tpb bank plc · 2016, and awarded a certificate of incorporation number 125056. the bank is...
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ANNUAL REPORT 2019
TPB Bank PLC
TPB Bank PLC
Head OfficeLAPF Towers, Kijitonyama
Bagamoyo Road,P. O. Box 9300Dar Es Salaam
Tanzania
Telephone: +255 22 2162940Fax: +255 22 2114815
E-mail [email protected]: www.tpbbank.co.tz
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ANNUAL REPORT 2019
CREATING AND DELIVERING VALUE
Dear Valued Stakeholders,
I strongly believe that public institutions need to create value for their stakeholders, in a sustainable way. TPB Bank is at the forefront of embracing this philosophy and has strove to consistently be a proactive entity in building the United Republic of Tanzania. We firmly believe that over and beyond our zeal for financial inclusion, we must also make a positive socio-economic impact on Tanzanian economy through our every-day operations.
Our contribution in 2019 was one that we are proud of, and the following are some of our substantial achievements:
· TPB paid out a total dividend of TZS 1.2 billion to our shareholders with TZS 1 billion paid to our majority shareholder, the Government of the United Republic of Tanzania.
· Corporate tax payments amounting to TZS 7.1 billion remitted to Tanzania Revenue Authority (TRA), up by 38% from the TZS 5.1 billion paid in 2018.
· Employment of 925 Tanzanians.
· Continued in-roads into the rural and un-banked populations through a combination of brick and mortar technology. This has seen a realization of 37 branches, 40 mini branches, 320,000 mobile banking customers, 75 ATM’s and 1,438 point of sale machines.
· A total of TZS 218 billion lent out to 50,000 pensioners, ensuring that they remain in the formal financial system and can engage in various socio-economic activities, promoting their livelihood after retirement.
While I am very proud of the socio-economic value TPB Bank creates, this success is an impetus that we must and will continue to do more to ensure our various stakeholders receive the very best that the bank has to offer. We are fully committed to ensuring a lasting impact on the great people of Tanzania.
Dr. Edmund Bernard Mndolwa
Chairman - Board of DirectorsTPB Bank PLC
31st March 2020
Dr. Edmund Bernard Mndolwa
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TPB Bank PLC
His Excellency the President of the United Republic of Tanzania, Hon. Dr. John Pombe Joseph Magufuli receiving a dummy cheque from TPB Board Chairman Dr. Edmund Bernard Mndolwa and TPB CEO Mr. Sabasaba Moshingi representing the bank’s dividend payment to the Government of the United Republic of Tanzania from 2018 operations. Second left is Hon. Job Ndugai, Speaker of Parliament and far left is Hon. Dr. Phillip Mpango, Minister for Finance and Planning.
Her Excellency the Vice-President of the United Republic of Tanzania, Ms. Samia Suluhu Hassan in a joint photo with TPB EXCO members during the launch of Tabasamu Account. On her left is Hon. Dr. Ashatu Kijaji, Deputy Minister for Finance and Planning, on her right is TPB Board Chairman - Dr. Edmund Mndolwa and on her far right is TPB CEO Mr. Sabasaba Moshingi.
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ANNUAL REPORT 2019
OUR VISION
“To be the leading bank in the provision of affordable financial services and promoting financial inclusion in Tanzania. ”
OUR MISSION
“To aid in the transformation of the socio-economic landscape of Tanzania by providing and promoting financial solutions in a sustainable way while ensuring stakeholder expectations are met.”
OUR VALUESTPB’s has identified its core values which will shape the culture, define the character of TPB and guide how TPB’s people behave and make decisions going forward.
Customer Focus: All our activities are primarily focused on customers’ needs and their fulfillment; we invest to enhance their experience of banking with us. The market we serve determines our choice of products and services and the way we deliver them.
Trustworthy: Our people conduct themselves ethically in a manner that is above reproach to win the trust of our customers and stakeholders.
Professionalism: We always aspire to conduct our business to the highest standard and compliance with best banking practices and regulations.
Teamwork: Our business units will work together in harmony so as to make sure our customers get the best value for money in the services and products we offer.
Quality: Quality is the focus of everything we do. Our continual innovation, spirit of integration, and high standards improve quality in every aspect of our bank.
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TPB Bank PLC
BANK INFORMATIONLEGAL STATUS
TPB Bank is a Public Limited Company incorporated under the Companies Act, 2002 on 29th March 2016, and awarded a certificate of incorporation number 125056. The bank is licensed by the Bank of Tanzania.
PHIYSICAL ADDRESS POSTAL ADDRESS
Head OfficeLAPF Towers TPB BANK PLCBagamoyo Road P. O. Box 9300Dar Es Salaam Dar Es SalaamTanzania TanzaniaTelephone: +255 22 2162940Fax: +255 22 2114815E-mail [email protected]: www.tpbbank.co.tz
AUDITORS Controller and Auditor GeneralNational Audit HouseSamora Avenue/Ohio StreetP.O. Box 9080Dar es Salaam.
TPB LAWYERS
1. M.A. Ismail & Company 5. Rex Attorneys Plot No. 16, Malik Road, Upanga Rex House, P.O. Box 1553 145 Magore Street, Upanga, Dar es Salaam. P.O.Box 7495, Dar es Salaam. 2. Astute Law Attoneys, Plot No 12, Block K, 6. B & E Ako Law, Nyanza Building, 3rd Floor, Tanhouse Tower (4th Floor) P.O. Box 311, Plot No 34/1-Ursino South Mwanza. P.O.Box 2475 Dar es Salaam
3. Kailu Chambers Advocates, 7. Gabriel & Co, Plot No 75/6, Block S, Plot No 1736, Kahama Road, Masaki P.O. Box 127, P.O.Box 106204 Mwanza. Dar es Salaam. 4. Legis Attorneys, 8. Amicus Attorneys 4th City Plaza Building, Raha Towers, 1st Floor, LAPF Building 145 Magore Street, Upanga, P.O.Box 7219 P.O. Box 3750, Dar es Salaam.
Dar es Salaam.
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ANNUAL REPORT 2019
OUTREACH
BRANCHES37 Branches
40 Mini-branches
WESTERN UNION MONEY TRANSFER37 Branches of TPB Bank
40 Mini-branches of TPB Bank
1 Dedicated location for Western Union Money Transfers at YWCA Branch
87 Tanzania Posts Corporation Offices
8 Branches of DCB Commercial Bank
2 Branches of Mwanga Community Bank
3 Branches of Uchumi Commercial Bank
4 Branches of Mucoba Bank Plc
25 Branches of Azania Bank Limited
9 Branches of Amana Bank
3 Branches of Maendeleo Bank
11 Branches of Mkombozi Bank Plc
ATM NETWORK 75 TPB Bank’s own ATMs
250 Umoja ATMs
TPB POPOTE POS NETWORK49 TPC Agents operating via Selcom
1,448 Selcom Individual Agents, and
87 Mobile Agent operators.
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TPB Bank PLC
FIVE - YEAR FINANCIAL REVIEW
(Figures stated in Billion Shillings)
Interest Income
2019Dec.
2018Dec.
2017Dec.
2016Dec.
2015Dec.
100.2 95.9 83.1 66.8 49.2
Non-Interest Income 29.5 22.4 23.7 24.9 25.1
TOTAL INCOME 129.7 118.3 106.8 91.7 74.5
Impairment for Loans (10.5) (13.7) (11.2) (7.1) (4.4)
PROFIT BEFORE TAX 23.0 17.1 18.4 15.7 12.0
PROFIT AFTER TAX 15.9 12.7 12.7 10.8 8.3
LOANS AND ADVANCES 420.6 412.8 325.1 297.6 251.9
TOTAL DEPOSITS 517.7 453.5 382.6 337.4 322.2
SHAREHOLDERS’ FUNDS 98.9 82.9 59.8 51.8 41.1
TOTAL ASSETS 647.2 562.3 458.3 400.7 370.7
OTHER INDICATORS
Core Capital to total Risk Weighted Assets 15.86% 13.98% 12.00% 12.10% 12.46%
Total Capital to total Risk Weighted Assets 15.86% 14.86% 12.92% 13.00% 13.32%
Return on Average Assets 2.87% 2.26% 2.87% 4.2% 2.23%
Return on average Shareholders’ Funds 18.40% 15.34% 20.85% 31.5% 20.13%
Number of Branches plus Mini branches 77 75 67 60 59
Number of Staff 925 888 718 700 660
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ANNUAL REPORT 2019
FINANCIAL HIGHLIGHTS
TPB Bank has had strong financial performance over the last decade on all key financial parameters - revenue, profit before tax, loans and advances, deposit mobilization, total assets and shareholders fund. TPB has strove to consistently deliver superior financial performance as a basis to aid TPB in delivering reliable, timely and world class solutions. This impressive financial performance is underpinned by product diversification, improved service delivery and a key focus on innovation.
During the period 2010 – 2019, total income has grown by 535% while profit before tax has multiplied by factor of 26. Total deposits have more than quadrupled whereas loans and advances have grown by 548%. The bank’s balance sheet has grown by 429% while the shareholders fund has grown by a factor of 12.9.
150Revenue - TZS Billion
100
50
0
16
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
16 15 20 25 31 3953
75
92
107118 130
Profit Before Tax - TZS Billion
5
10
15
20
25
0 0.4 0.9 0.5 0.93.8
5.77.0
10.3 12.015.7
18.4 17.2
23.0
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
Total Deposits - TZS Billion
200
300
400
500
600
100
0
74 80 88 109 121146 173
265322
337383
454518
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
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TPB Bank PLC
FINANCIAL HIGHLIGHTS
Loans and Advances - TZS Bilion
400
500
300
100
200
036
46 38 65 66101 120
196252
298 325413
421
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
Total Assets - TZS Billion
400
600
800
200
084 86 97 121 136 167 201
298371 401
458562
647
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
Shareholders Fund - TZS Billion
80.0
100.0
120.0
60.0
20.0
40.0
0.06.0 5.0
7.0 7.7 11.3 16.923.0
29.841.0
51.8
59.882.9
98.9
Dec. 2007
Dec. 2015
Dec. 2011
Dec. 2019
Dec. 2009
Dec. 2017
Dec. 2013
Dec. 2008
Dec. 2016
Dec. 2012
Dec. 2010
Dec. 2018
Dec. 2014
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ANNUAL REPORT 2019
COMPOSITION OF SHAREHOLDING AS AT 31 DECEMBER 2019
COMPOSITION OF ASSETS AS AT 31 DECEMBER 2019
COMPOSITION OF LIABILITIES AND EQUITY AS AT 31 DECEMBER 2019
COMPOSITION OF INVESTMENTS AS AT 31 DECEMBER 2019
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TPB Bank PLC
TABLE OF CONTENTS
CONTENTS Page
Creating and delivering value ii
Our Vision, Our Mission & Our Values iv
Bank Information 1
Outreach 2
Five - Year Financial Review 3
Financial Highlights 4
Letter Of Transmittal 8
Statement by The Chairman of The Board of Directors 9
Statement by The Chief Executive Officer 11
Milestones During 2019 13
The Board Of Directors 22
Executive Management 24
Abbreviations 29
Corporate information 30 - 31
Report of the Directors 32
Corporate Governance 33 – 41
Statement of Directors’ Responsibilities 42
Declaration of Head of Finance 43
Report of The Controller and Auditor General 44
Financial statements:
Statement of profit or loss and other comprehensive income 48
Statement of financial position 49
Statement of changes in equity 50
Statement of cash flows 51
Notes to the financial statements 52 – 115
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ANNUAL REPORT 2019
LETTER OF TRANSMITTAL
TPB BANK PLC
P. O. Box 9300 Dar es Salaam
31st March 2020
Hon. Dr. Philip Mpango, Minister for Finance and Planning, The United Republic of Tanzania, Treasury Square Building,P.O. Box 2802,40468 DODOMA.
Honorable Minister,
In accordance with the Companies Act, 2002 I have the honor to submit, on behalf of the Board of Directors,
the Annual Report and Audited Statement of Accounts of the TPB Bank Plc for the year ended 31st
December, 2019.
Yours sincerely,
TPB Bank PLC
Dr. Edmund Mndolwa Chairman - Board of Directors
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TPB Bank PLC
STATEMENT BY THE CHAIRMAN OF
THE BOARD OF DIRECTORS
Our esteemed customers, business partner’s, shareholders and stakeholders: It is with immense pride that I present to you the Annual Report of TPB Bank PLC for the year ended 31st December 2019. As the decade came to a close, the bank achieved what can be termed nothing short of phenomenal, as profit before tax grew from TZS 0.9 billion in 2010 to TZS 23.0 billion in 2019 – growth by a factor of 25.5. Year-on-year, this equates to an increase of 34% on the TZS 17.2 billion profit realized in 2018.
I was greatly honored to present TPB’s dividend payment of TZS 1.0 billion from the bank’s 2018 operations to His Excellency, the President of the United Republic of Tanzania, Dr. John Pombe Joseph Magufuli. Accompanying us at the handover ceremony was the Speaker of Parliament, Hon. Job
Ndugai and the Minister for Finance and Planning, Hon. Dr. Philip Mpango. As part of my tenure as Board Chairman, I will ensure that the bank maximizes shareholders’ value and makes a viable and sustainable financial return to the bank’s investors.
It was a special privilege to have the Vice President, Honourable Samia Suluhu Hassan as our Guest of Honour during the launch of Tabasamu Account. We were also joined by Honourable Dr. Ashatu Kijaji, the Deputy Minister of Finance and Planning. As I previously noted, our merger with the former Tanzania Women’s Bank provided an opportunity to expand our outreach to empower and strengthen women socio-economically. The Tabasamu Account presents a path that women at the bottom of the pyramid can follow, toward uplifting their lives.
At this juncture, I feel I must talk about two other new products that were launched in 2019. M-Koba and Songesha really speak to the level of innovation that has come to typify TPB Bank. Both products were launched in partnership with Vodacom Tanzania Limited and are a true testament of the bank’s standing in the market. M-Koba allows a non-TPB customer to save as part of a group while Songesha is an overdraft facility, providing access to credit in a quick and stress-free way.
The two products are market firsts in Tanzania, with new ground broken and a higher standard set in terms of what collaboration can deliver. It is very heartening to see firms that are in a similar competitive space coming together to pool their resources and share their expertise with the result being such pioneering solutions.
I would like to welcome on board two new members to the Board of Directors at TPB Bank. Mr. Gilbert William Chawe represents the Public Service Social Security Fund (PSSSF) that became one of TPB’s shareholders after the merger with the former Twiga Bancorp (Twiga). Mr. Chawe, a holder of a Master of Science in Information Technology and Management is the Director of Information and Communication Technologies at PSSSF.
Mr. Bezil Protas Ewala represents the Workers Compensation Fund (WCF) where he is the Director of Finance, Planning and Investments. WCF like PSSSF became a TPB shareholder after the merger
DR. EDMUND BERNARD MNDOLWA
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ANNUAL REPORT 2019
with former Twiga BankCorp. Mr. Ewala has a Masters Degree in Business Administration and is a Certified Public Accountant (Tanzania). I believe both Mr. Chawe and Mr. Ewala will make an immense contribution to the governance and trajectory of TPB.
The year 2019 also signaled the end of the bank’s Strategic Plan covering the period 2016 - 2019. I look forward to the next six years as we implement the bank’s new Strategic Plan covering the period 2020 - 2025. Our focus over the medium term is to better serve our more traditional customers and new market segments such as corporate clients, re-engineer what and how we do things and forge deeper partnerships centred on innovation. We also plan to leverage our most important resource people by creating an environment where they can thrive and reach their full potential.
During the course of the year, I was able to attend the launch of our mini branches in Nzega and Karagwe as well as have dinner with our staff from our branches in Mwanza. It was refreshing to meet staff and see their drive and passion for the bank. This is a call for the bank to continue to grow and provide the appropriate opportunities for our staff.
My confidence is further buoyed by our regional and international partnerships. The bank hosted the Board of Directors of Kenya Post Office Savings Bank for a
benchmark visit in 2019. Our partners at Botswana Savings Bank visited us in early 2020 as part of their drive to see what part of our journey can be impacted as they start their own transformation journey to becoming a national asset. This is a follow-up visit from the one they made in 2018.
All these successes could not be completed without the support of the following organs: The Ministry of Finance and Planning, the Treasury Registrar’s Office, Bank of Tanzania and our business partners. A special acknowledgement to our customers who have been extremely loyal to us - thank you. I would like to extend my sincere thanks to the Board of Directors for their support and insights in taking this bank to new heights.
To the CEO of TPB Bank PLC, Mr. Sabasaba Moshingi, thank you for your effort in moving the bank forward. To the staff of the bank, your efforts are valued and recognized. My hope is that we will tackle 2020 with the same passion and zeal as we did in 2019 and make 2020 an even more unforgettable year.
Dr. Edmund Bernard MndolwaChairman - Board of DirectorsTPB Bank PLC
31st March 2020
STATEMENT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
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TPB Bank PLC
STATEMENT BY THE CHIEF EXECUTIVE OFFICER
MR. SABASABA K. MOSHINGI
Our esteemed customers, business partners and shareholders, I am honored to share our performance for 2019 as contained in the Audited Accounts of TPB Bank PLC for the year ended 31st December 2019. As I share the 2019 performance, I am profoundly delighted that TPB Bank has maintained its track record of outstanding performance year in year out since the beginning of its transformation that commenced back in 2011. in 2019 the bank attained a record profit before tax of TZS 23.0 billion, a 34% increase from TZS 17.2 billion realized in year 2018. In a nutshell, despite many challenges that the bank encountered during 2019, we can proudly look back with a deep sense of accomplishment at what we achieved and how it can truly be seen as momentous results.
Let me start by welcoming our two new Board Members, Mr. Gilbert William Chawe from the Public Service Social Security Fund (PSSSF) and Mr. Bezil Protas Ewala from Workers Compensation Fund (WCF). I believe they will be a major asset to
TPB Bank as they bring-in their expertise to improve the governance and performance of the bank.
The bank’s four year Strategic Plan covering the period 2016 – 2019 has come to an end and the bank has put in place a six year Strategic Plan covering the period 2020 - 2025. The focus of the 2016 - 2019 Strategic Plan was on major technology enhancements, re-capitalizing the bank and lowering the physical proximity gap.
The Strategic Plan 2020 - 2025 focuses on creating a deeper and more emotive connection with TPB’s target market and simplifying and/or removing processes toward making banking with TPB a more tranquil affair. What is more so exciting is that this is a plan developed in its entirety by internal resources. The strategic objectives of this plan are:
· SO1: Financial Performance.
· SO2: Brand Repositioning.
· SO4: Process Improvement.
· SO4: Human Capital Management.
Needless to say, I am very excited about the next six years as we implement our new Strategic Plan. Especially against the backdrop of the very successful implementation of our previous Strategic Plan. Some of the successes we were able to register during the implementation of the previous Strategic Plan are; the upgrade of our core banking system from Equinox 4.3 to Rubikon, acquiring our own mobile gateway, repealing the Tanzania Postal Bank Act and registering the bank under the Companies Act as TPB Bank PLC and re-branding the bank as ‘TPB Bank’.
Our staff continue to innovate in ways that are refreshing and quite literally ‘outside the box’ as we expand our product suite. The year started with the launch of Tabasamu Account where the Vice President of The United Republic of Tanzania, Honorable Samia Suluhu Hassan was our Guest of Honour. Honorable Dr. Ashatu Kijaji, the Deputy Minister for Finance and Planning was also in attendance. Two ‘new to market’ strategic products that followed were M-Koba, a group deposit account and Songesha, an overdraft facility. The two were both done in partnership with Vodacom Tanzania Limited.
The bank also launched Wavuvi Account to help Tanzanians in the fishing value-chain. The products provide a structured way to save and keep depositors’ money safe. The bank is now a mortgage
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ANNUAL REPORT 2019
finance provider, ensuring that Tanzanians can have access to affordable accommodation. The bank began initial work on VISA Card ‘acquiring and issuing’, and this is projected to be completed in 2020. The bank became a super-agent for Tanzania Telecommunications Company Limited’s T-Pesa and also integrated its mobile banking product TPB Popote with Zantel’s Ezy Pesa. This is a way of improving the banks relationship with mobile money operators, by creating an enabling environment to promote financial inclusion in the country.
The bank relocated several of its mini branches during the course of 2019: Pemba, Karagwe, and Masasi were re-located to ultra-modern premises. The bank’s Usa River and Mpanda mini branches relocation will be done in early 2020. During the year, the bank conducted minor upgrades at its LAPF branch in Dodoma while Sengerema mini branch was renovated and upgraded to a fully-fledged branch. The bank launched operations at the Manyoni Post Office as a mini branch and plans to start operations at Kibaha Post Office early in 2020. The bank rolled out 3 new ATM’s at Karagwe, Masasi and Manyoni, bringing the bank’s total number of ATM’s to 75, 30% of the 250 ATM’s under the Umoja-Switch.
In order to improve the signage of TPB locations in post offices, joint-branding with TPC was done at Ikwiriri, Kigamboni, Kondoa, Kibondo, Ifakara, Korogwe, Geita, Kyela, Chato, Makambako, Mbinga, Bagamoyo, Tunduru, Same, Newala, Nachingwea, Mpwapwa, Manyoni, Tarime and Mpanda, with Arusha Meru, Pamba and Tunduma to be completed early in 2020. During the year the bank continued to execute its donor funded projects absolutely well. The Savings at the Frontier project is now operational in 15 locations: Iringa, Mtwara, Ifakara, Kyela, Morogoro, Songea, Lindi, Njombe, Makambako, Mbinga, Tunduru, Usa River, Masasi, Nachingwea and Mbeya. In-roads continue to be made into the agricultural value-chain in collaboration with the Tanzania Agricultural Development Bank (TADB) Credit Guarantee Scheme, Alliance for Green Revolution Africa funding and backing from the Private Agricultural Sector Support Trust.
As Bank of Tanzania (BOT) began to clean-up the bureau-de-change sub-sector and ensure compliance, banks have taken a more proactive role
STATEMENT BY THE CHIEF EXECUTIVE OFFICER
in money changing business. TPB was one of the first movers into the bureau-de-change business, which is now conducted at all of TPB’s branches and mini branches countrywide.
Looking at operating results, the bank’s performance in 2019 was nothing short of excellent. The revenue grew to TZS 130 billion from TZS 118 billion in 2018, growth of TZS 12 billion or 10%. Profit before tax jumped to TZS 23.0 billion from TZS 17.2 billion, a 34% leap. Loans and advances grew from TZS 413 billion to TZS 421 billion, an upward movement of 2%. Total deposits grew by 14% from TZS 454 billion on 31st December 2018 to TZS 518 billion. Total assets grew from TZS 562 billion to TZS 647 billion, recording a growth of TZS 85 billion or 15%. Shareholders Fund grew 19% from TZS 82.9 billion to TZS 98.9 billion. This reflects a significant growth on all key financial parameters, and I am very confident that the bank has the foundation for sustained progression in the future. Owing to successful business, the bank also paid a dividend totaling TZS 1.2 billion, out of 2018 operations.
All these milestones could not be achieved were it not for the support of the Ministry of Finance and Planning, the Treasury Registrar’s Office, our main regulator - the Bank of Tanzania, our business partners as well as our developmental partners.
I would like to extend my sincere thanks to the Board of Directors under the leadership of Dr. Edmund Bernard Mndolwa for their support and guidance. The Board has truly been a vehicle of imparting wisdom to us.
I wish to make a special recognition of our customers, who have been extremely loyal to the bank and are the reason for what the bank is today. To members of staff of TPB, thank you for your hard work, dedication and commitment. Let us make 2020 an even more successful year.
Mr. Sabasaba Kitewita MoshingiChief Executive OfficerTPB Bank PLC
31st March 2020
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TPB Bank PLC
MILESTONES DURING 2019
1.0 Branch Refurbishment
TPB Board Chairman Dr. Edmund Mndolwa with Kagera Regional Commissioner Mr. Marco Gaguti during inauguration of Karagwe Mini Branch.
TPB Board Chairman Dr. Edmund Mndolwa and TPB CEO Mr. Sabasaba Moshingi flank Hon. Mr. Aggrey Mwanri, Regional Commissioner for Tabora during the launch of Nzega Mini Branch. To the left of TPB CEO is Member of Parliament for Nzega and Deputy Minister for Agriculture Hon. Hussein Bashe.
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ANNUAL REPORT 2019
Mtwara Regional Commissioner Hon. Gelasius Byakanwa about to cut the tape during the launch of Masasi Mini Branch. Together with him is TPB CEO Mr. Sabasaba Moshingi, TPB Director of Finance Ms. Regina Semakafu, TPB Director of Strategic Planning Mr. Muondakweli Kaniki and Masasi Branch Manager Mr. Julius Mataso.
MILESTONES DURING 2019
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TPB Bank PLC
2.0 New Products
Deputy Minister for Livestock and Fisheries (Center) Hon. Abdallah Hamis Ulega with TPB CEO Mr. Sabasaba Moshingi in a group photo during the launch of Wavuvi Account.
MILESTONES DURING 2019
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ANNUAL REPORT 2019
Vodacom Tanzania Limited CEO Mr. Hisham Hendi shaking hands with TPB Director of Marketing and Business Development Mr. Deogratius Kwiyukwa during the official launch of M-KOBA.
Second right is Vodacom Tanzania Limited M-Commerce Director Mr. Epimack Mbeteni holding hands with TPB Director of Marketing and Business Development Mr. Deogratius Kwiyukwa on the right side and TPB Director of Risk Management and Compliance Mr. Moses Manyatta on the left side together with other senior officials, during the official launch of SONGESHA.
MILESTONES DURING 2019
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TPB Bank PLC
Deputy Minister of Lands, Housing and Human Settlement Development Hon. Angeline Mabula with TPB CEO Mr. Sabasaba Moshingi and TPB’s Director of Marketing and Business Development Mr. Deogratius Kwiyukwa during the launch of Housing Microfinance loans.
3.0 Respected Local Bank
TPB’s CEO Mr. Sabasaba Moshingi talking with The Prime Minister Hon. Kassim Majaliwa Majaliwa, behind is TPB’s Director of Legal Services Mrs. Mystica Mapunda Ngogi and Company Secretary and Director of Retail and Business Banking Mr. Henry Bwogi when they paid him a courtesy call in Dodoma.
MILESTONES DURING 2019
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ANNUAL REPORT 2019
MILESTONES DURING 2019
From left is Theobald Sabi, MD of NBC, Sabasaba Moshingi CEO for TPB, Abdulmajid Nsekela CEO and MD of CRDB, Violet Mordichai MD of AAR Insurance, Sanjay Rughani CEO of Standard Chartered Tanzania, Ruth Zaipuna Ag. MD of NMB and IFC Tanzania Resident Representative Mr. Frank Ajilore during an official launch of finance2equal program. TPB Bank is a participating bank on the Finance2Equal program.
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TPB Bank PLC
4.0 Corporate Social Responsibility
One of the project that touched on improving the education environment of students was the renovation of 11
classes at Busisi Primary School in Sengerema, at a cost of TZS 10.4 million.
The classrooms before TPB intervention
Block of classrooms at Busisi Primary school in Sengerema, Mwanza after renovation.
MILESTONES DURING 2019
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ANNUAL REPORT 2019
TPB CEO Mr.Sabasaba Moshingi accompanied with Tanga DC Thobias Mwilapwa during the handing over event of 50 desks to Pongwe Primary School in Tanga.
TPB CEO Mr. Sabasaba Moshingi listening to Sumbawanga prison officials during the handing over of 200 bags of cement which will assist in the construction of a new prison ward, capable of holding 200 inmates.
MILESTONES DURING 2019
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TPB Bank PLC
TPB Board Chairman Dr. Edmund Mndolwa handing over 50 iron sheets and 100 bags of cement to Rumanyika Primary School in Karagwe district.
TPB Director of Technology and Operations Mr. Jema Msuya handing over a donation of electrical equipment to SSP Simon Pasua of Zanzibar Police Force. The materials will be used to assist in the finishing work of six houses being built for the Fuoni police officers in Zanzibar.
MILESTONES DURING 2019
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ANNUAL REPORT 2019
THE BOARD OF DIRECTORS
DOCTOR EDMUND MNDOLWA Board Chairman
Dr. Edmund Bernard Mndolwa has over 40 years’ experience in auditing. Dr. Mndolwa has an immense interest and built expertise in tax, strategy, corporate governance, banking and finance and policy formulation. Dr. Mndolwa holds a Master of Business Administration degree from Mzumbe University and a Doctorate of Philosophy (Finance) from the Commonwealth Open University. Dr. Mndolwa is a Fellow of the Chartered Association of Certified Accountants, a Certified Fraud Examiner and having successfully completed the Corporate Governance Course conducted by the Commonwealth Association for Corporate Governance, Dr. Mndolwa is eligible to be appointed a director in any company in the Commonwealth. Dr. Mndolwa is a former partner at Deloitte and a former partner at PwC and is currently a partner at Globe Accountancy Services. Dr. Mndolwa has previously served as Board Chairman at National Insurance Corporation, Board Chairman at KCB Bank Tanzania and Board Chairman at TPB Bank shortly after it began operations as Tanzania Postal Bank. Dr. Mndolwa has served as Vice Chairman of Consolidated Holdings Company, and has been a Board Member at both the National Bank of Commerce and the Public Procurement Regulatory Authority. Dr. Mndolwa is currently Chairman of Jumuiya ya Wazazi in the Chama cha Mapinduzi.
MR. SEIF SHAABAN SEIFBoard Member
Mr. Seif Shaaban Seif represents the Revolutionary Government of Zanzibar. He works as a Commissioner of Public Investments and Stock Verification in the Ministry of Finance, Revolutionary Government of Zanzibar. Mr. Seif has a Post Graduate Diploma in Tax Management and an Advanced Diploma in Tax Management, both from the Institute of Finance and Management. Mr. Seif has vast experience on Tax matters, having attended various courses, workshop and short courses inside and outside the country on tax, Value Added tax and Revenue collection.
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TPB Bank PLC
MR.AMAN MATHEW NGAGABoard Member
Mr. Aman Mathew Ngaga represents the POSTA NA SIMU SACCOS where he has over ten years experience as Chairman of the Supervisory Committee, and is also a Board Member. Mr. Ngaga holds a Master of Business Administration degree in Finance and Banking from Mzumbe University and a Bachelor of Science degree from Makerere University. Mr. Ngaga currently works for Tanzania Telecommunications Company Limited as a Revenue Assurance Analyst and Credit Controller with experience in budgeting, investment analysis, financial planning and credit management.
MR. DANIEL MACRICE MBODOBoard Member
Mr. Daniel Macrice Mbodo represents the Tanzania Post Corporation where he works as General Manager Corporate Resources Management. Mr. Mbodo has an Advanced Diploma in Accounting from the Institute of Finance Management and is currently pursuing his Masters degree in Business Administration (Corporate Management) at Mzumbe University. He is a Certified Public Accountant (CPA T), a Certified Director, Certified Procurement and Supplies Professional of Tanzania, Certified Internal Auditor and a Certified Fraud Examiner.
MR. GILBERT WILLIAM CHAWEBoard Member
Mr. Gilbert William Chawe represents the Public Service Social Security Fund where he works as the Director of Information and Communication Technology. Mr. Chawe holds a Masters of Science degree in Information Technology and Management from Avinashiligam University in collaboration with IFM, and Advanced Diploma in Computer Science from the Institute of Finance Management. He has more than ten years of experience working in pension funds.
MR. BEZIL PROTAS EWALABoard Member
Mr. Bezil Protas Ewala represents Workers Compensation Fund where he works as Director of Finance, Planning and Investments. He holds a Masters degree in Business Administration (Finance) from University of Dar Es Salaam and Advanced Diploma in Accountancy from Institute of Finance Management. Mr. Ewala is a Certified Public Accountant (CPA T) ACPA with twenty years experience in finance, accounting, investments and planning. Prior to WCF, Mr Ewala also worked as Head of Finance and Accounts at Fair Competition Commission for ten years.
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ANNUAL REPORT 2019
EXECUTIVE MANAGEMENT
MR. SABASABA KITEWITA MOSHINGI Chief Executive Officer
Mr. Moshingi joined TPB bank PLC in 2011 as Chief Executive Officer. Prior to that Mr. Moshingi was Regional Head of Consumer Banking Operational Risk and Sales Governance for Standard Chartered Bank from 2007 in Northern Gulf, Levant and Oman - based in the Kingdom of Bahrain . Mr. Moshingi, a seasoned banker is also a Board Member and Group Vice President - Presidents Committee of the World Savings and Retail Banking Institute (WSBI Headquartered in Brussels, Belgium), Governing Council Member and Representative in East African Community of the Tanzania Bankers Association, Governing Council Member and Chairman Education Committee of the Tanzania Institute of Bankers, Board Member of the Association of Savings Banks of East Africa, Board Member and Chairman of the UmojaSwitch, Board Member Association of Tanzania Employers (ATE), an Advisory Board Member of AIESEC Tanzania and an Eisenhower Fellow. Mr. Moshingi is a certified chartered banker with a Master of Business Administration degree (Finance) from the University of Dar-es-Salaam.
MR SOSTHENES F. NYENYEMBEDirector of Internal Audit
Mr. Nyenyembe serves as the Director of Internal Audit at TPB Bank PLC since year 2011. Prior to that he worked as Chief Manager Audit since year 2006. He is a guru in Auditing, Risk management and Governance in both Banks and Financial Institutions. Additionally, he performs audits for Umoja Switch Company Ltd which provides ATM services for over fifty banks across the country. Mr. Sosthenes sits in the Audit Committee of the E-Government Public Institution as Board Member. He holds a Master of Business Administration (Finance) from the University of Dar-es-Salaam and professionally is the Associate Certified Public Accountant ACPA (T) and registered as Director by Institute of Directors- Tanzania (IoDT).
MR. MOSES MANYATTA Director of Risk Management and Compliance
Mr. Manyatta joined TPB in 1994 as Banking Operations Officer. During his career in the bank Mr. Manyatta rose through various positions to key positions such as Chief Economist in 2006. In 2009 Mr. Manyatta was appointed Director of Risk Management & Compliance, a position held to-date. Mr. Manyatta holds a Bachelor of Arts degree (Economics) (Hons) from the University of Dar-es-Salaam, a Post Graduate Diploma (Strategic Planning and Finance) from The Institute of Housing and Urban Development Studies in Rotterdam (The Netherlands) and a Master of Science (Economics) from the Inter University Institute of Macau (China) (now St. Joseph University). Mr. Manyatta is a certified member of Institute of Directors Tanzania (IoDT) and a certified member of Risk Management.
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TPB Bank PLC
MR. DEOGRATIUS KWIYUKWA Director of Marketing and Business Development
Mr. Kwiyukwa joined the bank in 2013 as Director of Marketing and Business Development. He has experience from the telecom sector and banking, having previously worked at Celtel (now Airtel Tanzania) as Zonal Sales Manager and Zantel (part of Etisalat) as Head of Retail Sales. Mr. Kwiyukwa holds an Advanced Diploma (Economic Planning) from Mzumbe University, a Post Graduate Diploma (Business Administration) from Institute of Finance Management. Mr.Kwiyukwa also holds a Master of Business Administration (Marketing) degree from the University of Dar-es-Salaam.
MR. HENRY BWOGI Director of Retail and Business Banking
Mr. Bwogi is a seasoned banker with more than 20 years of experience. Mr. Bwogi, a Board Member of the Posta na Simu (TP&TC) SACCO’s and a Board Member of Posta Bureau de Change, was appointed Director of Retail and Business Banking in 2015. He previously held key positions such as Senior Manager and Chief Manager. Mr.Bwogi holds a Diploma in Business Management (Marketing Management) and an Advanced Diploma in Business Management (Marketing Management) from the College of Business Education. Mr. Bwogi also holds a Post Graduate Diploma in Financial Management from the Institute of Finance Management and a Master of Business Administration (Marketing Management) from the Open University of Tanzania.
MS. DIANA MYONGA Director of Human Resources and Administration
Ms Diana Myonga joined TPB Bank in 2006 as Senior Manager Administration. Ms. Diana was promoted to Chief Manager Administration and Corporate Services in 2009 before being appointed Acting Director of Human Resources and Administration in 2018. Ms. Diana holds an Advanced Diploma in Materials Management from Mzumbe University and a Masters Degree in Business Administration (Corporate Management) from Mzumbe University. She also holds a Certificate in Directorship (IoDT) and attended Bullet Proof Managers Course.
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ANNUAL REPORT 2019
MR. JEMA MSUYADirector of Technology and Operations
Mr. Jema Msuya has 16 years of experience in the banking industry. He joined TPB in 2012 as Director of Technology & Operations from Standard Chartered Bank Tanzania, where he worked as Country Head of Information Technology from 2008. Mr. Msuya holds a Bachelor of Science (Computer Science) from the University of Dar-es-Salaam and is a Certified Systems Security Professional (CSSP). Mr. Msuya is currently pursuing a Masters degree in Business Administration from University of Dar-es-Salaam Business School.
MS. REGINA SEMAKAFUDirector of Finance
Ms. Regina Semakafu has 25 years of experience in banking industry. She joined TPB in 1995 and rose through the ranks to hold key positions such as Chief Manager Treasury. She was appointed Director of Finance in 2014. Ms.Semakafu holds a Bachelor of Commerce (Hons.) from the University of Dar-es-Salaam and Master in Business Administration (International Banking and Finance) from the University of Birmingham, United Kingdom. She is a Certified Public Accountant and a holder of ACI certification. Ms. Regina is also a certified Director by Institute of Directors in Tanzania, IoDT.
MRS. MYSTICA MAPUNDA NGONGI Director Legal Services and Company Secretary
Ms. Mystica Ngongi is a registered and practicing advocate and notary public of the High Court of Tanzania and all courts below it, save for Primary Courts - since 2004. She joined TPB in 2006 as a Senior Manager Legal Services from Exim Bank Tanzania and became Chief Manager Legal Services in 2009. Ms. Ngongi was appointed Director of Legal Services and Board Secretary in 2013. She is a holder of Bachelor of Law (Hons.) from the University of Dar-es-Salaam, a Master of Business Administration (Corporate Management) from Mzumbe University and is also an Associate Member Institute of Chartered Secretaries and Administrators (UK Chapter).
EXECUTIVE MANAGEMENT
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TPB Bank PLC
MR. MUONDAKWELI KANIKI Director of Strategic Planning
Mr. Kaniki joined TPB as a Senior Manager Strategic Planning in 2014. Two years later he was promoted to Chief Manager Strategic Planning and then appointed Director of Strategic Planning in 2017. Mr. Kaniki has previously worked for Standard Chartered Bank Tanzania and Vodacom Tanzania, and has consulted in Marketing, Brand Management and Business Strategy. Mr. Kaniki holds a Diploma in Commerce (Distinction) and a Bachelor of Commerce (Marketing) from the University of Swaziland (now called the University of Eswatini). He also graduated in Masters of Business Administration majoring marketing from the University of Dar-es-Salaam Business School. Mr. Kaniki is a Certified Director by the Institute of Directors in Tanzania and from the same institute has also attained the level of Mastery in Directorship.
MS. NOVES MOSES Chief Manager Corporate Affairs
Ms. Noves Moses joined TPB Bank in 2008 as Senior Public Relations Manager and she was promoted to Chief Manager Corporate Affairs in 2012. Ms. Moses has previously worked at ITV / Radio One and Barclays Bank Tanzania. Ms. Moses holds a Diploma in International Relations and Diplomacy from the Centre of Foreign Relations and a Bachelor of Arts (International Relations and Public Administration) from the University of Dar-es-Salaam. She also holds a Master of Business Administration degree (MBA - Marketing) from the Open University of Tanzania.
MR. ERICK ZAKAYO Chief Manager Procurement
Mr. Zakayo joined TPB in 2015 as a Senior Procurement Officer and was promoted to Chief Manager Procurement. He previously worked in the pharmaceuticals and construction industries. Mr. Zakayo holds an Advanced Diploma in Procurement and Supplies Management from the College of Business Administration and is a Certified Procurement and Supplies Professional by the Procurement and Supplies Professionals Technical Board.
EXECUTIVE MANAGEMENT
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ANNUAL REPORT 2019
EXECUTIVE MANAGEMENT
MR.WENCESLAUS FUNGAMTAMAChief Manager Treasury
Mr. Fungamtama is a financial markets professional with a decade of experience in Treasury Sales and Operations. He joined TPB as a Senior Manager Treasury in 2012 from Standard Chartered Bank where he was responsible for FX Sales. He was promoted to Chief Manager Treasury in 2014. Before that he worked for KCB Bank in Treasury Operations and Trade Finance. Mr. Fungamtama acquired a Bachelor of Science degree from Sokoine University of Agriculture and subsequently an MBA (Finance) from the University of Dar-es-Salaam. He is a certified member of ACI, a leading global Financial Markets Association.
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TPB Bank PLC
ABBREVIATIONS
(i) Abbreviations
HIV/AIDS Human Immunodeficiency Virus/Acquired Immuno deficiency Syndrome
IFRSs International Financial Reporting Standards
ISAs International Standards on Auditing
ISSAI International Standards of Supreme Audit Institutions
NBAA National Board of Accountants and Auditors
PAA Public Audit Act No. 11 of 2008
PAR Public Audit Regulations, 2009
PAC Public Accounts Committee
PFA Public Finance Act No.6 of 2001 (Revised 2004)
PFR Public Finance Regulations,2001
PPA Public Procurement Act, 2011
PPR Public Procurement Regulations, 2013
Reg. Regulations
Sect. Section
URT United Republic of Tanzania
BOT Bank of Tanzania
ARCC Audit, Risk Management and Compliance Committee
GRRC Governance, Recruitment and Remuneration Committee
TP & TC SACCOS Posta na Simu Savings & Credit Cooperative Society
CAG Controller and Auditor General
TWB Tanzania Women’s Bank Plc
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ANNUAL REPORT 2019
CORPORATE INFORMATION
DIRECTORS
Name Position Remarks
Dr. Edmund B. Mndolwa Chairman Appointed on 23 April 2018
Mr. Seif S. Seif Member Reappointed on 23 June 2017
Mr. Aman M. Ngaga Member Appointed on 1 June 2018
Mr. Gilbert .W. Chawe Member Appointed on 8 July 2019
Mr. Bezil. P. Ewala Member Appointed on 1 August 2019
Mr. Macrice D. Mbodo Member Appointed on 5 June 2017
AUDIT, RISK MANAGEMENT AND COMPLIANCE COMMITTEE
Name Position
Mr. Macrice .D. Mbodo Chairman
Mr. Aman M. Ngaga Member
Mr. Gilbert W. Chawe Member
GOVERNANCE, RECRUITMENT AND REMUNERATION COMMITTEE
Name Position
Mr. Seif S. Seif Chairman
Mr. Aman M. Ngaga Member
Mr. Gilbert W. Chawe Member
SECRETARY Mystica Mapunda Ngongi
Director Legal Services & Company Secretary
TPB Bank Public Limited Company
LAPF Millennium Towers
Bagamoyo Road
P.O. Box 9300
Dar es Salaam
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
LAPF Towers
Bagamoyo Road
P.O. Box 9300
Dar es Salaam
PRINCIPAL AUDITORS Controller and Auditor General
National Audit Office
Samora Avenue/Ohio Street
P.O. Box 9080
Dar es Salaam
31
TPB Bank PLC
CORPORATE INFORMATION (CONTINUED)
DELEGATED AUDITORS Ernst & Young Tanzania
P.O.Box 2475
Dar es salaam
Tanzania
LAWYERS M. A. Ismail & Co. Advocates
Plot No. 356
U.N. Road, Upanga
P.O. Box 1553
Dar es Salaam
Rex Attorneys
Rex House
145 Magore Street, Upanga
P.O. Box 7495
Dar es Salaam
Kailu Chambers Advocates
Plot No 75/6, Block S,
P.O. Box 127
Mwanza
Astute Law Attoneys
Nyanza Building, 3rd Floor
P.O. Box 311
Mwanza
32
ANNUAL REPORT 2019
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2019
INTRODUCTION
The Directors present this annual report together with audited financial statements for the year ended 31 December 2019. The report provides a statement of the Directors on the overall performance and state of financial affairs of the TPB Bank Public Limited Company (the “Bank”) and Corporate Governance for the year ended 31 December 2019.
ESTABLISHMENT
TPB Bank Public Limited Company, is a Company registered under the Companies Act, Cap 212 of 2002 licensed as a financial institution under the Banking and Financial Institutions Act, 2006 and also governed by the Public Finance Act, 2004, the Public Corporations Act, 1992 and the Public Procurement Act, of 2011.
VISION AND MISSION
The Bank’s Vision is “to be the leading Bank in the provision of affordable financial services and promoting financial inclusion in Tanzania”, and its mission statement is “to improve the economic well-being and quality of life of every Tanzanian by actively promoting savings, access to credit and the practice of sound financial management while creating value for our stakeholders”.
The Bank’s vision and mission statements direct it to be at the forefront of promoting access, usage and understanding of financial services to a wider range of population in the rural, peri-urban and urban areas while ensuring sustainable financial returns and benefits to its various stakeholders.
PRINCIPAL ACTIVITIES
The principal activities of the Bank continued to be provision of banking services as empowered by the Banking and Financial Institutions Act, 2006. The Bank continues to foster a savings culture among Tanzanians, provide affordable credit facilities to pensioners, micro enterprises, groups, small and medium enterprises as well as and salaried employees.
CAPITAL STRUCTURE AND SHAREHOLDING OF THE BANKThe capital structure and shareholding position of the Bank as at 31 December 2019 and 31 December 2018, respectively are as follows:
2019 2018
Name of ShareholderNumber of
sharesheld
Percentage ofshareholding
Number ofshares
held
Percentage ofshareholding
Government of the United Republic of Tanzania 23,423,304 83.44% 23,423,304 83.44%
Tanzania Posts Corporation 2,135,540 7.61% 2,135,540 7.61%
Revolutionary Government of Zanzibar 816,215 2.91% 816,215 2.91%
Posta na Simu Savings & Credit Cooperative Society Ltd 749,312 2.67% 749,312 2.67%
Public Service Social Security Fund (PSSSF) 660,401 2.35% 660,401 2.35%
Workers’ Compensation Fund (WCF) 286,971 1.02% 286,971 1.02%
TOTAL SHARES 28,071,743 100.00% 28,071,743 100.00%
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TPB Bank PLC
CORPORATE GOVERNANCE
The Board of Directors (the “Board”) is responsible for the governance of the Bank and is committed to ensure that its business and operations are conducted with integrity and in compliance with the laws of the United Republic of Tanzania. The Board observes sound corporate governance principles and business ethics in managing the Bank. In this regard, the Board oversees that the Bank complies with all relevant legislation including the provisions of the Banking and Financial Institutions Act, 2006 and the prudential guidelines issued by the Bank of Tanzania. The Board has two committees namely, the Governance, Recruitment and Remuneration Committee; and the Audit, Risk Management and Compliance Committee. The two Board committees discharge their functions as vested onto each one of them under their respective charters. Each of the Committees is required to meet at least once quarterly.
The Board delegates the day to day management of the Bank business to Chief Executive Officer who is assisted by senior management. Senior Management are invited to attend board meetings and facilitates the effective control of all the Bank’s operational activities, acting as a medium of communication and coordination between all the various business units.
The Bank attaches great importance to sound corporate governance practice because it ensures integrity and transparency in managing the relationship that exists between the Bank and all its stakeholders. It is in that vein that the Bank ensures that it is in compliance with the requirements of various legislations which govern its operations including the Companies Act, Cap 212 of 2002, the Banking and Financial Institutions Act, 2006, the Public Corporations Act, 1992, the Public Procurement Act, 2011, the Public Finance Act, 2001 and the Prudential Regulations and Guidelines, Circulars and Rules issued by the Bank of Tanzania. Members of the Management team also participate in various industry initiatives and affairs through the Tanzania Bankers Association and the Tanzania Institute of Bankers.
The Board of Directors
The Board of Directors retains full and effective control of the Bank and monitors executive management. The Board is also responsible for the Bank’s direction, policies and strategies and all investment and divestment decisions. It also ensures that the Bank meets its responsibilities to all its stakeholders and is prudently managed against the major risks inherent in general business dynamics.
In this respect, the Board makes key decisions to ensure that it retains proper direction and control of the Bank. The Directors bring in experience and expertise from their own fields of business to ensure that debate on matters of strategy, policy and performance is robust, informed and constructive. Furthermore, the role of the Chairman and the Chief Executive Officer do not vest in one person.
The Board structure is such that no one individual or group dominates the decision making process. There is a schedule of matters reserved for the full Board’s approval and clear delegation of authority to Committees of the Board and to management. A procedure exists for the determination of matters arising between scheduled meetings. There are established procedures in existence for planning and capital expenditure, for banking operations and lending activities, for management of investments, for information reporting systems and for monitoring the Bank’s business and performance generally.
The Bank has in place a charter for the Board of Directors and charters for the Board Committees. The charters provide and guide Members of the Board and/or Board Committees of the roles, duties and responsibilities of the Board of Directors or Committees, the rights and liabilities of members and also provide for procedural matters relating to the functions of the Board of Directors or the Board Committees.
The Chairman and the Chief Executive Officer in consultation with the Company Secretary agree on the agenda for Board meetings, but all Board members are entitled to raise other matters. The Chairman ensures that all Board members are properly briefed on all issues transacted through Board Committees. It is the responsibility of the executive management to ensure that the Board is supplied with information in a timely manner in a form and of a quality appropriate to enable it carry out effectively its duties.
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ANNUAL REPORT 2019
CORPORATE GOVERNANCE (CONTINUED)
Board Committees
The Board which comprises six non-executive Directors is confident that its members have the knowledge, talent and experience to lead the Bank. The Board of Directors are independent of management and exercise their independent judgement with their in depth knowledge and experience. During the year, none of the Directors were found to have acted on any matter on which he had conflict of interest. Refer to Directors’ Report for the Directors who held office in the year under review.
To enable it discharge its executive functions, the Board has established two standing committees, each governed by written terms of reference, defining the frequency of meetings, power and duties and reporting obligation. These committees continuously evaluated progress towards meeting the Bank’s overall objectives in addition to ensuring efficient and effective management of the entire Bank’s core functions. The Chairperson of the Committees chair the Committees meetings.
The board committees are:-
(i) The Governance, Recruitment and Remuneration Committee; and
(ii) The Audit, Risk Management and Compliance Committee.
The Governance, Recruitment and Remuneration Committee
The Governance, Recruitment and Remuneration Committee is chaired by the Chairperson of the Committee and consists of two other Board Members. The Chief Executive Officer and other senior management members are in attendance. The committee meets at least once quarterly to receive and discuss quarterly performance reports and matters relating to Human Resource Management.
The Committee operates under a formal charter approved by the Board of Directors and committee members have unlimited access to all information. Members of senior management are invited to attend and present quarterly performance reports and give feedback at committee meetings. The Committee also handles recruitment process for senior management positions and recommends to the Board of Directors appointments and remuneration of senior Management staff. The Committee also is responsible for disciplining of senior management members. The Company Secretary provides secretariat services to the Committee.
The Audit, Risk Management and Compliance Committee
The Audit, Risk Management and Compliance Committee is chaired by the Chairperson of the Committee and consists of two other Board members. The Chief Executive Officer, Director of Internal Audit and management in attendance. The committee meets at least once quarterly to evaluate, among others accounting practices, internal control systems and auditing and financial reporting. Its task includes evaluating critical risk areas identified with the help of the internal auditors.
The committee operates under a formal charter approved by the Board of Directors and committee members have unlimited access to all information. Certain members of management are invited to attend and give feedback at Committee meetings. The Committee also negotiates with external auditors’ their remuneration. The Committee also holds separate meetings with the head of internal audit department and the external auditors when required to ensure matters are considered without undue influence. The Company Secretary provides secretariat services to the Committee.
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TPB Bank PLC
CORPORATE GOVERNANCE (CONTINUED)
Board Meetings
There were Eleven (11) Board meetings, ten (10) ARCC meetings and eleven (11) GRRC meetings conducted during the year and were attended by the Board of Directors as follows:
No. NAME OF DIRECTORS BOARD MEETINGS ARCC GRRC1. Dr. Edmund B. Mndolwa 11 2 2
2. Mrs. Anne C. Mbughuni * 5 6 2
3. Mr. Seif. S. Seif 11 3 11
4. Mr. Aman M. Ngaga 11 10 10
5. Mrs. Sarah K. Msika * 5 - 2
6. Mr. Macrice D. Mbodo 11 9 5
8. Mr. Gilbert .W. Chawe 4 1 4
Note: those marked with * their tenure ended on 10th May, 2019.The Board of Directors meets on a quarterly basis. Four meetings were ordinary and the other seven were special due to special matters requiring immediate attention. The ARCC had four ordinary meetings and six special meetings due to audit matters. GRCC had four ordinary meetings and seven special meetings due to credit approvals.
Board Evaluation
The Board recognizes that self-evaluation is a best practice benchmark of assessing the levels of performance of the Board. On an ongoing basis, the Board carries out self-evaluation of its performance. The review seeks to identify specific areas in need of improvement or strengthening and the result on any actions to be taken are discussed by the full Board. In a similar way, Directors also do conduct self-evaluation of their performance as members of the Board.
Directors’ Compensation
The disclosure of Directors’ fees and remunerations are made in financial statements (Refer to note 33(d)). Directors’ fees or any amendments are approved by shareholders at the Annual General Meeting and cleared by the Minister for Finance and Planning.
Risk Management and Internal Control
The Board accepts final reasonability for the risk management and internal control systems of the Bank. It is the task of management to ensure adequate internal financial and operational control systems are developed and maintained on an ongoing basis to provide reasonable assurance regarding the:-
(i) effectiveness and efficiency of operations;(ii) safeguarding of the Bank’s assets (including information);(iii) compliance with applicable laws, regulations and supervisory requirements;(iv) reliability of accounting records;(v) business sustainability under normal as well as adverse conditions; and (vi) responsible behavior towards all stakeholders.
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ANNUAL REPORT 2019
CORPORATE GOVERNANCE (CONTINUED)
The efficiency of internal control system is dependent on the compliance with prescribed measures. There is always a risk of non-compliance with such measures by staff. Whilst no system, of internal control can provide absolute assurance against misstatement or losses, the Bank system is designed to provide the Board with reasonable assurance that the procedures in place are operating effectively.
Consequently, even a strict and efficient internal control system can provide no more reasonable measure of assurance in respect of the above mentioned objectives. Internal auditors monitor the operations and the internal control systems and report to the Audit committee of the Board their findings and recommendations. All critical Information Technology (IT) is backed up and the Bank has put in place well documented Business Continuity and Disaster Recovery policies and procedures. The procedures are tested periodically and the Board is of the opinion they meet the acceptable criteria.
Financial Reporting
The Directors accept final responsibility for preparation of the annual financial statements which fairly present:
(i) the financial position of the Bank as at the end of the year under review;
(ii) the financial results of operations; as well as
(iii) the cash flows for that year.
The responsibility for compiling the annual financial statements was delegated to management. The Statutory Auditor reports on whether the annual financial statements are fairly presented. The directors confirm and are satisfied that during the year under review:
(i) adequate accounting records were maintained;
(ii) an effective system of internal control and risk management, monitored by management, was maintained;
(iii) appropriate accounting policies supported by reasonable and prudent judgements and
estimates, were used consistently; and
(iv) The financial statements were compiled in accordance with International Financial Reporting Standards and comply with requirements of the Banking and Financial Institutions Act; 2006 the Public Procurement Act, 2011; and Companies Act, 2002; and National Board of Accountants and Auditors Technical Pronouncements.
Financial Reporting (continued)
The directors are also satisfied that no material event has occurred between the financial year-end and the date of this report.
Company Secretary
The Board of Directors appoints the Company Secretary and all board members have access to the services of the Company Secretary. The Company Secretary is the principal advisor of the Board on legal and corporate governance matters. Where necessary the Board seeks independent professional advice on some matters. The Company Secretary ensures that:
(i) Annual calendar for Board meetings is prepared and circulated to all Board members after approval.
(ii) Adequate information is provided to all the members prior to commencement of the Board and sub-committee meetings.
(iii) Proceedings of the Board and those of Board Committees are recorded and Minutes written soon thereafter the meeting.
(iv) Resolutions and directives of the Board and/ or Board Committees are communicated to Management for implementation and status of implementation is reported to the Board or Committee at the next meeting.
(v) To promote a culture of good Corporate Governance.
(vi) Maintaining the statutory registers.
(vii) Communication link between the Board of Directors and Management.
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TPB Bank PLC
CORPORATE GOVERNANCE (CONTINUED)
Internal Audit
Internal audit is an independent, objective assurance and consulting activity designed to add value to the Bank and improve operations. It helps the Bank accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve risk management, control and governance processes.
Internal audit plans cover matters identified in risk management assessments as well as issues highlighted by the Board, the Audit, Risk Management and Compliance Committee and senior management.
The Internal Audit directorate administratively reports to the Chief Executive Officer on day-to-day matters, but reports directly to the Chairman of the Audit Committee on operational matters and on a regular basis. The purpose, authority and responsibility of the independent internal audit activities are formally defined in an Internal Audit Charter which is updated regularly and approved by the Audit Committee. Significant audit findings are reported to the Audit Committee. All significant business operations are subject to internal audit.
Internal Communication and Labor relations
Members of staff at all levels are kept fully informed of developments within the bank using a range of communication mechanism. These include newsletters, website, circulars as well as regular discussions at different management levels. The emphasis is on two-way communication to develop a workforce which understands and supports the business philosophy and ethics of the Bank.
Environment and Social Management Policy
The Bank recognizes that environmental management is the responsibility of all institutions, both public and private. As a good corporate citizen, the Bank has continued to participate and support environmental and social activities through financial donations or employees’ physical participation in such activities.
COMPOSITION OF THE BOARD OF DIRECTORS
The Chairman of the Board of Directors is appointed by the President of United Republic of Tanzania while other Board Members are appointed by the respective shareholders. The current composition of the Board of Directors is as per TPB Bank Public Limited Company Memorandum and Articles of Associations are as follows:
1 The Government of United Republic of Tanzania – Appoints Chairman of the Board of Directors and two other Board Members. The President of the United Republic of Tanzania appoints the Chairman of the Board of Directors and the Minister for Finance and Planning appoints the two Board Members;
2 Tanzania Posts Corporation – One Board Member;
3 Revolutionary Government of Zanzibar – One Board Member
4 Posta na Simu Savings & Credit Cooperative Society Ltd – One Board Member.
5 Public Servant Social Security Fund – One Board Member.
6 Workers Compensations Fund – One Board Member.
The tenure of Board Members is three years per term and they are eligible for reappointment for three terms.
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gnati
on
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ation
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lifica
tion
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onal
ity
1.D
r. Ed
mun
d B.
M
ndol
wa
Chai
rman
– T
anza
nia
1949
23 A
pril
2018
Chai
rman
of t
he
Boar
dPa
rtne
r –
Glo
bal A
ccou
ntan
cy
Serv
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. D
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n
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r. Se
if S.
Sei
f
Mem
ber
– Ta
nzan
ia
1969
23 Ju
ne 2
014,
Re
app
oint
ed fr
om
23 Ju
ne 2
017
to
2020
Mem
ber-
GRR
CCo
mm
issi
oner
for
Publ
ic
Inve
stm
ents
and
Sto
ck
Veri
ficati
ons
(Min
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Fi
nanc
e, Z
anzi
bar)
Post
grad
uate
Dip
lom
a in
Tax
Man
agem
ent
Tanz
ania
n
3.M
r. A
man
M. N
gaga
Mem
ber
– Ta
nzan
ia
1969
1 June
201
8M
embe
r – A
RCC
Reve
nue
Ass
uran
ce A
naly
st
and
Cred
it Co
ntro
ller
(Tan
zani
a Te
leco
mm
unic
ation
s Lt
d)
Mas
ters
of B
usin
ess
Adm
inis
trati
on in
Fi
nanc
e an
d Ba
nkin
g, B
.Sc.
(Eco
nom
ics)
.Ta
nzan
ian
4.M
rs. A
nne
C. M
bugh
uni
Mem
ber
– Ta
nzan
ia
1959
10 M
ay 2
016
– 10
th
May
, 201
9Ch
airp
erso
n –
ARC
C
Mem
ber –
GRR
C
Retir
ed. F
orm
erly
Dire
ctor
Co
rpor
ate
Affa
irs (F
air
Com
petiti
on C
omm
issi
on)
Mas
ters
of S
ocia
l Sci
ence
(Acc
ounti
ng &
D
evel
opm
ent F
inan
ce)
CPA
(T)
Tanz
ania
n
5.M
rs. S
arah
K. M
sika
Mem
ber
– Ta
nzan
ia
1971
10 M
ay 2
016-
to
10th
May
201
9M
embe
r – G
RRC
Hea
d of
Pub
lic R
elati
ons
&
Prom
otion
(Soc
ial S
ecur
ity
Regu
lato
ry A
utho
rity
)
B.Co
m M
arke
ting,
Mas
ters
Deg
ree
in
Busi
ness
Adm
inis
trati
on (M
BA) M
arke
ting
Tanz
ania
n
6.M
r. M
acri
ce D
. Mbo
do
Mem
ber
– Ta
nzan
ia
1983
5 Ju
ne 2
017
Mem
ber –
ARC
Gen
eral
Man
ager
Res
ourc
es
Man
agem
ent (
Ass
ista
nt C
EO-
Tanz
ania
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t Cor
pora
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ter’
s D
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lom
a in
A
ccou
nting
, CPA
(T)
Tanz
ania
n
7.M
r. G
ilber
t W. C
haw
e
Mem
ber-
Tanz
ania
1968
8 July
201
9M
embe
r –G
RCC
Dire
ctor
of I
nfor
mati
on a
nd
Com
mun
icati
on T
echn
olog
ies
-PSS
SF
Mas
ters
of S
cien
ce in
Info
rmati
on a
nd
Tech
nolo
gyTa
nzan
ian
8.Be
zil P
. Ew
ala
Mem
ber
- Tan
zani
an
1970
1st A
ugus
t 201
9M
embe
r –A
RCC
Dire
ctor
of F
inan
ce, P
lann
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and
Inve
stm
ents
-WCF
Mas
ters
in B
usin
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Adm
inis
trati
on (M
BA)
Fina
nce,
CPA
(T) A
CPA
Tanz
ania
n
39
TPB Bank PLC
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
SECRETARY
The Company Secretary is Mrs. Mystica Mapunda Ngongi (Masters in Corporate Management, LLB (Hons), Associate Member - AMICSA), CiDir.
MANAGEMENT
Management of the Bank is under the Chief Executive Officer and is organized into the following Directorates:
·Finance;·Technology and Operations; ·Marketing and Business Development;·Risk Management and Compliance; ·Human Resources and Administration;·Strategic Planning;· Internal Audit;·Retail & Business Banking; and·Legal Services and Company Secretary.
Key management personnel of the Bank are listed below:
Name Position
Sabasaba K. Moshingi Chief Executive Officer
Sosthenes F. Nyenyembe Director of Internal Audit
Regina E. Semakafu Director of Finance
Jema A. Msuya Director of Technology & Operations
Henry J. Bwogi Director of Retail & Business Banking
Diana W. Myonga Director of Human Resources & Administration
Moses S. Manyatta Director of Risk Management & Compliance
Deogratius C. Kwiyukwa Director of Marketing & Business Development
Mystica M. Ngongi Director of Legal Service & Company Secretary
Muondakweli Kaniki Director of Strategic Planning
FUTURE DEVELOPMENT PLANS
The Bank is the main financial service provider to the bottom of the pyramid in Tanzania. The bank’s four year Strategic Plan covering the period 2016 – 2019 has come to an end and was successfully implemented. The bank has put in place a six year Strategic Plan covering the period 2020 – 2025.
The Strategic Plan 2016 – 2019 was centered on re-capitalizing the bank, major technology enhancements and reducing the physical proximity gap. The Strategic Plan 2020 – 2025 focuses on reducing the psychological proximity gap by making the TPB brand more relevant to the bank’s customers and simplifying processes.
40
ANNUAL REPORT 2019
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
A key cornerstone of the Strategic Plan is creating a more emotive brand with uncomplicated pan-bank procedures that resonate with the target market. High net worth customers, SMEs, corporates, groups, women and pensioners represent key market segments for growth in the medium term. The Bank sees the opportunity to have socio-economic impact in these areas ensure that it grows and also create lasting effect on the general society.
PERFORMANCE FOR THE YEARDuring the year, the Bank registered a profit before tax of TZS 23,006,364,000 compared to TZS 17,188,045,000 in the previous year.
During the year, assets of the Bank grew by TZS 84,838,920,000 or 15.09% from TZS 562,344,907,0000 at the end of 2018 to TZS 647,183,827,000 at the end of 2019. Customer deposit base increased from TZS 390,599,533,000 to TZS 442,177,176,000 while total lending portfolio increased from TZS 412,768,650,000 to TZS 420,593,660,000.
Shareholders’ Funds at the end of 2019 increased to TZS 98,892,727,000 from TZS 82,920,431,000 at the end of 2018.
DIVIDENDSThe Board of Directors recommend payment of dividend of 10% of profit after tax for the year 2019 (2018: TZS 1,210,210,100 dividend paid).
SOLVENCYThe Board has reasonable expectation that the Bank will have adequate resources to continue in operational existence for the foreseeable future.
EMPLOYEES’ WELFAREManagement and Employees’ RelationshipThere continued to be a very good and healthy relationship between employees and management in 2019. There were no unresolved complaints received by management from the employees during the year. A dynamic relationship continues to exist between management and trade union.
The Bank is equal opportunity employer giving
equal access to employment opportunities and ensuring that the best available candidate is appointed to any given position free from any form of discrimination based on factors like age, gender, marital status, tribe, religion and disability which do not impair the ability the person to discharge their duties.
Training FacilitiesDuring the year, the Bank spent a sum of TZS 544,480,682 (2018: TZS 794,710,000) for staff training in order to improve employees technical skills and hence effectiveness. Training programs have been and are continually being developed to ensure employees are adequately trained at all levels, all employees’ have some form of annual training to upgrade skills and enhance development.
Medical AssistanceAll members of staff are availed medical insurance guaranteed by the Board of Directors. This is for all members of staffs’ spouse and a maximum number of four dependents who are below the age of 18 or 22 if they are still in school. Currently, these services are provided by National Health Insurance Fund.
EMPLOYEES’ WELFARE (CONTINUED)Health and SafetyThe Bank has a strong focus on health and safety ensuring that a strong culture of safety prevails at all times. A safe working environment is ensured for all employees and contractors by providing adequate and proper personal protective equipment, training and supervision as necessary.
Financial Assistance to StaffBank provides various loans to employees in accordance with Bank’ Staff Loans Policy and Staff Regulations in place. These include Mortgages, Motor Vehicle Loans, Motor Vehicle Insurance Loans, House Rent Loans, Personal Loans and Incentive Loans.
41
TPB Bank PLC
COMPOSITION OF THE BOARD OF DIRECTORS (CONTINUED)
Persons with Disabilities
Applications for employment by disabled persons are always considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Bank continues and appropriate support and training is arranged. It is the policy of the Bank that training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. The Bank has employed a number of disabled people in its service.
Employees Benefit Plan
The Bank makes mandatory contributions to social security funds which qualify to be a defined contribution plan.
The number of employees at the end of the year was 925 (2018: 888).
GENDER PARITY
The Bank had 925 (2018: 888) employees, out of which 461 (2018: 409) were female and 464 (2018: 479) were male.
POLITICAL AND CHARITABLE DONATIONS
Donations amounting to TZS 227,177,988 (2018: TZS 194,242,803) were made to charitable organizations. The bank’s primary focus and spend was on education TZS 108 million (2018: TZS 156 million), health TZS 53 million (2018: TZS 28 million) and social welfare TZS 66 million (2018: TZS 10 million). The key issue here is the fact that the Bank does not operate in a vacuum but needs to have a lasting and uplifting effect on society. During the year, no political donations were made (2018: Nil).
RELATED PARTY TRANSACTIONSDetails of related party transactions are set out in note 34 to the financial statements.
AUDITORS
The Controller and Auditor-General (“CAG”) is the statutory auditor for the TPB Bank Public Limited Company pursuant to the provisions of Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2005), Sections 30 -33 of the Public Audit Act No. 11 of 2008 and Section 20(6) of the Bank of Tanzania Act, 2006. Ernst and Young, Certified Public Accountants (Tanzania) were appointed by the CAG to audit the Bank’s financial statements on his behalf, pursuant to Section 33 of the Public Audit Act, No 11 of 2008.
Approved by the Board of Directors and signed on its behalf by:
Dr. Edmund B. MndolwaChairman
Date 5th May, 2020
Mr. Seif S. Seif Director
Mr. Macrice D. MbodoDirector
42
ANNUAL REPORT 2019
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Companies Act, 2002 requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of the financial affairs of the Bank as at the end of the financial year and of its financial results for the year then ended. It also requires the Directors to ensure the Bank keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Bank. They are also responsible for safeguarding the assets of the Bank.
The Directors are responsible for the preparation of the financial statements that give true and fair view in accordance with the International Financial Reporting Standards, and in manner required by the Companies Act, 2002; the Banking and Financial Institutions Act, 2006; National Board of Accountants and Auditors Technical Pronouncements and for such internal controls as Directors determine are necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.
The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported
by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Companies Act, 2002; the Banking and Financial Institutions Act, 2006; and National Board of Accountants and Auditors Technical Pronouncements. The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Bank and of its operating results. The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Directors to indicate that the Bank will not remain a going concern for at least the next twelve months from the date of this statement.
Dr. Edmund B. MndolwaChairman
Date 5th May, 2020
Mr. Seif S. Seif Director
Mr. Macrice D. MbodoDirector
43
TPB Bank PLC
43
TPB Bank PLC
DECLARATION OF HEAD OF FINANCE
The National Board of Accountants and Auditors (NBAA) according to the power conferred under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a Statement of Declaration issued by the Head of Finance responsible for the preparation of financial statements of the Bank concerned.
It is the duty of a professional accountant to assist the Board of Directors to discharge the responsibility of preparing financial statements of a Bank showing true and fair view position of the Bank in accordance with International Accounting Standards and statutory reporting requirements. Full legal responsibility for financial statements rests with the Board of Directors as under Directors Responsibility statement on an earlier page.
I, Regina E. Semakafu, being the Director of Finance of TPB Bank Public Limited Company hereby acknowledge my responsibility of ensuring that financial statements for the year ended 31 December 2019 have been prepared in compliance with applicable accounting standards and statutory requirements.
I thus confirm that the financial statements comply with applicable accounting standards and statutory requirements as on that date and that they have been prepared based on properly maintained financial records.
Signed by: Regina E. Semakafu Date 5th May, 2020
Director of Finance
NBAA Member No.: ACPA 1322
44
ANNUAL REPORT 2019
REPORT OF THE CONTROLLER AND AUDITOR GENERAL
To: Dr. Edmund B. Mndolwa,Chairman of the Board of Directors,TPB Bank Public Limited Company,P.O. Box 9300,DAR ES SALAAM
RE: REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE AUDIT OF THE FINANCIAL STATEMENTS OF TPB BANK PUBLIC LIMITED COMPANY FOR THE YEAR ENDED 31st DECEMBER 2019
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Introduction
I have audited the financial statements of TPB Bank Public Limited Company (the Bank) set out on pages 23 to 88, which comprises the statement of financial position as at 31 December 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
Opinion
In my opinion, the financial statements of TPB Bank Public Limited Company (the Bank) are presented fairly, in all material respects, the financial position of the Bank as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act, 2002 and the Banking and Financial Institutions Act, 2006 of Tanzania.
Basis for Opinion
I conducted my audit in accordance with Public Audit Act 2008 and International Standards on Auditing (ISAs). My responsibilities under the law and those standards are further amplified in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of TPB Bank Public Limited Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) 2016, together with NBAA Code of Ethics. I have fulfilled my ethical responsibilities in accordance with these Codes.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
45
TPB Bank PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Key Audit Matters (Continued)
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements.
The results of our audit procedures, including the procedures performed to address the matters below, provided the basis for our audit opinion on the accompanying financial statements.
No. Key audit matter How our audit addressed the key audit matter
1. Credit risk and impairment of loans and advances to customers
Impairment is a subjective area due to the level of judgement applied by management in determining provisions.
The Bank is required to calculate impairment of loans and advances to customers in accordance with both the Bank of Tanzania regulations and IFRSs. Impairment of loans and as 31 December 2019 is disclosed in Note 20(c) to the financial statements.
We focused on the measurement of impairment, including the assessment whether historical experience is appropriate when assessing the likelihood of incurred losses in respect of loans. Judgement is required to determine the appropriate parameters and assumptions used to calculate impairment. For example, the assumptions of customers that will default, the valuation of collateral for secured lending and the estimated amount and timing of future cash flows from the loans.
We also considered there to be a risk that the disclosures in Note 5 to the financial statements which are significant to the understanding of the Bank’s credit risk and impairment of loans and advances to customers, are not complete.
Our audit procedures included the assessment of key controls over the approval, recording and monitoring of loans and advances, and evaluating the methodologies, inputs and assumptions used by the Bank in calculating collectively assessed impairment losses, and assessing the adequacy of impairment allowances for individually assessed loans and advances for both IFRS and Bank of Tanzania impairment allowances.
We compared the Bank’s assumptions for impairment allowances to externally available industry, financial and economic data and our own assessments in relation to key inputs. As part of this, we assessed the Bank’s estimates and assumptions used including the consistency of judgement applied in the determination of the amount and timing of expected future cash flows and consideration of economic factors and historical default rates.
We evaluated whether the Bank’s assumptions on the estimated future cash flows, including the value of realisable collateral, was based on up to date valuations and available market information.
We evaluated whether the Bank’s computations for the regulatory impairment allowances were based on the Bank of Tanzania regulations. This included assessing whether the classification of loans and the percentages applied were in accordance with the regulations.
We also assessed whether the financial statements disclosures in Notes 20appropriately reflect the Bank’s exposure to credit risk.
46
ANNUAL REPORT 2019
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Other Information included in the Bank’s 2019 Directors’ Report
Other information consists of the information included in the Directors’ Report, other than the financial statements and my auditor’s report thereon. The directors are responsible for the other information.
My opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or the knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information; I am required to report that fact. I have nothing to report in this regard.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act, CAP 212 Act No. 12 of 2002, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Bank or to cease operations, or have no realistic alternative but to do so. The directors are responsible for overseeing the Bank’s financial reporting process.
Responsibilities of the Controller and Auditor General
My responsibility as an auditor is to express an independent opinion on the financial statements based on the audit. The audit was conducted in accordance with International Standards on Auditing (ISA) and such other audit procedures I considered necessary in the circumstances. These standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, I considered the internal control relevant to the Bank’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
In addition, Sect. 10 (2) of the Public Audit Act No. 11 of 2008 requires me to satisfy myself that the financial statements have been prepared in accordance with the appropriate accounting standards and that; reasonable precautions have been taken to safeguard the collection of revenue, receipt, custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have been duly observed and expenditures of public monies have been properly authorized.
47
TPB Bank PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)
Further, Sect 48(3) of the Public Procurement Act No.11 of 2011 and Regulation 269 of the Public Procurement Regulations 2013 requires me to state in my annual audit report whether or not the Bank has complied with the provisions of the Law and its Regulations.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
This report, including the opinion, has been prepared for, and only for, the Bank’s members as a body in accordance with the Companies Act, 2002 of Tanzania and for no other purposes.
As required by the Companies Act, 2002 of Tanzania, we report to you, based on our audit, that:
I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit;
In my opinion, proper books of account have been kept by the Bank, so far as appears from our examination of those books;
The Directors’ Report is consistent with the financial statements;
Information specified by law regarding directors’ remuneration and transactions with the Bank is disclosed; and,
The Bank’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.
i. Compliance with Banking and Financial Institutions Regulations
As required by the Banking and Financial Institutions (External Auditors) Regulations, 2014 of Tanzania, I report to you, based on my audit, that;
In my opinion, the capital adequacy ratios as presented in Note 6 to the financial statements have been computed in accordance with the Banking and Financial Institutions Act, 2006 and the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014 of Tanzania. Section 9 of part II of the Banking and Financial Institutions (Capital Adequacy, 2014 requires all Banks and financial institutions to maintain at all times, core capital of not less than twelve and one half per cent of its total risk-weighted assets and off-balance sheet exposure; and total capital of not less than fourteen and one half per cent of its total risk weighted assets and off-balance sheet exposure. I state that TPB Bank Public Limited Company maintained a minimum core capital of 15.86% % and 15.86% for Tier 1 and Tier 2 respectively as at 31 December 2019 which comply with the regulation on capital adequacy.
ii. Compliance with Public Procurement Act
In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I reviewed as part of this audit, I state that, TPB Bank Public Limited Company procurement processes have generally complied with the Public Procurement Act, 2011 and its related Regulations of 2013.
Mr. Charles Edward KichereCONTROLLER AND AUDITOR GENERALNational Audit OfficeDodoma, TANZANIA.
Date 12th March, 2020
48
ANNUAL REPORT 2019
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018
Note TZS ‘000 TZS ‘000
Interest income 7 100,176,542 95,944,964
Interest expense 8 (22,495,671) (17,870,226)
Net interest income 77,680,871 78,074,738
Fees and commission income 9 20,850,792 19,754,296
Fees and commission expense 10 (525,700) (410,897)
Net fee and commission income 20,325,092 19,343,399
Foreign exchange income 11 2,073,659 903,584
Other income 12 6,614,491 1,712,874
Loan impairment loss 20(c) (10,533,347) (13,655,680)
Administrative expenses 13 (73,154,402) (69,190,870)
Profit before tax 23,006,364 17,188,045
Income tax expense 15(a) (7,115,062) (5,085,944)
Profit for the year 15,891,302 12,102,101
Other comprehensive income
Actuarial gain from defined benefit obligation 35 190,276 884,037
Deferred tax on actuarial gain from defined benefit obligation (57,083) (265,211)
Actuarial gain net of tax 133,193 618,826
Past cost on defined benefit obligation 35 - -
Deferred tax on past cost on defined benefit obligation - -
Past cost on defined benefit obligation net of tax - -
Other comprehensive income net of tax 133,193 618,826
Total comprehensive income for the year 16,024,495 12,720,927
49
TPB Bank PLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019Notes 2019 2018
Assets TZS ‘000 TZS ‘000
Cash and balances with Bank of Tanzania 16 63,576,332 36,914,013
Cheques and items for collection 3,586 231,928
Placement and balances with other banks 17 14,556,678 15,821,018
Treasury bills 18 75,397,988 43,620,066
Treasury bonds 19 25,189,964 13,199,202
Loans and advances to customers 20(a) 420,593,660 412,768,650
Other assets 21 6,607,895 7,488,941
Deferred tax asset 27 6,887,244 6,242,024
Intangible assets 22 3,294,099 3,035,349
Right of Use of Assets 33(a) 9,185,768 -
Tax recoverable 15(c) - 465,681
Property and equipment 23 21,890,613 22,558,035
Total assets 647,183,827 562,344,907
Liabilities and equity
Customer deposits 24 442,177,176 390,599,533
Borrowing and balances due to other banks 25 75,572,029 62,930,870
Lease Liability 33(b) 7,313,510 -
Other liabilities 26 14,987,266 19,403,952
Tax Payable 15(c) 451,684 -
Revenue grant 1,436,064 547,609
Staff benefit obligation 35 6,353,371 5,942,512
Total liabilities 548,291,100 479,424,476
EquityShare capital 28(b) 28,071,743 28,071,743
Regulatory reserve 28(c) - 135,093
General reserve 28(c) - 3,912,553
Fixed asset revaluation reserve 5,220,318 5,220,318
Other reserves (acquired in business combination) 4,999,760 5,041,745
Defined benefit reserve (2,704,829) (2,838,021)
Retained earnings 63,305,735 43,377,000
Total equity 98,892,727 82,920,431Total liabilities and equity 647,183,827 562,344,907
The financial statements were approved and authorized for issue by the Board of Directors on Date 5th May, 2020 and signed on its behalf by:
Dr. Edmund B. MndolwaChairman
Mr. Seif S. Seif Director
Mr. Macrice D. MbodoDirector
50
TPB
Bank
PLC
ANN
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51
TPB Bank PLC
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
2019 2018Note TZS ‘000 TZS ‘000
Cash generated from operations 29 46,599,553 11,408,572
Tax paid 15(c) (6,900,000) (6,084,000)
Employee benefit paid during the year 35 (489,847) (419,752)
Net cash generated from operating activities 39,209,706
4,904,820
Cash flow from investing activities
Purchase of intangible assets 22 (1,409,481) (2,352,638)
Purchase of property and equipment 23 (4,001,243) (6,340,689)
Proceeds from disposal of property and equipment 1,149 153,851
Net cash used in investing activities (5,409,575) (8,539,476)
Cash flow from financing activities
Dividend paid (1,210,211) -
Payments on lease liability 33 (4,991,790) -
Grant received 888,457 526,400
Net cash (used in)/generated from financing activities (5,313,544) 526,400
Net decrease in cash and cash equivalents 28,486,587 (3,108,256)
Cash and cash equivalents at 1 January 5,259,564 8,367,820
Cash and cash equivalents at 31 December 33,746,151 5,259,564
Analysis of cash and cash equivalents at 31 December
Cash and balances with Bank of Tanzania 16 63,576,332 36,914,013
Placements with other banks maturing within 3 months 17 14,674,790 11,429,051
Cheques and items for collection maturing within 3 months 3,586 231,928
Treasury bills maturing within 3 months 18 26,179,803 19,615,442
Treasury bonds maturing within 3 months 19 4,883,669 -
Borrowings and balances due to other banks 25 (75,572,029) (62,930,870)
33,746,151 5,259,564
52
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. REPORTING ENTITY
TPB Bank Public Limited Company is domiciled in the United Republic of Tanzania. It was incorporated as limited liability company on 29 March 2016 and took over the business of the former Tanzania Postal Bank following the repeal of Tanzania Postal Bank Act No. 11 of 1991 on 29 May 2015. The Bank is licensed under the Banking and Financial Institutions Act, 2006 and regulated by the Bank of Tanzania. The addresses of its registered office and principal place of business are disclosed in the corporate information section in this report. The principal activities of the Bank are described in the Report of the Directors.
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)
(a) New standards, amendments and interpretation adopted by the Bank
The following new and revised IFRS have been applied in the current year and had no material impact on the amounts reported in these financial statements.
Leases (IFRS 16)
The Bank has adopted IFRS 16 as issued by the International Accounting Standards Board (“IASB”) in July 2016 with a date of transition of 1 January 2019, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements. The Bank did not early adopt IFRS 16 in any previous periods. As permitted by the transitional provisions of IFRS 16, the Bank elected not to restate comparative figures.
The adoption of IFRS 16 has resulted in changes in the Bank’s accounting policies for leases previously classified as operating leases under IAS 17, which were off-balance sheet. On initial application of IFRS 16, the Bank has:
a) Recognised a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The lease liability has been measured at the present value of the lease payments to be made over the lease term using incremental borrowing rate.
b) The right-of-use asset has initially been measured at the amount of the lease liability adjusted to lease prepayments and accruals.
c) Recognize depreciation of right-of-use assets and interest on lease liabilities in the statement of profit or loss; whereby
d) Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the cash flow statement.
e) For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and office furniture), the Bank has opted to recognize a lease expense on a straight-line basis as permitted by IFRS 16.
53
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued)
Operating Lease (IFRS 16) (continued)
f) Measurement of Lease Liabilities
2019 TZS ‘000
Operating lease commitments disclosed as at 31 December 2018 (note 32(b)) 13,010,257
Discounted using the Bank’s incremental borrowing rate; 8%
Add: finance lease liabilities recognised as at 31 December 2018 -
(Less): short-term leases recognised on a straight-line basis as expense -
(Less): low-value leases recognised on a straight-line basis as expense
(Less): contracts reassessed as service agreements -
Add/(less): adjustments as a result of a different treatment of extension and termination options
-
Add/(less): adjustments relating to changes in the index or rate affecting variable payments
-
Lease liablility recognised as at 1 January 2019 11,777,833
g) Measurement of right of use assets
The right-of use assets were measured at the amount of the initial measurement of the lease liability amounts discounted using the lessee’s incremental borrowing rate at the date of initial application, and adjusted for any initial direct costs, direct incentives received and restoration costs.
Adjustments recognised in the balance sheet on 1 January 2019
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
TZS’000· Property, plant and equipment increased by 13,152,283
· Prepayments reduced by 1,374,450
· Other liabilities increased by 11,777,833
There was no impact on opening retained earnings on 1 January 2019.
54
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued)
(a) New standards, amendments and interpretation adopted by the Bank (continued)
Amendments to IFRS 9 Prepayment Features with Negative Compensation
The amendments to IFRS 9 clarify that for the purpose of assessing whether a prepayment feature meets the SPPI condition, the party exercising the option may pay or receive reasonable compensation for the prepayment irrespective of the reason for prepayment. In other words, prepayment features with negative compensation do not automatically fail SPPI.
The amendment applies to annual periods beginning on or after 1 January 2019, with earlier application permitted. There are specific transition provisions depending on when the amendments are first applied, relative to the initial application of IFRS 9.
The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s consolidated financial statements.
Amendments to IAS 19 Employee Benefits Plan Amendment, Curtailment or Settlement
The amendments clarify that the past service cost (or of the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated assumptions and comparing benefits offered and plan assets before and after the plan amendment (or curtailment or settlement) but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus position). IAS 19 is now clear that the change in the effect of the asset ceiling that may result from the plan amendment (or curtailment or settlement) is determined in a second step and is recognised in the normal manner in other comprehensive income.
The paragraphs that relate to measuring the current service cost and the net interest on the net defined benefit liability (asset) have also been amended. An entity will now be required to use the updated assumptions from this re-measurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. In the case of the net interest, the amendments make it clear that for the period post plan amendment, the net interest is calculated by multiplying the net defined benefit liability (asset) as re-measured under IAS 19.99 with the discount rate used in the re-measurement (also taking into account the effect of contributions and benefit payments on the net defined benefit liability (asset)).
The amendments are applied prospectively. They apply only to plan amendments, curtailments or settlements that occur on or after the beginning of the annual period in which the amendments to IAS 19 are first applied.
The amendments to IAS 19 must be applied to annual periods beginning on or after 1 January 2019, but they can be applied earlier if an entity elects to do so. The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s consolidated financial statements.
55
TPB Bank PLC
Annual Improvements to IFRS Standards 2015–2017 Cycle Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
The Annual Improvements include amendments to four standards:
IAS 12 Income Taxes
The amendments clarify that an entity should recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised the transactions that generated the distributable profits. This is the case irrespective of whether different tax rates apply to distributed and undistributed profits.
IAS 23 Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.
IFRS 3 Business Combinations
The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, the entity applies the requirements for a business combination achieved in stages, including re-measuring its previously held interest (PHI) in the joint operation at fair value. The PHI to be re-measured includes any unrecognized assets, liabilities and goodwill relating to the joint operation.
IFRS 11 Joint Arrangements
The amendments to IFRS 11 clarify that when a party that participates in, but does not have joint control of, a joint operation that is a business obtains joint control of such a joint operation, the entity does not re-measure its PHI in the joint operation.
56
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (Continued)
(b) New and revised IFRSs in issue but not yet effective for year ended 31 December 2019
Definition of a Business (Amendments to IFRS 3)
The amendments in Definition of a Business to IFRS 3, are changes to Appendix A Defined terms, the application guidance, and the illustrative examples of IFRS 3 only. They:
· clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
· add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
· remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
· add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
· Business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020
Amendments to IAS 1 and IAS 8 The amendments in Definition of Material (Amendments to IAS 1 and IAS 8)clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards. Effective date: Annual reporting periods beginning on or after 1 January 2020.
Amendments to IFRS 9, IAS 39 and IFRS 7
The amendments in Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform. Effective date: Annual reporting periods beginning on or after 1 January 2020.
(c) Early adoption of standards
The Bank did not early-adopt any new or revised standards in 2019.
The directors of the Bank do not anticipate that the application of the amendments in the future will have an impact on the Bank’s financial statements.
57
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations as issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. Additional information required by regulatory bodies is included where appropriate.
b) Basis of preparation
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at amortised costs.
c) Revenue recognition
The Bank recognizes revenue when the amount of revenue can be reliably measured, and it is probable that future economic benefits will flow to the Bank. The amount of revenue is not considered to be reliably measured until all contingencies relating to the transaction have been resolved. The Bank bases its estimates on historical results, taking into consideration the type of transaction and specifics of each arrangement.
(i) Interest and similar income
Interest income includes interest on loans and advances, interest on placements with other banks, and interest and discounts on government securities which is recognised on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
When an account is classified as non-performing the interest on the account is suspended until it is realised in cash.
(ii) Fees and commission income
Fees and commissions are generally recognised on an accrual basis when the service has been provided. The Bank earns fees and income from diverse range of services it provides to its customers and services offered to various mobile companies and some banks as agent on Mobile Pesa and cash collections.
d) Interest expense
Interest expense is recognized in the profit or loss using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments through the expected life of financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial liability. When calculating the effective interest rate, the Bank estimates future cash flows considering all contractual terms of the financial liability.
The calculation of the effective interest rate includes transaction costs and fees paid that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition of the financial liability.
e) Fees and commission expense
Fees and commission expense that are integral to the effective interest rate on a financial liability are included in the measurement of the effective interest rate period.
Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.
58
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f) Employee benefits
Short term benefits
The cost of all short-term employee benefits such as salaries, employees’ entitlements to leave pay, medical aid, other contributions, provision of housing to senior management staff, etc. are recognized during the period in which the employees render the related services.
Pension Obligation
The Bank and its other employees contribute to the Public Service Pensions Fund (PSPF), which is a defined contribution schemes. The Bank contribute 15% equivalent of the employees’ salary to the scheme and employees contributes 5%. The Bank has no further obligation after such payment.
The Bank’s contributions to the defined contribution schemes are recognized to the profit or loss in the year to which they relate.
Retirement benefit obligations
The Bank has a defined benefit scheme for staff who were absorbed from the forerunner Tanganyika Postal Savings Bank, who had worked with the defunct East African Community. Under this plan the Bank contributes a sum determined as equivalent to the estimated annual liability on monthly instalment for all who are in the scheme. The amounts are paid to a Trust namely the Ex-East African Posts and Telecommunications Corporation Staff Pension Fund, which manages the fund on behalf of the employer.
Defined benefit plan
The Bank operates an unfunded lumpsum Gratuity Arrangement (“the Arrangement”). As the Arrangement is unfunded, gratuity benefits are paid out of the Bank’s general revenues.
Under this Gratuity Arrangement, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Re-measurement, comprising actuarial gains and losses is reflected in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
· Past service cost;· Net interest expense or income; and· Re-measurement.
The Bank presents the first two components of defined benefit cost in profit or loss in the line item Staff costs.
59
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a) Income tax expense
Income tax expense represents the sum of the current tax payable and the deferred taxation.
(i) Current tax
Current taxation is provided on the basis of the results for the year as shown in the financial statements, adjusted in accordance with the tax legislation using enacted tax rates.
(ii) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 liabilities and assets are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset realised, based on enacted tax rates by the end of the reporting period.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
(iii) Value Added Tax
Revenues and expenses and capital items are recognised inclusive of the amount of value added tax except where the value added tax incurred on a purchase of assets or services is recoverable from the taxation authority, in which case the value added tax is recognised as an asset.
60
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Financial instruments
A financial instrument is defined as any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity. The Bank recognizes all financial instruments on its statement of financial position when it becomes a party to the contractual provision of the instrument.
Measurement Methods
Amortised cost and effective interest rate
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial assert or liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees. For purchased or originated credit-impaired (‘POCI’) financial assets-assets that are credit-impaired at initial recognition- the Group calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporate the impact of expected credit losses in estimated future cash flows.
When the Group revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discount using the original effective interest
rate. Any changes are recognised in profit or loss.
Interest income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:
a) POCI financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.
b) Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision).
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.
(i) Classification and subsequent measurement of financial assets
Up to 31 December 2019, the Bank classified its financial assets into one of the following categories:
· as loans and receivables; or · at fair value through profit or loss, and
within this category as:
– held for trading; or
– designated at fair value through profit or loss.
All financial liabilities were measured at amortised cost.
61
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognised at fair value plus any directly attributable transaction costs and measured subsequently at amortised cost using the effective interest method. Interest on financial assets is included in profit or loss and is reported as interest income”.
The Bank uses settlement date accounting for regular way contracts when recording financial asset transactions. Financial assets, consisting of investment securities, that are transferred to a third party but do not qualify for de-recognition remain within investment securities but disclosed as “pledged as collateral”, if the transferee has the right to sell or re-pledge them.
(b) Financial assets at fair value through profit or loss
Fair value through profit or loss category comprises of financial assets designated at fair value through profit or loss. These are initially recognised at fair value, with transaction costs recognised in profit or loss and subsequently measured at fair value. Interest on financial assets is included in profit or loss and is reported as interest income. Dividend income is recognised in profit or loss on the date on which the right to receive payment is established.
Fair value through profit or loss category comprises of financial assets designated at fair value through profit or loss. These are initially recognised at fair value, with transaction costs recognised in profit or loss and subsequently measured at fair value. Interest on financial assets is included in profit or loss and is reported as “Interest income”. Dividend income is recognised in profit or loss on the date on which the right to receive payment is established.
From 1 January 2018, the Bank has applied IFRS 9 and classifies its financial assets in the following measurement categories:
· Amortised cost;· Fair value through profit or loss (“FVTPL”);
or· Fair value through other comprehensive
income (FVOCI)
The classification requirements for debt and equity instruments are described below:
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans and government bonds. Classification and subsequent measurement of debt instruments depend on:
· the Bank’s business model for managing the asset; and
· the cash flow characteristics of the asset.
Business model
The business model reflects how the Bank manages its assets in order to generate cash flows. That is, whether the Bank’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVTPL.
Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and how risks are assessed and managed.
62
ANNUAL REPORT 2019
recognised and measured as described in Note 3.(a) Interest income from these financial assets is included in interest income using the effective interest method.
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees.When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income (“FVOCI”) are measured at FVTPL. A gain or loss on a debt instrument that is subsequently measured at FVTPL is recognised in profit or loss and presented in profit or loss within gains arising from fair valuation of financial assets at fair value through profit or loss in the period in which it arises.
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Financial instruments (continued)
(iii) Classification and subsequent measurement of financial assets (continued)
Solely Payments of Principal and Interest (“SPPI”) test
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether the financial instruments’ cash flows represent solely payments of principal and interest (the SPPI test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at FVTPL.
The Bank reclassifies debt instruments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.
(b) Financial assets at fair value through profit or loss (continued)
Based on these factors, the Bank classifies its debt instruments into one of the following measurement categories:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss (“ECL”) allowance
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· the time value of money; and· reasonable and supportable information
that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
Note 5.(a) provides more detail of how the ECL allowance is measured.
(i) Modification of Loans
The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the original terms .
The Bank does this by considering, among others, the following factors.
• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay.
• Whether any substantial new terms are introduced such as a profit share/equity –based return that substantially affects the risk profile of the loan.
• Significant extension of the loan term when the borrower is not in financial difficulty.
• Significant change in the interest rate.
• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Bank derecognizes the original financial assets and recognizes a new asset at fair value and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for the impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred .
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Financial instruments (continued)
(iii) Classification and subsequent measurement of financial assets (continued)
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets.
The Bank subsequently measures all equity instruments at FVTPL. Dividends, when representing a return on such investments, continue to be recognised in profit or loss under ‘Other income’ when the Bank’s right to receive payments is established. Gains and losses on equity investments at FVTPL are included in the ‘Gains arising from fair valuation of financial assets at fair value through profit or loss’ line in profit or loss.
Immediately after initial recognition, an ECL allowance is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. At 1 January 2019 and 31 December 2019, the Bank did not have any financial assets measured at FVOCI.
The Bank assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and with the exposure arising from loan commitments. The Bank recognizes a loss allowance for such losses at the end of each reporting period. The measurement of ECL reflects:
· an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
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all the risks and rewards of ownership have not been transferred, the Bank tests control to ensure that continuing involvement on the basis of any retained powers of control does not prevent de-recognition).
Financial liabilities are derecognized only when the obligation is discharged, cancelled or expired.
(vi) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Bank has access at that date. The fair value of liability reflects its non-performance risk.
When available, the Bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Financial instruments (continued)
(ii) Impairment
However the Bank also assesses whether the new financial assets recognised is deemed to be credit-impaired at initial recognition ,especially in circumstances where the renegotiation was driven by the debtor being unable being unable to make the originally agreed payments. Differences in the carrying amount are also recognized in Profit or loss as a gain or loss on derecognition.
(iii) Modification of Loans (continued)
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial assets and recognizes a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate(or Credit –adjusted effective interest rate for purchased or originated credit –impaired financial assets).
(iv) Classification and subsequent measurement of financial liabilities
All the financial liabilities are measured at amortised cost under both IAS 39 and IFRS 9.The Bank recognizes all its financial liabilities initially at the value of the consideration received for those liabilities, excluding transaction costs and subsequently measures them at amortised cost.
(v) De-recognition of financial assets and liabilities
Financial assets are derecognized when the contractual rights to receive cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that is, if substantially
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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Depreciable assets are reviewed for impairment.
Whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in profit or loss.
Capital work in progress
Capital work in progress relates to property and equipment under construction. Cost includes materials, direct labor and any other direct expenses incurred in respect of the project less any recognised impairment losses. The amounts are transferred to the appropriate property and equipment categories once the project is completed and the asset is available for use.
Leases
The Bank leases office space in various parts of the region. Rental contracts are typically made for a periods of 1 to 5, few contracts are up to 10 years but may have extension options as described below, under extension and termination section. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Contracts may contain both lease and non-lease components. The Bank allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Bank is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) Property and equipment
Property and equipment is initially recorded at cost and thereafter stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or are optimized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred.
Leasehold improvement costs are related to refurbishment on leased Banking premises. Leasehold improvements are only capitalized when the cost is above TZS 20 million. The cost is amortized to profit or loss for the year using straight line method over the remaining lease period or the expected economic useful life of the refurbished costs whichever is shorter.
Depreciation
Depreciation of other assets is calculated using the straight-line method to write down their cost to their residual values over their estimated useful lives, using the following annual rates:
Buildings 4%
Motor vehicles 25%
Data communication equipment
20%
Computer hardware 20%
Furniture, fittings and equipment
10%
Leasehold improvement
Over the term of the lease or 20%
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lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Bank:
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date less any lease incentives received
· any initial direct costs and· restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
Extension and termination options
Extension and termination options are included in a number of property leases contracts. These terms are used to maximise operational flexibility in terms of managing contracts.In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For the leases of office space, the following factors are normally the most relevant:
· If there are significant penalties to terminate (or not extend), the Bank is typically reasonably certain to extend (or not terminate).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) Property and equipment (continued)
Leases (continued)
Until the 2019 financial year, leases of office space were classified as operating leases, see note 32(b) for details. From 1 January 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Bank. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
· fixed payments (including in-substance fixed payments), less any lease incentives receivable
· variable lease payment that are based on an index or a rate
· amounts expected to be payable by the lessee under residual value guarantees
· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
· payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
· Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Bank, the
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Amortization is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it becomes available for use. The estimate useful life of software is five years.
l) Impairment of tangible and intangible assets
At the end of each reporting period, the Bank reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that these assets have suffered an impairment loss.
If objective evidence on impairment losses exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss.
Assets that have an indefinite useful life are not subject to amortization and are tested for impairment annually.
In determining the recoverable amount, the Bank considers the higher of the fair value of the asset less costs to sell, and value in use. In estimating value in use, the Bank iscognizant of the estimated future cash flow discounted to the present value using a pre-tax discount rate that is reflective of the current market assessment of time value of money and the risks specific to the asset itself.
Where impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount should not exceed the carrying amount that would have been determined had no impairment loss been recognized.
a) Regulatory reserve
IFRS 9 requires the Bank to recognize immediately after initial recognition, an ECL allowance for financial assets measured at amortized cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognized in profit or loss when an asset is newly originated. However, Bank of Tanzania prudential guidelines require the Bank to set aside amounts as provision for losses on loans
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j) Leases (continued)· If any leasehold improvements are expected
to have a significant remaining value, the Bank is typically reasonably certain to extend (or not terminate).
· Otherwise, the Bank considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset. Most extension options in offices and vehicles leases have not been included in the lease liability, because the Bank could replace the assets without significant cost or business disruption.
· The lease term is reassessed if an option is actually exercised (or not exercised) or the Bank becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
k) Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Acquired computer software and related licenses are stated at cost less accumulated amortization. Subsequent expenditure on software assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Where software is not an integral part of the related hardware it is recognized as an intangible asset.
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Grants
Grants related to assets are treated as deferred income and released to the profit or loss over the expected useful lives of the assets concerned.
Grants towards improvement of Bank’s processes are recognized to profit or loss over the periods necessary to match them with the related costs.
Cash and cash equivalents
For the statement of cash flow purposes, cash and cash equivalents includes cash on hand, unrestricted balances held with Bank of Tanzania and short-term liquid investments with maturities of three months or less from the acquisition date, less advances from other banks repayable within three months from date of the advance.
Restricted cash balances are those balances that the Bank cannot use for working capital purposes as they have been placed as a lien to secure borrowings.
Contingent liabilities Letters of credits, acceptances and guarantees are generally written by the Bank to support performance of the customer to third parties. The Bank will only be required to meet these obligations in the event of the customer’s default. These obligations are accounted for as off-balance sheet transactions and disclosed as contingent liabilities.
ProvisionsProvisions are recognised when the Bank has a present obligation (legal or constructive) as a result of a past event, it is probable that the Bank will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
and advances in addition to those losses that have been recognized under IFRS 9. Any such amounts set aside represent appropriations of retained earnings and not expenses in determining profit or loss.
These amounts are dealt with in the regulatory reserve. Bank of Tanzania introduced General provision of 1% on current loans which the Bank has set aside from retained earnings with effect from August 2015.
Translation of foreign currenciesFunctional and presentation currency
The financial statements of the Bank are measured using the currency of the primary economic environment in which the Bank operates (‘the functional currency’). The financial statements are presented in Tanzania Shillings rounded to the nearest TZS ‘000.Tanzania Shillings is the Bank’s functional and presentational currency.
Transactions and balances
Foreign currency transactions that are transactions denominated, or that requires settlement, in a foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a) Regulatory reserve (continued)
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· Establishing portfolio segmentation of similar financial assets for the purpose of measuring ECL.
Detailed information about judgements and estimates made by the Bank in the above areas is set out in note 5(a).
Business models and SPPI as Significant Judgements.
As well as ECL determining the appropriate business models and assessing the SPPI requirements for financial assets may require significant impact on the financial statements as discussed in 3(h).
Property and equipment and intangible assetsCritical estimates are made by the Directors in determining useful lives, residual values, and depreciation and amortization rates of property and equipment, and intangible assets respectively.
Defined benefit planThe Bank operates an unfunded defined benefit retirement plan for all employees. Employees do not contribute to the plan, the Bank bears all cost. A provision is made in the financial statements for the estimated cost of the future benefits. The accuracy and completeness of such provisions is confirmed periodically by an independent actuarial valuation. Refer to note 35 of the financial statements for uncertainty and sensitivity disclosure.
TaxesThe Bank is subjected to a number of taxes and levies by various government and quasi-government regulatory bodies. As a rule of thumb, the Bank recognizes liabilities for the anticipated tax/levies payable with utmost care and diligence. However, significant judgement is usually required in the interpretation and applicability of those taxes/levies. Should it come to the attention of management, in one way or the other, that the initially recorded liability should be reassessed or re-estimated, any differences from the liabilities are dealt with through profit or loss for the year.
b) Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING THE BANK’S ACCOUNTING POLICIES
In application of the Bank’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis.
Measurement of the Expected Credit Losses Allowance.
The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation techniques used in measuring ECL to changes in these elements are explained in note 5(a).
A number of significant judgements are also required in applying the accounting requirement for measuring ECL, such as
· Determining criteria for significant increase of credit risk.
· Choosing appropriate models and assumptions for measuring ECL;
· Establishing the number and relative weightings of forward-looking scenarios for each portfolio segmentation and associated ECL; and
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relation to the risks faced by the Bank. On the other hand, the Governance, Recruitment and Remuneration Committee among other issues also has the mandate to review performance of the Bank through various reports submitted by Management.
These Board committees are assisted in these functions by various management committees which undertake both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Board.
The most important types of risks which the Bank manages on a day-to-day basis are:
· Credit risk;
· Liquidity risk;· Market risk;
- Interest rate risk; and- Foreign exchange/currency risk.
· Operations Risk.The notes below provide detailed information on each of the above risks and the Bank’s objectives, policies and processes for measuring and managing the risks.
b) Credit riskCredit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Bank. It arises principally from lending and treasury activities. The amounts presented in the statement of financial position are net of impairment for doubtful debts, estimated by the Bank’s management based on prior experience and their assessment of the current economic environment.
The Board of Directors has delegated responsibility for the management of credit risk to its Audit, Risk management and Compliance Committee which is responsible for oversight of the Bank’s credit policy, including among others:· formulating the policies, covering risk
acceptance procedures, collateral requirements, credit appraisal, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements;
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and return and optimize potential adverse effects on the Bank’s financial performance. The Bank’s risk management policies are designed to identify and analyses these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. As part of its governance structure, the Board of Directors has embedded a comprehensive risk management framework for identification, measuring, monitoring, controlling and mitigation of the Bank’s risks. The policies are integrated in the overall management information systems of the Bank and supplemented by a management reporting structure.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered, and emerging best practice. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees/ stakeholders understand their roles and obligations.
The Audit, Risk Management and Compliance Committee of the Board of Directors of the Bank have the responsibility for monitoring compliance with the Bank’s risk management policies and procedures, and review of the adequacy of risk management framework in
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loss ratios and defaults correlation between counterparties .The Bank measures credit risk using Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD).This is similar to the approach used for the purposes of measuring Expected Credit Loss (ECL) under IFRS 9.
Expected credit loss measurement
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition as summarized below:· A financial instrument that is not
credit-impaired on initial recognition is classified in ‘Stage 1’ and has its credit risk continuously monitored by the Bank.
· If a significant increase in credit risk (‘SICR’) since initial recognition is identified, the financial instrument is moved to ‘Stage 2’ but is not yet deemed to be credit-impaired.
· If the financial is credit-impaired, the financial instrument is then moved to ‘Stage 3’.
· Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses that result from default events possible within the next 12 months. Instruments in stage 2 or 3 have their ECL measured based on expected credit losses on a lifetime basis.
· A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking information.
· Purchased or originated credit-impaired financial assets are those financial assets that are credit-impaired on initial recognition. Their ECL is always measured on a lifetime basis (Stage 3).
Further explanation is also provided of how the Group determines appropriate groupings when ECL is measured on a collective basis.
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a) Credit risk (continued)
· establishing the optimized structure for the approval of credit facilities;
· reviewing and assessing credit risk on all exposures in excess of approval limits of the management prior to facilities being committed to customers; limiting concentrations of exposure to counterparties and industries (for loans and advances).
· Developing and maintaining the Bank’s risk grading system in order to categories exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The risk grading system is used in determining where impairment provisions may be required against specific credit exposures; and
· Reviewing reports on compliance with agreed exposure limits, including those for selected industries and product types.
Day to day management of the Bank’s credit risk is vested on the Director of Risk Management and Compliance who reports to the Chief Executive Officer of the Bank. Regular audits of the credit processes and management are undertaken by Internal Audit.
(i) Credit Risk measurement Loans and advances (including loan commitments and financial guarantees)
The estimation for credit exposure for risk management purposes is complex and requires the use of models as the exposure varies with the changes in the market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of assets entails further estimation as the likelihood defaults occurring, of associated
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used for internal credit risk management purposes. The default definition has been applied consistently to model the Probability of default (PD), Exposure at Default (EAD) and loss given Default (LGD) throughout the Group’s expected loss calculations.
Measuring ECL – Explanation of inputs, assumptions and estimation techniques
The Expected Credit loss (ECL) is measured on either a 12-month (12M) or lifetime basis depending on whether a significant increase in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected credit losses are the discounted product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as follows:
· The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-impaired” above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
· EAD is based on the amounts the Bank expects to be owed at the time of default, over the next 12 months (12M EAD) or over the remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the Bank includes the current drawn balance plus any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.
· Loss Given Default (LGD) represents the Bank’s expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of exposure at the time of default (EAD). LGD is calculated on a 12 –month or lifetime basis, where 12 month-month LGD is the percentage of loss expected to be if the default occurs in the next 12-months and lifetime LGD’s the
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a) Credit risk (continued)
The following diagram summaries the important requirements under IFRS 9 (other than purchased or originated credit-impaired financial assets):
Significant Increase in Credit Risk (SICR)
The Bank considers a financial instrument to have experienced a significant increase in credit risk when the borrower is more than 5 days past due on contractual repayments for microfinance products and 30 days past due on its contractual payments for products other than microfinance
Definition of default and credit-impaired assets
The Bank defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it meets one or more of the following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments (with the sole exception of microfinance portfolio where 30 days past due on contractual repayment is default).
Qualitative criteria
The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty. These are instances where:
· The borrower is in long-term forbearance· The borrower is deceased · The borrower is insolvent· It is becoming probable that the borrower
will enter bankruptcy· Financial assets are purchased or
originated at a deep discount that reflects the incurred credit losses.
The criteria above have been applied to all financial instruments held by the Bank and are consistent with the definition of default
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· For secured products, this is primarily based on collateral type and projected collateral values, historical discounts to market/book values due to forced sales, time to repossession and recovery costs observed.
· For unsecured products, LGD’s are typically set at product level due to the limited differentiation in recoveries achieved across different borrowers. Probability of loans getting back to performing is also adjusted to obtain LGD parameter.
Forward-looking economic information is also included in determining the 12-month and lifetime PD and LGD.
The assumptions underlying the ECL calculation – such as how the maturity profile of the PDs and how collateral values change etc. – are monitored and reviewed on a quarterly basis.
There have been no significant changes in estimation techniques or significant assumptions made during year.
Forward-looking information incorporated in the ECL models
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Bank has performed historical analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio.
These economic variables and their associated impact on the PD and LGD vary by financial instrument. Expert judgement has also been applied in this process. Forecasts of these economic variables (the “base economic scenario”) are obtained from independently published information on a quarterly basis and provide the best estimate view of the economy over the next ten years.
The impact of the economic variables on the PD and LGD has been determined by performing statistical logistic regression analysis to understand the impact changes in these variables have had historically on default rates and on the components of LGD.
percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan.
Measuring ECL – Explanation of inputs, assumptions and estimation techniques (continued)
The ECL is determined by projecting the PD, LGD and EAD for each future month for collective segments. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier month).
This effectively calculates an ECL for each future quarters, which is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.
The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type.
· For amortizing products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over 12 month or lifetime basis. This will also be adjusted for any expected overpayments made by the borrower. Early repayment/refinance assumptions are also incorporated into the calculation.
· For revolving products such as overdrafts, the exposure at default is predicted by taking current drawn balance and adding a “credit conversion factor” which allows for the expected drawdown of remaining limit by the time of default. These assumptions vary by product type and current limit utilization band, based on an analysis of the Bank’s recent default data.
Definition of default and credit-impaired assets (continued)
The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries made post default. These vary by product type.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
74
ANNUAL REPORT 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Credit risk (continued)
In addition to the base economic scenario, the Bank estimates other scenarios along with scenario weightings. The number of other scenarios used is set based on the analysis of each major product type to ensure non-linearity are captured. The number of scenarios and their attributes are reassessed at each reporting date. At 1 January 2018 and 31 December 2018, for all portfolios the Bank concluded that three scenarios appropriately captured non-linearity. The Bank concluded that two additional scenarios, best case and worst case scenarios were required. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario is representative of.
These probability –weighted ECLs are determined by running each scenario through the relevant ECL model and multiplying it by the appropriate scenario weighting. As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Bank considers these forecasts to represent its best estimate of the possible outcomes.
Economic variables assumptions
The most significant year end assumptions used for ECL estimate as at 31 December 2019 are set out below. The scenarios “Base”, “Best Case” and “Worst Case” were used for each specific portfolios depending on macroeconomic factor correlation with default rates.
CL,STL EstimatesVariable Scenarios 2020 2021 2022 2023 2024Population Base 3.1% 3% 3% 3% 3%
Best case 3.2% 3.1% 3.1% 3.1% 3.1%
Worst case 3.0% 2.9% 2.9% 2.9% 2.9%
LPF, COL & PSL EstimatesVariable Scenarios 2020 2021 2022 2023 2024Interest rates Base 15.5% 15.5% 15.5% 15.5% 15.5%
Best case 15.8% 15.8% 15.8% 15.8% 15.8%
Worst case 15.2% 15.2% 15.2% 15.2% 15.2%
GRL & MIC EstimatesVariable Scenarios 2020 2021 2022 2023 2024Household Spending
Base 12.4% 12.4% 0% 0% 0%
Best case 12.7% 12.7% 0% 0% 0%
Worst case 12.1% 12.1% 0% 0% 0%
Forward-looking information incorporated in the ECL models (continued)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
75
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
The weightings assigned to each economic scenario as at 31 December 2019 were as follows:
Portfolio Scenarios WeightingsAll portfolios Base 50%
Best case 25%
Worst case 25%
Groupings of instruments for losses measured on collective basis
For expected credit loss provisions modelled on collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such that risk of exposures within a group are homogenous. In performing this grouping, there must be sufficient information for the group to be statistically credible. The Bank has grouped its loans based on loan product type.
Exposure to credit risk
2019 2018
TZS’000 % TZS’000 %
On balance sheet items Note
Cash balance with Bank of Tanzania
16 50,242,685 8.31% 31,056,012 5.89%
TPB Mobile Money Balance 13,333,643 2.20% 5,858,011 1.11%
Cheques and items for collection 3,586 0.00% 231,928 0.04%
Placements and balances with other banks
17
14,556,678 2.41%
15,821,018 3.00%
Treasury bills 18 75,397,988 12.47% 43,620,066 8.28%
Treasury bonds 19 25,189,964 4.17% 13,199,202 2.50%
Loans and advances to customers 20 420,682,541 69.57% 412,768,650 78.32%
Other assets 21 5,310,803 0.88% 4,493,508 0.8%
604,717,888 100.00% 527,048,395 100.00%
76
ANNUAL REPORT 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a) Credit risk (continued)
Classification of loans and advances
The table below contains an analysis of the risk exposure of financial instruments for which an ECL allowance is recognized. The gross carrying amount of financial assets below also represents the Bank’s maximum exposure to credit risk on these assets.
ECL Staging 2019Stage 1 Stage 2 Stage 3 TZS ‘000
12- month ECL Lifetime ECL Lifetime ECL
Purchased credit
Impaired TotalNeither past due nor impaired 361,555,628 - - - 361,555,628
Past due but not impaired 41,998,141 18,262,447 - - 60,260,588
Impaired - - 19,652,830 1,753,742 21,406,572
Gross 403,553,769 18,262,447 19,652,830 1,753,742 443,222,788
Less: allowance for impairment (3,038,817) (3,394,386) (12,308,424) (475,882) (19,217,508)
Less: Interest in suspense - - (3,322,738) - (3,322,738)
Total (note 20) 400,514,952 14,868,061 4,021,668 1,277,860 420,682,542
ECL Staging 2018Stage 1 Stage 2 Stage 3 TZS ‘000
12- month ECL Lifetime ECL Lifetime ECL
Purchased credit
Impaired TotalNeither past due nor impaired 335,969,681 - - - 335,969,681
Past due but not impaired 45,931,700 21,684,580 - - 67,616,280
Impaired - - 25,024,861 6,065,394 31,090,255
Gross 381,901,381 21,684,580 25,024,861 6,065,394 434,676,216
Less: allowance for impairment (3,612,886) (1,119,899) (9,641,909) (3,431,417) (17,806,111)
Less: Interest in suspense - - (4,101,455) - (4,101,455)
Total (note 20) 378,288,495 20,564,681 11,281,497 2,633,977 412,768,650
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
77
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a) Credit risk (continued)
Classification of loans and advances (continued)
Loans and advances that are neither past due nor impaired
The Bank classifies loans and advances under this category for those exposures that are up to date, in terms of repayment with contractual agreements as well as quality of legal and loan documentation. Such loans would have demonstrated financial conditions, risk factors, quality of documentation and capacity to repay that are acceptable. These exposures will normally be maintained largely within approved product programs and with no signs of impairment or distress. These exposures are categorized as normal accounts in line with the Bank of Tanzania (BOT) regulations.
Past due but not impaired
This category includes loans that are superior in quality in repayment to those classified as substandard but they are potentially weak in terms of documentation thus, require closer management supervision.
Impaired loans and advances
Impaired loans are loans for which the Bank determines that it is probable that it will not be able to collect all outstanding principal and interest due according to the contractual terms of the advance. These accounts under BOT guidelines are termed as non-performing loans.
Loss allowance
The loss allowance recognised in the period is impacted by a variety of factors as described below:
· Transfer between stage 1 and stage 2 or due to financial instruments experiencing significant increase (or decrease) of credit risk or becoming credit-impaired in the period, and the consequent “step up”( or step down”) between 12-months and lifetime ECL:
· Additional allowance for new financial instruments recognised during the period, as well as releases for financial instruments de-recognised in the period;
· Impact on the measurement of ECL due to changes in PDS and LGDs in the period, arising from regular refreshing of inputs to models:
· Impact on the measurement of ECL due to the passage of time, as ECL is measured on present values basis;
· Foreign exchange retranslation for assets denominated in foreign currencies and other movements: and
· Financial assets derecognized during the period and write offs of allowance related to assets that were written off during the period.
78
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
The
follo
win
g ta
bles
exp
lain
the
chan
ges
in th
e lo
ss a
llow
ance
bet
wee
n th
e be
ginn
ing
and
the
end
of th
e an
nual
per
iod
due
to th
ese
fact
ors:
Loss
allo
wan
ce –
Loa
ns a
nd a
dvan
ces t
o
cust
omer
s at a
mor
tised
cos
tSt
age
1St
age
2St
age
3
2019
12-m
onth
ECL
Life
time
ECL
Life
time
ECL
PO
CITo
tal
TZS
000s
TZS
000s
TZS
000s
TZ
S 00
0sTZ
S 00
0s
Loss
allo
wan
ce a
s at
31
Dec
embe
r 20
18
3,52
4,70
41,
119,
899
9,64
2,13
63,
431,
417
17,7
18,1
56
Off
Bal
ance
she
et a
s at
31
Dec
embe
r 20
18
87,
954
87,
954
Tota
l On
and
Off
bal
ance
she
et L
oss
allo
wan
ce a
s at
01
Janu
ary
2019
3,61
2,65
81,
119,
899
9,64
2,13
63,
431,
417
17,8
06,1
11
Chan
ges
in th
e lo
ss a
llow
ance
-
– Tr
ansf
er to
sta
ge 1
79
,644
(277
,658
)(1
,152
,224
)-
(1,3
50,2
38)
– Tr
ansf
er to
sta
ge 2
(7
7,55
8)61
4,95
0(2
02,8
50)
-33
4,54
2
– Tr
ansf
er to
sta
ge 3
(5
5,40
0)(1
76,3
42)
4,88
7,33
8-
4,65
5,59
6
New
fina
ncia
l ass
ets
orig
inat
ed o
r pu
rcha
sed
1,
893,
306
770,
824
1,36
1,46
746
2,69
84,
488,
295
Chan
ges
in m
odel
s/ri
sk p
aram
eter
s
184,
972
(1,6
78,4
63)
(2,4
12,8
05)
(1,2
01)
(3,9
07,4
96)
Fina
ncia
l ass
ets
that
hav
e be
en d
erec
ogni
sed
othe
r th
an
wri
te o
ffs
(1,5
53,1
35)
(274
,853
)(2
,319
,852
)(4
42,4
24)
(4,5
90,2
64)
Fore
ign
exch
ange
and
oth
er m
ovem
ents
2,
690,
693
4,42
7,02
418
,696
,096
2,88
0,78
928
,694
,603
Tota
l net
P&
L ch
arge
dur
ing
the
peri
od
3,16
2,52
23,
405,
483
18,8
57,1
702,
899,
863
(10,
533,
347)
Oth
er m
ovem
ents
with
no
P&L
impa
ct
– W
rite
-offs
(3
4,82
4)(1
1,09
7)(6
,548
,746
)(2
,423
,981
)(9
,033
,069
)
Loss
allo
wan
ce a
s at
31
Dec
embe
r 20
19
3,03
8,81
73,
394,
386
12,3
08,4
2447
5,88
2 1
9,21
7,50
8
Off
bal
ance
she
et a
s at
31
Dec
embe
r 20
19
88,
881
88,8
81
Loss
allo
wan
ce a
s at
31
Dec
embe
r 20
193,
127,
698
3,39
4,38
612
,308
,424
475,
882
19,
306,
389
79
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
Stag
e 1
St
age
2
Stag
e 3
P
urch
ased
2
018
Loss
allo
wan
ce –
Loa
ns a
nd a
dvan
ces t
o
cust
omer
s at a
mor
tised
cos
t
12-m
onth
ECL
Li
fetim
e EC
L
Life
time
ECL
Cr
edit
Impa
ired
To
tal
TZ
S 00
0s
TZS
000s
TZ
S 00
0s
TZS
000s
TZ
S 00
0sLo
ss a
llow
ance
as
at 3
1 D
ecem
ber
2017
3,
166,
233
51
1,62
310
,432
,895
-
14
,110
,751
Rest
atem
ent o
f the
pri
or y
ear
- -
- -
-
Loss
allo
wan
ce a
s at
01
Janu
ary
2018
3,
166,
233
51
1,62
310
,432
,895
-
14
,110
,751
Prov
isio
n al
low
ance
(Tw
iga
and
TWB)
--
-52
4,77
752
4,77
7
Chan
ges i
n th
e lo
ss a
llow
ance
-
– Tr
ansf
er to
sta
ge 1
30
,636
(1
47,6
42)
(661
,233
)
-
(7
78,2
39)
– Tr
ansf
er to
sta
ge 2
(5
9,64
2)
263,
857
(166
,753
)
-
37
,462
– Tr
ansf
er to
sta
ge 3
(7
3,23
9)
(74,
189)
4,61
7,19
1
-
4,46
9,76
3
New
fina
ncia
l ass
ets
orig
inat
ed o
r pu
rcha
sed
2,
898,
876
78
5,96
52,
781,
569
2,
906,
640
9,37
3,05
0
Chan
ges
in m
odel
s/ri
sk p
aram
eter
s
(4
15,1
40)
(3
,156
)(2
04,1
40)
-
(6
22,4
36)
Fina
ncia
l ass
ets
that
hav
e be
en d
erec
ogni
zed
othe
r th
an w
rite
off
(1,9
34,9
43)
(216
,316
)(4
,061
,724
)(6
,212
,983
)
P&L
Char
ge d
urin
g th
e ye
ar
446,
548
60
8,51
9
2,30
4,91
0
2,90
6,64
0
6
,266
,617
Oth
er M
ovem
ents
with
no
P&L
Impa
ct
– W
rite
-offs
(2
27)
(2
79)
(3
,095
,528
)
-
(3,0
96,0
34)
Loss
allo
wan
ce a
s at
31
Dec
embe
r 20
183,
612,
554
1,11
9,86
39,
642,
277
3,43
1,41
717
,806
,111
80
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
The
tabl
e be
low
exp
lain
s ch
ange
s in
the
gros
s ca
rryi
ng a
mou
nt o
f Loa
ns a
nd a
dvan
ces
to h
elp
expl
ain
thei
r si
gnifi
canc
e to
the
chan
ges
in th
e lo
ss a
llow
ance
for
the
sam
e po
rtfol
io.
Stag
e 1
Stag
e 2
Stag
e 3
2019
Loan
s an
d ad
vanc
es to
cus
tom
ers
at a
mor
tised
cos
t
12-m
onth
ECL
Life
time
ECL
Life
time
ECL
POCI
To
tal
TZS
000s
TZS
000s
TZS
000s
TZS
000s
TZS
000s
Gro
ss c
arry
ing
amou
nt a
s at
31
Dec
embe
r 20
1838
1,90
1,38
121
,684
,580
25,0
24,8
616,
065,
394
434,
676,
216
Gro
ss c
arry
ing
amou
nt a
s at
01
Janu
ary
2019
381,
901,
381
21,6
84,5
8025
,024
,861
6,06
5,39
443
4,67
6,21
6
Chan
ges
in th
e gr
oss
carr
ying
am
ount
-–
Tran
sfer
to s
tage
16,
300,
925
(4,5
26,2
63)
(1,7
74,6
62)
-(0
)
– Tr
ansf
er to
sta
ge 2
(7,2
02,6
04)
7,55
9,30
9(3
56,7
05)
-0
– Tr
ansf
er to
sta
ge 3
(8,3
03,2
97)
(2,8
36,2
87)
11,1
39,5
84-
(0)
New
fina
ncia
l ass
ets
orig
inat
ed o
r pu
rcha
sed
243,
245,
957
6,48
1,70
62,
810,
157
1,67
6,04
025
4,21
3,86
0
Fina
ncia
l ass
ets
that
hav
e be
en d
erec
ogni
sed
(174
,814
,743
)(7
,259
,363
)(5
,318
,746
)(9
31,1
85)
(188
,324
,036
)
Wri
te-o
ffs(7
2,90
0)(7
,909
)(8
,692
,174
)(2
,374
,586
)(1
1,14
7,56
8)
Oth
er c
hang
es(3
7,50
0,95
1)(2
,833
,327
)(3
,179
,485
)(2
,681
,922
)(4
6,19
5,68
5)
Gro
ss c
arry
ing
amou
nt a
s at
31
Dec
embe
r 20
1940
3,55
3,76
918
,262
,447
19,6
52,8
301,
753,
742
443,
222,
787
81
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
Stag
e 1
St
age
2
Stag
e 3
P
urch
ased
201
8
Loan
s and
adv
ance
s to
cust
omer
s at a
mor
tized
co
st12
-mon
th E
CLLi
fetim
e EC
LLi
fetim
e EC
LCr
edit
Impa
ired
Tota
lTZ
S 00
0sTZ
S 00
0sTZ
S 00
0sTZ
S 00
0sTZ
S 00
0s
Gro
ss c
arry
ing
amou
nt a
s at
31
Dec
embe
r 20
1729
8,40
9,23
418
,968
,886
27,0
90,8
23
-
344,
468,
943
Rest
atem
ent o
f the
pri
or y
ear
- -
- -
-
Gro
ss c
arry
ing
amou
nt a
s at
01
Janu
ary
2018
298,
409,
234
18,9
68,8
8627
,090
,823
- 34
4,46
8,94
3
Chan
ges
in th
e gr
oss
carr
ying
am
ount
-
– Tr
ansf
er to
sta
ge 1
5,49
3,83
6(4
,475
,615
)(1
,018
,221
) -
-
– Tr
ansf
er to
sta
ge 2
(5,2
41,7
72)
5,47
5,01
1(2
33,2
39)
-
-
– Tr
ansf
er to
sta
ge 3
(10,
084,
826)
(3,1
82,7
66)
13,2
67,5
92 -
-
New
fina
ncia
l ass
ets
orig
inat
ed o
r pu
rcha
sed
288,
229,
596
16,6
23,9
67
8,05
2,96
0 6,
065,
394
318,
971,
917
Fina
ncia
l ass
ets
that
hav
e be
en d
erec
ogni
zed
(159
,856
,661
)(9
,037
,429
)(7
,135
,237
)-
(176
,029
,327
)
Wri
te-o
ffs(5
4,02
0)(2
22,7
32)
(12,
252,
309)
- (1
2,52
9,06
1)
Oth
er c
hang
es(3
4,99
4,00
7)(2
,464
,741
)(2
,747
,508
)-
(40,
206,
256)
Gro
ss c
arry
ing
amou
nt a
s at
31
Dec
embe
r 20
18
381,
901,
380
21,
684,
581
25,
024,
861
6,0
65,3
94
434,
676,
216
Writ
e-off
pol
icy
The
Bank
wri
tes
off fi
nanc
ial a
sset
, in
who
le o
r in
par
t, w
hen
it ha
s ex
haus
ted
all p
racti
cal r
ecov
ery
effor
ts a
nd h
as c
oncl
uded
the
re is
no
reas
onab
le e
xpec
tatio
n of
rec
over
y. I
ndic
ator
s th
at t
here
is n
o re
ason
able
exp
ecta
tion
of r
ecov
ery
incl
ude
(i) c
easi
ng e
nfor
cem
ent
activ
ity a
nd (
ii) w
here
the
Ban
k re
cove
ry m
etho
d is
fo
recl
osin
g on
col
late
ral a
nd t
he v
alue
of t
he c
olla
tera
l is
such
tha
t th
ere
is n
o re
ason
able
exp
ecta
tion
of r
ecov
erin
g in
full.
The
Ban
k m
ay w
rite
-off
fina
ncia
l ass
ets
that
are
stil
l sub
ject
ed t
o en
forc
emen
t ac
tivity
. The
Ban
k sti
ll se
ek t
o re
cove
r am
ount
s it
is le
gally
ow
ed in
full,
but
whi
ch h
ave
been
par
tially
wri
tten
off
due
to
no
reas
onab
le e
xpec
tatio
n of
full
reco
very
.
82
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Concentration of risk
The Bank monitors concentration of loans by economic sector in line with set limits per sector. The objective is to ensure diversification of risk by always maintaining a well-diversified product-mix. An analysis of concentrations within the loan and advances to customers.
2019 2018TZS ‘000 % TZS ‘000 %
Loans and advances to customers (gross)Agriculture fishing, forestry and hunting 2,111,908 0.48% 14,645,212 3.37%
Building & construction 3,246,969 0.73% 667,636 0.15%
Education 2,971,272 0.67% 15,265,474 3.51%
Electricity - 0.00% 17,345 0.00%
Financial Intermediaries 229,059 0.05% 1,497,245 0.35%
Gas - 0.00% 30,520 0.01%
Health 399,100 0.09% 1,769,764 0.41%
Hotels & Restaurants 7,027,266 1.59% 3,632,108 0.84%
Manufacturing 72,456 0.02% 200,162 0.05%
Mining quarrying 462,511 0.10% 130,430 0.03%
Personal 362,708,381 81.83% 160,626,989 36.95%
Trade 57,171,986 12.90% 41,073,281 9.54%
Transport & Communications 6,268,092 1.41% 2,499,412 0.58%
Warehousing & storage 888 0.00% 55,137 0.01%
Real Estate 552,901 0.12% 17,556,443 4.04%
Water - 0.00% 35,122 0.01%
Other Services - 0.00% 174,973,936 40.25%
443,222,787 100.0% 344,468,943 100.0%
b) Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations from financial liabilities. The Assets and Liabilities Committee (ALCO), a management committee is tasked with the responsibility of ensuring that all foreseeable funding commitments and deposits withdrawals can be met when due, and that the Bank will not encounter difficulty in meeting obligations from its financial liabilities as they occur. ALCO relies substantially on the Bank’s Treasury Department to coordinate and ensure discipline across the Bank, certify sufficient liquidity under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation.
83
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Liquidity and funding management The Bank manages the liquidity risk by ensuring among others that:
· sufficient funds are maintained to meet demand by customers as well as any statutory obligations;· There is adequate investment in highly liquid assets at all times as well as tracking mismatches
in its statement of financial position to identify any liquidity needs; all investments made in financial assets are aimed at diversifying the investment portfolio, timing of cash flows and balancing the maturity ladders of financial assets and financial liabilities;
· monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory funding mix; and
· Maintaining liquidity contingency plan which identifies early warning indicators of stress conditions and describes actions to be taken in the event of difficulties arising from systemic or other crises while optimizing adverse long-term implications.
Source of funding
The Bank’s major source of funding is from customer deposits. To this end, the Bank maintains a diversified and stable funding base comprising current/demand, savings and time deposits. The Bank borrows from the interbank market through transactions with other banks for short term liquidity requirements.
Exposure to liquidity risk The key measure used by the Bank for managing and measuring liquidity risk is the ratio of liquid assets to demand deposit. For this purpose liquid assets consist of cash and interbank deposits, investment in securities maturing within one year and clearing accounts maintained with the Bank of Tanzania (BOT). The Bank’s maturing liabilities comprises all deposits and other liabilities with maturity period of less than one year.
The Bank’s exposure to liquidity risk at 31 December, 2019 is summarized below.
84
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
b) L
iqui
dity
risk
(con
tinue
d)
The
follo
win
g is
the
liqui
dity
pro
file
of th
e Ba
nk a
s at
31
Dec
embe
r 20
19:
Up
to 1
1-3
3-6
6-12
Ove
rm
onth
mon
ths
mon
ths
mon
ths
1 ye
arTo
tal
Fina
ncia
l ass
ets
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
Cash
and
bal
ance
s w
ith B
ank
of T
anza
nia
50,2
42,6
85-
--
-50
,242
,685
TPB
Mob
ile M
oney
Bal
ance
13,3
33,6
47-
--
-13
,333
,647
Cheq
ues
and
item
s fo
r co
llecti
on3,
586
--
--
3,58
6Pl
acem
ents
and
bal
ance
s w
ith o
ther
ban
ks14
,556
,678
--
--
14,5
56,6
78Tr
easu
ry b
ills
-26
,179
,803
-49
,218
,185
-75
,397
,988
Trea
sury
bon
ds-
4,88
3,66
91,
577,
425
1,58
2,30
917
,146
,561
25,1
89,9
64Lo
ans
and
adva
nces
to c
usto
mer
s9,
347,
365
5,19
2,25
110
,302
,735
29,3
32,6
7736
6,41
8,63
242
0,59
3,66
0O
ther
ass
ets
4,53
9,50
4-
--
-4,
539,
504
Tota
l fina
ncia
l ass
ets
92,0
23,4
6536
,255
,723
11,8
80,1
6080
,133
,171
383,
565,
193
603,
857,
712
Fina
ncia
l lia
biliti
esCu
stom
er d
epos
its26
3,14
8,75
7 1,
000
29,5
47,7
25
59,9
61,5
07
89,5
18,1
87
442,
177,
176
Borr
owin
g an
d ba
lanc
es d
ue to
oth
er b
anks
2,5
59,0
63
14,4
04,0
18
16,4
72,2
12
13
,296
,065
28,8
40,6
71
75
,572
,029
O
ther
liab
ilitie
s 2
,509
,686
4,
892,
991
- -
- 7
,402
,676
Tota
l fina
ncia
l lia
biliti
es26
8,21
7,50
6 19
,298
,009
4
6,09
1,93
7 7
3,25
7,57
1 1
18,3
58,8
59
525,
151,
881
Net
liqu
idity
gap
(176
,194
,041
)
16,9
57,7
14
(34,
139,
777)
6,87
5,59
9
265,
206,
335
78,7
05,8
31
At 3
1 De
cem
ber 2
018
Tota
l fina
ncia
l ass
ets
62,
095,
865
23,2
74,7
4611
,367
,461
57,6
85,6
8337
2,62
4,63
052
7,05
2,38
5To
tal fi
nanc
ial l
iabi
lities
339,
403,
360
13,8
03,8
5146
,423
,848
59,4
30,1
9513
,573
,102
472,
634,
356
Net
liqu
idity
gap
(277
,307
,495
)9,
470,
895
(35,
056,
387)
(1
,744
,512
)35
9,05
1,52
854
,414
,029
85
TPB Bank PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
c) Market risk
Market risk is the risk that movement in market factors, including interest rates and foreign currency exchange rates, will reduce income or value of portfolio. The objective of market risk management process is to manage and control market risk exposures in order to optimize return on risk while maintaining a market profile as a provider of financial products and services.
Overall responsibility for management of market risk rests with ALCO. Market Risk Management Policies are in place to guide management of this risk and are subject to review and approval by the Board on a regular basis.
Market risk can be further subdivided into interest rate risk and currency risk.
Interest rate risk
The Bank is exposed to the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The maturities of asset and liabilities and the ability to replace at an acceptable cost as they mature are important factors in assessing the Bank’s exposure to changes in interest rates.
In addition to maintaining an appropriate mix between fixed and floating rates deposit base, interest rates on advances to customers are pegged to the Bank’s base lending rate. The base rate is adjusted from time to time to reflect the cost of deposits whereas loans with a maturity of more than one year are re-priced regularly to ensure that the Bank is not exposed to interest rate risk.
Interest rate risk – stress tests
The Bank monitors the impact of risks associated with the effects of fluctuations in prevailing interest rates. At 31 December 2019, the following table summarizes the estimated impact on profit or loss of an immediate increase or decrease in interest rates of 125 basis points on current interest rate risk profile to the Bank’s before tax profit.
2019 2018
TZS ‘000 TZS ‘000125 basis points increase or decrease in interest rates 732,142 502,163
86
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
The
tabl
e su
mm
ariz
es th
e ex
posu
re to
inte
rest
rate
risk
. Ass
ets
and
liabi
lities
are
cat
egor
ized
by
the
earl
iest
of c
ontr
actu
al re
pric
ing
or m
atur
ity d
ates
. The
Ban
k do
es
not b
ear
inte
rest
rate
ris
k on
off
bal
ance
she
et it
ems.
Non
in
tere
st
Up
to 1
2-3
4-6
7-12
Ove
rTo
tal
bear
ing
mon
thm
onth
sm
onth
sm
onth
s1
year
Fina
ncia
l ass
ets
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
TZS
‘000
Cash
and
bal
ance
with
Ban
k of
Tan
zani
a50
,242
,685
50,2
42,6
85 -
- -
- -
TPB
Mob
ile M
oney
bal
ance
13,3
33,6
4713
,333
,647
--
--
-
Cheq
ues
and
item
s fo
r co
llecti
on3,
586
3,5
86 -
- -
- -
Plac
emen
ts a
nd b
alan
ces
with
oth
er b
anks
14,5
56,6
78-
14,5
56,6
78-
--
-Tr
easu
ry b
ills
75,3
97,9
88 -
- 2
6,17
9,80
3 -
49,
218,
185
-
Trea
sury
bon
ds25
,189
,964
- -
4,88
3,66
91,
577,
425
1,58
2,30
917
,146
,561
Loan
s an
d ad
vanc
es to
cus
tom
ers
420,
593,
660
- 9,
347,
365
5,19
2,25
1 1
0,30
2,73
5 29
,332
,677
36
6,41
8,63
2
Oth
er a
sset
s4,
539,
504
4,53
9,50
4-
--
---
Tota
l fina
ncia
l ass
ets
603,
857,
712
68,1
19,4
22
23,9
04,0
4336
,255
,723
11
,880
,160
80
,133
,171
38
3,56
5,19
3 Fi
nanc
ial l
iabi
lities
Cust
omer
dep
osits
442,
177,
176
9,7
06,0
5325
3,44
2,70
41,
000
29,5
47,7
25
59,9
61,5
07
89,5
18,1
87
Borr
owin
g an
d ba
lanc
es d
ue to
oth
er b
anks
75,5
72,0
29-
2,55
9,06
3
-
-
13,2
96,0
65
28
,840
,671
Oth
er li
abili
ties
7,40
2,67
67,
402,
676
- -
- -
-
Tota
l fina
ncia
l lia
biliti
es52
5,15
1,88
2 1
7,10
8,72
9 2
56,0
01,7
67
1,0
00
29,
547,
725
73,
257,
571
118
,359
Net
Liq
uidi
ty g
ap78
,705
,831
51
,010
,693
(2
32,0
97,7
24)
36,2
54,7
23(1
7,66
7,56
5)
6,87
5,59
9
265,
206,
335
At 3
1 De
cem
ber 2
018
Tota
l fina
ncia
l ass
ets
527,
052,
385
41,6
39,4
4920
,456
,416
23,2
74,7
4611
,371
,461
57,6
85,6
8337
2,62
4,63
0
Tota
l fina
ncia
l lia
biliti
es47
2,63
4,35
627
,394
,491
319,
974,
885
24,5
70,2
9238
,705
,811
48,4
15,7
7513
,573
,102
Net
pos
ition
54,4
14,0
2914
,244
,958
(299
,518
,469
)(1
,295
,546
)(2
7,33
4,35
0)9,
269,
908
359,
051,
528
87
TPB Bank PLC
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
c) Market Risk (continued)
Foreign Exchange Risk
Foreign exchange- Exposure risk
The Bank is exposed to the risk on earnings and capital arising from adverse movement of foreign exchange rates. The bank’s exposure risk is managed within the Bank of Tanzania (BOT) exposure guideline of 7.50% of core capital.
The Bank’s transactional exposures give rise to foreign currency gains and losses that are recognized in profit or loss. The Bank also has monitoring and control system for its positions in major currencies in which it is active. The Bank ensures that its net exposure is kept to an acceptable level by selling and buying foreign currencies when considered appropriate.
Foreign exchange risk – stress test
At 31 December 2019, if the TZS had weakened or strengthened by 10% against the USD and EURO with all other variables held constant, the impact on the profit before tax for the year would have been lower or higher by TZS 3,350,000 (2018: TZS 89,324,000).
The carrying amounts of the Bank’s material foreign currency denominated monetary assets and liabilities that will have an impact on profit or loss when exchange rates change, as at 31 December 2019 and 31 December 2018 were as follows:
2019 2018 TZS ‘000 TZS ‘000
Cash and balance with Bank of Tanzania 8,659,580 4,400,674
Placements and balances with other banks 7,548,786 5,991,280
Loans & Advances to customers 4,945,407 4,269,137
Other assets (4,782,669) 377,027
Customer deposits (16,106,885) (15,909,504)
Other liabilities (230,724) (21,850)
33,496 (893,236)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
88
TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
NO
TES
TO T
HE
FIN
ANCI
AL S
TATE
MEN
TS (C
ON
TIN
UED
)
FOR
THE
YEAR
EN
DED
31 D
ECEM
BER
2019
The
Bank
ope
rate
s w
holly
with
in T
anza
nia
and
its a
sset
s an
d lia
biliti
es a
re re
port
ed in
the
loca
l cur
renc
y. T
he b
ank’
s cu
rren
cy r
isk
is m
anag
ed w
ithin
the
Bank
of
Tan
zani
a ex
posu
re g
uide
line
of 7
.5%
of c
ore
capi
tal.
The
bank
’s c
urre
ncy
posi
tion
as a
t 31
Dec
embe
r 20
19 w
as a
s fo
llow
s:
Tota
lU
SDG
BPEU
ROKE
NYA
RAN
DTZ
STZ
S ‘0
00TZ
S ‘0
00TZ
S ‘0
00TZ
S ‘0
00TZ
S ‘0
00TZ
S ‘0
00TZ
S ‘0
00
Fina
ncia
l ass
ets
Cash
and
bal
ance
with
Ban
k of
Tan
zani
a50
,242
,685
6,31
8,51
076
5,26
887
8,72
58,
196
688,
880
41,5
83,1
05
TPB
Mob
ile M
oney
bal
ance
13,3
33,6
47-
--
--
13,3
33,6
47
Cheq
ues
and
item
s fo
r co
llecti
on3,
586
--
- -
-3,
586
Plac
emen
ts a
nd b
alan
ces
with
oth
er b
anks
14,5
56,6
786,
620,
230
-92
8,55
7-
-7,
007,
892
Trea
sury
bill
s 7
5.39
7,98
8 -
- -
--
75.
397,
988
Trea
sury
bon
ds 2
5,18
9,96
4 -
- -
--
25,1
89,9
64
Loan
s an
d ad
vanc
es to
cus
tom
ers
420,
593,
660
4,94
5,40
7-
- -
-41
5,64
8,25
3
Oth
er a
sset
s4,
539,
504
(1,5
48,9
48)
(762
,861
)(1
,773
,784
)(8
,196
)(6
88,8
80)
9,32
2,17
3
Tota
l fina
ncia
l ass
ets
603,
857,
712
16,
335,
198
2,40
8 3
3,49
9-
-58
7,48
6,60
7
Fina
ncia
l lia
biliti
esCu
stom
er d
epos
its44
2,17
7,17
616
,104
,478
2,40
6-
--
426,
070,
291
Borr
owin
g an
d ba
lanc
es d
ue to
oth
er b
anks
75,5
72,0
29-
- -
--
75,5
72,0
29
Oth
er li
abili
ties
7,40
2,67
623
0,72
4-
- -
-7,
171,
952
Tota
l fina
ncia
l lia
biliti
es52
5,15
1,88
116
,335
,202
2,40
6-
--
508,
814,
273
Net
pos
ition
78,7
05,8
31(4
)1
33,4
99-
-78
,672
,334
At 3
1 De
cem
ber 2
018
Tota
l fina
ncia
l ass
ets
527,
148,
385
14,4
04,7
2957
,271
699,
076
6,98
3-
511,
980,
326
Tota
l fina
ncia
l lia
biliti
es47
2,63
4,35
615
,928
,236
575
2,54
2-
-45
6,70
3,00
3
Net
pos
ition
54,5
14,0
29(1
,523
,507
)56
,696
696,
534
6,98
3-
55,2
77,3
23
89
TPB Bank PLC
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
d) Categorization of financial assets and liabilities
All the Bank’s financial assets are categorized as loans and receivables except for treasury bills and government stocks which were classified as financial assets held to maturity.
All the financial liabilities are carried at amortized costs using the effective interest rate method.
e) Fair value estimation
IFRS 13 requires the Bank to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The Bank specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair value hierarchy:
• 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).
• 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).
This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.
Fair value of the Bank’s financial assets and financial liabilities that are measured at fair value on recurring basis.
The Bank did not have any financial asset and financial liabilities that are measured at fair value (2018: Nil).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
90
ANNUAL REPORT 2019
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
e) Fair value estimate (continued)
Financial instruments not measured at fair value
The following table analyses within the fair value hierarchy the Bank’s assets and liabilities (by class) not measured at fair value at 31 December 2019.
Level 1 Level 2 Level 3 TotalTZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000
ASSETS
Cash and balances with Bank of Tanzania 50,242,685 - - 50,242,685
TPB Mobile Money balance 13,333,647 - - 13,333,647
Cheques and items for collection 3,586 - - 3,586
Placements and balances with other Banks - 14,556,678 - 14,6556,678
Treasury bills - 75,397,988 - 75,397,988
Government stocks and other securities - 25,189,964 - 25,189,964
Loans and advances to customers - 420,682,541 - 420,682,541
Other assets (excluding prepayments) - 4,539,504 - 4,539,504
Total 63,579,918 540,366,675 - 603,946,593
LIABILITIES
Deposits from customers -
(442,177,176) -
(442,177,176)
Borrowings and balances due to other banks - (75,572,029) - (75,572,029)
Other liabilities - 7,797,655 - 7,797,655
Total - (509,951,550) - (509,951,550)
Most of the financial assets and liabilities are short term in nature and those which are long term bear interest at prevailing market rate therefore the carrying amounts approximate fair value.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
91
TPB Bank PLC
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
e) Fair value estimate (continued)
Financial instruments not measured at fair value ( continued)
The following table analyses within the fair value hierarchy the Bank’s assets and liabilities (by class) not measured at fair value at 31 December 2018.
Level 1 Level 2 Level 3 TotalTZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000
ASSETS
Cash and balances with Bank of Tanzania 31,056,012 - - 31,056,012
TPB Mobile Money balance 5,858,001 - - 5,858,001
Cheques and items for collection 231,928 - - 231,928
Placements and balances with other Banks - 15,821,018 - 15,821,018
Treasury bills - 43,620,066 - 43,620,066
Government stocks and other securities - 13,199,202 - 13,199,202
Loans and advances to customers - 412,768,650 - 412,768,650
Other assets - 4,493,508 - 4,493,508
Total 37,145,941 489,902,444 - 527,048,385
LIABILITIES
Deposits from customers -
(390,599,533) -
(390,599,533)
Borrowings and balances due to other banks - (62,930,870) - (62,930,870)
Other liabilities - (10,794,909) - (10,794,909)
Total - (464,325,312) - (464,325,312)
Most of the financial assets and liabilities are short term in nature and those which are long term bear interest at prevailing market rates therefore the carrying amounts approximate fair value.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
92
ANNUAL REPORT 2019
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES
The Bank’s objective when managing capital are driven by the broader concept of capital as defined by the Bank of Tanzania (BOT) which substantially relies on the guidelines developed by the Basel Committee, for supervisory purposes. Those objectives are intended to:
· sustain a strong capital base to support the development of business;
· safeguard the Bank’s ability to continue as a going concern; and
· comply with the capital requirements set out by the BOT;
· to provide an adequate return to shareholders by pricing products and services commensurate with the level of risk; and
· to maintain an optimal capital structure to reduce the cost of capital.
As per the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014, the Bank’s total regulatory capital is divided into two tiers:
· Tier 1 Capital (Core Capital): share capital, share premium, capital grants plus retained earnings less prepaid expenses and intangible assets. In July 2019, software balance was removed from computation of core capital;
· Tier 2 Capital (Supplementary Capital): subordinated debts.
The Bank monitors the adequacy of its capital using ratios established by BOT. These ratios measure capital adequacy by comparing the Bank’s eligible capital with its balance sheet assets, off- balance sheet commitments and market and other risk positions at a weighted amount to reflect their relative risk.
The risk-weighted assets are measured by means of a hierarchy of four risk weights classified according to the nature of assets and reflecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses.
The composition and the ratios of the Bank’s regulatory capital and the details of the risk weighted assets for the year ended 31 December 2019 and 2018 are summarized hereunder.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
93
TPB Bank PLC
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Capital adequacy
2019 2018Tier 1 Capital TZS ‘000 TZS ‘000
Share capital 28,071,743 28,071,743
Disclosed reservesRetained earnings (excluding profit for the year) 47,281,240 30,791,166
Qualifying year to date profit 16,024,495 12,720,927
Defined benefit reserve (2,704,829) (2,838,021)
Other reserves - acquired in business combination 4,999,760 5,041,745
93,672,409 73,787,560Less deductions from capital Prepaid expenses (1,762,774) (3,461,114)
Intangible assets - (3,035,349)
Deferred tax asset (6,887,244) (6,242,025)
Lease hold (4,714,613) (5,001,673)
Total deductions from capital (13,364,631) (17,740,161)
Core capital 80,307,778 56,047,399
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
94
ANNUAL REPORT 2019
6. CAPITAL MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Capital adequacy (continued)
2019 2018TZS ‘000 TZS ‘000
Tier 2 CapitalRegulatory reserve-general provisions (note 28(c)) - 3,912,553
Total regulatory capital 80,307,778 59,959,952
Risk-weighted assets
On-balance sheet 447,144,923 438,104,216
Operation Risk exposure 50,759,263 45,958,625
Market Risk exposure 4,891,678 1,908,023
Off-balance sheet exposure (note 32 (c)) 3,428,339 2,453,549
Total risk-weighted assets 506,224,203 488,424,413
Capital adequacy ratios
Tier 1 (BOT minimum – 12.5%) 15.86% 11.48%
Tier 1 + Tier 2 (BOT minimum – 14.5%) 15.86% 12.28%
As at 31 December 2019, the Bank’s core capital and total regulatory capital were both above the required minimum of 12.50% and 14.50% respectively, as specified under sections 9 (a) and 9 (b) of the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
95
TPB Bank PLC
2019 2018TZS ‘000 TZS ‘000
7. INTEREST INCOME
Interest on loans and advances 92,771,554 89,746,913
Interest on government securities 7,045,238 5,602,504
Interest on placement with other banks 359,750 595,547
100,176,542 95,944,964
8. INTEREST EXPENSE
Interest on savings accounts 7,693,612 7,762,223
Interest on time deposits 14,802,059 10,108,003
22,495,671 17,870,226
9. FEES AND COMMISSION INCOME
Net Western Union transfer fees and settlement gain 2,379,385 2,487,162
Other fees and commissions 18,471,407 17,267,134
20,850,792 19,754,296
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
96
ANNUAL REPORT 2019
2019 2018TZS ‘000 TZS ‘000
11. FEES AND COMMISSION EXPENSE
Agency service fees to Tanzania Posts Corporation (TPC) 300,000 300,000
Umoja switch fees 225,700 110,897
525,700 410,897
12. FOREIGN EXCHANGE INCOME
Net gain on foreign exchange transactions 117 11,810
Net revaluation gain 2,073,542 891,774
2,073,659 903,584
13. OTHER INCOME
Tender income 19,809 7,001
Revenue Grant recognised in the profit/loss - 247,280
Gain on disposal of property and equipment (2,219) 149,090
Other income 6,596,901 1,309,503
6,614,491 1,712,874
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
97
TPB Bank PLC
2019 2018TZS ‘000 TZS ‘000
15. ADMINISTRATIVE EXPENSES
Staff costs (note 14) 35,718,872 34,693,507
Telephone and electronic mail expenses 2,065,275 2,099,932
Security expenses 2,756,898 2,646,169
Printing, stationery and hire of note counting machines 892,022 955,859
Auditors’ remunerations 600,000 600,000
Board of directors expenses 481,570 456,109
Depreciation and amortization of assets ( Note 23) 4,667,953 4,110,829
Amortization of intangible assets (Note 22) 1,150,116 629,132
Repairs and maintenance 1,737,350 1,429,395
Office rent expense - 6,160,829
Advertisement and promotion expenses 1,788,037 1,138,630
Travelling on duty 1,739,177 1,617,297
Insurance expenses 1,823,675 1,304,073
Consultancy fees 1,233,069 2,000,242
License fees 1,058,670 994,346
Non-claimable taxes 137,598 772,369
Electricity and cleaning expenses 1,233,474 1,353,166
Amortization of Right of Use of Assets (Note 33) 4,712,171 -
Interest expense on lease liability (Note 33) 527,468 -
Expected Credit Loss- Placements with other Banks (Note 17) 118,112 -
Other operating expenses 8,712,895 6,228,986
73,154,402 69,190,870
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
98
ANNUAL REPORT 2019
2019 2018TZS ‘000 TZS ‘000
17. STAFF COSTS
Salaries and wages 19,252,614 18,348,910
Bonus 2,500,000 2,400,000
Leave travel and transport allowance 3,154,021 1,663,758
Pension funds contributions 2,895,209 2,376,832
Responsibility allowances 1,597,761 1,446,163
Medical expenses 1,456,511 963,396
Post-employment benefit (note 34) 1,090,982 1,950,805
Training 575,001 794,710
Skills and development levy 1,088,066 990,860
Other staff costs 2,108,707 3,758,073
35,718,872 34,693,507
18. TAXATION
(a) Income tax expense
Current taxation at applicable rate of 30% (2018: 30%) 7,817,364 5,820,790
Deferred tax credit - (Note 27) (702,302) (734,446)
Prior year deferred tax under provision (Note 27) - (400)
7,115,062 5,085,944
(b) Reconciliation of income tax expense
Profit before tax 23,006,364 17,188,045
Tax at the applicable rate of 30% (2018: 30%) 6,901,909 5,156,414
Effect of expenses not allowable for tax purposes 213,153 195,111
Prior year adjustments - (265,211)
Prior year deferred tax under provision - (370)
7,115,062 5,085,944
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
99
TPB Bank PLC
2019 2018TZS ‘000 TZS ‘000
(c) Tax movement
Balance at beginning of the year 465,681 202,471
Current tax charge for the year (7,817,364) (5,820,790)
Tax paid during the year 6,900,000 6,084,000
Balance as at 31 December (451,684) 465,681
20. CASH AND BALANCES WITH BANK OF TANZANIA
Cash on hand 24,415,640 17,860,064
Balance with Bank of Tanzania 25,827,045 13,195,948
TPB Mobile Money balance 13,333,647 5,858,001
63,576,332 36,914,013
2019 2018 TZS ‘000 TZS ‘000
22. PLACEMENTS AND BALANCES WITH OTHER BANKS
Placements with other local banks 6,728,772 8,626,427
Balances with other local banks 6,175,294 5,111,619
Balances with foreign banks 1,770,724 2,082,972
ECL on Placements with other banks (Note 13) (118,112) -
14,556,678 15,821,018
Placements and balances with other banks of TZS 14,674,790,000 (2018: TZS 15,821,018,000) had maturity of less than 3 months. The weighted average interest rate on placements was 4.72% (2018: 6.26%).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
100
ANNUAL REPORT 2019
2019 2018 TZS ‘000 TZS ‘000
24. TREASURY BILLS
Treasury bills - Held to maturity
Maturing within 3 months 26,179,803 19,615,442
Maturing between 3 months to 1 year 49,218,185 24,004,624
75,397,988 43,620,066
These are classified as held to maturity and are stated at amortized cost. Treasury bills of TZS 26,179,803,000 (2017: TZS 19,615,442,000) with maturities of less than 3 months from reporting date form part of cash and cash equivalents for the purpose of the statement of cash flows.
Treasury bills amounting to TZS 25,200,000,000 were pledged as security, whereby seven securities worth TZS 16,200,000,000 were pledged to NBC Bank and two securities worth TZS 9,000,000,000 were pledged to SELF MICROFINANCE to secure interbank borrowings (Note 30).
The weighted average effective interest rate on treasury bills during the year was 8.25% (2018: 7.65%).
25. TREASURY BONDS
2019 2018Treasury bonds - Held to maturity: TZS ‘000 TZS ‘000
Maturing within 1 to 3 months 4,883,669 -
Maturing within 4 to 6 months 1,577,425 565,907
Maturing within 7 to 12 months 1,582,309 1,312,004
Maturity over 1 year 17,146,561 11,321,291
25,189,964 13,199,202
Treasury bonds amounting to TZS 16,570,000,000 (2018: TZS 12,951,800,000) were pledged as security to NBC Bank (Note 30).
The weighted average effective interest rate of Treasury Bond at 31 December, 2019 was 10.44% (2018: 14.35%).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
101
TPB Bank PLC
26. LOANS AND ADVANCES TO CUSTOMERS
2019 2018
TZS ‘000 TZS ‘000(a) Loans and advances
Loans and advances to customers 420,763,217 419,490,766
Loans and advances to staff 22,459,570 15,185,450
Gross loans and advances 443,222,787 434,676,216
Interest in suspense (3,322,738) (4,101,455)
Provision for impairment of loans and advances
(note 20(c)) (19,306,389)
(17,806,111)
Net loans and advances 420,593,660
412,768,650
(b) Analysis of loans and advances to customers by maturityMaturing:
Within 1 year 54,175,028 54,994,404
Over 3 years 366,418,632 357,774,246
420,593,660 412,768,650
(c) Movement of provision for impairment of loans and advances
At the beginning of the year 17,806,111 15,401,660
IFRS 9 Transition adjustment - (1,290,909)
At 1 January 17,806,111 14,110,751
Write off during the year (9,033,069) (10,485,097)
Provision allowance (Twiga and TWB) - 524,777
Loan impairment loss 10,533,347 13,655,680
Write off without prior year provision - 7,389,063
Movement in provision during the year 10,532,420 6,178,663
ECL Off Balance sheet Items 927 87,954
At the end of the year 19,306,389 17,806,111
The effective interest rate on loans and advances to customers during the year was 23.07% (2018:23.55%).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
102
ANNUAL REPORT 2019
2019 2018
TZS’000 TZS’000
28. OTHER ASSETS
Prepayments 1,297,093 2,995,433
Staff receivables 1,643,896 1,715,698
Western Union International receivable 445,055 377,027
Tanzania Posts Corporation Western Union Agents 762,609 738,798
Others receivables 2,459,242 1,661,985
6,607,895 7,488,941
29. INTANGIBLE ASSETS
YEAR 2019Computer Software
POPOTE Project cost
Equinox Channel
Manager Total
TZS ‘000 TZS ‘000 TZS’000 TZS ‘000
COSTAt 1 January 8,589,530 11,060 40,464 8,641,054
Additions 1,409,481 - - 1,409,481
At 31 December 9,999,011 11,060 40,464 10,050,535
AMORTISATIONAt 1 January 5,554,181 11,060 40,464 5,605,705
Disposal 615 - - 615
Charge for year 1,150,116 - - 1,150,116
At 31 December 6,704,912 11,060 40,464 6,756,436
NET BOOK VALUEAt 31 December 3,294,099 - - 3,294,099
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
103
TPB Bank PLC
YEAR 2018Computer Software
POPOTE Project cost
Equinox Channel
Manager Total
TZS ‘000 TZS ‘000 TZS’000 TZS ‘000COST
At 1 January 4,002,794 11,060 40,464 4,054,318
Additions 823,126 - - 823,126
Additions (Twiga and TWB) 3,763,610 - - 3,763,610
At 31 December 8,589,530 11,060 40,464 8,641,054
AMORTISATION
At 1 January 2,690,951 11,060 40,464 2,742,475
Transferred from Twiga and TWB 2,234,098 - - 2,234,098
Charge for year 629,132 - - 629,132
At 31 December 5,554,181 11,060 40,464 5,605,705
NET BOOK VALUEAt 31 December 3,035,349 - - 3,035,349
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
104
TPB
Bank
PLC
ANN
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019
NO
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PRO
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ary
1
2,31
2,49
5 9,
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169
1,9
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41 7
,349
,191
1,95
9,04
313
,632
,872
140,
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,803
,586
Add
ition
s
60
3,57
4 -
5,00
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226,
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225,
993
765,
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914
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-(1
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- -
(16,
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12,
916,
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9,4
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69
1,95
6,54
1 8
,564
,111
2,1
85,0
36 1
4,39
3,31
5 1
63,3
691,
151,
914
50,7
88,5
24
DEPR
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TIO
N
At 1
Janu
ary
7,
310,
820
1,
570,
282
1,34
4,96
1 5
,264
,100
1,43
4,08
5 7
,243
,706
77,
596
-24
,245
,550
Char
ge fo
r ye
ar
2,04
2,54
8 1
63,3
55
267
,143
8
41,5
6923
4,49
7 1,
103,
337
15,5
04
- 4
,667
,953
El
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ated
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ls -
- -
(11,
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) -
- (1
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31
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9,3
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1,7
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1,6
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6,09
4,10
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-
28,
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BO
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31
Dec
embe
r
3,56
2,70
1 1
,724
,532
34
4,43
7 2
,470
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6,0
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96
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,269
1,
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914
21,8
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975
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275
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,725
,268
Add
ition
s
1,
717,
616
161,
027
463,
830
656,
705
161,
278
1,59
8,16
2 -
-4,
758,
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Tran
sfer
(Tw
iga
and
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582,
493
850,
470
1,05
6,77
11,
493,
777
12,8
033,
230,
496
7,22
6,81
0
Tran
sfer
- re
valu
ation
-5,
363,
147
--
--
--
5,36
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7
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ls -
- (2
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--
(4,7
61)
- -
(270
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At 3
1 D
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9,4
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,191
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3,63
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40,2
75-
46,8
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86
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TIO
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nuar
y
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63,
919
-14
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,559
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sfer
(Tw
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& T
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--
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sfer
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ation
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--
--
--
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20
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4,26
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-
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65,4
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--
--
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)
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1 D
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7
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1
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344,
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6 77
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-
24,
245,
551
NET
BO
OK
VALU
EAt
31
Dec
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r
5,0
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7,8
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87
606
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2
,085
,091
524,
958
6,3
89,1
66
62
,679
-
22,5
58,0
35
106
ANNUAL REPORT 2019
2019
TZS ‘000
2018
TZS ‘000
31. CUSTOMER DEPOSITS
(a) Customer deposits
Domicile savings 193,825,709 192,562,540
Time deposits 178,850,343 143,227,872
Call accounts 40,675,034 30,240,304
“WADU” savings 16,961,492 13,977,676
Dormant accounts 9,706,053 8,290,538
Postal savings 2,029,619 2,173,488
Group savings 128,926 127,115
442,177,176 390,599,533
(b) Analysis of customer deposits by maturity
Maturing:
Within 1 year 352,658,989 377,026,431
Between 1 year and 3 years 89,518,187 13,573,102
442,177,176 390,599,533
The weighted average interest rate on savings was 3.25% (2018: 3.25%) whereas that on term deposits was 8.93% (2018: 7.83%).
25. BORROWINGS AND BALANCES DUE TO OTHER BANKS
2019
TZS ‘000
2018
TZS ‘000
Maturing within 90 days:Balances due to banking institutions 75,572,029 62,930,870
The weighted average interest rate on balances due to other banking institutions was 8.65% (2018: 8.54%).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
107
TPB Bank PLC
26. OTHER LIABILITIES
2019
TZS ‘000
2018
TZS ‘000
Retention money 211,823 120,635
Payroll liabilities 244,353 192,268
Taxes payable 853,739 585,806
Accrued expenses 633,976 2,396,255
Agency fees payable 300,000 300,000
Supplier liabilities 1,882,248 2,326,312
Indemnity Fund 4,463,974 4,585,969
Un-earned loan administration fee 2,054,138 3,380,047
Other payables 4,343,015 5,516,660
14,987,266 19,403,952
27. DEFERRED TAX
Deferred taxation is calculated on all temporary differences under the liability method using corporation tax rate of 30% (2018: 30%).
2019 2018TZS’000 TZS’000
The movement on the deferred tax account is as follows:
At the beginning of the year 6,242,025 5,772,390
Deferred tax credit (Note 15) 702,302 734,476
Prior year deferred tax under-provision ( Note 15) - 370
Deferred tax on actuarial gain from defined benefit (57,082) (265,211)
6,887,745 6,242,025
The deferred tax asset is attributable to:
Accelerated tax allowances (77,095) (213,139)
Temporary difference on provisions for loan impairment 5,791,917 5,184,400
Deferred tax on actuarial gain from defined benefit 57,082 265,211
Deferred tax on fixed asset revaluation 1,005,553 1,005,553
Deferred tax on Lease Liability 74,354 -
Deferred tax on ECL on placement with other Banks 57,083 -
6,887,245 6,242,025
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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ANNUAL REPORT 2019
29. SHARE CAPITAL
a. Authorized share capital
500,000,000 (2018: 500,000,000) ordinary shares of TZS 1,000 each 500,000,000 500,000,000
b. Paid up capitalThe issued and paid up share capital is 28,071,743 (2018: 28,071,743) ordinary shares of TZS 1,000 each 28,071,743 28,071,743
Following the repeal of Tanzania Postal Bank Act No. 11 of 1991, the Bank was licensed under the Banking and Financial Institutions Act, 2006 and regulated by the Bank of Tanzania. The Bank was registered under the Companies Act, 2002 as a public limited company on 29 March 2016 with authorized share capital of 500,000,0000 shares at a par value of TZS 1,000 each.
During the year bank did not issue bonus shares to shareholders (2018: TZS Nil) but Board of directors proposed payment of dividend amounting to TZS 1,210,210,000 (2018: Nil), which were approved at the Annual General Meeting held on 24 May 2019.
2019 2018TZS’000 % TZS’000 %
The share capital is held by the following shareholders:Government of the United Republic of Tanzania 23,423,304 83.44 23,423,304 83.44
Tanzania Posts Corporation 2,135,540 7.61 2,135,540 7.61
Revolutionary Government of Zanzibar 816,215 2.91 816,215 2.91
Posta na Simu Savings & Credit Cooperative Society Ltd
749,312 2.67 749,312 2.67
Public Service Social Security Fund (PSSSF) 660,401 2.35 660,401 2.35
Workers’ Compensation Fund (WCF) 286,971 1.02 286,971 1.02
28,071,743 100.0 28,071,743 100.0
c. Regulatory reserve2019 2018
TZS’000 TZS’000 Regulatory reserve - 135,093
General reserve** - 3,912,553
- 4,047,646
*Regulatory reserve is a statutory reserve that represents the surplus of loan provision computed as per the Bank of Tanzania regulations over the impairment of loans and advances as per International Financial Reporting Standards (IFRS). On 31st December, 2019 bank had nil Regulatory reserve.
**General reserve represents a provision of 1% on current loan and advances which was made as per the Banking and Financial Institutions (Management of Risk Assets) Regulations, 2014. The regulation was abolished by Bank of Tanzania in July 2019.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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TPB Bank PLC
2019 2018TZS ‘000 TZS ‘000
31. CASH GENERATED FROM OPERATIONS
Profit before taxation 23,006,364 17,188,045
Adjustment for:
Depreciation on plant and equipment (note 23) 4,667,953 4,110,829
Amortization of intangible assets (note 22) 1,150,116 629,132
Loss on disposal of plant and equipment 2,219 (149,090)
Loan impairment charges (note 20(c)) 1,500,278 2,404,451
Other reserve (Acquired in business combination) (41,983) 5,041,745
Defined benefit cost recognized in profit or loss 1,090,982 1,950,805
Amortization of ROU & Interest on lease liability 5,239,638 -
Provision for ECL for Placements with other Banks (note 17) 118,112 -
Other Assets written off 1,197,954 (247,280)
37,931,633 30,928,637
Movement in working capital:Decrease/(increase) in treasury bills maturing after 3 months (25,213,562) 196,558
Increase in investment in treasury bonds maturing after 3 months (7,107,093) (946,641)
Increase in loans and advances to customers (9,325,288) (90,107,713)
Increase in other assets (1,239,060) (888,983)
Increase in deposits from customers 51,577,643 67,572,380
Increase in placements maturing over 3 months 4,391,966 (4,391,966)
Increase/(decrease) in other liabilities (4,416,686) 9,046,300
Cash generated from operations 46,599,553 11,408,572
32. ASSETS PLEDGED AS SECURITY
As at 31 December 2019, there were seven securities worth TZS 32,770,000,000 (2018:TZS 11,157,680,000) pledged as securities to the Bank of Tanzania (BOT) to secure bank borrowing. Seven pledged securities worth TZS 16,200,000,000 (2018: TZS 10,738,880,000) were treasury bills and ten securities worth TZS 16,570,000,000 (2018:TZS 418,800,000) was Treasury bond.
There were another two treasury bills, worth TZS 9,000,000,000 were pledged as security to Self-Micro-finance to secure borrowing. At the end of the year 2019, the outstanding interbank borrowings was TZS 75,397,988 (2018: TZS 62,930,870,000).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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ANNUAL REPORT 2019
33. CONTINGENT LIABILITIES
As at 31 December 2019, there were a number of commercial and labor cases the Bank is involved. In the opinion of the Directors the amount which may be awarded against the Bank in the event of the Bank losing the cases is not likely to be material. Consequently, no provision has been made in the financial statements.
2019 2018TZS ‘000 TZS ‘000
34. COMMITMENTS
a) Capital commitments
Authorized and contracted for 601,166 5,788,294
Authorized but not contracted for 13,422,550 10,151,819
14,023,716 15,940,113
b) Operating lease commitments
Future minimum lease payments in respect of lease of Bank premises:
Payable within 1 year - 5,681,763
Payable between 1 year and not later than 5 years - 13,010,257
- 18,692,020
c) Commitments to extend credit
Commitments to extend credit are agreements to lend to a customer in future subject to certain conditions. Such commitments are normally made for a fixed period. The Bank may withdraw from its contractual obligation to extend credit by giving reasonable notice to the customer. At 31 December 2019, outstanding commitments to extend credit were TZS 3,428,339,000 (2018: TZS 2,453,549,000).
35. LEASES
Until the 2019 financial year, leases of office space were classified as operating leases, see note 32(b) for details. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Bank. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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TPB Bank PLC
a) Right of Use Assets 2019 2018 TZS ‘000 TZS ‘000Right of use asset - opening balance 11,777,833 -
Accumulated Amortization RoU (Note 13) (4,712,171) -
7,065,662 -
Rent Prepaid 2,144,026 -
Rent Payable (23,920) -
Right of use asset - Closing balance 9,185,768 -
b) Lease Liability2019 2018
TZS ‘000 TZS ‘000Lease liabilities - opening balance 11,777,833 -
Interest expense on Lease liability (Note 13) 527,468 -
12,305,301
Rent payments (4,991,791) -
Lease liabilities - closing balance 7,313,510 -
36. RELATED PARTY TRANSACTIONS
During the year, the Bank entered into several related party transactions in the normal course of business. The transactions were between the Bank and its key management staff and the members of the Board. These include loans, key management compensations and Directors fees. The summary of the transactions is as shown hereunder:
a) Directors and key management personnel-Loans:2019 2018
TZS ‘000 TZS ‘000
Balance at beginning of the year 1,463,827 810,199
Loans issued 204,542 839,239
Loans repayment (32,225) (185,611)
Balance as at 31 December 1,636,144 1,463,827
Interest rate on loans to Directors and key management personnel is 5% (2018: 5%) per annum.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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ANNUAL REPORT 2019
2019 2018TZS ‘000 TZS ‘000
c) Directors and key management - Deposits:
Balance at beginning of the year 1,355,888 539,940
Deposits during the year 4,752,031 5,867,720
Withdrawals during the year (4,552,595) (5,051,772)
Balance as at 31 December 1,555,324 1,355,888
Interest rates on deposits from Directors and key management personnel are at applicable bank commercial rates.
d) Related companies:Tanzania Post Corporation:
2019 2018TZS ‘000 TZS ‘000
Balance at beginning of the year - -
Deposits during the year 1,900,538 -
Withdrawals during the year (1,898,689) -
Balance as at 31 December 1,849 -
Savings and Credit Society:
Balance at beginning of the year 11,317 7,434
Deposits during the year 706,857 738,019
Withdrawals during the year (713,583) (734,136)
Balance as at 31 December 4,591 11,317
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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TPB Bank PLC
f) Directors’ and key management personnel compensation
2019 2018TZS ‘000 TZS ‘000
Salaries and other benefits 1,812,665 1,441,072
Social security contributions 358,495 292,567
Terminal benefits - -
Directors’ fees 66,639 86,880
Other Board expenses 414,932 369,229
g) Outstanding balances
Tanzania Posts Corporation Western Union Agents (Note 21) 762,609 738,798
The transactions entered into with related parties were at arm’s length and in accordance with laid down regulations.
37. EMPLOYMENT BENEFIT OBLIGATION
On 1 February 2017 the Bank entered in to a collective bargaining agreement (CBA) with the Tanzania Union of Industrial and Commercial Workers (TUICO). The CBA includes benefits under defined benefits plan whereby, a retiring employee having six years of service is entitled to a lump sum of twelve months basic salary for grade 1 to 3 TPB salary scale and ten months basis salaries for grade 4 and above. Other benefits covered included in are provision of building materials, repatriation benefit, long service awards to permanent employees and funeral services benefit.
The Bank provides for defined benefit obligation cost based on assessments made by independent actuaries. The Bank is recognizing the obligation for the first time in current year. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method as required by IAS 19.
The significant assumptions used for the purposes of the actuarial valuations were as follows:
2019 2018Discount rate 16.8% 17.7%
Future salary increases
- Management staff 8% 8.0%
- General staff 10% 10.0%
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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ANNUAL REPORT 2019
Amount recognised in statement of profit or loss and other comprehensive income in respect of this defined benefit obligation:
2019 2018TZS ‘000 TZS ‘000
Recognised in profit or loss (note 14) 1,090,982 1,950,805
- Service cost 70,101 58,468
- Interest cost 1,020,881 813,262
- Past service cost - 1,079,075
Recognised in other comprehensive income
- Actuarial (gain)/loss recognised in other comprehensive income
Actuarial (gain)/loss in experience (724,714) 32,497
Actuarial (gain)/loss in assumptions 534,638 (916,534)
Net cost for the year (190,276) 1,066,768
The movement in the Bank defined benefit obligation is as follows:
2019 2018TZS ‘000 TZS ‘000
Net obligation (asset) at start of period 5,942,512 5,295,496
Service cost 70,101 1,137,543
Interest cost 1,020,881 813,262
Benefit paid during the year (489,847) (419,752)
Actuarial (gain)/loss recognised in other comprehensive income (190,276) (884,037)
Closing balance 6,353,371 5,942,512
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
115
TPB Bank PLC
38. RESERVE TWB & TWIGA
The carrying amount of assets and liabilities purchased are as follows:
2019 2018
TZS’000 TZS’000
Opening balance 5,041,745
Twiga Bancorp Limited (41,983) 8,824,973
Tanzania Women’s Bank Plc - (3,783,228)
Net Reserve 4,999,762 5,041,745
Other reserve represents total net asset value of Twiga Bancorp Limited and Tanzania Women Bank (TWB) following the merger with TPB Bank in 2018.
39. FAIR VALUE
The Directors consider that there is no material difference between the fair value and carrying value of the Bank’s financial assets and liabilities where fair value details have not been presented.
40. CURRENCY
Except where indicated otherwise, these financial statements are presented in Tanzania Shillings, rounded to the nearest thousand (TZS’000), which is also the functional currency.
41. EVENTS SUBSEQUENT TO FINANCIAL YEAR END
At the date of signing the financial statements, the Directors are not aware of any other matter or circumstance arising since the end of the financial year, not otherwise dealt with in these financial statements, which significantly affect the financial position of the Bank and results of its operations.
42. COMPARATIVES
Where necessary comparative figures have been adjusted to conform to changes in presentation in the current year.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
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ANNUAL REPORT 2019
BRANCHES
BRANCH PHYSICAL ADDRESS E-mailMkwepu Mkwepu Street [email protected]
Kariakoo Msimbazi /Mhonda Street [email protected]
Manzese Morogoro Road [email protected]
Zanzibar Malawi/Malindi Street [email protected]
Njombe KKKT Building/Songea Road [email protected]
Arusha Uhuru Street [email protected]
YWCA Azikiwe Street [email protected]
Dodoma DSM Road, Uhindini [email protected]
Moshi NSSF Plaza [email protected]
Mtwara TANU Road [email protected]
Songea Sokoine Street [email protected]
Tabora Jamhuri Street/Shule Road [email protected]
Tanga Kenyata Road [email protected]
Kigoma TRA Building [email protected]
Shinyanga Nkomo Street [email protected]
Bukoba TRA Building/Uganda Kawawa Road [email protected]
Ilala Uhuru Street [email protected]
Iringa Uhuru Road [email protected]
Mwanza Kenyata Road [email protected]
Morogoro Luna Building [email protected]
Ubungo Ubungo Plaza [email protected]
Sumbawanga Sumbawanga Post Office [email protected]
Musoma Musoma Post Office [email protected]
Babati Babati Town [email protected]
Kijitonyama LAPF Millenium Towers [email protected]
Lindi TRA Building [email protected]
Singida NIC Building [email protected]
Tunduma Tunduma Post Office [email protected] Arusha Sokoine Road [email protected]
Liberty Mwanza Liberty Street [email protected]
Metropolitan Opposite Askari Monument [email protected]
Mlimani City Mlimani City [email protected]
Mkwepu Women’s Mkwepu St. - Sokoine Rd Junction [email protected]
Pamba Post Office/Pamba Road [email protected]
Sengerema Telecentre Building (Radio Sengerema) [email protected] Soko kuu, Mwanjelwa [email protected]
Samora Annex Ex- Telecom Bulding, Samora [email protected]
Soko Kuu Dodoma 11th Road Uhuru St. [email protected]
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MINI BRANCHES
BRANCH PHYSICAL ADDRESS E-mail
Bagamoyo Bagamoyo Post Office [email protected] Temeke Post Office [email protected] Kigamboni Post Office [email protected] Korogwe Post Office [email protected] Mpanda Post Office [email protected] Karagwe Post Office [email protected] Pemba Post Office [email protected] Nachingwea Post Office [email protected] River Usa River Post Office usa [email protected] Nzega Post Office [email protected] Mafinga Post Office [email protected] Makambako Post Office [email protected] Masasi Post Office [email protected] Nyasubi Street (Near Nsagali Petrol Station) [email protected] Geita Post Office [email protected] Tegeta Wema House (Along Bagamoyo Road) [email protected] Kyela Post Office [email protected] Ifakara Post Office [email protected] Ikwiriri Post Office [email protected] Mbinga Post Office [email protected] Tarime Post Office [email protected] Kimara Mwisho (Dawasco Road) [email protected] Bariadi Post Office [email protected] Kondoa Post Office [email protected] Kijitonyama (LAPF) executive [email protected] Mrombo Kwa Mrombo Road [email protected] Mpwapwa Post Office [email protected] Same Post Office [email protected] Newala Post Office [email protected] Central Chato Post Office Building [email protected] wa Mbu Migombani Street, Opp. Arusha - Karatu Road [email protected] Kalanje Post Office [email protected] Karume Street, NSSF Building [email protected] DIA - Terminal II [email protected] Bunda Ukerewe Road [email protected] Manyoni Barabara ya Bomani [email protected] Kibondo Post Office [email protected] Kibaha Post Office [email protected] Kariakoo Aggrey Street Kariakoo Business area, [email protected]
118
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M- Koba inatoa fursa kwa wanakikundi kuona maendeleo ya michango yao kwa urahisi
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Mfungulie mtoto wako Minor Account, timiza ndoto zake
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TPB
Bank
PLC
ANN
UAL
REPO
RT 2
019
Head Office, LAPF Towers, Kijitonyama Bagamoyo Road, P. O. Box 9300, Dar es Salaam, Tanzania
Telephone: +255 22 2162940, Fax: +255 22 2114815, @ E–mail: [email protected]
www.tpbbank.co.tz