Annual Financial Statements 2020

92 22 ANNEXURE CRISK AND CAPITAL MANAGEMENT CREDIT RISK CONTINUED RISKS Credit Funding and liquidity Market Operational STANDARD BANK NAMIBIA LIMITED Annual financial statements 2020 93 Credit impairment losses on loans and advances Loans and advances are assessed for possible impairment at each reporting date. Before impairments are allocated to individual loans, consideration is first given to whether there is evidence of a decrease in expected cash flows from a portfolio of loans and advances. This will include estimations of the emergence period between the date of the occurrence of the loss event and the identification of that loss. Portfolio impairments are calculated for both performing and non-performing but not specifically impaired loans. Factors such as national- and industry-specific economic conditions, the extent of early arrears and any legislation that could affect recovery, are all considered when calculating the portfolio impairment charge. For those non-performing loans (NPL) where there is objective evidence of default, specific impairments are calculated using methodologies that include inputs such as segmentation, modelled expected loss (EL) and PD. Estimates of future cash flows on individually impaired loans are based on historical loss experience for similar loans. Concentration risk Concentration risk is the risk of loss arising from an excessive concentration of exposure to a single counterparty, an industry, a product, a geography, maturity, or collateral. The company's credit risk portfolio is well-diversified. The company's management approach relies on the reporting of concentration risk along key dimensions, the setting of portfolio limits and stress testing. IFRS: INDUSTRY SEGMENTAL ANALYSIS GROSS LOANS AND ADVANCES 2020 N$'000 Collateral The table on the following page shows the financial effect that collateral has on the company's maximum exposure to credit risk. The table is presented according to Basel asset categories and includes collateral that may not be eligible for recognition under Basel but that management takes into consideration in the management of the company's exposures to credit risk. All on- and off-balance sheet exposures that are exposed to credit risk, including NPL, have been included. Collateral includes: ⚫ mortgage bonds over residential, commercial and industrial properties ⚫cession of book debts pledge and cession of financial assets ⚫ bonds over plant and equipment ⚫ the underlying movable assets financed under leases and instalment sales. Netting agreements, which do not qualify for offset under IFRS but which are nevertheless enforceable, are included as part of the company's collateral. All exposures are presented before the effect of any impairment provisions. Of the company's total exposure, 20% (2019: 20%) is unsecured and mainly reflects short-term exposures to individuals. Total exposure N$'000 Unsecured N$'000 Secured N$'000 Collateral coverage - Total collateral 1 to 50% N$'000 50 to 100% N$'000 6 774 248 3 555 265 3 218 983 3 218 983 2 364 482 2 364 482 2 364 482 2 465 115 2 465 115 2 465 115 20 605 556 2 970 544 17 635 012 17 635 012 13 603 027 13 603 027 13 603 027 7 002 529 2 970 544 4 031 985 4 031 985 32 209 401 6 525 809 25 683 592 3 218 983 22 464 609 6 764 974 (801 681) Agriculture Construction Electricity Finance, real estate and other business services Individuals Manufacturing Mining Other services Transport Wholesale Gross loans and advances All loans are recorded in Namibia. IFRS: SEGMENTAL ANALYSIS OF STAGE 3 ECL OF LOANS AND ADVANCES Agriculture Construction Electricity Finance, real estate and other business services Individuals Manufacturing Other services Mining Transport Wholesale Total ECL for stage 3 loans and advances, excluding IIS All impairments relate to loans that are recorded in Namibia. 2019 N$'000 670 202 172 162 742 434 279 547 1 066 959 1 709 557 6 463 584 7 337 965 15 118 111 14 878 991 956 474 648 890 587 567 295 072 457 758 497 653 80 775 289 822 159 434 181 494 25 733 026 26 861 425 2019 N$'000 (14 657) (3068) (966) 2020 N$'000 (63 476) (7 884) (1 762) (122 906) (103 569) (267 905) (176 338) (3 562) (77) (8 425) (839) (2 648) (479 484) (4 972) (61) (12 679) (928) (1997) (319 235) 2020 Corporate Sovereign Bank Retail Retail mortgage Other retail Total Add: financial assets not exposed to credit risk Less: impairments for loans and advances Less: unrecognised off balance sheet items Total exposure Reconciliation to statement of financial position: Cash and balances with central banks Derivative assets Trading assets Pledged assets Financial investments Loans and advances Other financial assets Total (6 476 374) 31 696 320 1 024 338 372 288 383 240 520 956 4 218 834 24 931 346 245 318 31 696 320

View entire presentation