National Bank of Malawi : NBM plc FY2022 Financials

SUMMARY OF AUDITED RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2022

Key Perfomance Highlights 34%		Profit After Tax 38%		Net Interest &	45%		Customer Deposits 29%		Loan Book
		Investment Income

		GROUP	COMPANY
		31-Dec-22	31-Dec-21	31-Dec-2231-Dec-21
		K'm	K'm	K'm	K'm
SUMMARY STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Interest income and similar income	111,984	79,476	99,662	69,441
Interest expense	(13,111)	(7,778)	(10,775)	(5,462)
Net interest income	98,873	71,698	88,887	63,979
Other income	45,232	42,495	40,919	38,807
Net income	144,105	114,193	129,806	102,786
Operating expenses	(70,747)	(61,106)	(57,587)	(50,011)
Profit before impairment losses on financial assets	73,358	53,087	72,219	52,775
Net impairment losses on financial assets	(3,995)	(2,499)	(1,002)	(1,648)
Profit before taxation	69,363	50,588	71,217	51,127
Taxation	(23,419)	(16,378)	(22,082)	(15,902)
Profit after tax	45,944	34,210	49,135	35,225
Other Comprehensive Income
Gains on property valuations	3,696	4,454	3,696	4,454
Deferred tax on revalued assets	2,032	735	2,032	735
Other Comprehensive Income net of tax	5,728	5,189	5,728	5,189
Total Comprehensive Income for the year	51,672	39,399	54,863	40,414
Profit attributable to shareholders
Owners of the Parent	47,474	34,928	49,135	35,225
Non-Controlling Interest (Minorities)	(1,530)	(718)	0	0
Comprehensive income attributable to shareholders	45,944	34,210	49,135	35,225
Owners of the Parent	53,202	40,117	54,863	40,414
Non-Controlling Interest (Minorities)	(1,530)	(718)	0	0
DIVIDENDS PAID	51,672	39,399	54,863	40,414
Interim	8,003	5,001	8,003	5,001
Final (for prior year)	18,005	10,501	18,005	10,501
Total	26,008	15,502	26,008	15,502
Earnings per share (Kwacha)	101.66	74.79
Dividend per share (Kwacha)	55.69	33.19
Number of ordinary shares in issue (millions)	467	467
SUMMARY STATEMENTS OF FINANCIAL POSITION
LIABILITIES & EQUITY
Customer deposits	809,562	558,245	568,644	456,412
Current income tax liabilities	7,712	4,901	7,189	4,789
Other liabilities	64,292	75,099	53,276	70,730
Loans and borrowings	11,108	10,596	8,105	10,596
Lease liability	6,849	7,900	1,838	2,603
Deferred tax	2	0	0	0
Equity attributable to equity holders of the parent company	172,180	142,958	169,231	140,376
Minority interest	1,644	3,211	0	0
Total liabilities and equity	1,073,349	802,910	808,283	685,506
ASSETS
Cash and funds with Central Banks	64,650	35,768	53,604	26,054
Placements with other banks	83,515	31,367	83,302	31,367

RESTATEMENT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

In order to correct non-compliance with IAS 7, the statement of cashflows has been restated to disclose separately gross receipts and payments of investing activities (investment in government securities), gross receipts and payments of long-term loans and reclassification of non -cash items from investment income to working capital under operating activities, reclassification of liabilities to other banks from cash and cash equivalents to working capital movements under operating activities.

BASIS OF PREPARATION

The Directors have prepared the summary consolidated and separate financial statements to meet the requirements of the Financial Services Act, 2010 and the Malawi Stock Exchange. The Directors have considered the requirements of the Financial Services Act, 2010 and the Malawi Stock Exchange and believe that the summary statements of financial position, summary statement of comprehensive income, summary statement of changes in equity and summary statement of cash flows are sufficient to meet the requirements of the users of the summary consolidated and separate financial statements. The amounts in the summary consolidated and separate financial statements are prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards. The summary consolidated and separate financial statements have been derived from the Annual Consolidated and Separate Financial Statements which were approved by the board of Directors on 31 March 2023, and are available on the company's website, www.natbank.co.mw.

IMPAIRMENT LOSSES/NON PERFORMING CREDIT FACILITIES AND PROVISIONS FOR LOSSES BY INDUSTRY SECTOR

					GROUP
		31st December 2022			31st December 2021
Sector	Outstanding		Impaired		Expected		Outstanding	Impaired	Expected
	Amount		Amount		Credit Losses		Amount	Amount	Credit Losses
	K'm		K'm		K'm		K'm	K'm	K'm
Agriculture, Forestry, Livestock and Fishing	36,740		2,926		693		34,311	1,977	451
Manufacturing	28,412		1,190		184		21,950	1,835	191
Mining and Quarrying	2,193		1		1		1,112	21	35
Construction and Engineering	5,227		889		346		4,211	252	164
Energy/Electricity, Gas, Air conditioning, Water supply & Waste	18,834		375		123		10,692	7,551	1412
management
Transport/Storage	14,601		935		477		2,613	522	204
Communication	8,204		26		658		13,377	66	301
Financial/Insurance/Professional/Scientific & Technical services	9,367		703		488		8,473	2,340	251
Wholesale/Retail	65,821		9,835		3629		59,671	6,565	2911
Individual/Households	81,037		1,760		1241		55,963	2,197	1847
Real Estate	7,016		5,323		29		7,403	154	46
Tourism	30,286		15,185		168		20,577	1,345	170
Other	11,903		4,059		1165		9,228	1,261	714
TOTAL	319,641		43,207		9,202		249,581	26,086	8,697

CREDIT CONCENTRATION

Total Credit Facilities including guarantees, acceptances and other similar commitments extended to any one customer or group of related customers where amounts exceed 25% of core capital.

SECTOR OF BORROWER		31st December 2022		31st December 2021
	K'm		% OF CORE CAPITAL	K'm		% OF CORE CAPITAL
Wholesale and Retail	0		0%	0		0%

The Board is pleased to announce the audited financial results of the Group for the year ended 31 December 2022.

PERFORMANCE

The Group registered a profit after tax of K45.94b representing a 34% increase from K34.21b reported in 2021. These results were largely driven by growth in customer deposits which resulted in increases in the loan book and fixed income securities. Consequently, Net interest and investment income grew by 38%. In addition, there was growth in foreign exchange commissions. Overall net revenue grew by 26%. Operating expenses increased by 16%, a pace lower than the average inflation for the year. On the other hand, impairment losses increased by 60% due to cleaning up of our foreign subsidiary's loan book.

Customer deposits increased by 45% year on year (2021: 38%) while the Bank's loan book grew by 29% (2021: 20%). Investment in Fixed Income securities grew by 16% (2021:66%).

All the subsidiaries of the Bank reported profits that contributed positively to the Group performance except for Akiba Commercial Bank (ACB) in Tanzania and an associate company, United General Insurance which reported losses.

THE OPERATING ENVIRONMENT

The Malawi economy grew by 1.7% in 2022 (2021: 4.2%). The growth in 2022 was adversely affected by weather related shocks in some parts of the country such as erratic rains and cyclones, low supply of foreign exchange and the Russia/Ukraine war which led to global supply chain challenges and high commodity prices. The country also experienced protracted power supply disruptions in addition to fuel supply shortages.

Average annual inflation increased to 22% from an average of 9.3% in 2021. Similarly interest rates were on the rise, with the Policy rate being raised by 400 basis points to 18% in the last quarter of the year. Generally, consumer demand was constrained.

The Malawi kwacha was devalued by 25% in May 2022. However, despite the devaluation foreign exchange supply challenges continued resulting in a significant build up of arrears in foreign payments.

DIVIDEND

The Bank paid a first interim dividend of K8b in September 2022 (2021: K5b) and a second interim dividend amounting to K10b in April 2023 (2022: K7b). The

directors recommend a final dividend of K15b (2022: K11b) making a total dividend of K33.0b in respect of 2022 profits representing K70.67 per ordinary share

(2021: K49.26 per share). The final dividend will be payable after approval by the Annual General Meeting scheduled for June 2023.

OUTLOOK*

The economy was expected to grow by 2.7% in 2023. However, the impact of the most recent cyclone Freddy which has affected most parts of the southern region and the protracted electricity and the foreign exchange supply challenges are expected to weigh heavily on the growth prospects.

The Bank completed implementation of its 5-year strategic plan in 2022. A new strategic plan has been developed for 2023 to 2027 to take the Group to the next level and turn around strategies have been put in place to turn the two entities ACB and UGI that made losses into profitable entities. The Board envisages a continuing challenging operating environment due the factors enumerated above. However, the Bank is expected to sustain its enviable performance through its ability to leverage on its core strengths, address challenges and exploit opportunities in the market, the hostile environment notwithstanding.

BY ORDER OF THE BOARD

M.M. Kawawa
Chief Executive Officer	Chief Financial Officer

Other money market investments	169,277	95,681	0	49,583
Other assets			16,580	9,554	11,408	7,506
Income Tax Receivable			16	839	0	0
Equity investments			6,892	5,357	6,892	5,357
Government of Malawi Promissory Notes	0	12,126	0	12,126
Government Securities			345,939	298,916	309,930	271,254
Loans and advances to customers	310,440	240,884	262,768	210,320
Investment in associate			918	1,558	992	992
Investment in subsidiaries	0	0	15,641	12,029
Property and equipment	44,936	40,047	44,338	39,557
Intangible assets			9,496	9,424	9,268	9,143
Right of use assets			4,946	6,293	792	1,570
Deferred tax			11,785	11,137	9,348	8,648
Goodwill			3,959	3,959	0	0
Total assets			1,073,349	802,910	808,283	685,506
Memorandum items			29,376	35,548	29,376	35,548
Contingent liabilities: Letters of credit and guarantees
SUMMARY STATEMENTS OF CHANGES IN EQUITY
As at beginning of period	146,169	117,918	140,376	115,464
Total comprehensive income for the year	51,672	39,399	54,863	40,414
Transfer of minority interest on acquisition of Akiba Commercial Bank	0	3,832	0	0
Translation differences			2,028	538	0	0
Dividends paid			(26,045)	(15,518)	(26,008)	(15,502)
As at end of period			173,824	146,169	169,231	140,376
SUMMARY STATEMENTS OF CASH FLOWS
			GROUP			COMPANY
			31-Dec-2231-Dec-21		31-Dec-2231-Dec-21
			K'm	K'm		K'm	K'm
Cash flows from operating activities		Restated			Restated
Profit before tax			69,363	50,588		71,217	51,127
Adjustments for:
Depreciation of property and equipment	3,146	2,929		2,913	2,661
Amortisation of intangible assets	1,356	1,326		1,288	1,256
Amortisation of right of use of assets	1,347	1,314		787	785
Interest on lease liability	1,035	1,078		417	526
Net gains on financial instruments classified as held for trading	(931)	(606)		(931)	(606)
Gains on disposal of financial instruments classified as held for trading	163	(119)		163	(119)
Profit(loss) on disposal	of property and equipment	3	32		3	40
Dividends received			(202)	(175)		(731)	(553)
Share of loss (profits) of	associate	1,042	(313)		0	0
Net fair value loss(gain) on revaluation of properties	(93)	(105)		(93)	(105)
Net losses on modified and restructured loans	126	461		126	461
Movement in allowance for impairment on financial assets	6,141	5,686		2,785	4,497
Operating cashflows before working capital movements	82,496	62,096		77,944	59,970
Movement in operating assets	(81,201)	(21,390)		(58,534)	(18,133)
Movement in investments	(2,174)	14,110		6,173	20,397
Movement in liabilities to other banks	(16,037)	39,120		(21,551)	36,953
Movement in operating liabilities	256,547	117,773		115,564	93,368
Net cash flow from operating activities	239,631	211,709		119,596	192,555
Tax paid			(18,511)	(15,070)		(18,350)	(14,621)
Net cash from operating activities	221,120	196,639		101,246	177,934
Net cash used in investing activities	(38,927)	(121,489)		(41,654)	(128,827)
Net cash outflow from financing activities	(27,567)	(20,584)		(29,690)	(19,700)
Net increase in cash and cash equivalents	154,626	54,566		29,902	29,407
Cash and cash equivalents at beginning of the year	162,816	108,250		107,004	77,597
Cash and cash equivalents at end of the year	317,442	162,816		136,906	107,004

LOANSTO DIRECTORS, SENIOR MANAGEMENT AND OTHER RELATED PARTIES

	GROUP AND COMPANY
	31st	31st
	December	December
	2022	2021
	K'm	K'm
DIRECTORS:
Balance at beginning of year	429	406
Loans granted during the year	123	179
Repayments	(379)	(156)
Balance at end of year	173	429
OTHER RELATED PARTIES:
Balance at beginning of year	7,554	7,811
Loans granted during the year	7,877	6,888
Repayments	(2,570)	(7,145)
Balance at end of year	12,861	7,554
SENIOR MANAGEMENT OFFICIALS:
Balance at beginning of year	1,150	887
Loans granted during the year	311	377
Repayments	(363)	(114)
Balance at end of year	1,098	1,150
Total related party lending	14,132	9,133
Total related party lending as a percentage of core capital	11%	9%
INVESTMENTS IN SUBSIDIARIES
Name of Subsidiary	Percentage Holding
	31st Dec	31st Dec
	2022	2021
NBM Capital Markets Limited	100%	100%
NBM Securities Limited	100%	100%
National Bank of Malawi Nominees Limited	100%	100%
NBM Bureau De Change Limited	100%	100%
NBM Development Bank Limited	100%	100%
NBM Pension Administration Limited	100%	100%
Akiba Commercial Bank	60.48%	60.48%
Stockbrokers Malawi Limited	75%	75%

LENDING RATES

	31st December 2022	31st December 2021
Malawi Kwacha facilities
Base Lending Rate	17.30%	12.20%
Lending Rate Spread	+1.1% to +11%	+1.1% to +11%
Foreign Currency facilities	7% to 12%	7.5% to 10%

DIRECTORS REMUNERATION,BONUSES AND MANAGEMENT FEES

	2022	2021
	K'm	K'm
Directors Remuneration	1,403	1,233
Total Bonuses Paid by the Group	5,959	3,715
Management Fees	Nil	Nil

DEPOSIT RATES

	31st December 2022	31st December 2021
Type of Deposit
Rate %	Rate %
Malawi Kwacha
Current Account	0.00	0.00
Savings	6.00	2.00
Special savings	4.50	1.00
Savings Bond	11.00	4.00
Student Save	5.00	2.00
Fiesta Save	9.00	5.00
7 Day Call	5.50	2.50
30 Day Call	6.00	2.25
2 Months	7.00	4.25
3 Months	7.50	4.00
6 Months	8.00	3.00
9 Months	Negotiable	Negotiable
12 Months	Negotiable	Negotiable
Foreign Currency Denominated
Accounts (FCDAs)
USD	0.50	0.50
GBP	0.50	0.50
ZAR	1.50	1.50
EUR	0.25	0.25

Chairman	Director
31 March 2023
Registered Office:
7 Henderson Street,
BLANTYRE
* Unaudited

REPORT OFTHE INDEPENDENT AUDITOR ONTHE SUMMARY CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

To the members of National Bank of Malawi plc

Opinion

The summary consolidated and separate financial statements, which comprise the summary consolidated and separate statements of financial position as at 31 December 2022, the summary consolidated and separate statements of profit or loss and other comprehensive incomes, summary consolidated and separate statements of changes in equity, summary consolidated and separate statements of cash flows for the year then ended and related notes, are derived from the audited consolidated and separate financial statements of National Bank of Malawi plc for the year ended 31 December 2022.

In our opinion, the accompanying summary consolidated and separate financial statements are consistent in all material respects, with the consolidated and separate financial statements, and the basis described on the basis for preparation paragraph.

Summary Consolidated and Separate Financial Statements

The summary consolidated and separate financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary consolidated and separate financial statements and the auditor's report thereon, therefore, is not a substitute for reading the audited consolidated and separate financial statements and the auditor's report thereon. The summary consolidated and separate financial statements and the audited consolidated and separate financial statements do not reflect the effects of events that occurred subsequent to the date of our report on the audited consolidated and separate financial statements.

The Audited Consolidated and Separate Financial Statements and Our Report Thereon

We expressed an unmodified audit opinion on the audited consolidated and separate financial statements in our report dated 13 April 2023. That report also includes the communication of key audit matters. Key audit matters are those matters that in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current year.

Director's Responsibility for the Summary Consolidated and Separate Financial Statements

The directors are responsible for the preparation of the summary consolidated and separate financial statements in accordance with the basis described on the basis for preparation paragraph.

Auditor's Responsibility

Our responsibility is to express an opinion on whether the summary consolidated and separate financial statements are consistent, in all material respects, with the audited consolidated and separate financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing 810 (Revised), Engagements to Report on Summary Financial Statements.

Chartered Accountants

Nkondola Uka

Partner

17th April 2023

www.natbank.co.mw