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Absa Group Limited – Basel III Pillar 3 Disclosure as at 30 September 2020
ABSA GROUP LIMITED ABSA BANK LIMITED
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa)
(Registration number: 1986/003934/06) (Registration number: 1986/004794/06)
ISIN: ZAE000255915 ISIN: ZAE000079810
JSE share code: ABG JSE share code: ABSP
(Absa Group Limited) (Absa Bank)
ABSA GROUP LIMITED – BASEL III PILLAR 3 DISCLOSURE AS AT 30 SEPTEMBER 2020
This Pillar 3 disclosure contains the quantitative Pillar 3 disclosure requirements in respect of Absa Group Limited (Absa Group or the Group) and
Absa Bank Limited (Absa Bank or the Bank). The quarterly report provides a view of the Group’s regulatory capital and risk exposures, and it complies
with:
- The Basel Committee on Banking Supervision (BCBS) revised Pillar 3 disclosure requirements (Pillar 3 standard).
- Regulation 43 of the Regulations relating to Banks (Regulations), issued in terms of the Banks Act, 1990 (Act No. 94 of 1990), where not
superseded by the revised Pillar 3 disclosure requirements.
1. Key prudential metrics and RWA
In line with regulatory and accounting requirements, the capital and leverage positions of the Group and the Bank in this document are reflected on a
regulatory basis (which requires unappropriated profits to be excluded). However, the capital and leverage positions of the Group are also managed
on a statutory basis (which includes unappropriated profits). The summary table below provides key capital adequacy and liquidity information on both
a regulatory and statutory basis as at 30 September 2020. As at 30 September 2020 all profits in the Group and Bank were appropriated, with the
result that regulatory and statutory basis were identical.
1.1 Capital adequacy and liquidity
Group Bank
Actual Actual Actual Actual
Board target Minimum RC 30 Sep 30 Jun 30 Sep 30 Jun
ranges (1) requirements (2) 2020 2020 2020 2020
% % % % % %
Statutory capital ratios (includes unappropriated
profits)
Common equity tier 1 (CET1) 11.00 – 12.00 11.3 11.0 10.7 10.6
Tier 1 12.00 – 13.00 12.2 11.9 11.7 11.7
Total capital adequacy requirement
(CAR) 14.50 – 15.50 15.1 14.9 15.7 15.8
Leverage 5.00 – 7.00 6.5 6.5 5.0 5.1
Regulatory Capital ratios (excludes unappropriated
profits)
CET1 7.5 11.3 11.0 10.7 10.6
Tier 1 9.3 12.2 11.9 11.7 11.7
Total CAR 11.5 15.1 14.9 15.7 15.8
Leverage 4.0 6.5 6.5 5.0 5.1
Liquidity coverage ratio (LCR) (%) 139 127 147 133
Net stable funding ratio (%) 119 117 113 112
Capital
- The Group’s CET1 capital position was well above minimum regulatory requirements as at 30 September 2020 and within the Board target range
of 11 - 12%.
- Group RWAs decreased by R14.6bn from R935.7bn to R921.1bn from June 2020 to September 2020 mainly within the Absa Regional Operations.
This was driven by rand strength combined with the impact of the Group deploying more of its surplus liquidity into low risk securities rather than
deposits with banks.
- Group CET1 capital increased by R1.3bn due to higher capital supply supported by improved profitability. At a total capital level, this was offset
by a decrease in Tier 2 capital of R1.5bn post the call of subordinated debt during September 2020.
- The Bank leverage ratio has decreased marginally from June 2020. This is due to an increase in leverage exposure as a result of balance sheet
growth mainly in investment securities and loans to customers which was partially offset by improvements in capital supply. The Group leverage
ratio remained flat due to additional capital supply generated by Group entities.
Liquidity
- The liquidity risk position of the Group is in line with risk appetite, and well above the minimum regulatory requirements.
- The Group liquidity coverage ratio increased to 139% (June 2020: 127%) as the liquidity resources of the Group strengthened over the third
quarter of the year and included Absa Bank investing in alternative forms of high-quality liquid assets (HQLA) as the Bank reduces reliance on
the committed liquidity facility (CLF), in line with the phase out requirements set out by the Prudential Authority.
- The Group net stable funding ratio strengthened to 119% (June 2020: 117%) with strong core deposit growth from retail and corporate clients.
1.2 KM1: Key metrics (at consolidated group level)
In line with the requirements of IFRS 9, which became effective on 1 January 2018, the Group moved from the recognition of credit losses on an
incurred loss basis to an expected credit loss (ECL) basis. The Group elected to utilise the transition period of three years for phasing in the regulatory
capital impact of IFRS 9, as afforded by Directive 5 issued by the Prudential Authority. The table below reflects the capital and leverage position of
the Group on a fully loaded basis, as well as on a transitional basis.
30 Sep 30 Jun 31 Mar 31 Dec 30 Sep
2020 2020 2020 2019 2019
Group Rm Rm Rm Rm Rm
Available capital (Rm)
1 Common equity tier 1 (CET1) transitional basis 104 119 102 818 103 450 100 637 100 115
1a Fully loaded ECL accounting model 103 255 101 954 102 586 98 909 98 387
2 Tier 1 transitional basis 112 189 110 885 111 636 109 062 107 216
2a Fully loaded ECL accounting model Tier 1 111 325 110 021 110 772 107 334 105 488
3 Total capital transitional basis 139 143 139 411 137 789 133 411 130 726
3a Fully loaded ECL accounting model total capital 138 279 138 547 136 924 131 683 128 998
RWA (Rm)
4 Total RWA transitional basis 921 129 935 766 939 800 870 406 884 742
4a Fully loaded RWA 917 556 932 193 936 226 863 260 877 595
Risk-based capital ratios as a percentage of RWA (%)
5 CET1 ratio transitional basis (3) 11.3 11.0 11.0 11.6 11.3
5a Fully loaded ECL accounting model CET (3) 11.3 10.9 11.0 11.5 11.2
6 Tier 1 ratio transitional basis 12.2 11.9 11.9 12.5 12.1
6a Fully loaded ECL accounting model Tier 1 ratio 12.1 11.8 11.8 12.4 12.0
7 Total capital ratio transitional basis (3) 15.1 14.9 14.7 15.3 14.8
7a Fully loaded ECL accounting model total capital ratio (3) 15.1 14.9 14.6 15.2 14.7
Additional CET1 buffer requirements as a percentage of RWA (%)
8 Capital conservation buffer requirement (2.5% from 2019) 2.5 2.5 2.5 2.5 2.5
9 Countercyclical buffer requirement (4) - - - - -
10 Bank G-SIB and/or D-SIB additional requirements (5) 0.5 0.5 0.5 0.5 0.5
Total of bank CET1 specific buffer requirements (Row 8 + row
11 9 + row 10) 3.0 3.0 3.0 3.0 3.0
CET1 available after meeting the bank’s minimum capital
12 requirements (5) 3.8 3.5 3.0 3.6 3.3
Basel III leverage ratio
13 Total Basel III leverage ratio exposure measure (Rm) 1 733 777 1 707 091 1 703 322 1 572 845 1 638 103
14 Basel III leverage ratio (%) (row 2 / row 13) transitional basis 6.5 6.5 6.6 6.9 6.5
Fully loaded ECL accounting model Basel III leverage ratio (%)
14a (row 2a / row 13) 6.4 6.4 6.5 6.8 6.4
Liquidity coverage ratio (6)
15 Total high-quality liquid assets (HQLA) (Rm) 235 845 215 229 176 982 182 093 183 757
16 Total net cash outflow (Rm) 169 516 169 966 146 514 135 510 149 051
17 LCR (%) 139 127 121 134 123
Net stable funding ratio
18 Total available stable funding (ASF) (Rm) 951 963 952 906 928 531 866 368 868 808
19 Total required stable funding (RSF) (Rm) 800 811 813 876 828 278 768 850 769 183
20 Net stable funding ratio (NSFR) (%) 119 117 112 113 113
1.3 OV1: Overview of RWA
Group Bank (7)
30 Sep 30 Jun 30 Sep 30 Sep 30 Jun 30 Sep
2020 2020 2020 2020 2020 2020
RWA RWA MCR RWA RWA MCR (8)
Rm Rm (8) Rm Rm Rm
Rm
1 Credit risk (excluding counterparty credit risk (CCR)) 674 198 680 504 77 533 462 530 455 608 53 191
2 Of which: standardised approach (SA) 200 791 213 908 23 091 112 172 13
3 Of which: foundation internal rating based (FIRB) approach - - - - - -
4 Of which: supervisory slotting approach - - - - - -
5 Of which: advanced internal ratings based (AIRB) approach 473 407 466 596 54 442 462 418 455 436 53 178
6 CCR 17 638 17 719 2 028 15 662 15 701 1 801
7 Of which: SA-CCR (9) 17 638 17 719 2 028 15 662 15 701 1 801
8 Of which: internal model method (IMM) - - - - - -
9 Of which: other CCR - - - - - -
10 Credit valuation adjustment (CVA) 9 225 9 469 1 061 9 225 9 469 1 061
11 Equity positions under the simple risk weigh approach 3 970 4 074 457 1 569 1 741 180
12 Equity investments in funds – look-through approach 7 894 8 435 908 508 507 59
13 Equity investments in funds – mandate-based approach - - - - - -
14 Equity investments in funds – fall-back approach - - - - - -
15 Settlement risk 789 1 359 91 717 792 82
16 Securitisation exposures in banking book 2 743 2 830 315 2 743 2 830 315
17 Of which: IRB ratings-based approach (SEC-IRBA) 2 743 2 830 315 2 743 2 830 315
Of which: securitisation external RBA (SEC-ERBA), including
18 internal assessment approach (IAA) - - - - - -
19 Of which: securitisation SA (SEC-SA) - - - - - -
20 Traded market risk 43 429 48 759 4 994 30 933 34 786 3 557
21 Of which: SA 20 243 19 736 2 328 7 747 5 763 891
22 Of which: internal model approach (IMA) 23 186 29 023 2 666 23 186 29 023 2 666
Capital charge for switch between trading book and banking
23 book - - - - - -
24 Operational risk 107 648 107 648 12 380 68 440 68 440 7 871
Non-customer assets 27 604 27 940 3 174 19 767 19 726 2 273
Amounts below the thresholds for deduction (subject to 250%
25 risk weight) 17 993 19 031 2 069 4 328 4 049 498
26 Floor adjustment (10) 7 998 7 998 920 5 763 5 763 663
Total (1+6+10+11+12+13+14+15+16+20+23+24+25+26+non-
27 customer assets) 921 129 935 766 105 930 622 185 619 412 71 551
1.4 CR8: RWA flow statements of credit risk exposures under IRB
30 Sep 2020
RWA amounts
(11)
Rm
1 RWA as at end of previous reporting period 466 596
2 Asset size 12 777
3 Asset quality (4 046)
4 Model updates -
5 Methodology and policy -
6 Acquisitions and disposals (954)
7 Foreign exchange movements (966)
8 Other -
9 RWA as at end of reporting period 473 407
1.5 MR2: RWA flow statements of market risk exposures under IMA
30 Sep 2020
Total
VaR sVaR IRC (12) CRM Other RWA
Rm Rm Rm Rm Rm Rm
1 RWA at previous quarter end 11 483 17 540 - - - 29 023
2 Movements in risk levels (2 882) (2 955) - - - (5 837)
3 Model updates/changes - - - - - -
4 Methodology and policy - - - - - -
5 Acquisitions and disposals - - - - - -
6 Other - - - - - -
7 RWA at end of reporting period 8 601 14 585 - - - 23 186
2. Leverage
Consistent with the treatment in table KM1, the leverage position below is shown on a regulatory, IFRS basis.
2.1 LR1: Summary comparison of accounting assets versus leverage ratio exposure measure
Group Bank
30 Sep 30 Jun 30 Sep 30 Jun
2020 2020 2020 2020
Rm Rm Rm Rm
1 Total consolidated assets 1 582 826 1 566 319 1 303 520 1 291 777
Adjustment for investments in banking, financial, insurance or commercial
entities that are consolidated for accounting purposes but outside the scope of
2 regulatory consolidation (35 524) (36 368) - -
Adjustment for fiduciary assets recognised on the balance sheet pursuant to the
operative accounting framework but excluded from the leverage ratio exposure
3 measure - - - -
4 Adjustments for derivative financial instruments (30 213) (42 372) (29 181) (41 501)
Adjustments for securities financing transactions (i.e. repos and similar secured
5 lending) - - - -
Adjustments for off-balance sheet items (i.e. conversion to credit equivalent
6 amounts of off-balance sheet exposures) 229 009 231 791 184 967 186 116
7 Other adjustments (12 321) (12 279) (9 626) (10 933)
8 Leverage ratio exposure measure 1 733 777 1 707 091 1 449 680 1 425 459
2.1 LR2: Leverage ratio common disclosure template
Group Bank
30 Sep 30 Jun 30 Sep 30 Jun
2020 2020 2020 2020
Rm Rm Rm Rm
On-balance sheet exposures
On-balance sheet exposures (excluding derivatives and securities financing
1 transactions (SFTs), but including collateral) 1 378 220 1 328 473 1 136 861 1 090 805
2 (Asset amounts deducted in determining Basel III Tier 1 capital) (11 471) (11 909) (9 964) (9 918)
Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of rows
3 1 and 2) 1 366 749 1 316 564 1 126 897 1 080 887
Derivative exposures
Replacement cost associated with all derivative transactions (where applicable net
4 of eligible cash variation margin and/ or with bilateral netting) 26 634 27 955 26 634 27 955
5 Add-on amounts for PFE associated with all derivative transactions 29 494 29 109 29 494 29 109
Gross-up for derivatives collateral provided where deducted from the balance
6 sheet assets pursuant to the operative accounting framework - - - -
(Deductions of receivable assets for cash variation margin provided in derivatives
7 transactions) - - - -
8 (Exempted CCP leg of client-cleared trade exposures) - - - -
9 Adjusted effective notional amount of written credit derivative 8 854 9 262 8 854 9 262
(Adjusted effective notional offsets and add-on deductions for written credit
10 derivatives) - - - -
11 Total derivative exposures (sum of rows 4 to 10) 64 982 66 326 64 982 66 326
Security financing transaction exposures
Gross SFT assets (with no recognition of netting), after adjusting for sale
12 accounting transactions 73 037 92 410 72 834 92 130
13 (Netted amounts of cash payables and cash receivables of gross SFT assets) - - - -
14 CCR exposure for SFT assets - - - -
15 Agent transaction exposures - - - -
16 Total securities financing transaction exposures (sum of rows 12 to 15) 73 037 92 410 72 834 92 130
Other off-balance sheet exposures
17 Off-balance sheet exposures at gross notional amount 374 591 376 196 312 787 313 631
18 (Adjustments for conversion to credit equivalent amounts) (145 582) (144 405) (127 820) (127 515)
19 Off-balance sheet items (sum of rows 17 and 18) 229 009 231 791 184 967 186 116
Capital and total exposures
20 Tier 1 capital (excluding unappropriated profits) 112 189 110 885 73 043 72 176
21 Total exposures (sum of lines 3, 11, 16 and 19) excluding IFRS 9 adjustment 1 733 777 1 707 091 1 449 680 1 425 459
Leverage ratio
22 Basel III leverage ratio (13) 6.5 6.5 5.0 5.1
3. Liquidity
3.1 LIQ1: Liquidity coverage ratio (LCR)
The Group LCR reflects an aggregation of the Bank LCR and the LCR of Absa Regional Operations (ARO). For this purpose, the Bank LCR is
calculated as a simple average of 90 calendar-day LCR observations and the ARO LCR is derived from a simple average of the relevant 3 month-
end data points.
Group Bank
30 Sep 2020 30 Sep 2020
Total Total Total Total
unweighted weighted unweighted weighted
value value value value
(average) (average) (average) (average)
Rm Rm Rm Rm
High-quality liquid assets (HQLA)
1 Total HQLA 235 845 219 074
Cash outflows
Retail deposits and deposits from small business customers of
2 which: 382 379 28 905 302 078 22 130
3 Stable deposits - - - -
4 Less stable deposits 382 379 28 905 302 078 22 130
5 Unsecured wholesale funding of which: 432 181 227 887 347 506 190 271
Operational deposits (all counterparties) and deposits in networks
6 of cooperative banks 135 609 33 902 135 609 33 902
7 Non-operational deposits (all counterparties) 288 743 186 156 205 196 149 668
8 Unsecured debt 7 829 7 829 6 701 6 701
9 Secured wholesale funding 523 523
10 Additional requirements of which: 312 180 40 936 281 843 38 143
Outflows related to derivative exposures and other collateral
11 requirements 18 610 18 610 18 422 18 422
12 Outflows related to loss of funding on debt products - - - -
13 Credit and liquidity facilities 293 570 22 326 263 421 19 721
14 Other contractual funding obligations - - - -
15 Other contingent funding obligations 194 696 9 428 171 486 8 431
16 Total cash outflows 307 679 259 498
Cash inflows
17 Secured lending (e.g. reverse repos) 40 503 5 833 40 503 5 833
18 Inflows from fully performing exposures 138 060 116 844 114 653 98 740
19 Other cash inflows 16 350 15 486 7 235 6 372
20 Total cash inflows 194 913 138 163 162 391 110 945
Total weighted value Total weighted value
High-quality liquid assets (HQLA)
21 Total HQLA (Rm) 235 845 219 074
22 Total net cash outflows (Rm) 169 516 148 553
23 LCR (%) 139 147
Notes:
(1) IFRS capital ratios (including unappropriated profits) are managed against Board capital target ranges.
(2) The 2020 minimum regulatory capital requirements of 11.5% includes the capital conservation buffer but excludes the bank-specific individual
capital requirement (Pillar 2B add-on).
(3) The difference between the CET1 and Total capital ratio on a transitional basis and the fully loaded ECL accounting model CET1 and Total
capital ratio is less than 5bps, hence no difference is discernible
(4) The countercyclical buffer is not required for banks in South Africa.
(5) SARB Directive 4/2020 requires the D-SIB add on to be disclosed. Previously the disclosure of the D-SIB add on was not a disclosure
requirement. Comparatives have been restated to allow for better comparability with prior period disclosures.
(6) The Group LCR reflects an aggregation of the Absa Bank LCR and the LCR of ARO. For this purpose, a simple average of the relevant 3
month-end data points is used in respect of ARO. In respect of Absa Bank, the LCR was calculated as a simple average of 90 calendar-day
LCR observations.
(7) Absa Bank Limited includes subsidiary undertakings, special-purpose entities, joint ventures, associates and offshore holdings.
(8) The 2020 minimum regulatory capital requirements of 11.5% includes the capital conservation buffer but excludes the bank-specific individual
capital requirement (Pillar 2B add-on).
(9) SA-CCR amount is calculated using the current exposure method (CEM).
(10) Includes the operational risk floor.
(11) IFSR9 RWA phase excluded
(12) IRC: incremental risk charge
(13) Numbers reported are on a regulatory quarter-end basis.
Johannesburg
19 November 2020
Enquiries:
Alan Hartdegen
E-mail: Alan.Hartdegen@absa.africa
Lead Independent Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited
Joint Sponsor:
Corporate and Investment Bank – a division of Absa Bank Limited
Date: 19-11-2020 07:33:00
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