousands 17,484). Those are recognized under net changes
in the fair value of the investment at fair value through profit and loss on
the consolidated statement of profit or losss.
7 Accounts receivable
31 December 2023 31 December 2022
Accounts receivable 7,230,156 5,613,136
Other brokerage companies 57 870,168
Balance 7,230,213 6,483,304
Impairment loss (ECL) (459,251) (315,048)
Balance 6,770,962 6,168,256
8 Funded facilities to customers
31 December 2023 31 December 2022
Micro finance 5,059,721 3,081,638
Finance lease 9,306,990 6,842,562
Consumer finance 6,293,816 3,900,888
Factoring 2,401,033 2,553,049
Other loans 2,350,756 1,441,312
Unearned interest (5,787,545) (3,565,032)
Balance 19,624,771 14,254,417
Impairment loss (507,116) (349,705)
19,117,655 13,904,712
31 December 2023 31 December 2022
Current 10,649,674 8,384,658
Non-current 8,467,981 5,520,054
19,117,655 13,904,712
8.1 Banking loans and facilities (aiBank)
31 December 2023 31 December 2022
Retail
Overdraft 220,707 453,437
Credit Cards 80,550 38,316
Personal loans 6,142,400 4,222,276
Mortgage Loans 1,063,049 630,737
7,506,706 5,344,766
Corporate loans including small loans for economic activities
Debit current accounts 447,007 1,816,153
Direct loans 11,473,182 11,750,598
Syndicated loans 3,332,907 1,929,715
15,253,096 15,496,466
Gross loans and facilities to customers 22,759,802 20,841,232
Less:
Expected credit losses (1,613,012) (1,410,813)
Suspended interest (643) (52,480)
Unearned interest (66,831) (60,509)
1,680,486 1,523,802
Banking loans and facilities (aiBank) - net 21,079,316 19,317,430
31 December 2023 31 December 2022
Current 6,630,556 4,510,080
Non-current 14,448,760 14,807,350
21,079,316 19,317,430
9 Investments at fair value through OCI
31 December 2023 31 December 2022
Non-current investments
Equity securities 187,146 159,532
Mutual fund certificates 138,264 116,119
Debt instruments 4,256,243 5,117,914
4,581,653 5,393,565
Current investments
Debt instruments 7,065,958 8,686,556
11,647,611 14,080,121
31 December 2023 31 December 2022
Listed 4,299,771 5,157,079
Unlisted 7,347,840 8,923,042
11,647,611 14,080,121
Financial assets at fair value through other comprehensive income (FVOCI)
comprise:
- Equity securities and mutual funds certificates are not held for
trading and which the Group has irrevocably elected at initial recognition to
recognise in this category. These are strategic investments, and the Group
considers this classification to be more relevant.
- Debt securities where the contractual cash flows are solely
principal, and interest and the objective of the Group's business model is
achieved both by collecting contractual cash flows and selling financial
assets.
10 Equity accounted investees
31 December 2023
Loacation Assets Liabilities Net gain (losses) Gross Profit Ownership Value
%
(a) Joint ventures
Bedaya Mortgage Egypt 1,602,404 1,374,318 9,854 41,946 33.34 81,069
Finance Co
EFG-EV Finech Egypt 55,433 4,773 13,086 21,347 50 23,418
Paytabs Egypt 22,522 22,781 (11,255) 7,788 51 48,852
API Capital Management Limited UAE 21,376 6,021 (6,563) 775 50 9,139
(b) Associates
Kaf Life Insurance takaful Egypt 370,168 256,611 (28,391) 27,957 37.5 49,648
Zahraa Elmaadi Egypt 2,531,888 871,390 219,016 311,089 20.33 337,646
Company*
Middle East Land Reclamation Egypt 47,974 192,215 (24,763) - 24.47 -
Company*
Prime for investment fund management* Egypt 2,637 159 297 21 20 512
Enmaa Financial Egypt 1,701,904 1,394,764 56,155 108,973 31.4 96,530
Leasing company*
Paytech 3100 BV Netherlands 486,877 1,112 (1,112) - 40.66 197,979
Total 844,793
31 December 2022
Loacation Assets Liabilities Net gain (losses) Gross Profit Ownership Value
%
(a) Joint ventures
Bedaya Mortgage Egypt 2,363,820 2,108,838 89,692 147,297 33.34 84,814
Finance Co
EFG-EV Finech Egypt 62,329 5,442 15,460 24,595 50 18,449
Paytabs Egypt 55,817 41,912 (10,859) 3,518 51 41,929
API Capital Management Limited UAE 18,582 3,742 (2,180) - 50 10,248
(b) Associates
Kaf Life Insurance takaful Egypt 340,318 196,555 (25,517) 12,521 37.5 62,030
Zahraa Elmaadi Egypt 2,563,500 1,032,639 216,266 307,688 20.30 311,285
Company*
Middle East Land Reclamation Egypt 47,974 192,215 (24,763) - 24.47 -
Company*
Prime for investment fund management* Egypt 2,752 199 377 265 20 511
Enmaa Financial Egypt 1,982,674 1,737,141 22,113 52,041 31.40 77,167
Leasing company*
Total 606,433
* Equity accounted investees acquired through Arab Investment Bank (aiBank).
11 Assets held for sale
Assets held for sale represented in the assets that has been acquired by Arab
Investment Bank (aiBank) amounted to EGP 330,652 (31 December 2022: EGP
349,701) in exchange of debt account receivables.
12 Investments at amortized cost
31 December 2023 31 December 2022
Debt instruments - Listed 7,209,859 10,964,941
Debt instruments - Un-listed 4,064,121 581,157
Impairment loss (40,120) (27,406)
11,233,860 11,518,692
13 Investment properties
2023 2022
Cost
As at 1 January 169,540 169,540
Disposal for the year (20,203) -
As at 31 December 149,337 169,540
Accumulated deprecations
As at 1 January 50,555 44,010
Disposal for the year (6,464) -
Depreciation charge for the year (note 31.2) 6,545 6,545
As at 31 December 50,636 50,555
Net book amount 98,701 118,985
Investment properties comprise the following:-
- EGP Thousand 93,457 the book value of the area owned by EFG Holding
Company ("Previously" EFG - Hermes Holding Company) in Nile City
building, and with a fair value of EGP Thousand 513,600.
- EGP Thousand 2,817 the book value of the area owned by Hermes
Securities Brokerage, one of the subsidiaries, in Elmanial branch and with a
fair value of EGP Thousand 13,000.
- EGP Thousand 2,427 the book value of the area owned by Hermes
Securities Brokerage, one of the subsidiaries, in Elharam branch and with a
fair value of EGP Thousand 21,716.
14 Property and equipment (continued)
Land & Buildings Leasehold Improvements Office furniture, equipment & electrical appliances Computer Equipment Vehicles Right of use assets Total
Cost
Balance as at 1 January 2022 1,199,531 255,000 357,745 530,567 46,411 307,814 2,697,068
Additions 21,000 26,512 88,723 136,813 7,997 112,118 393,163
Disposals (456) (324) (8,726) (49,249) (6,499) (68,578) (133,832)
Adjustments - - - - - 20,579 20,579
Acquisition of subsidiaries - - 686 2,738 - 2,909 6,333
Foreign currency translation differences 78 1,054 82,852 69,980 5,442 66,100 225,506
Total cost as at 31 December 2022 1,220,153 282,242 521,280 690,849 53,351 440,942 3,208,817
Balance as at 1 January 2023 1,220,153 282,242 521,280 690,849 53,351 440,942 3,208,817
Additions 173,789 159,262 164,284 153,743 32,258 193,595 876,931
Disposals (46) (8,102) (61,994) (36,654) (7,162) (27,722) (141,680)
Adjustments - - 309 (309) - 2,306 2,306
Acquisition of subsidiaries - - 376 844 - - 1,220
Foreign currency translation differences 3 (67) 53,252 36,753 3,022 50,778 143,741
Total cost as at 31 December 2023 1,393,899 433,335 677,507 845,226 81,469 659,899 4,091,335
14 Property and equipment (continued)
Land & Buildings Leasehold Improvements Office furniture, equipment & electrical appliances Computer Equipment Vehicles Right of use assets Total
Accumulated depreciation
Balance as at 1 January 2022 164,398 204,877 268,844 390,300 29,810 116,526 1,174,755
Depreciation for the year (note 31.2) 40,609 23,843 36,795 82,890 7,780 60,163 252,080
Disposals' accumulated depreciation (455) (324) (8,383) (47,459) (4,892) (11,034) (72,547)
Adjustment - - - - - 20,091 20,091
Acquisition of subsidiaries - - 191 715 - 829 1,735
Foreign currency translation differences 43 927 77,372 66,049 3,507 48,762 196,660
Balance as at 31 December 2022 204,595 229,323 374,819 492,495 36,205 235,337 1,572,774
Balance as at 1 January 2023 204,595 229,323 374,819 492,495 36,205 235,337 1,572,774
Depreciation for the year (note 31.2) 45,269 33,573 53,962 99,619 9,473 96,817 338,713
Disposals' accumulated depreciation (46) (6,497) (46,293) (32,297) (4,728) (16,926) (106,787)
Adjustment - - - 4 - (12,248) (12,244)
Acquisition of subsidiaries - - 365 733 - - 1,098
Foreign currency translation differences 1 (68) 50,158 32,736 1,758 35,407 119,992
Balance as at 31 December 2023 249,819 256,331 433,011 593,290 42,708 338,387 1,913,546
Carrying amount
As at 31 December 2022 1,015,558 52,919 146,461 198,354 17,146 205,605 1,636,043
As at 31 December 2023 1,144,080 177,004 244,496 251,936 38,761 321,512 2,177,789
15 Goodwill and other intangible assets
31 December 2023 31 December 2022
Goodwill (note 15.1 & 15.2) 1,704,024 1,256,048
Customer Relationsships (note 15.1) 346,387 400,637
Retailer List (note 15.1) 41,651 49,340
Licenses (note 15.1) 14,029 14,403
Brand Name (note 15.1) 34,704 34,704
Software (note 15.1) 174,818 192,099
2,315,613 1,947,231
15.1 Movement of goodwill and other intangible assets during the year is as
follows:
2023 Goodwill Customer Relationships Retailer List Licenses Brand Name Software
Balance as at 1 January as previously reported 1,751,894 64,547 - 14,403 - 123,905
Adjustment (note 15.2.1) (495,846) 336,090 49,340 - 34,704 68,194
Balance as at 1 January 1,256,048 400,637 49,340 14,403 34,704 192,099
Additions - - - - - 20,665
Acquisitions 459,978 - - - - 17,289
Disposals - - - - - (613)
Amortisation during the year - (70,166) (7,689) (2,461) - (51,112)
Impairment during the year (12,002) - - - - -
Acquisitions - - - - - (6,256)
Disposals - - - - - 296
Foreign currency translation differences - 15,916 - 2,087 - 2,450
Balances as at 31 December 1,704,024 346,387 41,651 14,029 34,704 174,818
2022
Balance as at 1 January 896,014 70,691 - 10,368 - 174,719
Adjustment ( Note 15.2.1 ) (495,846) 366,644 53,825 -- 34,704 72,418
Balance as at 1 January 400,168 437,335 53,825 10,368 34,704 247,137
Additions -- 16,030 -- 9,938 -- 70,989
Acquisitions 881,545 -- -- -- -- 9,476
Amortisation and impairment as at 1 Jan as previously reported (15,426) (31,807) -- (6,529) -- (104,190)
Adjustments ( Note 15.2.1 ) - (30,554) (4,485) -- -- (4,224)
Balance as at 1 Jan (15,426) (62,361) (4,485) (6,529) - (108,414)
Amortisation during the year -- (10,133) - (854) - (26,859)
Impairment during the year (10,239) - - - - -
Acquisitions - - - - - (2,024)
Foreign currency translation differences - 19,766 - 1,480 - 1,794
Balance as at 31 December 1,256,048 400,637 49,340 14,403 34,704 192,099
15.2 Goodwill relates to the acquisitions of the below subsidiaries:
31 December 2023 31 December 2022
EFG- Hermes IFA Financial Brokerage Company Kuwait -KSC 179,148 179,148
Tanmeyah Micro Enterprise Services S.A.E 365,399 365,399
Frontier Investment Management Partners LTD 325,801 325,801
Fatura Netherlands B.V (note 15.2.1) 373,698 373,698
Noutah for electronic commerce - 12,002
Paynas BV (note 15.2.1) 459,978 -
1,704,024 1,256,048
15 Goodwill and other intangible assets (continued)
15.2.1 Acquisitions during the year were as follows:
2023 Paynas BV
EGP Thousands
Acquired total assets 355,727
Acquired total liabilities (420,910)
Net assets(liabilities) (65,183)
Non-controlling interests (3,099)
Group's share in the acquired net assets (liabilities) (62,084)
Consideration transferred 397,894
Resulting goodwill 459,978
Acquisition of Paynas BV
On 30, September 2023 U Consumer Finance (Previously ValU) (Subsidiary)
acquired 94.96% of Paynas BV shares with an acquisition cost amounting to EGP
Thousands 397,894.
The Company's share in the acquired net liabilities on the date of acquisition
amounted to EGP Thousands (62,084). Accordingly, the goodwill arisign on the
acquistion was recorded as EGP Thousands 459,978.
Paynas was the first fintech in Egypt to receive an Agent Banking License from
the CBE, enabling it to integrate SMBs into the financial system by digitizing
their wage payments via Paynas's payroll cards - issued in partnership with
Banque Misr and powered by Visa. This is provided in tandem with the Paynas
app, which provides employee management tools and financial benefits,
improving the financial wellness of SMB employees.
The acquisition builds on U's strategy to expand its product offering and
penetrate the B2B space, through leveraging the Paynas offering and network.
Furthermore, access to the data on the employee management platform will be
used to enrich and enhance credit decisions. This is in addition to the
strong technical and business capabilities of the team.
2022 Fatura Netherlands B.V Noutah for electronic commerce
EGP Thousands EGP Thousands
Acquired total assets 19,430 226
Acquired total liabilities (62,655) -
Net assets(liabilities) acquired (43,255) 226
Consideration transferred 826,319 12,228
Resulting goodwill 869,544 12,002
15 Goodwill and other intangible assets (continued)
15.2.1 Acquisitions during the year were as follows (continued):
Acquisition of Fatura Netherlands B.V
In June 2022 Tanmeyah Micro Enterprise Services S.A.E (Subsidiary 93.983%)
acquired 100% of Fatura Netherlands B.V shares with an acquisition cost
amounting to EGP 826,319. As at 31 December 2022, the Group recorded a
provisional goodwill of EGP 869,544. In 2023 the group has performed the
Purchase Price Allocation (PPA) study to determine the fair value of the
identifiable asset and liabilities according to the International Financial
Reporting Standards. Accordingly, the provisional goodwill recognised
previously has been adjusted and recognised as an estimate change
The following represents final PPA on the acquisition date:
Fatura Netherlands B.V PPA Effect Fatura Netherlands B.V
On the date of acquisition After PPA
Acquired total assets 19,430 527,591 547,021
Acquired total liabilities (62,655) -- (62,655)
Net assets(liabilities) (43,225) 527,591 484,366
Non-controlling interests -- 31,745 31,745
Consideration transferred 826,319 -- 826,319
Resulting goodwill 869,544 -- 373,698
Management of the Group has applied those changes prospectively (note 37).
16 Other assets
31 December 2023 31 December 2022
Deposits with others (note 16.1) 403,361 47,488
Down payments to suppliers 1,108,232 1,188,540
Prepaid expenses 259,999 197,725
Employees' advances 135,886 117,224
Accrued revenues 1,796,384 1,236,759
Taxes withheld by others 41,232 27,083
Payments for investments 9,259 19,354
Settlement Guarantee Fund 19,869 26,790
Due from Egypt Gulf Bank- Tanmeyah Clients 8,487 10,582
Due from Payment Channels 90,209 27,959
Due from custodian 123,146 -
Receivables-sale of investments 177,803 39,000
Securitization surplus 266,865 178,567
Sundry debtors 312,083 303,448
4,752,815 3,420,519
Impairment loss (36,638) (18,608)
4,716,177 3,401,911
16.1 Deposits with others
Deposits with others include an amount of EGP Thousands 17,961 in the name of
the subsidiaries,EFG - Hermes Interntional Securities Brokerage and Hermes
Securities Brokerage Company which represents blocked deposits for same day
trading operations settlement takes place in the Egyptian Stock Exchange. Both
companies are not entitled to use these amounts without prior approval from
Misr Clearance Company.
Deposit with also include an amount of EGP Thousands 319,788 in the name of
the subsidary EFG Hermes KSA . This Represent Margin Deposited with the
General Clearing Member ( GCM ) as Required by the Clearing House ( Muqassa )
17 Due to banks and financial institutions
31 December 2023 31 December 2022
Financial institutions 31,750 41,546
Bank overdraft * 11,474,569 11,544,331
Deposits** 2,378,769 515,900
Due to Central Bank** 5,225 -
Current account** 292,100 270,059
14,182,413 12,371,836
* Banks overdraft include facilities granted from one of the banks which
represents the following:
Ø A governmental bond has been pledged against facility with a credit limit
of EGP Thousands 1,066,632.
Ø A Treasury bill have been pledged against facility with a credit limit of
EGP Thousands 741,052.
** Related to Arab Investment Bank (aiBank).
18 Customer Deposits (aiBank)
31 December 2023 31 December 2022
Call deposits 20,261,265 15,239,776
Term deposits 20,316,818 22,111,560
Saving and deposit certificates 8,354,273 8,651,603
Saving deposits 968,657 1,140,599
Other deposits 733,194 986,634
Balance 50,634,207 48,130,172
Corporate deposits 35,505,821 35,927,785
Retail 15,128,386 12,202,387
Balance 50,634,207 48,130,172
Current 45,494,018 40,923,835
Non-current 5,140,189 7,206,337
50,634,207 48,130,172
19 Accounts payable - customers credit balance at fair value through profit
and loss
This amount represents payable to customers against the structured notes
issued by one of the Group companies.these financial liabilities are linked to
structured notes purchased by the company. These structured notes are linked
mainly to treasury bills and quoted equity securities .
19.1 Accounts payable - customers credit balance
Accounts payable balances are mainly represented in the advances made by
clients to buy shares in the activity of brokerage. Coupons collected and
proceeds from sale of shares for the benefit of clients are also being added
to these accounts.
20 Issued bonds
- During June 2022 EFG Corp-Solutions (a subsidiary - 100%) issued the
first issuance of unsecured medium-term bonds with a value of EGP 500 million
for two years. The issuance is part of a three years issuance program with
total value of EGP 3 billion. The bonds are tradable and non-convertible to
shares but it can be expedited to payment starting from coupon number 5
(seventh month of the issuance). The bonds proceeds will be used to finance
different company activities and meet its financial obligations.
- During April 2023 Hermes Securities Brokerage (a subsidiary - 100%)
issued short-term bonds with a value of EGP 250 million (First issuance of
second program) that are tradable and non-convertible to shares and with a
maturity of 12 months at a par value of EGP 100 (one hundred Egyptian pounds
only) for a bond to be paid at the end of the period with a fixed rate of
18.77%, that will be paid at the end of the issuance period and it's
non-expedited payment, the bonds proceeds will be used to finance different
company activities and meet its financial obligations.
21 Creditors and other credit balances
31 December 2023 31 December 2022
Accrued expenses 3,712,173 2,851,514
Dividends payable (prior years) 154,368 215,380
Deferred revenues 76,617 147,777
Suppliers 444,780 382,771
Clients' coupons - custody activity 276,902 205,948
Takaful 26,915 25,590
Tax authority 89,275 43,748
Social Insurance Association 16,673 13,507
Payables- purchase of investments 157,359 5,263
Deposits Due to others 14,182 4,041
Lease liabilities 419,140 412,473
Sundry creditors 265,067 212,621
Pre collected Installments 494,994 462,032
6,148,445 4,982,665
21.1 Accrued expenses comprise of employee benefits, occupancy expenses and
office expenses accruals.
21.2 Deposits due to others amounted to EGP Thousands 14,182 as at 31 December
2023 versus EGP Thousands 4,041 as at 31 December 2022 represents the deposits
collected from the lessees of EFG Corp- Solutions.
21.3 Lease liabilities include an amount of EGP Thousands 63,823 (31 December
2022 EGP Thousands 153,253) in the name of EFG Holding that represents sale
and lease back agreement. Below table shows the current versus non-current
analysis of such balances
31 December 2023 31 December 2022
Current 169,639 108,203
Non-current 249,501 304,270
419,140 412,473
22 Deferred tax assets (liabilities)
31 December
2023 Balance as at 1 January Acquisition Recognized in profit or loss Recognised in equity Disposals Foreign currency differences Net Deferred tax assets Deferred tax Liabilites
of subsidiaries (note 30)
Property and equipment depreciation (110,329) 522 (35,762) - - 56 (145,513) - (145,513)
Claims provision 185 - 40,804 - - 8 40,997 40,997 -
Impairment loss on assets 1,421 - - - - (4) 1,417 1,417 -
Prior year losses carried forward 51,804 - 11,149 - (4,968) 11,013 68,998 68,998 -
Investment at fair value (469,494) - (290,436) 14,319 - - (745,611) - (745,611)
Foreign currency translation differences (213,621) - 139,373 - - (12) (74,260) - (74,260)
Revaluation of investment property 1,867 - - - - - 1,867 1,867 -
Investment in Associates (7,217) - (4,375) - - - (11,592) - (11,592)
ESOP deferred 9,209 - 3,923 - - - 13,132 13,132 -
Securitization Surplus Revaluation - - (10,460) - - - (10,460) - (10,460)
(736,175) 522 (145,784) 14,319 (4,968) 11,061 (861,025) 126,411 (987,436)
31 December
2022 Balance as at 1 January - as previously stated Adjustment to opening balance Balance as at 1 January - as adjusted Acquisition Recognized in profit or loss Recognised in equity Foreign currency differences Net Deferred tax assets Deferred tax liabilities
of subsidiaries (note 30)
Property and equipment depreciation -
6,086 (119,542) (113,456) (100) 3,168 59 (110,329) - (110,329)
Claims provision (398) - (398) - 148 - 435 185 185 -
Impairment loss on assets 1,180 - 1,180 - 253 - (12) 1,421 1,421 -
Prior year losses carried forward 29,242 - 29,242 - 14,155 - 8,408 51,804 51,804 -
Investment at fair value (290,607) - (290,607) - (203,330) 24,443 -- (469,494) - (469,494)
Foreign currency translation differences 1,457 - 1,457 - (215,263) - 185 (213,621) - (213,621)
Revaluation of investment property 1,867 - 1,867 - - - -- 1,867 1,867 -
Investment in Associates (5,583) - (5,583) - (1,634) - -- (7,217) - (7,217)
ESOP deferred 7,775 - 7,775 - 1,434 - -- 9,209 9,209 -
(248,981) (119,542) (368,523) (100) (401,069) 24,443 9,075 (736,175) 64,486 (800,661)
23 Provisions
31 December 2023 31 December 2022
Claims provision 532,632 406,954
ECL on unfunded exposure (aiBank) 66,278 55,414
Severance pay provision 536,122 405,701
Financial guarantee for contingent liabilities 32,698 35,647
1,167,730 903,716
2023 Claims provision Severance Financial guarantee for contingent liabilities ECL on unfunded exposure (aiBank) Total
Pay provision*
Balance as at 1 January 406,954 405,701 35,647 55,414 903,716
Charged during the year 163,247 62,556 38,055 9,250 273,108
Foreign currency differences 8,909 100,603 - 1,614 111,126
Used during the year (40,536) (29,226) (41,004) - (110,766)
Actuarial gains or losses - (3,512) - - (3,512)
Released (note 28) (5,942) - - - (5,942)
Balance as at 31 December 532,632 536,122 32,698 66,278 1,167,730
2022 Claims provision Severance Financial guarantee for contingent liabilities Commercial bank contingent liabilities Total
Pay provision*
Balance as at 1 January 372,814 226,617 34,453 56,118 690,002
Charged during the year 96,579 60,311 21,174 - 178,064
Foreign currency differences 11,422 135,536 - 1,903 148,861
Used during the year (23,438) (21,268) (19,980) - (64,686)
Actuarial gains or losses - 4,505 - - 4,505
Released (note 28) (50,423) - - (2,607) (53,030)
Balance as at 31 December 406,954 405,701 35,647 55,414 903,716
* Related to Group entities outside Egypt.
24 Loans and borrowings
Borrowers Borrowing Contract dates Maturity dates 31 December 2023 31 December 2022
EFG Corp-Solutions * Limits
335 million 16-Jul-20 16-Jul-27 115,329 71,975
150 million 27-Feb-20 27-Feb-27 14,271 27,332
600 million 12-Dec-19 12-Dec-26 587,119 314,593
590 million 29-Mar-23 31-Mar-30 585,189 472,734
2 billion 22-Aug-22 22-Aug-28 541,266 715,726
923 million 28-May-23 28-May-33 568,459 374,366
13.5 million 14-Mar-16 30-Jun-23 13,532 24,020
333 million 13-Jul-20 13-Jul-27 83,943 135,448
- 18-Jul-23 18-Jul-28 - 168
450 million 09-Mar-22 31-Mar-29 417,964 141,154
150 million 25-Jun-23 30-May-24 44,516 75,527
400 million 12-Dec-23 12-Dec-28 170,582 173,766
- 24-Apr-17 24-Apr-23 - 409
28 million 06-Sep-23 31-Aug-24 27,622 36,194
250 million 04-Apr-21 04-Apr-28 226,813 50,700
492.8 million 19-Oct-17 19-Oct-22 492,800 493,700
200 million 12-Dec-23 12-Dec-30 147,703 196,836
27.5 million 07-Feb-18 07-Feb-23 27,591 57,591
59.3 million 19-May-20 19-May-27 59,325 101,407
600 million 15-Aug-22 15-Aug-28 36,747 61,293
780 million 06-Feb-22 30-Mar-24 579,079 386,920
100 million 26-Nov-20 26-Nov-27 54,757 62,677
100 million 11-Jul-23 11-Jul-30 76,464 -
4,871,071 3,974,536
aiBank 10.3 million 13-Apr-17 01-Aug-23 - 1,556
25.4 million 13-Apr-17 31-Jul-23 - 5,001
- 6,557
EFG - Hermes Pakistan Limited 41 million 12-May-17 11-May-26 41,085 40,833
49 million 29-Oct-21 28-Oct-24 - 49,000
41,085 89,833
Tanmeyah Micro Enterprise Services S.A.E 100 million 15-Oct-23 30-Oct-23 100,000 59,481
200 million 30-Apr-23 30-Apr-24 188,956 -
288,956 59,481
U consumer Finanace ("previously"ValU) 100 million 11-Dec-17 01-Dec-23 - 8,000
350 million 15-Jun-22 31-Dec-23 349,647 253,949
225 million 05-Sep-22 30-Nov-23 135,817 172,774
375 million 06-Jul-22 30-Sep-24 221,579 430,899
150 million 30-Jan-23 28-Feb-24 128,066 -
100 million 02-Feb-23 28-Feb-24 21,661 -
300 million 05-Feb-23 05-Feb-24 261,514 -
345 million 15-Aug-23 15-Aug-25 342,314 -
100 million 04-Jan-23 04-Jan-24 98,388 -
340 million 13-Jul-22 13-Jul-23 340,356 -
600 million 13-Jun-23 13-Jun-24 600,636 -
2,499,978 865,622
EFG Finance Holding
120 million 06-Feb-22 30-Mar-24 120,000 -
200 million 12-Dec-23 12-Dec-30 183,129 -
303,129 -
Total 8,004,219 4,996,029
Distributed as follows:
Current 3,636,531 1,481,401
Non-current 4,367,688 3,514,628
8,004,219 4,996,029
* EFG Hermes Corp - Solutions (wholly owned subsidiary), is committed to
settle the credit granted by waiving the rental value of the finance lease
contracts to the banks within the credit amount.
25 Share capital
- The company's authorized capital amounts EGP 6 billion and issued
capital amounts EGP Thousands 3,843,091 distributed on 768,618,223 shares of
par value EGP 5 per share which is fully paid.
- The company's General Assembly approved in its session held on May
20, 2021 to increase the company's issued capital from EGP Thousands 3,843,091
to EGP Thousands 4,611,709 distributed on 922,341,868 shares with an increase
amounting to EGP Thousands 768,618 by issuing 153,723,645 shares with par
value EGP 5 through the issuance of one free share for every five shares. This
increase is transferred from the company retained earnings that presented in
December 31, 2020 financial statements. The required procedures had been taken
to register the increase in the Commercial Register.
- On September 28, 2021, the Company's General Assembly approved the
increase in issued capital from EGP Thousands 4,611,709 to EGP Thousands
4,865,353 representing an increase of EGP Thousands 253,644 and distributed on
50,728,803 shares having a par value of EGP 5 per share, The issuance of the
capital increase shares were financed from the share premium reserve for the
purpose of the Remuneration & Incentive Program of the Employees, Managers
& Executive Board Members of the Company and its subsidiaries. The
commercial register was updated and the issued shares were allocated under the
Remuneration & Incentive Program of the Employees of the Company, and the
Beneficiary of the program will be entitled to attend the Ordinary and
Extraordinary General Shareholders of the Company and to vote on its
resolutions upon the transfer of ownership of the Granted Shares to the
Beneficiary.
- The company's General Assembly approved in its session held on May
19, 2022 to increase the company's issued capital from EGP Thousands 4,865,353
to EGP Thousands 5,838,424 distributed on 1,167,684,806 shares with an
increase amounting to EGP Thousands 973,071 by issuing 194,614,135 shares with
par value EGP 5 through the issuance of one free share for every five shares.
This increase is transferred from the company retained earnings that presented
in December 31, 2021 financial statements. The required procedures had been
taken to register the increase in the Commercial Register.
- The company's General Assembly approved in its session held on May
24, 2023 to increase the company's authorized capital from EGP 6 billion to
EGP 30 billion and increase the company's issued capital from EGP Thousands
5,838,424 to EGP Thousands 7,298,030 distributed on 1,459,606,008 shares with
an increase amounting to EGP Thousands 1,459,606 distributed on 291,921,202
shares with par value EGP 5 through the issuance of one free share for every
four shares. This increase is transferred from the company retained earnings
that presented in December 31, 2022 financial statements. The required
procedures had been taken to register the increase in the Commercial Register.
26 Non - controlling interests ("NCIs")
31 December 2023 31 December 2022
Non-controlling interests 4,074,904 3,445,286
Movement in NCIs during the year was as follows
Balance as at 1 Jaunary - as previously stated (note 37) 3,445,286 2,959,899
Adjustments during the year (note 37) - 29,382
Balance as at 1 Jaunary (note 37) 3,445,286 2,989,281
Comprehensive income for the year 708,786 503,288
Dividends during the year (135,421) (95,657)
Acquisition of a subsidiary 3,110 -
Changes in ownership interests without change in control 53,143 48,374
Balance as at 31 December 4,074,904 3,445,286
26 Non - controlling interests ("NCIs") (continued)
The Group considers the Arab Investment Bank ("aiBank") as a subsidiary that
have a material non-controlling interests to the Group. The principle palce of
buisness of aiBank is the Arab Republic of Egypt. The proportion of ownership
interests and voting rights held by non-controlling interests in aiBank
represents 48.979% as at 31 December 2023 (31 December 2022: 48.979%).
Summarised financial information of aiBank is disclosed under note 32 under
the Commercial bank (aiBank) business segment.
Accumulated non-controlling interests of aiBank amounted to EGP Thousand
3,355,396 as 31 December 2023 (2022: 2,803,578).
The profit allocated to non-controlling interests of aiBank during the year
ended 31 December 2023 amounted to EGP Thousand 555,435 (2022: 252,426)
27 Contingent liabilities
The Holding company guarantees its subsidiary EFG- Hermes UAE LLC against the
Letters of Guarantee issued from banks amounting to:
31 December 31 December 2022
2023
AED 93,670 83,670
Equivalent to EGP 785,517 562,363
Assets under management (off-financial position item) 159,430,997 108,911,766
Securitization and Sukuk transactions
The Group has entered certain securitization and Sukuk transactions, the
assets and liabilities related to those transactions do not qualify for the
recognition criteria, accordingly the Group has not recognized those assets or
liabilities.
The assets and liabilities related to those transactions are represented in :
31 December 31 December 2022
2023
Client portfolios related to securitization transactions 15,241,137 11,694,429
Balances with custodians 1,292,213 1,644,812
Land and Buildings related to Sukuk transactions 600,000 2,350,000
Total Assets 17,133,350 15,689,241
Bonds 12,843,168 8,629,177
Sukuk 480,000 2,350,000
Total liabilities 13,323,168 10,979,177
27 Contingent liabilities (continued)
The contingent liabilities of aiBank is as follows:
(i) Capital commitments
Financial investments
The value of commitments related to financial investments for which payments
were not requested until the date of the financial position as at 31 December:
USD Thousands
31 December 2023 Contribution amount Amount paid Residual amount
African Export -Import Bank 4,890 2,116 2,775
EGP Thousands
Contribution Amount Amount Paid Residual Amount
Long term assets 1,015,907 804,476 211,432
31 December 2022 USD Thousands
Contribution Amount
Amount paid Residual amount
African Export -Import Bank 1,066 586 480
EGP Thousands
Contribution Amount Amount Paid Residual Amount
Long term assets 1,026,119 835,921 190,198
(ii) Commitments on loans, guarantees and facilities are as follows:
31 December 2023 31 December 2022
Loan Commitments 933,981 -
Letters of guarantees 2,798,308 2,649,791
Letters of credit (Export and Import) 13,816 330,149
Acceptances of supplier facilities 649,754 236,791
4,395,859 3,216,731
28 Other Revenue
Other revenues includes rental income and non-recurring income as follows:
For the year ended
31 December 31 December
2023 2022
Release of provisions (note 23) 5,942 53,030
Rental incomes 67,630 44,581
Gain on sale of property and equipment 3,251 4,200
Gain on sale of Investment property 56,438 -
Custodion rebates 16,141 9,013
Advisory fees 92,400 -
Other gains 56,197 48,367
297,999 159,191
29 Impairment loss on financial assets - net of recoveries
For the year ended
December December
2023 2022
Accounts receivable 133,080 168,004
Funded facilities to customers 219,827 74,674
Banking loans and facilities (aiBank) 622,864 457,372
Cash and cash equivalents 265 273
Other assets 54,435 (1,038)
Investments FVOCI - debt instruments (7,472) 28,090
Investments at amortized cost - debt instruments 7,334 (864)
1,030,333 726,511
30 Income tax expense
For the year ended
December December
2023 2022
Current income tax 948,213 702,655
Deferred income tax (note 22) 145,784 401,069
1,093,997 1,103,724
31 General and administrative expenses
For the year ended
31 December December
2023 2022
Wages , salaries and similar items (note 31.1) 6,390,632 4,690,355
Marketing, technology and network expenses 649,957 569,506
Consultancy 549,330 365,708
Leased line and communication expenses 351,313 42,944
Travel , accommodation and transportation 83,874 207,381
Rent and utilities expenses 133,546 93,211
Other expenses 785,233 572,759
8,943,885 6,541,864
31.1 Share-based payments.
The Holding Company introduced an Employees Share Ownership plan (ESOP) in
accordance with the shareholder's approval at the extraordinary general
assembly meeting by issuing Free shares representing 5.5% of the issued
capital of the Company shall be granted to employees, managers and executive
board members of the Company and its subsidiaries.
The duration of this program is five years starting as of 1 January 2021 till
31 December 2025, the vesting period is 3-4 years starting from 1 January 2021
till 31 December 2024. The beneficiary entitled to shares granted to 4 equal
installments.
The equity instruments for share-based payment are recognized at fair value on
the grant date and are record in the income statement with a corresponding
increase in equity. The value of expenses charged to the income statement
during the period amounted EGP Thousand 130,938.
Equity instruments during the year represents the following:
For the year ended
December December
2023 2022
No. of Shares No. of Shares
Total at the beginning of the year 56,204,722 48,504,101
Free shares distributed during the year 13,657,274 9,700,821
Forfeited shares during the year (1,804,699) (2,000,200)
Total at the end of the year 68,057,297 56,204,722
31.2 Depreciation and amortisation expenses
For the year ended
December December
2023 2022
Depreciation expenses - investment properties (note13) 6,545 6,545
Depreciation expenses - properties and equipment (including depreciation of 338,713 252,080
right-of-use assets) (note14)
Amortisation expenses - intangible assets (note 15) 131,428 77,109
476,686 335,734
32 Operating segments
Basis for operating segment
Segment information is presented in respect of the Group's business segments.
The primary format, business segment, is based on the Group's management and
internal reporting structure. Inter-segment pricing is determined on an arm's
length basis. Segment results, assets and liabilities include items directly
attributable to a segment. The revenue & expense and assets &
liabilities analyses in the table below are based on the type of business
activities and services that are distinguishable component.
For the year ended 31 December 2023 Holding & Treasury Brokerage Asset Management Investment Banking Private Finance Leasing Micro Consumer Factoring Commercial banking Intersegment Total
Equity Holding Financing eliminations
Interest income 886,840 1,004,774 5,133 42,644 26,751 6,229 1,140,559 1,491,099 868,308 385,040 7,669,036 (41,599) 13,484,814
Interest expense (706,588) (296,036) - (27,428) - - (923,705) (770,603) (727,788) (337,560) (5,129,506) 55,381 (8,863,833)
Net Interest Income 180,252 708,738 5,133 15,216 26,751 6,229 216,854 720,496 140,520 47,480 2,539,530 13,782 4,620,981
Fee and commission income (2) 2,706,287 1,260,115 718,976 226,211 1,131 47,054 573,158 547,637 65,582 1,015,823 (53) 7,161,919
Fee and commission expense (6,554) (434,997) (141,402) - (9,567) (661) (90) (15,607) (1,980) (51) (108,700) - (719,609)
Net fee and commission income (6,556) 2,271,290 1,118,713 718,976 216,644 470 46,964 557,551 545,657 65,531 907,123 (53) 6,442,310
Securities' gain 5,707 14,528 - - 149 58 - - 2,350 - 148,879 - 171,671
Changes in the fair value of investments at FVTPL 1,462,793 2,122 (104,769) - 264 51,480 - - - - - - 1,411,890
Foreign Currencies Exchnage Differences 1,202,906 6,551 - - - 418 50,977 (4,262) (20,891) 6,622 (87,474) - 1,154,847
Dividend Income 17,521 50,465 - - - - - - - - 13,491 - 81,477
Gains on selling Assets held for sale - - - - - - 267 - - - 9,530 - 9,797
Share of profit from equity accounted investees - - - - (4,166) (12,694) - - - - 61,908 - 45,048
Other Revenues 197,497 20,917 (80) 207 6,490 - 4,933 22,598 95,787 - 14,657 (65,007) 297,999
Net gains on dereceognition of financial assets measured at amortized cost - - - - - - 42,594 - 390,337 - - - 432,931
Impairment loss on financial assets - net of recoveries (8,788) (122,880) (24,243) - (11,518) (627) (9,592) (98,423) (84,859) (43,383) (626,020) - (1,030,333)
Total Revenues 3,051,332 2,951,731 994,754 734,399 234,614 45,334 352,997 1,197,960 1,068,901 76,250 2,981,624 (51,278) 13,638,618
General and administrative expenses (1,576,902) (2,439,370) (649,094) (807,003) (245,662) (98,350) (142,333) (1,051,360) (721,888) (42,766) (1,317,252) 148,095 (8,943,885)
Financial Guarantee Provision - - - - - - - (38,055) - - - - (38,055)
Impairment loss on goodwill and intangible assets - - - - - - - (12,002) - - - - (12,002)
Provisions (32,521) (51,016) 46 (3,561) (1,185) (1,712) - (24,261) (3,438) - (117,405) - (235,053)
Depreciation and Amortization (134,311) (38,445) (9,840) (342) (3,912) (7,098) (400) (69,172) (29,373) (1,857) (85,119) (96,817) (476,686)
Profit Before Income Tax 1,307,598 422,900 335,866 (76,507) (16,145) (61,826) 210,264 3,110 314,202 31,627 1,461,848 - 3,932,937
Income Tax expense (243,807) (225,501) (8,449) (16,048) (1,645) (1,314) (56,037) (49,697) (73,965) (7,263) (410,271) - (1,093,997)
Profit for the Period 1,063,791 197,399 327,417 (92,555) (17,790) (63,140) 154,227 (46,587) 240,237 24,364 1,051,577 - 2,838,940
Total assets 17,458,594 19,568,959 1,574,356 419,557 411,063 354,651 6,241,397 5,686,611 5,871,252 2,366,864 61,954,670 - 121,907,974
Total liabilities 6,528,678 15,223,112 511,463 378,051 295,123 44,684 5,929,381 4,330,108 4,784,171 1,621,261 54,866,013 - 94,512,045
32 Operating segments (continued)
Basis for operating segment (continued)
For the year ended 31 December 2022 Holding & Treasury Brokerage Asset Management Investment Banking Private Finance Leasing Micro Consumer Factoring Commercial banking Intersegment Total
Equity Holding Financing eliminations
Interest income 747,964 538,630 1,349 29,388 15,165 2,129 723,666 1,154,849 554,494 232,429 5,389,669 (93,843) 9,295,889
Interest Expense (427,692) (224,522) - (12,501) - - (600,224) (434,966) (270,321) (199,947) (3,598,337) 70,505 (5,698,005)
Net Interest income 320,272 314,108 1,349 16,887 15,165 2,129 123,442 719,883 284,173 32,482 1,791,332 (23,338) 3,597,884
Fee and commission income 3 1,771,185 700,473 730,330 113,935 - 56,092 761,952 257,925 50,153 363,806 (1,038) 4,804,816
Fees and commission expense (1,449) (358,362) (72,133) - (5,097) (656) (300) (547) (1,509) (39) (69,186) 1,038 (508,240)
Net fees and commission income (1,446) 1,412,823 628,340 730,330 108,838 (656) 55,792 761,405 256,416 50,114 294,620 - 4,296,576
Securities Loss (939,808) 15,688 - 187 (227) - - - - - 77,133 - (847,027)
Changes in the investments FVTPL 1,011,125 (8,048) (79,897) - (149) - - - - - - - 923,031
Foreign currencies' differences 2,473,665 15,258 - - - - - 2,950 - - 3,802 - 2,495,675
Dividend income 623 1,664 - - - - - - - - 3,374 - 5,661
Gains on selling Assets held for sale - - - - - - 1,563 - - - 3,924 - 5,487
Share of profit from investees - - - - (1,090) 21,596 - - - - 56,056 - 76,562
Other revenues 49,604 28,623 2,928 474 48,008 - - 15,037 50 - 14,467 - 159,191
Net gains on derecognition of financial assets measured at amortized cost - - - - - - 113,434 - 108,876 - - - 222,310
Impairment loss on financial assets - net of recoveries 10,024 (163,477) (4,171) - (32,990) (1,015) (16,184) 132 (6,547) (39,425) (481,621) 8,763 (726,511)
Total revenues 2,924,059 1,616,639 548,549 747,878 137,555 22,054 278,047 1,499,407 642,968 43,171 1,763,087 (14,575) 10,208,839
General administrative expenses (1,179,128) (1,592,914) (438,778) (723,399) (170,719) (128,435) (113,852) (812,790) (592,385) (81,683) (782,519) 74,738 (6,541,864)
Financial guarantee provision - - - - - - - (21,174) - - - - (21,174)
Impairment loss on assets - (8,639) - - (1,600) - - - - - - - (10,239)
Provisions (61,089) (54,265) (3,063) (2,625) (560) (3,237) - (7,526) - - (24,525) - (156,890)
Depreciation and amortisation (36,876) (25,983) (12,751) (359) (441) (6,415) (349) (94,910) (11,918) (1,807) (83,762) (60,163) (335,734)
Profit before income tax 1,646,966 (65,162) 93,957 21,495 (35,765) (116,033) 163,846 563,007 38,665 (40,319) 872,281 - 3,142,938
Income tax expense (413,137) (108,998) 11,012 (6,240) (4,827) 149 (49,025) (163,812) (6,508) (5,433) (356,905) - (1,103,724)
Profit for the year 1,233,829 (174,160) 104,969 15,255 (40,592) (115,884) 114,821 399,195 32,157 (45,752) 515,376 - 2,039,214
Total assets 13,578,468 17,469,371 1,361,445 732,966 291,949 269,530 5,165,676 4,699,851 4,098,689 2,544,599 55,888,600 - 106,101,144
Total liabilities 5,135,737 13,465,031 445,396 599,833 253,435 39,666 4,662,308 3,225,062 3,666,220 2,131,723 50,108,149 - 83,732,560
32 Operating segments (continued)
Geographical segments
The Group operates in three main geographical areas: Egypt, GCC and other. In
presenting the geographic information, segment revenue has been based on the
geographical location of operation and the segment assets were based on the
geographical location of the assets. The Group's operations are reported under
geographical segments, reflecting their respective size of operation.
The revenue analysis in the tables below is based on the location of the
operating Group, which is the same as the location of the major customers and
the location of the operating companies.
December 31, 2023
Egypt GCC Other Total
Total revenues 10,853,984 2,650,040 134,594 13,638,618
Segment assets 98,584,694 15,237,799 8,085,481 121,907,974
December 31, 2022
Egypt GCC Other Total
Total revenues 8,212,319 1,877,900 118,620 10,208,839
Segment assets 84,424,402 14,681,496 6,995,246 106,101,144
For the year ended
Interest income from: 31 December 2023 31 December 2022
Banks and financial institutions 777,923 255,129
Accounts receivables 441,275 291,138
Loans and facilities to customer 9,152,168 5,949,841
Investment through fair value 1,559,092 1,535,830
Investment at amortized cost 1,554,356 1,263,951
Balance 13,484,814 9,295,889
For the year ended
Interest expenses paid to: 31 December 2023 31 December 2022
Banks and financial institutions 2,381,322 1,408,725
Customer deposits 5,117,932 3,581,633
Loans and borrowings 1,231,978 610,543
Short term bonds 132,601 97,104
Balance 8,863,833 5,698,005
33 Tax status (The Holding company)
- As to Income Tax, the years till 2019 the competent Tax Inspectorate
inspected the parent company's books and all the disputed points have been
settled with the Internal Committee and as to years 2020/2022, have not been
inspected yet.
- As to Salaries Tax, the parent company's books had been examined till 2020
and all the disputed points have been settled with the Internal committee and
as to years 2021/2023 have not been inspected yet.
- As to Stamp Tax, the parent company's books had been examined from year 1998
till 2018 and all the disputed points have been settled with the competent Tax
Inspectorate and as to years 2019/2023 have not been inspected yet.
- As to Property Tax, for Smart Village building the company paid tax till
December 31, 2023, and for Nile City building the company paid tax till
December 31, 2023.
34 Earnings per share
Earnings per share is calculated by dividing the net profit for the year after
deduction of Tier 1 capital notes payment by the weighted average number of
ordinary shares in issue during the year as set out below:
31-Dec-23 31-Dec-22
Net profit for the year 2,216,683 1,687,208
Weighted average number of ordinary shares:
Number of shares issued/deemed to be outstanding from the beginning of the 1,167,685 973,071
year
Free shares dividend issued during the year 2022 -- 194,614
Free shares dividend issued during the year 2023 291,921 291,921
Weighted average number of shares issued under the share-based payment scheme -- --
Weighted average number of ordinary shares 1,459,606 1,459,606
Basic earnings per share - EGP 1.52 1.16
Net profit for the year for calculating diluted earnings per share 2,216,683 1,687,208
Weighted average number of ordinary shares 1,459,606 1,459,606
Weighted average number of dilutive shares under share-based payment scheme -- --
Weighted average number of ordinary shares in issue for diluted earnings per 1,459,606 1,459,606
share
Diluted earnings per share - EGP 1.52 1.16
Basic and diluted earnings per share are the same due to the fact that the
Group has fully issued the shares under share-based payment scheme (note 25)
hence, the impact of dilution is nil for the year ended 31 December 2023 and
the year ended 31 December 2022.
35 Financial risk management
The Group, as a result of its activities, is exposed to various financial
risks, considering the risk acceptance is the basis of the financial activity.
Some risks or a group of risks are analyzed, assessed, and managed
collectively, and therefore the Group intends to achieve an appropriate
balance between risk and interest and to reduce the potential negative effects
on the financial performance of the Bank. The most significant types of
financial risks are credit risk, market risk and liquidity risk and other
operating risks. Market risk includes foreign exchange rate risk, and interest
rate risk.
Risk management policies are adopted to determine and analyse risks to limit,
control and monitor the risks and commit to limits through the reliable
techniques and updated information systems. The Bank periodically reviews and
modifies the risk management policies and systems to reflect changes in
markets, products, services, and the best recent applications.
Risks are managed by Risk Function in terms of the policies approved by the
Board of Directors. Risk Function determines, assesses and covers the
financial risks in close cooperation with the various operating units of the
Bank. The Board of Directors provides written principles for managing the
risks as a whole, in addition to written policies covering specific risk areas
such as credit risk, foreign exchange risk, interest rate risk and the use of
derivative and non-derivative instruments. In addition, the Risk Function is
independently responsible for periodic review of the risk management and
control environment.
35 Financial risk management (continued)
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk. The Group's overall
risk management program seeks to minimize potential adverse effects on the
Group's financial performance.
Management of financial risk in the commercial bank (aiBank) is conducted
through a separate organization from the investment bank due to regulatory
rules and operational necessity. Below is a summary of the risk management
framework in both business segments.
Risk management framework in the investment bank
The investment bank has a central treasury department that works closely with
the operating units throughout the Group. The board of directors provides,
through its audit and risk committee, guidance to management to issues
regarding risk. The board of directors is responsible for:
Ø Overseeing, ratifying, and reviewing the duties of the risk management
department.
Ø Approving the investment bank's risk appetite framework ("RAF") and ensure
it remains consistent with the Firm's short- and long-term strategy, business
and capital plans and risk capacity.
Ø Discuss and determine actions if any of the RAF measures are breached.
Investment bank market risk
Market risk is defined as the potential loss in both on and off balance sheet
positions resulting from movements in market risk factors such as foreign
exchange rates, interest rates, and equity prices.
Market risk is represented in the factors which affect values, earnings and
profits of all securities negotiated in stock exchange or affect the value,
earning and profit of a particular security.
According to the company's investment policy, the following procedures are
undertaken to reduce the effect of this risk.
- Performing the necessary studies before investment decision to
verify the merits of the investment.
- Diversification of investments in different sectors and
industries.
- Performing continuous studies required to follow up the company's
investments and their development.
I. Foreign exchange risk
The investment bank operates internationally and is exposed to foreign
exchange risk arising from various currency exposures primarily with respect
to the US dollar and other GCC currencies. Foreign exchange risk arises from
future commercial transactions, recognized assets and liabilities and net
investments in foreign operations.
Management requires investment bank companies to manage their foreign currency
risk against their functional currency. Commercial transactions are conducted
either in the functional currency of the investment bank country or in
transaction currency.
The investment bank actively manages its currency exposure by holding
different currency positions in accordance with the RAF and may use
derivatives or hedging tools if needed.If the Egyptian pound had
weakened/strengthened by 10% against the US dollar with all other variables
held constant the Company would have recognized gains or losses for the year
as follows:
35 Financial risk management (continued)
Risk management framework in the investment bank (continued)
Investment bank market risk (continued)
I. Foreign exchange risk (continued)
Year ended Year ended
31 December 2023 31 December 2022
Weakened 10 % 797,165 746,867
Strengthened 10 % (797,165) (746,867)
II. Price risk
EFG is exposed to equity price risk on equity investments, through holding of
equities of another entity. The fair value of these instruments will fluctuate
due changes in the market price. The Group manages this risk through
diversification of investments in terms of geographical distribution and
industry concentration.
The following table estimates the sensitivity to a possible change in equity
markets on the Group's income statement. The sensitivity of the income
statement is the effect of the assumed change in the reference equity
benchmark on the fair value of investments carried at fair value through the
income statement and through OCI.
Year ended Year ended
31 December 2023 31 December 2022
5% Increase 5% Decrease 5% Increase 5% Decrease
Net asset value of managed funds and private equities 374,685 (374,685) 266,313 (266,313)
Operating 1,559 (1,559) 1,923 (1,923)
Exchange Index
III. Interest rate risk
Interest rate risk stems from the sensitivity of earnings to future movements
in interest rates applied on assets and liabilities. The Group's management
closely monitors interest rate fluctuations on a continuous basis and ensures
that assets and liabilities are matched and re-priced in a timely manner.
The Group is exposed to interest rate risk as a result of mismatches or gaps
in the amounts of assets and liabilities that mature or are re-priced in a
given period. The most important source of interest rate risk derives from the
lending, funding and investing activities, where fluctuations in interest
rates are reflected in interest margins and earnings.
a) Investment bank credit risk
Credit risk is the risk of a person or an organization defaulting in the
repayment of their obligations to the Group in respect of the terms and
conditions of the credit facilities granted to them by the Group. The
management minimizes this risk by spreading its loan portfolio overall
economic sectors and by adopting appropriate procedures and controls to
evaluate the quality of the credit facilities granted and the creditworthiness
of the borrowers. The credit risk of connected accounts is monitored on a
united basis. In addition, the effective credit appraisal procedure for
examining applications for credit facilities followed by the Group, adopts as
the main criteria the repayment capability and obtaining sufficient collateral
and/or guarantees depending on the nature of the lending business. The
continuous monitoring of credit accounts and the timely preventive action
further minimize, to a large extent, the exposure to credit risk.
35 Financial risk management (continued)
Risk management framework in the investment bank (continued)
a) Investment bank credit risk (continued)
International Financial Reporting Standard (IFRS) 9 covering classification
and measurement, impairment and hedge accounting. IFRS 9 introduces a
forward-looking approach for recognising credit losses in the financial
accounts-the Expected Credit Loss (ECL) approach, which takes into account a
broad range of information, including forward-looking events and conditions.
Under IFRS 9's ECL impairment framework, financial Institutions are required
to recognize ECLs at all times, taking into account past events, current
conditions and forecast information, and to update the amount of ECLs
recognised at each reporting date to reflect changes in an asset's credit
risk. It is a more forward-looking approach and will result in more timely
recognition of credit losses.
IFRS 9 introduces a three-stage approach for the measurement of ECLs of
financial assets described as follows:
Stage 1 (Performing) - Where there has not been a significant increase in
credit risk (SICR) since initial recognition of a financial instrument, an
amount equal to 12 months expected credit loss is recorded. The expected
credit loss is computed using a probability of default occurring over the next
12 months. For those instruments with a remaining maturity of less than 12
months, a probability of default corresponding to remaining term to maturity
is used.
Stage 2 - (Under-performing) When a financial instrument experiences a SICR
subsequent to origination but is not considered to be in default, it is
included in Stage 2. This requires the computation of expected credit loss
based on the probability of default over the remaining estimated life of the
financial instrument.
Stage 3 - (Non-performing) Financial instruments that are considered to be in
default are included in this stage. Similar to Stage 2, the allowance for
credit losses captures the lifetime expected credit losses.
If the credit risk has not increased significantly accounts are held in Stage
1 and accordingly IFRS 9 requires allowances based on 12 month expected
losses. If the credit risk has increased significantly, accounts will move to
Stage 2 and if the loan is 'credit impaired' then clients move further to
Stage 3. For Stage 2 and Stage 3 the standard requires allowances to be based
on lifetime expected losses.
Defining "SICR":
A significant increase in credit risk is expected to occur prior to
delinquency. While behavioral indicators should not be ignored, behavioral
indicators (DPD, Partial payments etc.) are often lagging indicators of
increases in credit risk and therefore they should be considered in
conjunction with other, more forward-looking information.
b) Investment bank liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its payment
obligations when they fall due under normal and stress circumstances. To limit
this risk, management has arranged diversified funding sources.
Cash flow forecasting is performed in the operating entities of the bank and
aggregated by the central treasury unit. The unit monitors the bank's
liquidity requirements to ensure it has sufficient cash to meet operational
needs while maintaining sufficient headroom on its committed short term
facilities at all times so that the bank does not breach any capital adequacy
rules.
35 Financial risk management (continued)
Risk management framework in the investment bank (continued)
b) Investment bank liquidity risk (continued)
Surplus cash held by the operating entities over and above balance required
for working capital management are, with the input of central treasury, are
either up streamed to the holding company invested in time deposits, money
market accounts and investment funds.
c) Investment bank operational risk
Operational risk is the risk of direct or indirect loss due to an event or
action causing failure of technology, process infrastructure, personnel, and
other risks having an operational risk impact. The Group seeks to minimize
actual or potential losses from operational risk failure through a framework
of policies and procedures that identify, assess, control, manage, and report
those risks.
Controls include effective segregation of duties, access, authorization and
reconciliation procedures, staff education and assessment processes.
35.1 Credit risk
Risk management framework in aiBank
The Bank is exposed to credit risk which is the risk resulting from a party's
failure to meet its contractual obligations towards the Bank. The credit risk
is considered to be the most significant risk for the Bank, therefore
requiring careful management. Credit risk is mainly represented in lending
activities that give rise to loans, facilities and investment activities that
result in the Bank's assets including debt instruments.
Credit risk exists also in financial instruments outside the financial
position such as loan commitments. The financial risk management and control
are centralized in a financial risk management team in the Bank's Risk
Management Department which reports to the Board of Directors and head of each
business unit regularly.
Loans and facilities to banks and customers (including commitments and
financial guarantee contracts)
In measuring credit risk of Funded facilities to customers and to banks, the
Bank's rating system is based on three key pillars:
- Current exposures to the counterparty and its likely future
development, from which the Bank derive the (exposure at default);
- The risk of default failure (Loss given default); and
- The probability of default by the customer or counterparty on its
contractual obligations.
These credit risk measurements, are embedded in the Bank's daily operations
which reflect expected loss through the expected loss model required by the
Banking Supervision Committee, and the operational measures can contradict
with the burden of impairment in accordance with the previous standards that
depend on the losses that have realized on the date of the financial
statements (realized loss model) and not the expected losses as will come
after.
The Bank assesses the probability of default per each customer using internal
rating techniques tailored to the various categories of customers. These
techniques have been developed internally and the statistical analyses combine
credit officers' personal judgment to reach the appropriate viability rating.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Customers of the Bank are segmented into four viability rating classes. The
Bank's viability rating scale, which is shown below, reflects the range of
default probabilities defined for each rating class. This means that, in
principle, credit positions migrate between classes as the assessment of their
probability of default changes. The rating techniques are kept under review
and are upgraded as necessary. The Bank regularly validates the performance of
the viability rating techniques and their ability to predict cases of default.
Bank's internal rating classes Bank's rating Rating description
1 Performing debts
2 Standard monitoring
3 Special monitoring
4 Non- performing debts
The position exposed to default depends on the amounts expected by the Bank to
be outstanding when default occurs. For example, for a loan, this position is
the nominal value and for commitments, the Bank recognizes all amounts
actually withdrawn in addition to other amounts that are expected to have been
withdrawn up to the date of the delay if it occurs.
Loss given default or loss severity represents the Bank's expectation of the
extent of loss on a claim should a default occur. It is expressed as
percentage of loss to debt and typically varies by type of the debtor,
seniority of claim and availability of collateral or other credit coverages.
Estimation of exposure to credit risks to manage the credit risks is a complex
matter that requires the use of statistical and electronic models, as the
level of exposure to credit risks changes depending on the changes in market
conditions and other economic areas in a complex and rapid degree. The
exposure to credit risk changes depending on the changes in the level, value
and timing of expected cash flows and the passage of time. Accordingly,
assessment of the credit risk of the assets portfolio requires further
estimations of the probability of default and the related loss rates. The Bank
measures credit risk losses by using the probability of default (default in
contractual liabilities) based on the carrying amount balance of the financial
instrument at the date of Exposure at Default and loss given default.
Classification of credit risks
The Bank assesses the probability of default at the level of each customer /
related Group / credit product, by using techniques to classify the customers
into different categories, taking into account the minimum rating in
accordance with the CBE instructions in terms of determining the
creditworthiness of the customers and making the provisions issued during the
year 2005. Therefore, the Bank uses a Group of internally developed models and
evaluation techniques for the categories of counterparties, customers and the
nature of various loans in light of the available information that is
collected on the date of adoption of the used model (such as: level of income,
level of disposable income and guarantees for individual clients, revenues,
type of industry, and other financial and non-financial indicators of the
institutions). The Bank completes such indicators with a set of external data,
such as the inquiry reports issued by both CBE and credit reporting companies
on borrowers and the reports issued by the other local and external credit
rating agencies. Moreover, the models used by the Bank allow the systematic
exercise of expert assessment by credit risk officials in the final internal
credit rating. Therefore, this allows to consider other matters and indicators
that may not have been taken as part of other data inputs in the internally or
externally developed assessment models and techniques or through external
sources.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Classification of credit risks (continued)
Credit grades are assessed so that the risk of default increases incrementally
at each higher risk grade, namely the difference in default rates between the
rating grade A and A- is less than the difference in default rates between
rating grade B and B-. Additional considerations for each type of credit
portfolio held by the Bank are set out below:
Individuals, retail banking products and small & micro enterprises
After the date of initial recognition, the borrower's payment behaviour is
monitored periodically to calculate a measurement of the payment pattern. Any
other information known about the borrower, supposed to be determined by the
Bank, may have an impact the creditworthiness, such as unemployment rates and
non- payment precedents, as they are included to measure the payment pattern
and default rates are, accordingly, determined for each payment pattern
measurement.
(Large & Medium) Enterprises and Companies
The rating is determined at the level of the borrower / Groups with similar
credit risks. Any updated or new credit information or assessments are
included in the credit system constantly and periodically. In addition,
information about the creditworthiness of the borrower / Groups with similar
credit risks is also updated periodically from other sources such as financial
statements and other published financial and non-financial statements.
Debt Instruments, Treasury Bills and Government Bonds
The Bank uses the external ratings issued by the institutions mentioned in the
CBE's instructions to manage the credit risk in terms of the debt instruments
in the investment portfolio. These published classifications are monitored and
updated regularly and periodically. The default rates associated with each
rating are determined based on the rates realized over the previous twelve
months, as published by the aforementioned rating agencies. The loss rate of
the government and CBE debt instruments dominated in local currency is zero.
Future data used in the expected loss model
Future data is used in assessing whether there is a significant increase in
the credit risk of financial instruments and estimating the expected credit
losses (ECL). The management of Bank determines the main economic variables
that affect credit risk and expected credit losses for each credit portfolio
by carrying out an analysis of historical data. The economic variables and the
related effect on both Probability of Default "PD" and the Exposure at Default
"EAD" and Loss Given Default "LGD" are different depending on the financial
asset. The Bank will use expert opinions regarding these assumptions and
estimates, if necessary.
To determine the impact of such economic variables on both Probability of
Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD), the
management of the Bank carries out the "regression analysis" to understand the
historical effects arising from such variables on the default rates and the
inputs used in calculating both Exposure at Default (EAD) and Loss Given
Default (LGD). Further to the key economic scenarios, the management of Bank
establishes other potential scenarios in addition to assumptions relating to
each scenario separately.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Classification of credit risks (continued)
Future data used in the expected loss model (continued)
The lifetime probability of default (PD) relating to the key assumption and
other assumptions are used, as the outcome of multiplication is determined for
each assumption with the related probabilities of each, in addition to the
supporting indicators and qualitative indicators. Based on the results of such
study, it is assessed whether this financial asset is located at the first,
second or third level, on the basis of which it is determined whether the
expected credit losses "ECL" will be computed on 12- month bases "12-month
ECL" or over lifetime of the financial instrument "Lifetime ECL".
The expectations and probabilities of occurrence are subject to a high degree
of uncertainty, as it is known to any economic forecasts, therefore the actual
results may be significantly different from those anticipated. The Bank makes
the best estimate of these potential expectations and carries out an
analytical study of the irrelevant and non -similar factors for the different
credit portfolios to conclude appropriate assumptions for all possible
scenarios.
Variable Economic Assumptions
The most significant assumptions that have an impact on the expected credit
losses "ECL" are:
(i) Consumption Pricing Indicators (CPI)
(ii) Unemployment Rate
(iii) Gross Domestic Product (GDP)
(iv) Gross national saving/investment
(v) Real available income
Classification of the instruments relating to the losses measured on basis of
the similar Groups
For ECL provisions, Groups are classified on the basis of similar credit risk
characteristics, as risk exposure within the Bank is homogeneous. When
carrying out this classification, it is taken into consideration that there is
sufficient information that enables the Bank to classify the Bank with
statistical reliability. When sufficient information is not available, the
Bank takes into consideration the complementary internal / external reference
data.
Corporate loans
- Probability of default model (S& P) is used.
- A conciliation was made between "S&P" and "ORR".
- The model was updated by some economic indicates to keep the
probability of default in line with the clients existing in Egypt.
- The model was updated by the ratios of change in the low credit
rating of the other clients of the Bank for two years to keep the ratios of
model default in line with the clients of the Bank.
Maximum Exposure to Credit Risks - Impaired Financial Instruments
The following table includes the analysis of maximum exposure to the credit
risks of financial instruments for which the provision of expected credit
risks (ECL) is recognized
The following table represents the total carrying amount of the financial
assets and the maximum exposure to credit risk on these financial assets.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
Retail 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 218,450 1,996 261 220,707
Personal loans 5,534,145 218,152 12,711 5,765,008
Credit cards 73,907 1,653 15 75,575
Mortgage Loans 1,048,884 4,410 6,809 1,060,103
Special monitoring
Personal loans 27,008 205,669 13,819 246,496
Credit cards 2,936 728 35 3,699
Mortgage Loans -- 1,758 771 2,529
Default
Personal loans 7,836 -- 123,060 130,896
Credit cards 562 121 593 1,276
Mortgage Loans -- -- 417 417
Total carrying amount 6,913,728 434,487 158,491 7,506,706
Expected credit losses (20,566) (14,806) (153,093) (188,465)
Net carrying amount 6,893,162 419,681 5,398 7,318,241
Collaterals 2,810,872 321,585 107,631 3,240,088
Retail 31 December 2022
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 448,042 5,203 192 453,437
Personal loans 3,775,668 117,842 53,627 3,947,137
Credit cards 34,495 501 183 35,179
Mortgage Loans 620,411 1,751 7,101 629,263
Special monitoring
Personal loans 78,152 69,460 9,105 156,717
Credit cards 1,721 932 2 2,655
Mortgage Loans 592 297 306 1,195
Default
Personal loans -- -- 118,422 118,422
Credit cards 195 55 232 482
Mortgage Loans -- -- 279 279
Total carrying amount 4,959,276 196,041 189,449 5,344,766
Expected credit losses (37,942) (13,798) (145,907) (197,647)
Net carrying amount 4,921,334 182,243 43,542 5,147,119
Collaterals 2,103,776 124,953 50,308 2,279,037
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
Corporate 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 446,878 1 -- 446,879
Direct loans 10,099,457 271,204 2,777 10,373,438
Syndicated Loans 2,591,978 538,795 -- 3,130,773
Special monitoring
Overdraft -- 10 -- 10
Direct loans -- 170,176 -- 170,176
Default
Overdraft -- -- 118 118
Direct loans -- -- 929,568 929,568
Syndicated Loans -- -- 202,134 202,134
Total carrying amount 13,138,313 980,186 1,134,597 15,253,096
Expected credit losses (347,180) (167,719) (909,648) (1,424,547)
Net carrying amount 12,791,133 812,467 224,949 13,828,549
Collaterals 2,439,021 101,929 117,186 2,658,136
EGP Thousands
Corporate 31 December 2022
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring
Overdraft 1,731,280 84,776 18 1,816,074
Direct loans 9,820,868 667,574 233,194 10,721,636
Syndicated Loans 1,591,379 -- 153,501 1,744,880
Special monitoring
Direct loans -- -- 11,728 11,728
Syndicated Loans -- 184,835 -- 184,835
Default
Overdraft -- -- 79 79
Direct loans -- -- 1,017,234 1,017,234
Total carrying amount 13,143,527 937,185 1,415,754 15,496,466
Expected credit losses (328,511) (142,588) (742,067) (1,213,166)
Net carrying amount 12,815,016 794,597 673,687 14,283,300
Collaterals 3,938,922 135,392 220,298 4,294,612
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
Due From Banks 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 11,529,087 -- -- 11,529,087
Total carrying amount 11,529,087 -- -- 11,529,087
Expected credit losses (2,716) -- -- (2,716)
Net carrying amount 11,526,371 -- -- 11,526,371
Financial Investments 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 19,938,906 -- -- 19,938,906
Total carrying amount 19,938,906 -- -- 19,938,906
Expected credit losses (70,434) -- -- (70,434)
Net carrying amount 19,868,472 -- -- 19,868,472
Other Assets 31 December 2023
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 2,373,963 -- -- 2,373,963
Total carrying amount 2,373,963 -- -- 2,373,963
Expected credit losses (9,451) -- -- (9,451)
Net carrying amount 2,364,512 -- -- 2,364,512
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Maximum exposure to credit risks - impaired financial instruments (continued)
Due From Banks 31 December 2022
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 8,119,011 -- -- 8,119,011
Total carrying amount 8,119,011 -- -- 8,119,011
Expected credit losses (1,582) -- -- (1,582)
Net carrying amount 8,117,429 -- -- 8,117,429
Financial Investments 31 December 2022
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 22,604,332 -- -- 22,604,332
Total carrying amount 22,604,332 -- -- 22,604,332
Expected credit losses (68,737) -- -- (68,737)
Net carrying amount 22,535,595 -- -- 22,535,595
Other Assets 31 December 2022
Order of Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Credit Rating 12 Month Lifetime Lifetime
Standard monitoring 2,335,404 -- -- 2,335,404
Total carrying amount 2,335,404 -- -- 2,335,404
Expected credit losses (1,603) -- -- (1,603)
Net carrying amount 2,333,801 -- -- 2,333,801
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Credit Guarantees
The Bank uses many policies and practices to limit the credit risks. The most
widely adopted of these is the acceptability of collateral for debt
instruments and loan commitments. The Bank has internal policies regarding
classes of collateral that can be accepted to limit or decrease the credit
risks.
The Bank accrues out an assessment of the guarantees that have been obtained
when establishing these loans. This assessment is regularly assessed. The key
types of guarantees are:
· Cash and cash equivalent
· Real estate mortgage
· Derivatives margin agreement that has been signed with the Bank
as a part of main offsetting agreements.
· Commercial mortgages
· Financial assets pledge such as debt instruments and equity
instruments.
The guarantees held as collateral against the financial assets other than
loans and facilities depend on the nature of the instrument, as debt
securities, government bonds and other qualified bills are generally not
secured, except for the asset-backed securities and similar instruments
secured by portfolios of financial instruments. The derivatives are often
secured.
The policies adopted by the Bank have not been changed significantly in terms
of obtaining guarantees during the financial year, and there has been no
change in the quality of those guarantees held by the Bank compared to the
previous financial year.
The Bank closely monitors the guarantees held against the low - credit
financial assets, as it is likely that the Bank will hold collateral to
mitigate potential credit losses.
Written-off Financial Instruments (Loans)
The Bank excludes the financial assets that are still under compulsory
collection for unpaid contractual amounts of the bad assets. The Bank seeks to
fully recover some amounts legally due that were partially or fully written
off due to the lack of a possibility of a full recovery.
Modifications of loans terms and rescheduling
The Bank sometimes modifies terms of the loans granted to the customers due to
the commercial renegotiation or non-performing to increase the chances of
recovery. The activities of restructuring include arrangements of extension of
repayment terms, grace periods, exemption from repayment or some or full
interests. Restructuring policies and practices are based on indicators or
criteria that indicate - based on the discretion of management- that repayment
is likely to continue. These policies are constantly reviewed.
Reduction and Risk Avoidance Policies
The Bank manages, limits, and controls the concentration of credit risks at
the debtor level, Groups, industries, and countries. The Bank regulates the
levels of acceptable credit risks by setting limits to the amount of risk that
will be accepted at the level of each borrower, or Group of borrowers, and at
the level of economic activities and geographical sectors.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Reduction and Risk Avoidance Policies (continued)
These risks are monitored constantly and are reviewed annually or on a
recurring basis, when necessary. Limits of the credit risks at the level of
the borrower / bank, producer, sector, and country are quarterly approved by
the Board of Directors.
Credit limits for any borrower, including banks, are divided into sub-limits
that include the amounts on- and off- balance sheet, and the daily risk limit
relating to trading items such as forward foreign exchange contracts. Actual
amounts are compared with the daily limits. Exposure to credit risks is also
managed through periodic analysis of the ability of borrowers and potential
borrowers to meet the repayment of their liabilities and by amending lending
limits, if appropriate.
Means of setting limits of to the risks are shown as following:
Guarantees
The Bank adopts many policies and controls to limit the credit risks. These
means include the guarantees obtained against borrowed funds. The Bank sets
guiding rules for specific acceptable classes of guarantees. The key types
guarantee of loans and facilities are:
· Real estate mortgages.
· Mortgage of activity assets such as machinery and merchandise
· Mortgage of financial instruments such as debt instruments and
equity.
The financing is often granted in the longer term and loans to the companies
are secured. In order to reduce the credit loss to a minimum, the Bank seeks
to get additional guarantees from the concerned parties and when indicators of
impairment are shown for a loan or facilities. The guarantees taken as
collateral for assets other than loans and facilities are determined based on
the nature of the instrument. Generally, the debt instruments and treasury
bills are not secured, except for Groups of financial instruments covered by
Asset-Backed Securities and similar instruments that are secured by a
portfolio of financial instruments.
Master Netting Arrangements
The Bank further restricts its exposure to credit losses by entering into
master netting arrangements with counterparties with which it undertakes a
significant volume of transactions. Master netting arrangements do not
generally result in an offset of assets and liabilities shown in the balance
sheet, as transactions are usually settled on a gross basis. However, the
credit risk associated with favorable contracts is reduced by a master netting
arrangement to the extent that if a default occurs, all amounts with the
counterparty are terminated and settled on a net basis. The Bank's overall
exposure to credit risk on derivative instruments subject to master netting
arrangements can change substantially within a short year, as it is affected
by each transaction subject to the arrangement.
Credit Related Commitments
The main purpose of credit-related commitments is to ensure that funds are
available to the customer on demand, and financial guarantee contracts carry a
credit risk related to loans, and documentary and commercial credits issued by
the Bank on behalf of the customer to grant a third party the right to
withdraw from the Bank within certain amounts and under specific terms and
conditions often secured against the goods being shipped and therefore carries
a lower degree of risk than a direct loan.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Credit Related Commitments (continued)
Commitments to extend credit represent unused portions of authorizations to
extend credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Bank 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 Bank monitors the term to
maturity of credit commitments because longer-term commitments generally have
a greater degree of credit risk than shorter-term commitments.
Expected Credit Loss Measurement Policy
The Bank's policy requires defining three stages for classifying financial
assets that are measured at amortized cost, loan commitments and financial
guarantees, as well as debt instruments at fair value through other
comprehensive income, according to changes in credit quality since the initial
recognition, and then measuring (expected credit losses) in the value related
to these instruments as follows:
The unimpaired financial asset is classified upon initial recognition in Stage
1 and credit risk is monitored on an ongoing basis by the Bank's credit risk
department.
If there has been a significant increase in credit risk since initial
recognition, the financial asset is transferred to Stage 2 and the financial
asset is not considered impaired at this stage (lifetime expected credit loss
in the absence of credit impairment).
If there are indications of impairment in the value of the financial asset, it
is transferred to Stage 3, and the Bank relies on the following indicators to
determine whether there are objective evidence indicating.
· A significant increase in the rate of interest on the financial
asset because of the increase in credit risk.
· Negative material changes in the activity and financial or
economic conditions in which the borrower operates.
· A scheduling request because of difficulties facing the
borrower.
· Negative material changes in actual or expected operating
results or cash flows.
· Early signs of cash flow/liquidity problems such as delays in
servicing creditors/business loans.
· Cancellation of a direct facility by the Bank due to the
borrower's high credit risk.
General Bank Risk Measurement Model
The management performs classifications in the form of a more detailed
subGroup to comply with the requirements of the Central Bank of Egypt, and the
assets exposed to credit risk are classified according to detailed rules and
conditions that depend largely on the information related to the customer, his
activity, his financial status, and the extent of his regularity of payment.
The Bank calculates the required provisions in accordance with the
instructions of creditworthiness, on the basis of specific ratios by the
Central Bank of Egypt, and in the event that the required provisions in
accordance with the rules of the Central Bank of Egypt exceed the expected
credit losses calculated for the purposes of preparing the financial
statements, the general bank risk reserve is set aside within.
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
General Bank Risk Measurement Model (continued)
This reserve is periodically adjusted by increase or decrease so that it is
always equal to the amount of the increase between the two provisions, and
this reserve is not distributable.
Following is a table on the creditworthiness levels for institutions in
accordance with the internal assessment bases compared to the Central Bank of
Egypt assessment bases and the provision ratios required for the impairment of
the assets exposed to credit risk:
CBE Rating description Provision Internal rating description
Rating %
1 Low Risk 0% Good debts
2 Moderate Risk 1% Good debts
3 Satisfactory Risk 1% Good debts
4 Reasonable Risk 2% Good debts
5 Acceptable Risk 2% Good debts
6 Marginally Acceptable Risk 3% Standard monitoring
7 Watch List 5% Special monitoring
8 Substandard 20% Non-performing debts
9 Doubtful 50% Non-performing debts
10 Bad Debt 100% Non-performing debts
Maximum limits for credit risk before collateral
31 December 2023 31 December 2022
Cash and Balances with Central Bank limited to the statutory reserve ratio 4,030,033 1,906,215
Treasury Bills and other Government Securities 9,849,828 8,701,794
Due from banks 11,526,371 8,117,429
Loans and facilities to customers
Retail Loans
Personal loans 5,969,104 4,035,535
Credit cards 76,961 38,213
Overdraft 220,481 453,375
Mortgage loans 1,051,695 620,066
Corporate Loans
Overdraft 439,916 1,801,799
Direct loans 10,519,440 10,719,717
Syndicated loans 2,869,193 1,761,714
Suspended interest (643) (52,480)
Unearned interest (66,831) (60,509)
Financial Investment
Debt instruments 10,048,958 13,875,131
Other assets - accrued revenue 738,563 797,153
57,273,069 52,715,152
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
General Bank Risk Measurement Model (continued)
Credit risk exposure item without taking collaterals (off-balance sheet):
31-Dec-23 31-Dec-22
Items exposed to credit risk (off-balance sheet)
Loan Commitment 933,981 1,280,305
Acceptances on supplier facilities 649,754 236,791
Letters of credit 135,397 697,440
Letters of guarantee 3,310,132 3,038,760
5,029,264 5,253,296
The above table represents the maximum bank exposure to credit risk as at 31
December 2023 and 31 December 2022, without taking in consideration any
collateral held for in-balance sheet items, the balances included are based on
net carrying amounts as reported in the balance sheet and as shown above,
36.10% of the maximum exposure arising from loans and facilities to customers
against 38.42% at 31 December 2022; While investments in debt tools represent
36%, compared to 41.64% on December 31, 2022.
Management is confident in its ability to continue to control and sustain
minimal exposure of credit risk to the Bank resulting from both its loan and
facility portfolio and debt Instruments based on the following:
- 94.45% of the loans and facility portfolio is categorized in the top two
grades of the internal rating system against 94.55% at 31 December 2022.
- 84.46% of the loans and facility portfolio without accruals or impairment
indicators against 86.17% at 31 December 2022.
- 99.39% of the investments in debt instruments and treasury bills represent
the debt instruments on Egyptian Government against 89.46% at 31 December
2022.
Loans and facilities
Balances of loans and facilities at 31 December 2023 are set out below:
31 December 2023 31 December 2022
Stage 1 20,052,041 18,102,803
Stage 2 1,414,673 1,133,226
Stage 3 1,293,088 1,605,203
Total 22,759,802 20,841,232
Less:
Expected credit losses (1,613,012) (1,410,813)
Reserved interests (643) (52,479)
Interest unearned (66,831) (60,509)
Net 21,079,316 19,317,431
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Loans and facilities according to past due periods
31 December 2023 Retail Corporate
EGP Thousand Debit current Credit cards Personal loans Real estate Debit current Direct loans Syndicated Total loans and facilities to customers
Grades Accounts loans accounts loans
Performing /No Dues 220,707 66,187 5,324,833 1,049,905 447,007 9,172,630 2,941,754 19,223,023
Past due up to 30 days -- 9,387 440,175 10,197 -- 1,130,307 189,019 1,779,085
Past due 30-60 days 1,812 156,432 2,279 -- 73,671 -- 234,194
Past due more than 60 to 90 days 1,888 90,064 251 -- 168,966 -- 261,169
Impairment 1,276 130,896 417 -- 927,608 202,134 1,262,331
Total 220,707 80,550 6,142,400 1,063,049 447,007 11,473,182 3,332,907 22,759,802
31 December 2022 Retail Corporate
EGP Thousand Debit current Credit cards Personal loans Real estate Debit current Direct loans Syndicated Total loans and facilities to customers
Grades Accounts Loans accounts loans
Performing /No Dues 453,437 30,333 3,609,468 622,892 1,816,153 10,031,512 1,392,241 17,956,036
Past due up to 30 days - 4,847 337,669 6,371 - 270,773 158,279 777,939
Past due 30-60 days - 1,404 107,196 1,007 - 247,093 - 356,700
Past due more than 60 to 90 days - 1,251 49,521 188 - - - 50,960
Impairment - 481 118,422 279 - 1,201,220 379,195 1,699,597
Total 453,437 38,316 4,222,276 630,737 1,816,153 11,750,598 1,929,715 20,841,232
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Restructured loans and facilities
Restructuring activities include extending payment arrangements, implementing
forced management programs, modifying and postponing payments. Policies for
implementing restructuring depend on indicators or criteria that indicate that
there is a high probability of Continued payments, based on the personal
judgment of management. These policies are subject to continuous review. It is
usual to apply restructuring to long-term loans, especially customer financing
loans, and the renegotiated loans at 31 December 2023 amounted to EGP 431,513
thousand, compared to EGP 196,563 thousand at 31 December 2022.
Written-off loans
In accordance with the Board of Directors' decision or its specialized
committees, the written-off loans from the non-performing loans are
written-off against its related loan loss provisions and that step is made
after exhausting all the possible recovery processes.
Debt Instruments and Treasury Bills
The table below presents an analysis of debt instruments, and other treasury
bills according to the rating agencies at 31 December 2023, based on Standard
& Poor's rating and equivalent.
Treasury bills & other Governmental securities
Debt Instruments
Total
31 December 2023 - B 9,863,355 10,075,551 19,938,906
31 December 2022 - B 8,707,793 13,896,539 22,604,332
35 Financial risk management (continued)
35.1 Credit risk (continued)
Risk management framework in aiBank (continued)
Activity segments
The following table represent the analysis of the Bank's main credit exposure
at carrying value categorized by the activities practiced by the bank's
customers.
31 December 2023 Commercial activity Industrial Financial institutions Real estate companies Governmental sector Other Individuals Total
activity
Activities
Cash and balances with Central Bank -- -- 4,240,517 -- -- -- -- 4,240,517
Due from banks -- -- 11,529,087 -- -- -- -- 11,529,087
Loans and facilities to customers Retail loans
Overdraft -- -- -- -- -- 1,321 219,386 220,707
Personal loans -- -- -- -- -- 904 6,141,496 6,142,400
Credit cards -- -- -- -- -- -- 80,550 80,550
Mortgage loans -- -- -- -- -- -- 1,063,049 1,063,049
Corporate loans
Overdraft 19 9,851 92,343 4 -- 344,790 -- 447,007
Direct loans 284,565 5,839,569 1,422,342 971,254 -- 2,955,452 -- 11,473,182
Syndicated loans -- 656,706 -- 1,289,894 264,653 1,121,654 -- 3,332,907
Financial investments
Debt instruments -- -- 19,938,906 -- -- -- -- 19,938,906
Other assets -- -- 767,981 -- -- -- -- 767,981
Total at 31 December 2023 284,584 6,506,126 37,991,176 2,261,152 264,653 4,424,121 7,504,481 59,236,293
35 Financial risk management (continued)
35.1 Credit risk (continued)
31 December 2022 Commercial activity Industrial Financial institutions Real estate companies Governmental sector Other Individuals Total
activity
Activities
Cash and balances with Central Bank - - 2,072,958 - - - - 2,072,958
Due from banks - - 8,119,010 - - - - 8,119,010
Loans and facilities to customers
Retail loans
Overdraft - - - - - - 453,437 453,437
Personal loans - - - - - - 4,222,276 4,222,276
Credit Cards - - - - - - 38,316 38,316
Mortgage loans - - - - - - 630,737 630,737
Corporate loans
Overdraft 49 179,441 120,579 1,045,529 - 470,555 - 1,816,153
Direct loans 123,738 5,987,374 1,666,493 1,226,697 11,816 2,734,480 - 11,750,598
Syndicated loans - 291,240 - 596,607 295,486 746,382 - 1,929,715
Financial Investments
Debt instruments - - 22,604,333 - - - - 22,604,333
Other assets - - 797,153 - - - - 797,153
Total at 31 December 2022 123,787 6,458,055 35,380,526 2,868,833 307,302 3,951,417 5,344,766 54,434,686
35 Financial risk management (continued)
35.2 Market risk
Risk management framework in aiBank
The Bank is exposed to market risk, which is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market risks arise from open positions in interest rate,
currency and equity products, all of which are exposed to general and specific
market movements and changes in the level of sensitivity of market rates or
prices such as interest rates, foreign exchange rates and equity prices. The
Bank separates exposures to market risk into either trading or non- trading
portfolios.
The management of market risks arising from trading or non-trading activities
is concentrated in the market risk management of the Bank and is monitored by
two teams separately. Periodic reports on market risks are submitted to the
Board of Directors and heads of each business unit.
Trading portfolios include those positions arising from the Bank's dealings
directly with customers and market-making transactions, where the Bank acts as
a principal with customers or with the market Non- trading portfolios
primarily arise from the interest rate management of the entity's retail and
commercial banking assets and liabilities, these portfolios include foreign
exchange and equity risks arising from investments at amortized cost and at
fair value through other comprehensive income.
The Bank uses the method of relating debit interest rate with credit interest
rate to avoid the risk of fluctuations in interest rate. The Bank also depends
on fluctuated interest rate which does not exceed 3 months except in specific
cases interest rates are specified for longer period relating resources
portfolio with application portfolio to get return that covers its costs.
In addition, the Bank should not exceed the following:
(i) The surplus amount of any foreign currency positions should not
exceed 1 % of the capital base
(ii) The total surplus of foreign currency positions should not exceed 2
% of capital base
(iii) The total shortage amount in the position of any currency should not
exceed 10 % of capital base
(iv) The total shortage of (local/foreign) currency positions should not
exceed 20 % of capital base
Market Risk Measurement Techniques
The exchange rate risk is measured and hedged by daily follow-up of foreign
exchange rates and purchase or sale operations in proportion to market prices
with the adoption of limits for foreign currency positions and daily stop-loss
limits in proportion to the risks acceptable to the Bank.
The risk of interest rate movements is measured using the standard method for
measuring the gap that affects the Bank's profits or the economic value of the
Bank.
The risks of securities rate fluctuations are measured. The Market Risk
Department follows up on the classification, sale, and purchase of financial
investments for the purpose of trading and making a daily assessment of them
with close follow-up and working to set the necessary limits for them, in
cooperation with the treasury sector, while measuring the value at risk of
those instruments if they are kept for the purpose of trading to determine the
extent of potential losses.
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Market Risk Measurement Techniques (continued)
Liquidity risk is measured by managing all assets and liabilities inside and
outside the balance sheet in line with the Bank's objectives in its
management, through the ALCO committee, which identifies the sources from
which liquidity risks arise with the management of market risks and the work
of possible scenarios for liquidity pressure and management in case of crises.
The causes of market risks are due to the risk of interest rates and exchange
rate risks that arise due to the Bank's daily activities. The Bank manages the
risks it is exposed to in the market through a comprehensive framework that
reflects the limited acceptance of those risks. All reports are presented to
the Risk Committee and the Assets and Liabilities Committee of the Bank.
market risks are measured as follows:
Measuring the interest rate risk for positions held not for the purpose of
trading, which is the risk that arises from unfavourable movements in the
prevailing interest rates in the market during a certain period of time, which
may negatively affect the Bank's profitability and the economic value of its
equity and consequently the bank's position and the Bank's profitability. The
Bank calculates the qualitative and quantitative requirements regarding the
rate of interest risks of the positions held for non-trading purposes, while
carrying out stress tests on them.
Value at risk of non-trading purpose according to risk type
31 December 2023
Average Higher Lower
EGP
EGP EGP
Interest rate risk 839,393 1,419,214 329,476
31 December 2022
Average Higher Lower
EGP
EGP EGP
Interest rate risk 206,098 345,451 175,299
Foreign exchange fluctuation risk
The Bank is exposed to the effects of fluctuations in the foreign currency
exchange rates on its financial position and cash flows. The Board of
Directors sets limits on the level of exposure by currency and in aggregate
for both overnight and intra-day positions, which are monitored daily. The
table below summarizes the Bank's exposure to foreign currency exchange rate
risk at the end of financial year, and Bank's financial instruments at
carrying amounts, categorized by currency.
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Foreign exchange fluctuation risk (continued)
31 December 2023 EGP USD EUR GBP Other Total
Currencies
Financial Assets
Cash and balances with Central Bank 4,145,948 77,013 13,709 757 3,090 4,240,517
Due from banks 6,201,523 4,696,110 393,379 229,657 5,702 11,526,371
Loans and facilities to customers 19,100,791 1,958,757 19,768 -- -- 21,079,316
Financial Investments
Financial Investments at fair value through other comprehensive income 8,338,787 493,308 2,778 -- -- 8,834,873
Financial Investments at amortized cost 4,990,053 6,169,819 73,989 -- -- 11,233,861
Financial Investments in associates 434,687 -- -- -- -- 434,687
Other Financial Investments 653,136 111,504 3,083 258 -- 767,981
Total financial assets at 31 December 2023 43,864,925 13,506,511 506,706 230,672 8,792 58,117,606
Financial liabilities
Due to banks 5,129 2,650,375 -- -- 20,589 2,676,093
Customers' deposits 39,077,242 10,812,453 508,248 230,893 5,371 50,634,207
Other loans 126,684 -- -- -- -- 126,684
Other financial liabilities 546,828 44,062 127 9 -- 591,026
Total financial liabilities at 31 December 2023 39,755,883 13,506,890 508,375 230,902 25,960 54,028,010
31 December 2023 4,109,042 (379) (1,669) (230) (17,168) 4,089,596
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Foreign exchange fluctuation risk (continued)
31 December 2022 EGP USD EUR GBP Other Total
Currencies
Financial Assets
Cash and balances with Central Bank 2,015,850 45,425 10,458 237 988 2,072,958
Due from banks 6,803,457 839,286 314,997 150,682 9,007 8,117,429
Loans and facilities to customers 17,590,294 1,711,849 15,287 - - 19,317,430
Financial Investments
Financial Investments at fair value through other comprehensive income 9,301,609 1,834,998 58,776 - - 11,195,383
Financial Investments at amortized cost 7,928,983 3,589,709 - - - 11,518,692
Financial Investments at Fair value through profit or loss - - - - - -
Financial Investments in associates 388,963 - - - - 388,963
Other Financial Investments 720,465 74,295 2,332 61.00 - 797,153
Total financial assets at 31 December 2022 44,749,621 8,095,562 401,850 150,980 9,995 53,408,008
Financial liabilities - - - - - -
Due to banks - 785,959.00 - - - 785,959
Customers' deposits 40,002,099 7,398,695 565,604 151,231 12,543 48,130,172
Other loans 6,557 - - - - 6,557
Other financial liabilities 392,180 11,401 10 5 - 403,596
Total financial liabilities at 31 December 2022 40,400,836 8,196,055 565,614 151,236 12,543 49,326,284
31 December 2022 4,348,785 (100,493) (163,764) (256) (2,548) 4,081,724
Interest rate risk
The Bank is exposed to the effects of fluctuations in the levels of the
prevailing interest rate in the market, i.e., the risk of cash flows of the
interest rate represented in the fluctuation of future cash flows of a
financial instrument due to changes in the interest rate of the instrument and
fair value risk of the interest rate, i.e., is the risk of fluctuations in the
value of the financial instrument as a result of a change in the interest
rates in the market. The interest margin may increase due to these changes;
however, the profits may decrease if unexpected movements occur. The Bank's
Board of Directors sets limits for the level of variation in interest
re-pricing that can be maintained by the Bank, and this is monitored daily by
the Bank's fund management.
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Interest rate risk (continued)
The tables below summaries the Bank 's exposure to the interest rate
fluctuations risk that include carrying amount of the financial instruments
categorized based on the repricing dates or the maturity date - whichever is
earlier.
31 December 2023 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
Financial Assets
Cash and balances with Central Bank -- -- -- -- -- 4,240,517 4,240,517
Due from banks 6,782,038 4,728,513 18,536 -- -- (2,716) 11,526,371
Loans and facilities to customers 1,726,427 10,359,962 1,256,937 7,169,237 2,247,239 (1,680,486) 21,079,316
Financial Investments
Financial Investments at fair value through other comprehensive income 2,670,452 3,800,142 1,618,038 521,227 55,065 169,949 8,834,873
Financial Investments at amortized cost 285,936 3,917,998 2,463,559 4,323,498 282,990 (40,120) 11,233,861
Financial Investments in associates -- -- -- -- -- 434,687 434,687
Other Financial Investments -- -- -- -- -- 767,981 767,981
Total financial assets at 31 December 2023 11,464,853 22,806,615 5,357,070 12,013,962 2,585,294 3,889,812 58,117,606
Financial liabilities -- -- -- -- -- -- --
Due to banks 2,378,769 -- -- -- -- 297,324 2,676,093
Customers' deposits 13,898,659 9,562,144 12,239,988 14,153,190 47,032 733,194 50,634,207
Other loans -- -- -- -- 126,684 -- 126,684
Other financial liabilities -- -- -- -- -- 591,026 591,026
Total liabilities 16,277,428 9,562,144 12,239,988 14,153,190 173,716 1,621,544 54,028,010
31 December 2023 (4,812,575) 13,244,471 (6,882,918) (2,139,228) 2,411,578 2,268,268 4,089,596
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Interest rate risk (continued)
31 December 2022 Up to 1 month More than 1 month to 3 months More than 3 months to 1 year More than 1 year to 5 years More than 5 years Without interest Total
Financial Assets
Cash and balances with Central Bank -- -- -- -- -- 2,072,958 2,072,958
Due from banks 3,571,704 4,396,591 -- -- -- 149,134 8,117,429
Loans and facilities to customers 2,496,358 8,631,569 1,430,660 4,439,275 3,843,369 (1,523,801) 19,317,430
Financial Investments
Financial Investments at fair value through other comprehensive income 1,794,500 1,935,585 5,430,407 1,781,258 730,406 (476,773) 11,195,383
Financial Investments at amortized cost 879,316 2,662,840 2,338,332 5,269,763 395,848 (27,407) 11,518,692
Financial Investments in associates -- -- -- -- -- 388,963 388,963
Other Financial Investments -- -- -- -- -- 797,153 797,153
Total financial assets at 31 December 2022 8,741,878 17,626,585 9,199,399 11,490,296 4,969,623 1,380,227 53,408,008
Financial liabilities
Due to banks 515,900 -- -- -- -- 270,059 785,959
Customers' deposits 12,395,706 10,044,977 12,044,897 12,608,245 49,714 986,633 48,130,172
Other loans -- -- -- -- 6,557 -- 6,557
Other financial liabilities -- -- -- -- -- 403,596 403,596
Total financial liabilities at 31 December 2022 12,911,606 10,044,977 12,044,897 12,608,245 56,271 1,660,288 49,326,284
31 December 2022 (4,169,728) 7,581,608 (2,845,498) (1,117,949) 4,913,352 (280,061) 4,081,724
35 Financial risk management (continued)
35.2 Market risk (continued)
Risk management framework in aiBank (continued)
Interest rate risk (ontinued)
Sensitivity analysis of interest rate
Changes in interest rates affect equity by the following ways:
(i) Retained Earnings: Increase or decrease in the net interest income and
fair value of the financial derivatives included in profits and losses.
(ii) Fair value reserve: Increase or decrease in the fair value of the
financial assets at fair value through other comprehensive income recognized
directly in the statement of other comprehensive income.
35.3 Liquidity risk
Risk management framework in aiBank
Liquidity risk is the risk that the Bank is unable to meet its 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
obligation to repay depositors and fulfil commitments to lending.
Liquidity Risk Management
The Bank's liquidity management process, as carried out within the Bank and
monitored by Assets & Liabilities Committee, includes:
(i) Day-to-day funding managed by monitoring future cash flows to ensure
that requirements can be met. This includes replenishment of funds as they
mature or borrowed by customers. The Bank maintains an active presence in
global money markets to enable this to happen.
(ii) Maintaining a portfolio of highly marketable assets that can easily
be liquidated as protection against any unforeseen interruption to cash flow.
(iii) Monitoring the liquidity ratios against internal and regulatory
requirements by the Central Bank of Egypt.
(iv) Managing the concentration and profile of debt maturities.
For monitoring and reporting purpose, the cash flow is measured and projected
for the next day, week and month respectively, which are key periods for
liquidity management. The starting point for those projections represented in
the contractual maturity analysis of the financial liabilities and the
expected collection date of the financial assets.
Asset and liability management also monitors unmatched medium-term assets, the
level and type of undrawn loan commitments, the usage of debit current account
facilities and the impact of contingent liabilities such as letters of
guarantees and credits.
The following table represent the analysis of the Bank's liquidity coverage
ratio:
31-Dec-23 31-Dec-22
Total value of high-quality liquid assets (1) 16,081,143 23,282,621
Total cash outflow 10,601,212 16,130,875
Total cash inflow within the set limit (the value less than: total cash (7,950,909) (4,788,014)
inflows ،75% from total cash outflows)
Net cash outflows (2) 2,650,303 11,342,861
Liquidity coverage ratio (1/2) 606.77% 205.26%
35 Financial risk management (continued)
35.4 Capital risk
Risk management framework in aiBank
The Bank's objectives on managing capital, which include other elements in
addition to the equity shown in the balance sheet, are as follows:
Compliance with the legal requirements of capital in the Arab Republic of
Egypt.
Protecting the Bank's ability to continue as a going concern and enabling it
to continue generating income for shareholders and other parties dealing with
the Bank.
Maintaining a strong capital base that supports the growth of activity.
The capital adequacy and capital uses are daily reviewed according to the
requirements of the Central Bank of Egypt by the Bank's management, through
forms based on the guidelines of the Basel Committee on Banking Supervision.
The required data are submitted and provided to the Central Bank of Egypt on a
quarterly basis.
The Central Bank of Egypt requires the Bank to do the following:
- Maintain one billion Egyptian pounds as a minimum for issued and paid-up
capital.
- Maintain a ratio equal to or more than 10% between the elements of capital
and the elements of assets and contingent liabilities weighted by risk
weights.
The numerator of the capital adequacy ratio consists of the following two
tiers:
Tier I after disposals includes the following:
Some of the items that will be deducted/ will not be considered and mentioned
in the "supervisory instructions on the minimum ratio of capital adequacy",
Chapter II on the capital base will be dealt with later as stated in the
instructions.
- Continuing core capital after disposals (CET1-Common Equity).
- Additional core capital
There are some items that will be deducted/ not considered and mentioned in
the "supervisory instructions on the minimum ratio of capital adequacy",
Chapter II on the capital base. These items are deducted from the continuous
core capital if the balance is negative, while they are not considered if it
is positive.
Tier II after disposals
It includes 45% of the special reserve, loans and subordinated deposits within
the limits of the prescribed percentage, as well as the considerable
provisions required against the debt instruments, loans, credit facilities and
contingent liabilities included in the first stage (Stage 1).
The capital adequacy ratio model includes some important notes and points
which are as follows:
1. Reserves: include legal, general, statutory, supportive and capital
reserves only.
2. The "general risk reserve" is formed on the beginning date of the
application of International Financial Reporting Standard (IFRS 9), in
accordance with the supervisory instructions issued to banks on 26 January
2019. It includes the special reserve - credit, the general bank risk reserve
- credit and the reserve risk of standard (9), considering that in the
subsequent periods of application, the Bank shall abide by what is stated
within the instructions on minimum capital adequacy ratio "which is not to
consider the bank risk reserve when calculating the ratio."
35 Financial risk management (continued)
35.4 Capital risk (continued)
Risk management framework in aiBank (continued)
The numerator of the capital adequacy ratio consists of the following two
tiers (continued):
Tier II after disposals (continued)
3. The values of accumulated other comprehensive income items, whether they
are positive or negative, are considered.
4. Interim profits/ (losses): It is allowed to record the net interim
profits within the capital base after the limited inspection report prepared
by the auditor on the Bank's financial statements on a quarterly basis. As for
the interim losses, they are presented without any conditions.
5. It does not include the part related to credit, and the explanatory
instructions of the rules on the preparation and presentation of the financial
statements issued by the Central Bank in April 2009, page 7, item (9) must be
perused.
6. It should not exceed 1.25% of total assets and contingent liabilities
weighted for credit risk, provided that the required provisions against debt
instruments, loans, credit facilities and contingent liabilities included in
the Stage 2 and Stage 3 are sufficient to meet the obligations for which the
provision is formed.
7. "The value of exceeding the limits set for investments in countries,
weighted by risk weights."
8. This value must be included in accordance with Form No. 720 related to
investments in countries abroad, taking into account that the value of the
capital base listed in the aforementioned statement must be adjusted according
to the calculated value.
Ø The continuing core capital after the regulatory adjustments is Clause 1.1
before excluding contributions to financial companies (shares or investment
funds) represented in Clause 1.3.1.1.
Ø Continuing core capital before regulatory adjustments means paid-up
capital, reserves, retained earnings, general risk reserve, and accumulated
other comprehensive income items net of goodwill and treasury shares.
Ø Subordinated loans (deposits): provided that they do not exceed 50% of Tier
I after disposals and that 20% of its value is consumed in each of the last
five years.
35.5 Financial leverage ratio
Risk management framework in aiBank
The Board of Directors of the Central Bank of Egypt, in its session held on 7
July, issued a decision approving the supervisory instructions related to the
financial leverage, besides the banks' compliance with the stipulated minimum
percentage (3%) on a quarterly basis, as follows:
This is in preparation for the consideration of it within the first pillar of
Basel decisions (the minimum capital adequacy ratio) for maintaining the
strength and integrity of the banking sector and keeping pace with the best
international control practices in this regard.
The financial leverage reflects the relationship between Tier I of capital
used in capital adequacy ratio (after disposals) and the Bank's assets (inside
and outside the balance sheet) unweighted with risk weights.
36 Fair values and classifications of financial assets and liabilities
Financial instruments measured at fair value
Bank balances
The fair value of one-day variable-rate placements and deposits represent
their present value, and the expected fair value of variable-rate deposits is
estimated based on the discounted cash flows using the interest rate
prevailing in the capital markets for debts that have similar credit risk and
maturity date.
Loans and facilities to banks
Loans and facilities to banks represent loans other than bank deposits. The
expected fair value of loans and facilities is the discounted value of future
cash flows expected to be collected and the cash flows are discounted using
the current market interest rate for determining the fair value to determine
the fair value to meet all the requirements. This includes replacement of
funds on maturity or upon being lent to customers. The Bank is present in
global money markets to achieve this objective.
Funded facilities to customers
They are recognized at net value after deduction of provision for impairment
loss. The expected fair value for these loans and facilities represents the
discounted value of estimated future cash flows expected to be collected. Cash
flows are deducted using the current interest rate in the market to specify
the fair value.
Investments in securities
Assets through other comprehensive income or profit or loss are carried at
fair value. The fair value is determined based on market prices. If such data
is not available, fair value is estimated using prices of capital markets for
traded securities with similar credit characteristics, dates of maturity and
rates.
Due to other banks and customers
The estimated fair value of deposits with undefined maturity date including
interest bearing deposits is the amount to be paid upon request. The fair
value of fixed interest deposits and non-current other loans are determined in
an active market based on discounted cash flows using the interest rate on new
debts with similar maturity dates.
Issued debt Instruments
Total fair value is calculated based on prices ruling in the capital markets.
For securities with no active markets, discounted cash flow model is used
based on the current rate appropriate with the remaining period to date of
maturity.
Financial instruments not measured at fair value
Financial investments at amortized cost
They include held-to-maturity financial investments that are listed in the
market and are measured at amortized cost in case of bonds, and with respect
to investment funds, the evaluation is done at the recoverable amount (fair
value).
Management believes that the fair value is not materially different from the
carrying amount of these assets.
Due from banks
The fair value of one-day variable-rate placements and deposits represent
their present value, and the expected fair value of variable-rate deposits is
estimated based on the discounted cash flows using the interest rate
prevailing in the capital markets for debts that have similar credit risk and
maturity date.
36 Fair values and classifications of financial assets and liabilities
(continued)
Loans and facilities to banks
Loans and facilities to banks represent loans other than bank deposits. The
expected fair value of loans and facilities is the discounted value of future
cash flows expected to be collected and the cash flows are discounted using
the current market interest rate for determining the fair value. Loans and
facilities are presented net of provision for impairment losses.
Fair value measurement - fair value hierarchy:
The fair values of financial assets and financial liabilities that are traded
in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair
values using other valuation techniques.
For financial instruments that trade infrequently and have little price
transparency fair value is less objective, and requires varying degrees of
judgment depending on liquidity, concentration, uncertainty of market factors,
pricing assumptions another risks affecting the specific instrument.
Fair values of financial instruments
a) Valuation models
The Group measures fair values using the following fair value hierarchy, which
reflects the significance of the inputs used in making the measurements. Th
Group has an established control framework with respect to the measurement of
fair values.
This includes a valuation team that has overall responsibility for overseeing
a significant fair value measurements, including level 3 fair values, and
report to the management.
The valuation team regularly reviews significant unobservable inputs an
valuation adjustments.
If third party information, such as broker quotes or pricing services, is used
to measure fair values, then the valuation team assesses the evidence obtained
from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which
such valuations should be classified.
Significant valuation issues are reported to the Group Audit Committee. When
measuring the fair value of an asset or liability, the Group uses mark
observable data as far as possible. Fair values are categorized into different
levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
Level 1: inputs that are quoted market prices (unadjusted) in active markets
of identical instruments.
Level 2: inputs other than quoted prices included within Level 1 that are
observable either directly (i.e. as prices) or indirectly (i.e. derive from
prices). This category includes instruments valued using: quoted market prices
in active markets for similar instruments; quoted price for identical or
similar instruments in markets that are considered less than active; or other
valuation techniques in which all significant inputs are directly or
indirectly observable from market data.
Level 3: inputs that are unobservable. This category includes all instruments
for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based on quoted
prices for similar instruments for which significant unobservable adjustments
or assumptions are required to reflect differences between the instruments.
36 Fair values and classifications of financial assets and liabilities
(continued)
Fair values of financial instruments (continued)
b) Financial instruments measured at fair value
The following tables analyses financial instruments measured at fair value at
the reporting date, the amounts are based on the values recognized in the
statement of financial position:
Carrying amounts Fair value level
31 December 2023 Designated Amortized Designated Total Level 1 Level 2 Level 3 Total
at FVTPL
cost
at FVOCI
Financial assets measured at Fair Value:
Mutual fund certificates (notes 6 and 9) 7,355,442 - 138,264 7,493,706 43,528 - 7,450,178 7,493,706
Equity securities (notes 6 and 9) 108,293 - 187,146 295,439 31,190 - 264,249 295,439
Structured notes (notes 6 and 9) 680,319 - - 680,319 - 680,319 - 680,319
Treasury bills (notes 6 and 9) 219,222 - 7,065,958 7,285,180 - 7,285,180 - 7,285,180
Debt instruments (notes 6 and 9) 832,915 - 4,256,243 5,089,158 5,089,158 - - 5,089,158
9,196,191 - 11,647,611 20,843,802 5,163,876 7,965,499 7,714,427 20,843,802
Financial assets not measured at fair value: - - - -
Cash and cash equivalents (note 5) - 32,252,243 - 32,252,243 - - - -
Funded facilities to customers (note 8) - 19,117,655 - 19,117,655 - - - -
Banking loans and facilities (aiBank) (note 8.1) - 21,079,316 - 21,079,316 - - - -
Accounts receivable (note 7) - 6,770,962 - 6,770,962 - - - -
Investments at amortized cost (note 12) - 11,233,860 - 11,233,860 - - - -
Other assets (note 16) - 4,716,177 - 4,716,177 - - - -
- 95,170,213 - 95,170,213 - - - -
Financial liabilities measured at fair value:
Accounts payable-Customers credit balances at FVTPL (note 19) 680,319 - - 680,319 - 680,319 - 680,319
Financial Liabilities not measured at fair value:
Due to banks and financial institutions - 14,182,413 - 14,182,413 - - - -
Customer deposits - 50,634,207 - 50,634,207 - - - -
Loans and borrowings - 8,004,219 - 8,004,219 - - - -
Creditors and other credit balances - 6,148,445 - 6,148,445 - - - -
Account payable-customer credit balances - 11,319,690 - 11,319,690 - - - -
Short term bonds - 749,003 - 749,003 - - - -
- 91,037,977 - 91,037,977 - - - -
36 Fair values and classifications of financial assets and liabilities
(continued)
Fair values of financial instruments (continued)
b) Financial instruments measured at fair value (continued)
Carrying amounts Fair value level
31 December 2022 Designated Amortized Designated Total Level 1 Level 2 Level 3 Total
in EGP
at FVTPL
cost
at FVOCI
Financial assets measured at Fair Value:
Mutual fund certificates (notes 6 and 9) 5,231,021 - 116,119 5,347,140 - - 5,347,140 5,347,140
Equity securities (notes 6 and 9) 165,787 - 159,532 325,319 77,624 - 247,695 325,319
Structured notes (notes 6 and 9) 379,039 - - 379,039 - 379,039 - 379,039
Treasury bills (notes 6 and 9) 336,439 - 8,686,556 9,022,995 - 9,022,995 - 9,022,995
Debt instruments (notes 6 and 9) 660,607 - 5,117,914 5,778,521 5,778,521 - - 5,778,521
6,772,893 - 14,080,121 20,853,014 5,856,145 9,402,034 5,594,835 20,853,014
Financial assets not measured at fair value: - - - -
Cash and cash equivalents (note 5) - 26,214,250 - 26,214,250 - - - -
Funded facilities to customers (note 8) - 13,904,712 - 13,904,712 - - - -
Banking loans and facilities (A) (note 8.1) - 19,317,430 - 19,317,430 - - - -
Accounts receivable (note 7) - 6,168,256 - 6,168,256 - - - -
Investments at amortized cost (note 12) - 11,518,692 - 11,518,692 - - - -
Other assets (note 16) - 3,401,911 - 3,401,911 - - - -
- 80,525,251 - 80,525,251 - - - -
Financial liabilities measured at fair value:
Accounts payable-Customers credit balances at FVTPL (note 19) 379,039 - - 379,039 - 379,039 - 379,039
Financial Liabilities not measured at fair value:
Due to banks and financial institutions - 12,371,836 - 12,371,836 - - - -
Customer deposits - 48,130,172 - 48,130,172 - - - -
Loans and borrowings - 4,996,029 - 4,996,029 - - - -
Creditors and other credit balances - 4,982,665 - 4,982,665 - - - -
Account payable-customer credit balances - 10,194,569 - 10,194,569 - - - -
Short term bonds - 500,000 - 500,000 - - - -
- 81,175,271 - 81,175,271 - - - -
37 Change in estimate and reclassifications of comparative figures
In June 2022 Tanmeyah Micro Enterprise Services S.A.E (Subsidiary 93.983%)
acquired 100% of Fatura Netherlands B.V shares with an acquisition cost
amounting to EGP 826,319. In 2023 the group has performed the Purchase Price
Allocation (PPA) study to determine the fair value of the identifiable asset
and liabilities according to the International Financial Reporting Standards.
The Group hasreclassified a number of the comparative information to match the
current year's presentation.
The table below summarises the reatatement and reclassifications of
comparative figures:
Consolidated statement of financial position As at 31 December 2022 as previously stated Adjustments Reclassifications As at 31 December 2022
Accounts receivables 5,569,133 -- 599,123 6,168,256
Goodwill and other intangible assets 1,954,750 (7,519) -- 1,947,231
Accounts payable - customers credit balance 9,595,446 -- 599,123 10,194,569
Retained earnings 7,460,140 (36,901) -- 7,423,239
Non - controlling interests 3,415,904 29,382 -- 3,445,286
Consolidated statement of profit or loss For the year ended 31 December Adjustments Reclassifications For the year ended 31 December 2022
2022 as previously stated
Depreciation and amortisation (296,471) (39,263) -- (335,734)
Total impact on the consolidated statement of profit or loss 2,078,477 (39,263) - 2,039,214
Attributable to:
Shareholders of the Holding Company 1,724,109 (36,901) - 1,687,208
Non-controlling interests 354,368 (2,362) - 352,006
The Group did not present a third statement of financial position as at the
beginning of the preceding period as the restatement did not impact the
information in the statement of financial position at the beginning of the
preceding period.
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