Proshare To Release Its Report On The Impact of IFRS9 Rules On Banks 2019 Financials

Proshare

Tuesday, April 23, 2019  /  01.37PM  /  By Proshare MARKETS / Header Image Credit: Jabatix Net

 

RELEASE DATE FOR REPORT -  Thursday April 25, 2019

While banks’ welcomed the boost in profits from Day One adjustments in their 2018 financial results; the reality of the imminent impact of IFRS9 on the 2019 financial results is beginning to dawn on the industry; as financial controllers agonise over options open to them.

 

Proshare undertook an assessment into this reality and according to the Managing Editor, “will release its comprehensive report on the impact of IFRS9 on bank profit and loss statements and their statements of financial position in 2018 and the likely consequences for their books in 2019 on this date”. 

 

 

Background

Banks in Nigeria have witnessed shareholder funds shrink by almost a trillion naira (N1trn) in 2018 as new provisioning regulations contained in the International Financial Reporting Standards (IFRS9) accounting rules took a toll on their statements of financial positions. In addition, day one adjustments allowed by the accounting rules allowed most banks declare stronger than expected bottom line numbers.

 

The impact on ETI Plc Accounts for 2018 was a day one provisioning adjustment of about $299m, GT Bank Plc was $417m, Zenith Bank Plc $297m,  Access Bank Plc $222m and Stanbic IBTC Plc  $28m.

 

ETI saw itself gain from a $571m provisioning that was no longer necessary knocking provisioning down from an initial $811m (excluding day one provisions) to $240m in 2018. This is a reduction of -26.4% from provisioning of $326m in 2017. The trend was similar for other deposit money banks (DMB’s).


 

Table 1: ETI Provisioning for Non-Performing Loans

Proshare Nigeria Pvt. Ltd.

Source: Ecobank Audited Annual Accounts FY2018, Proshare

 

 

Table 2: IFRS9 Day One adjustments for Selected Nigerian Banks 2018

Proshare Nigeria Pvt. Ltd.

Source: Selected Nigerian Banks Audited Annual Accounts FY2018, Proshare


 

By Thursday April 25, 2019 Proshare will release its comprehensive report on the impact of IFRS9 on bank profit and loss statements and their statements of financial position in 2018 and the likely consequences for their books in 2019. 

 

The report looks at the consequence of the new international reporting standard on local shareholder equity, corporate bottom lines and bank fixed income asset portfolios.

 

Indeed in a recent report by analysts at UBA Plc, they note that given the realities of IFRS 9, “the perceived pricing inefficiency in the market will be gradually corrected, as we expect fund managers, banks, insurance and other investor categories to increasingly price-in credit risks in new issues in the Nigerian capital market”.

 

 

Take-Away

In other words, as banks shift their liabilities into fixed income instruments they must be increasingly sensitive to the forward-looking risk adjustments that must be built into provisioning and the pricing of these so-called “risk free” assets. 

 

 

Proshare Nigeria Pvt. Ltd.

 

 

Notes

·         IFRS 9 Will Impact Banks' Provisions | Moody's Analytics

IFRS 9 is the International Accounting Standards Board's (IASB) response to the financial crisis, aimed at improving the accounting and reporting of financial assets and liabilities. ... The classification and measurement of financial assets.

·        IAS 32 — Financial Instruments: Presentation - IAS Plus

IAS 32 is a companion to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments. ... IAS 39 was progressively replaced by IFRS 9 as the IASB completed the various phases of its financial instruments project.

·        IFRS 9 — Financial Instruments - IAS Plus

Does IFRS 9 replace IFRS 7? On 19 November 2013, the IASB issued IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) amending IFRS 9 to include the new general hedge accounting model, allow early adoption of the treatment of fair value changes due to own credit on liabilities designated at fair value ...

·        IFRS vs. US GAAP: What's the Difference? - Investopedia

·         IFRS 9 - Wikipedia

    What is the purpose of IFRS 9? IFRS 9. IFRS 9 is an International Financial Reporting Standard (IFRS) promulgated by the International Accounting Standards Board (IASB). It addresses the accounting for financial instruments. 

·         IFRS 9 What's new in financial instruments accounting for asset ... - PwC

·         IFRS 9 – What is involved and what are the implications for Internal ...

·         Disclosures under IFRS 9 – KPMG  Feb 09, 2018

 

 

 

Proshare Nigeria Pvt. Ltd.

 

 

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 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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