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Group Group Group Group
December December December December
2017 2016 2017 2016
Loans and advances to individuals Loans and advances to corporates
Impact on Profit before tax

20% reduction in expected cashflow from specif- (14,757,060) (2,204,979) (14,529,752) (2,204,979)
ically impaired loans and All customers rated 5 are
specifically impaired

Increase in LGD and PD by 2% (727,376) (21,795,115) (716,172) (21,129,199)
Decrease in LGDs and PD by 2% 647,444 20,940,405 637,471 20,288,377

Increase in LGDs and PD by 10% (3,477,014) (23,504,536) (3,423,456) (22,911,741)
Decrease in LGDs and PD by 10% 3,397,082 19,230,984 3,344,756 18,707,632

Statement of prudential adjustments

Provisions under prudential guidelines are determined using the time based provisioning regime prescribed by the Revised
Central Bank of Nigeria (CBN) Prudential Guidelines. This is at variance with the incurred loss model required by IFRS under
IAS 39. As a result of the differences in the methodology/provision regime, there will be variances in the impairments
allowances required under the two methodologies.

Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be
required to make provisions for loans as prescribed in the relevant IFRS Standards when IFRS is adopted. However, Banks
would be required to comply with the following:

a) Provisions for loans recognised in the profit and loss account should be determined based on the requirements
of IFRS. However, the IFRS provision should be compared with provisions determined under prudential guidelines
and the expected impact/changes in general reserves should be treated as follows:
• Prudential Provisions is greater than IFRS provisions; the excess provision resulting should be transferred
from the general reserve account to a “regulatory risk reserve”.
• Prudential Provisions is less than IFRS provisions; IFRS determined provision is charged to the statement of
comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter reversed to the
general reserve account
b) The non-distributable reserve should be classified under Tier 1 as part of the core capital.
The Bank has complied with the requirements of the guidelines as follows:

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Annual Report & Accounts 2017