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FBN Bank (UK) Limited

Report and Financial Statements

Period ended 31 December 2011

Our VisionTo be the first choice UK

and European Bank for Africa

Our MissionTo provide world class international

banking services to African related

businesses and individuals

The London Olympic Stadium.

Report and Financial Statement

3

Contents

Profile 04

Officers and professional advisers 05

Chairman’s statement 06

Managing Director/Chief Executive’s Review 08

Directors' report 13

Statement of directors’ responsibilities 15

Independent auditors' report 16

Statement of comprehensive income 17

Balance sheet 18

Statements of changes in equity 19

Consolidated cash flow statement 20

Bank cash flow statement 21

Notes to the consolidated accounts 22


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FBN Bank (UK) Ltd commenced trading on the 1st November2002 following receipt of the relevant authorisation from theFinancial Services Authority and the approval of the courtsunder the Financial Services and Markets Act 2000. The assetsand liabilities of the former London branch of First Bank ofNigeria PLC were absorbed by FBN Bank (UK) Ltd. It is awholly owned subsidiary of First Bank of Nigeria Plc and theoffice is based in the heart of the City of London, at 28Finsbury Circus, EC2M 7DT.

First Bank of Nigeria Plc for over a century has distinguisheditself as a leading banking institution and a major contributorto the economic advancement and development of Nigeria.Founded in 1894 by a shipping magnate from Liverpool, SirAlfred Jones, the Bank commenced as a small operation inthe office of Elder Dempster & Company in Lagos. It wasincorporated as a Limited Liability Company on March 31,1894, with the Head Office in Liverpool. It started businessunder the corporate name of the Bank for British West Africa(BBWA) with a paid - up capital of £12,000, after absorbingits predecessor, the African Banking Corporation, which wasestablished earlier in 1892. This signalled the pre-eminentposition which the Bank was to establish in the bankingindustry in West Africa.

In the early years of operations, the Bank recorded impressive growth and worked closely with the ColonialGovernment in performing the traditional functions of aCentral Bank. To justify its West Africa coverage, a branchwas opened in Accra, Gold Coast (now Ghana) in 1896 andanother in Freetown, Sierra Leone in 1898. These marked the creation of the Bank’s international banking operations.The second branch of the Bank in Nigeria was in the oldCalabar in 1900 and two years later, services were extendedto Northern Nigeria.

Currently with 717 branches, agencies and subsidiaries spread throughout Nigeria, the Bank maintains the largestbranch network in the industry. To satisfy the needs of itscustomers, First Bank has diversified into a wide range ofbanking activities and services. These include Corporate,Retail and Private Banking, Registrarship, Pension FundCustodianship, Trusteeship, Insurance Brokerage, PrivateEquity, Venture Capital and Microfinance.

Over the years, the Bank has experienced phenomenalgrowth and Capital stood at N365 billion at the end ofDecember 2011 with a deposit base of N1,947 billion. To reposition and to take advantage of opportunities in the changing environment, the Bank embarked on severalrestructuring initiatives. In 1957, it changed its name fromBank of British West Africa to Bank of West Africa. In 1969,the Bank was incorporated locally as the Standard Bank ofNigeria Limited in line with the Companies’ Decree of 1968.Changes in the name of the Bank also occurred in 1979 and1991, to First Bank of Nigeria Limited and First Bank ofNigeria Plc, respectively.

FBN obtained a listing on the Nigerian Stock Exchange (NSE)in March 1971 and has won the NSE President’s merit awardmany times for the best financial report in the banking sector.Globally, it has over 1.5 million shareholders.

With 7 million customers, and 11 subsidiaries in Nigeria, the Group now provides a comprehensive range of financialservices. Apart from FBN Bank (UK) Ltd in London and its’branch in Paris, the Bank has recently acquired BanqueInternational de Credit in the Republic of Congo and hasRepresentative offices in Johannesburg, Beijing and Abu Dhabi.

The vision of the First Bank of Nigeria Plc is ‘To be the clear leader and Nigeria’s bank of first choice’.

Profile


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Directors

Stephen Olabisi Onasanya Acting Chairman

Peter Stuart Hinson Managing Director/Chief Executive

Michael John Bamber Executive Director/Chief Operating Officer

Christiana Ekaete Fashogbon Executive Director, Business Development

Peter Arnhem Grafham

Remilekun Adetola Odunlami

Anthony Robert Paget Williams

Company Secretary

Venetia Carpenter, FCIS

Registered office

28 Finsbury CircusLondonEC2M 7DT

Bankers

HSBC Bank plc, London

HSBC, New York

Deutsche Bank AG, Frankfurt

Standard Chartered Bank PLC, New York

The Bank of Tokyo – Mitsubishi UFJ Ltd, Tokyo

Credit Suisse, Zurich

Solicitors

DLA Piper UK LLP, London

Auditors

Deloitte LLPLondon

Report and Financial StatementsOfficers and professional advisers

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As output growth moderated in the major economies, theglobal economic outlook worsened during the year in review.Both business and consumer sentiments continued to trenddownwards on the back of a succession of events in early2011 including the devastating earthquake and tsunami inJapan which caused major supply chain disruptions, theuprisings in the Middle East and North Africa region and thesharp rises in commodity prices. In the Euro area, the sovereigndebt crisis deepened despite further fiscal consolidation insome economies. Euro-zone leaders increased funding to theEuropean Financial Stability Facility to bail out weaker memberstates amidst growing uncertainty over the future of the Euro.In North America, modest signs of a recovery in the US’unemployment and consumer spending numbers were evidenttowards the end of the year, but not before the Americangovernment had agreed further spending curbs and the debtceiling to the detriment of the sovereign US’ credit rating.

Growth remained strong and consistent with earlier estimatesin the large emerging economies including China and India.However, lower exports are expected to slow growth in theseeconomies as confidence in the importing countries is dampenedby the weakness in the Euro-zone, high unemployment andbudget cuts. In the UK, the economy grew by 0.9% as theTreasury continued to implement its fiscal consolidation policywhile the budget deficit improved beyond forecast to 11.7%of GDP; however public sector net debt rose to 64.2% ofGDP from 59.3% the previous year. Base rates remained at0.5% while the Bank of England implemented a secondquantitative easing (QE) programme worth GBP 75 billion to encourage economic expansion.

Africa continues to be one of the major potential drivers of global economic recovery and growth as technology-leddevelopments, increased political stability, fiscal discipline andinfrastructure developments make it an attractive destinationfor foreign direct and portfolio investments. FBN Bank isstrategically placed as a UK bank with vast knowledge of theregion and tailored financial products to partner with companiesinvesting in Africa; a position which summarises the Bank’svision of being the first choice UK and European Bank for Africa.

In Nigeria, growth enhancing reforms put in place over thecurrent electoral cycle began to yield dividends before the endof 2011. Following the elections in April, a strong economicteam was appointed to implement a tighter monetary policyand better fiscal discipline resulting, by year-end in thesuccessful reversal of the declining trend of the country’sreserves. Key structural reforms have commenced in the oilindustry to attract investment to the downstream sector.Furthermore, the privatization of the power sector is wellunderway with visible improvements resulting from therehabilitation of existing structures. Expectations are high asthe success of the current reform efforts should result inlower business costs and increased foreign direct investments.

The Nigerian economy grew by an estimated 7.36% in 2011,driven by the non-oil sector, especially trade and agriculture.Inflation moderated over the 12 months to end-December2011, as the Central Bank of Nigeria (CBN) tighter monetarypolicy increased the policy rate by 575bps to 12% by year-end. The World Bank forecasts 7.1% GDP growth for Nigeriain 2012.

Chairman’s statement

Fellow shareholders, invited guests and distinguished ladies and gentlemen,

It gives me great pleasure to welcome you all to our 10thAnnual General Meeting. Ten years ago, FBN Bank (UK) Ltdwas established in place of First Bank’s London Branch as afully-fledged and independent subsidiary of First Bank ofNigeria Plc. Today, we can look back and identify severalachievements that we as a Bank have made in order tobecome one of the most prominent African Banks in the City of London. Year after year, the Bank has posted excellentresults while improving on products and service offerings. Last year was not an exception, but before delving into ourperformance and outlook for 2012, I would like to highlight afew key events that marked the global economy and impactedon the operating environments of FBN Bank in 2011.


As FBN Bank celebrates 10years in the city of London,we do not rest on our laurelsbut continue to press forwardas a pioneering bank

Stephen O OnasanyaActing Chairman


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Operating EnvironmentOur main operating environment is the UK where key regulatoryreforms are underway to stabilize the financial industry and intandem with international efforts to prevent the repetition ofsystemic failure of the recent years. The proposed FinancialServices Bill will increase the scope of the Bank of England’sprudential regulatory duties to include minimizing any adverseeffects of failure in the UK financial industry. With theimplementation of Basel III on the horizon, financial institutionsare shoring up capital levels and gearing up for the higheroperational costs expected from regulatory compliance.

The need to be innovative has never been greater in the UKmarket. As competition becomes fiercer, bank products mustbe tailored to meet customer needs even as the banks ensurethat they make the most effective use of capital. FBN Bank hasconsistently operated prudent capital management, ensuringa close monitoring of our capital allocation. Furthermore, in2012 we will be increasing our capital base by issuing furtherequity to our shareholder in preparation for Basel III.

In the Nigerian market which is our core source of business,the operating environment is undergoing reformative changesas the apex bank continues to closely supervise bank operations.Following the acquisition by the Asset Management Companyof Nigeria (AMCON) of non-performing loans on all thebanks’ balance sheets, and the nationalization of three failedbanks, the banking sector witnessed a spate of restructuring,mergers and acquisitions in response to CBN’s recapitalizationrequirements. Our parent bank, First Bank of Nigeria Plc, withmarket capitalization of N475 billion (GBP1.94 billion) remainsa strong pillar in the industry and continues to be an ardentsupporter of our business.

Going forward, FBN Bank UK will further leverage its relationshipwith First Bank in order to penetrate deeper into the Nigerianmarket while utilizing the beneficial synergy to provide awider array of products and services for our customersglobally. Particularly for the Nigerian and other sub-Saharanmarkets, we are well placed to increase our share of thegrowing trade and infrastructure development financemarkets given our parent bank’s capitalization and reach.

Financial ResultsAcross the financial industry, 2011 was a challenging year asbanks struggled to remain profitable while deleveraging theirbalance sheets of impaired debts in order to meet toughercapital ratios. Despite this difficult environment, FBN Banksuccessfully improved its profitability as Profit after Tax ofGBP17.6m was reported, a 3% increase from GBP17min2010. Our prudential risk management ensured a highquality of balance sheet assets, resulting in a lowerimpairment charge hence improving our bottom line.

Following the trend from previous years, total assets grew by30% from GBP 1.4bn to GBP 1.8bn as the Bank madeinroads into new African markets including Sierra Leone andIvory Coast, particularly with structured lending products. Ourshareholders funds improved by 2.2% to GBP113.4m, a resultof increased retained earnings, while we closed the year witha capital ratio of 16.26%.

OutlookAs FBN Bank celebrates 10 years in the city of London, we do not rest on our laurels but continue to press forward as a pioneering bank, in our mission to provide world classinternational banking and trade services to Africa-relatedbusinesses and individuals. In support of this and in recognitionof our capabilities, our shareholder has agreed to subscribefor additional equity and our expectation is to deliverexcellent results given our increased capital and liquidity.

In the coming year, FBN Bank will continue to leverage itspresence in Africa to expand and further develop its franchise.Despite the downward revision by the IMF of world growthforecast from 4.1% to 3.3%, sub-Saharan Africa is expectedto grow by 5.5%. With our outstanding market expertise,astute commercial judgement and sound risk managementstructure, we will be at the foremost position to contribute to and partake in the growth.

Euro-zone banks deleveraging their balance sheets, whichcould result in credit starvation and adversely impact economicrecovery in 2012, was a contributory factor to the IMF’sforecast of a mild recession of -0.5%, in addition to theimpact of additional fiscal consolidation. Moreover, Euro-zoneleaders face a tough time ahead in managing the crisis inGreece and charting an appropriate course for the future ofthe single currency area.

In this uncertain business environment, we expect to continue on tough roads for a period; however we placecredence in our prudential risk management, investment inhuman resources and a strong drive for sustainable growth.We look ahead to 2012 with the confidence that we are wellequipped to face this challenging environment.

AppreciationI would like to extend my sincere gratitude to our highlyesteemed customers for their continued patronage and to ourshareholders for their immense support. I wish to also thankall our dedicated staff, our Management and our Board ofDirectors for their remarkable efforts and committed servicetowards building a recognisable brand of expertise andpersonal service for the Bank in the city of London. With thistremendous support from all our stakeholders, we relentlesslystrive towards achieving our mission and objectives, while weendeavour to surpass their expectations.

Thank you.

Stephen O OnasanyaActing Chairman

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Distinguished shareholders, ladies and gentlemen,

I am delighted to present my report to the tenth AnnualGeneral Meeting of FBN Bank (UK) Ltd.

I am even more pleased to report that for the year to 31st December 2011 the Bank achieved another increase in profit but, before I expand upon that further, it is worthreflecting upon the environment and challenges in which this was achieved.

The IndustryThe financial services industry continued to face enormouschallenges during a year which was aggravated by the Eurocrisis resulting from difficulties faced by various countries, dueto their unsustainable levels of debt and in which even the USlost its AAA status. The regulator led demand for higher levelsof capital is understood by the industry but allied to similardemands for increases in liquidity buffers it is at odds with callsby the Government for a more generous approach to lendingto assist economic growth. This has seen the global banks lookto reduce the size of their balance sheets as a part solution toincrease capital ratios with the result of uplifts in the cost ofborrowing as credit becomes more limited. In addition theinterbank market lost confidence with banks preferring to place surplus funds with central banks or on short tenors with counterparties.

In Nigeria the Central Bank successfully continued to play a keyrole in the stabilisation of the industry by finding solutions forweak banks and taking direct ownership of three of them.

Regulatory FrameworkThe Financial Services Authority continues to work on itsrestructure into a ‘twin peaks’ model with the PrudentialRegulation Authority and the Financial Conduct Authority both due to be fully in place by 2013. Recovery and ResolutionPlans for each firm are now being developed and the draftreport of the Independent Commission on Banking will requirecareful consideration as we craft our future strategy. In themeantime work continues on Basel III, the RDR and MiFID 2,among other issues in the pipeline. Last year saw banksbuilding up their liquidity buffers, work on issues such as Single Customer View, recording of mobile phones, phasing inchanges to Complaints Handling, and the implementation ofthe Bribery Act and Faster Payments. Not all new regulationsand requirements are burdensome or unwelcome but it isworth reflecting upon how the industry manages to cope withconstant change whilst carrying on business and making anappropriate return for shareholders.

Our BusinessThe year saw us focus on our strategy and drive for increasedshares in our chosen markets, operating from our Head Officein London and our Paris and Nigerian Representative Offices.These are markets with an African flavour and it is pleasingthat at a time when our home economy here in the UK faceschallenges, we are seeing growth in the West African economieswhere the Bank has much strength upon which it can leverage.Our Financial Institutions, Structured Project and StructuredTrade Commodity Finance businesses are now well establishedand recognised players in the financial markets. We will beexpanding to build a business specifically to focus on general

Managing Director/Chief Executive’s Review


We have a sound business model which has proved resilientin difficult times and we will takeadvantage of the challenges asthey arrive

Peter S HinsonManaging Director & Chief Executive


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Corporate business in the coming year to capitalize on ourexpertise and the growing opportunity. All of the above areunder-pinned by our Trade Finance department and servicingskills which make us a market leader in quality of service.

For the third year running we have received the award for the‘Best Trade Finance Bank in West Africa’ from the Global TradeReview magazine and won an award for a market-leadingstructured facility.

Our Private Banking Service is discreetly growing and offering a high quality banking and investment management service.The growth has been particularly driven by customer referralswhich is very satisfying and complimentary. Allied to the PrivateBanking Service is our Property team providing mortgages forboth investment and owner-occupied properties in the London area.

Our FirstSave® internet savings franchise continues to delightcustomers with both the interest returns and a high level ofservice. This continues to be a key integral part of our balancesheet, diversifying our dependence on large deposits. We regularlyreceive a good flow of positive customer feedback on both thequality of our offering and delivery standards.

Correspondent Banking – working closely with internationalbanks, we offer a professional service to most of the upperquartile banks and their customers in West Africa, both Englishand French speaking. Through the facilitation of Trade Financewe have expanded our reach into East Africa and now haverelationships in over 20 countries.

Government and Parastatal Banking – the banking needs ofGovernment and parastatal or state industries are immense.Whilst the main Nigerian Government relationships aremanaged through our parent bank, we often provide theessential international leg of the services.

Commercial and Corporate Banking, (Trade Finance) –according to available statistics, Nigeria continues to be theworld’s leading issuer of Letters of Credit and whilst we servemany customers in a number of countries the majority are inNigeria. Once again, we expanded our reach outside of Nigeriaand our name has become recognized throughout Africa.

Structured Trade Commodity Finance – drawing on inherentstrengths, this business line has established itself as arecognized and serious player in our chosen markets and a keypart of our overall business. Identifying financing opportunities,we offer customers solutions around structured securedfacilities financing trade commodity flows, mostly but notexclusively, into Africa. It is pleasing to record that for two yearsrunning we have received a ‘deal of the year’ award for largemulti commodity and multi jurisdictional facilities we have putin a place for major customers. In the years ahead we seeopportunities for further growth with a wide spread ofcommodity risk in the market.

Structured Finance – We entered this longer term market in2010, and have built a book of quality assets around projectsand medium term corporate needs, often but not exclusivelyfocused on Africa. During the year we made the naturalprogression to lead arrange financings for customers.

Private Banking – London has traditionally been a destinationfor ‘High Net Worth’ visitors from West Africa and this continues.We now provide a highly professional and personal service tothis niche market sector, offering advice on investment productsto improve yield allied to wealth protection, alongside the moretraditional banking services.

UK Property – We provide finance for property purchase,either for investment or owner occupation, in London and thesurrounding area within the M25, meeting the needs of Africanand UK property investors.

UK savers – Our ‘FirstSave®’ brand is now an established and recognised product in this market, offering internet based,demand, notice and fixed term accounts. During 2012 we willbe extending the service to include a postal alternative.

Financial PerformanceAgainst the poor home economic background, the Bankperformed well in 2011 delivering a satisfactory set of resultswhen compared to the previous year. Whilst net interestincome reduced by 9% to £23.6m, this was partly offset by a5% rise in non-interest income to over £11m. Growth of non-interest income is one of our key strategies. Total operatingincome amounted to just under £35m, down from just under£37m and although operating costs rose by some 16%, asubstantial reduction in impairment charges led to the Bankachieving a 3% increase in profit before tax to £17.6m. Thisreflects a return on capital of above 16% which places usfavourably when compared to our peer group competitors.

Overall, the balance sheet grew by 30% and whilst profitsgrew, these were held back to a degree as a result of increasedcosts principally due to higher capital and liquidity requirements.We do not expect the impact of capital and liquidity onprofitability to lessen in the future and they may well increaseas Basel III phases in.

Our CustomersI have been honoured to meet with many of the customers ofboth our London and Paris offices in the past year as these arethe bank’s most important asset. Our Directors and Managerstravel extensively across the globe meeting customers on theirown patch, in our view a vital element of the customer/bankrelationship, to gain a detailed understanding of their needs.We deeply value the relationship we manage to build with our customers.

Corporate GovernanceThe Board of Directors is currently composed of 7 members, 4 Non Executives and 3 Executives.

The Board, in summary, agrees the strategic direction, businessplan and annual budget which are then implemented by theExecutive. The Board is currently supported by the followingCommittees which meet at least quarterly.

Continued overleaf...


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Board Governance CommitteeChairman S O Onasanya Non Executive DirectorMember A R P Williams Non Executive Director

Board Audit and Risk Assessment CommitteeChairman P A Grafham Non Executive DirectorMembers R A Odunlami Non Executive Director

A R P Williams Non Executive Director

Board Credit CommitteeChairman R A Odunlami Non Executive DirectorMembers P S Hinson Managing Director

C E Fashogbon Executive Director,Business Development

A R P Williams Non Executive Director

Board Establishment CommitteeChairman S O Onasanya Non Executive DirectorMembers P S Hinson Managing Director

P A Grafham Non Executive DirectorA R P Williams Non Executive Director

Board Strategy Review CommitteeChairman A R P Williams Non Executive DirectorMembers P S Hinson Managing Director

M J Bamber Executive Director/Chief Operating Officer

C E Fashogbon Executive Director,Business Development

P A Grafham Non Executive DirectorR A Odunlami Non Executive Director

Executive CommitteesThe Executive operate through the following Committees to implement the business plan.

Executive Management CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director/

Chief Operating OfficerC E Fashogbon Executive Director,

Business DevelopmentS O Aiyere Chief Financial OfficerM J Barrett Chief Risk OfficerM C Connell Head of Compliance

& MLRO

Executive Credit CommitteeChairman P S Hinson Managing DirectorMembers C E Fashogbon Executive Director,


& MLRO

Anti Money Laundering CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director/


Business DevelopmentM J Barrett Chief Risk OfficerM C Connell Head of Compliance

& MLROT G Fall Head of Customer Services

Asset & Liability CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director/


Business DevelopmentS O Aiyere Chief Financial OfficerM J Barrett Chief Risk OfficerC P Edwards Head of Treasury



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Risk Management CommitteeChairman P S Hinson Managing DirectorMembers M J Bamber Executive Director/



& MLROV Murataj Head of Human ResourcesC P Edwards Head of Treasury

Treating Customers Fairly CommitteeChairman CE Fashogbon Executive Director,

Business DevelopmentMembers M J Bamber Executive Director/

Chief Operating OfficerN Hawkins Director & Head of

Private BankingM C Connell Head of Compliance

& MLROT G Fall Head of Customer Services

New Products Committee Chairman S O Aiyere Chief Financial OfficerMembers M J Bamber Executive Director/

Chief Operating OfficerM J Barrett Chief Risk OfficerM C Connell Head of Compliance

& MLRO

Investment CommitteeChairman P S Hinson Managing DirectorMembers N Hawkins Director & Head of

Private BankingCE Fashogbon Executive Director,

Business DevelopmentM J Barrett Chief Risk OfficerM C Connell Head of Compliance

& MLRO

Corporate ResponsibilityWorking with our parent bank we have undertaken to be agood corporate citizen by supporting worthy causes in variousways. Donations totalling £12,740 were approved by theExecutive Management Committee and take into account thebenefit to society and the support of our staff who may beeither directly or indirectly involved in the good cause.

We are proud to have specifically supported the followingduring the year:-

The Anthony Nolan Trust

Movember United Kingdom

The Nigeria High Commission Nigeria Day celebrations

The FutureWith the substantial amount of uncertainty surrounding thehealth of financial markets, it is appropriate to be circumspectabout the future. However, with our sound strategy ofdeveloping further growth in known markets we areconfident that the outlook is good.

ConclusionI am grateful for the continuing support of the group’s Lagosbased Executives and the way in which they have helped withour establishment and growth as well as the guidance fromthe learned Non-Executive Directors. We have a soundbusiness model which has proved resilient in difficult timesand we will take advantage of the challenges as they arrive.

In closing I would especially thank our customers, ouremployees and our Board alike.

Peter S HinsonManaging Director/Chief Executive



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Executive Directors

Non Executive Directors

Senior Staff

Peter Stuart HinsonManaging Director/

Chief Executive

Michael John BamberExecutive Director/Chief

Operating Officer

Christi Etukudo FashogbonExecutive Director,

Business Development

Samuel AiyereChief Financial Officer

Michael BarrettChief Risk Officer

Kamoru OladimejiHead of FBNUK NigeriaRepresentative Office

Michael ConnellHead of Compliance

& MLRO

John VowellDirector, Structured

Trade Commodity Finance

Trevor FallHead of Customer Services

Chris EdwardsHead of Treasury

Frederic Le BourgeoisGeneral Manager,

FBN Bank (UK) Ltd, Paris

Simon SingerHead of Trade Finance

Stephen OlabisiOnasanya

Acting Chairman

Peter Arnhem Grafham

Anthony Robert Paget Williams

Remilekun AdetolaOdunlami

Nicolas PitiotDirector, Head of

Structured Finance

Nigel HawkinsDirector, Head of Private Banking

David OberheimDirector, Financial

Institutions

Adetunji FadahunsiDirector, Corporate

Banking

Martin BarneyAssistant Director,Property Finance


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The Directors have pleasure in presenting their annual reportand the audited financial statements for the year ended 31 December 2011.

Principal activitiesFBN Bank (UK) Limited (“The Bank”) is an authorised bankinginstitution regulated by the Financial Services Authority andprovides a range of domestic and international banking andfinancial services.

The Group consists of the following:

• FBN Bank (UK) Limited

• FBN Bank (UK) Limited, Paris Branch; and

• Coombe Valley Properties Limited.

The principal activities are the provision of CorrespondentBanking, Corporate Banking, Structured Trade CommodityFinance, Trade Finance, Private Banking, Structured Financeand Treasury services to our clients.

The Group concentrates on the provision of services to existing and new customers with business interestsspanning Europe and Africa. We work very closely with our colleagues in First Bank of Nigeria Plc in Nigeria to provide structured trade finance products and target a large volume of corporate lending facilities. We also focuson banks in Africa for their correspondent banking needs, by providing trade links to Europe and the rest of the world.

Private Banking has a client base largely resident in the WestAfrica region and the United Kingdom. We are continuing to focus on a deposit driven customer proposition which is outsourced in the United Kingdom.

Treasury acts as the funding and liquidity management hubfor FBN Bank (UK) Limited. Its focus is primarily on foreignexchange, money market and other investment activities.

While we continue to improve existing products and services,it is the intention of the Group to launch new products in thecoming period for the benefit of its customers. These initiativeswill continue to be driven by the Business Development teamthrough our offices in London, Paris and Lagos. The initiativeswill ultimately assist in expanding the Group’s customer base.

Business reviewThe Bank is an authorised banking institution and provides a range of banking and financial services. There have notbeen any significant changes in the Group’s principal activitiesin the year under review. The directors are not aware, at thedate of this report, of any likely changes in the Group’sactivities in the forthcoming period.

The Group continues to invest in human capital and technologywhich has resulted in improved productivity. The Directorsregard such investment as necessary for the continued successin the medium to long term future of the business.

As shown in the Group’s income statement, the net interest income reduced by 9% compared to prior year (2010 – 91% increase) but fee income increased by 23% over the prior year (2010 –24% increase). The overall,operating income reduced by 5% (2010 – 79% increase).Whilst the business volume increased during the year revenuedid not grow at a level commensurate as a result of theprevailing difficult economic and regulatory environments.

One of the Group’s key measurements of the effectiveness of its operations is calculating operating margin after directcosts. The Group achieved an operating margin after directcosts of 50% (2010 – 46%). The increase in operating margin is attributable to strong fee income and a reducedloan impairment charge made during the year.

The balance sheet shows that the Group’s net assets at theyear end have significantly increased, compared to the prioryear end. The Group’s asset level has increased by 30.5%,from £1,410m at 31 December 2010 to £1,842m at 31December 2011. The growth in the balance sheet size is dueto general increased customer base and business conducted.

DirectorsThe Directors, who all served throughout the year, are as listed on page 5 of the report.

Results and dividendThe Group’s profit for the year after taxation amounted to £12,841,872 (2010 – £12,171,030).

A dividend of £6,000,000 was paid by the Bank in respect of the year ended 31 December 2011 (2010 – £5,000,000). No final dividend is proposed (2010 – nil).

Future prospects and going concernThe Group’s capacity to identify, generate and deliver newbusiness remains satisfactory despite the prevailing economicclimate and increased market competition. The focus isprincipally on profitable business and sustainable balancesheet growth with a well diversified risk asset portfolio.

The Group will continue to assess and respond as appropriateto the global economic situation, particularly the Eurozoneeconomic and soverign debt crises. While the Group hadminor direct exposure to European sovereign debt as at 31 December 2011, it will continue to restrict exposure to higher risk counterparties.

A high capital adequacy ratio was recorded at the year end and it will be maintained at a satisfactory level in future. Liquidity is key to the business and as a policy due consideration is given to ensure the Group maintains a strong liquidity position at all times in order to meet its financial obligations. The Directors believe that the Group is well placed to manage its business risksuccessfully; hence they continued to adopt the goingconcern basis in preparing the annual report and accounts.

Report and Financial StatementsDirectors’ Report



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FBN Bank (UK) Limited looks forward with confidence to a future of continued prudent business growth andoutstanding financial performance for the benefit of its customers and shareholders.

Charitable contributionsDuring the year the Group made charitable contributionstotalling £12,740 (2010 – £12,740).

Financial risk management objectives and policiesThe principal risks associated with the business of FBN Bank (UK) Limited are credit risk, market risk, liquidity risk and operational risk.

FBN Bank (UK) Limited has established a comprehensive risk management framework to manage these risks as it complies with Basel II requirements. Hence the risk-management framework is constantly evolving as businessactivities change and expand in response to credit, market,product and other developments.

The risk management framework is guided by a number of principles as outlined in Basel II including the formaldefinition of risk management governance, an evaluation of risk appetite expressed in terms of formal risk limits, riskoversight independent of business units, disciplined riskassessment and measurement including portfolio stresstesting and various risk monitoring and mitigation techniques.

The Board of Directors sets FBN Bank (UK) Limited overall riskparameters, gives risk tolerances and sets the significant riskmanagement policies.

The FBN Bank (UK) Limited Executive Credit Committee and Risk Management Committee, chaired by the ManagingDirector, have the primary responsibilities for sanctioning risk-taking activities and risk-management policies respectively,within the overall risk parameters and tolerances defined by the Board of Directors.

The risk-management control process is based on a detailedstructure of policies, procedures and limits and comprehensiverisk measurement and management information systems for the control, monitoring and reporting of risks.

Periodic reviews by both the Internal Auditor and regulatory authorities subject the risk-managementprocesses to additional scrutiny which helps to furtherstrengthen the risk-management environment.

The Group’s approach to financial risk-management and its objectives are disclosed in note 28.

Capital structureFBN Bank (UK) Limited has two key components to its capitalstructure, being £82m share capital and subordinated debtamounting to £50m. Whilst the subordinated debt isdisclosed as a liability in the financial statements, it counts as upper tier 2 capital for the regulatory capital base.

No new ordinary shares were issued during the year (2010 – £nil), however there was an increase in the Bank’s authorised share capital from £100,000,000 to£200,000,000. Subsequent to year end, new 25,000,000shares were issued at £1 per share, and fully paid.

No additional subordinated debt was issued by the Group during the year (2010 – £33.5m).

Further information regarding the Group’s approach to riskmanagement and its capital adequacy are contained in theunaudited disclosures made under the requirements of Basel II Pillar 3 (the Pillar 3 disclosures). These disclosures arepublished on the Bank’s website shortly after the approval of these financial statements at http://www.fbnbank.co.uk

AuditorEach of the Directors as at the date of approval of this reportconfirms that:

• so far as the Director is aware, there is no relevant auditinformation of which the Group’s auditor is unaware; and

• the Director has taken all steps that he/she ought to havetaken as a Director to make himself/herself aware of anyrelevant audit information and to establish that the Group’sauditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of S418 of theCompanies Act 2006.

In accordance with Sections 485 and 487 of the CompaniesAct 2006, Deloitte LLP is deemed to have been re-appointedas auditor of the Bank.

By Order of the Board

Venetia Carpenter, FCISFor and on behalf of

FBN Bank (UK) Ltd23 April 2012

Registered Office Address:28 Finsbury Circus, London EC2M 7DT

Report and Financial StatementsDirectors’ Report continued


15

The Directors are responsible for preparing the report and the financial statements in accordance with applicablelaws and regulations.

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, theDirectors have elected to prepare the financial statements in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union. Under companylaw the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.

In preparing these financial statements, InternationalAccounting Standard 1 requires that directors:

1. properly select and apply accounting policies;

2. present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

3.provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enableusers to understand the impact of particular transactions,other events and conditions on the entity’s financial positionand financial performance; and

4.make an assessment of the Group’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Group’stransactions and disclose with reasonable accuracy at any timethe financial position of the Group and to enable them to ensurethat the financial statements comply with the Companies Act2006. They are also responsible for safeguarding the assets ofthe Group and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrityof the corporate and financial information included on theGroup’s website. Legislation in the United Kingdom governingthe preparation and dissemination of financial statements maydiffer from legislation in other jurisdictions.

.

Report and Financial StatementsStatement of Directors’ responsibilities



16

Report and Financial StatementsIndependent auditors’ report to the members of FBN Bank (UK) Limited

We have audited the financial statements of FBN Bank (UK)Limited, for the year ended 31 December 2011 which comprisethe Consolidated and Bank Statements of comprehensiveincome, the Consolidated and Bank Balance Sheets, theConsolidated and Bank Statements of changes in equity, theConsolidated and Bank cash flow statements, and the relatednotes to the consolidated accounts 1 to 34. The financialreporting framework that has been applied in theirpreparation is applicable law and International FinancialReporting Standards (IFRSs) as adopted by the EuropeanUnion and, as regards the parent company financialstatements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Bank’s members, as a body,in accordance with Chapter 3 of Part 16 of the CompaniesAct 2006. Our audit work has been undertaken so that we might state to the Bank’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, wedo not accept or assume responsibility to anyone other thanthe Bank and the Bank’s members as a body, for our auditwork, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Statement of Directors’Responsibilities, the Directors are responsible for thepreparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibilityis to audit and express an opinion on the Group and Bank’sfinancial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the AuditingPractices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group and the Bank’s circumstances and have been consistently appliedand adequately disclosed; the reasonableness of significantaccounting estimates made by the Directors; and the overallpresentation of the financial statements. In addition, we readall the financial and non-financial information in the annualreport to identify material inconsistencies with the auditedfinancial statements. If we become aware of any apparentmaterial misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion:

• the financial statements give a true and fair view of the state of the Group and the Bank’s affairs as at 31 December 2011 and of the Group and the Bank’s profit for the year then ended;

• the financial statements have been properly prepared in accordance with IFRSs as adopted by the EuropeanUnion; and

• the financial statements have been prepared in accordancewith the requirements of the Companies Act 2006.

Separate opinion in relation to IFRSs as issued by the IASBAs explained in Note 1 to the financial statements, the Group,in addition to applying IFRSs as adopted by the EuropeanUnion, has also applied IFRSs as issued by the InternationalAccounting Standards Board (IASB).

In our opinion the Group financial statements comply withIFRSs as issued by the IASB.

Opinion on other matter prescribed by the CompaniesAct 2006In our opinion the information given in the Directors’ Reportfor the financial year for which the financial statements areprepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matterswhere the Companies Act 2006 requires us to report to youif, in our opinion:

• adequate accounting records have not been kept by the Bank, or returns adequate for our audit have not been received from branches not visited by us; or

• the Bank’s financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanationswe require for our audit.

Simon Hardy FCA (Senior Statutory Auditor)for and on behalf of Deloitte LLP

Chartered Accountants and Statutory AuditorLondon, United Kingdom

23 April 2012


17

Report and Financial StatementsReport and Financial StatementsConsolidated and Bank Statement of comprehensive incomeFor the year ended 31 December 2011

Notes

Group

Year En

ded

31 Decem

ber 2011

£ Bank

Year En

ded

31 Decem

ber 2011

£ Group

Year En

ded

31 Decem

ber 2010

£ Bank

Year En

ded

31 Decem

ber 2010

£

The accompanying notes are an integral part of these financial statements. The results above arose wholly from continuing activities.

Continuing activities

Interest receivable 4 51,403,925 51,411,841 45,250,344 45,250,344

Interest payable 4 (27,722,460) (27,722,460) (19,098,413) (19,098,413)

Net interest income 23,681,465 23,689,381 26,151,931 26,151,931

Fees and commissions income 5 6,981,686 7,001,686 5,680,909 5,680,909

Dealing and exchange profits 2,696,962 2,696,962 1,795,279 1,795,279

Other operating income 483,225 483,225 399,910 399,910

Investment revenues 4 1,112,737 1,112,737 2,881,521 2,881,521

Operating income 34,956,075 34,983,991 36,909,550 36,909,550

Administrative expenses 6 (16,479,430) (16,463,447) (14,153,616) (14,153,616)

Impairment charge 25 (976,897) (976,897) (11,815,498) (11,815,498)

Loan recovery 25 93,839 93,839 6,140,393 6,140,393

Profit on ordinary activities before taxation 17,593,587 17,637,486 17,080,829 17,080,829

Tax expense 9 (4,751,715) (4,751,715) (4,909,799) (4,909,799)

Profit on ordinary activities after taxation 12,841,872 12,885,771 12,171,030 12,171,030

Revaluation available for sale

financial assets (4,350,488) (4,350,488) 2,070,694 2,070,694

Exchange differences on translation

of foreign operations 24 – – 22,984 –

Total comprehensive income for the period 8,491,384 8,535,283 14,264,708 14,241,724

Group

31 Decem

ber 2011

£Notes

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£


18

Report and Financial StatementsConsolidated and Bank Balance sheetAs at 31 December 2011

Bank

31 Decem

ber 2010

£

Stephen Olabisi Onasanya Peter Stuart HinsonActing Chairman Managing Director/

Chief Executive

Assets

Cash at bank and in hand 11 17,554,507 17,554,507 16,805,201 16,738,427

Loans and advances to banks 12 1,128,941,539 1,128,941,539 756,193,496 756,193,496

Loans and advances to customers 13 580,003,133 580,293,531 575,790,096 575,790,096

Investments in Subsidiary 14 – 1 – 10,373

Available for sale financial assets 15 111,392,338 111,392,338 58,330,632 58,330,632

Property and equipment 16 766,685 516,685 451,774 360,095

Intangible assets 17 647,684 647,684 681,489 680,430

Other assets 18 1,811,304 1,811,304 2,126,959 2,045,993

Deferred tax asset 10 43,794 43,794 71,161 71,161

Financial assets – derivatives 536,268 536,268 22,835 22,835

Total assets 1,841,697,252 1,841,737,651 1,410,473,643 1,410,243,538

Liabilities

Deposits by banks 19 715,387,045 715,387,045 608,855,076 608,855,076

Customer accounts 20 874,679,300 874,679,300 590,292,118 590,292,118

Other liabilities 21 80,546,559 80,543,059 47,738,148 47,531,027

Financial liabilities – derivatives 7,095,239 7,095,239 2,647,513 2,647,513

Subordinated liabilities 22 50,012,788 50,012,788 50,005,952 50,005,952

Total liabilities 1,727,720,931 1,727,717,431 1,299,538,807 1,299,331,686

Called up share capital 23 82,000,000 82,000,000 82,000,000 82,000,000

Revaluation Reserves (1,706,709) (1,706,709) 2,070,694 2,070,694

Translation reserves 24 – – 22,984 –

Retained earnings 33,683,030 33,726,929 26,841,158 26,841,158

Equity shareholder’s funds 113,976,321 114,020,220 110,934,836 110,911,852

Total liabilities & shareholder’s funds 1,841,697,252 1,841,737,651 1,410,473,643 1,410,243,538

The accompanying notes are an integral part of these financial statements. These financial statements were approved by the Boardof Directors and authorised for issue on 23 April 2012.Signed on behalf of the Board of Directors

Share

Capital

£ Revaluation

Reserve

£ Tran

slation

Reserve

£


19

Report and Financial StatementsConsolidated and Bank Statement of changes in equityFor the year ended 31 December 2011

Retained

Earnings

£ Total

Equity

£

Share

Capital

£ Revaluation

Reserve

£ Tran

slation

Reserve

£Bank

Balance attributable to equity

as at 31 December 2009 82,000,000 – – 19,670,128 101,670,128

Revaluation of AFS securities – 2,070,694 – – 2,070,694

Profit for the year – – – 12,171,030 12,171,030

Dividend paid – – – (5,000,000) (5,000,000)


as at 31 December 2010 82,000,000 2,070,694 – 26,841,158 110,911,852

Revaluation of AFS securities – (4,350,488) – – (4,350,488)

Current tax credit on AFS securities – 573,085 – – 573,085

Profit for the year – – – 12,885,771 12,885,771

Dividend paid – – – (6,000,000) (6,000,000)


shareholders as at 31 December 2011 82,000,000 (1,706,709) – 33,726,929 114,020,220

The accompanying notes are an integral part of these financial statements.

Retained

Earnings

£ Total

Equity

£

Group


as at 31 December 2009 82,000,000 – – 19,670,128 101,670,128

Revaluation of AFS securities – 2,070,694 – – 2,070,694

Profit for the year – – 22,984 12,171,030 12,194,014

Dividend paid – – – (5,000,000) (5,000,000)


as at 31 December 2010 82,000,000 2,070,694 22,984 26,841,158 110,934,836

Revaluation of AFS securities – (4,350,488) – – (4,350,488)

Current tax credit on AFS securities – 573,085 – – 573,085

Profit for the year – – (22,984) 12,841,872 12,818,888

Dividend paid – – – (6,000,000) (6,000,000)


shareholders as at 31 December 2011 82,000,000 (1,706,709) – 33,683,030 113,976,321

Notes

Group

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed

31 Decem

ber2010

£


20

Report and Financial StatementsConsolidated cash flow statement For the year ended 31 December 2011

Group

Cash flow from operating activities

Profit before tax 17,593,587 17,080,829

Adjustment to reconcile net profit to cash flow from/(used in) operating activities:

Depreciation of property and equipment 216,383 213,337

Amortisation of intangible assets 285,381 242,564

IFRS Adjustment to Securities (138,902) 296,679

Risk Asset Impairment 883,058 9,991,670

18,839,507 27,825,079

Net (increase)/decrease in assets relating to operating activities

Loans and advances to banks (372,748,043) 95,183,409

Loans and advances to customers (4,287,059) (304,819,307)

Securities-available-for-sale (58,185,359) (53,833,838)

Other assets (145,198) (395,466))

(416,526,152) (236,040,123)

Net increase/(decrease) in liabilities relating to operating activities

Due to banks 106,531,969 (152,047,213)

Due to customers 284,387,182 90,064,367

Other liabilities 38,912,891 (22,682,538)

429,832,042 219,429,042

Corporation tax paid (5,781,483) (1,657,408)

Net cash from/(used in) operating activities 7,524,407 (18,268,489)

Cash flow used in investing activities

Acquisition of fixed assets (781,937) (392,558)

Net cash used in investing activities (781,937) (392,558)

Cash flow from financing activities

Subordinated Loans 6,836 33,329,911

Dividend paid (6,000,000) (5,000,000)

(5,993,164) 28,329,911

Net increase in cash at bank and in hand 749,306 9,688,864

Cash at bank in hand at 31 December 2010 11 16,805,201 7,136,337

Cash at bank and in hand at 31 December 2011 11 17,554,507 16,805,201



21

Report and Financial StatementsBank cash flow statementFor the year ended 31 December 2011

Bank

Cash flow from operating activities

Profit before tax 17,637,486 17,080,829

Adjustment to reconcile net profit to cash flow from/(used in) operating activities

Depreciation of property and equipment 216,383 153,807

Amortisation of intangible assets 285,381 242,208

IFRS Adjustment to Securities (138,902) 296,679

Risk Asset Impairment 883,058 9,991,670

18,883,406 27,765,193

Net (increase)/decrease in assets relating to operating activities

Loans and advances to banks (372,748,043) 95,183,409

Loans and advances to customers (4,577,457) (304,819,307)

Securities-available-for-sale (58,185,359) (53,833,838)

Other assets (258,955) (377,965)

(416,886,408) (236,082,508)

Net increase/(decrease) in liabilities relating to operating activities

Due to Banks 106,531,969 152,879,242

Due to customers 284,387,182 90,064,367

Other liabilities 39,089,921 (23,540,244)

430,009,072 219,403,365

Corporation tax paid (5,781,483) (1,657,408)

Net cash from/(used in) operating activities 7,341,181 (18,336,551)

Cash flow used in investing activities

Acquisition of fixed assets (531,937) (391,270)

Net cash used in investing activities (531,937) (391,270)

Cash flow from financing activities

Subordinated Loans 6,836 33,329,911

Dividend paid (6,000,000) (5,000,000)

(5,993,164) 28,329,911

Net increase in cash at bank and in hand 816,080 9,602,090

Cash at bank and in hand at 31 December 2010 11 16,738,427 7,136,337

Cash and cash equivalents at 31 December 2011 11 17,554,507 16,738,427


Notes

Bank

Year End

ed31 Decem

ber 2011

£ Bank

Year end

ed

31 Decem

ber2010

£


22

Report and Financial StatementsNotes to the consolidated financial statementsFor the year ended 31 December 2011

1. Accounting policies

General informationFBN Bank (UK) Limited (‘’the Bank’’) is a companyincorporated in the Great Britain under the Companies Act2006. The address of the registered office is given on page 5.Coombe Valley Properties Limited was incorporated as a subsidiary during 2011, and is registered in England andWales. FBN UK (Representative office in Nigeria) Limited was deregistered and ceased to be a subsidiary during 2011. The nature of the Group’s operations and its principalactivities are set out in the Directors’ Report.

Basis of preparationFBN Bank (UK) Limited has prepared these financialstatements using International Financial Reporting Standards (IFRSs) as adopted in the EU and has also applied IFRSs as issued by the International AccountingStandards Board (IASB).

The financial statements are expressed in Pounds Sterling (£), which is the functional currency of the Group as this is the currency of the primary economic environment in which the Group operates.

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Bank and the entity controlledby the Bank (its subsidiary) made up to 31 December eachyear. Control is achieved where the Bank has the power to govern the financial and operating policies of an investeeentity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during theyear are included in the consolidated income statement fromthe effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bringthe accounting policies used into line with those used by the group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Going concernThe Group’s business activities, together with the factors likelyto affect its future development, performance and positionare set out in the Directors’ Reports on pages 2 to 5. Thefinancial position of the Group, its cash flow and capitalposition are as described on pages 9 to 13. In addition, the Group’s business objectives, capital structure policies and financial risk management objectives are as stated in the Directors’ report. Details of its financial instruments and hedging activities, and its exposures to credit and liquidityrisks are in notes 28 and 29 of the financial statements.

The Group has considerable financial resources as evidencedby its high capital adequacy ratio, together with long termdeposit and loan contracts with a number of customers across different geographic areas and strong support from the shareholder. Also, the Group has developed a broadercustomer base thereby ensuring stable and long tenoreddeposits to support profitable business growth. The financialforecasts indicate that the Group will continue to operateprofitably in the future.

As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonableexpectation that the Group has adequate resources tocontinue in operational existence for the foreseeable future.Accordingly, they continued to adopt the going concern basisin preparing the annual report and accounts.

Accounting conventionThe financial statements have been prepared on the historical cost basis, except for the revaluation of certainfinancial instruments. The principal accounting policiesadopted are described below:

Income recognition

a) Interest income and expenseInterest income on financial assets that are classified as loans and receivables and interest expense on financialliabilities are recognised in ‘Interest income’ and ‘Interestexpense’ in the income statement using the “effectiveinterest rate’’ method.

The effective interest rate is the rate that exactly discountsthe expected future cash payments or receipts through theexpected life of the financial instrument, or when appropriate,a shorter period, to the net carrying amount of the financialinstrument. The effective interest rate incorporates feesreceivable that are an integral part of the “effectiveinterest rate’’ of a financial instrument.

All income derives from banking business carried out in the United Kingdom and France

b) Non-interest income

Fees and commissions

Fees and commissions are accounted for depending on the services to which the income relates to as follows:

• fees earned on the execution of a significant act arerecognised in ‘fee income’ when the act is completed;

• fees earned in respect of services are recognised in ‘feeincome’ as the services are provided; and

• fees which form an integral part of the “effective interest rate’’ of a financial instrument are recognised as an adjustment to the effective interest rate andrecorded in ‘interest income’

Foreign currencyTransactions in foreign currencies are recorded using the rateof exchange ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies aretranslated into sterling using the rate of exchange as at the balance sheet date and resulting gains and losses on translation are included in the income statement.

Exchange profits on foreign exchange transactions withcustomers are recognised as income during the year.


23


Financial instrumentsFinancial assets and liabilities are recognised in the Group’sbalance sheet when the Group becomes a party to thecontractual provisions of the instrument.

The Group classifies its financial assets into the followingcategories:

• financial assets at fair value through profit or loss;

• loans and receivables; and

• available-for-sale investments.

Management determines the classification of financial assetsat the time of initial recognition.

Financial assets at fair value through profit and lossFinancial assets at fair value through profit or loss comprisefinancial assets that are held for trading, and those designatedby management as being at fair value through profit or losson initial recognition.

Financial assets may be designated at fair value through profitor loss only if such a designation (a) eliminates or significantlyreduces a measurement or recognition inconsistency; (b) appliesto a group of financial assets, financial liabilities, or both thatthe Group manages and evaluates on a fair value basis; or (c)relates to an instrument that contains an embedded derivativewhich is not closely related to the host contract.

Financial assets at fair value through profit or loss arerecognised initially at fair value, with transaction costsrecognised in the income statement. Subsequently, gains and losses arising from changes in fair value are recognised as they arise

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified upon initialrecognition as available-for-sale or at fair value through profit and loss.

Loans and receivables are initially recognised at fair value,including directly attributable transaction costs and aresubsequently measured at amortised cost, using the effectiveinterest rate method, less any impairment losses.

Financial assets available-for-saleAvailable-for-sale investments are those intended to be heldfor an indefinite period of time, which may be sold in responseto needs for liquidity or changes in interest rates, exchangerates or equity prices.

Available-for-sale financial assets are recognised on settlementdate and are subsequentially carried at fair value. Gains andlosses arising from changes in the fair value of available-for-sale financial assets are generally recognised directly in equityuntil the financial assets are derecognised or impaired atwhich time the cumulative gain or loss previously recognisedin equity is recognised in profit and loss.

Impairment of financial assets held at amortised cost If there is objective evidence that an impairment loss on afinancial asset or group of financial assets classified as held-to-maturity or loans and receivables has been incurred, theamount of impairment loss is measured as the differencebetween the asset or group of assets carrying amount andthe present value of estimated future cash flows from theasset or group of assets discounted at the effective interestrate determined on initial recognition.

Impairment losses are recognised in the income statementand the carrying amount of the financial assets or group of financial assets are reduced by establishing an allowancefor impairment losses.

If, in a subsequent period, the amount of the impairment loss reduces and the reduction can be related objectively to an event occurring after the impairment was recognised,the previously recognised impairment loss is reversed byadjusting the allowance account. The amount of the reversalis recognised in the income statement.

Impairment of financial assets available-for-saleThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a portfolioof financial assets is impaired. In the case of investmentsclassified as available-for-sale, a significant or proportioneddecline in the fair value of the investment below its cost isconsidered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financialassets, the cumulative loss measured is the differencebetween the acquisition cost and the current fair value, less any impairment loss on that financial asset previouslyrecognised in profit or loss which is removed from thebalance sheet and recognised in the income statement. If in the subsequent period, the fair value of the investmentclassified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised as profit or loss, theimpairment loss is reversed through the income statement.

Financial liabilitiesThe Group classifies its financial liabilities in the following categories:

• financial liabilities designated at fair value through profit or loss; and

• other financial liabilities.

Management determines the classification of financialliabilities at initial recognition.

Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss comprisefinancial liabilities that are held for trading, and thosedesignated by management as being at fair value throughprofit or loss on initial recognition.

Financial liabilities are classified as held for trading if they areacquired principally for the purposes of generating a profitfrom short-term fluctuations in price or dealer’s margin, orform part of a portfolio of similar liabilities for which there


24


1.Accounting policies (continued)

is evidence of a recent actual pattern of short-term profit-taking, or are derivatives (not designated into a qualifyinghedge relationship).

Financial liabilities may be designated at fair value throughprofit or loss only if such a designation: (a) eliminates orsignificantly reduces a measurement or recognition inconsistency;(b) applies to a group of financial assets, financial liabilities, or both that the Group manages and evaluates on a fair value basis; or (c) relates to an instrument that contains anembedded derivative which is not evidently closely related to the host contract.

Financial liabilities at fair value through profit or loss arerecognised initially at fair value, with transaction costsrecognised in the income statement. Subsequently, gains and losses arising from changes in fair value are recognised as they arise.

Other financial liabilitiesOther financial liabilities are initially recognised at fair valueincluding directly attributable transaction costs and aresubsequently measured at amortised cost, using the effective interest rate method.

Determining fair valueAll financial instruments are recognised initially at fair value.The fair value of a financial instrument on initial recognition is normally the transaction price.

Subsequently, the fair values of financial instruments that arequoted in an active market are based on bid price (for assets)and offer price (for liabilities). Where there is no quotedmarket price in an active market, fair values are determinedusing valuation techniques including discounting future cashflows, option pricing models and other methods used bymarket participants.

Where the fair value cannot be reliably determined for an investment in an equity instrument, the instrument is measured at cost.

Derivative financial instrumentsDerivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative.Derivative assets and liabilities arising from differenttransactions are only offset where there is a legal right of offset of the recognised amounts and the parties intend to settle the cash flows on a net basis, or realise the asset and settle the liability simultaneously.

Property and equipmentProperty and equipment are stated at cost less accumulateddepreciation and any accumulated impairment losses.

Depreciation is provided on a straight-line basis at the following rates to write off the cost of the fixed assets over their estimated useful life as follows:

Leasehold improvement 10 years (or leaseperiod if shorter)

Office equipment/furniture 5 years

Computer hardware 3 years

Motor vehicles 4 years

At each balance sheet date, property and equipment are assessed for indications of impairment. If indications are present, these assets are subject to an impairment review.The impairment review comprises a comparison of thecarrying amount of the asset with its recoverable amount: the higher of the asset’s net selling price and its value in use. Net selling price is calculated by reference to theamount at which the asset could be disposed of in a bindingsale agreement in an arm’s length transaction evidenced by an active market or recent transactions for similar assets.Value in use is calculated by discounting the expected futurecash flows obtainable as a result of the assets continued use,including those resulting from its ultimate disposal, at amarket-based discount rate on a pre-tax basis.

The carrying values of fixed assets are written down by the amount of any impairment and this loss is recognisedin the income statement in the period in which it occurs. A previously recognised impairment loss relating to a fixedasset may be reversed in part or in full when a change incircumstances leads to a change in the estimates used todetermine the fixed asset’s recoverable amount. The carryingamount of the fixed asset will only be increased up to theamount that it would have been had the original impairmentnot been recognised.

Intangible assetsIntangible assets are stated at cost less amortisation andprovisions for impairment. The assets are primarily computersoftware and amortised over their useful life, five years, in a manner that reflects the pattern to which they contribute to future cash flows.

LeasesA lease is classified as a finance lease when the risks and rewards of ownership are substantially transferred to the lessee. All other leases are classified as operating leases(operating lease rentals payable are recognised as an expensein the income statement on a straight-line basis over the lease term).

The Group’s leases are all classified as operating leases.Operating lease rentals are recognised on a straight-line basis over the life of the lease.


25


ProvisionsProvisions are recognised when it is probable that an outflow of economic benefits will be required to settle acurrent legal or constructive obligation as a result of pastevents and a reliable estimate can be made of the amount of the obligation.

TaxationThe tax expense represents the sum of the tax currentlypayable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of incomeor expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.The Group liability for current tax is calculated using tax ratesthat have been enacted or substantively enacted by thebalance sheet date.

Deferred tax is the tax expected to be payable or recoverableon differences between the carrying amounts of the assetsand liabilities in the financial statements and thecorresponding tax bases used in the computation of taxableprofit and is accounted for using the balance sheet liabilitymethod. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets arerecognised to the extent that it is probable that taxable profitswill be available against which deductible temporarydifferences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the incomestatement, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also dealtwith in equity.

Pension costsThe Group operates a defined contribution pension schemeand the amount charged to the income statement in respectof pension costs and other post-retirement benefits is thecontributions payable in the year. Differences betweencontributions payable in the year and contributions actuallypaid are shown as either accruals or prepayments in thebalance sheet.

Cash and cash equivalentsCash and cash equivalents comprise cash and demanddeposits with banks together with short-term highly liquidinvestments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.

Use of estimatesThe preparation of financial statements in accordance withIFRSs requires the use of certain critical accounting estimates.It also requires management to exercise judgement in theprocess of applying the accounting policies. The notes to thefinancial statements set out areas involving a higher degree of judgement or complexity, or areas where assumptions aresignificant to the financial statements such as fair value of financial instruments and loan loss impairment.

Capital instrumentsThe Group classifies a financial instrument that it issues as a financial liability or an equity instrument in accordancewith the substance of the contractual arrangement. An instrument is classified as a liability if it is a contractualobligation to deliver cash or another financial asset, or toexchange financial assets or financial liabilities on potentiallyunfavourable terms. An instrument is classified as equity if it evidences a residual interest in the assets of the Group afterthe deduction of liabilities. The components of a compoundfinancial instrument issued by the Group are classified andaccounted for separately as financial liabilities or equity as appropriate

Adoption of new and revised standardsAt the date of authorisation of these financial statements, the following Standards and Interpretations have beenadopted in the current year:

• IFRS 7 (amended) Financial Instruments Disclosures

• IAS 1 (amended) Presentation of Financial Statements

• IAS 24 (revised) Related Party Disclosures

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issuebut not yet effective:

• IFRS 9 (revised) Financial Instruments

• IFRS 10 Consolidated Financial Statements

• IFRS 13 Fair Value Measurement

• IAS 1 (amended) Presentation of Items of Other Comprehensive Income

• IAS 12 (amended) Deferred Tax – Recovery of Underlying Assets

The Directors anticipate that the adoption of these Standardsand Interpretations in future periods will have no materialimpact on the financial statements of the Group.


26


1. Accounting policies (continued)

Critical accounting judgements and key sources ofestimation uncertaintyIn the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets andliabilities that are not readily apparent from other sources and may make necessary provisions in accordance with theirassumptions. The estimates and associated assumptions arebased on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Loan impairment provisionsThe Group’s loan impairment provisions are established to recognise incurred impairment losses in its portfolio of loans classified as loans and receivables and carried at amortised cost. A loan is impaired when there is objectiveevidence that events since the loan was granted have affectedexpected cash flows from the loan. The impairment loss is the difference between the carrying value of the loan and the present value of the estimated future cash flows at the loan’s original effective interest rate.

The impairment losses are recognised as the difference between the carrying value of the loan and the discounted value of management’s best estimate of future cash repayments and proceeds from any securityheld. The actual amount of the future cash flows and thedate they are received may differ from these estimates andconsequently actual losses incurred may differ from thoserecognised in these financial statements.

Fair value of derivatives and other financial instrumentsAs described in note 30, the Directors use their judgement in selecting an appropriate valuation technique for financialinstruments not quoted in an active market. Valuationtechniques commonly used by market practitioners areapplied. For derivative financial instruments, assumptions are made based on quoted market rates adjusted for specificfeatures of the instrument.

2. Dealing and exchange profits

Dealing and exchange profits relate to foreign exchangeincome derived from customer foreign exchange transactionsand the revaluation of foreign currency assets and liabilities

3. Segmental information

The Group’s main activities are commercial banking,correspondent banking and private banking which are carried out in the United Kingdom and France.

Bank

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed31 Decem

ber 2010

£Group

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£

Bank

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed31 Decem

ber 2010

£Group

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£

Bank

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed31 Decem

ber 2010

£Group

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£

4. (a) Net Interest income

Interest and similar income

Due from banks 28,639,865 28,639,865 28,514,417 28,514,417

Loans and advances to customers 18,132,313 18,140,229 11,939,184 11,939,184

Available-for-sale financial assets 4,631,747 4,631,747 4,796,743 4,796,743

51,403,925 51,411,841 45,250,344 45,250,344

Interest expense and similar charges

Due to banks 6,284,591 6,284,591 2,574,536 2,574,536

Due to customers 19,264,485 19,264,485 16,208,623 16,208,623

Debt issued and other borrowed funds 2,173,384 2,173,384 315,254 315,254

27,722,460 27,722,460 19,098,413 19,098,413

(b) Investment revenues

Investment Revenue – – 2,595,043 2,595,043

Gain on sale of available-for-sale investments 1,112,737 1,112,737 286,478 286,478

1,112,737 1,112,737 2,881,521 2,881,521


27


Bank

Year End

ed31 Decem

ber 2011

Num

ber

Group

Year End

ed31 Decem

ber 2010

Num

ber

Group

Year End

ed31 Decem

ber 2011

Num

ber

Bank

Year End

ed31 Decem

ber 2010

Num

ber

Bank

Year End

ed31 Decem

ber 2011

Num

ber

Group

Year End

ed31 Decem

ber 2010

Num

ber

Group

Year End

ed31 Decem

ber 2011

Num

ber

Bank

Year End

ed31 Decem

ber 2010

Num

ber

Bank

Year End

ed31 Decem

ber 2011

£ Group

& Ban

k

Year End

ed31 Decem

ber 2010

£Group

& Ban

k

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£


28


5. Fees and commissions income is derived from:

Loans 599,196 619,196 860,108 860,108

Letters of credit 4,853,067 4,853,067 3,756,161 3,756,161

Funds transfer 692,143 692,143 451,262 451,262

Other 837,280 837,280 613,378 613,378

6,981,686 7,001,686 5,680,909 5,680,909

6. Administrative expenses

Average No of employees

(including three (2010 - three) executive directors)

Banking Division 54 54 44 37

Operations 44 44 36 35

Administration 11 11 10 6

109 109 90 78

Wages & Salaries (including directors) 7,925,200 7,925,200 7,011,910 7,011,910

Social security costs 708,611 708,611 532,060 532,060

Other pension costs 423,320 423,320 318,822 318,822

Total Staff Costs 9,057,131 9,057,131 7,862,792 7,862,792

Other administrative expenses 7,422,299 7,406,316 6,290,824 6,290,824

16,479,430 16,463,447 14,153,616 14,153,616

Bank

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed31 Decem

ber 2010

£Group

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£


29


Group

& Ban

k

Year End

ed31 Decem

ber 2011

£ Group

& Ban

k

Year End

ed

31 Decem

ber 2010

£

7. Directors’ emoluments

Directors’ fees 154,500 127,000

Other emoluments 1,057,522 623,156

Contribution to a money purchase pension scheme 49,954 43,624

1,261,976 793,780

The highest paid director received emoluments, excluding pension contributions, totalling £421,800 (2010 - £243,830) and pension

contributions of £21,000 (2010 - £17,830).

8. Profit on ordinary activities before taxation

Operating profit is stated after charging:

Depreciation - property and equipment 216,383 216,383 213,337 153,807

Amortisation 285,381 285,381 242,564 242,208

Auditor's remuneration:

- audit of annual accounts 99,000 95,500 112,999 99,500

- regulatory assurance 4,000 4,000 – –

- tax services (audit related) – – 5,816 5,816

- consultancy (non audit related) 4,860 4,860 52,645 52,645

Rental of premises held under operating leases 828,806 828,806 738,878 626,259


30


9. Taxation

Tax on profit on ordinary activities charged in the income statement

(i) Analysis of tax charge on ordinary activities

United Kingdom corporation tax based on the profit for the year 4,742,743 4,843,537

Prior period current tax adjustment (18,396) 45,139

Total current tax 4,724,347 4,888,676

Deferred tax:

Temporary differences, origination and reversal 7,822 6,619

Effect of tax rate change 3,504 2,635

Prior period deferred tax adjustments 16,042 11,869

Tax expense 4,751,715 4,909,799

(ii) Reconciliation of the total tax charge

Profit on ordinary activities before tax 17,593,587 17,080,829

Tax at 26.5% (31 December 2010: 28%) thereon 4,662,301 4,782,632

Effects of:

Expenses not deductible for tax purposes 88,264 67,524

Effect of tax rate change 3,504 2,635

Prior year adjustment (2,354) 57,008

Tax expense 4,751,715 4,909,799

Group

& Ban

k

Year End

ed

31 Decem

ber 2010

£Group

& Ban

k

Year End

ed31 Decem

ber 2011

£

Group

& Ban

k

Year End

ed

31 Decem

ber 2010

£Group

& Ban

k

Year End

ed31 Decem

ber 2011

£


31


10. Deferred tax

The following are the deferred tax assets recognised by the Group and movements thereon during the current and priorreporting period. Deferred tax is calculated on temporary differences using the tax rate of 25% (2010: 27%). Finance Act2010 reduced the UK corporation tax rate from 28% to 26% with effect from 1 April 2011. In the March 2012 BudgetStatement, the UK Government announced that the main rate of corporation tax was to be reduced to 24 per cent from 1 April 2012 and the reduction was substantively enacted on 26 March 2012. Further reductions to the main rate areproposed to reduce the rate by 1 per cent per annum to 22 per cent by 1 April 2014.These subsequent and proposedchanges to the main rate had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements. The estimated financial effect of these changes is insignificant.

Group and Bank

At 1 January 2010 66,874 25,410 92,284

Charge to income (381) (6,238) (6,619)

Effect of tax rate change (1,853) (782) (2,635)

Prior period adjustment (14,602) 2,733 (11,869)

At 31 December 2010 50,038 21,123 71,161

Charge to income (4,442) (3,380) (7,822)

Effect of tax rate change (2,189) (1,314) (3,503)

Prior period adjustment (16,042) – (16,042)

At 31 December 2011 27,365 16,429 43,794

11. Cash at bank and in hand

Cash 52,261 52,261 193,068 126,294

Short-term balances with other banks 17,502,246 17,502,246 16,612,133 16,612,133

17,554,507 17,554,507 16,805,201 16,738,427

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£

Accelerated

tax

depreciation

£ Other Tem

porary

Differen

ces

£ Total

£


32


12. Loans and advances to banks

Group & Bank

Repayable on demand

or at short notice 54,120,071 – 54,120,071 58,345,743 – 58,345,743

Remaining maturity:

- 3 months or less

excluding on demand

or at short notice 891,239,757 – 891,239,757 471,145,669 – 471,145,669

- 1 year or less

but over 3 months 142,481,398 – 142,481,398 147,657,318 – 147,657,318

- 5 years or less

but over 1 year 41,100,313 – 41,100,313 79,044,766 – 79,044,766

Less Allowance

for Impairment – –

1,128,941,539 – 1,128,941,539 756,193,496 – 756,193,496

Total loans advanced to First Bank of Nigeria Plc (Parent Bank) at 31 December 2011 were £25,501,984 (2010 - £6,526,705).Loans and advances to banks are categorised as loans and receivables in accordance with IAS 39. None of the loans andadvances to banks were impaired (2010 £nil) and no collateral was held in respect of December 2011 impaired loans.

13. Loans and advances to customers

Group

Repayable on demand

or at short notice 70,000,183 1,122,137 71,122,320 51,570,929 1,052,306 52,623,235

Remaining maturity:

– 3 months or less

excluding on demand

or at short notice 259,314,900 259,314,900 288,527,587 288,527,587

– 1 years or less

but over 3 months 50,191,073 400,000 50,591,073 35,706,646 35,706,646

– 5 years or less

but over 1 year 114,253,032 2,095,000 116,348,032 127,894,722 500,000 128,394,722

– Over 5 years 83,378,852 83,378,852 71,031,047 232,800 71,263,847

Less Allowances for

impairment (note 25) – (752,044) (752,044) – (725,941) (725,941)

577,138,040 2,865,093 580,003,133 574,730,931 1,059,165 575,790,096

Performing

Loan

s as at

31 Decem

ber 2011

£ Impa

ired

Loan

s as at

31 Decem

ber 2011

£ Total

£ Performing

Loan

s as at

31 Decem

ber 2010

£ Impa

ired

Loan

s as at

31 Decem

ber 2010

£ Total

£

Performing

Loan

s as at

31 Decem

ber 2011

£ Impa

ired

Loan

s as at

31 Decem

ber 2011

£ Total

£ Performing

Loan

s as at

31 Decem

ber 2010

£ Impa

ired

Loan

s as at

31 Decem

ber 2010

£ Total

£


33


13. Loans and advances to customers (continued)

Bank

Repayable on demand

or at short notice 70,000,183 1,122,137 71,122,320 51,570,929 1,052,306 52,623,235

Remaining maturity:

– 3 months or less

excluding on demand

or at short notice 259,314,900 259,314,900 288,527,587 288,527,587

– 1 years or less

but over 3 months 50,191,073 400,000 50,591,073 35,706,646 35,706,646

– 5 years or less

but over 1 year 114,543,430 2,095,000 116,638,430 127,894,722 500,000 128,394,722

– Over 5 years 83,378,852 83,378,852 71,031,047 232,800 71,263,847

Less Allowances for

impairment (note 25) – (752,044) (752,044) – (725,941) (725,941)

577,428,438 2,865,093 580,293,531 574,730,931 1,059,165 575,790,096

As at 31 December 2011, the Group had advanced £71,122,320 overdrafts (2010 - £52,623,235) and £508,827,354 fixed term loans (2010 - £523,108,594) to customers. £53,459 was granted as staff loans (2010 - £58,267).

Loans and advances to customers are categorised as loans and receivables in accordance with IAS 39.

The Group held collateral £4,050,000 (2010: £900,000) in respect of the impaired loans.

Performing

Loan

s as at

31 Decem

ber 2011

£ Impa

ired

Loan

s as at

31 Decem

ber 2011

£ Total

£ Performing

Loan

s as at

31 Decem

ber 2010

£ Impa

ired

Loan

s as at

31 Decem

ber 2010

£ Total

£


34


Place of

Incorporation

Prop

ortion

of

Owne

rship

% Prop

ortion

of

voting

pow

er

%

14. Investments in subsidiary

Details of the Subsidiaries are as follows

Name

Coombe Valley Properties Ltd Great Britain 100 100

During the year the FBN UK (Representative office in Nigeria) Limited was deregistered and ceased to be a subsidiary. The Representative office operation has now been absorbed into the London operation. The value of N2,500,000.00 (GBP£10,373)for the consideration of 2,500,000.00 ordinary shares at N1 was repaid at the date of deregistration.

In June 2011, the Bank established Coombe Valley Properties Limited as a subsidiary. The Company has issued share capital of 100 at £1 each, £0.01p paid, of which the Bank has 100% holding. Coombe Valley Properties Limited is incorporated in Great Britain and registered in England and Wales.

Subsidiaries

FBN UK (Representative office in Nigeria) Limited – 10,373

Coombe Valley Properties Ltd 1 –

15. Available for sale financial assets

Available for Sale Investments carried at fair value

Financial Instruments available for Sale 123,362,055 123,362,055 67,982,820 67,982,820

Available for Sale valuation (2,279,794) (2,279,794) 2,070,694 2,070,694

Less Impairment (9,689,923) (9,689,923) (11,722,882) (11,722,882)

Balance as at 31 December 111,392,338 111,392,338 58,330,632 58,330,632

Held-to-maturity securities carried at amortised cost

Opening balance – – 14,233,782 14,233,782

Bonds purchased during the period – – 92,044,093 92,044,093

Sale of Bonds – – (38,295,055) (38,295,055)

Reclassification to Available-for-sale – – (67,982,820) ( 67,982,820)

Balance as at 31 December – – – –

Total Investments 111,392,338 111,392,338 58,330,632 58,330,632

Bank

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£


35


15. Securities (continued)

Maturity:

Between one year and five years 111,392,338 111,392,338 58,330,632 58,330,632

The Group holds its securities portfolio as available-for-sale and assesses at each balance sheet date whether there is objective evidence that the portfolio or a specific debt security is impaired. As a result of prolonged decline in the value of a particular debt security and the absence of market for the debt the Group decided to make full impairment charge in the year.

As at 31 December 2011, the Group had minimal exposure to sovereign debt in comparison to its balance sheet and capital. The exposure ($8m) was to the Kingdom of Belgium and did not present any default concern. The Group had no exposure to other sovereigns as at the balance sheet date.

16. Property and equipment

Group

Cost

31 December 2010 – 514,995 640,307 441,484 89,323 1,686,109

Additions 250,000 32,064 185,320 57,214 3,399 527,997

Exchange differences – (186) (2,817) (1,290) – (4,293)

31 December 2011 250,000 546,873 822,810 497,408 92,722 2,209,813

Accumulated Depreciation

31 December 2010 – 407,792 463,169 305,298 58,076 1,234,335

Charge year to date – 64,148 77,162 53,575 21,498 216,383

Exchange differences – (325) (3,101) (2,425) (1,739) (7,590)

31 December 2011 – 471,615 537,230 356,448 77,835 1,443,128

Net Book Value

31 December 2011 250,000 75,258 285,580 140,960 14,887 766,685

31 December 2010 – 107,203 177,138 136,186 31,247 451,774

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£Total

£Motor Veh

icles

£Furniture an

d

Equipm

ent

£Leaseh

old

Improvem

ents

£Compu

ter

Hardw

are

£Land

and

build

ings

£


36


16. Property and equipment (continued)

Bank

Cost

31 December 2010 – 505,103 572,951 334,126 – 1,412,180

Additions – 32,064 185,320 57,214 3,399 277,997

Exchange differences – (186) (2,817) (1,290) – (4,293)

Transfer from subsidiary – 9,892 67,356 107,358 89,323 273,929

31 December 2011 – 546,873 822,810 497,408 92,722 1,959,813

Accumulated Depreciation

31 December 2010 – 401,979 395,814 254,292 – 1,052,085

Charge year to date – 64,148 77,162 53,575 21,498 216,383

Exchange differences – (169) (861) (659) (1,689)

Transfer from subsidiary – 5,657 65,115 49,240 56,337 176,349

31 December 2011 – 471,615 537,230 356,448 77,835 1,443,128

Net Book Value

31 December 2010 – 75,258 285,580 140,960 14,887 516,685

31 December 2009 – 103,124 177,137 79,834 – 360,095

Total

£Motor Veh

icles

£Furniture an

d

Equipm

ent

£Leaseh

old

Improvem

ents

£Compu

ter

Hardw

are

£Land

and

build

ings

£


37


Compu

ter

Software

£

17. Intangible fixed assets

Group

Cost

31 December 2010 2,132,259

Additions 253,940

Exchange differences (4,097)

31 December 2011 2,382,102

Accumulated depreciation

31 December 2010 1,450,770

Charge year to date 285,381


31 December 2011 1,734,418

Net book value

31 December 2011 647,684

31 December 2010 681,489


38


17. Intangible fixed assets (continued)

Bank

Cost

31 December 2010 2,130,494

Additions 253,940


Transfer from subsidiary 1,765

31 December 2011 2,382,102

Accumulated depreciation

31 December 2010 1,450,064

Charge year to date 285,381


Transfer from subsidiary 686

31 December 2011 1,734,418

Net book value

31 December 2011 647,684

31 December 2010 680,430

18. Other assets

Prepayments 1,811,304 1,811,304 2,126,959 2,045,993

1,811,304 1,811,304 2,126,959 2,045,993

Compu

ter

Software

£

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£


39


19. Deposits by banks

Repayable on demand 298,526,008 298,526,008 177,757,501 177,757,501

With agreed maturity dates

or periods of notice by remaining maturity:

Three months or less 333,912,079 333,912,079 431,097,575 431,097,575

One year or less, but over three months 82,948,958 82,948,958 – –

715,387,045 715,387,045 608,855,076 608,855,076

Total deposits due to First Bank of Nigeria Plc at 31 December 2011 were £274,814,201 (2010 - £105,893,219).

Deposits by banks are categorised as other liabilities in accordance with IAS 39.

20. Customer accounts

Repayable on demand 181,078,173 181,078,173 165,054,414 165,054,414

With agreed maturity dates

or periods of notice by remaining maturity:

Three months or less but not repayable on demand 236,979,546 236,979,546 287,529,788 287,529,788

One year or less, but over three months 435,206,188 435,206,188 54,278,678 54,278,678

More than one year but less than five years 21,415,393 21,415,393 83,429,238 83,429,238

874,679,300 874,679,300 590,292,118 590,292,118

Deposits by customers are categorised as other liabilities in accordance with IAS 39.

Bank

31 Decem

ber 2010

£Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£


40


21. Other liabilities

Taxation 1,832,692 1,832,692 3,462,912 3,462,912

Social security 762,178 762,178 437,698 437,698

Cash collateral 68,512,670 68,512,670 31,864,861 31,864,861

Customers unclaimed balances 599,408 599,408 587,387 587,387

Others payable 8,839,611 8,836,111 11,385,290 11,178,169

80,546,559 80,543,059 47,738,148 47,531,027

22. Subordinated liabilities

Subordinated debt

Principal 50,000,000 50,000,000 50,000,000 50,000,000

Accrued Interest 12,788 12,788 5,952 5,952

50,012,788 50,012,788 50,005,952 50,005,952

Subordinated liabilities represent subordinated loans of £16,500,000 and £33,500,000 granted by the parent company, First Bank of Nigeria Plc, on 31 December 2010. The loans are repayable on 31 December 2020, respectively at interest rates of 2.75% and 4%, margins over period LIBOR. First Bank of Nigeria Plc has the right to determine the interest period at each reprice date.

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£


41


23. Called up share capital

Authorised

Ordinary shares of £1 each 200,000,000 200,000,000 100,000,000 100,000,000

Issued, allotted and fully paid

Ordinary shares of £1 each 82,000,000 82,000,000 82,000,000 82,000,000

Ordinary Shares:First Bank of Nigeria Plc holds 82,000,000 (2010 - 82,000,000) or 100% (2010 -100%) of the ordinary shares issued. 100,000,000new shares (2010 – nil) were authorised but no new shares were issued (2010 – nil) during the current period. Each share carries avoting right of 1 vote.

24. Translation Reserves

Balance as at 31 December 2010 22,984 –

Exchange differences on translating the net assets of foreign subsidiary (22,984) –

Balance as at 31 December 2011 – –

Group

Tran

slation Re

serve

£ Bank

Tran

slation Re

serve

£

Group

& Ban

k

31 Decem

ber 2011

No. of Shares

Group

& Ban

k

31 Decem

ber 2011

Amou

nt£ Group

& Ban

k

31 Decem

ber 2010

No. of Shares

Group

& Ban

k

31 Decem

ber 2010

Amou

nt£


42


25. Impairment

Opening balance 12,448,823 12,448,823 7,053,605 7,053,605

Charge to income statement 976,897 976,897 11,815,498 11,815,498

Loan recovery (93,839) (93,839) (6,140,393) (6,140,393)

Exchange difference (36,507) (36,507) 74,861 74,861

Amount written off (2,853,407) (2,853,407) (354,748) (354,748)

Closing balance 10,441,967 10,441,967 12,448,823 12,448,823

Available-for-sale financial assets (Note 15) 9,689,923 9,689,923 11,722,882 11,722,882

Loans and advances to banks (Note 12) – – – –

Loans and advances to customers (Note 13) 752,044 752,044 725,941 725,941

10,441,967 10,441,967 12,448,823 12,448,823

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or portfolio of financial assets is impaired. As part of this assessment, management takes account of any forbearance arrangements it has entered into with its residential mortgage customers. As at 31 December 2011, none of the mortgage customers had entered into any such arrangement.

26. Contingent liabilities and commitments

a) Legal issuesAt 31 December 2011, there were no pending legal cases or issues in progress which may have a material impact on the financial statements of the Group (2010– nil).

b) Operating lease commitmentsAt 31 December 2011 the Group was committed to making the following future payments in respect of operating leases for land and buildings. The lease is expected to expire in June 2016.

Within one year 892,730 892,730 718,310 628,310

Between one and five years 2,984,751 2,984,751 2,535,743 2,513,243

More than five years 31,348 31,348 706,424 706,424

3,908,829 3,908,829 3,960,477 3,847,977

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£


43


26. Contingent liabilities and commitments (continued)

c) Off-balance sheet liabilities

Contingent Liabilities

Letters of credit 311,242,118 311,242,118 128,840,897 128,840,897

Guarantees given to third parties 7,629,501 7,629,501 13,959,835 13,959,835

318,871,619 318,871,619 142,800,732 142,800,732

Loan Commitments

Undrawn irrevocable loan commitments 53,698,585 53,698,585 14,946,640 14,946,640

Bank

31 Decem

ber 2011

£ Group

31 Decem

ber 2010

£Group

31 Decem

ber 2011

£ Bank

31 Decem

ber 2010

£

Year End

ed31 Decem

ber 2011

£ Year End

ed31 Decem

ber 2010

£Year End

ed31 Decem

ber 2011

£ Year End

ed31 Decem

ber 2010

£


44


27. Related party transactions

A number of banking transactions were entered into with related parties in the normal course of business. These include loansand deposits and foreign currency transactions. Outstanding balances at the end of the year, and related income and expensefor the year are as follows:

Assets

Amounts due to parent bank 30,346,673 30,346,673 6,526,705 6,526,705

30,346,673 30,346,673 6,526,705 6,526,705

Liabilities

Amounts due to parent bank 279,658,890 279,658,890 105,893,219 105,893,219

Subordinated liabilities 50,000,000 50,000,000 50,000,000 50,000,000

Amount due to fellow subsidiaries 5,192,323 5,192,323 3,142,361 3,142,361

334,851,213 334,851,213 159,035,580 159,035,580

Letters of guarantee

From parent bank 24,668,899 24,668,899 65,038,807 65,038,807

Income

From parent bank 3,742,235 3,742,235 1,510,139 1,510,139

Expenses

To parent bank 4,016,504 4,016,504 783,967 783,967

To fellow subsidiaries 44,933 44,933 39,727 39,727

4,061,437 4,061,437 823,694 823,694

Mortgages were approved and advanced on a commercial arm’s length basis, to three (2010 - three) Directors of First Bankof Nigeria Plc, during the year. As at 31 December 2011, a total mortgage amount of £2,832,055 (2010 - £1,190,556) was outstanding in respect of these Directors.

Loans of £200,000 (2010 - £nil) was made to one of the Directors of First Bank of Nigeria Plc as at 31 December 2011.

Deposit liabilities totalling £834,457 (2010 - £817,788) were held by the Bank in respect of these Directors.

Subordinated loans of £16.5m and £33.5m were granted by First Bank of Nigeria Plc in December 2010, and wereoutstanding as at 31 December 2011 (note 22).

There were no other related party transactions or balances requiring disclosure.

Bank

Year End

ed31 Decem

ber 2011

£ Group

Year End

ed31 Decem

ber 2010

£Group

Year End

ed31 Decem

ber 2011

£ Bank

Year End

ed31 Decem

ber 2010

£


45


28. Financial risk management

Derivatives and other financial instrumentsThe Group’s financial instruments, other than derivatives and bonds, principally comprise loans and deposits that arisefrom its operations as a lending and deposit-taking institution.

The Group also enters into a small number of derivativetransactions (all forward foreign currency contracts). The purpose of the transactions is to manage the currency risks arising from the Group’s operations.

The Group has entered into a small number of bondtransactions. The purpose of the transactions is to improveprofitability and to better manage the Group’s liquidity.

The Group holds and issues financial instruments for three main purposes:

• to earn an interest margin or a fee;

• to finance its operations; and

• to manage the interest rate and currency risks arising from its operations and from its sources of finance.

The Group does not have a trading book. The Group financesits operations by a mixture of shareholders’ funds and customerand bank deposits. The deposits raised may be in a range ofcurrencies at variable or fixed rates of interest. The Group’slending is in USD, GBP, EUR, JPY and CHF. The Group deals inspot and forward foreign exchange transactions.

The main risks arising from the Group’s financial instruments are credit risk, market risk and liquidity risk. Market risk includes interest rate, foreign currency risk and other price risk.The management reviews and agrees policies for managingeach of these risks and they are summarised below. Thesepolicies were reviewed within the period being reported.

Credit riskCredit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligation under a contract. It arises principally from lending, trade finance and treasury activities. Internal controls are in place within theGroup’s credit function which are designed to ensure that loansare made in accordance with the Group’s credit policy and thatonce made such facilities are monitored on a regular basis by the appropriate level of management.

Moreover, significant changes in the economy, or state of a particular industry could result in risks that are differentfrom those provided for at the balance sheet date. To managethese risks, management has established limits in relation to individual borrowers or group of borrowers.

Credit risk and asset/liability concentrationThe Group’s Credit Committee is responsible for approvingcredit recommendations and making other credit decisions as per its delegated authority within the Group’s LendingAuthority Policy. This includes decisions on individual credits,reviewing and recommending credits, large exposures and/orconcentration limits to the Board of Directors for their approval.The Credit Committee is also responsible for monitoring thecredit approval delegated to the Credit Risk ManagementDepartment by the Board of Directors.

The limits established are constantly monitored and are subjectto a regular review by an approval body (based on the amountof the limit). Limits relating to specific sectors and countries are examined and approved by the Board of Directors.

The Group’s credit policy documents include details on lendingauthorities, large exposures, concentration risk, transactionswith parent and affiliates, country risk exposure, industrylending, use of external credit assessments, credit risk collateral and provisioning.

The exposure to credit risk is managed by an analysis of the ability of the borrowers to meet their obligations using internal credit rating systems and methodologies.

In the instances of borrowers who have obtained facilities in other group companies, the total exposure on a group basisis taken into account in determining credit risk.

As a result the credit limits are adjusted if considered necessary.In addition the above analysis takes into account the interestrate spread and collaterals held.

The Group’s exposure to credit risk is determined by thecounterparties with whom the Group conducts business, as well as the markets and countries in which thosecounterparties conduct their business. Counterparty and country limits are in place and the Group performs creditappraisal procedures prior to the advancing of any facilities. The Group also has policies on the levels of collateral that are required to secure facilities.


46


28. Financial Risk Management (continued)

The tables below show the maturity of the Group’s financial assets and the Group’s exposure to credit risk based on residualmaturity, markets and countries in which the Group’s customers conduct their business. Maturity Analysis based on the earlier of the periods to the next interest rate pricing date or the maturity dates.

Group

As at 31 Dec 2011

AssetsCash at bank and in hand 17,555 – – – – – 17,555

Loans and advances to banks 945,361 61,937 80,544 41,100 – – 1,128,942

Loans and advances to customers 329,685 15,027 35,564 116,348 83,379 - 580,003

Investment – – – – – – –

Available-for-sale financial assets – – – 111,392 – – 111,392

Tangible fixed assets – – – – – 766 766

Intangible fixed assets – – – – – 648 648

Other assets – – – – – 1,811 1,811

Deferred tax – – – – – 44 44

Financial assets - derivatives 536 – – – – – 536

Total assets 1,293,137 76,964 116,108 268,840 83,379 3,269 1,841,697

Bank

As at 31 Dec 2011


Loans and advances to banks 945,361 61,937 80,544 41,100 – – 1,128,942

Loans and advances to customers 329,685 15,027 35,564 116,638 83,379 – 580,293


Available-for-sale financial assets – – – 111,392 – – 111,392



Other assets – – – – – 1,811 1,811

Deferred tax – – – – – 44 44


Total assets 1,293,137 76,964 116,108 269,130 83,379 3,020 1,841,738

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000

More than five years

£’000

Not exposed to

credit risk

£’000

Total

£’000

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Not exposed to

credit risk

£’000

Total

£’000


47



Group

As at 31 Dec 2010


Loans and advances to banks 529,491 28,539 119,118 79,046 – – 756,194



Available-for-sale financial assets – 5,020 – 53,311 – – 58,331



Other assets – – – – – 2,127 2,127

Deferred tax – – – – – 71 71


Total assets 887,635 53,842 134,542 260,101 71,023 3,331 1,410,474

Bank

As at 31 Dec 2010


Loans and advances to banks 529,491 28,539 119,118 79,046 – – 756,194


Investment – – – – 10 – 10

Available-for-sale financial assets – 5,020 - 53,311 – – 58,331



Other assets – – – – – 2,046 2,046

Deferred tax – – – – – 71 71


Total assets 887,568 53,842 134,542 260,101 71,033 3,158 1,410,244

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Not exposed to

credit risk

£’000

Total

£’000

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Not exposed to

credit risk

£’000

Total

£’000


48


Group

& Ban

k

Amortised cost

31 Decem

ber 2011

£ Group

& Ban

k

Provision on

31 Decem

ber 2011

£ Group

& Ban

k

Net boo

k value

31 Decem

ber 2011

£

Group

& Ban

k

Amortised cost

31 Decem

ber 2010

£ Group

& Ban

k

Provision on

31 Decem

ber 2010

£ Group

& Ban

k

Net boo

k value

31 Decem

ber 2010

£


Age analysis of past due but not impaired assets

The table below shows the age analysis of past due but not impaired assets. The Group held no collateral (2010 - £nil) against these assets.

Group & Bank

Within three months 6,758,109 – 6,758,109 – – –

Between three to six months – – – – – –

Over six months but less than one year – – – – – –

Over one year – – – – – –

6,758,109 – 6,758,109 – – –

Analysis of impaired financial assets

The following table shows analysis of impaired financial assets.

Loans and advances to banks – – –

Loans and advances to customers (note 13) 3,617,137 752,044 2,865,093

3,617,137 752,044 2,865,093

Loans and advances to banks – – –

Loans and advances to customers (note 13) 1,785,106 725,941 1,059,165

1,785,106 725,941 1,059,165

Group

& Bank

Gross Amou

nt

31 Decem

ber 2

011

£ Group

& Bank

Collateral

31 Decem

ber 2

011

£ Group

& Bank

Amou

nt31 Decem

ber 2

011

£ Group

& Bank

Gross Amou

nt

31 Decem

ber 2

010

£ Group

& Bank

Collateral

31 Decem

ber 2

010

£ Group

& Bank

Amou

nt31 Decem

ber 2

010

£

Bank

Year End

ed31 Decem

ber 2011

£’000

Group

Year End

ed31 Decem

ber 2010

£’000

Group

Year End

ed31 Decem

ber 2011

£’000

Bank

Year End

ed31 Decem

ber 2010

£’000

Bank

Year End

ed31 Decem

ber 2011

£’000

Group

Year End

ed31 Decem

ber 2010

£’000

Group

Year End

ed31 Decem

ber 2011

£’000

Bank

Year End

ed31 Decem

ber 2010

£’000

Group

& Ban

k

31 Decem

ber 2011

£


49



The Group holds collateral in respect of certain loans and advances to banks and customers that are impaired. The following table shows financial and non-financial assets, recognised on the Group’s balance sheet.

Group & Bank

Residential property 4,050,000

Commercial property –

4,050,000

In general, the Group will seek to dispose of property and other assets obtained by taking possession of collateral and convertinto cash as rapidly as the market for the individual asset permits.

Credit exposure by sector

Group & Bank

Banks 1,239,664 1,239,664 813,844 813,788

Corporates 543,456 543,746 515,560 515,560

Government 5,023 5,023 17,471 17,471

Individuals 49,749 49,749 60,244 60,244

1,837,892 1,838,182 1,407,119 1,407,063

Credit exposure by location

Group & Bank

Western Europe 815,946 816,236 512,299 512,299

Eastern Europe 181,643 181,643 214,101 214,101

Africa 421,985 421,985 473,482 473,426

Others 418,318 418,318 207,237 207,237

1,837,892 1,838,182 1,407,119 1,407,063

The above sector and geographical analyses only include cash at bank and in hand, loans and advances to banks and to customers and debt securities.


50



The Group extends credit facilities to quality rated and unratedcounterparties. All rated counterparties must have a Fitch (orequivalent) rating of no less than B. A large percentage (59%)(2010 - 45%) of the Group’s total financial assets was to highquality financial institutions, the majority of which had ratingsof between A and AAA.

As at 31 December 2011, the Group’s maximum exposure to credit risk was £2,074m (2010 - £1,489m), of which£13.31m (2010 – £13.98m) was deemed to be impaired or doubtful. These amounts include all financial assets and undrawn irrevocable loan and trade commitments.

Total trade related exposure was £373m (2010 - £143m) against which the Group held cash collateral of £137m (2010 - £61m). In addition, the Group had collateral of £310m (2010 - £121m) in respect of other credit exposures.

Generally, the Group reduces its credit risk exposure by entering into collateral arrangements with certaincounterparties with whom it undertakes a significant volume of transactions including its ultimate parent, First Bank of Nigeria Plc. Under the terms of the collateral agreements,cash deposits are charged to the Group as collateral forcounterparty exposures. These arrangements do not result in an offset of balance sheet assets and liabilities. However, for regulatory reporting purposes the risk weighted assets are reduced by the amount of collateral held.

In the ordinary course of business, the Group also pledged assets as collateral to secure trade related liabilities. The aggregate amount of assets pledged was £72.9m (2010 - £55.3m).

Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:foreign currency risk; interest rate risk; and price risk. The objective of market risk management is to maintain market risk exposures within acceptable parameters, whilstoptimising the return on risk.

Interest rate riskInterest rate risk originating from banking activities arises due to the Group holding a combination of fixed and variablerate assets and liabilities that arise during the normal course of business. The tables summarise the variable rate assets and liabilities as at 31 December 2011 as a basis of disclosingthe Group’s interest rate sensitivity analysis.

Total

£’000

Other ccy

£’000

EUR

£’000

USD

£’000

GBP

£’000


51



Interest rate sensitivity analysisThe Group holds a combination of fixed and variable rate assets and liabilities. As a consequence of holding variable rate financialinstruments, the Group is exposed to cash flow interest rate risk.

Interest rate sensitivity analysis has been performed on the net cash flow interest rate risk exposures as at the reporting dates. Arange of possible upward/downward movements in Libor/Euribor of 100 – 150bps has been assumed for the different currencies.

If all other variables are held constant, the tables below present the likely impact on the Group’s profit or loss.

Group

As at 31 December 2011

Total financial assets 371,094 1,355,475 103,147 8,176 1,837,892

Less: Fixed Rate assets (6,145) (511,556) (12,050) – (529,751)

Total Variable Rate Assets 364,949 843,919 91,097 8,176 1,308,141

Total Financial Liabilities 759,185 770,291 54,654 5,937 1,590,067

Less: Fixed Rate Liabilities (566,871) – – – (566,871)

Total Variable Rate Liabilities 192,314 770,291 54,654 5,937 1,023,196

Net Cash Flow Interest Rate Risk exposures 172,635 73,628 36,443 2,239 284,945

Possible movement in Libor/Euribor (bps) 100 150 100 100 –

Possible impact of increase in Libor/Euribor on profit/loss 1,726 1,104 364 22 3,216

Possible impact of decrease in Libor/Euribor on profit/loss (1,726) (1,104) (364) (22) (3,216)


52



Bank


Total financial assets 371,385 1,355,475 103,147 8,176 1,838,183

Less: Fixed Rate assets (6,145) (511,556) (12,050) – (529,751)


Total Financial Liabilities 759,185 770,291 54,654 5,937 1,590,067


Total Variable Rate Liabilities 192,314 770,291 54,654 5,937 1,023,196

Net Cash Flow Interest Rate Risk exposures 172,926 73,628 36,443 2,239 285,236


Possible impact of increase in Libor/Euribor on profit/loss 1,729 1,104 364 22 3,219

Possible impact of decrease in Libor/Euribor on profit/loss (1,729) (1,104) (364) (22) (3,219)

Group


Total financial assests 349,226 990,152 63,562 4,179 1,407,119

Less: Fixed Rate assets – (389,718) (13,233) – (402,951)


Total Financial Liabilities 501,795 657,383 39,215 754 1,199,147


Total Variable Rate Liabilities 136,604 657,383 39,215 754 833,956

Net Cash Flow Interest Rate Risk exposures 212,622 (56,949) 11,114 3,425 170,212


Possible impact of increase in Libor/Euribor on profit/loss 2,126 (854) 111 34 1,417

Possible impact of decrease in Libor/Euribor on profit/loss (2,126) 854 (111) (34) (1,417)

Total

£’000

Other ccy

£’000

EUR

£’000

USD

£’000

GBP

£’000

Total

£’000

Other ccy

£’000

EUR

£’000

USD

£’000

GBP

£’000


53



Bank


Total financial assests 349,170 990,152 63,562 4,179 1,407,063

Less: Fixed Rate assets – (389,718) (13,233) – (402,951)


Total Financial Liabilities 501,795 657,383 39,215 754 1,199,147


Total Variable Rate Liabilities 136,604 657,383 39,215 754 833,956

Net Cash Flow Interest Rate Risk exposures 212,566 (56,949) 11,114 3,425 170,156


Possible impact of increase in Libor/Euribor on profit/loss 2,126 (854) 111 34 1,417

Possible impact of decrease in Libor/Euribor on profit/loss (2,126) 854 (111) (34) (1,417)Total

£’000

Other ccy

£’000

EUR

£’000

USD

£’000

GBP

£’000


54



Foreign Currency riskForeign exchange exposure arises from normal bankingactivities, particularly from the receipt of deposits and theplacement of funds denominated in foreign currencies. It is the policy of the Group to match the currencies and its assets and liabilities as far as practicable. It is also thepolicy of the Group to adhere to the limits laid down by the Board in respect of the “overall net open position”. The tables below give details of the Group’s net foreigncurrency exposures as at 31 December 2011 as a basis ofdisclosing the Group’s foreign currency sensitivity analysis.

Foreign Currency SensitivityForeign currency sensitivity analysis has been performed on the foreign currency exposures inherent in the Group’sfinancial assets and financial liabilities at the reporting datespresented, net of FX derivatives.

US Dollar

£’000

EUR

£’000

Other currencies

£’000

Group & Bank


Net foreign currency exposures (1,107) (229) 372

Impact of 5% increase in FC: GBP rate 55 11 (19)

Impact of 5% decrease in FC: GBP rate (55) (11) 19

Group & Bank


Net foreign currency exposures 3,812 (496) (941)

Impact of 5% increase in FC: GBP rate (191) 25 47

Impact of 5% decrease in FC: GBP rate 191 (25) (47)

29. Liquidity risk

The Group is regulated in the United Kingdom by the Financial Services Authority (FSA) who set the required liquidity mismatch parameters. The Group manages the liquidity structure of its assets, liabilities and commitments so that cash flows are appropriately balanced to ensure that all funding obligations are met when due and the required mismatch parameters by the FSA are not breached. The policy of the Group is to match the maturities and currencies as far as practicable for all (and particularly large) exposures or placements.

Maturity Analysis of Liabilities based on the contractual cash flow and on the earlier of the periods to the next interest rate pricing date or the maturity dates

US Dollar

£’000

EUR

£’000

Other currencies

£’000

The sensitivity analysis provides an indication of the impact onthe Group’s profit or loss of reasonably possible changes in thecurrency exposures embedded within the functional currencyenvironment that the Group operates in. Reasonably possiblechanges are based on an analysis of historical currencyvolatility, together with any relevant assumptions regardingnear-term future volatility.

The Group believes that for each foreign currency netexposure it is reasonable to assume a 5%appreciation/depreciation against the Group’s functionalcurrency. If all other variables are held constant, the tablesbelow present the impact on the Group profit or loss if thesecurrency movements had occurred.


55


29. Liquidity risk (continued)

Group


Liabilities

Deposits by banks 632,438 4,627 78,322 – – 715,387

Customer accounts 607,338 120,094 114,775 32,472 – 874,679

Other financial liabilities 80,547 – – – – 80,547

Financial liabilities - derivatives 7,095 – – – – 7,095

Subordinated liabilities 13 – – – 50,000 50,013

Off B/S items:

Letters of credit 238,517 67,906 1,483 3,336 – 311,242

Undrawn Loan Commitments 53,699 – – – 53,699

Guarantees 7,629 – – – – 7,629

Total Liabilities 1,627,276 192,627 194,580 35,808 50,000 2,100,291

Bank


Liabilities

Deposits by banks 632,438 4,627 78,322 – – 715,387





Off B/S items:

Letters of credit 238,517 67,906 1,483 3,336 – 311,242

Undrawn Loan Commitments 53,699 – – – 53,699

Guarantees 7,629 – – – – 7,629


Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Total

£’000

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not more

than one year

£’000

More than one year

but n

ot m

ore than five

years

£’000


£’000

Total

£’000


56


29. Liquidity risk (continued)

Group


Liabilities

Deposits by banks 608,855 – – – – 608,855





Off B/S items:

Undrawn Loan Commitments 14,947 – – – – 14,947


Bank


Liabilities

Deposits by banks 608,855 – – – – 608,855





Off B/S items:

Undrawn Loan Commitments 14,947 – – – – 14,947


Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Total

£’000

Not m

ore than

three mon

ths

£’000

More than th

ree

mon

ths b

ut not m

ore

than six mon

ths

£’000

More than six

mon

ths b

ut not m

ore

than one year

£’000

More than one year

but n

ot m

ore than

five years

£’000


£’000

Total

£’000


57


30. Fair values of financial instruments (continued)

Categories of financial instruments

The table below represents the Group’s assets and liabilities carrying amounts, classified by the categories as defined in IAS 39.

Group

Financial assets

Cash at bank and in hand 17,555 16,805

Fair value through profit and loss (FVTPL)

Designated as FVTPL 536 23

Investment in Subsidiaries – –

Held-to-maturity securities – –

Available-for-sale financial assets 111,392 58,331

Loans and receivables 1,708,945 1,331,984

1,838,428 1,407,143

Financial liabilities


Designated as FVTPL 7,095 2,648

Amortised cost 1,640,079 1,249,153

1,647,174 1,251,801

Fair Value

Period

End

ed

31 Decem

ber

2010

£’000

Fair Value

Year End

ed31 Decem

ber

2011

£’000


58



Bank

Financial assets

Cash at bank and in hand 17,555 16,738


Designated as FVTPL 536 23

Investment in Subsidiaries – 10

Held-to-maturity securities – –


Loans and receivables 1,709,236 1,331,984

1,838,719 1,407,086



Designated as FVTPL 7,095 2,648

Amortised cost 1,640,079 1,249,153

1,647,174 1,251,801

Fair Value

Period

End

ed

31 Decem

ber 2010

£’000

Fair Value

Year End

ed31 Decem

ber 2011

£’000

59


59



Set out below is a year-end comparison of current and book values of all the Group’s financial instruments by category.Market values are used to determine fair values. In the absence of readily ascertainable market values, Directors’ estimationis used to determine fair values

Group

Financial assets

Cash at bank and in hand 17,555 16,805 17,555 16,805

Loans and advances to banks 1,128,942 756,194 1,128,942 756,194

Loans and advances to customers 580,003 575,790 580,003 575,790

Investment in Subsidiaries – – – –

Available-for-sale financial assets 123,520 68,279 111,392 58,331

Financial asset - derivatives 800 20 536 23

1,850,820 1,417,088 1,838,428 1,407,143


Deposits by banks 715,387 608,855 715,387 608,855

Customer accounts 874,679 590,292 874,679 590,292

Financial liabilities - derivatives 6,687 2,147 7,095 2,648

Subordinated liabilities 50,013 50,006 50,013 50,006

1,646,766 1,251,300 1,647,174 1,251,801

Fair Value

Year End

ed31 Decem

ber 2011

£’000

Fair Value

Period

End

ed

31 Decem

ber 2010

£’000

Book

Value

Period

End

ed

31 Decem

ber 2010

£’000

Book

Value

Year End

ed31 Decem

ber 2011

£’000


60



Bank

Financial assets

Cash at bank and in hand 17,555 16,738 17,555 16,738

Loans and advances to banks 1,128,942 756,194 1,128,942 756,194

Loans and advances to customers 580,293 575,790 580,293 575,790

Investment in Subsidiaries 1 10 1 10

Available-for-sale financial assets 123,520 68,279 111,392 58,331

Financial asset - derivatives 800 20 536 23

1,851,111 1,417,031 1,838,719 1,407,086


Deposits by banks 637,488 608,855 637,488 608,855

Customer accounts 952,578 590,292 952,578 590,292

Financial liabilities - derivatives 6,687 2,147 7,095 2,648

Subordinated liabilities 50,013 50,006 50,013 50,006

1,646,766 1,251,300 1,647,174 1,251,801

Fair Value

Year End

ed31 Decem

ber 2011

£’000

Fair Value

Period

End

ed

31 Decem

ber 2010

£’000

Book

Value

Period

End

ed

31 Decem

ber 2010

£’000

Book

Value

Year End

ed31 Decem

ber 2011

£’000


61



Fair value measurement recognised in the statement of financial position

The following tables provide an analysis of financial instruments for the Group that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 – fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 – fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Group

Financial assets at FVTPL


Financial asset - derivatives 536 – – 536

111,928 – – 111,928

Financial liabilities at FVTPL

Financial liabilities - derivatives 7,095 – – 7,095

7,095 – – 7,095

Bank




111,928 – – 111,928



7,095 – – 7,095

Year End

ed31 Decem

ber 2011

Level 3

£’000

Total

£’000

Year End

ed31 Decem

ber 2011

Level 2

£’000

Year End

ed31 Decem

ber 2011

Level 1

£’000

Year End

ed31 Decem

ber 2011

Level 3

£’000

Total

£’000

Year End

ed31 Decem

ber 2011

Level 2

£’000

Year End

ed31 Decem

ber 2011

Level 1

£’000


62



Group




58,354 – – 58,354



2,648 – – 2,648

Bank


Available-for-sale fi-nancial assets 58,331 58,331


58,354 – – 58,354



2,648 – – 2,648

Year End

ed31 Decem

ber 2010

Level 3

£’000

Total

£’000

Year End

ed31 Decem

ber 2010

Level 2

£’000

Year End

ed31 Decem

ber 2010

Level 1

£’000

Year End

ed31 Decem

ber 2010

Level 3

£’000

Total

£’000

Year End

ed31 Decem

ber 2010

Level 2

£’000

Year End

ed31 Decem

ber 2010

Level 1

£’000

63

31. Pension costs

The Group operates a defined contribution pension scheme for staff and contributions were made during the year totalling £423,320 (2010 - £318,822). This amount forms part of total staff costs recorded under administrative expenses.

There were no outstanding or prepaid contributions at the balance sheet date.

32. Ultimate parent company and controlling party

The ultimate parent company and controlling party is First Bank of Nigeria Plc “FBN”, a company incorporated in Nigeria and which prepares group accounts including all companies within the FBN group. The parent of the smallest and largest group for which group accounts are prepared and of which the Bank is a member is First Bank of Nigeria Plc.Copies of such accounts may be obtained from the Company Secretary, First Bank of Nigeria Plc, Lagos, Nigeria.

33. Dividend paid

During the year a dividend payment of £6,000,000 was made in respect of the year ended 31 December 2011 (2010 – £5,000,000). The dividend paid, was agreed and passed by the board.

34. Subsequent events

In January 2012, the Group received additional capital of £25m from the Parent. This is to strengthen the Group’s capital base to support business growth and consolidate its leading competitive position.

63




64


Five Year Comparison - Group

Balance Sheet

Assets

Cash at bank and in hand 17,554,507 16,805,201 7,136,337 35,004,076 17,231,738

Loans and advances to banks 1,128,941,539 756,193,496 849,553,076 1,087,050,405 875,202,404

Loans and advances to customers 580,003,133 575,790,096 270,978,606 243,864,461 94,102,442

Investment in Subsidiary - - - - -

Securities-held-to-maturity - - 14,233,782 - -

Available-for-sale financial assets 111,392,338 58,330,632 - - -

Property and equipment 766,685 451,774 524,529 564,039 303,447

Intangible assets 647,684 681,489 682,688 544,999 615,617

Other assets 1,811,304 2,126,959 1,220,738 856,077 1,008,926

Deferred tax asset 43,794 71,161 92,284 103,409 38,464

Financial assets - derivatives 536,268 22,835 549,063 - 297,767

1,841,697,252 1,410,473,643 1,144,971,103 1,367,987,466 988,800,805

Financed by:

Share Capital 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000

Reserves 31,976,321 28,934,836 19,670,128 19,147,466 12,451,852

Deposits by banks 715,387,045 608,855,076 456,807,863 581,960,332 576,596,711

Customer accounts 874,679,300 590,292,118 500,227,751 590,749,699 165,505,746

Other liabilities 80,546,559 47,738,148 69,573,251 77,307,672 139,626,128

Financial liabilities - derivatives 7,095,239 2,647,513 16,069 322,297 1,120,368

Subordinated liabilities 50,012,788 50,005,952 16,676,041 16,500,000 11,500,000

1,841,697,252 1,410,473,643 1,144,971,103 1,367,987,466 988,800,805

March 2008

£March 2009

£Decem

ber 2009

£Decem

ber 2010

£Decem

ber 2011

£


65


Five Year Comparison - Group (continued)

Income Statement

Gross Earnings 62,678,535 56,007,963 33,197,153 64,860,995 54,112,166

Net Operating Income 34,956,075 36,909,550 15,491,381 27,958,280 22,268,174

Operating Expenses (16,479,430) (14,153,616) (7,928,254) (11,214,713) (7,626,788)

Provision for Losses (976,897) (11,815,498) (6,802,735) (408,377) (1,560)

Loan Recovery 93,839 6,140,393 - 1,560 45,677

Profit before Tax 17,593,587 17,080,829 760,392 16,336,750 14,685,503

Taxation (4,751,715) (4,909,799) (237,730) (4,641,136) (4,473,253)

Profit after Tax 12,841,872 12,171,030 522,662 11,695,614 10,212,250

Dividend 6,000,000 5,000,000 - 5,000,000 4,900,000

March 2008

£March 2009

£Decem

ber 2009

£Decem

ber 2010

£Decem

ber 2011

£


66


Five Year Comparison - Bank

Balance Sheet

Assets

Cash at bank and in hand 17,554,507 16,738,427 7,136,337 35,004,076 17,231,738

Loans and advances to banks 1,128,941,539 756,193,496 849,553,076 1,087,050,405 875,202,404

Loans and advances to customers 580,293,531 575,790,096 270,978,606 243,864,461 94,102,442

Investment in Subsidiary 1 10,373 10,373 - -

Securities-held-to-maturity - - 14,233,782 - -

Available-for-sale financial assets 111,392,338 58,330,632 - - -

Property and equipment 516,685 360,095 369,860 564,039 303,447

Intangible assets 647,684 680,430 681,262 544,999 615,617

Other assets 1,811,304 2,045,993 1,134,384 856,077 1,008,926

Deferred tax asset 43,794 71,161 92,284 103,409 38,464

Financial assets - derivatives 536,268 22,835 549,063 - 297,767

1,841,737,651 1,410,243,538 1,144,739,027 1,367,987,466 988,800,805

Financed by:

Share Capital 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000

Reserves 32,020,220 28,911,852 19,670,128 19,147,466 12,451,852

Deposits by banks 715,387,045 608,855,076 455,975,834 581,960,332 576,596,711

Customer accounts 874,679,300 590,292,118 500,227,751 590,749,699 165,505,746

Other liabilities 80,543,059 47,531,027 70,173,204 77,307,672 139,626,128

Financial liabilities - derivatives 7,095,239 2,647,513 16,069 322,297 1,120,368

Subordinated liabilities 50,012,788 50,005,952 16,676,041 16,500,000 11,500,000

1,841,737,651 1,410,243,538 1,144,739,027 1,367,987,466 988,800,805

March 2008

£March 2009

£Decem

ber 2009

£Decem

ber 2010

£Decem

ber 2011

£


67


Five Year Comparison - Bank (continued)

Income Statement

Gross Earnings 62,706,451 56,007,963 33,197,153 64,860,995 54,112,166

Net Operating Income 34,983,991 36,909,550 15,491,381 27,958,280 22,268,174

Operating Expenses (16,463,447) (14,153,616) (7,928,254) (11,214,713) (7,626,788)

Provision for Losses (976,897) (11,815,498) (6,802,735) (408,377) (1,560)

Loan Recovery 93,839 6,140,393 - 1,560 45,677

Profit before Tax 17,637,486 17,080,829 760,392 16,336,750 14,685,503

Taxation (4,751,715) (4,909,799) (237,730) (4,641,136) (4,473,253)

Profit after Tax 12,885,771 12,171,030 522,662 11,695,614 10,212,250

Dividend 6,000,000 5,000,000 - 5,000,000 4,900,000

March 2008

£March 2009

£Decem

ber 2009

£Decem

ber 2010

£Decem

ber 2011

£

Company Registration No. 4459383

fbn bank (uk) limited report and financial statements · fbn bank (uk) limited report and financial...

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