Contents · with an increase of 218.0% in impairments from R13.3 million last year to R42.3 million for the current year, resulted in net profitafter tax declining 36.7% from R164.0

ANNUAL REPORT 2009

1 Financialhighlightsandfive-yearreview 2

2 Bankvisionandstructure 3

3 BoardofDirectors 4

4 ExecutiveCommittee 5

5 Chairman’sreview 6

6 ChiefExecutiveOfficer’sreport 8

7 ChiefFinancialOfficer’sreport 20

8 Corporategovernance 22

9 Riskmanagement 24

10 Directors’approval 30

11 Independentauditor’sreport 31

12 Directors’report 32

13 Secretary’sreport 33

14 Accountingpolicies 34

15 Groupfinancialstatements 51

15.1 Statementofcomprehensiveincome 52

15.2 Statementoffinancialposition 53

15.3 Statementofchangesinshareholders’equity 54

15.4 Statementofcashflows 55

15.5 Operationalandsegmentalreport 56

15.6 Statementoffinancialpositionclassificationsoffinancialinstruments 58

15.7 Notestothefinancialstatements 62

15.8 Analysisofinvestmentsinsubsidiaries 93

15.9 Value-addedstatement 94

16 Companyfinancialstatements 95

16.1 Statementofcomprehensiveincome 96

16.2 Statementoffinancialposition 97

16.3 Statementofchangesinshareholders’equity 98

16.4 Statementofcashflows 99

16.5 Statementoffinancialpositionclassificationsoffinancialinstruments 100

16.6 Notestothefinancialstatements 104

16.7 Value-addedstatement 135

17 Homeloanandmortgagedisclosures 136

18 Analysisofpreferenceshareholders 138

19 Capitaladequacyreport 139

20 Corporateinformation insidebackcover

Contents

MotorFinance

PropertyFinance

SupplierAssetFinance

ProfessionalFinance

Imperial Bank Annual Report 2009 1

for the year ended 31 December 2009

2005 2006 2007 2008 2009 %increase

R’000 R’000 R’000 R’000 R’000 over2008

Statement of financial position

Totalassets 21813999 30400161 38228338 48768095 55 659 647 14%

Grossloansandadvances 20258257 28358203 36222383 45546590 51 639 288 13%

Totalordinaryshareholders’equity 1522804 1608674 2397186 3062314 3 463 013 13%

Amountsowedtodepositors 19229181 27036305 34047864 43934979 50 087 002 14%

Statement of comprehensive incomeNetinterestincome 804164 1078629 1491359 1732543 2 033 065 17%

Profitfromoperationsbeforedirecttaxation 373507 506259 684084 543458 599 183 10%

Netprofitafterdirectandindirecttaxation 294483 386060 479154 361213 430 775 19%

Numberofemployees 793 873 1003 1148 1 102 (4%)

Ratios (%)

Returnontotalassets 1.5% 1.5% 1.4% 0.8% 0.8%

Returnonordinaryshareholders’equity 23.2% 24.7% 23.9% 13.2% 13.2%Non-interestrevenueasapercentageofoperatingincome 6.8% 6.9% 10.6% 7.8% 15.6%

Efficiency 41.3% 35.4% 30.2% 28.8% 28.0%Impairmentsasapercentageofgrossloansandadvances 2.8% 2.2% 2.5% 1.8% 2.3%Impairment lossesasapercentageofgrossloansandadvances 0.6% 0.9% 1.3% 1.7% 2.0%

Capitaladequacy 10.2% 10.5% 10.6% 11.1% 11.2%

2 Imperial Bank Annual Report 2009

Financial Highlights and Five-year Review


VISIONImperialBankhasathreefoldvision:• toachievesustainableprofitsexceedingitsshareholders’expectations;• topromoteclientservicestandardswhichbecomerespectedintheindustry;and• tobeaninspiringandhappyplacetoworkforourstaff.

STRUCTURE

LIMITED

Nedbank

Limited

50.1%

ImperialHoldings

Limited49.9%

MotorFinance

PropertyFinance

SupportDivisions:Finance,Human

Resources,InformationTechnologyandRisk


ProfessionalFinance


Bank Vision and Structure

Post-balance sheet eventSubsequent to year-end, regulatory

approvalintermsoftheBanksActof1990

wasobtainedtoenableNedbankLimitedto

acquire the 49.9% of the ordinary shares

held by Imperial Holdings Limited. All

conditionsprecedenttotheacquisitionhave

thereforebeenfulfilledandtheacquisition

willnowbeimplementedbytheparties.


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O S Arbee (50) BAcc,CA(SA),DipTax(Unisa),IMD(Switzerland)

Non-executivedirector.

ChiefExecutiveOfficerofImperialCarRental&Tourism.

Resignedwitheffectfrom10February2010.

L E Bakoro (36) BCom,CA(SA),HDipTaxLaw(Wits)

Independentnon-executivedirector.

C J W Ball (70) DipIuris(Wits),MA(Cambridge)


Independentnon-executivedirectorofNedbankGroupLimited.

H R Brody (45) BAcc,BAcc(Hons),CA(SA)

Non-executiveChairmanofImperialBankLimited.

ChiefExecutiveOfficerofImperialHoldingsLimited.

M J Croucamp (64) FIAC,AEP,AMP(Insead)


P C W Hibbit (60) BCom,CA(SA),HDipTaxLaw(Wits),AMP(Harvard)

ChiefFinancialOfficerofImperialBankLimited.

N P Mnxasana (53) BCom,BCompt(Hons),CA(SA)


Independentnon-executivedirectorofNedbankGroupLimited.

R van Wyk (53) BCom,BCompt(Hons),CA(SA),AMP(Insead)

ChiefExecutiveOfficerofImperialBankLimited.

P K Ward (57) BCom,CA(SA)


P A Wessels (51) BCom,CA(SA),HDipAdv.BankLaw,SAISB


ChiefRiskOfficerofNedbankGroupLimited.

Board of Directors


T C M Browse (39) B.Optom,ACMA

HeadofMotorFinance.TwelveyearsinbankingandfiveyearswithImperialBankLimited.

P C W Hibbit (60) BCom,CA(SA),HDipTaxLaw(Wits),AMP(Harvard)

ChiefFinancialOfficerofImperialBankLimited.Twenty-fouryearsinbankingandfiveyearswithImperialBankLimited.MemberoftheLargeCreditExposuresCommittee.

B S Motshoane (35) BCom,BCom(Hons),MBL(Unisa),IEDP(Bankseta)

Chief Risk Officer of Imperial Bank Limited. Eleven years in banking and two years withImperialBankLimited.MemberoftheLargeCreditExposuresCommittee.

R C Naicker (33) BScChemEng,BEng(Hons)(CumLaude),MEng(CumLaude)

HeadofSupplierAssetFinanceandHeadofIT.NineyearsinbankingandthreeyearswithImperialBankLimited.

P C Swanepoel (48) BCom,AMP(Oxford)

HeadofPropertyFinanceandHeadofProfessionalFinance.Twenty-sixyearsinbankingandsevenyearswithImperialBankLimited.

R van Wyk (53) BCom,BCompt(Hons),CA(SA),AMP(Insead)

ChiefExecutiveOfficerofImperialBankLimited.EighteenyearsinbankingandfiveyearswithImperialBankLimited.MemberoftheLargeCreditExposuresCommittee.

Executive Committee


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The ImperialBankGroup (theGroup)consistsof ImperialBank

Limited (Imperial Bank or the Bank) and all of its subsidiaries.

ImperialBank,whichwasincorporatedin1996,isanicheplayer

primarily engaged in asset-based financing. Nedbank Limited

(Nedbank) and Imperial Holdings Limited (Imperial Holdings)

respectively holds 50.1% and 49.9% of the share capital.

In terms of a Memorandum of Understanding signed by the

shareholders in 2001, Nedbank provides the funding for the

Bankaswellasriskmanagementsupportwhichincludeshaving

representativeson theBank’sCreditCommitteeandAssetand

LiabilityCommittee,whilst ImperialHoldingsprovides theBank

with access to its extensive network of business operations

throughoutSouthAfrica.

As announced during 2009, Nedbank has agreed, subject to

regulatory approval, to acquire ImperialHoldings’ shareholding

of49.9%oftheordinarysharesofImperialBank.Theregulatory

approvalintermsoftheBanksActof1990hassubsequentlybeen

receivedandtheBankwillbecomeawholly-ownedsubsidiaryof

Nedbank.

The first half of the year was characterised by a continuation

of theextremelydifficult trading conditionsexperienced in the

secondhalfof2008whichcontrastedwiththeimprovedtrading

conditionsinthesecondhalfoftheyear.Thebenefitsofthelower

interest rate environment are assistinghard-pressed consumers

resulting in an improvement in retail arrear accounts and a

reductioninthehighlevelofimpairmentsexperiencedinthefirst

halfoftheyear.Thismorefavourabletradingenvironmentenabled

theBanktoproducenetprofitaftertaxofR430.8millionwhichis

19.3%upontheR361.2millionofthepreviousyear.Duetolack

ofdemand for secondarycapitalaswellas theannouncement

of the shareholder transaction, the composition of capital was

notoptimisedresultinginaproportionallyhigherlevelofaverage

equity capital in 2009. Consequently return on equity remains

constant year-on-year at 13.2%. The efficiency ratio improved

from28.8% in2008 to28.0% in the current year. Loans and

advancesgrew12.8%fromR44.7billiontoR50.5billionasthe

Bankcontinuedtoattractgoodqualitynewbusiness.

Motor Finance had a significantly better year with net profit

aftertaxincreasing92.5%fromR164.5milliontoR316.6million

whilst loans and advances grew 16.1% from R28.0 billion to

R32.5billion.Asmentionedinlastyear’sreport,MotorFinance

was able to generate good quality business, predominantly in

the used car market, at appropriate pricing while maintaining

strong risk controls and a lean operating environment. This

trend continued during 2009. These factors combined with

the improved impairmentsduringthesecondhalf,enabledthe

divisiontoproducethesefarmorepleasingresults.

Asanticipated,PropertyFinancehashadadifficultyear.Whilst

therehasbeendemand for commercial propertyfinance there

hasbeenvirtuallynodemandforresidentialdevelopmentfinance.

Asa result, loansandadvancesgrew11.3% fromR8.0billion

toR8.9billion.Althoughcommercialpropertyfinanceproduces

goodqualityannuityincome,itdoesnotproducethesamelevel

ofnetinterestincomeascontributedbyresidentialdevelopment

finance.Thischangeinbusinessmixresultsinsignificantlylower

netinterest incomewhichdropped25.9%fromR328.1million

lastyeartoR243.2millionforthecurrentyear.This,combined

withan increaseof218.0%in impairmentsfromR13.3million

last year to R42.3 million for the current year, resulted in net

profitaftertaxdeclining36.7%fromR164.0millionfor2008to

R103.8millionfor2009.

ProfessionalFinancehadamuch improvedyearwithnetprofit

after tax increasing 42.7% from R17.8 million last year to

R25.4million for thecurrentyear.Thiswas largelyattributable

to improvedmargins,good costmanagementanda reduction

inimpairmentswhichreduced3.4%fromR26.7millionin2008

toR25.8millionfortheyearunderreview.Loansandadvances

increased16.3%fromR4.9billionlastyeartoR5.7billionforthe

currentyear.

SupplierAssetFinancehadadisappointingyear,withthedivision

being badly affected by the poor economic environment. The

division incurred a loss after tax of R12.7 million for the year

compared to a profit after tax of R37.3 million last year. This

wasmainlydue to impairmentswhich increased201.7% from

R29.2millionlastyeartoR88.1millionforthecurrentyear.Inline

withthestrategytoselectivelyconsidernewbusiness,loansand

advancesdeclined10.8%fromR3.7billionat31December2008

toR3.3billionat31December2009.

EconomyDuringthesecondhalfoftheyear,theeconomyshowedsigns

of a recovery. However, the recovery is fragile with continued

uncertainty in the market which could negatively impact on

the business and particularly the corporate and commercial

businesses.

AppreciationAsmentionedabove,theBankwillnowbecomeawholly-owned

subsidiary of Nedbank. Consequently, this is the final annual

Chairman’s Review


reporttobepublishedbytheBank,soIwouldliketotakethis

opportunityofexpressingmyappreciation to themanagement

andstaffoftheBank.Thisisayoungbankwhichhasachieved

significant growth, particularly over the last seven years and is

nowameaningfulplayer inasset-basedfinancewithamarket

share in excess of 15% in the instalment credit market. It is

pleasingthatthisgrowthhasbeenachievedwhilstmaintaining

prudent risk management and credit criteria. This has enabled

the Bank to weather the volatile markets and, despite the

depressedstateoftheeconomy,toproduceimprovedresultsfor

theyearunderreview.Thissustainedperformanceisduetothe

soundleadershipoftheBankcombinedwiththehardworkand

dedicationofbothmanagementandstaff.Iwouldliketothank

theExecutiveCommittee,managementandallstaffnotonlyfor

thegoodresultsofthecurrentyear,butalsoforbuildingtheBank

intothesignificantbusinessitistoday.

Iwouldalsoliketothankmyfellowdirectorsfortheirguidance

and wisdom and particularly for ensuring that the various

committeesoftheBoardrunsmoothly.

FinallyIwouldliketothanktheRegistrarofBanksandhisstafffor

theinterestthattheyhaveshownintheBankovertheyearsand

theguidancetheyhaveprovided.

H R Brody

Chairman


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WiththeworldandSouthAfricaneconomiesinrecession,2009

has been an extremely challenging year. It would, however,

appear that we are now through the worst of the storm and

although2010 isexpectedtobeanothertoughyear,thereare

signsofaslowrecovery.TheBankhadapoorfirstsixmonths,

but experienceda farbetter secondhalf,with the lastquarter

producing good results. As a result, the year ended on a

positive note, with net profit after tax increasing 19.3% from

R361.2milliontoR430.8millionandtheefficiencyratioshowing

further improvement from 28.8% to 28.0%. Due to lack of

demand for secondarycapitalaswellas theannouncementof

theshareholdertransaction,thecompositionofcapitalwasnot

optimised resulting in a proportionally higher level of average

equity capital in 2009. Consequently return on equity remains

constantyear-on-yearat13.2%.

Loans and advances grew 12.8% from R44.7 billion to

R50.5billion,withbothMotorFinanceandProfessionalFinance

achieving good growth of 16.1% and 16.3% respectively.

The growth of 11.3% in Property Finance was due to growth

in commercial and industrial finance as there was virtually no

demand for residential development finance. The Bank took a

cautious approach to Supplier Asset Finance and selectively

considered new business, with the result that these loans and

advancesdeclined10.8%fortheyear.

Chief Executive Officer’s Report


MotorFinance

PropertyFinance


ProfessionalFinance

Transformation

Socio-economicdevelopment

Appreciation

pages 10 – 11

pages 12 –13

pages 14 – 15

pages 16 – 17

page 18

pages 18 – 19

page 19


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Motor Finance


Review of the yearAlthough the sale of new passenger vehicles declinedsignificantlyby23.8%from295064unitsin2008to224708units in 2009, the demand for finance for used passengervehicles has remained relatively strong. As the division hasbeentraditionallywellrepresentedintheusedcarmarket,ithasbeenabletobenefitfromthisshiftinmarkettrends.

The division continues to receive good support from theImperialGroupdealerships,aswellasincreasedsupportfromotherlargedealershipsandtheindependentdealernetwork.Thesefactorshaveenabledthedivisiontoincreasenetloansandadvancesby16.1%,fromR28.0billiontoR32.5billion.

Thebenefitoftheinterestratecutsandamorestableeconomyin the second half of 2009 meant that credit impairmentsreduced significantly in the final quarter. Although theimpairmentcharge increased26.8%fromR631.3million in2008toR800.5millionin2009andtheratioofimpairmentlosses to average gross loans and advances deterioratedslightlyfrom2.5%to2.6%,thiswasanotableimprovementfromthe30June2009interimfigureof3.2%.

Theefficiencyratioshowedfurtherimprovementfrom26.4%to 23.4% and continues to be a significant competitiveadvantage.

Net profit after tax improved from R164.5 million toR316.6million.

OVERVIEWMotor Finance provides finance to the general public for the acquisition ofpassengervehicles.Thedivisionhascontinuedtofocusonitscoremarketofretailpassengervehiclefinanceviathemotordealeroriginationchannel.

TOTALNET PROFIT AFTER TAX2009(Rm) 316.6

2008(Rm) 164.5NET LOANS AND ADVANCES2009(Rm) 32500

2008(Rm) 28020IMPAIRMENTS TO GROSS LOANS AND ADVANCES (BALANCE SHEET)2009(%) 2.7

2008(%) 2.2ALLOCATED COSTS2009(Rm) 75.5

2008(Rm) 73.3EFFICIENCY2009(%) 23.4

2008(%) 26.4NUMBER OF EMPLOYEES2009 692

2008 717AFTER-TAX RETURN ON AVERAGE NET LOANS AND ADVANCES2009(%) 1.0

2008(%) 0.7AFTER-TAX RETURN ON EQUITY2009(%) 16.6

2008(%) 11.9IMPAIRMENT LOSSES AS A PERCENTAGE OF AVERAGE GROSS LOANS AND ADVANCES2009(%) 2.6

2008(%) 2.5


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Property Finance


Review of the yearDuring 2009, the residential development book decreasedduetoveryfewnewprojectsandtherun-offoftheexistingbook.Thecommercialandindustrialbookincreased22.8%,fromR5.7billiontoR7.0billionandnowrepresents79.2%ofthePropertyFinancebook.Marginsremainedunderpressureduringtheyear.

Thequalityofthebookremainssound,notwithstandingtheimpairmentlossesincreasingfrom0.2%in2008to0.5%ofaveragegrossloansandadvancesfortheyearunderreview.Operatingexpensescontinuetobewellcontrolled.

Theexpectationfor2010isthattherewillbesubduedgrowthintheCommercialandIndustrialmarketandafurtherdeclineintheResidentialDevelopmentmarket.

OVERVIEWProperty Finance provides finance for commercial, industrial and residentialdevelopment properties. The economic recession severely impacted theresidential development market; however, the commercial and industrialmarketswerelessseverelyimpacted.





2008(Rm) 25.4EFFICIENCY2009(%) 31.3





2008(%) 0.2


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Supplier Asset Finance


Review of the yearTheeconomicdownturnhasnegativelyaffecteddemandforfinance, resulting in customers delaying asset replacementsand growth programmes. In line with the strategy toselectivelyconsidernewbusiness,thenewdealflowdecreasedsignificantlyduringthecourseoftheyearresultinginadeclinein the division’s net loans and advances. The total turnoverdecreasedby57.7%fromR2.6billionin2008toR1.1billionin2009,withnetloansandadvancesdecreasing10.8%fromR3.7billiontoR3.3billion.ImpairmentlossesincreasedfromR29.2milliontoR88.1millionreflectingthedifficultmarketconditions,andthesubsequenteffectonbusinesscustomersinthistoughenvironment.

As a result of the increased level of impairment losses thedivisionincurredalossofR12.7millionfortheyearcomparedtoaprofitofR37.3millioninthepreviousyear.Thedivisionisconfidentthatthe impairmentpositionhasbottomedoutandthequalityofthecurrentbookwillreflecttheimprovingeconomicenvironmentin2010.

OVERVIEWSupplier Asset Finance is focused on financing equipment for the businesscommunity and on providing asset-based finance to mostly medium-sizedcompanies in the construction, mining, aviation, transport and material-handlingsectors.

TOTALNET (LOSS)/PROFIT AFTER TAX2009(Rm) (12.7)




2008(Rm) 19.3EFFICIENCY2009(%) 55.6


2008 80AFTER-TAX RETURN ON AVERAGE NET LOANS AND ADVANCES2009(%) (0.4)

2008(%) 0.9AFTER-TAX RETURN ON EQUITY2009(%) (4.8)


2008(%) 0.7


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Professional Finance


Review of the yearNetloansandadvancesincreasedby16.3%.Thelowmarginswereaddressedduringtheyearbychangesinpricing,resultinginanincreaseinthenetmarginandagrowthof11.8%innetinterestincome.

Operating expenses were well managed during the year,resulting in an improved efficiency ratio, from 53.4% to50.9%.

Impairment losses have shown an improvement from thepreviousyear,withthechargedecreasingfrom0.6%to0.5%oftheaveragegrossloansandadvances.

Netprofitsafter tax increased42.7%fromR17.8million toR25.4million.

OVERVIEWProfessional Finance provides asset-based financial products to professionalswithin South Africa. It operates from a head office and six branch officescountrywide, delivering services to its target market across the country andmakingfinanceavailableforresidentialproperties,motorvehicles,equipmentand practice needs by way of mortgage loans, instalment sale facilities andloans.


2008(Rm) 17.8NET LOANS AND ADVANCES

2009(Rm) 5691



2008(Rm) 21.3EFFICIENCY

2009(%) 50.9

2008(%) 53.4NUMBER OF EMPLOYEES

2009 75




2008(%) 0.6


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TransformationImperialBankregardstransformationasakeybusinessimperative

inachievinglong-termsustainablegrowth.Itispleasingtoreport

thattheBankmet,andinsomecases,exceededitstransformation

objectivesfor2009.TheBankincreasedthetotalrepresentation

ofblackemployeesatmanagerial levelfrom39.0%in2008to

42.0% in 2009. Targets were exceeded at junior and middle

managementlevels,aswasthedisabilitytarget.

The talentmanagementanddevelopment strategycontributed

significantlytowardstheBank’sretentionofkeystaffaswellasto

thehighperformanceculture.

Thetrainingbudgetwasincreasedto4.9%oftotalcosts,alarge

portion of which was spent on the development of previously

disadvantagedindividuals.

Adult Basic Education and Training (ABET) is being conducted

withgreatsuccesswithintheBank,andall10learnersenrolled

ontheprogrammesuccessfullycompletedit.

Allleadershipdevelopmentprogrammesarealignedtotheinternal

talent development pipeline in order to harness development

efforts within the Bank. As a result of this, the participation

rate in the internal Leadership Development Programme was

increasedfor2009.Thenumberof learnersontheFoundation

Management Programme (FMP) was increased from 18 to 33,

and the Management Development Programme (MDP) was

increased from 13 to 17 learners. External programmes were

identified for employees at senior levels. Four employees were

enrolledontheSeniorManagementProgramme(SMP)launched

in 2009 and three employees completed the GIBS Executive

DevelopmentProgramme.

In alignment with the internal development strategy, the Bank

facilitated various internal programmes aimed at enhancing

technical skills. To date, 28 employees have been developed

throughtheseprogrammes.

Culturemanagementprogrammeswereimplementedtofacilitate

a positive work environment within the Bank. All employees

participated in diversity management training workshops and

employmentequityawarenessprogrammesthatwereconducted

acrosstheBank.

A success formula was developed and implemented with

the involvement of employees to effectively promote good

employmentpracticesandvalueswithintheBank.Surveyswere

conductedquarterly toensure thatagreedworkprinciplesand

valueswereeffectivelyimplementedwithintheBank.

TheEmpowerdexBEEauditconductedinJuly2009indicatesthat

theBankhasachievedalevelfourrating.At31December2009,

the internal unaudited scorecard indicates that the Bank has

furtherimprovedtoachievealevelthreeBEErating.

Socio-economic DevelopmentAs a responsible corporate citizen, Imperial Bank recognises

that education is critical in achieving sustainable growth and

developmentinSouthAfrica.During2009,theBankcontinued

its contribution towards upgrading education programmes

and systems within disadvantaged communities. The following

initiativesweresupported:

• St. Mary’s Children’s Home

oRunningcostsasasupplementtothestategrants.

• East Rand Schools

ThreeSchoolsintheEastRandbenefitedasfollows:

oFeeding schemes forall schools toprovide food for2500

children,threedaysaweek.

oTeachers’ programme – All teachers involved in creative

teachertrainingdonebytheKobusNeethlingGroup.

oGrade11learnersassessedonsubjectchoice.

oDonated450desksand750chairstoGracelandeducation

centre.

• Cape Town – Sevile School

oTheBankdonated funds for a librarianat Sevile School in

Khayelitsha.

oTeachers’ programme – All teachers involved in creative

teachertrainingdonebytheKobusNeethlingGroup.

• Action for the Deaf and Blind

oAJaws10softwareprogramwasdonated,aspartofacall

centreforblindpeople.ThesupplierwasSensorySolutions.

• Westbury Secondary School and Bernard Isaacs Primary

School

oTeachers’ programme – All teachers involved in advanced

creativeteachertrainingbytheKobusNeethlingGroup.

• Schaumburgh Combined School – Skeerpoort

oTwomobileclassrooms.

• Bursary

oA bursary to study Bachelor of Business Science (BBusSc)

Finance at UCT was granted to a learner from Graceland

whohadachievedfivedistinctionsinMatric.

Chief Executive Officer’s Report (continued)


• Tihololehelo Junior Primary School

oFeedingscheme–threetimesperweek.

oRepairandmaintenanceofschoolfacilities.

At31December2009,theBankcontributedR4.6milliontowards

socio-economicdevelopmentinitiatives.

AppreciationAs the Bank will now become a wholly-owned subsidiary of

Nedbank, this is the last annual report to bepublishedby the

Bank.

Despite the very tough trading environment and the negative

effectthattheshareholdertransactionishavingonstaffmorale,

the Bank was able to produce encouraging results. This has

beenachieved through thededicationandcommitmentof the

wholeImperialBankteam.Iwouldliketothankthemallfortheir

tremendouscontributionunderverydifficultcircumstances.

TheguidanceandsupportoftheBoardhas,onceagain,beenof

greatbenefit.Theshareholdershavealsobeenverysupportiveof

thebusinessand Iwould liketotakethisopportunitytothank

Imperial Holdings for their role as shareholder from inception

of thebusiness. Their support andencouragementhasbeena

consistentandkeyfactorinthegrowthoftheBank.

Finally,IwouldliketothanktheRegistrarofBanksandhisstaff

fortheirguidanceandsupport.

R van Wyk

Chief Executive Officer


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Chief Financial Officer’s Report

The financial statements are prepared in accordance withInternational Financial Reporting Standards. There have beennochangesinaccountingpoliciesduringtheyearunderreview,exceptfortheamendmentstoIAS1–PresentationofFinancialStatements.

Net profit after tax increased 19.3% from R361.2 million toR430.8 million, the return on ordinary shareholders’ equityremainedconstantat13.2%whilsttheefficiencyratioimprovedfrom28.8%to28.0%.

Theimprovednetprofitaftertaxwasduetoa22.6%increaseingrossincomeoff-setbya36.6%increaseinimpairmentsanda19.3%increaseinoperatingexpenses.Inaddition,theeffectivetaxratedecreasedfrom33.5%to28.1%.

Statement of Comprehensive Income

Net interest income (NII)

NII increased17.4%fromR1732.5milliontoR2033.1millionwhich was marginally lower than the average balance sheetgrowthof20.0%.Themarginremainedrelativelyconstantyear-on-year moving from 4.2% for 2008 to 4.3% for 2009. Thebettermarginsonnewbusinesswereoff-setby thechange inmixinPropertyFinanceandanincreaseinnon-performingloans.

Non-interest revenue (NIR)

NIRincreased127.3%fromR87.6milliontoR199.1million.TheanalysisofNIRisasfollows:

2009 2008

Rm Rm

Commissionsandfees 162.1 97.3

Sundryincome 22.7 19.7

184.8 117.0

Marktomarketprofit/(loss) 14.3 (29.4)

199.1 87.6

Marktomarketprofitandlossoccursthroughdifferencesinfairvalueadjustments todesignatedfixed rateassetsand liabilitiesandtheinterestrateswapshedgingthesedesignatedassetsandliabilities.

Impairment losses on loans and advances

Theimpairmentlosseshaveincreased36.6%fromR700.5milliontoR956.6million,andareanalysedasfollows:

%ofaverage

grossadvances

Impairmentlossesasa%

ofaveragegrossadvances

2009 2008

MotorFinance 64.8% 2.6% 2.5%

PropertyFinance 17.4% 0.5% 0.2%

SupplierAssetFinance 6.6% 2.5% 0.7%

ProfessionalFinance 11.2% 0.5% 0.6%

The increased impairments in Supplier Asset Finance reflectthe stress experienced by small and medium sized enterprises,particularlyinthetransportandaviationsectorswhiletheincreaseofimpairmentsinPropertyFinancereflectthepoorstateoftheresidentialpropertymarket.

Operating expenses

Operating expenses increased 19.3% from R524.8 million in2008 to R625.9 million for the year under review. This is lessthanthegrowthof22.6%ingrossincomeand,asaresult,theefficiencyratioimprovedfrom28.8%to28.0%.

Indirect taxation

Indirect taxation declined 1.7% from R51.3 million in 2008 toR50.4million in thecurrentyearwhichwasmainlydue to theloweracquisitioncostsfortheyear.

Direct taxation

Theeffective taxation rateof28.1% is in linewith theofficialrate.


Statement of Financial Position

Capital

Duringtheyear,NedbankcontributedanadditionalR350milliionofTierIIcapitalwhich,togetherwiththeincreaseindistributablereserves, improved the capital adequacy ratio from 11.1% to11.2%. Average ordinary shareholders’ equity increased from7.2%for2008to7.4%fortheyearunderreview.Thereturnonordinaryshareholders’equityfortheyearunderreviewremainsconstantat13.2%.

Loans and advances

Net loans and advances grew 12.8% from R44.7 billion toR50.5billion.Therewascontinueddemandforpassengervehiclefinance,particularlyintheusedcarsegment.ThisenabledMotorFinance to increase net loans and advances by 16.1% whilstmaintaininghealthypricingandstrongriskcontrols.

DemandforProfessionalFinanceimprovedsteadilyinthesecondhalf of the year enabling the division to grow net loans andadvances 16.3% from R4.9 billion at 31 December 2008 toR5.7billionat31December2009.

Property Finance increased net loans and advances by 11.3%from R8.0 billion at 31 December 2008 to R8.9 billion at31 December 2009. The growth occurred in commercial andindustrial property finance where there was steady demandthrough the year. There was very little demand for residentialdevelopmentfinance.

Net loans and advances in Supplier Asset Finance declined by10.8% from R3.7 billion at 31 December 2008 to R3.3 billionat31December2009,asthedivisionselectivelyconsiderednewbusinesswhilefocusingonreturningthebusinesstoprofitability.

P C W Hibbit Chief Financial Officer


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TheBoardofDirectors(theBoard)hasassessedtheeffectivenessofthecorporategovernancestructuresdetailedbelowandhasfoundthemtorepresentanadequateframeworkforcorporategovernanceinImperialBank.

Board of DirectorsThe directors are responsible for ensuring that an adequateand effective process of corporate governance exists and ismaintained,whichisconsistentwiththenature,complexityandrisk inherent in the Bank’s on- and off-balance sheet activitiesand which responds to change in theBank’s environment andconditions.

TheBoardmeetsatleastquarterlytoevaluateperformance,assessriskandreviewthestrategicdirectionoftheBank.TheBoardissupportedbyvarioussub-committees,whichhelp it toexecuteits responsibilities. All directors have access to management,includingthecompanysecretaryandthecomplianceofficer,andto such information as is needed to carry out their duties andresponsibilitiesfullyandeffectively.

Feedback received at board meetings includes managementinformation, divisional reports and reports on progress againststrategies. The Board approves the strategy and budgets fortheBank in addition to riskmanagement policies, frameworksand mandates. All meetings of the Board and the Board sub-committeesareminuted.

Non-executive directors: H R Brody (Chairman), O S Arbee,LEBakoro,CJWBall,MJCroucamp,NPMnxasana,PKWardandPAWessels*

Executivedirectors:RvanWykandPCWHibbit

*MrPAWesselsisanexecutiveoftheBank’sholdingcompany(Nedbank)andassuchisdeemedtobeanexecutivedirectorofImperialBankLimitedintermsoftheBanksActRegulations.

Board of Directors’ Attendance Schedule

MEMBER BOARD AUDITRISKANDCAPITAL

MANAGEMENTDIRECTORS’

AFFAIRS REMUNERATION

HRBrody 5/5 5/5 4/4 4/4

OSArbee 5/5

LEBakoro 5/5 4/5 4/5 3/4

CJWBall 5/5 4/5 4/5 3/4

MJCroucamp 5/5 5/5 4/4

PCWHibbit 5/5

NPMnxasana 4/5 4/5

RvanWyk 5/5

PKWard 5/5 5/5 1/1*

PAWessels 5/5 3/5 3/4

(Numeratorisnumberofmeetingsattended;denominatorisnumberofmeetingsheld)

*MrPKWardwasappointedasamemberoftheRiskandCapitalManagementCommitteeon1October2009.

Corporate Governance


Audit CommitteeThe Audit Committee meets at least four times a year, withthe internal and external auditors and members of the Bank’sexecutivemanagementtoevaluatetheadequacyandefficiencyoftheinternalcontrolsystems,accountingpractices,informationsystems and auditing processes applied within the Bank. Themain functions and responsibilities of the committee are setout in the terms of reference, which are addressed at AuditCommitteemeetings.Inaccordancewiththetermsofreference,theAuditCommitteeconductsanannualself-assessmentofitseffectiveness.

Asakeycomponentoftheindependentassuranceframework,the Audit Committee reviewed, and was satisfied with, theconfirmationoftheindependenceandobjectivityoftheexternalauditors.

The internal audit function is independently performed byNedbank InternalAudit (NIA).NIA’sresponsibility forevaluatingthe effectiveness of processes by which risks are identified,managed and controlled, is set out in its charter. NIA reportsdirectlytotheAuditCommitteeandtheChiefFinancialOfficeron their activities, which include the reviews of reliability andintegrityoffinancialandoperatinginformationandeffectivenessofoperationalactivitiesinconductingbusiness.

Members:PKWard(Chairmanfrom1October2009),LEBakoro,CJWBallandNPMnxasana

Remuneration CommitteeThe Remuneration Committee is responsible for monitoringthe human resources function of the Bank and determiningguidelines for remuneration and terms of employment. Thecommittee assists the Board in creating an environment andinstillingaphilosophyofremunerationintheBankthatattracts,retains, motivates and rewards staff in order to implementsuccessfully,theBank’sstrategyandachievetheBank’sobjectivesonsustainabilityandtransformation.

Thecommitteereviewsallaspectsoftheremunerationpolicies,including incentive schemes, profit-sharing schemes and anyotherremuneration-relatedschemesoftheBank.ThecommitteeisalsoresponsibleformonitoringtheBank’stalentdevelopmentandmanagementaswellassuccessionplanningprocesses.

Thecommitteemeetsatleastfourtimesayear.Theperformanceof executive and senior management is measured againstpredetermined objectives (both financial and non-financial).Salaries are reviewed annually and where appropriateperformance-relatedbonusesareawardedtoemployees,basedonbusinessunitperformance.

Members:MJCroucamp(Chairman),CJWBall,HRBrodyandPAWessels

Risk and Capital Management CommitteeTheRiskandCapitalManagementCommitteeassiststheBoardinitsevaluationoftheadequacyandefficiencyoftheriskpolicies,procedures,practicesandcontrolsappliedwithintheBank.Themainfunctionsandresponsibilitiesofthecommitteearesetoutin the termsof reference,which are regularly reviewedby thecommittee.Thecommitteemeetsatleastfourtimesayear.

Members: M J Croucamp (Chairman), L E Bakoro, C J W Ball,HRBrody,PKWardandPAWessels

Directors’ Affairs CommitteeThe Directors’ Affairs Committee assists the Board in itsdetermination and evaluation of the adequacy, efficiency andappropriateness of the corporate governance structure andpractices of the Bank. The committee conducts an annualassessment of the effectiveness and competence of the Boardand its sub-committees. It also establishes and maintains aboard directorship continuity programme. The main functionsandresponsibilitiesofthecommitteearesetoutinthetermsofreferencewhicharereviewedateachDirectors’AffairsCommitteemeeting.Thecommitteemeetsatleastfourtimesayear.

In accordance with the terms of reference, the committeedeterminestheremunerationofthenon-executivedirectorsandtheChairmanconductsanannualassessmentoftheeffectivenessandperformanceoftheindividualnon-executivedirectors.

Members:HRBrody(Chairman)andLEBakoro

Large Credit Exposures CommitteeTheLargeCreditExposuresCommitteeoverseesallcreditgrantinginexcessof10%oftheBank’snetqualifyingcapital.

Members: C J W Ball (Chairman), H R Brody, P A Wessels,RvanWyk,PCWHibbitandBSMotshoane


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Enterprise-wide RiskAs depicted in the diagram on pages 26 and 27, ImperialBank’s Board of Directors approved and adopted a three-tierriskmanagementaccountabilitystructurewhichisoperationallyeffective.TheBoardisultimatelyresponsibleforriskmanagementinImperialBankbutmonitorsspecificriskareasthroughitsvariouscommittees.Prior to theescalationand reportingof risk issuesto board level, risks are addressed by the Bank’s managementthroughtheappropriatelymandatedexecutivecommitteesandforums.The lowest level in the three-tier structure is individualaccountabilityforrisktaking.ThisallowsImperialBanktobalancethebestcombinationofentrepreneurialandinnovativerisktakingwithsoundindependentoversightandgovernancestructures.

Credit RiskThe credit environment for most of 2009 is apparent in thefollowingcomparativeratios:

2009 2008 %change

Grossloansandadvances R51.6 billion R45.5billion 13.4

Defaultedloans R1 623.4 million R909.6million 78.5

Defaultratio 3.1% 2.0%

Impairmentlosses(as%ofaveragegrossloansandadvances) 2.0% 1.7%

Motor FinanceMotorFinancecontinuedtoweatherthedownturnandbenefitedfromthedeclininginterestrateenvironmentduring2009.Grossloans and advances increased from R28.7 billion in 2008 toR33.4billionattheendof2009,anincreaseof16.5%.ThestrongdemandforusedvehiclesandMotorFinance’sstrengthinusedvehiclefinancecontributedsignificantlytoachievingthisgrowth.Thequalityofthenewbusinesshasalsoimprovedduetotherisk-basedpricingandadealerincentiveprogrammewhichrewardsthedealer forgoodqualitybusiness. Thequalityof theoverallloanbookremainsacceptablewithdelinquencies(thecombinedoverdueanddefaultedportfolios)showingan improvingtrend.Collectionscontinuetobeanareaofmanagementfocus.

The overdue portfolio remained unchanged at R2.05 billion atend of both 2008 and 2009. Defaulted loans increased fromR651.1millionin2008toR838.3million,primarilyasaresultoflargernumbersofNationalCreditAct(NCA)accountsbreachingthedefaultpoint.ImpairmentlossespostedtothestatementofcomprehensiveincomeincreasedfromR631.3millionin2008toR800.5millionfortheyearunderreview.TheselossescanpartiallybeattributedtothegrowthinthenumberofborrowersseekingreliefwithintheprovisionsoftheNCA.Longwork-outtime-linesanddelayedrepaymentprospectscharacterisethisportfolio.Theslowerportfoliogrowthrecordedduring2009,relativeto2008,andtheincreasedimpairmentlossespostedtothestatementofcomprehensiveincomeresultedinthedefaultratio(impairment

lossesinthestatementofcomprehensiveincomeasapercentageof the averagegross loans andadvances) deteriorating slightlyfrom2.5%in2008to2.6%in2009.

The portfolio has shown an improving trend in the last fourmonthsof2009.Theimprovementcanmainlybeascribedtothelaggingeffectoftheinterestratereductionsandtherecoveryineconomicactivityinthesameperiod.

Property FinanceDespite a depressed fixed property market during 2009,PropertyFinanceincreasedtheirgross loansandadvancesfromR8.0billiontoR8.9billion.Thedemandforresidentialpropertiesremainedvery lowin2009,therebychangingtheportfoliomixto long-term commercial loans. The overdue portfolio reducedfrom R364.9 million in 2008 to R223.6 million in 2009 whilstthe defaulted loan portfolio increased from R131.5 millionto R464.4 million over the same period. This increase in thedefaultedloanportfolioisduetotheoccurrenceofafewhigh-value,butwellsecured,loanfailures.Thestrongsecurityvaluesunderpinning the exposures minimises the impact on creditimpairment losseswhich increased fromR13.3million in2008to R42.3 million for the year under review. The quality of theportfolio remains good and the collection of past due loans isundercontrol.

Professional FinanceProfessionalFinancepostedasteadygrowthinthegrossloansandadvancesportfolio,increasingitfromR5.0billiontoR5.8billionattheendof2009.Thequalityoftheportfolioremainsgooddespiteahigher incidenceof overdue anddefaulted exposures,whichremainsinlinewithmarketconditions.Overdueloansincreasedfrom R45.8 million for 2008 to R79.5 million for 2009, whilstdefaulted loans increased fromR56.4million toR113.9millionover the same period. A large proportion of the delinquentexposuresconsistofhousingloansthatareadequatelysecuredbythevalueofthefixedpropertyassets.Thetotalcreditimpairmentslossesinthestatementofcomprehensiveincomedeclinedduring2009fromR26.7millionin2008,toR25.8millionin2009.Thisisreflectedinthedefaultratiowhichimprovedmarginallyfrom0.6%for2008to0.5%for2009.

Supplier Asset FinanceSupplierAssetFinance,asafinancierofmoveableassetstothecorporateclient,wasseverely impacteduponbythedifficultiesexperiencedwithintheminingandtransportindustries.Thelowdemand for yellow equipment and transport assets combinedwiththestrategytoselectivelyconsidernewbusinessresultedinadeclineintheportfolioduring2009.Grossloansandadvancesdeclined from R3.8 billion in 2008 to R3.4 billion in 2009. Asaresultofthedifficultmarketenvironment, loandelinquenciesincreased significantly, with overdue loans increasing fromR80.8millionin2008toR88.5millionin2009andthedefaultedportfolio increased from R70.3 million to R206.7 million overthe same period. Transport operators have been particularlyhard hit due to lower payloads emanating from the miningindustryandtheresultantrequestsforloanrestructuresincreased

Risk Management


significantly.Thedeclineintheportfolioresultedinthestatementof comprehensive income impairment losses increasing fromR29.2 million for 2008 to R88.1 million for 2009. The declineintheportfolioandthehigherimpairmentlossesresultedinthedefaultratiodeterioratingfrom0.7%for2008to2.5%for2009.Themanagementteamremainskeenlyawareoftheimportanceof the collections function and a hands-on approach is beingfollowedtoensurethatthequalityoftheportfolioremainswithinacceptablelevels.

AllimpairmentlossesintheBankareaccountedforinlinewithInternational Accounting Standard 39 – Financial Instruments:MeasurementandRecognition(IAS39).Thisstandardisbasedonanincurredlossconceptwherebyadefaultmusthaveoccurredbefore any asset impairment charge is permissible. However,IAS39 includestheconceptofan“incurredbutnotreported”charge (IBNR) and Imperial Bank carries an IBNR impairmentagainst loans and advances that are classified current (not inarrear) and loans that arepastdueup to90days. The triggereventsarelinkedtoprobabilityofdefaultandrecoveryratesasdeterminedbythenewBaselIIparametersandsubstantiatedbyhistoricallossexperience.

CreditapprovalintheMotorFinanceretailbookissubstantiallyautomated. The performance of the credit scoring model iscloselymonitoredbymanagementandupdatedwhenconsiderednecessary.Decisionoverridesaretightlymanagedtoensuretheintegrityofcreditquality.

Withinthewholesaleportfolios(SupplierAssetFinance/PropertyFinance/Professional Finance), credit approvals are extendedthroughacombinationofdivisionalinternalmandateauthoritiesand Board-approved credit committee structures. Divisionsenjoy credit approval mandates ranging up to R20 million,whichdecisionsaresubject to independentoverviewbyGroupCreditRiskMonitoring.LoanapplicationsaboveR20millionareconsideredbytheManagementCreditCommittee(>R20millionto R50 million) and the Exco Credit Committee (>R50 millionto R120 million). The Board Large Exposures Committee, asconstituted in terms of section 73 of the Banks Act of 1990,considers all loan applications with exposure greater thanR120million,against thepositive recommendationof theExcoCreditCommittee.

Credit quality is monitored monthly by the Bank’s executivemanagement teamandquarterly by theBoard appointed sub-committee, and the Board Risk and Capital ManagementCommittee.

AcentralindependentCreditRiskunitassessestheadequacyofcredit skills, structures, mandate levels, overviews, restructuresandbestpracticepolicydevelopment.Thisunitalsocheckstheregulatorycreditriskreturnsforaccuracy.

Eachmonth,theBankholdsImpairmentCommitteemeetingstoanalysealldefaultedloansindetail.Securityvaluesareconfirmedand the necessary impairments raised and recorded in theminutes.

ComplianceTheBank’scompliancestructuremeetstheBanksActrequirements

ofunfetteredanddirectaccesstotheChairmanoftheBoard.

The Bank follows the principle of centralised compliance

monitoring with the operating divisions being responsible for

ongoingoperationalcompliancethroughdedicatedresources.

Thecompliancefunctionoperatesaspartoftheenterprise-wide

risk management framework of the Bank, in order to ensure

that theBankcontinuouslymanages its regulatory risk, that is,

theriskthattheBankdoesnotcomplywithapplicablelawsand

regulationsorsupervisoryrequirements.

Foradministrativepurposes,thecomplianceofficerreportsdirectly

tothechiefriskofficeroftheBank,butforcompliancematters

hasthefollowingreportinglinesinlinewiththeregulations:

• TheChiefExecutiveOfficer

• NedbankLimitedGroupgovernanceandcomplianceofficer

• TheDirectors’AffairsCommittee

• TheChairmanoftheBoard

The compliance officer of the Bank attends the following

meetings:

Meeting/Committee Ex officio

EnterpriseRiskCommittee ✓

InformationTechnologySteeringCommittee ✓

ExecutiveCommittee ✓

Directors’AffairsCommittee ✓

AuditCommittee ✓

RiskCommittee ✓

Boardmeeting ✓

CHIEFEXECUTIVE

OFFICER

CHIEFRISK

OFFICER CHIEFCOMPLIANCE

OFFICER

DIRECTORS’AFFAIRS

COMMITTEE

BOARDReporting

line on non-compliance matters


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Overview of Imperial Bank’s enterprise-wide risk management framework (ERMF)

Enterprise-wide risk

Risk universeACCOUNTING

AND TAXATION RISK

OPERATIONAL RISK

INSURANCE AND ASSURANCE RISK

NEW BUSINESS RISK

INVESTMENT RISK CAPITAL RISKMARKET RISK

LIQUIDITY RISKINFORMATION

TECHNOLOGY RISKCREDIT RISK COMPLIANCE RISK STRATEGIC RISK REPUTATIONAL RISK

SOCIAL AND ENVIRONMENTAL RISK

TRANSFORMATION RISK

PEOPLE RISKTrading book

Banking book

Key features of the ERMF

• The Board of Directors is ultimately responsible for all risks in the Bank, approval and oversight of the risk measurement and management system and the setting of risk appetite.

• The Board is assisted by four Board sub-committees.

• The Exco is also assisted by sub-committees.

•The Chief Risk Officer reports to the Chief Executive Officer, who has ultimate individual accountability for risk.

• Credit and Risk division is independent of the operational business units.

• Strong emphasis in the ERMF is placed on individual accountability and not on undue reliance on committees. • Primary responsibility and accountability for the risks originating in the business are clearly assigned to the respective business unit heads. • Risk management frameworks and risk officers are in place across all the business units and for all major risk types.

1ST LINE OF DEFENCE EXECUTIVE COMMITTEE (EXCO)

Board Committees Audit Committee Risk and Capital Management Committee Directors’ Affairs Committee Remuneration Committee

EXCO Committees EXCO Enterprise Risk Committee (ERCO) Assets and Liabilities Committee (ALCO) IT Steering Committee Exco Credit Committee

Management Credit Committees ERCO EXCO Human Resources and Transformation Committee

Business Units

Motor Finance, Property Finance, Supplier Asset Finance and Professional Finance

• Business Unit (BU) Excos/Risk Forums.

• Business Unit Risk Heads/Officers (Reporting to Business Unit Heads).

Support Areas Human Resources, Information Technology

Central Financial Risk and Capital Management

FINANCE DIVISION

Chief Financial Officer – Peter Hibbit

BASEL II AND CAPITAL MANAGEMENT

Manny Lazera

ASSET and LIABILITY MANAGEMENT

Manny Lazera

TAXATION

Stephan Potgieter

FINANCIAL and MANAGEMENT ACCOUNTING

Stephan Potgieter

REGULATORY REPORTING

Nirvana Kassie

INVESTOR RELATIONS

Peter Hibbit

2ND LINE OF DEFENCE INDEPENDENT GROUP RISK

Independent functions for Group policy, risk monitoring, model validation and challenge.

Championing of Basel II,Enterprise-wide Risk Management and “world-class at managing risk”.

CREDIT and RISK DIVISION ENTERPRISE GOVERNANCE AND COMPLIANCE

Chief Risk Officer – Ben Motshoane Chief Compliance Officer – Johan Breedt

GROUP RISK SERVICES

Nick Jacobs

LEGAL

Sharm Siphali

ENTERPRISE-WIDE RISK MANAGEMENT

Charles Mavimbela

OPERATIONAL RISK MANAGEMENT

Charles Mavimbela

CREDIT RISK MONITORING

Reuben Smith

MARKET RISK MONITORING

Anny Pachyannis-Alman

COMPANY SECRETARY and CORPORATE GOVERNANCE

Gcobisa Tyusha

3RD LINE OF DEFENCE INTERNAL AND EXTERNAL AUDIT

Independent Assurance

INTERNAL AUDIT EXTERNAL AUDIT

Nedbank Group Internal Audit DELOITTE & TOUCHE

Risk Management (continued)


Overview of Imperial Bank’s enterprise-wide risk management framework (ERMF)

Enterprise-wide risk

Risk universeACCOUNTING

AND TAXATION RISK

OPERATIONAL RISK

INSURANCE AND ASSURANCE RISK

NEW BUSINESS RISK

INVESTMENT RISK CAPITAL RISKMARKET RISK

LIQUIDITY RISKINFORMATION

TECHNOLOGY RISKCREDIT RISK COMPLIANCE RISK STRATEGIC RISK REPUTATIONAL RISK

SOCIAL AND ENVIRONMENTAL RISK

TRANSFORMATION RISK

PEOPLE RISKTrading book

Banking book

Key features of the ERMF

• The Board of Directors is ultimately responsible for all risks in the Bank, approval and oversight of the risk measurement and management system and the setting of risk appetite.

• The Board is assisted by four Board sub-committees.

• The Exco is also assisted by sub-committees.

•The Chief Risk Officer reports to the Chief Executive Officer, who has ultimate individual accountability for risk.

• Credit and Risk division is independent of the operational business units.

• Strong emphasis in the ERMF is placed on individual accountability and not on undue reliance on committees. • Primary responsibility and accountability for the risks originating in the business are clearly assigned to the respective business unit heads. • Risk management frameworks and risk officers are in place across all the business units and for all major risk types.

1ST LINE OF DEFENCE EXECUTIVE COMMITTEE (EXCO)

Board Committees Audit Committee Risk and Capital Management Committee Directors’ Affairs Committee Remuneration Committee

EXCO Committees EXCO Enterprise Risk Committee (ERCO) Assets and Liabilities Committee (ALCO) IT Steering Committee Exco Credit Committee

Management Credit Committees ERCO EXCO Human Resources and Transformation Committee

Business Units

Motor Finance, Property Finance, Supplier Asset Finance and Professional Finance

• Business Unit (BU) Excos/Risk Forums.

• Business Unit Risk Heads/Officers (Reporting to Business Unit Heads).

Support Areas Human Resources, Information Technology

Central Financial Risk and Capital Management

FINANCE DIVISION

Chief Financial Officer – Peter Hibbit

BASEL II AND CAPITAL MANAGEMENT

Manny Lazera

ASSET and LIABILITY MANAGEMENT

Manny Lazera

TAXATION

Stephan Potgieter

FINANCIAL and MANAGEMENT ACCOUNTING

Stephan Potgieter

REGULATORY REPORTING

Nirvana Kassie

INVESTOR RELATIONS

Peter Hibbit

2ND LINE OF DEFENCE INDEPENDENT GROUP RISK

Independent functions for Group policy, risk monitoring, model validation and challenge.

Championing of Basel II,Enterprise-wide Risk Management and “world-class at managing risk”.

CREDIT and RISK DIVISION ENTERPRISE GOVERNANCE AND COMPLIANCE

Chief Risk Officer – Ben Motshoane Chief Compliance Officer – Johan Breedt

GROUP RISK SERVICES

Nick Jacobs

LEGAL

Sharm Siphali

ENTERPRISE-WIDE RISK MANAGEMENT

Charles Mavimbela

OPERATIONAL RISK MANAGEMENT

Charles Mavimbela

CREDIT RISK MONITORING

Reuben Smith

MARKET RISK MONITORING

Anny Pachyannis-Alman

COMPANY SECRETARY and CORPORATE GOVERNANCE

Gcobisa Tyusha

3RD LINE OF DEFENCE INTERNAL AND EXTERNAL AUDIT

Independent Assurance

INTERNAL AUDIT EXTERNAL AUDIT

Nedbank Group Internal Audit DELOITTE & TOUCHE


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Statusupdatewithregardstothefollowing:

Issue Status

Complianceresourcing Inplace

Complianceandcorporategovernanceawareness Ongoingtraining

Implementationofcomplianceriskmanagementframework

Continuousrefinement

Monitoringofcompliancerisks Inplace,ongoing

RegularcompliancereportingtotheBoard,Directors’AffairsCommitteeandregulators Yes

Remedialactiontakenbyoperationalandsupportunitswhencompliancebreachesaredetected Yes

Ensurethatrequirementsofnewlegislationareimplementedandthatupdatingforexistinglegislationtakesplace Yes

Statutoryreportingtoregulators Uptodateandcomplete

Regulatorysanction None

Operational RiskThe Bank has adopted and received approval to applythe Standardised Approach of Basel II with effect from1 January 2008. All approval conditions were met, except forthe formalisationof theoperational riskappetite.TheBusinessContinuityManagement(BCM)hasbeenimplementedandwasfullyoperational fromMarch2009.Theplanwas last tested inOctober2009andthetestwassuccessful.Theoperationalriskappetitewillbe formalisedduring thefirsthalfof2010as thethree-yearlossdatabasehasnowbeenpopulated.

Notabledeliverablesachievedin2009were:

1.Populationofthelossdatabaseoverathree-yearperiod.

2. ImplementationofafullyfunctionalBCMstrategy.

3.Controlself-assessmentworkshopsconducted.

4. ReviewoftheOperationalRiskframeworkincludingallrelatedpolicies.

Asset and Liability Risk Management TheBank’sAssetandLiabilityCommittee(ALCO)meetsmonthlytomanageliquidityandinterestraterisk,andreportstotheBoardRiskandCapitalManagementCommitteequarterly.

TheBankhasnoappetiteormandatetotakeproprietarytradingrisk or market risk. Liquidity risk is negligible given Nedbank’scommitment toprovide fundsas required.However, theALCOdoes monitor maturity mismatches and fixed rate hedgeeffectiveness. It also ensures liquid assets are maintained atrequiredlevelsandinstrumentspurchasedarecost-effective.

TheBankdoesnotfundadvancesinforeigncurrencyandhasnocross-border exposure. This removes foreignexchange risk andcurrencytranslationrisk.

Capital Management The Bank’s operations are limited to South Africa and as suchregulated solely by the South African Reserve Bank (SARB). Indetermining the appropriate level of capital, the Bank ensurescompliancewithregulatoryrequirementsbuthasalsocompletedan Internal Capital Adequacy and Assessment Process (ICAAP)during 2008. Given the pending transaction between theshareholders, the ICAAP has not been reviewed during 2009and management ensured that the capital adequacy ratiowas maintained above 10.5%, which is above the regulatoryrequirement.Thecurrentcapitaladequacyratiois11.2%.

In view of the volatile market conditions and the pendingtransaction between the shareholders, a Tier II long-termsubordinatedbondofR350millionwastransacteddirectlywithNedbankratherthanthroughthecapitalmarkets.

Therehavebeennoordinarydividendpaymentsduringthe2009financialyear.

ImperialBankhascompliedwithregulatorycapitalrequirementsfor the duration of 2009. Capital is allocated to the businessunitswithintheBankbasedontheirrisk-weightedassetsontheBaselIIstandardisedapproach.

Basel II Pillar 1

Although the measurement of credit risk in the Bank’s largestdivision, Motor Finance, is closely aligned to the advancedinternal ratings based (AIRB) approach, the other divisions donothavesufficienthistoryorvolumeto facilitate reliablecreditriskmeasurementunderthisapproach.TheBankhasthereforedecided to adopt the standard approach until such time as alldivisionsareabletomeaningfullyassesscreditriskundertheAIRBapproach.

Pillar 2

Inviewofthetransactionbetweentheshareholders, theSARBcancelled the ICAAP review during the year. Management hashoweverensuredthatthecapitaladequacyratiowasmaintainedat all times above 10.5% which is above the regulatoryrequirement.

Pillar 3

TheBankhascompliedwiththeMarketDisciplinerequirementsunderPillarIIIofBaselIIandthedetailsthereofarepublishedonourwebsite.

Economic Capital Economic capital provides a consistent quantification andcomparisonofriskacrosstheoperatingdivisionsandrisktypes.Thisalsoenablesafocusonbothdownsiderisk(riskprotection)and upside potential (earnings). It highlights where the Bankshouldgrowanddiversifyorwhere itneedsrestructuring in itscreditandmarketriskbusinesses.

Risk Management (continued)


TheBankdoesnotcarryanysignificantmarketorinvestmentriskandthereforecalculatescapitalagainstcreditandoperationalrisktoarriveatthetotaleconomiccapitalrequirementoftheBank.Thisiscomparedwithavailablefinancialresourcesandisusedasthebasisforcapitalallocation.EconomicprofitisviewedasakeyfinancialperformanceindicatorandduringthepastyeartheBankcommencedmeasurementofdivisionalperformanceutilisingthisas an indicator. It should be noted that the impairment loss isnot adjusted to reflect a look-through approach in calculatingthedisclosedeconomicprofit.Thecapitalthatisallocatedtotheoperatingdivisionsiscalculatedontheirrespectiverisk-weightedassets,basedontheBank’soverallcapitalposition.

B S MotshoaneChief Risk Officer


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Responsibility for the Annual Financial StatementsThedirectors are responsible for themaintenanceof adequate

accounting records and the preparation and integrity of the

annual financial statements and the related information. The

external auditors are responsible for reporting on the fair

presentation of the annual financial statements. The annual

financial statements have been prepared in accordance with

International Financial Reporting Standards and in the manner

requiredbytheCompaniesActofSouthAfrica.

ThedirectorsarealsoresponsiblefortheGroupandCompany’s

systemsofinternalandfinancialcontrol.Thesearedesignedto

providereasonable,butnotabsoluteassuranceastothereliability

oftheannualfinancialstatements,andtoadequatelysafeguard,

verifyandmaintainaccountabilityoftheassets,andtoprevent

anddetectmisstatementandloss.

Toenablethedirectorstomeettheseresponsibilities:

• TheBoardandmanagementsetstandards,andmanagement

implements systems of internal control and accounting and

information systems aimed at providing reasonable, but not

absolute,assurancethatassetsaresafeguardedandthatrisks

oferror,fraudor lossarereducedinacost-effectivemanner.

Thesecontrols, contained inpoliciesandprocedures, include

theproperdelegationofresponsibilitiesandauthoritieswithin

aclearlydefinedframework,effectiveaccountingprocedures

andadequatesegregationofduties.

• The Imperial Bank Audit Committee meets with the internal

and external auditors and members of the Bank’s executive

management, to review accounting, auditing, financial

reporting and internal control matters. The internal audit

function, responsible to the Audit Committee, conducts

operational,financialandspecificad-hocauditsinconsultation

withtheexternalauditors.

• TheBoardRiskandCapitalManagementCommitteeevaluates

and monitors risks identified by management and monitors

compliancewithpoliciesandproceduresandreportsitsfindings

to the Board. They also set prudential limits for particular

categoriesofbusiness.

• The Directors’ Affairs Committee assists the Board in its

determinationandevaluationoftheadequacy,efficiencyand

appropriateness of the corporate governance structure and

practicesoftheBank.Italsoestablishesandmaintainsaboard

directorshipcontinuityprogramme.

Theannualfinancialstatementshavebeenpreparedonthegoing

concern basis, since the directors have every reason to believe

thattheGroupandCompanyhasadequateresourcesinplaceto

continueinoperationfortheforeseeablefuture.

The annual financial statements have been audited by an

independentauditingfirm.Theirreportispresentedonpage31

ofthesefinancialstatements.

Approval of Annual Financial StatementsThe annual financial statements which appear on pages 52 to

139 were approved by the Board of Directors on 19 February

2010andaresignedonitsbehalfby:

H R Brody R van Wyk

Chairman Chief Executive Officer

19February2010

Directors’ Approval


Audit.Tax.Consulting.Financial Advisory.Corporate Finance. Deloitte Touche TohmatsuMember of

National Executive: GG Gelink Chief Executive AE Swiegers Chief Operating Officer GM Pinnock AuditDL Kennedy Tax & Legal and Financial Advisory L Geeringh Consulting L Bam Corporate FinanceCR Beukman Finance TJ Brown Clients & Markets NT Mtoba Chairman of the Board

A full list of partners and directors is available on request

B-BBEE rating: Level 3 contributor/AA (certified by Empowerdex)

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BANK LIMITEDReport on the Financial Statements

We have audited the accompanying Group annual financial

statementssetoutonpages52to93andtheCompanyannual

financialstatementsofImperialBankLimitedsetoutonpages96

to134,whichcomprisethedirectors’report,setoutonpage32,

thestatementsoffinancialpositionasat31December2009,the

statementsofcomprehensiveincome,statementsofchangesin

equityandthestatementsofcashflowfortheyearthenended,

and a summary of significant accounting policies and other

explanatorynotes.

Directors’ responsibility for the financial statements

The directors are responsible for the preparation and fair

presentation of these financial statements in accordance with

International FinancialReportingStandards,and in themanner

requiredbytheCompaniesActofSouthAfrica.Thisresponsibility

includes: designing, implementing and maintaining internal

control relevant to the preparation and fair presentation of

financial statements that are free from material misstatement,

whetherduetofraudorerror;selectingandapplyingappropriate

accountingpolicies; andmaking accounting estimates that are

reasonableinthecircumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those

standards require that we comply with ethical requirements

andplanandperformtheaudittoobtainreasonableassurance

whether the financial statements are free from material

misstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidence

about theamountsanddisclosures in thefinancial statements.

The procedures selected depend on the auditor’s judgement,

includingtheassessmentoftherisksofmaterialmisstatementof

thefinancialstatements,whetherduetofraudorerror.Inmaking

those risk assessments, the auditor considers internal control

relevant to theentity’spreparationandfairpresentationof the

financial statements in order to design audit procedures that

areappropriateinthecircumstances,butnotforthepurposeof

expressinganopinionontheeffectivenessoftheentity’sinternal

control.Anauditalsoincludesevaluatingtheappropriatenessof

accountingprinciplesusedandthereasonablenessofaccounting

estimatesmadebythedirectors,aswellasevaluatingtheoverall

financialstatementpresentation.

Webelievethattheauditevidencewehaveobtainedissufficient

andappropriatetoprovideabasisforourauditopinion.

Opinion

In our opinion, the Group and Company financial statements

presentfairly,inallmaterialrespects,thefinancialpositionofthe

GroupandCompanyasat31December2009,andthefinancial

performanceandthecashflowsoftheGroupandCompanyfor

the year thenended inaccordancewith International Financial

Reporting Standards, and in the manner required by the

CompaniesActofSouthAfrica.

Deloitte & Touche

PerLitoNunes

Partner

19February2010


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for the year ended 31 December 2009

Thedirectorspresenttheirreportwhichformspartoftheaudited

annualfinancialstatementsoftheGroupandCompanyforthe

yearended31December2009.

Nature of BusinessImperialBankLimitedisaregisteredbankthatoffersarangeof

bankingandfinancialservicesfocusingprimarilyonasset-based

financetotheconsumerandcorporatemarkets.

Holding Company and Other ShareholderNedbank Limited holds 50.1% of the issued share capital of

ImperialBankLimitedand theother49.9% isheldby Imperial

HoldingsLimited.Theultimateholdingcompany isOldMutual

plcwhichisincorporatedintheUnitedKingdom.

Financial ResultsTheresultsoftheGroupandCompanyaresetoutintheannual

financial statements and accompanying notes. The accounting

policiescomplywithInternationalFinancialReportingStandards.

Share CapitalTheauthorisedandissuedsharecapitaloftheBankisdetailedin

note19totheGroupfinancialstatements.Noequityshareswere

issuedduringtheyear.

Subsidiary CompaniesTheCompany’sinterestinsubsidiarycompaniesissetoutinthe

analysisofinvestmentsinsubsidiariesonpage93totheGroup

financialstatements.

TheMotor FinanceCorporation (Proprietary) Limited (a 100%-

owned subsidiary) recorded an after-tax profit of R0 million

(2008:R0million)fortheyear.

NRB Risk Solutions (NRB) (a 100%-owned subsidiary) recorded

anafter-taxprofitofR18.1million (2008:R0.7million loss) for

theyear.

Interest of DirectorsNodirectorholdsadirectbeneficialinterestintheordinaryshares

oftheCompany.

DividendsPreferencedividendNo7of374.73973centspersharehasbeen

declaredfortheperiodfrom1July2009to31December2009,

payableonMonday,29March2010,toshareholdersofthenon-

redeemable,non-participating,non-cumulativepreferenceshares

recordedinthebooksoftheCompanyatthecloseofbusinesson

Friday,26March2010.

Directors and SecretaryDetailsofthedirectorsandsecretaryoftheCompanyduringthe

yearandatthedateofthisreportareasfollows:

Directors

OSArbee*

LEBakoro

CJWBall

HRBrody Chairman

MJCroucamp

PCWHibbit** ChiefFinancialOfficer

MPMnxasana

RvanWyk** ChiefExecutiveOfficer

PKWard

PAWessels

*Resignedwitheffectfrom10February2010

**Executivedirectors

ThecompanysecretaryisGTyushawhoseaddressesare:

Business address Postal address

24AchterRoad POBox6093

Paulshof Rivonia

Sunninghill 2128

2191

Directors’ Interest in ContractsAtnotimeduringtheyearunderreviewwereanycontractsof

significanceenteredintorelativetotheGroup’sandCompany’s

businessinwhichadirectorhadamaterialpersonalinterest.

Post-balance Sheet EventsSubsequent to year-end, regulatory approval in terms of the

Banks Act of 1990 was obtained to enable Nedbank Limited

to acquire the 49.9% of the ordinary shares held by Imperial

Holdings Limited. All conditions precedent to the acquisition

have therefore been fulfilled and the acquisition will now be

implementedby theparties.Other than theabovementioned,

thedirectorsarenotawareofanyothermatteroreventwhichis

materialtothefinancialaffairsoftheGroupandCompanythat

hasoccurredbetweenthebalancesheetdateandthedateofthe

approvalofthefinancialstatements.

AuditorsIt is not a requirement for Imperial Bank Limited to engage

the services of two independent firms of auditors. The Board

thereforeresolvedtoreappointDeloitte&Toucheassoleauditors

oftheBank.TheAuditCommitteehasconsideredandissatisfied

withtheindependenceoftheexternalauditor.

19February2010

Directors’ Report


Intermsofsection268G(d)oftheCompaniesAct61of1973,as

amended,Icertifythattothebestofmyknowledgeandbelief,

ImperialBankLimitedhaslodgedwiththeRegistrarofCompanies

for the year ended31December2009, all such returnsas are

requiredofapubliccompanyintermsoftheCompaniesAct,and

thatallsuchreturnsaretrue,correctanduptodate.

G Tyusha

Company Secretary

Paulshof

19February2010

Secretary’s Report


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1Thefollowingprincipalaccountingpolicieshavebeenapplied

consistentlyindealingwithitemsthatareconsideredmaterial

inrelationtotheImperialBankGroupandCompanyfinancial

statements. The Bank’s accounting policies are consistent

with the Nedbank Group. There have been no changes in

accountingpoliciesduringtheyearunderreview,exceptforthe

amendmentstoIAS1–PresentationofFinancialStatements.

1.1 Basis of preparation

Thefinancialstatementshavebeenpreparedonagoing

concernbasisandhavebeenpreparedonaconsistent

basiswiththeprioryear.

The Group and Company financial statements have

beenpreparedinaccordancewithInternationalFinancial

ReportingStandards(IFRS)andtherequirementsofthe

SouthAfricanCompaniesAct,1973,asamended.

ThefinancialstatementsarepresentedinSouthAfrican

Rands(ZAR),thefunctionalcurrencyoftheGroup,and

unless otherwise stated, are rounded to the nearest

thousandRands.Theyarepreparedonthehistoricalcost

basisofaccounting,exceptfor:

• non-current assets anddisposalgroupsheld for sale

thatarestatedat the lowerofcarryingamountand

fairvaluelesscoststosell;and

• the following assets and liabilities that are stated at

theirfairvalue:

– derivativefinancialinstruments;

– financial assets and financial liabilities classified as

held-for-trading;

– financialassetsandfinancialliabilitiesdesignatedat

fairvaluethroughprofitorloss;

– financialassetsclassifiedasavailable-for-sale;and

– investmentpropertyandowner-occupiedproperties.

Theaccountingpoliciessetoutbelowhavebeenapplied

consistentlybyallGroupentitiestoallperiodspresented

inpreparingtheseGroupfinancialstatements.

1.2 Foreign currency transactions

Transactions in foreign currencies are translated into

SouthAfricanRandsatthedateofsuchtransactionsby

applyingthespotexchangeraterulingatthetransaction

datetotheforeigncurrencyamounts.

Monetary assets and liabilities in foreign currencies

are translated into the functional currency at the spot

exchangeraterulingatthebalancesheetdate.

Exchange differences that arise on the settlement and

translation of monetary items at rates different from

thoseatwhichtheyweretranslatedoninitialrecognition

duringtheperiodorinpreviousfinancialstatementsare

recognisedinprofitorlossintheperiodtheyarise.

Non-monetary assets and liabilities denominated in

foreign currencies that are measured at fair value are

translatedintothefunctionalcurrencyusingtheforeign

exchange rate ruling at the date when the fair values

weredetermined.

Non-monetary assets and liabilities denominated in

foreigncurrenciesthataremeasuredintermsofhistorical

cost are converted into the functional currency at the

rate of exchange ruling at the date of the transaction

andarenotsubsequentlyretranslated.

Exchange differences for non-monetary items are

recognised consistently with gains and losses on such

items.Forexample,exchangedifferencesrelatingtoan

itemforwhichgainsand lossesarerecogniseddirectly

inequityarerecognisedinequity.Conversely,exchange

differencesfornon-monetaryitemsforwhichgainsand

lossesarerecognisedinprofitorloss,arerecognisedin

profitorlossintheperiodinwhichtheyarise.

1.3 Group accounting

(i) Subsidiary undertakings and special-purpose

entities

Group

Subsidiary undertakings are those entities,

includingunincorporatedentitiessuchastrustsand

partnerships, which are controlled by the Group.

Control is defined as the power to govern the

financialandoperatingpoliciesofanentitysoasto

obtainbenefitsfromitsactivities.

Control is presumed to exist when the Group

owns directly or indirectly through subsidiaries

more than half of the voting power of an entity

unless, in exceptional circumstances, it can clearly

be demonstrated that such ownership does not

constitute control. The existence and effect of

potentialvotingrightsthatarecurrentlyexercisable

orconvertible,includingpotentialvotingrightsheld

by other entities, are considered when assessing

whethertheGrouphascontrol.

Subsidiaries include special-purpose entities (SPEs)

thatarecreatedtoaccomplishanarrow,well-defined

objective which may take the form of a company,

corporation, trust, partnership or unincorporated

entity.TheassessmentofcontrolforSPEsisbasedon

thesubstanceoftherelationshipbetweentheGroup

Accounting Policies


andtheSPE.SPEsinwhichtheGroupholdshalfor

less of the voting rights, but which are controlled

by the Group by retaining the majority of risks or

benefits, are consolidated in the Group financial

statements.

The Group financial statements include the assets,

liabilitiesandresultsoftheCompanyandsubsidiaries

controlledbytheGroupfromthedateofacquisition

until the date the Group ceases to control the

subsidiary.

Intragroup balances, transactions, income and

expenses, and profits and losses are eliminated

in preparation of the Group financial statements.

Unrealised losses are not eliminated to the extent

thattheyprovideobjectiveevidenceofimpairment.

Company

Subsidiaries, associates and joint ventures that are

notclassifiedasheldforsaleareaccountedforatcost

oratfairvaluethroughprofitandlossinaccordance

withIAS39–FinancialInstruments:Recognitionand

Measurement.

(ii)Acquisitions and disposals of stakes in Group

companies

Acquisitions of subsidiaries (entities acquired)

and businesses (assets and liabilities acquired) are

accounted for using the purchase method. The

cost of a business combination ismeasured as the

aggregateofthefairvalues(atthedateofexchange)

ofassetsgiven, liabilities incurredorassumed,and

equityinstrumentsissuedbytheGroupinexchange

for control of the acquiree. For all transactions

subsequentto31December2008acquisition-related

costs are recognised in profit or loss as incurred.

Prior to this date all acquisition-related costs were

capitalisedtothecostoftheacquisition.

Where appropriate, the cost of acquisition that

includes any asset or liability resulting from a

contingent consideration arrangement is measured

atitsacquisition-datefairvalue.Subsequentchanges

in such fair valuesare adjustedagainst the costof

acquisition where they qualify as measurement

periodadjustments(seebelow).Allothersubsequent

changesinthefairvalueofcontingentconsideration

classifiedasanassetorliabilityareaccountedforin

accordancewiththerelevant IFRSs.Changes inthe

fairvalueofcontingentconsiderationthathavebeen

classifiedasequityarenotrecognised.

The acquiree’s identifiable assets, liabilities and

contingent liabilities that meet the conditions for

recognitionunder IFRS3 –BusinessCombinations,

are recognised at their fair value at the date of

acquisition,except:

• deferred tax assets or liabilities which are

recognised and measured in accordance with

IAS 12 – Income Taxes, and liabilities or assets

related toemployeebenefitarrangementswhich

arerecognisedandmeasuredinaccordancewith

IAS19–EmployeeBenefits;

• liabilities or equity instruments that relate to

the replacement, by the Group, of an acquiree’s

share-based payment awards are measured in

accordancewith IFRS2–Share-basedPayments;

and

• assets(ordisposalgroups)thatareclassifiedasheld

for sale inaccordancewith IFRS5–Non-current

AssetsHeldforSaleandDiscontinuedOperations

aremeasuredinaccordancewiththatStandard.

If the initial accounting forabusiness combination

is incompletebytheendofthereportingperiodin

which the combination occurs, the Group reports

provisional amounts for the items for which the

accounting is incomplete. Where provisional

amounts were reported, these are adjusted during

the measurement period (see below). Additional

assets or liabilities are recognised to reflect any

new information obtained about the facts and

circumstances that existed as at the date of

acquisition,thatifknown,wouldhaveaffectedthe

amountsrecognisedonthatdate.

Themeasurementperiodistheperiodfromthedate

ofacquisitiontothedatetheGroupreceivescomplete

informationaboutthefactsandcircumstancesthat

existedasattheacquisitiondate.Thismeasurement

periodissubjecttoamaximumofonereportingyear.

Whereabusinesscombinationisachievedinstages,

theGroup’spreviouslyheldinterestsintheacquired

entityareremeasuredtofairvalueattheacquisition

date on the date the Group attains control and

the resulting gain or loss, if any, is recognised in

profit or loss. Amounts arising from interests in

theacquireepriortotheacquisitiondatethathave

previouslybeen recognised inother comprehensive

incomearereclassifiedtoprofitorloss,wheresuch


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treatmentwouldbeappropriateifthatinterestwere

disposedof.

Non-controlling interests in the net assets of

consolidated subsidiaries are identified separately

from the Group’s equity therein. The interest of

non-controlling shareholders is initially measured

eitheratfairvalueoratthenon-controllinginterest’s

proportionateshareoftheacquiree’sidentifiablenet

assets. The choice of measurement basis is made

on an acquisition-by-acquisition basis. Subsequent

to the acquisition, non-controlling interests consist

of theamountattributedtosuch interestsat initial

recognitionandthenon-controllinginterest’sshareof

changesinequitysincethedateofthecombination.

The difference between the proceeds from the

disposalofasubsidiaryanditscarryingamountasat

thedateofdisposal,includingthecumulativeamount

of any exchangedifferences that are recognised in

equity that relatetothesubsidiary, is recognised in

the Group statement of comprehensive income as

thegainorlossonthedisposalofthesubsidiary.

ChangesintheGroup’sinterest inasubsidiarythat

donotresultinalossofcontrolareaccountedforas

equity transactions (transactionswithowners).Any

differencebetween theamountbywhich thenon-

controlling interestsareadjustedand the fair value

of theconsiderationpaidor received, is recognised

directlyinequityandattributedtotheGroup.

This accounting policy has been adopted for all

transactions after 1 January 2009. The accounting

forpriortransactionshavenotbeenrestated.

(iii)Goodwill

Goodwill arising on the acquisition of a subsidiary

is recognised as an asset on the date that control

is acquired, being the acquisition date. Goodwill

is measured as the excess of the sum of the

consideration transferred over the amount of any

non-controllinginterest intheacquireeandthefair

valueoftheacquirer’spreviouslyheldequityinterest.

If,afterreassessment,theGroup’sinterestinthenet

fair value of the acquiree’s identifiable net assets

exceeds the sum of the consideration transferred

plus the amount of any non-controlling interest

in the acquiree and the fair valueof the acquirer’s

previouslyheldequityinterest(ifany),thisexcessis

recognisedimmediatelyinprofitorlossasabargain

purchasegain.

Goodwill is not amortised but is reviewed for

impairmentat leastonceannually.Any impairment

lossisrecognisedimmediatelyinprofitorlossandis

notsubsequentlyreversed.

Ondisposalofasubsidiarytheattributableamount

ofgoodwill is included in thedeterminationof the

profitorlossondisposal.

(iv)Partnerships

ThejointventurebetweenImperialBankLimited(IBL)

andAssociatedMotorHoldings(AMH)istreatedasa

partnershipasitdoesnotmeettherequirementsof

IAS31–InvestmentsinJointVentures.Thespecified

incomeaccrues to IBLandvests in theventure. IBL

cedes 50% of the rights, title and interest of the

specifiedincomeandexpensestoAMHasandwhen

itaccrues.

In order to comply with the requirements of the

South African Reserve Bank, AMH’s half share in

the interests of the partnership, is recorded as a

marketing fee in the statement of comprehensive

income.

1.4 Financial instruments

Financial instruments as reflected on the statement of

financialpositionincludeallfinancialassetsandfinancial

liabilities, including derivative instruments, but exclude

investments in subsidiaries, associated companies

and joint ventures, property and equipment, deferred

taxation, taxation payable, intangible assets, leases

and employee benefit plans. Financial instruments are

accounted for under IAS 32 – Financial Instruments:

Disclosure and Presentation, IAS 39 – Financial

Instruments:RecognitionandMeasurementand IFRS7

–FinancialInstruments:Disclosure.

TheGroupdoesnotcurrentlyapplyhedgeaccounting.

Thisaccountingpolicyshouldbereadinconjunctionwith

theGroup’scategorisedstatementoffinancialposition

andtheGroup’sriskmanagementpolicies.

(i) Initial recognition

Financialinstrumentsarerecognisedonthestatement

of financial position when the Group becomes a

party to the contractual provisions of the financial

instrument. All purchases of financial assets that

require delivery within the time frame established

by regulationormarketconvention (“regularway”

purchases)arerecognisedattradedate,whichisthe

dateonwhichtheGroupcommitstopurchasethe

financial asset. The liability to pay for regular way

purchasesoffinancialassets is recognisedontrade

Accounting Policies continued


date,whichiswhentheGroupbecomesapartyto

thecontractualprovisionsofthefinancialinstrument.

Contracts that require or permit net settlement

of the change in the valueof the contract arenot

consideredregularwaycontractsandaretreatedas

derivativesbetweenthetradeandsettlementdateof

thecontact.

(ii) Initial measurement

Financial instruments that are designated at initial

recognitionasbeingat fair value throughprofitor

loss are recognised at fair value with transaction

costs, which are directly attributable to the

acquisition or issue of the financial instruments,

beingrecognisedimmediatelythroughthestatement

ofcomprehensiveincome.

Financial instruments that are not carried at fair

value through profit or loss are initially measured

at fair valueplus transaction costs that aredirectly

attributabletotheacquisitionorissueofthefinancial

instruments.

Wherethetransactionprice,inanon-activemarket,

is different to the fair value from other observable

currentmarkettransactions inthesameinstrument

orbasedona valuation techniquewhosevariables

includeonlydatafromobservablemarkets,theGroup

defers such differences (day-one profits or losses).

Day-oneprofitsorlossesareamortisedonastraight-

linebasisoverthelifeofthefinancialinstrument.To

theextentthattheinputsdeterminingthefairvalue

ofthe instrumentbecomeobservable,orwhenthe

instrument isderecognised,day-onegainsor losses

arerecognisedimmediatelyinprofitorloss.

(iii)Subsequent measurement

Subsequent to initial recognition, financial

instruments are either measured at fair value or

amortisedcostdependingontheirclassificationand

whethertheirfairvaluecanbemeasuredreliably.

Categoriesoffinancialinstruments

• Financial instruments at fair value through profit or

loss

Financialinstrumentsatfairvaluethroughprofitor

lossconsistofinstrumentsthatareheldfortrading

and instruments that the Group has designated,

oninitialrecognitiondate,asatfairvaluethrough

profitorloss.

The Group classifies an instrument as held

for trading if it has been acquired or incurred

principallyforthepurposeofsaleorrepurchasein

thenearterm,itispartofaportfolioofidentified

financialinstrumentsforwhichthereisevidenceof

arecentactualpatternofshort-termprofit-taking,

or the instrument is a derivative. The Group’s

derivativetransactionsincludeinterestrateswaps

andinterestratecaps.

• Financial instruments that the Group has elected,

on initial recognition date, to designate as at fair

value through profit or loss are those that meet

any one of the following conditions:

– where the fair value through profit or loss

designationeliminatesorsignificantlyreducesa

measurementor recognition inconsistency that

wouldotherwisearisefromusingdifferentbases

tomeasureandrecognisethegainsand losses

onfinancialassetsandfinancialliabilities;

– theinstrumentformspartofaGroupoffinancial

instrumentsthatismanagedanditsperformance

isevaluatedonafairvaluebasis,inaccordance

with a documented risk management or

investmentstrategyand informationaboutthe

Groupisprovidedinternallyonthatbasistokey

managementpersonnel,usingafairvaluebasis;

or

– acontractthatcontainsoneormoreembedded

derivatives that requires separation from the

host contract or the derivative significantly

modifiesthecashflowsofthehostcontractto

whichitisdesignated.

Gainsorlossesonfinancialinstrumentsatfairvalue

through profit or loss (excluding interest income

andinterestexpensecalculatedontheamortised

costbasisrelatingto interest-bearinginstruments

thathavebeendesignatedasatfairvaluethrough

profitorloss)arereportedinnon-interestrevenue

astheyarise.Interestincomeandinterestexpense

calculated on the effective interest rate method

are reported in interest income and expense,

exceptforinterestincomeandinterestexpenseon

instrumentsheldfortrading,whicharerecognised

innon-interestrevenue.

Gains or losses on the derecognition of trading

financial liabilities are reported in non-interest

revenue.

• Held-to-maturity financial assets

Held-to-maturityfinancialassetsarenon-derivative

financial assets with fixed or determinable

paymentsandfixedmaturity that theGrouphas


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theintentionandabilitytoholdtomaturity,other

thanthose thatmeet thedefinitionof loansand

receivables,thosethatweredesignatedasatfair

value through profit or loss or available-for-sale.

Held-to-maturityfinancial assetsaremeasuredat

amortisedcost,withinterestincomerecognisedin

interestandsimilarincome.Gainsorlossesarising

ondisposalofheld-to-maturityfinancialassetsare

recognisedinnon-interestrevenuethroughprofit

orloss.

• Loans and receivables

Loansandreceivablesarenon-derivativefinancial

assets with fixed or determinable payments that

are not quoted in an active market, other than

those financial assets classified by the Group on

initialrecognitionasatfairvaluethroughprofitor

loss,available-for-saleorloansandreceivablesthat

areheldfortrading.

Financialassetsclassifiedasloansandreceivables

arecarriedatamortisedcost,withinterestincome

recognised in interest and similar income. Gains

and losses arising on disposal are recognised in

non-interestrevenue.ThemajorityoftheGroup’s

advancesareincludedintheloansandreceivables

category.

• Available-for-sale financial assets

Available-for-sale financial assets are non-

derivative financial assets that are designated as

available-for-saleorarenotclassifiedas (a) loans

and receivables, (b) held-to-maturity investments

or (c) financial assets at fair value throughprofit

orloss.Available-for-saleinstrumentsaretypically

assets that are held for a longer period and in

respectofwhich short-termfluctuations in value

donotaffecttheGroup’sholdorselldecision.

Available-for-salefinancialassetsaremeasuredat

fairvalue,withfairvaluegainsorlossesrecognised

directlyinequity.Foreigncurrencytranslationgains

or losses or interest income, calculated on the

effectiveinterestmethod,arereportedinprofitor

loss.

When available-for-sale financial assets are

disposed of, the fair value gains or losses

accumulated in equity are recognised in the

statementofcomprehensiveincome.

• Non-trading financial liabilities

Allfinancialliabilities,otherthanthoseatfairvalue

throughprofitorloss,areclassifiedasnon-trading

financialliabilitiesandaremeasuredatamortised

cost. Gains or losses on non-trading financial

liabilities are reported in non-interest revenue;

interestexpenseisrecordedinnetinterestincome.

(iv)Measurement of financial instruments

• Amortised cost

The amortised cost of a financial instrument is

the amount at which the financial instrument is

measured at initial recognition minus principal

repayments, plus or minus the cumulative

amortisation using the effective interest method

ofanydifferencebetweenthatinitialamountand

the maturity amount, and minus any cumulative

impairmentlosses.

The effective interest method is a method of

calculating the amortised cost of a financial

instrumentandallocatingtheinterestincomeand

expense over the relevant period. The effective

interest rate is the rate that exactly discounts

estimatedfuturecashpaymentsorreceiptsthrough

the expected life of the financial instrument or,

when appropriate, a shorter period, to the net

carryingamountofthefinancialinstrument.When

calculatingtheeffectiveinterestrate,weestimate

cashflowsconsideringallcontractualtermsofthe

financialinstrument,butshallnotconsiderfuture

creditlosses.Thecalculationincludesallfeesand

points paid or received between parties to the

contractthatarean integralpartoftheeffective

interest rate, transaction costs and all other

premiumsordiscounts.

• Fair value

The fair valueof afinancial instrumenton initial

recognition is normally the transaction price,

which isthefairvalueoftheconsiderationgiven

orreceived.However,ifpartoftheconsiderationis

givenorreceivedforanotherassetorliability,the

fairvalueofthefinancial instrument isestimated

usingavaluationtechnique.

Publishedpricequotations,inanactivemarket,are

thebestevidenceoffairvalueandwhentheyexist

theyareusedtomeasurethefinancialinstrument.

Financial instruments are regarded as quoted in

anactivemarket ifquotedpricesare readilyand

regularly available from an exchange, dealer,

broker,industrygroup,pricingserviceorregulatory

agency, and those prices represent actual and

regularly occurring market transactions on an

arm’slengthbasis.Theappropriatequotedmarket

price for an asset heldor liability tobe issued is



usuallythecurrentbidpriceand,foranassettobe

acquiredoraliabilityheld,theaskingprice.

When the Group has assets and liabilities with

offsetting market risks it may use mid-market

pricesasabasisforestablishingfairvaluesforthe

offsettingriskpositionsandapplythebidorasking

pricetothenetopenpositionasappropriate.

If the market for a financial instrument is not

active, fair value is established by using a

valuationtechnique.Valuationtechniques include

using recent arm’s length market transactions

between knowledgeable and willing parties, if

available; reference to the current fair value of

anotherinstrumentthatissubstantiallythesame;

discounted cash flow analysis and option pricing

models.Ifthereisavaluationtechniquecommonly

usedbymarketparticipantstopricetheinstrument

and that technique has been demonstrated to

provide reliable estimates of prices obtained in

actualmarkettransactions,thattechniquemaybe

used.

The objective of using a valuation technique is

to establish what the transaction price would

havebeenon themeasurementdate inanarm’s

length exchange motivated by normal business

considerations.Fairvalueisestimatedonthebasis

oftheresultsofavaluationtechniquethatmakes

maximumuseofmarketinputs,andreliesaslittle

as possible on entity-specific inputs. A valuation

techniquewouldbeexpectedtoarriveatarealistic

estimate of the fair value if (a) it reasonably

reflects how the market could be expected to

price the instrument and (b) the inputs to the

valuation technique reasonably represent market

expectations and measures of the risk-return

factorsinherentinthefinancialinstrument.

Therefore,avaluationtechnique(a)incorporatesall

factorsthatmarketparticipantswouldconsiderin

settingapriceand(b)isconsistentwithaccepted

economic methodologies for pricing financial

instruments. Periodically, the Group calibrates

the valuation technique and tests it for validity

using prices from any observable current market

transactions in the same instrument (i.e. without

modification or repackaging) or asked on any

available observable market data. Market data is

obtained consistently in the same market where

theinstrumentwasoriginatedorpurchased.

The use of a valuation technique may result in

no gain or loss being recognised on the initial

recognition of a financial instrument. In such a

case, IAS39 requires that againor loss shall be

recognised after initial recognition only to the

extent that it arises from a change in a factor

(including time) that market participants would

considerinsettingaprice.

Where discounted cash flow techniques are

used, estimated future cash flows are based on

management’sbestestimatesandthediscountrate

usedisamarket-relatedrateatthereportingdate

foraninstrumentwithsimilartermsandconditions.

Wherepricingmodelsareused,inputsarebasedon

market-related measures (prices from observable

currentmarkettransactionsinthesameinstrument

without modification or other observable market

data)atthereportingdate.Whenmarket-related

measuresarenotavailable,observablemarketdata

ismodified to incorporate relevant factors that a

market participant in an arm’s length exchange

motivated by normal business considerations

would consider in determining the fair value of

the financial instrument (non-observable market

inputs).

Financialinstrumentscarriedatfairvaluethrough

profitorlossarevaluedinoneoftwoways:

– If the instrument is listed on a recognised

exchange, the active price quoted on the

exchangeisused;or

– Allotherfinancialinstrumentsarevaluedusinga

discountedcashflowmodel,wherefuturecash

flowsarediscountedbackatthemarketrateson

thevaluationdate.

Governmentstockand investmentsarecarriedat

the Bond Exchange of South Africa (BESA) listed

prices.

Loansandadvancesandothershort-termsecurities

thatarecarriedatfairvaluethroughprofitorloss

arevaluedusingdiscountedcashflowmodels.

Thefairvalueofafinancialliabilitywithademand

feature is not less than the amount payable on

demand,discountedfromthefirstdateonwhich

the amount couldbe required tobepaid.When

the fair value of financial liabilities cannot be

reliably determined, the liabilities are recorded at

theamountdue.


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Fairvalueisconsideredreliablymeasurableif:

– the variability in the range of reasonable fair

value estimates is not significant for that

instrument;or

– theprobabilitiesofthevariousestimateswithin

therangecanbereasonablyassessedandused

inestimatingfairvalue.

Investmentsinequityinstrumentsthatdonothave

a quoted market price in an active market and

whosefairvaluecannotbereliablymeasured,and

derivativesthatarelinkedtoandhavetobesettled

bydeliveryof suchunquotedequity instruments,

arenotmeasuredatfairvaluebutatcost.

(v)Derecognition

Allsalesoffinancialassetsthatrequiredeliverywithin

the time frameestablishedby regulationormarket

convention (“regular way” sales) are recognised at

trade date, which is the date on which the Group

commitstothesaleoftheasset.

TheGroupderecognisesafinancialasset(orgroupof

financialassets)orapartofafinancialasset(orpart

ofagroupoffinancialassets)whenandonlywhen:

• the contractual rights to the cash flows arising

fromthefinancialassethaveexpired;

• ittransfersthefinancialasset,includingsubstantially

alltherisksandrewardsofownershipoftheasset;

or

• ittransfersthefinancialasset,neitherretainingnor

transferringsubstantiallyall therisksandrewards

of ownership of the asset, but no longer retains

controloftheasset.

Afinancial liability (orpartof afinancial liability) is

derecognised when and only when the liability is

extinguished, i.e. when the obligation specified in

thecontractisdischarged,cancelledorhasexpired.

The difference between the carrying amount of a

financial asset or financial liability (or part thereof)

that is derecognised and the consideration paid or

received,includinganynon-cashassetstransferredor

liabilitiesassumed,isrecognisedinprofitor lossfor

theperiod.

The Group securitises various consumer and

commercial financial assets, which generally results

inthesaleoftheseassetstospecial-purposeentities,

whichinturnissuesecuritiestoinvestors.Interestsin

thesecuritisedfinancialassetsmayberetainedinthe

formofseniororsubordinatedtranches,interest-only

stripsorother residual interests (retained interests).

Gainsorlossesonsecuritisationdependinpartonthe

carrying amount of the transferredfinancial assets,

allocatedbetweenthefinancialassetsderecognised

and the retained interests based on their relative

fairvaluesatthedateoftransfer.Gainsorlosseson

securitisationarerecordedinotheroperatingincome.

(vi)Impairment of financial assets

TheGroupassessesateachreportingdatewhether

there is objective evidence that a financial asset or

group of financial assets is impaired. A financial

assetoragroupoffinancialassets is impairedand

impairmentlossesareincurredif,andonlyif,thereis

objectiveevidenceofimpairmentasaresultofoneor

moreeventsthatoccurredaftertheinitialrecognition

of the asset (a loss event) and that loss event (or

events)hasanimpactontheestimatedfuturecash

flowsofthefinancialassetorgroupoffinancialassets

that can be reliably estimated. Objective evidence

thatafinancialassetorgroupofassets is impaired

includesobservabledatathatcometotheattention

oftheGroupaboutthefollowinglossevents:

– significant financial difficulty of the issuer or

obligor;

– a breach of contract, such as a default or

delinquencyininterestorprincipalpayments;

– theGroup,foreconomicorlegalreasonsrelating

to the borrower’s financial difficulty, granting to

theborroweraconcessionthattheGroupwould

nototherwiseconsider;

– itbecomesprobable that theborrowerwillenter

bankruptcyorotherfinancialreorganisation;

– the disappearance of an active market for that

financialassetbecauseoffinancialdifficulties;or

– observable data indicating that there is a

measurable decrease in the estimated future

cashflows fromagroupoffinancialassets since

the initial recognition of those assets, although

the decrease cannot yet be identified with the

individualfinancialassetsintheGroup,including:

• adverse changes in the payment status of

borrowersintheGroup;or

• national or local economic conditions that

correlate with defaults on the assets in the

Group.



• Assets carried at amortised cost

If there is objective evidence that an impairment

loss on loans and receivables or held-to-maturity

investments carried at amortised cost has been

incurred, the amount of the loss is measured

as the difference between the asset’s carrying

amountandthepresentvalueofestimatedfuture

cashflows(excludingfuturecreditlossesthathave

not been incurred) discounted at the financial

asset’soriginaleffectiveinterestrate.Thecarrying

amountoftheassetisreducedthroughtheuseof

anallowanceaccountandtheamountoftheloss

isrecognisedinprofitorloss.

The Group first assesses whether there is

objective evidence of impairment individually for

financial assets that are individually significant,

and individuallyorcollectively forfinancialassets

that are not individually significant. If the Group

determinesthat there isnoobjectiveevidenceof

impairment for an individually assessed financial

asset, whether significant or not, it includes the

asset in a group of financial assets with similar

credit risk characteristics and collectively assesses

themforimpairment.

If, in a subsequent period, the amount of the

impairment loss decreases and the decrease

can be related objectively to an event occurring

after the impairmentwas recognised (suchasan

improvement in the debtor’s credit rating), the

previously recognised impairment loss is reversed

byadjusting theallowanceaccount. The reversal

doesnotresultinacarryingamountofthefinancial

asset that exceeds what the amortised cost

would have been had the impairment not been

recognisedatthedateonwhichtheimpairmentis

reversed.Theamountofthereversalisrecognised

inprofitorlossfortheperiod.

Theimpairmentforperformingloansiscalculated

on a portfolio basis, based on historical loss

ratios, adjusted for national and industry-specific

economicconditionsandotherindicatorspresent

atthereportingdatethatcorrelatewithdefaultson

theportfolio.Theseincludeearlyarrearsandother

indicators of potential default, such as changes

in macroeconomic conditions and legislation

affectingcredit recovery.Theseannual loss ratios

areapplied to loanbalances in theportfolioand

scaledtotheestimatedlossemergenceperiod.

• Financial assets carried at cost

If there is objective evidence that an impairment

loss has been incurred on an unquoted equity

instrumentthatisnotcarriedatfairvalue,because

its fair value cannot be reliably measured, or on

aderivativeasset that is linked toandhas tobe

settled by delivery of such an unquoted equity

instrument, or a financial asset that is carried at

costbecauseitsfairvaluecouldnotbedetermined,

theamountoftheimpairmentlossismeasuredas

thedifferencebetweenthecarryingamountofthe

financialassetandthepresentvalueofestimated

futurecashflowsdiscountedatthecurrentmarket

rate of return for a similar financial asset. Such

impairmentlossesarenotreversed.

• Available-for-sale financial assets

Whenadecline in the fair valueof anavailable-

for-salefinancialassethasbeenrecogniseddirectly

inequityandthere isobjectiveevidencethatthe

asset is impaired, the cumulative loss that has

beenrecogniseddirectlyinequityisremovedfrom

equityandrecognisedinprofitorlosseventhough

thefinancialassethasnotbeenderecognised.The

amount of the cumulative loss that is removed

fromequityandrecognisedinprofitorlossisthe

difference between the acquisition cost (net of

any principal repayment and amortisation) and

currentfairvalue,lessanyimpairmentlossonthat

financial asset previously recognised in profit or

loss.Impairmentlossesrecognisedinprofitorloss

foraninvestmentinanequityinstrumentclassified

asavailable-for-salearenotreversedthroughprofit

orloss.

If,inasubsequentperiod,thefairvalueofadebt

instrumentclassifiedasavailable-for-saleincreases

and the increase can be objectively related to

an event occurring after the impairment loss

was recognised in profit or loss, the impairment

loss is reversed, with the amount of the reversal

recognisedinprofitorlossfortheperiod.

• Maximum credit risk

Creditriskarisesprincipallyfromloansandadvances

to clients, investment securities derivatives and

irrevocable commitments to provide facilities.

The maximum credit risk is typically the gross

carryingamount,netofanyamountsoff-setand

impairment losses.Themaximumcreditexposure

for loan commitments is the full amount of the

commitment if the loancannotbe settlednet in

cashorusinganotherfinancialasset.


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(vii)Offsetting financial instruments and related incomeFinancialassetsandliabilitiesareoff-setandthenet

amountreportedinthestatementoffinancialposition

onlywhentheGrouphasalegallyenforceableright

to set off the financial asset and financial liability

andtheGrouphasanintentionofsettlingtheasset

andliabilityonanetbasisorrealisingtheassetand

settling the liability simultaneously. Income and

expense items are off-set only to the extent that

their related instruments have been off-set in the

statementoffinancialposition.

(viii)CollateralFinancial and non-financial assets are held as

collateral in respect of recognised financial assets.

Such collateral, except cash collateral, is not

recognised by the Group, as the Group does not

retain the risks and rewards of ownership, and is

obliged to return such collateral to counterparties

upon settlement of the related obligations. Should

a counterparty be unable to settle its obligations,

theGroup takespossessionof collateralor callson

othercreditenhancementsasfullorpartsettlement

ofsuchamounts.Theseassetsarerecognisedwhen

theapplicablerecognitioncriteriaunderIFRSaremet,

andtheGroup’saccountingpoliciesareappliedfrom

thedateofrecognition.Cashcollateralisrecognised

whentheGroupreceivesthecashandisreportedas

amountsreceivedfromdepositors.

Collateral is also given to counterparties under

certain financial arrangements, but such assets are

notderecognisedwheretheGroupretainstherisks

and rewards of ownership. Such assets are at risk

to the extent that the Group is unable to fulfil its

obligationstocounterparties.

1.5 Revenue recognition(i) Interest income and expense

Interestincomeandexpensearerecognisedinprofit

orlossusingtheeffectiveinterestmethodtakinginto

account the expected timing and amount of cash

flows.Theeffective interestmethodisamethodof

calculating the amortised cost of a financial asset

or financial liability (or group of financial assets or

financial liabilities) and of allocating the interest

incomeorinterestexpenseovertherelevantperiod.

Interestincomeandexpenseincludetheamortisation

of any discount or premium or other differences

between the initial carrying amount of an interest-

bearing instrument and its amount at maturity

calculatedonaneffectiveinterestratebasis.

Interestearnedwhileholdingtradingsecuritiesand

interest incurred on trading liabilities are reported

as interest incomeandexpensewithinnon-interest

revenue.

(ii)Non-interest revenue

• Fees and commission

The Group earns fees and commissions from

a range of services it provides to customers and

theseareaccountedforasfollows:

– Incomeearnedontheexecutionofasignificant

act is recognised when the significant act has

beenperformed;

– Incomeearnedfromtheprovisionofservicesis

recognisedastheserviceisrenderedbyreference

tothestageofcompletionoftheservice;

– Income that forms an integral part of the

effective interest rate of a financial instrument

is recognisedasanadjustment to theeffective

interestrateandrecordedininterestincome.

• Dividend income

Dividend income is recognisedwhen the right to

receivepaymentisestablishedontheex-dividend

date for equity instruments and is included in

dividendincome.

• Net trading income

Nettradingincomecomprisesallgainsandlosses

fromchanges in the fair valueoffinancial assets

and financial liabilities held for trading, together

with the related interest, expense, costs and

dividends.

• Other

Exchange and securities trading income, from

investmentsandnetgainsonthesaleofinvestment

bankingassets,isrecognisedinprofitorlosswhen

the amount of revenue from the transaction or

servicecanbemeasuredreliably,itisprobablethat

theeconomicbenefitsofthetransactionorservice

will flow to the Group and the costs associated

with the transaction or service can be measured

reliably.

Fairvaluegainsor lossesonfinancial instruments

at fair value through profit or loss, including

derivatives, are included in non-interest revenue.

Thesefairvaluegainsorlossesareafterdeducting

the interest component, which is recognised

separatelyininterestincomeandexpense.



Gainsor lossesonderecognitionof anyfinancial

assets or financial liabilities are included in non-

interestrevenue.

1.6 Taxation

Taxation expense, recognised in the statement of

comprehensive income, comprises both current and

deferredtaxation.Income(direct)taxationisrecognised

in profit or loss except to the extent that it relates to

items recognised directly to equity, in which case it is

recognisedinequity.

(i) Current taxation

Current taxation, recognised in the statement of

comprehensive income, is the expected taxation

payable on the taxable income for the year, using

taxation rates enacted or substantively enacted

at reporting date, and any adjustment to taxation

payableinrespectofprioryears.

Secondary taxation on companies (STC) that arises

fromthedistributionofdividendsisrecognisedatthe

sametimeastheliabilitytopaytherelateddividend,

beingthedateofthedeclarationofthedividend.

(ii)Deferred taxation

Deferredtaxationisprovidedusingthebalancesheet

liability method, based on temporary differences.

Temporary differences are differences between the

carryingamountsofassetsandliabilitiesforfinancial

reporting purposes and their taxation bases. The

amount of deferred taxation provided is based on

the expected manner of realisation or settlement

of the carrying amount of assets and liabilities

and is measured at the taxation rates (enacted or

substantivelyenactedatthereportingdate)thatare

expectedtobeappliedtothetemporarydifferences

whentheyreverse.

Deferred taxation is recognised in profit or loss for

theperiod,except to theextent that it relates toa

transaction that is recognised directly in equity, or

abusinesscombination that isaccounted forasan

acquisition. The effect on deferred taxation of any

changes in taxation rates is recognised in profit or

lossfortheperiod,excepttotheextentthatitrelates

to items previously charged or credited directly to

equity.

Deferred tax liabilities are generally recognised for

all taxable temporary differences, and deferred tax

assets are generally recognised for all deductible

temporarydifferencestotheextentthatitisprobable

that taxable profits will be available against which

those deductible temporary differences can be

utilised. Deferred tax assets are reviewed at each

reportingdateandarereducedtotheextentthatitis

nolongerprobablethattherelatedtaxationbenefits

willberealised.

Deferredtaxationisnotrecognisedforthefollowing

temporary differences: the initial recognition of

goodwill;theinitialrecognitionofassetsorliabilities

in a transaction that is not a business combination

andthataffectsneitheraccountingnortaxableprofit;

anddifferencesrelatingtoinvestmentsinsubsidiaries

andjointlycontrolledentitiestotheextentthatthey

willnotreverseintheforeseeablefuture.

Deferred tax assets are recognised for STC credits

receivedbasedon the expectedutilisationof these

credits by Group companies in the declaration of

futuredividends.

1.7 Goodwill and intangible assets

(i) Goodwill and goodwill impairment

Goodwill arises on the acquisition of subsidiaries,

associatesandjointventures.Goodwillismeasuredat

costlessaccumulatedimpairmentlosses.Inrespectof

equity-accounted investments, the carrying amount

ofgoodwillisincludedinthecarryingamountofthe

investment.

Goodwillisallocatedtooneormorecash-generating

units (CGUs), being the smallest identifiable group

ofassetsthatgeneratescashinflowsthatarelargely

independentofthecashinflowsfromotherassetsor

groupofassets.GoodwillisallocatedtotheCGUsin

whichthesynergiesfromthebusinesscombinations

areexpected.

Each CGU containing goodwill is annually tested

for impairment. An impairment loss is recognised

wheneverthecarryingamountofanassetoritsCGU

exceeds its recoverable amount. Impairment losses

thatarerecognisedinrespectofCGUsareallocated

firsttoreducethecarryingamountofanygoodwill

allocatedtoaCGUandthentoreducethecarrying

amountoftheotherassetsintheCGUonaprorata

basis.However the carryingamountof theseother

assetsmaynotbereducedbelowthehighestof its

fairvaluelesscoststosell;itsvalueinuseandzero.

Impairment testing procedures

TherecoverableamountofaCGUisthehigherofits

fairvaluelesscosttosellanditsvalueinuse.Thefair

value less cost to sell isdeterminedbyascertaining

the current market value of an asset (or the CGU)


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anddeductinganycostsrelatedtotherealisationof

theasset.

In assessing value in use, the expected future pre-

taxcashflowsfromtheCGUarediscountedtotheir

present value using a pre-tax discount rate that

reflectscurrentmarketassessmentsofthetimevalue

of money and the risks specific to that particular

CGU.

Impairment losses relating to goodwill are not

reversedandallimpairmentlossesarerecognisedin

profitorlossfortheperiod.

(ii)Computer software and capitalised development

costs

Expenditureon researchactivities,undertakenwith

the prospect of gaining new scientific or technical

knowledge and understanding, and expenditure

on internally generated goodwill and brands is

recognised as an expense in profit or loss for the

period.

If costs can be reliably measured and future

economic benefits are available, expenditure on

computersoftwareandotherdevelopmentactivities,

wherebysetproceduresandprocessesareappliedto

aprojectfortheproductionofneworsubstantially

improvedproductsandprocesses,iscapitalisedifthe

computersoftwareandotherdevelopedproductsor

processes are technically and commercially feasible

andtheGrouphassufficientresourcestocomplete

development.Theexpenditurecapitalisedincludesthe

costofmaterialsanddirectlyattributableemployee

and other direct costs. Computer development

expenditure is amortised only once the relevant

softwareisavailableforuseinthemannerintended

by management. Capitalised software is stated at

cost lessaccumulatedamortisationand impairment

losses. Computer development expenditure, which

hasnotyetbeencommissioned,isstatedatcostless

impairmentlosses.

Amortisationofcomputersoftwareanddevelopment

costs is charged to profit or loss on a straight-line

basisovertheestimatedusefullivesoftheseassets,

which does not exceed five years and is reviewed

at appropriate intervals. Subsequent expenditure

relatingtocomputersoftwareiscapitalisedonlywhen

it increasesthefutureeconomicbenefitsembodied

inthespecificasset,initscurrentcondition,towhich

itrelates.

All other subsequent expenditure is recognised as

anexpenseintheperiodinwhichitisincurred.On

thedisposalofcomputersoftwaretheprofitorloss

ondisposalisrecognisedinnon-tradingandcapital

items (in the statementof comprehensive income).

The profit or loss on disposal is the difference

betweenthenetproceedsreceivedandthecarrying

amountoftheasset.

1.8 Property and equipment

(i) Owned assets

Items of property and equipment are initially

recognised at cost if it is probable that any future

economicbenefitsassociatedwiththeitemswillflow

totheGroupandithasacostthatcanbemeasured

reliably.Certainitemsofpropertyandequipmentthat

hadbeenrevaluedtofairvalueon1January2004,

thedateoftransitionto IFRS,aremeasuredonthe

basisofdeemedcost,beingtherevaluedamountat

thedateofthatrevaluation.

Owner-occupied property is stated at revalued

amounts,beingfairvalueatthedateofrevaluation

less subsequent accumulated depreciation and

accumulatedimpairmentlosses.

Subsequent to initial recognition, computer

equipment, vehicles and furniture and other

equipment are measured at cost less accumulated

depreciationandaccumulatedimpairmentlosses.

(ii)Subsequent expenditure

Subsequentexpenditureisrecognisedinthecarrying

amountof itemsofpropertyandequipment if it is

measurableandit isprobablethatfutureeconomic

benefits associated with the expenditure will flow

to theGroup.Allotherexpensesare recognised in

profitorlossasanexpensewhenincurred.

(iii)Revaluation of land and buildings

Land and buildings, whose fair values can be

reliablymeasured,arecarriedat revaluedamounts,

being the fair value at the date of revaluation less

any subsequent accumulated depreciation and

impairmentlosses.

External valuations are obtained once every

three yearsona rotationalbasis. In theeventof a

material change in market conditions between

the valuation date and reporting date an internal

valuation is performed and adjustments made to

reflectanymaterialchangesinvalue.Thevaluation

methodologyadoptedisdependentuponthenature

oftheproperty.



Revaluationincreasesarecrediteddirectlytoequity,

in “Other comprehensive income” under the

heading“Revaluationreserve”.However,revaluation

increasesarerecognisedinprofitorlosstotheextent

thattheyreversearevaluationdecreaseofthesame

assetpreviouslyrecognisedinprofitorloss.

Revaluationdecreasesarerecognisedinprofitorloss.

However, decreases are debited directly to equity

to the extent of any credit balance existing in the

revaluationsurplusinrespectofthesameasset.

(iv)Depreciation

Eachpartofanitemofpropertyandequipmentwith

acostthatissignificantinrelationtothetotalcostof

theitemisdepreciatedseparately.Itemsofproperty

andequipmentthatareclassifiedasheldforsalein

termsofIFRS5arenotdepreciated.Thedepreciable

amountsofpropertyandequipmentarerecognised

in profit or loss on a straight-line basis over the

estimateduseful livesof the itemsofpropertyand

equipment,unlesstheyareincludedinthecarrying

amountofanotherasset.Usefullives,residualvalues

anddepreciationmethodsareassessedandadjusted

whererequired,onanannualbasis.

On revaluation, any accumulated depreciation at

thedateoftherevaluationiseliminatedagainstthe

gross carrying amount of the item concerned and

the net amount restated to the revalued amount.

Subsequentdepreciationchargesareadjustedbased

ontherevaluedamountlessresidualvalues.

Any difference between the depreciation charge

on the revalued amount and that which would

havebeenchargedunderhistoriccostistransferred

net of any related deferred taxation between the

revaluation reserve and retained earnings as the

propertyisutilised.

Landisnotdepreciated.

The maximum initial estimated useful lives are as

follows:

Computersoftware 3years

Computerequipment 3–6years

Motorvehicles 5years

Fixturesandfurniture 10years

Leaseholdproperty 20years

Significantleaseholdproperty

components lowerof10yearsor

theleaseperiod

Freeholdproperty 50years

Buildingimprovements 5years

(v)Derecognition

Itemsofpropertyandequipmentarederecognised

on disposal or when no future economic benefits

areexpectedfromtheiruseordisposal.Thegainor

lossonderecognition is recognised inprofitor loss

andisdeterminedasthedifferencebetweenthenet

disposal proceeds, if any, and the carrying amount

of the item. On derecognition any surplus in the

revaluation reserve in respect of an individual item

ofpropertyandequipmentistransferreddirectlyto

retained earnings in the statement of changes in

equity.

Compensationfromthirdpartiesforitemsofproperty

andequipmentthatwereimpaired,lostorgivenup

isincludedinprofitorlosswhenthecompensation

becomesreceivable.

1.9 Impairment (all assets other than financial

instruments)

TheGroupassessesallassets(otherthanintangibleassets

notyetavailable foruse) for indicationsof impairment

or the reversal of a previously recognised impairment

at each reporting date. Should there be indications of

impairment, the recoverable amounts of the assets

are estimated. These impairments (where the carrying

amountofanassetexceedsitsrecoverableamount)or

the reversal of a previously recognised impairment are

recognised in profit or loss for the period. Intangible

assetsnotyetavailableforusearetestedataminimum

ofanannualbasisforimpairment.

Impairmentlossisrecognisedinprofitorlosswhenever

thecarryingamountofanassetexceedsitsrecoverable

amount.

Therecoverableamountofanassetisthehigherofits

fairvalue lesscost toselland itsvalue inuse.The fair

valuelesscosttosell isdeterminedbyascertainingthe

currentmarketvalueofanassetanddeductinganycosts

relatedtotherealisationoftheasset.

In assessing value in use, the expected future pre-tax

cashflowsfromtheassetarediscountedtotheirpresent

valueusingapre-taxdiscountratethatreflectscurrent

market assessments of the time value of money and

therisksspecifictotheasset.Foranassetwhosecash

flows are largely dependent on those of other assets

the recoverable amount is determined for the cash-

generatingunittowhichtheassetbelongs.

Apreviouslyrecognisedimpairmentlosswillbereversed

if the recoverable amount increases as a result of a

changeintheestimatesusedpreviouslytodeterminethe


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recoverableamount,butnottoanamounthigherthan

thecarryingamountthatwouldhavebeendetermined,

netofdepreciationoramortisation,hadnoimpairment

lossbeenrecognisedinpriorperiods.

1.10 Employee benefits

(i) Defined contribution plans

Adefinedcontributionplanhasbeenestablishedfor

eligibleemployees.

Contributions in respect of defined contribution

plansarerecognisedasanexpenseinthestatement

ofcomprehensiveincomeasincurred.

(ii)Short-term employee benefits

Short-term employee benefit obligations are

measured on the statement of financial position

onanundiscountedbasisandareexpensedas the

relatedserviceisprovided.

1.11 Leases

(i) The Group as lessee

Leases in respect of which the Group bears

substantially all risks and rewards incidental to

ownership are classified as finance leases. Finance

leasesarecapitalisedattheinceptionoftheleaseat

thelowerofthefairvalueoftheleasepropertyorthe

presentvalueoftheminimumleasepayments.Directly

attributablecosts,suchascommissionpaid,incurred

bytheGroupareaddedtothecarryingamountof

theasset.Eachleasepayment isallocatedbetween

theliabilityandfinancechargestoachieveaconstant

periodicrateofinterestonthebalanceoutstanding.

Contingent rentalsareexpensed in theperiodthey

areincurred.Thedepreciationpolicyforleasedassets

isconsistentwiththatofdepreciableassetsowned.

If the Group does not have reasonable certainty

that itwillobtainownershipof the leasedassetby

theendof the lease term, theasset isdepreciated

overtheshorteroftheleasetermanditsusefullife.

Leases that are not classified as finance leases are

classifiedasoperatingleases.Paymentsmadeunder

operating leases, net of any incentives received

fromthelessor,arerecognisedinprofitorlossona

straight-linebasisoverthetermofthelease.

Whenanothersystematicbasisismorerepresentative

of the timepatternof theuser’sbenefit, then that

methodisused.

(ii)The Group as lessor

Where assets are leased out under a finance lease

arrangement,thepresentvalueoftheleasepayments

is recognised as a receivable in the statement of

financialposition.Initialdirectcostsareincludedinthe

initialmeasurementofthereceivable.Thedifference

betweenthegrossreceivableandunearnedfinance

income is recognised in the statement of financial

position in loans and advances. Finance lease

incomeisallocatedtoaccountingperiodstoreflect

aconstantperiodicrateofreturnontheGroup’snet

investmentoutstandinginrespectoftheleases.

Assetsleasedoutunderoperatingleasesareincluded

under property and equipment in the statement

of financial position. Initial direct costs incurred in

negotiatingandarrangingtheleaseareaddedtothe

carryingamountoftheleasedassetandrecognisedas

anexpenseovertheleasetermonthesamebasisas

therentalincome.Leasedassetsaredepreciatedover

theirexpectedusefullivesonabasisconsistentwith

similar assets. Rental income,netof any incentives

giventolessees,isrecognisedonastraight-linebasis

overthetermofthelease.Whenanothersystematic

basis is more representative of the time pattern of

theuser’sbenefit,thenthatmethodisused.

(iii)Recognition of lease of land

Leasesoflandandbuildingsareclassifiedasoperating

orfinanceleasesinthesamewayasleasesofother

assets. However, when a single lease covers both

land and a building, the minimum lease payments

attheinceptionofthelease(includinganyupfront

payments) are allocatedbetween the landand the

buildinginproportiontotherelativefairvaluesofthe

respectiveleaseholdinterests.Anyupfrontpremium

allocated to the land element that is normally

classified as an operating lease represents prepaid

leasepayments.Thesepaymentsareamortisedover

the leaseterminaccordancewiththetimepattern

ofbenefitsprovided.Iftheleasepaymentscannotbe

allocated reliablybetween these twoelements, the

entireleaseisclassifiedasafinancelease,unlessitis

clearthatbothelementsareoperatingleases.

1.12 Cash and cash equivalents

Cashandcashequivalentscomprisebalanceswith less

than 90 days’ maturity from the date of acquisition,

includingcashandbalanceswithcentralbanksthatare

notmandatory,othereligiblebillsandamountsduefrom

otherbanks.

1.13 Provisions

ProvisionsarerecognisedwhentheGrouphasapresent

legal or constructive obligation as a result of a past

event,inrespectofwhichitisprobablethatanoutflow



ofeconomicbenefitswilloccurandareliableestimate

canbemadeof the amountof theobligation.Where

the effect of discounting the provision is material, the

provisionisdiscounted.Thediscountratereflectscurrent

market assessments of the time value of money and,

where appropriate, the risks specific to the liability.

Gainsfromtheexpecteddisposalofassetsarenottaken

intoaccountinmeasuringtheprovision.Theprovisions

are reviewed at each reporting date and adjusted to

reflectthecurrentreasonableestimate.Ifitisnolonger

probablethatanoutflowofresourceswillberequiredto

settletheobligation,theprovisionisreversed.

(i) Reimbursements

Where some or all of the expenditure required to

settle a provision is expected to be reimbursed by

a party outside the Group, the reimbursement is

recognised when it is virtually certain that it will

be received if the Group settles the obligation.

The reimbursement is recorded as a separate asset

at an amount not exceeding the related provision.

The expense for the provision is presented net of

thereimbursementinprofitorloss.Specificpolicies

describedin(ii)and(iii)belowapply.

(ii)Onerous contracts

Aprovisionforonerouscontractsisrecognisedwhen

the expected benefits to be derived by the Group

fromacontractarelowerthantheunavoidablecost

ofmeetingtheobligationsunderthecontract.

(iii)Restructuring

Aprovisionforrestructuringisrecognisedwhenthe

Group has a detailed formal plan for restructuring

and has raised a valid expectation, among those

partiesdirectlyaffected,thattheplanwillbecarried

out, either by having begun implementation or

by publicly announcing the plan’s main features.

Restructuring provisions include only those costs

that arise directly from restructuring that are not

associatedwiththeongoingactivitiesoftheGroup.

Futureoperatingcostsorlossesarenotprovidedfor.

1.14 Segmental reporting

TheGroup’s segmental reporting isby lineofbusiness

and loans and advances are disclosed by geography.

TheGroup’s policy is todisclosemandatory segmental

information under IFRS 8 – Segment Reporting and

to disclose additional supplemental information for

each business segment at the Group’s discretion. The

segmentaldisclosurebygeographyisdeterminedbythe

originofbusinesstransacted.

The accounting policies of the Group’s reported

segments are the same as the accounting policies of

theGroup.Assets, liabilities,revenuesorexpensesthat

arenotdirectlyattributabletoaparticularsegmentare

allocatedbetweensegmentswherethereisareasonable

basisfordoingso.TheGroupaccountsforintersegment

revenuesandtransfersas if thetransactionswerewith

thirdpartiesatcurrentmarketprices.

Anoperatingsegmentisacomponentofanentitythat

engages in business activities from which it may earn

revenues,whoseoperatingresultsareregularlyreviewed

bymanagementtomakedecisionsaboutresourcestobe

allocatedandtoassess itsperformance,andforwhich

financialinformationisavailable.

The Group’s identification of its segments and the

measurement of segment results are based on the

Group’s internal reporting to management. The

segmentshavebeenidentifiedaccordingtothenature

oftheirrespectiveproductsandservicesandtheirrelated

targetmarkets,thedetailofwhichcanbefoundinthe

GroupOperationalandSegmentalReportonpages56

to57oftheannualreport.

1.15 Non-current assets held for sale and discontinued

operations

Non-current assets (or disposal groups) are classified

as held for sale when their carrying amount will be

recoveredprincipally throughsale rather thanuse.The

assetordisposalgroupmustbeavailableforimmediate

saleinitspresentconditionandthesaleshouldbehighly

probable,withanactiveprogrammetofindabuyerand

theappropriatelevelofmanagementapprovingthesale.

Immediatelybeforeclassificationas“held for sale”,all

assets are remeasured in accordance with the Group’s

accountingpolicies.

Non-current assets held for sale are measured at the

lowerofcarryingamountandfairvaluelessincremental

directlyattributablecosttosell (excludingtaxationand

financecharges)andarenotdepreciated.

Gains or losses recognised on initial classification of

assetsasheld for saleandsubsequent remeasurement

arerecognisedinprofitorloss,regardlessofwhetherthe

assets were previously measured at revalued amounts.

The maximum gains that can be recognised are the

cumulative impairment losses previously recognised

in profit or loss. A disposal group continues to be

consolidated while classified as held for sale. Income

andexpensescontinuetoberecognisedinprofitorloss.

However,assetsarenotdepreciatedoramortised.


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Non-current assets (or disposal groups) are reclassified

from held for sale to held for use if they no longer

meet the held-for-sale criteria. On reclassification, the

non-current asset (or disposal group) is remeasured at

the lower of its recoverable amount and the carrying

amount that would have been recognised had the

asset (or disposal group) never been classified as held

forsale.Anygainsor lossesarerecognised inprofitor

loss,unlesstheassetwascarriedatarevaluedamount

priortoclassificationasheldforsale.Gainsorlosseson

such assets are recognised as revaluation increases or

decreases.

A discontinued operation is a clearly distinguishable

component of the Group’s business that has been

disposedoforisheldforsale,which:

• represents a separate major line of business or

geographicalareaofoperations;

• is part of a single co-ordinated plan to dispose of

a major line of business or geographical area of

operations;or

• is a subsidiary acquired exclusively with a view to

resale.

1.16 Share capital

Ordinary share capital, preference share capital or any

financialinstrumentissuedbytheGroupisclassifiedas

equitywhen:

• payment of cash, in the form of a dividend or

redemption,isatthediscretionoftheGroup;

• the instrument does not provide for the exchange

of financial instruments under conditions that are

potentiallyunfavourabletotheGroup;

• settlementintheGroup’sownequityinstrumentsis

forafixednumberofequity instrumentsatafixed

price;and

• the instrument represents a residual interest in the

assetsoftheGroupafterdeductingallofitsliabilities.

The Group’s ordinary and preference share capital is

classifiedasequity.

Consideration paid or received for equity instruments

is recognised directly in equity. Equity instruments

are initially measured at the proceeds received, less

incrementaldirectlyattributable issuecosts,netofany

related income tax benefit. No gain is recognised in

profitorlossonthepurchase,sale,issueorcancellation

oftheGroup’sequityinstruments.

When the Group issues a compound instrument, i.e.

an instrument that contains both a liability and equity

component,theequitycomponentis initiallymeasured

at the residual amount after deducting from the

fair value of the compound instrument the amount

separately determined for the liability component.

Transactioncoststhatrelatetotheissueofacompound

financial instrument are allocated to the liability and

equity components of the instrument in proportion to

theallocationofproceeds.

Distributions to holders of equity instruments are

recognisedasdistributionsinthestatementofchangesin

equityintheperiodinwhichtheyarepayable.Dividends

fortheyearthataredeclaredafterthereportingdateare

disclosedinthenotestothefinancialstatements.

1.17 Borrowing costs

Borrowingcostsdirectlyattributable to theacquisition,

construction and production of qualifying assets are

capitalisedaspartofthecostsoftheseassets.Qualifying

assetsareassets that takeasubstantialperiodof time

topreparefortheirintendeduseorsale.Capitalisation

ofborrowingcostscontinuesuptothedatewhenthe

assetsaresubstantiallyreadyfortheiruseorsale.

Allotherborrowingcostsareexpensedintheperiodin

whichtheyareincurred.

Details of borrowing costs capitalised are disclosed in

the notes by asset category and are calculated at the

Group’s average funding cost, except to the extent

thatfundsareborrowedspecificallyforthepurposeof

obtaining a qualifying asset. Where this occurs, actual

borrowing costs incurred less any investment income

on the temporary investment of those borrowings are

capitalised.

1.18 Standards and interpretations issued but not yet

effective

1.18.1Standards and interpretations not adopted

in the current year

1.18.1.1 New standards

The following standard, mandatory for the Group’s

accountingperiodscommencingonorafter1January

2009,hasnotbeenearlyadoptedbytheGroup:

(i)IFRS 9 – Financial Instruments

The IASB has issued IFRS 9 – Financial Instruments

which is the first step in its project to replace IAS 39

–FinancialInstruments:RecognitionandMeasurement.

IFRS 9 introduces new requirements for classifying

and measuring financial assets. The IASB intends to

expand IFRS9during2010 to addnew requirements

for classifying and measuring financial liabilities,

derecognitionoffinancialinstruments,impairmentand

hedgeaccounting.



Theimplementationofthestandardisexpectedtohave

amaterial impactontheGroup’sfinancialstatements.

TheGroup is currently evaluating the impact that the

adoptionwillhaveonthecurrentrequirementsofthe

standard.

The standard is effective for the Group for year-end

commencing1January2013.

1.18.1.2Revised standardsThe following revision to International Accounting

StandardshasnotbeenearlyadoptedbytheGroup:

(i)Annual improvements project

As part of its first annual improvements projects, the

IASBhasissueditseditionofannualimprovements.The

annualimprovementprojectaimstoclarifyandimprove

theaccountingstandards.

Theimprovementsincludethoseinvolvingterminology

oreditorialchangeswithminimaleffectonrecognition

andmeasurement.

There are no significant changes in the current year’s

improvementthatwillaffecttheGroupandiseffective

fortheGroupcommencing1January2009.

1.18.1.3InterpretationsThe following interpretation of the existing standards

isnotyeteffectiveandhasnotbeenearlyadoptedby

theGroup:

(i) Amendments to IFRIC 14 – Prepayment of a Minimum

Funding Requirement

The interpretation was amended to remedy an

unintended consequence of IFRIC 14 where entities

are in somecircumstancesnotpermitted to recognise

prepaymentsofminimumfundingcontributions,asan

asset.

The amendment to IFRIC 14 is effective for annual

periodscommencingonorafter1July2011andisnot

anticipatedtohaveasignificanteffectontheGroup’s

financialstatements.

1.18.2 Standards and interpretations adopted in the current year

1.18.2.1 Revised standardsThe following revisions to International Financial

ReportingStandardshavebeenadoptedbytheGroup:

(i)Amendments to IFRS 3 – Business Combinations:

Comprehensive revision on applying the acquisition

method and consequential amendments to IAS 27 –

Consolidated and Separate Financial Statements, IAS

28 – Investments in Associates and IAS 31 – Interest

in Joint Ventures

TherevisedIFRS3retainedthebasicrequirementsofIFRS

3(2004)toapplyacquisitionaccountingforallbusiness

combinationswithinthescopeofIFRS3,toidentifythe

acquirerandtodeterminetheacquisitiondateforevery

businesscombination.Themostsignificantchangeisa

move from a purchase price allocation approach to a

fairvaluemeasurementprinciple.Therevisionappliesto

businesscombinationsforwhichtheacquisitiondateis

onorafterthebeginningofthefirstannualreporting

periodbeginningonorafter1July2009.

Theamended IAS27 requiresaccounting forchanges

inownershipinterestsinasubsidiarythatoccurwithout

lossofcontrol,toberecognisedasanequitytransaction.

WhentheGrouplosescontrolofasubsidiaryanyinterest

retainedintheformersubsidiarywillbemeasuredatfair

valuewiththegainorlossrecognisedinprofitorloss.

TheGroupwilladopttherevisionstothestandardforits

annualperiodcommencing1January2010.

Therevisionandamendmentisapplicableprospectively

andwillnotaffectpasttransactions,andthereforedid

nothaveanyeffectontheGroup’sfinancialstatements.

(ii)Amendments to IFRS 7 – Enhancing Disclosures

about Fair Value and Liquidity Risk

The amendments expand the disclosures required in

respect of fair value measurements recognised in the

statementoffinancialposition.Forthepurposeofthese

expandeddisclosures,a three-levelhierarchyhasbeen

introduced.

Theadditionaldisclosuresrequiredcanbesummarised

asfollows:thelevelinthehierarchyinwhichfairvalue

measurements are categorised; reasons for significant

transfers between level 1 and 2 of the hierarchy; a

reconciliation from beginning to closing balances for

level3of thehierarchy; and if changes toanyof the

assumptionsappliedforlevel3measurementswillhave

a significant effect on the fair value, the nature and

extentthereofshouldbedisclosed.

Theamendmentsalsoclarify thescopeof itemstobe

includedinthematurityanalysesrequiredunderIFRS7

bychangingthedefinitionofliquidityrisktostatethat

liquidity risk only includes financial liabilities that are

settledbydeliveringcashoranotherfinancialasset.

This results in the exclusion of financial liabilities that

are settled by the entity delivering its own equity

instrumentsornon-financialassets.

Furthermore,theamendmentsspecifydifferentliquidity

risk disclosure requirements for derivative and non-

derivativefinancialliabilities.


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Theadoptionofthestandarddidnothaveaneffecton

theGroup’sfinancialpositionorperformanceas itdid

not require any measurement adjustment, but rather

enhanceddisclosure.

(iii)Amendments to IAS 1 – Presentation of Financial

Statements: Comprehensive revision including

requiring a statement of comprehensive income

The revisions made to IAS 1 required information in

financial statements tobeaggregatedon thebasisof

shared characteristics and introduce a statement of

comprehensive income. The revision includes changes

intitlesoffinancialstatementstoreflecttheirfunctions

moreclearly.

ThemainchangeintherevisedIAS1istherequirement

topresentallnon-ownertransactionsinthestatement

ofcomprehensiveincome.Theamendmentalsorequires

twosetsofcomparativenumberstobeprovidedforthe

financial position in any yearwhere therehasbeena

restatementorreclassificationofbalances.

The revised standardwasadopted in the current year

and had an effect on the disclosure provided in the

annualreport.

(iv)Amendment to IAS 32 – Financial Instruments:

Presentation, and IAS 1 – Presentation of Financial

Statements: Puttable financial instruments arising on

liquidation and obligations

Theamendment requiresadditional information tobe

presented on puttable instruments that are presented

asequity.

TheamendmentdidnotaffecttheGroup,astheGroup

doesnothaveputtableinstrumentsthatarepresented

withinequity.

(v)Amendments to IAS 39 – Financial Instruments:

Recognition and Measurement: eligible hedged

items and clarification regarding ending assessment

of embedded derivatives

Theamendmentsprovideclarificationontwoaspectsof

hedgeaccounting:identifyinginflationasahedgedrisk

andhedgingwithoptions.

The adoption of the amendment of the standard

regardingeligiblehedgeditemsdoesnothaveaneffect

on the Group, as the Group does not apply hedge

accounting.

These amendments also deal with the accounting

treatment for embedded derivatives in the case of a

reclassificationofafinancialassetoutofthe“fairvalue

throughprofitorloss”category.

The amendment did not affect the Group, as the

Groupdoesnothaveafinancialassetwhichhavebeen

classifiedoutofthe“fairvaluethroughprofitorloss”

category.

(vi)Annual Improvements Project

Aspartofitssecondannualimprovementsprojects,the

IASBhasissueditseditionofannualimprovements.The

annualimprovementprojectaimstoclarifyandimprove

theaccountingstandards.

Theimprovementsincludethoseinvolvingterminology

oreditorialchangeswithminimaleffectonrecognition

andmeasurement.

NosignificantchangesweremadetotheGroupfinancial

statements for the revisions which were effective for

periodscommencingonorafter1January2009.




Contents

Statementofcomprehensiveincome 52

Statementoffinancialposition 53

Statementofchangesinshareholders’equity 54

Statementofcashflows 55

Operationalandsegmentalreport 56

Statementoffinancialpositionclassificationsoffinancialinstruments 58

Notestothefinancialstatements 62

Analysisofinvestmentsinsubsidiaries 93

Value-addedstatement 94

Group Financial Statements


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Group Statement of Comprehensive Income for the year ended 31 December 2009

2009 2008

Note R’000 R’000

Interestandsimilarincome 2 6 217 843 6431739

Interestexpenseandsimilarcharges 3 4 184 778 4699196

Net interest income 2 033 065 1732543

Impairmentlossesonloansandadvances 15 956 636 700538

Income from lending activities 1 076 429 1032005

Non-interestrevenue 4 199 114 87609

Operating income 1 275 543 1119614

Operatingexpenses 5 625 911 524846

Net operating income 649 632 594768

Indirecttaxation 6 50 449 51310

Profit from operations before direct taxation 599 183 543458

Directtaxation 7 168 408 182245

Net profit for the year 430 775 361213

Other comprehensive income net of taxation – 11823

–Gainsonpropertyrevaluation – 15727

–Taxationonothercomprehensiveincome – (3904)

Total comprehensive income for the year 430 775 373036

Profit attributable to:

–Equityholdersoftheparent 400 699 331318

–Non-controllinginterest–Preferenceshareholders 30 076 29895


Group Statement of Financial Position at 31 December 2009

2009 2008

Note R’000 R’000

ASSETS

Cashandcashequivalents 9 300 800 46693

Othershort-termsecurities 11 2 346 963 1563385

Derivativefinancialinstruments 10 50 921 37619

Governmentandothersecurities 11 202 608 529163

Loansandadvancestocustomers 11,12&15 50 450 770 44734236

Otherassets 13 741 663 504787

Investmentsecurities 11 3 970 5183

Propertyandequipment 16 268 241 279484

Intangibleassets 17 78 136 –

Mandatorydepositswithcentralbank 9 1 215 575 1067545

Total assets 55 659 647 48768095

EQUITY AND LIABILITIES

Ordinarysharecapital 19.1 3 937 3937

Ordinarysharepremium 1 097 747 1097747

Reserves 2 361 329 1960630

Total ordinary shareholders’ equity 3 463 013 3062314

Preferencesharecapitalandpremium 19.2 298 047 298047

Total shareholders’ equity 3 761 060 3360361

Total liabilities 51 898 587 45407734

Bankoverdraft 9 6 920 –


Amountsowedtodepositors 20 50 087 002 43934979

Otherliabilities 21 161 503 110712

Provisions 22 52 049 45403

Currenttaxation 14 23 511 5706

Deferredtaxation 8 175 992 162013

Long-termdebtinstruments 11&23 1 146 653 791750

Total equity and liabilities 55 659 647 48768095

Contingentliabilities* 25 363 806 1079640

*Contingentliabilitiesfor2008havebeenrestatedtoexcludeunutilisedfacilitiesofR1.4billion.


Numberofordinary

shares

Numberofpreference

shares

Ordinarysharecapital

R’000

Ordinaryshare

premiumR’000

RevaluationreserveR’000

Generalcreditriskreserve*

R’000

Accu-mulated

profitR’000

Totalordinaryshare-

holders’equityR’000

Preferenceshare

capitalandpremium

R’000

Totalshare-


Balanceat31December2006 288222599 3000000 2882 348802 – 180821 1076169 1608674 298062 1906736

Transferto/(from)reserves 48550 (48550) – –

Totalcomprehensiveincomefortheperiod 35361 479154 514515 514515

Preferencedividendspaid (26003) (26003) (26003)

Ordinarysharesissued 51787025 518 299482 300000 300000

Shareissueandrepurchaseexpenses – (15) (15)

Balanceat31December2007 340009624 3000000 3400 648284 35361 229371 1480770 2397186 298047 2695233

Transfer(from)/toreserves (229371) 229371 – –


Ordinarydividendspaid (128013) (128013) (128013)



Balance at31 December 2008 393 682 789 3 000 000 3 937 1 097 747 47 184 – 1 913 446 3 062 314 298 047 3 360 361

Total comprehensive income for the period 430 775 430 775 430 775

Preference dividends paid (30 076) (30 076) (30 076)


*Representsnon-distributablereservestransferredfromotherdistributablereservesinordertocomplywiththeBanksAct,1990.

Group Statement of Changes in Shareholders’ Equity for the year ended 31 December 2009


2009 2008

Note R’000 R’000

Cashreceivedfromclients 24.2 6 519 569 6567560

Cashpaidtoclients,staffandsuppliers 24.3 (4 768 566) (5221734)

Recoveriesonloanspreviouslywrittenoff 15.1 51 475 19074

Cash generated by operating activities 24.1 1 802 478 1364900

Change in funds for operating activities (1 445 357) (826524)

Increaseinoperatingassets 24.4 (7 529 803) (10908116)

Increaseinoperatingliabilities 24.5 6 084 446 10081592

Net cash generated by operating activities before taxation 357 121 538376

Taxationpaid 24.6 (187 073) (174985)

Net cash generated by operating activities 170 048 363391

Net cash utilised in investing activities (94 755) (106553)

Acquisitionofpropertyandequipment (29 277) (116889)

Proceedsondisposalofpropertyandequipment 9 459 10336

Acquisitionofintangibleassets (74 937) –

Net cash from financing activities 319 924 77092

Proceedsfromissueofordinaryshares – 450000

Dividendspaid (30 076) (157908)

Redemptionoflong-termdebtinstrument – (515000)

Proceedsfromissueoflong-termdebtinstrument 350 000 300000

Net increase in cash and cash equivalents 395 217 333930

Cashandcashequivalentsatthebeginningoftheyear 1 114 238 780308

Cash and cash equivalents at the end of the year 9 1 509 455 1114238

Group Statement of Cash Flows for the year ended 31 December 2009


MotorFinance PropertyFinance SupplierAssetFinance ProfessionalFinance TreasuryandEliminations ImperialBank

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

STATEMENT OF FINANCIAL POSITION Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn

ASSETS

Cashonhand – – – – – – – – 1.5 1.1 1.5 1.1

Liquidassets – – – – – – – – 2.6 2.2 2.6 2.2

Loansandadvancestocustomers 32.5 28.0 8.9 8.0 3.3 3.7 5.7 4.9 0.1 0.1 50.5 44.7

Investmentsandotherassets 0.5 0.4 0.3 – – – – – – 0.1 0.8 0.5

Fixedassets 0.1 0.1 – – – – – – 0.2 0.2 0.3 0.3

33.1 28.5 9.2 8.0 3.3 3.7 5.7 4.9 4.4 3.7 55.7 48.8


Deposits 29.9 26.0 7.9 6.8 2.8 3.2 5.3 4.5 4.2 3.5 50.1 44.0

Otherliabilities 0.3 0.2 0.1 0.2 0.1 – – – 0.2 0.2 0.7 0.6

Shareholders’funds 2.2 1.9 0.9 0.8 0.3 0.4 0.3 0.3 0.1 – 3.8 3.4

Secondaryloancapital 0.7 0.4 0.3 0.2 0.1 0.1 0.1 0.1 (0.1) – 1.1 0.8

33.1 28.5 9.2 8.0 3.3 3.7 5.7 4.9 4.4 3.7 55.7 48.8

STATEMENT OF COMPREHENSIVE INCOME Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Netinterestincome 1 515.4 1158.8 243.2 328.1 155.4 144.5 117.9 105.5 1.2 (4.4) 2 033.1 1732.5

Impairmentlossesonloansandadvances 800.5 631.3 42.3 13.3 88.1 29.2 25.8 26.7 (0.1) – 956.6 700.5

Incomefromlendingactivities 714.9 527.5 200.9 314.8 67.3 115.3 92.1 78.8 1.3 (4.4) 1 076.5 1032.0

Non-interestrevenue 153.7 63.8 28.9 (11.2) 9.4 12.7 7.8 6.2 (0.7) 16.1 199.1 87.6

Operatingincome 868.6 591.3 229.8 303.6 76.7 128.0 99.9 85.0 0.6 11.7 1 275.6 1119.6

Operatingexpensesandindirecttaxation 428.9 362.9 85.6 75.8 94.3 76.2 64.7 60.3 2.9 1.0 676.4 576.2

Profitfromoperationsbeforedirecttaxation 439.7 228.4 144.2 227.8 (17.6) 51.8 35.2 24.7 (2.3) 10.7 599.2 543.4

Directtaxation 123.1 63.9 40.4 63.8 (4.9) 14.5 9.8 6.9 – 33.1 168.4 182.2

Netprofitfortheyear 316.6 164.5 103.8 164.0 (12.7) 37.3 25.4 17.8 (2.3) (22.4) 430.8 361.2

Costofequitycharge 290.2 191.4 114.1 80.3 39.8 33.3 43.7 30.1 7.4 40.0 495.2 375.1

Economic profit 26.4 (26.9) (10.3) 83.7 (52.5) 4.0 (18.3) (12.3) (9.7) (62.4) (64.4) (13.9)

TheGroupoperationalandsegmentalreportreflectsthecurrentmethodofmeasuringtheperformanceoftherespectivebusinessdivisions.Eachdivisionisallocatedcapitaltobeutilisedinthegenerationofrevenuebasedontheirrisk-weightedassets.ThedivisionsarechargedcostofcapitalonthecapitalallocatedbasedontheBank’sactualcapitalstructure.Thecostofequitychargeisreflectedaftertaxationandtheresidualprofitisreferredtoaseconomicprofit.ThecostofequitychargecomprisestheBank’stargetedtier1components,namely:ordinaryequity,preferencesharesandhybridinstruments.The2008figureshavebeenrestatedaccordingly.

Group Operational and Segmental Report for the year ended 31 December 2009


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2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

STATEMENT OF FINANCIAL POSITION Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn Rbn

ASSETS

Cashonhand – – – – – – – – 1.5 1.1 1.5 1.1

Liquidassets – – – – – – – – 2.6 2.2 2.6 2.2

Loansandadvancestocustomers 32.5 28.0 8.9 8.0 3.3 3.7 5.7 4.9 0.1 0.1 50.5 44.7

Investmentsandotherassets 0.5 0.4 0.3 – – – – – – 0.1 0.8 0.5

Fixedassets 0.1 0.1 – – – – – – 0.2 0.2 0.3 0.3

33.1 28.5 9.2 8.0 3.3 3.7 5.7 4.9 4.4 3.7 55.7 48.8


Deposits 29.9 26.0 7.9 6.8 2.8 3.2 5.3 4.5 4.2 3.5 50.1 44.0

Otherliabilities 0.3 0.2 0.1 0.2 0.1 – – – 0.2 0.2 0.7 0.6

Shareholders’funds 2.2 1.9 0.9 0.8 0.3 0.4 0.3 0.3 0.1 – 3.8 3.4

Secondaryloancapital 0.7 0.4 0.3 0.2 0.1 0.1 0.1 0.1 (0.1) – 1.1 0.8

33.1 28.5 9.2 8.0 3.3 3.7 5.7 4.9 4.4 3.7 55.7 48.8

STATEMENT OF COMPREHENSIVE INCOME Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Netinterestincome 1 515.4 1158.8 243.2 328.1 155.4 144.5 117.9 105.5 1.2 (4.4) 2 033.1 1732.5

Impairmentlossesonloansandadvances 800.5 631.3 42.3 13.3 88.1 29.2 25.8 26.7 (0.1) – 956.6 700.5

Incomefromlendingactivities 714.9 527.5 200.9 314.8 67.3 115.3 92.1 78.8 1.3 (4.4) 1 076.5 1032.0

Non-interestrevenue 153.7 63.8 28.9 (11.2) 9.4 12.7 7.8 6.2 (0.7) 16.1 199.1 87.6

Operatingincome 868.6 591.3 229.8 303.6 76.7 128.0 99.9 85.0 0.6 11.7 1 275.6 1119.6

Operatingexpensesandindirecttaxation 428.9 362.9 85.6 75.8 94.3 76.2 64.7 60.3 2.9 1.0 676.4 576.2

Profitfromoperationsbeforedirecttaxation 439.7 228.4 144.2 227.8 (17.6) 51.8 35.2 24.7 (2.3) 10.7 599.2 543.4

Directtaxation 123.1 63.9 40.4 63.8 (4.9) 14.5 9.8 6.9 – 33.1 168.4 182.2

Netprofitfortheyear 316.6 164.5 103.8 164.0 (12.7) 37.3 25.4 17.8 (2.3) (22.4) 430.8 361.2

Costofequitycharge 290.2 191.4 114.1 80.3 39.8 33.3 43.7 30.1 7.4 40.0 495.2 375.1

Economic profit 26.4 (26.9) (10.3) 83.7 (52.5) 4.0 (18.3) (12.3) (9.7) (62.4) (64.4) (13.9)

TheGroupoperationalandsegmentalreportreflectsthecurrentmethodofmeasuringtheperformanceoftherespectivebusinessdivisions.Eachdivisionisallocatedcapitaltobeutilisedinthegenerationofrevenuebasedontheirrisk-weightedassets.ThedivisionsarechargedcostofcapitalonthecapitalallocatedbasedontheBank’sactualcapitalstructure.Thecostofequitychargeisreflectedaftertaxationandtheresidualprofitisreferredtoaseconomicprofit.ThecostofequitychargecomprisestheBank’stargetedtier1components,namely:ordinaryequity,preferencesharesandhybridinstruments.The2008figureshavebeenrestatedaccordingly.


2009 Held-for-trading Designated as at fair value through profit or loss At amortised

cost

Non-financialassets andliabilities

R’000 R’000 R’000 R’000 R’000

2009 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

ASSETS


Othershort-termsecurities 2 346 963 2 346 963 2 346 963

Derivativefinancialinstruments 50 921 50 921 50 921

Governmentandothersecurities 202 608 202 608 202 608

Loansandadvancestocustomers* 50 450 770 6 478 759 6 478 759 43 972 011

Otherassets 741 663 6 152 6 152 735 511

Investmentsecurities 3 970 3 970 3 970


Intangibleassets 78 136 78 136

Mandatorydepositswithcentralbank 1 215 575 1 215 575

Total assets 55 659 647 50 921 50 921 206 578 8 831 874 9 038 452 46 223 897 346 377


Ordinarysharecapital 3 937 3 937

Ordinarysharepremium 1 097 747 1 097 747

Reserves 2 361 329 2 361 329

Total ordinary shareholders’ equity 3 463 013 3 463 013

Preferencesharecapitalandpremium 298 047 298 047

Total shareholders’ equity 3 761 060 3 761 060

Total liabilities 51 898 587 244 957 244 957 492 763 492 763 50 799 951 360 916

Bankoverdraft 6 920 6 920


Amountsowedtodepositors 50 087 002 50 087 002

Otherliabilities 161 503 52 139 109 364

Provisions 52 049 52 049



Long-termdebtinstruments** 1 146 653 492 763 492 763 653 890

Total equity and liabilities 55 659 647 244 957 244 957 492 763 492 763 50 799 951 4 121 976

*Loansandadvancesandinvestmentsinshort-termsecurities’fairvaluesaredeterminedusingdiscountedcashflowmodels,wherefuturecashflowsarediscountedusingcurrentmarketrates.

**Long-termdebtinstrumentsatamortisedcostapproximatesitsfairvalue.

Thestatementoffinancialpositionaboveprovidesananalysisoffinancialinstruments’classificationsgroupedintoLevels1to3basedonthedegreetowhichthefairvalueisobservable.–Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.–Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinLevel1thatareobservable

fortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).–Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliabilitythatarenot

basedonobservablemarketdata(unobservabledata).

Group Statement of Financial Position Classifications of Financial Instruments at 31 December 2009



cost


R’000 R’000 R’000 R’000 R’000


ASSETS






Otherassets 741 663 6 152 6 152 735 511





Total assets 55 659 647 50 921 50 921 206 578 8 831 874 9 038 452 46 223 897 346 377




Reserves 2 361 329 2 361 329














TheBankdoesnothaveLevel3instruments.Therewerenotransfersbetweenlevelsduringtheyear.TheBankdesignatesallsignificantfixedrateinstrumentsasatfairvaluethroughprofitorlossinaccordancewiththefairvalueoptionunderIAS39–FinancialInstruments:RecognitionandMeasurement.Loansandreceivablesandfinancialliabilitiesthatarenotcarriedatfairvalueareprimarilycomprisedofvariableratefinancialassetsandliabilitiesandrepriceasinterestrateschange.Inrespectofall loansandreceivables,aswellasfinancial liabilitiesatamortisedcost,theBankhasassessedpotentialchangesincreditriskforperformingadvancesusing internal creditmodelsand is satisfied that thereareno significant changes in fair valuedue tocreditrisk.Forimpairedloansandadvances,thecarryingvalue,asdeterminedbytheBank’sIAS39creditmodels,isconsideredthebestestimateoffairvalue.Therefore,theBankissatisfied,afterconsideringtheseinternalcreditmodelstogetherwithotherassumptionsandthevariableinterestrateexposure,thatthecarryingvalueoftheseloansandadvancesandfinancialliabilitiesatamortisedcostapproximatesfairvalue.


2008 Held-for-trading DesignatedasatfairvaluethroughprofitorlossAtamortised

cost

Non-financial

assetsand

liabilities

R’000 R’000 R’000 R’000

2008 Level1 Level2 Level3 Total Level1 Level2 Level3 Total

ASSETS

Cashandcashequivalents 46693 46693

Othershort-termsecurities 1563385 1563385 1563385

Derivativefinancialinstruments 37619 37619 37619

Governmentandothersecurities 529163 529163 529163

Loansandadvancestocustomers 44734236 4564947 4564947 40169289

Otherassets 504787 504787

Investmentsecurities 5183 5183 5183

Propertyandequipment 279484 279484

Mandatorydepositswithcentralbank 1067545 1067545

Total assets 48768095 37619 37619 534346 6128332 6662678 41788314 279484


Ordinarysharecapital 3937 3937

Ordinarysharepremium 1097747 1097747

Reserves 1960630 1960630

Total ordinary shareholders’ equity 3062314 3062314

Preferencesharecapitalandpremium 298047 298047

Total shareholders' equity 3360361 3360361

Total liabilities 45407734 357171 357171 488409 488409 44272904 289250


Amountsowedtodepositors 43934979 43934979

Otherliabilities 110712 34584 76128

Provisions 45403 45403

Currenttaxation 5706 5706

Deferredtaxation 162013 162013

Long-termdebtinstruments* 791750 488409 488409 303341

Total equity and liabilities 48768095 357171 357171 488409 488409 44272904 3649611

*Long-termdebtinstrumentsfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.

Group Statement of Financial Position Classifications of Financial Instruments at 31 December 2009



cost

Non-financial

assetsand

liabilities

R’000 R’000 R’000 R’000


ASSETS










Total assets 48768095 37619 37619 534346 6128332 6662678 41788314 279484




Reserves 1960630 1960630

Total ordinary shareholders’ equity 3062314 3062314












*Long-termdebtinstrumentsfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.


2009 2008

R’000 R’000

Financial instruments at fair value

throughprofit & loss

Financialinstruments

not at fair value through

profit & loss Total

Financialinstrumentsatfairvalue

throughprofit&loss


notatfairvaluethrough

profit&loss Total

1 ACCOUNTING POLICIESRefertopages34to50fortheaccountingpolicies.

2 INTEREST AND SIMILAR INCOME*Mortgageloans 241 846 1 087 565 1 329 411 89874 1474366 1564240

–Interestearned 241 846 1 049 064 1 290 910 89874 1372790 1462664

–Deferredrevenueandacquisitioncosts – 38 501 38 501 – 101576 101576

Leaseandinstalmentdebtors 495 259 4 027 209 4 522 468 151012 4312915 4463927

–Interestearned 495 259 4 189 274 4 684 533 151012 4433579 4584591

–Deferredrevenueandacquisitioncosts – (162 065) (162 065) – (120664) (120664)

Termloansandother 59 292 103 775 163 067 73013 106093 179106

Governmentandpublicsectorsecurities 191 808 – 191 808 213400 – 213400

Preferenceshares – 11 089 11 089 – 11066 11066 988 205 5 229 638 6 217 843 527299 5904440 6431739

Interestincomeonimpairedfinancialassets 61 708 129771

*Interestincomedisclosedaboveincludesinterestincomeonimpairedfinancialassets.

3 INTEREST EXPENSE AND SIMILAR CHARGESDepositandloanaccounts – 3 799 606 3 799 606 – 4323653 4323653

Derivativefinancialinstruments 159 055 – 159 055 65193 – 65193

Long-termdebtinstruments 42 307 40 789 83 096 102933 3341 106274

Otherdeposits – – – – 674 674

Securitisationnotes – 146 220 146 220 – 203402 203402

Borrowingcostscapitalised – (3 199) (3 199) – – – 201 362 3 983 416 4 184 778 168126 4531070 4699196

4 NON-INTEREST REVENUECommissionandfeeincome* – 162 091 162 091 – 97329 97329

–Insurancecommission – 29 540 29 540 – 27800 27800

–Fees – 132 551 132 551 – 69529 69529

Fairvalueadjustmentsthroughprofitandloss** 14 294 – 14 294 (29409) – (29409)

–Designatedasatfairvaluethroughprofitandloss (126 311) – (126 311) 276967 – 276967

–Heldfortrading 140 605 – 140 605 (306376) – (306376)

Otherincome 6 152 16 577 22 729 – 19689 19689

–Rentreceived – 8 765 8 765 – 12257 12257

–Fairvalueadjustmentonoption 6 152 – 6 152 – – –

–Profitondisposalofpropertyandequipment – 506 506 – 285 285

–Other – 7 306 7 306 – 7147 7147

20 446 178 668 199 114 (29409) 117018 87609

*All commissionand fee incomeother thanamounts included indetermining theeffective interest rate relates tofinancialinstrumentsthatarenotclassifiedasfinancialinstrumentsatfairvaluethroughprofitandloss.

**Thenetgainsandlossesonfinancialinstrumentsincludesallrealisedandunrealisedfairvaluechanges,interestanddividends.

Notes to the Group Financial Statements for the year ended 31 December 2009


2009 2008

R’000 R’000

5 OPERATING EXPENSES

Staffcosts* 358 868 306229

–Salariesandwages 358 868 306229

Computerprocessing 47 627 40089

–Depreciationforcomputerequipment 14 209 14507

–Othercomputerprocessingexpenses 33 418 25582

Occupationandaccommodation 34 424 26364

–Depreciationforowner-occupiedbuildings 11 363 5338

–Operatingleasechargesforlandandbuildings 12 710 13176

–Otheroccupationandaccommodationexpenses 10 351 7850

Marketingandpublicrelations 10 947 14418

Feesandinsurances 26 440 25760

–Auditors’remuneration 8 704 10063

–Auditfees–internal 3 768 1573

–Auditfees–external 4 733 7243

–Otherservices 203 1247

–Otherfeesandinsurances 17 736 15697

Officeequipmentandconsumables 45 243 39177

–Depreciationforfurnitureandotherequipment 5 247 3684

–Otherofficeequipmentandconsumables 39 996 35493

Vehiclesandtransportexpenses 748 948

–Depreciationforvehicles 748 948

Sundryexpenses 74 901 70648

Feestoalliancepartners 26 713 1213

625 911 524846

*Refertopage79onrelatedpartiesforadetailedbreakdownofdirectors’compensation.

6 INDIRECT TAXATION

Value-addedtaxation 50 449 51310

50 449 51310

Value-addedtaxationcomprisesthatportionwhichisirrecoverableasaresultoftheinterestearnedinthebankingsector.


2009 2008

R’000 R’000

7 DIRECT TAXATION

7.1 Charge for the year

SouthAfricannormaltaxation

–Current 151 429 121831

–Deferred 14 811 53040

–Changeduetotaxationratedecreasingfrom29%to28% – (3278)

–Secondarytaxoncompanies 2 135 10610

Totaldirecttaxation 168 375 182203

Prioryearunderprovision–currenttaxation 865 1209

Prioryearoverprovision–deferredtaxation (832) (1167)

168 408 182245

7.2 Taxation rate reconciliation

StandardrateofSouthAfricannormaltaxation 28.0% 28.0%

Reductionintaxrate 0.0% (0.5%)

Non-taxabledividendincome (0.5%) (0.5%)

Non-taxablecapitalprofit (0.3%) 0.0%

Deferredtaxableincome 0.0% 5.5%

Secondarytaxoncompanies 0.4% 2.0%

Other 0.5% (1.0%)

Totaldirecttaxationonincomeasapercentageofprofitbeforedirecttaxation 28.1% 33.5%



2009 2008

R’000 R’000

8 DEFERRED TAXATION

8.1 Reconciliation of deferred taxation balances

Deferred taxation liability

Openingbalance 162 013 109512

Ratechangefrom29%to28% – (3278)

Prioryearadjustment–Statementofcomprehensiveincome (832) (1167)

Currentyeartemporarydifferences 14 811 56946

–Recognisedinprofitandloss 14 811 53040

–Incomeandexpenditureaccrualsdeducted 13 916 36859

–Incomeaccrued – 30148

–Impairmentofloansandadvances 1 719 (9343)

–Other (824) (4624)

–Recognisedinequity – 3906

–Propertyandequipment,leasesandotherassets – 3906

Balance at end of year 175 992 162013

8.2 Analysis of deferred taxation


Propertyandequipment,leasesandotherassets – 3849

Impairmentofloansandadvances (22 519) (24238)

Revaluationofpropertyandequipment 18 348 18348

Incomeandexpenditureaccruals 181 617 164684

Other (1 454) (630)

175 992 162013

9 CASH AND CASH EQUIVALENTS

Coinsandbanknotes 25 25

Moneyatcallandshortnotice 300 525 46418

Balanceswithcentralbankotherthanmandatorydeposits 250 250

300 800 46693

Bankoverdrafts (6 920) –

Mandatorydepositswithcentralbank 1 215 575 1067545

1 509 455 1114238

Moneyatcallandshortnoticeconstitutesamountswithdrawablein32daysorless.MandatorydepositsarenotavailableforuseintheBank’sday-to-dayoperations.


10 DERIVATIVE FINANCIAL INSTRUMENTS

Thesetransactionshavebeenenteredintointhenormalcourseofbusinessandnomaterial lossesareanticipatedotherthanthoseforwhichprovisionhasbeenmadeinthestatementofcomprehensiveincome.Therearenocommitmentsorcontingentcommitmentsunderderivativeinstrumentsthataresettledotherthanwithcash.TheprincipaltypesofderivativecontractsintowhichtheBankentersaredescribedbelow:

SwapsTheseareover-the-counter(OTC)agreementsbetweentwopartiestoexchangeperiodicpaymentsofinterest,orrelatedindex,overasetperiodbasedonnotionalprincipalamounts.TheBankentersintoswaptransactionsinseveralmarkets.InterestrateswapsareusedtoeconomicallyhedgetheinterestrateriskoftheBank.

Risk monitoringDetailsoftheBank’sriskmanagementstructure,policiesandmethodsarenotedonpages24to29andtheinterestrateriskanalysisisdetailedonpages89to90.

2009 2008

R’000 R’000

10.1 Total carrying amount of derivative financial instruments

Grosscarryingamountofassets 50 921 37619

Grosscarryingamountofliabilities (244 957) (357171)

Netcarryingamount (194 036) (319552)

Adetailedbreakdownofthenotionalprincipal,carryingamountandfairvalueofthevarioustypesofderivativefinancialinstrumentsheldbytheGroupispresentedinthefollowingtables:

10.2 Notional principal of derivative financial instruments

This represents thenotionalamountsofalloutstandingcontractsat year-end.Thisnotionalamount is the sumof theabsoluteamountofallpurchasesandsalesofderivative instruments.Thenotionalamountsdonot representamountsexchangedbythepartiesandthereforerepresentonlythemeasureofinvolvementbytheBankinderivativecontractsandnotitsexposuretomarketorcreditrisksarisingfromsuchcontracts.Theamountsactuallyexchangedarecalculatedonthebasisofthenotionalamountsandothertermsofthederivative,whichrelatetointerestrates,securitiespricesorfinancialandotherindices.

2009 2008

Notionalprincipal

R’000

Positive valueR’000

NegativevalueR’000

Notionalprincipal

R’000

PositivevalueR’000

Negativevalue

R’000

Banking derivatives

Interestrateswaps 12 283 657 3 550 375 8 733 282 108601812817235 8042946

Interestratecaps – – – 11000 11000 –

Total notional principal 12 283 657 3 550 375 8 733 282 108711812828235 8042946

10.3 Carrying amount of derivative financial instruments

The amounts disclosed represent the value of all derivative instruments held. The fair value of a derivative financialinstrumentistheamountatwhichitcouldbeexchangedinacurrenttransactionbetweenwillingparties,otherthanaforcedliquidationorsale.Fairvaluesareobtainedfromquotedmarketpricesanddiscountedcashflowmodels.Whenitisnotpracticable,owingtoconstraintsoftimelinessorcost,todeterminethefairvalueofaderivativeinstrumentwithsufficientreliability,suchderivativeisincludedinthefollowingtableatavaluecalculatedonanaccrualbasis.Intermsofthatbasisavalueisobtainedbytakingintoaccounttheoriginalcostofthederivativeandonlytherealisedgainsorlossesinrespectoftheinstrument.

2009 2008

Net carrying amount

R’000

Carrying amount of

assetsR’000

Carrying amount of

liabilitiesR’000

Netcarryingamount

R’000

Carryingamountof

assetsR’000

Carryingamountof

liabilitiesR’000

Banking derivatives

Interestrateswaps (194 036) 50 921 (244 957) (319638) 37533 (357171)


Total carrying amount (194 036) 50 921 (244 957) (319552) 37619 (357171)



11 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

TheBankhassatisfiedthecriteriafordesignationofaninstrumentasatfairvaluethroughprofitorlossintermsoftheaccountingpolicyasstipulatedintheannualfinancialstatements.

VariousfixedrateinstrumentsareenteredintobytheBank.TheoverallinterestrateriskoftheBankisthenhedgedbytheALCObywayofaninterestrateswapthushavingtheinterestrateriskpassedouttothemarket.Theswapsmeetthedefinitionof“derivatives”,andarethereforeheldatfairvalueintermsofIAS39–FinancialInstruments:RecognitionandMeasurement.Thefixedrateinstruments,however,donotmeetthisdefinition.Therefore,toavoidanaccountingmismatchbyholdingthefixedrateinstrumentatamortisedcostandthebalanceofthehedgingschemes’instrumentsatfairvalue,thefixedrateinstrumentsaredesignatedasatfairvaluethroughprofitorlossandarethereforeheldatfairvalue.

Variousinstrumentsaredesignatedasatfairvaluethroughprofitorlossconsistentwiththerelevantentity’sdocumentedriskmanagementorinvestmentstrategy.Intheseinvestmentstrategiesthefairvalueistheinstrumentattributethatismanagedandreviewedonaregularbasis.Businessstrategies,operatingmandatesand/orinvestmentstrategiesarealignedwiththefairvalueoftheinstruments.Theriskoftheportfolioismeasuredandmonitoredonafairvaluebasis.Performancemeasurementisdirectlyalignedtothefairvalueandisreportedtokeymanagementpersonnelonaregularbasis.

11.1 Financial assets designated as at fair value through profit or loss

2009 2008

R’000 R’000

Maximum exposure to credit risk



Loansandadvancesdesignatedasatfairvaluethroughprofitorloss* 6 478 759 4564947

Othershort-termsecurities 2 346 963 1563385

9 032 300 6662678

*Thisamountisincludedaspartoftheloansandadvancesbalanceinthestatementoffinancialposition.Refertonote12forfurtherinformationonloansandadvances.

Nocreditderivativesareissuedonanyoftheabovefinancialassets.

Changesincreditriskwereidentifiedatadivisionlevelonanindividualbasisbyreviewofhistoricalrecords.Eachindividualtransactionwasassessedforsignsofsignificantcreditdeterioration.Wheresignificantdeteriorationwas identified,thecollateralandprovisionamountsweretakenintoaccounttoachievefairvalue.

Thecreditmarginiskeptfixedonthefinancialinstrumentsthatarenotlistedonarecognisedexchange,upuntilthedateanimpairmenteventoccurs.

2009 2008

R’000 R’000

11.1.1 Government and other securities

Analysis

Governmentandgovernment-guaranteedsecurities 202 608 529163

Sectoral analysis

Governmentandpublicsector 202 608 529163

Valuation

–Carryingamount 202 608 529163

–Marketvalue(listed) 202 608 529163


2009 2008

R’000 R’000

11 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS(continued)

11.1 Financial assets designated as at fair value through profit or loss (continued)

11.1.2 Investment securities

Analysis

EagleBonds 3 970 5183

Sectoral analysis

Publicsector 3 970 5183

Valuation


–Marketvalue(listed) 3 970 5183

TheEagleBondswere issuedon10June2003atanominalvalueofR10millionbearingacouponof9.956%.Interestpaymentsandinstalmentsarereceivedonaquarterlybasisandthebondmatureson31July2012.

11.1.3 Other short-term securities

Analysis

Treasurybills 1 634 976 1182129

SARBdebentures 711 987 381256

2 346 963 1563385

Sectoral analysis

Governmentandpublicsector 2 346 963 1563385

Valuation

–Carryingamount 2 346 963 1563385

–Marketvalue 2 346 963 1563385

AregisteroftreasurybillsanddebenturesisavailableforinspectionattheregisteredofficeoftheCompany.

11.2 Financial liabilities designated as at fair value through profit or loss

Fair valueR’000

Contractuallypayable at

maturityR’000

Difference

R’000

Change in fair value due to change in credit risk

Current yearR’000

CumulativeR’000

2009

Long-termdebtinstruments 492 763 500 000 (7 237) (8 972) (13 335)

2008

Long-termdebtinstruments* 488409 500000 (11591) (704) (22307)

ChangesinfairvalueduetocreditriskchangesareassessedwithreferencetogovernmentstockR154,whichhasreplacedtheR153.

*Long-termdebtinstrumentsfor2008havebeenrestatedtoalignwithNedbankLimited’sdisclosure.



2009 2008

R’000 R’000

12 LOANS AND ADVANCES TO CUSTOMERS

TheBankoperates in selectednichemarkets concentratingonasset-basedfinance. Loansandadvancesmadearemostlyintheformofinstalmentcredittoindividualsandmortgagelendingtopropertydevelopers,corporateborrowersandindividuals.

12.1 Category analysis*

Homeloans 2 985 711 1620947

Commercialmortgages 6 027 493 6171879

Otherloanstoclients 5 086 591 4853663

Netinvestmentininstalmentsaleandleaseagreements 37 420 300 32777997

Preferenceshares 119 193 122104

51 639 288 45546590

Impairmentofloansandadvances(note15) (1 188 518) (812354)

50 450 770 44734236

*Loansandadvancessplitfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.

ThepreferenceshareshaveanominalvalueofR110millionandearndividendsatafixedrateof9.4%.TheyareredeemableinApril2012.

12.2 Sectoral analysis

Individuals 36 951 798 31261832

Financialservices,insuranceandrealestate 5 071 098 3501400

Manufacturing 601 155 658058

Buildingandpropertydevelopment 1 817 588 2287855

Transport,storageandcommunication 1 110 647 1338554

Retailers,cateringandaccommodation 1 425 454 1527429

Wholesaleandtrade 226 669 254203

Miningandquarrying 168 296 980933

Agriculture,forestryandfishing 124 316 24144


Otherservices 4 126 392 3685621

51 639 288 45546590

12.3 Geographical analysis

SouthAfrica 51 639 288 45546590

Gauteng 27 799 089 25254856

WesternCape 6 562 521 5827322

EasternCape 2 442 567 2236686

KwaZulu-Natal 5 827 638 4916887

FreeState 2 316 493 1944624

NorthWest 1 112 452 948066

Mpumalanga 3 930 016 3153840

NorthernCape 584 959 463039

Limpopo 1 063 553 801270

51 639 288 45546590


2009 2008

R’000 R’000

13 OTHER ASSETS

Sundryreceivables 11 703 61344

Deferredacquisitioncosts 462 629 442264

Propertyinventory 1 179 1179

Non-financialassetsold 260 000 –

Option 6 152 –

741 663 504787

14 CURRENT TAXATION

NormalSouthAfricantaxation

–Currenttaxationliability 23 511 5706

23 511 5706

15 IMPAIRMENT OF LOANS AND ADVANCES

15.1 Impairment of loans and advances

2009

Totalimpairment

R’000

Specificimpairment

R’000

Portfolioimpairment

R’000

Openingbalance 812 354 565 264 247 090

Amountwrittenoff (631 947) (631 947) –

Netnewimpairmentscreated 956 636 935 125 21 511

Impairmentscreated 3 237 777 3 216 266 21 511

Impairmentsreleased (2 281 141) (2 281 141) –

Recoveriesofbaddebts 51 475 51 475 –

Closingbalance 1 188 518 919 917 268 601

2008


Amountwrittenoff (810098) (810098) –

Netnewimpairmentscreated 700538 604133 96405

Impairmentscreated 2062922 1966517 96405

Impairmentsreleased (1362384) (1362384) –

Recoveriesofbaddebts 19074 19074 –

Closingbalance 812354 565264 247090



2009 2008

R’000 R’000

15 IMPAIRMENT OF LOANS AND ADVANCES (continued)


Individuals 850 815 557554

Financialservices,insuranceandrealestate 116 762 62455


Buildingandpropertydevelopment 41 373 40809

Transport,storageandcommunication 25 573 23876

Retailers,cateringandaccommodation 32 821 27245




Governmentandpublicsector 366 474

Otherservices 95 010 65741

1 188 518 812354


SouthAfrica 1 188 518 812354

Gauteng 639 598 450437

WesternCape 151 102 103934

EasternCape 56 240 39893

KwaZulu-Natal 134 181 87696

FreeState 53 337 34684

NorthWest 25 614 16909

Mpumalanga 90 489 56251


Limpopo 24 488 14291

1 188 518 812354

15.4 Ratio of impairments

Impairmentofloansandadvancesatendofyear 1 188 518 812354

Totalgrossloansandadvances 51 639 288 45546590

Ratio(%) 2.3% 1.8%


16 PROPERTY AND EQUIPMENT

LandandbuildingsComputerequipment

Furnitureandotherequipment Vehicles Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Gross carrying amount

Balanceat1January 236 036 133043 92 908 78492 40 993 34295 4 604 5819 374 541 251649

Acquisitions 6 889 86599 18 963 22588 2 683 6698 742 1004 29 277 116889

Disposals (417) (1206) (9 453) (8172) (1 547) – (933) (2219) (12 350) (11597)

Revaluation – 17600 – – – – – – – 17600

Balanceat31December 242 508 236036 102 418 92908 42 129 40993 4 413 4604 391 468 374541

Accumulated depreciation and impairment losses


Depreciationchargefortheyear 11 363 5338 14 209 14507 5 247 3684 748 948 31 567 24477

Disposals (52) (21) (2 699) (226) (58) – (588) (1299) (3 397) (1546)

Revaluation – 1872 – – – – – – – 1872


Carrying amount

At1January 219 508 123704 34 646 34511 23 087 20073 2 243 3107 279 484 181395

At31December 214 669 219508 32 646 34646 19 034 23087 1 892 2243 268 241 279484

Registersprovidingtheinformationregardinglandandbuildings,asrequiredintermsofSchedule4oftheCompaniesActof1973,areavailableforinspectionattheregisteredofficeoftheCompany.

Landandbuildingsarerevaluedbyanindependentvalueratthree-yearintervals.Observablemarketdataisusedtoperformthevaluation.Thelatestindependentvaluationwasperformedin2007.



17 INTANGIBLE ASSETS

17.1 Intangible assets

Softwaredevelopmentcosts*

2009 2008

R’000 R’000


Balanceat1January – –

Developmentcostscapitalised 74 937 –

Borrowingcostscapitalised 3 199 –

Balanceat31December 78 136 –

Accumulated amortisation and impairment losses


Balanceat31December – –

Carrying amount

At1January – –

At31December 78 136 –

*SoftwaredevelopmentscostsontheSAPprojecthavebeencapitalisedinaccordancewiththe requirementsof IAS38– IntangibleAssets.This iscalculatedonthe rateatwhichNedbanklendsfundstoImperialBank.TheSAPprojectisnotcompleteandthereforeisnotreadyforuse.Amortisationoftheintangibleassetwillcommenceoncetheprojectiscompleted.

17.2 Borrowing costs capitalised

Borrowingcostscapitalisedduringtheperiod 3 199 –

GeneralborrowingcostsontheSAPproject(note17.1)havebeencapitalisedinaccordancewiththerequirementsofIAS23–BorrowingCosts.ThisiscalculatedontherateatwhichNedbanklendsfundstoImperialBank.

18 POST-EMPLOYMENT EMPLOYEE BENEFITS

AlleligibleemployeesaremembersoftheImperialBankPensionFundorProvidentFund,financedby Company and employee contributions. These funds are defined contribution plans andare governed by the Pension Funds Act of 1956. There are no further post-retirement benefitobligations.

Pensionfundcontributionsexpensed 29 227 25723


2009 2008

R’000 R’000

19 SHARE CAPITAL

19.1 Ordinary share capital

Authorised:

500000000(2008:500000000)ordinarysharesofR0.01each 5 000 5000

Issued:

393682789(2008:393682789)fullypaidordinarysharesofR0.01each 3 937 3937

SubjecttotherestrictionsimposedbytheCompaniesActof1973,theunissuedsharesareunderthecontrolofthedirectorsuntiltheforthcomingannualgeneralmeeting.

Shareholders’ analysis

NedbankLimited 50.1% 50.1%

ImperialHoldingsLimited 49.9% 49.9%

100.0% 100.0%

TheultimatecontrollingshareholderisOldMutualplc,listedontheLondonStockExchange.

19.2 Preference share capital

Authorised:

8000000(2008:8000000)non-redeemable,non-participating,non-cumulativepreferencesharesofR0.0005each 4 4

Issued:


Share premium:

Preferencesharepremium 298 045 298045

Total preference share capital and premium 298 047 298047

Allthepreferenceshareswereissuedduring2006andarelistedontheJSELimited(JSE)inthe“PreferenceShares”sectoroftheJSElistwiththeabbreviatedname“IBLPref”,JSEpreferencesharecodeIBLPandISINZAE000081675.



2009 2008

R’000 R’000

20 AMOUNTS OWED TO DEPOSITORS

20.1 Analysis

Depositsandloanaccounts

–Callandtermdeposits 47 006 159 40170321

–Fixeddeposits 1 496 804 2000817

–Securitisationnotes* 1 584 039 1751366

–Noticedeposits – 12475

50 087 002 43934979

Comprises:

–Amountsowedtodepositors 1 584 347 1954132

–Amountsowedtobanks 48 502 655 41980847

50 087 002 43934979

*On18June2007,ImperialBanksuccessfullysecuritisedR1.7billionofitsmotorvehicleinstalmentsaleagreements.ThetransactionhasbeenstructuredasarevolvingR1.7billiontranche for a period of 24 months, which ended on 20 July 2009, and thereafter acontrolled amortisation. Although the instalment sale agreements have been legallycededbyImperialBank,theinstalmentsaleassetsremainontheImperialBankstatementof financial position, as required by IAS 39 – Financial Instruments: Recognition andMeasurement.Refertonote29forfurtherinformationonsecuritisations.


Banks 48 502 655 41980847

Businesssector 1 584 347 1954132

50 087 002 43934979


SouthAfrica

Gauteng 50 087 002 43934979

21 OTHER LIABILITIES

Creditorsandotherliabilities 107 889 72683

Leavepayaccrual(note21.1) 20 094 14649

Deferredrevenue 31 306 21875

Operatingleasesaccelerated 2 214 1505

161 503 110712

21.1 Leave pay accrual

Balanceatbeginningofyear 14 649 15090

Movementforyear 5 445 (441)

20 094 14649

22 PROVISIONS

Provisionforbonuspay 34 000 27300

Othergeneralprovisions* 18 049 18103

52 049 45403

*Othergeneralprovisionsincludethepotentialtaxliabilityonthestructuredfinancedeals.


2009 2008

R’000 R’000

23 LONG-TERM DEBT INSTRUMENTS

Rand-denominated

R500millionbondsrepayableon30December2010 492 763 488409


R350millionbondsrepayableon16September2015 351 651 –

1 146 653 791750

TheR500millionbond(IPB2)issubordinated,unsecuredandcallableon30December2010.Therateisfixedat8.38%.

TheR300millionbond(IPB3)issubordinated,unsecuredandcallableon4December2013.Therateisvariableat3monthJIBARplus2.5%.

TheR350millionbond(IPB4)issubordinated,unsecuredandcallableon16September2015.Therateisvariableat3monthJIBARplus4.25%.

24 CASH FLOW INFORMATION

24.1 Reconciliation of profit from operations before direct taxation to cash generated by operating activities

Profitfromoperationsbeforedirecttaxation 599 183 543458

Adjustedfor:

–Indirecttaxation 50 449 51310

Non-cash items

–Fairvalueadjustmentsthroughprofitandloss (14 294) 29409

–Depreciation 31 567 24477

–Movementinleave-payprovision 5 445 (441)

–Movementinotherprovisions 6 646 (22300)

–Operatingleasedeferrals 709 572

–Movementinimpairmentofadvances 1 008 111 719612

–Fairvalueadjustmentonoptions (6 152) –

–(Profit)ondisposalofpropertyandequipment (506) (285)

–Deferredrevenue/deferredacquisitioncosts 123 564 19088

–Long-termdebtinstruments’interestaccruals 955 –

–Borrowingcostscapitalised (3 199) –

1 802 478 1364900

24.2 Cash received from clients

Interestincomeanddividendsfromfinancefacilities 6 341 407 6450827

Commissionandfeeincome(note4) 162 091 97329

Otherincome 16 071 19404

6 519 569 6567560



2009 2008

R’000 R’000

24 CASH FLOW INFORMATION (continued)

24.3 Cash paid to clients, staff and suppliers

Interestexpenseandsimilarcharges (4 187 022) (4699196)

Staffcosts(note5) (358 868) (306229)

Otheroperatingexpenses (222 676) (216309)

(4 768 566) (5221734)

24.4 Increase in operating assets

Othershort-termsecurities (783 578) (457791)

Governmentandpublicsectorsecurities 326 555 (198178)

Loansandadvancesandotheraccounts (7 072 780) (10252147)

(7 529 803) (10908116)

24.5 Increase in operating liabilities

Otherdeposits 6 152 023 9887115

Creditorsandotherliabilities (67 577) 194477

6 084 446 10081592

24.6 Taxation paid

Amountsdueatbeginningofyear (5 706) (2392)

Statementofcomprehensiveincomecharge (168 408) (182245)

Deferredtaxationmovement 13 979 55256

Totalindirecttaxation (50 449) (51310)

Amountsdueatendofyear 23 511 5706

(187 073) (174985)

25 CONTINGENT LIABILITIES

Liabilitiesunderguarantees* 363 806 1079640

TheBank,intheordinarycourseofbusiness,entersintotransactionswhichexposestheBanktotaxation,legalandbusinessrisks.Provisionsaremadeforknownliabilitieswhichareexpectedtomaterialise.Possibleobligationsandknownliabilitieswherenoreliableestimatecanbemadeoritisconsideredimprobablethatanoutflowwouldresult,arenotedasacontingentliability.ThisisinaccordancewithIAS37–Provisions,ContingentLiabilitiesandContingentAssets.

Inaddition,inpastyearsImperialBankenteredintostructuredfinancetransactionswiththirdpartiesusingthetaxationbaseoftheBank.Pursuanttothetermsofthemajorityofthesetransactions,theunderlyingthirdpartyhascontractuallyagreedtoaccepttheriskofanytaxationbeingimposedbySARS,althoughtheobligationtopayinthefirstinstancemayrestwithImperialBankLimited.Inlimitedcasesaprovisionismadewherethecreditqualityofaclientbecomesdoubtful.



26 COMMITMENTS

26.1 Operating lease commitments

CompaniesintheBankhaveenteredintoleasesoverfixedproperty,furnitureandotherequipmentforvaryingperiods.Thechargeswillincreaseinfutureinlinewithnegotiatedescalationsandexpansions.Thefollowingaretheminimumleasepaymentsundernon-cancellableleases:

2011– 2015and

2010 2014 beyond

R’000 R’000 R’000

Landandbuildings 9447 24063 16784

2009 2008

R’000 R’000

26.2 Commitments

Irrevocableguarantees 11 467 3409

Capitalcommitments

Contracted 4 943 97791

Notyetcontracted 40 941 –

57 351 101201

26.3 Unutilised facilities

TheBankcommits toextendcredit tocustomers in theordinarycourseofbusiness.Thecontractualamountofthisoff-balancesheetcommitmentisasfollows:

Unutilisedfacilities* 977 455 2711602

*Unutilisedfacilitiesfor2008havebeenrestated.ThisrestatementhasnoimpactontheStatementofComprehensiveIncomeortheStatementofFinancialPosition.



27 RELATED PARTIES

27.1 Relationships between parent and subsidiaries

Theparent companyof ImperialBank isNedbankLimited,whichholds50.1%of theCompany’sordinary shares. TheultimatecontrollingpartyisOldMutualplc,incorporatedintheUnitedKingdom.

MaterialsubsidiariesoftheGroupareidentifiedonpage93.

27.2 Key management personnel compensation

27.2.1 Directors’ compensation

CompensationpaidtotheBoardofDirectorsisaggregatedbelow,togetherwiththeaggregatecompensationpaidtotheexecutivedirectors.

2009 2008

R’000 R’000

Executive directors

RvanWyk 3 653 2819

–Salary 1 646 1511

–Bonus–shortterm 1 500 750

–Bonus–longterm 161 240

–Retirementfundcontributions 337 309

–Benefits 9 9

PCWHibbit 1 792 1544

–Salary 1 079 830

–Bonus–shortterm 600 475



–Benefits 9 9

Non-executive directors

Fees: 1 557 1337

OSArbee* 70 87

LEBakoro 220 192

CJWBall 232 212

HRBrody* 227 208

MJCroucamp 382 350

NPMnxasana* 119 87

PKWard 146 16

PAWessels* 161 185

*Directors’ feesmarkedwithanasteriskdonot accrue to the individualsbut toeitherImperialHoldingsorNedbankLimited.

27.2.2 Compensation of other members of the Executive Committee

9 669 11334

Salary 5 621 7061

Bonus–shortterm 2 925 2775

Bonus–longterm 379 552

Retirementfund 582 857

Benefits 162 89


27 RELATED PARTIES (continued)

27.3 Identity of related parties with whom material transactions have occurred

ImperialBankanditssubsidiaries,intheordinarycourseofbusiness,enterintovariousfinancialservicestransactionswithassociates,jointventuresandotherrelatedpartieswithinthegreaterNedbank,ImperialHoldingsandOldMutualgroup.Thefollowingmaterialtransactionsoccurredbetweenrelatedparties:

2009

Statement of financial position information

Balance due from/(to)

R’000 Terms and conditions

Parent – Nedbank Limited

Deposit (47 556 543) NofixedtermsofpaymentattheNedbankprime

replicatingportfoliorate

Fixeddeposit (1 496 804) Fixeddeposithelduntilmaturity

Currentaccount 300 344 CurrentaccountattheNedbankprimereplicating

portfoliorate

Loan 615 952 Callandtermloan

Swaps (157 483) Netswaps

Bonds (502 771) IPB3&IPB4

Non-controlling shareholder – Imperial Holdings Limited

Option 6 152 Option

Fellow subsidiaries*

MutualandFederalLtd (12 184) Bonds

NedgroupInsurancecompanies (4 501) Fixedandcalldeposit

NedgroupPensionFund (3 201) IPB2

OldMutualLtd (136 797) Bonds&IPB2

Synthesis (463 698) Bonds

Associated companies**

AssociatedMotorHoldings(Pty)Ltd (8 032) Alliancepartner

DreamWorldInvestments239(Pty)Ltd 119 193 Preferenceshares

EagleBondsOne(Pty)Ltd 3 988 Bonds

MedicalAidPre-Funder (3 748) Calldeposit

RegentInsuranceLtd (151 120) IPB3

RegentLifeAssuranceAnnuitiesFund (24 606) Calldeposit

RegentLifeAssuranceSinkingFund (3 700) Calldeposit

SAFAIRLeaseFinance(Pty)Ltd 4 393 Netswaps

FarmBothasfontein(Kyalami)(Pty)Ltd 13 888 Guarantees

ImperialLogisticsLtd 2 250 Guarantees

CargoAfrica(Pty)Ltd 1 989 Instalmentsaleagreement

FourwaysHaulage(Pty)Ltd 7 562 Instalmentsaleagreement

MegafreightServices(Pty)Ltd 26 942 Guarantees

NationalAirwaysCorporation(Pty)Ltd 2 106 Loan

43AirSchool(Pty)Ltd 9 262 Loan

Fuelogic(Pty)Ltd 44 100 Suretyship




27.3 Identity of related parties with whom material transactions have occurred (continued)

Interest received/

(paid)

Other amounts received/

(paid)

Statement of comprehensive income information R’000 R’000


Deposit (3 647 320)

Fixeddeposit (185 751)

Currentaccount 1 820

Loan 51 786

Swaps (87 346)

Bonds (24 059)


Fairvalueadjustmentonoption 6 152

Dealerincentivecommission (91 750)


MutualandFederalLtd (1 598)

NedbankGroupInternalAudit (1 106)

NedgroupInsurancecompanies (6 898)

OldMutualLtd (13 124)

Synthesis (46 365)


AssociatedMotorHoldings(Pty)Ltd (26 713)

DreamWorldInvestments239(Pty)Ltd 11 089

RegentInsuranceLtd (18 518) 5 947

RegentLifeAssuranceAnnuitiesFund (1 926)

RegentLifeAssuranceCompanyCorporateFund (1 125)

RegentLifeAssuranceIphFund (3 427)

SAFAIRLeaseFinance(Pty)Ltd 4 315

FourwaysHaulage(Pty)Ltd 1 057

Fuelogic(Pty)Ltd 16 937

*Subsidiariesandfellowsubsidiarieswithintheultimateholdingcompany,OldMutualplc,listedontheLondonStockExchange.

**CompanieswithintheImperialHoldingsLimitedGroup.




2008

Statementoffinancialpositioninformation

Balanceduefrom/(to)

R’000 Termsandconditions


Deposit (40060681) NofixedtermsofpaymentattheNedbankprimereplicating

portfoliorate

Fixeddeposit (1960653) Fixeddeposithelduntilmaturity

Currentaccount 12564 CurrentaccountattheNedbankprimereplicating

portfoliorate

Loan 2166 Termloan

Swaps 263494 Netswaps

Bond (151670) IPB3


MutualandFederalLtd (18456) Bonds

NedgroupInsurancecompanies (41871) Fixedandcalldeposit

NedgroupPensionFund (3201) IPB2

OldMutualLtd (144264) Bonds

Synthesis (512689) Bonds


DreamWorldInvestments239(Pty)Ltd 122104 Preferenceshares

EagleBondsOne(Pty)Ltd 5195 Bonds

MedicalAidPre-Funder 2166 Calldeposit

RegentInsuranceLtd

Calldeposit (29621) Calldeposit

Bond (69768) IPB3

RegentLifeAssuranceAnnuitiesFund


Bond (56624) IPB3

RegentLifeAssuranceCompanyCorporateFund


Bond (13145) IPB3

RegentLifeAssuranceIphFund


Bond (7078) IPB3

RegentLifeAssuranceSinkingFund


Bond (5056) IPB3

SAFAIRLeaseFinance(Pty)Ltd 8181 Netswaps

FarmBothasfontein(Kyalami)(Pty)Ltd*** 12338 Guarantees

ImperialLogisticsLtd*** 2250 Guarantees

CargoAfrica(Pty)Ltd*** 3707 Instalmentsaleagreement

FourwaysHaulage(Pty)Ltd*** 11443 Instalmentsaleagreement

MegafreightServices(Pty)Ltd*** 29472 Guarantees

NationalAirwaysCorporation(Pty)Ltd*** 1904 Loan

43AirSchool(Pty)Ltd*** 10628 Loan

TycoTrucks(Pty)Ltd*** 2015 Variousaccounts





Interestreceived/

(paid)

Otheramountsreceived/

(paid)

Statementofcomprehensiveincomeinformation R’000 R’000


Deposit (4128420)

Fixeddeposit (169989)

Currentaccount 1349

Swaps (15391)


Dealerincentivecommission (119048)


MutualandFederalLtd (2210)

NedbankGroupInternalAudit (1573)

NedbankInsurancecompanies (4906)

OldMutualLtd (36258)

Synthesis (61122)


AssociatedMotorHoldings(Pty)Ltd (1213)

DreamWorldInvestments239(Pty)Ltd 11066

RegentInsuranceLtd (4122) 5260

RegentLifeAssuranceAnnuitiesFund (2909)

RegentLifeAssuranceIphFund (6949)

SAFAIRLeaseFinance(Pty)Ltd (5164)

43AirSchool(Pty)Ltd*** 1482

Fuelogic(Pty)Ltd*** 19158



***Information regarding these transactions was unavailable in 2008. It has now beendisclosedforcompleteness.

***


28 GROUP RISK DISCLOSURES

28.1 Group liquidity risk analysis

Term to maturity

2009R’000 Demand

1 – 12 months

1 – 5 years

Over 5 years

Non-determin-

able

ASSETSCashandcashequivalents 300 800 300 800 Othershort-termsecurities 2 346 963 1 034 572 1 312 391 Derivativefinancialinstruments* 50 921 5 877 31 067 13 977 Governmentandothersecurities 202 608 101 023 101 585 Loansandadvancestoclients 50 450 770 2 764 698 9 737 276 28 566 020 9 382 776 Otherassets 741 663 741 663 Investmentsecurities 3 970 3 970 Propertyandequipment 268 241 268 241 Intangibleassets 78 136 78 136 Mandatorydepositswithcentralbank 1 215 575 1 215 575

Total assets 55 659 647 5 315 645 11 898 230 28 702 642 9 396 753 346 377

EQUITY AND LIABILITIESOrdinarysharecapital 3 937 3 937 Ordinarysharepremium 1 097 747 1 097 747 Reserves 2 361 329 2 361 329

Total ordinary shareholders’ equity 3 463 013 – – – – 3 463 013


Total shareholders’ equity 3 761 060 – – – – 3 761 060 Total liabilities 51 898 587 2 903 488 11 180 488 30 672 424 6 804 782 337 405 Bankoverdraft 6 920 6 920 Derivativefinancialinstruments* 244 957 16 561 176 659 51 737 Amountsowedtodepositors 50 087 002 2 896 568 10 595 514 30 193 526 6 401 394 Otherliabilities 161 503 52 139 109 364 Provisions 52 049 52 049 Currenttaxation 23 511 23 511 Deferredtaxation 175 992 175 992 Long-termdebtinstruments 1 146 653 492 763 302 239 351 651

Total equity and liabilities 55 659 647 2 903 488 11 180 488 30 672 424 6 804 782 4 098 465

Remaining contractual maturitiesBalance sheet liabilities 60 801 043 3 239 608 15 078 264 35 310 711 6 835 055 337 405Bankoverdraft 6 920 6 920Derivativefinancialinstruments* 244 957 16 561 176 659 51 737Amountsowedtodepositors 58 599 740 3 232 688 14 380 326 34 585 332 6 401 394Otherliabilities 161 503 52 139 109 364Provisions 52 049 52 049Currenttaxation 23 511 23 511Deferredtaxation 175 992 175 992Long-termdebtinstruments 1 536 371 605 727 548 720 381 924Off-balance sheet liabilities 1 352 728 1 352 728 – – – – Revocableguarantees 363 806 363 806Irrevocableguarantees 11 467 11 467Loancommitments 977 455 977 455

Total liabilities 62 153 771 4 592 336 15 078 264 35 310 711 6 835 055 337 405



28 GROUP RISK DISCLOSURES (continued)

28.1 Group liquidity risk analysis (continued)

Termtomaturity

2008R’000 Demand

1–12months

1–5years

Over5years

Non-determin-

able

ASSETSCashandcashequivalents 46693 46693

Othershort-termsecurities 1563385 1563385

Derivativefinancialinstruments* 37619 86 37533


Loansandadvancestoclients 44734236 3152887 8218572 24515545 8847232


Investmentsecurities 5183 5183



Total assets 48768095 4267125 10504448 24869806 8847232 279484EQUITY AND LIABILITIESOrdinarysharecapital 3937 3937


Reserves 1960630 1960630Total ordinary shareholders’ equity 3062314 – – – – 3062314

Preferencesharecapitalandpremium 298047 298047Total shareholders’ equity 3360361 – – – – 3360361Total liabilities 45407734 152003 608452 44241897 149483 255899

Derivativefinancialinstruments* 357171 309 207494 149368






Long-termdebtinstruments 791750 791750

Total equity and liabilities 48768095 152003 608452 44241897 149483 3616260

Remaining contractual maturitiesBalance sheet liabilities 53496906 621089 4440355 48030080 149483 255899

Derivativefinancialinstruments* 357171 309 207494 149368






Long-termdebtinstruments 1135209 85089 1050120Off-balance sheet liabilities 2715011 2715011 – – – –

Irrevocableguarantees** 3409 3409

Loancommitments** 2711602 2711602

Total liabilities 56211917 3336099 4440355 48030080 149483 255899

*DerivativefinancialinstrumentshavebeenreclassifiedintodifferentmaturitybucketstoalignwithNedbankLimited’sdisclosure.**Irrevocableguaranteesandloancommitmentsfor2008havebeenrestated.ImperialBank’sALCOmeetsmonthlytomanageliquidityandinterestraterisk,andreportstotheBoardRiskCommitteequarterly.TheBankhasnoappetiteormandatetotakeproprietarytradingriskormarketrisk.LiquidityriskisnegligiblegivenNedbankLimited’scommitmenttoprovidefundsasrequired.However,theALCOdoesmonitormaturitymismatchesandfixedratehedgeeffectiveness.Italsoensuresliquidassetsaremaintainedatrequiredlevelsandinstrumentspurchasedarecost-effective.ImperialBankdoesnotfundadvancesinforeigncurrency,andhasnocross-borderexposure.Thisremovesforeignexchangeriskandcurrencytranslationrisk.



28.2 Group credit risk analysis

Maximum exposure to credit risk per financial assets

2009 2008

R’000 R’000

Balance sheet

Off-balance sheet Total

Balancesheet

Off-balancesheet Total

Mandatoryreservedepositswithcentralbank 1 215 575 1 215 575 1067545 1067545

Loansandadvances* 50 450 770 1 341 261 51 792 031 44734236 2711602 47445838

Homeloans 2 985 711 144 851 3 130 562 1620947 1620947

Commercialmortgages 6 027 493 767 749 6 795 242 6171879 2711602 8883481

Otherloanstoclients 5 086 591 5 086 591 4853663 4853663

Netinvestmentininstalmentsaleandleaseagreements 37 420 300 428 661 37 848 961 32777997 32777997

Preferenceshares 119 193 119 193 122104 122104

Less:Impairmentofloansandadvances (1 188 518) (1 188 518) (812354) (812354)

Investmentsandsecurities 2 866 044 – 2 866 044 2205768 – 2205768

Governmentandgovernment- guaranteedsecurities 2 549 571 2 549 571 2092548 2092548


Short-termfundsandsecurities 300 800 300 800 46693 46693

Other 11 703 11 703 61344 61344

Derivativefinancialinstruments–assets 50 921 50 921 37619 37619

Guarantees–irrevocable 11 467 11 467 3409 3409

54 583 310 1 352 728 55 936 038 48045168 2715011 50760179




28.2 Group credit risk analysis (continued)

2009 2008

R’000 R’000

Loans and advances

Gross statement of financial position value of loans and advances*

Neitherpastduenorimpaired 49 445 918 44009266

Pastduebutnotspecificallyimpaired 569 938 627724

Impairedloansandadvances 1 623 432 909600

Total statement of financial position gross loans and advances 51 639 288 45546590

Divisionalbreakdownofimpairedloansandadvances* 1 623 432 909600

–MotorFinance 838 292 651143

–PropertyFinance 464 421 131563

–SupplierAssetFinance 206 655 70348

–ProfessionalFinance 113 889 56403

–TreasuryandEliminations 175 143

Restructureslessthanandequaltofourmonths**

Riskbucketindicatorpriortorestructure 715 471 307428

–Standard 342 791 133825

–Specialmention 239 890 130351

–Substandard 119 116 37591

–Doubtful 12 571 4681

–Loss 1 103 980

Restructuredloansandadvancesthathavebeenrehabilitatedandincludedin“Neitherpastduenorimpaired”*** 1 386 933 746924

Analysis of gross balance sheet value by Basel II categories

–Standard 49 445 918 44009266



–Doubtful 49 037 19751

–Loss 1 432 039 777007

51 639 288 45546590

*GrossloansandadvancessplithasbeenreclassifiedinordertoalignwithNedbankLimited’sdisclosure.

**Thisrelatestoloansandadvancesthathavebeenrestructuredandarestillinthefour-monthperiod.InlinewiththeBank’simpairmentmethodologytheseloanscarryanadditionalimpairmentassociatedwiththeriskbucketindicatorpriortorestructuring.Theseloansareincludedinthe“Neitherpastduenorimpaired”category.

***Thisrelatestothoseloansandadvancesthathavebeenrestructured,havepassedthefour-monthperiodfromthedateoftherestructureandduetogoodperformancedonotcarryanadditionalimpairment.Theseloansareincludedinthe“Neitherpastduenorimpaired”category.



28.2 Group credit risk analysis (continued)

Imperial Bank’s impairment methodology on loans and advances:

Legal loans and advances Allloansandadvancesclassifiedaslegal(>90days)areimpairedusingthefollowingformula:

Outstandingbalancelessthenetpresentvalue(NPV)ofexpectedfuturecashflows.

• AspertheBank’screditpolicy,securityvaluesaredeterminedonaforcedsalebasis. • InMotor Finance, the collectionsproceduremanual specifies the security value as apercentageof trade value. This

percentageisreviewedfromtimetotimebytheMotorFinanceExecutiveCommitteebasedoncollectionsachievedandusedcarpricesobtained.ProfessionalFinanceadoptsasimilarapproach.

• InPropertyFinance,thesecurityvalueistakenfromthelatestannualvaluation(externalvaluationordesktop,basedonnatureofpropertyandmateriality)oranimmediaterevaluationifthemostrecentvaluationisdeemedtobestale,orconditionswiththespecificpropertyorareahavechanged.

• InSupplierAssetFinance,thesecurityvalueisdeterminedviaaconservativeforcedsalevaluebasedonlatestmarketpricingforthespecificasset.Onspecialisedequipment,includingaviation,anindependentexpertvaluationmaybecalledfor.

•Ifthesecurityvaluecannotbedeterminedaccurately,ortherealisationofsecurityisofseriousconcern,100%impairmentisraised.

Arrears (pre-legal) loans and advances ImpairmentsonarrearaccountsinMotorFinancearecalculatedbasedontheoutstandingbalanceslesstheNPVoftheexpectedfuturerecoveries.Thisimpairmentlossisraisedonaportfoliobasis.

ArrearaccountsinPropertyFinance,SupplierAssetFinanceandProfessionalFinancearescrutinisedonacase-by-casebasis.Specificimpairmentsareraised,withapprovalfromtheImpairmentCommittee,iffeltnecessary.

Impairments on arrears accounts are IFRS compliant and are always based on the NPV of the expected future cashflows.

Performing loans and advances AnIBNRportfolioimpairmentisraisedonallperformingloansandadvances.Theimpairmentisbasedontheprobabilityofdefaultandthelossgivendefault.Theannualprobabilitiesofdefaultarescaledtotherelevantemergenceperiods.

Restructured loans and advances Restructuredloansandadvancescarrytheriskbucketindicatorpriortotherestructureforaperiodoffourmonthsaftertheinitialrestructure.Similarly,therestructuredcreditexposurewillretainthehigherimpairmentassociatedwiththeriskbucketintowhichtheloanfellpriortotherestructurebeingprocessed,foraminimumperiodoffourmonths.

Statement of financial position value of debt and similar securities, other than loans and advances, according to rating agency designation (based on Standard and Poor’s ratings or equivalent)

R’000 TreasurybillsOthereligible

bills Debtsecurities Total

Investmentgrade(AAAtoBBB) 1634976 711987 3970 2350933

Ofwhichissuedby:

–Governmentsandgovernment-guaranteedsecurities 1634976 711987 2346963

–Other 3970 3970

1634976 711987 3970 2350933




28.3 Group market risk analysis

28.3.1 Group interest rate risk analysis

Interest rate sensitive

2009 R’000 < 3 months

3 months< 6 months

6 months< 1 year

1 year< 5 years > 5 years

Tradingand non-

ratesensitive

ASSETS


Othershort-termsecurities 2 346 963 2 346 963



Loansandadvancestocustomers 50 450 770 41 588 926 308 194 644 514 5 718 105 2 191 031

Otherassets 741 663 741 663





Total assets 55 659 647 44 236 689 308 194 745 537 5 823 660 2 191 031 2 354 536

EQUITIES AND LIABILITIES



Reserves 2 361 329 2 361 329

Total ordinary shareholders’ equity 3 463 013 – – – – – 3 463 013


Total shareholders’ equity 3 761 060 – – – – – 3 761 060

Total liabilities 51 898 587 48 652 872 375 768 1 545 510 666 425 – 658 012



Amountsowedtodepositors 50 087 002 47 992 062 375 768 1 052 747 666 425





Long-termdebtinstruments 1 146 653 653 890 492 763

Total equity and liabilities 55 659 647 48 652 872 375 768 1 545 510 666 425 – 4 419 072



28.3 Group market risk analysis (continued)

28.3.1 Group interest rate risk analysis (continued)

Interestratesensitive

2008R’000 <3months

3months<6months

6months<1year

1year<5years >5years

Tradingandnon-

ratesensitive

ASSETS



Derivativefinancialinstruments 37619 37619


Loansandadvancestocustomers 44734236 36330847 19515 43934 4023232 4316708


Investmentsecurities 5183 5183



Total assets 48768095 38158543 19515 43934 4339960 4316708 1889435




Reserves 1960630 1960630

Total ordinary shareholders’ equity 3062314 – – – – – 3062314


Total shareholders’ equity 3360361 – – – – – 3360361




Otherliabilities 110712 110712




Long-termdebtinstruments 791750 303342 488408





28.3 Group market risk analysis (continued)

28.3.2 Sensitivity analysis for market risk

Method used in preparing the sensitivity analysis • TheinterestrateriskoftheBankisbestunderstoodbyanalysingthebalancesheetrepricingcharacteristics.• 82%oftheBank’sassetsarelinkedtovariablerateswith18%atfixedrates. • 88%oftheBank’sfundingliabilitiesaresourcedfromNedbankLimitedundertheMemorandumofUnderstanding.

TheapplicablecostoffundsistheprimereplicatingportfolioratewhichismadeupoftheNedbankLimitedcall,1-month,3-monthand12-monthrates.

• A100basispointinstantaneousparalleldeclineintheinterestrateswillresultinaR46.9millionlossinNIIovera12-monthperiod.

• A25basispointdeclineintheprime/callgapwouldresultinaR50.8millionlossforthebankovera12-monthperiod.

• TheBank’scapitalispartlyinvestedinthetwo-tofive-yearfixedrateassetfinancetransactionswiththebalanceinvestedinprimelinkedassets.

Sensitivity analysis

AnanalysisoftheGroup’ssensitivitytoadecreaseinthemarketinterestratesisasfollows:

2009 2008

100 bp parallel decline

25 bp prime/ call gap decline

100bpparalleldecline

25bpprime/callgapdecline

Impactonnetinterestincome(Rm) (46.9) (50.8) (23.4) (43.7)

Asapercentageoftotalshareholders’equity(%) (1.25) (1.35) (0.71) (1.32)

The following model assumptions are used in the above sensitivity analysis: • Theplannedcapitalmanagementactionsareincludedinthemodelling. • The statement of financial position maturity profile is expected to remain unchanged during the modelling

period. • Ratesspreadshavebeenadjustedtoalignwithforecasts. • Therehavebeennomaterialchangestothemodelassumptionsduringtheyearunderreview.


29 SECURITISATIONSTheBankwaspartytosecuritisationtransactionsinvolvingmotorvehiclefinancing.

Securitisationsmay,dependingontheindividualarrangement,resultincontinuedrecognitionofthesecuritisedassetsandtherecognitionofthedebtsecuritiesissuedinthetransaction,partialcontinuedrecognitionoftheassetstotheextentoftheBank’scontinuing involvement in thoseassetsorderecognitionof theassetsand the separate recognition,asassetsor liabilities,ofanyrightsandobligationscreatedorretained inthetransfer.FullderecognitiononlyoccurswhentheBanktransfersboth itscontractualrighttoreceivecashflowsfromthefinancialassets,orretainsthecontractualrightstoreceivethecashflows,butassumesacontractualobligationtopaythecashflowstoanotherpartywithoutmaterialdelayorreinvestment,andalsotransferssubstantiallyalltherisksandrewardsofownership,includingcreditrisk,prepaymentriskandinterestraterisk.

Thefollowingtableshowsthecarryingamountofsecuritisedassets,statedattheamountoftheBank’scontinuinginvolvementwhereappropriate,togetherwiththeassociatedliabilities:

2009 2008

Carrying amount of

assetsAssociated liabilities

Carryingamountof

assetsAssociated

liabilities

R’000 R’000 R’000 R’000

Loans and advances to customers

Motorvehiclefinancing 1 672 740 1 593 683 1781406 1751366

30 SUBSEQUENT EVENTS30.1 Thepreferencesharedividendof374.73973centspersharehasbeenapprovedbytheBoardofDirectorson10February2010.

30.2 Subsequenttoyear-end,regulatoryapprovalintermsoftheBanksActof1990wasobtainedtoenableNedbankLimitedtoacquirethe49.9%ofordinarysharesheldbyImperialHoldings.Allconditionsprecedenttotheacquisitionhavethereforebeenfulfilledandtheacquisitionwillnowbeimplementedbytheparties.

30.3 Witheffectfrom10February2010,OsmanArbeehasresignedasadirectoroftheBank.



Group Company

Issuedcapital EffectiveholdingBookvalueofinvestments Netindebtedness

2009 2008 2009 2008 2009 2008 2009 2008

R’000 R’000 % % R’000 R’000 R’000 R’000

NRBRiskSolutions(Pty)Ltd 329 329 100 100 43 018 43018 424 718 332348

MotorFinanceCorporation(Pty)Ltd 0* 0* 100 100 0* 0* – –

329 329 43 018 43018 424 718 332348

ImperialBankLimitedholds100%oftheshareholdingandvotingpoweroftheabovesubsidiaries.

Netindebtednessarisewithnofixedtermsofrepaymentandarechargedinterestatavariableratelinkedtoprime.

Thebookvalueiscarriedatthedirectors’valuation.

*RepresentsamountslessthanR‘000.

Analysis of Investments in Subsidiaries for the year ended 31 December 2009


2009 2008

R’000 % R’000 %

Value added is the wealth created from providing quality services to clients

Netinterestincome 2 033 065 202% 1732543 192%

Impairmentlossesonloansandadvances (956 636) (95%) (700538) (78%)

Marginonlending 1 076 429 107% 1032005 114%

Non-margin-relatedincome 199 114 20% 87609 10%

Otherexpenditure (267 043) (27%) (218617) (24%)

1 008 500 100% 900997 100%

Value is allocated to:

Employees

Salaries,wagesandotherbenefits 358 868 35% 306229 34%

Government

Normaltaxation 168 408 17% 182245 20%

Value-addedtaxation 50 449 5% 51310 6%

Retentions for growth 430 775 43% 361213 40%

Depreciationandamortisation 31 567 3% 24477 3%

Reserves 399 208 40% 336736 37%

1 008 500 100% 900997 100%

Value-added Statement for the year ended 31 December 2009


Contents

Statementofcomprehensiveincome 96

Statementoffinancialposition 97

Statementofchangesinshareholders’equity 98

Statementofcashflow 99

Statementoffinancialpositionclassificationsoffinancialinstruments 100

Notestothefinancialstatements 104

Value-addedstatement 135

Company Financial Statements


Company Statement of Comprehensive Income for the year ended 31 December 2009

2009 2008

Note R’000 R’000

Interestandsimilarincome 2 6 197 918 6431864

Interestexpenseandsimilarcharges 3 4 258 722 4763075

Net interest income 1 939 196 1668789

Impairmentlossesonloansandadvances 16 959 083 697101

Income from lending activities 980 113 971688

Non-interestrevenue 4 193 455 95485

Operating income 1 173 568 1067173

Operatingexpenses 5 597 411 493352

Net operating income 576 157 573821

Indirecttaxation 6 49 176 49811

Profit from operations before direct taxation 526 981 524010

Directtaxation 7 146 150 146924

Net profit for the year 380 831 377086

Other comprehensive income net of taxation – 11823

–Gainsonpropertyrevaluation – 15727

–Taxationonothercomprehensiveincome – (3904)

Total comprehensive income for the year 380 831 388909

Profit attributable to:

–Equityholdersoftheparent 350 755 347191

–Non-controllinginterest–Preferenceshareholders 30 076 29895


2009 2008

Note R’000 R’000

ASSETS


Othershort-termsecurities 11 2 346 963 1563385


Governmentandothersecurities 11 202 608 529163

Loansandadvancestocustomers 12&16 50 403 995 44659961

Otherassets 13 735 746 503986

Investmentinsubsidiarycompanies 15 43 018 43018



Intangibleassets 18 78 136 –

Mandatorydepositswithcentralbank 9 1 215 575 1067795

Total assets 55 963 003 49048902


Ordinarysharecapital 20.1 3 937 3937


Reserves 2 268 864 1918109

Total ordinary shareholders’ equity 3 370 548 3019793

Preferencesharecapitalandpremium 20.2 298 047 298047

Total shareholders’ equity 3 668 595 3317840

Total liabilities 52 294 408 45731062

Bankoverdraft 9 6 920 –



Loansfromsubsidiarycompanies 15 424 718 332348


Provisions 23 51 992 44087



Long-termdebtinstruments 11&24 1 146 653 791750

Total equity and liabilities 55 963 003 49048902

Contingentliabilities* 26 363 806 1079640


Company Statement of Financial Position at 31 December 2009


Numberofordinary

shares

Numberofpreference

shares

Ordinarysharecapital

R’000

Ordinaryshare

premiumR’000

RevaluationreserveR’000

Generalcreditriskreserve*

R’000

Accu-mulated

profitR’000

Totalordinaryshare-


Preferenceshare

capitalandpremium

R’000

Totalshare-


Balanceat31December2006 288222599 3000000 2882 348802 – 180821 1044219 1576724 298062 1874786

Transferto/(from)reserves 48550 (48550) – –




Shareissueandrepurchaseexpenses – (15) (15)

Balanceat31December2007 340009624 3000000 3400 648284 35361 229371 1422376 2338792 298047 2636839

Transfer(from)/toreserves (229371) 229371 – –


Ordinarydividendspaid (128013) (128013) (128013)




Total comprehensive income for the period 380 831 380 831 380 831

Preference dividends paid (30 076) (30 076) (30 076)


*Representsnon-distributablereservestransferredfromotherdistributablereservesinordertocomplywiththeBanksAct,1990.

Company Statement of Changes in Shareholders’ Equity for the year ended 31 December 2009


2009 2008

Note R’000 R’000

Cashreceivedfromclients 25.2 6 492 147 6557183

Cashpaidtoclients,staffandsuppliers 25.3 (4 813 209) (5252720)

Recoveriesonloanspreviouslywrittenoff 51 262 19014

Cash generated by operating activities 25.1 1 730 200 1323477

Change in funds for operating activities (1 392 164) (792031)

Increaseinoperatingassets 25.4 (7 552 539) (10498367)

Increaseinoperatingliabilities 25.5 6 160 375 9706336

Net cash generated by operating activities before taxation 338 036 531446

Taxationpaid 25.6 (168 165) (166176)

Net cash generated by operating activities 169 871 365270

Net cash utilised in investing activities (94 578) (106777)

Acquisitionofpropertyandequipment (29 015) (116656)

Proceedsondisposalofpropertyandequipment 9 374 9879

Acquisitionofintangibleasset (74 937) –

Net cash from financing activities 319 924 77092

Proceedsfromissueofordinaryshares – 450000

Dividendspaid (30 076) (157908)

Redemptionoflong-termdebtinstrument (515000)

Proceedsfromissueoflong-termdebtinstrument 350 000 300000

Net increase in cash and cash equivalents 395 217 335585

Cashandcashequivalentsatthebeginningoftheyear 1 114 230 778645

Cash and cash equivalents at the end of the year 9 1 509 447 1114230

Company Statement of Cash Flows for the year ended 31 December 2009


*Loansandadvancesandinvestmentsinshort-termsecurities’fairvaluesaredeterminedusingdiscountedcashflowmodels,wherefuturecashflowsarediscountedusingcurrentmarketrates.

**Long-termdebtinstrumentsatamortisedcostapproximatesitsfairvalue.

Thestatementoffinancialpositionaboveprovidesananalysisoffinancialinstruments’classificationsgroupedintoLevels1to3basedonthedegreetowhichthefairvalueisobservable.–Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.–Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinLevel1thatareobservable

fortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).–Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliabilitythatarenot

basedonobservablemarketdata(unobservabledata).


cost


R’000 R’000 R’000 R’000 R’000


ASSETS






Otherassets 735 746 6 152 6 152 729 594






Total assets 55 963 003 43 282 43 282 528 248 8 831 874 9 360 122 46 171 197 388 402




Reserves 2 268 864 2 268 864















Company Statement of Financial Position Classifications of Financial Instruments at 31 December 2009


TheCompanydoesnothaveLevel3instruments.Therewerenotransfersbetweenlevelsduringtheyear.

TheCompanydesignatesallsignificantfixedrateinstrumentsasatfairvaluethroughprofitorlossinaccordancewiththefairvalueoptionunderIAS39–Financial Instruments:RecognitionandMeasurement.Loansandreceivablesandfinancial liabilitiesthatarenotcarriedatfairvalueareprimarilycomprisedofvariableratefinancialassetsandliabilitiesandrepriceasinterestrateschange.Inrespectofallloansandadvances,aswellasfinancialliabilitiesatamortisedcost,theCompanyhasassessedpotentialchangesincreditriskforperformingadvancesusinginternalcreditmodelsandissatisfiedthattherearenosignificantchangesinfairvalueduetocreditrisk.Forimpairedloansandadvances,thecarryingvalue,asdeterminedbytheCompany’sIAS39creditmodels,isconsideredthebestestimateoffairvalue.Therefore,theCompanyissatisfied,afterconsideringtheseinternalcreditmodelstogetherwithotherassumptionsandthevariable interestrateexposure,thatthecarryingvalueofthese loansandadvancesandfinancial liabilitiesatamortisedcostapproximatesfairvalue.


cost


R’000 R’000 R’000 R’000 R’000


ASSETS






Otherassets 735 746 6 152 6 152 729 594






Total assets 55 963 003 43 282 43 282 528 248 8 831 874 9 360 122 46 171 197 388 402




Reserves 2 268 864 2 268 864
















Company Statement of Financial Position Classifications of Financial Instruments at 31 December 2009


cost

Non-financial

assetsand

liabilities

R’000 R’000 R’000 R’000 R’000


ASSETS







Investmentinsubsidiarycompanies 43018 43018




Total assets 49048902 26978 26978 859062 6128332 6987394 41713230 321300




Reserves 1918109 1918109

Total ordinary shareholders' equity 3019793 3019793






Loansfromsubsidiarycompanies 332348 332348







*Long-terminstrumentsfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.



cost

Non-financial

assetsand

liabilities

R’000 R’000 R’000 R’000 R’000


ASSETS











Total assets 49048902 26978 26978 859062 6128332 6987394 41713230 321300




Reserves 1918109 1918109

Total ordinary shareholders' equity 3019793 3019793






Loansfromsubsidiarycompanies 332348 332348







*Long-terminstrumentsfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.


2009 2008

R’000 R’000

Financial instruments at fair value

throughprofit & loss


not at fair value through

profit & loss Total

Financialinstrumentsatfairvalue

throughprofit&loss


notatfairvaluethrough

profit&loss Total

1 ACCOUNTING POLICIESRefertopages34to50fortheaccountingpolicies.

2 INTEREST AND SIMILAR INCOME*Mortgageloans 241 846 1 085 508 1 327 354 89874 1470790 1560664

–Interestearned 241 846 1 047 118 1 288 964 89874 1369350 1459224

–Deferredrevenueandacquisitioncosts 38 390 38 390 101440 101440

Leaseandinstalmentdebtors 495 259 4 045 279 4 540 538 151012 4336356 4487368

–Interestearned 495 259 4 207 219 4 702 478 151012 4457347 4608359

–Deferredrevenueandacquisitioncosts – (161 940) (161 940) – (120991) (120991)

Termloansandother 38 194 88 935 127 129 61002 98364 159366

Governmentandpublicsectorsecurities 191 808 – 191 808 213400 – 213400

Preferenceshares – 11 089 11 089 – 11066 11066 967 107 5 230 811 6 197 918 515288 5916576 6431864

Interestincomeonimpairedfinancialassets 61 708 129901

*Interestincomedisclosedaboveincludesinterestincomeonimpairedfinancialassets.

3 INTEREST EXPENSE AND SIMILAR CHARGESDepositandloanaccounts – 3 799 607 3 799 607 – 4317682 4317682

Derivativeinstruments 145 900 – 145 900 65193 – 65193

Long-termdebtinstruments 42 307 40 789 83 096 102933 3341 106274

Otherdeposits – 2 854 2 854 – – –

Securitisationnotes – 230 464 230 464 – 273926 273926

Borrowingcostscapitalised – (3 199) (3 199) – – – 188 207 4 070 515 4 258 722 168126 4594949 4763075

4 NON-INTEREST REVENUECommissionandfeeincome* – 162 486 162 486 – 96875 96875

–Insurancecommission – 29 935 29 935 – 27339 27339

–Fees – 132 551 132 551 – 69536 69536

Fairvalueadjustmentsthroughprofitandloss** 16 118 – 16 118 (10559) – (10559)

–Designatedasatfairvaluethroughprofitandloss (126 311) – (126 311) 276967 – 276967

–Heldfortrading 142 429 – 142 429 (287526) – (287526)

Otherincome – 14 851 14 851 – 9169 9169

–Rentreceived – 906 906 – 2225 2225

–Fairvalueadjustmentonoption – 6 152 6 152 – – –

–Profitondisposalofpropertyandequipment 506 506 277 277

–Other – 7 287 7 287 – 6667 6667

16 118 177 337 193 455 (10559) 106044 95485

*All commissionand fee incomeother thanamounts included indetermining theeffective interest rate relates tofinancialinstrumentsthatarenotclassifiedasfinancialinstrumentsatfairvaluethroughprofitandloss.

**Thenetgainsandlossesonfinancialinstrumentsincludesallrealisedandunrealisedfairvaluechanges,interestanddividends.

Notes to the Company Financial Statements for the year ended 31 December 2009


2009 2008

R’000 R’000

5 OPERATING EXPENSES

Staffcosts* 352 091 297194

–Salariesandwages 352 091 297194

Computerprocessing 47 531 39871

–Depreciationforcomputerequipment 14 209 14488

–Othercomputerprocessingexpenses 33 322 25383

Occupationandaccommodation 34 309 26240

–Depreciationforowner-occupiedbuildings 11 304 5305

–Operatingleasechargesforlandandbuildings 12 683 13095

–Otheroccupationandaccommodationexpenses 10 322 7840

Marketingandpublicrelations 10 879 14366

Feesandinsurances 23 406 21754

–Auditors’remuneration 8 118 9372

–Auditfees–internal 3 767 1573

–Auditfees–external 4 148 6572

–Otherservices 203 1227

–Otherfeesandinsurances 15 288 12382

Officeequipmentandconsumables 44 454 38097

–Depreciationforfurnitureandotherequipment 5 149 3521

–Otherofficeequipmentandconsumables 39 305 34576

Vehiclesandtransportexpenses 519 692

–Depreciationforvehicles 519 692

Sundryexpenses 57 509 53925

Feestoalliancepartners 26 713 1213

597 411 493352

*Refertopage121onrelatedpartiesforadetailedbreakdownofdirectors’compensation.

6 INDIRECT TAXATION

Value-addedtaxation 49 176 49811

49 176 49811

Value-addedtaxationcomprisesthatportionwhichisirrecoverableasaresultoftheinterestearnedinthebankingsector.


2009 2008

R’000 R’000

7 DIRECT TAXATION

7.1 Charge for the year

SouthAfricannormaltaxation

–Current 136 675 110143

–Deferred 7 307 28328

–Changeduetotaxationratedecreasingfrom29%to28% – (1986)

–Secondarytaxationoncompanies 2 135 10397

Totaldirecttaxes 146 117 146882

Prioryearunderprovision–currenttaxation 865 1209

Prioryearoverprovision–deferredtaxation (832) (1167)

146 150 146924

7.2 Taxation rate reconciliation

StandardrateofSouthAfricannormaltaxation 28.0% 28.0%

Reductionintaxrate 0.0% (0.4%)

Non-taxabledividendincome (0.6%) (0.6%)

Non-taxablecapitalprofit (0.3%) 0.0%

Secondarytaxationoncompanies 0.4% 2.0%

Other 0.2% (1.0%)

Totaldirecttaxationonincomeasapercentageofprofitbeforedirecttaxation 27.7% 28.0%



2009 2008

R’000 R’000

8 DEFERRED TAXATION

8.1 Reconciliation of deferred taxation balances



Ratechangefrom29%to28% – (1986)

Prioryearadjustment–Statementofcomprehensiveincome (832) (1167)

Currentyeartemporarydifferences 7 307 32234

–Recognisedinprofitandloss 7 307 28328

–Incomeandexpenditureaccrualsdeducted 6 853 36859

–Impairmentofloansandadvances 1 278 (9124)

–Other (824) 593

–Recognisedinequity – 3906

–Propertyandequipment,leasesandotherassets – 3906

Balance at end of year 107 598 101123

8.2 Analysis of deferred taxation


Propertyandequipment,leasesandotherassets – 3849

Impairmentofloansandadvances (21 550) (22828)

Revaluationofpropertyandequipment 18 348 18348

Incomeandexpenditureaccruals 112 254 102385

Other (1 454) (631)

107 598 101123

9 CASH AND CASH EQUIVALENTS

Coinsandbanknotes 17 17

Moneyatcallandshortnotice 300 525 46168

Balanceswithcentralbankotherthanmandatorydeposits 250 250

300 792 46435

Bankoverdrafts (6 920) –

Mandatorydepositswithcentralbank 1 215 575 1067795

1 509 447 1114230

Moneyatcallandshortnoticeconstitutesamountswithdrawablein32daysorless.MandatorydepositsarenotavailableforuseintheCompany’sday-to-dayoperations.


10 DERIVATIVE FINANCIAL INSTRUMENTS

Thesetransactionshavebeenenteredintointhenormalcourseofbusinessandnomaterial lossesareanticipatedotherthanthoseforwhichprovisionhasbeenmadeinthestatementofcomprehensiveincome.Therearenocommitmentsorcontingentcommitmentsunderderivativeinstrumentsthataresettledotherthanwithcash.TheprincipaltypesofderivativecontractsintowhichtheCompanyentersaredescribedbelow:

SwapsTheseareover-the-counter(OTC)agreementsbetweentwopartiestoexchangeperiodicpaymentsofinterest,orrelatedindex,overasetperiodbasedonnotionalprincipalamounts.TheCompanyentersintoswaptransactionsinseveralmarkets.InterestrateswapsareusedtoeconomicallyhedgetheinterestrateriskoftheCompany.

Risk monitoringDetailsoftheCompany’sriskmanagementstructure,policiesandmethodsarenotedonpages24to29andtheinterestrateriskanalysisisdetailedonpages131to132.

2009 2008

R’000 R’000

10.1 Total carrying amount of derivative financial instruments

Grosscarryingamountofassets 43 282 26978

Grosscarryingamountofliabilities (234 770) (349871)

Netcarryingamount (191 488) (322893)

Adetailedbreakdownofthenotionalprincipal,carryingamountandfairvalueofthevarioustypesofderivativefinancialinstrumentsheldbytheCompanyispresentedinthefollowingtables:

10.2 Notional principal of derivative financial instruments

This represents thegrossnotional amountsofalloutstandingcontractsat year-end.Thisgrossnotional amount is thesumoftheabsoluteamountofallpurchasesandsalesofderivativeinstruments.ThenotionalamountsdonotrepresentamountsexchangedbythepartiesandthereforerepresentonlythemeasureofinvolvementbytheCompanyinderivativecontractsandnotitsexposuretomarketorcreditrisksarisingfromsuchcontracts.Theamountsactuallyexchangedarecalculatedonthebasisofthenotionalamountsandothertermsofthederivative,whichrelatetointerestrates,securitiespricesorfinancialandotherindices.

2009 2008

Notionalprincipal

R’000

Positive valueR’000

NegativevalueR’000

Notionalprincipal

R’000

PositivevalueR’000

Negativevalue

R’000

Banking derivatives

Interestrateswaps 10 704 740 2 208 295 8 496 445 8978516 1217820 7760696


Total notional principal 10 704 740 2 208 295 8 496 445 8989516 1228820 7760696

10.3 Carrying amount of derivative financial instruments

The amounts disclosed represent the value of all derivative instruments held. The fair value of a derivative financialinstrumentistheamountatwhichitcouldbeexchangedinacurrenttransactionbetweenwillingparties,otherthanaforcedliquidationorsale.Fairvaluesareobtainedfromquotedmarketpricesanddiscountedcashflowmodels.Whenitisnotpracticable,owingtoconstraintsoftimelinessorcost,todeterminethefairvalueofaderivativeinstrumentwithsufficientreliability,suchderivativeisincludedinthefollowingtableatavaluecalculatedonanaccrualbasis.Intermsofthatbasisavalueisobtainedbytakingintoaccounttheoriginalcostofthederivativeandonlytherealisedgainsorlossesinrespectoftheinstrument.

2009 2008

Net carrying amount

R’000

Carrying amount of

assetsR’000

Carrying amount of

liabilitiesR’000

Netcarryingamount

R’000

Carryingamountof

assetsR’000

Carryingamountof

liabilitiesR’000

Banking derivatives

Interestrateswaps (191 488) 43 282 (234 770) (322979) 26892 (349871)


Total carrying amount (191 488) 43 282 (234 770) (322893) 26978 (349871)



11 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

TheCompanyhassatisfiedthecriteriafordesignationofan instrumentasatfairvaluethroughprofitor loss intermsoftheaccountingpolicyasstipulatedintheannualfinancialstatements.

VariousfixedrateinstrumentsareenteredintobytheCompany.TheoverallinterestrateriskoftheCompanyisthenhedgedbyALCObywayofinterestrateswaps,thushavingtheinterestrateriskpassedouttothemarket.Theswapsmeetthedefinitionof“derivatives”andarethereforeheldatfairvalueintermsofIAS39.Thefixedrateinstruments,however,donotmeetthisdefinition.Therefore,toavoidanaccountingmismatchbyholdingthefixedrateinstrumentatamortisedcostandthebalanceofthehedgingschemes’instrumentsatfairvaluethefixedrateinstrumentsaredesignatedasatfairvalue,throughprofitorlossandarethereforeheldatfairvalue.

Variousinstrumentsaredesignatedasatfairvaluethroughprofitandlossconsistentwiththerelevantentity’sdocumentedriskmanagementorinvestmentstrategy.Intheseinvestmentstrategiesthefairvalueistheinstrumentattributethatismanagedandreviewedonaregularbasis.Businessstrategies,operatingmandatesand/orinvestmentstrategiesarealignedwiththefairvalueoftheinstruments.Theriskoftheportfolioismeasuredandmonitoredonafairvaluebasis.Performancemeasurementisdirectlyalignedtothefairvalueandisreportedtokeymanagementpersonnelonaregularbasis.

11.1 Financial assets designated as at fair value through profit or loss

2009 2008

R’000 R’000

Maximum exposure to credit risk



Loansandadvancesdesignatedasatfairvaluethroughprofitorloss* 6 478 759 4564947

Othershort-termsecurities 2 346 963 1563385

9 353 970 6987394

*Thisamountisincludedaspartoftheloansandadvancesbalanceinthestatementoffinancialposition.

Nocreditderivativesareissuedonanyoftheabovefinancialassets.

Changesincreditriskwereidentifiedatadivisionlevelonanindividualbasisbyreviewofhistoricalrecords.Eachindividualtransactionwasassessedforsignsofsignificantcreditdeterioration.Wheresignificantdeteriorationwas identified,thecollateralandprovisionamountsweretakenintoaccounttoachievefairvalue.

Thecreditmarginiskeptfixedonthefinancialinstrumentsthatarenotlistedonarecognisedexchange,upuntilthedateanimpairmenteventoccurs.

2009 2008

R’000 R’000

11.1.1 Government and other securities

Analysis

Governmentandgovernment-guaranteedsecurities 202 608 529163

Sectoral analysis


Valuation


–Marketvalue 202 608 529163


2009 2008

R’000 R’000

11 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS(continued)

11.1 Financial assets designated as at fair value through profit or loss (continued)

11.1.2 Investment securities

Carrying amount

Listed investments

EagleBonds 3 970 5183

OctaneABS1 273 685 276360

Unlisted investments

OctaneABS1subordinatedloan 47 985 48356

325 640 329899

Valuation

Listedatmarketvalue 277 655 281543

Unlisteddirectors’valuation 47 985 48356

325 640 329899

TheEagleBondswere issuedon10June2003atanominalvalueofR10millionbearingacouponof9.956%.Interestpaymentsandinstalmentsarereceivedonaquarterlybasisandthebondmatureson31July2012.

11.1.3 Other short-term securities

Analysis

Treasurybills 1 634 976 1182129

SARBdebentures 711 987 381256

2 346 963 1563385

Sectoral analysis

Governmentandpublicsector 2 346 963 1563385

Valuation

–Carryingamount 2 346 963 1563385

–Marketvalue(listed) 2 346 963 1563385

AregisteroftreasurybillsanddebenturesisavailableforinspectionattheregisteredofficeoftheCompany.

11.2 Financial liabilities designated as at fair value through profit or loss

Fair valueR’000

Contractuallypayable at

maturityR’000

Difference

R’000

Change in fair value due to change in credit risk

Current yearR’000

CumulativeR’000

2009

Long-termdebtinstruments 492 763 500 000 (7 237) (8 972) (13 335)

2008

Long-termdebtinstruments* 488409 500000 (11591) (704) (22307)

ChangesinfairvalueduetocreditriskchangesareassessedwithreferencetogovernmentstockR154,whichhasreplacedtheR153.

*Long-termdebtinstrumentsfor2008havebeenrestatedtoalignwithNedbankLimited’sdisclosure.



2009 2008

R’000 R’000

12 LOANS AND ADVANCES TO CUSTOMERS

TheCompanyoperatesinselectednichemarketsconcentratingonasset-basedfinance.Loansandadvancesmadearemostlyintheformofinstalmentcredittoindividualsandmortgagelendingtopropertydevelopers,corporateborrowersandindividuals.

12.1 Category analysis*

Homeloans 2 985 711 1620946

Commercialmortgages 6 028 515 6175065

Otherloanstoclients 5 073 662 4812479

Netinvestmentininstalmentsaleandleaseagreements 37 377 766 32714015

Preferenceshares 119 193 122104

51 584 847 45444609

Impairmentofloansandadvances(note16) (1 180 852) (784648)

50 403 995 44659961

*Loansandadvancessplitfor2008havebeenreclassifiedtoalignwithNedbankLimited’sdisclosure.

ThepreferenceshareshaveanominalvalueofR110millionandearndividendsatafixedrateof9.4%.TheyareredeemableinApril2012.


Individuals 36 925 633 31217498

Financialservices,insuranceandrealestate 5 067 796 3494266


Buildingandpropertydevelopment 1 814 091 2281335

Transport,storageandcommunication 1 110 109 1337471

Retailers,cateringandaccommodation 1 425 454 1527429





Otherservices 4 118 898 3674398

51 584 847 45444609


SouthAfrica 51 584 847 45444609

Gauteng 27 767 400 25195356

WesternCape 6 555 578 5820174

EasternCape 2 441 690 2234291

KwaZulu-Natal 5 820 081 4899356

FreeState 2 313 371 1940639

NorthWest 1 110 903 943159

Mpumalanga 3 928 664 3150614


Limpopo 1 063 014 801270

51 584 847 45444609


2009 2008

R’000 R’000

13 OTHER ASSETS

Sundryreceivables 5 853 60615

Deferredacquisitioncosts 462 562 442192

Propertyinventory 1 179 1179

Non-financialassetsold 260 000 –

Option 6 152 –

735 746 503986

14 CURRENT TAXATION

NormalSouthAfricantaxation

–Currenttaxationliability 22 020 1334

22 020 1334

15 INVESTMENT IN SUBSIDIARY COMPANIES

Costofinvestment 43 018 43018

Loansfromsubsidiarycompanies (424 718) (332348)

16 IMPAIRMENT OF LOANS AND ADVANCES

16.1 Impairment of loans and advances

2009

Totalimpairment

R’000

Specificimpairment

R’000

Portfolioimpairment

R’000

Openingbalance 784 648 538 840 245 808

Amountwrittenoff (614 141) (614 141) –

Netnewimpairmentscreated 959 083 937 270 21 813

Impairmentscreated 2 568 642 2 546 829 21 813

Impairmentsreleased (1 609 559) (1 609 559) –

Recoveriesofbaddebts 51 262 51 262 –

Closingbalance 1 180 852 913 231 267 621

2008


Amountwrittenoff (707829) (707829) –

Netnewimpairmentscreated 697101 601903 95198

Impairmentscreated 2041875 1946677 95198

Impairmentsreleased (1344774) (1344774) –

Recoveriesofbaddebts 19014 19014 –

Closingbalance 784648 538840 245808



2009 2008

R’000 R’000

16 IMPAIRMENT OF LOANS AND ADVANCES (continued)


Individuals 845 612 538926

Financialservices,insuranceandrealestate 116 059 60351


Buildingandpropertydevelopment 41 070 39402

Transport,storageandcommunication 25 423 23100

Retailers,cateringandaccommodation 32 645 26381




Governmentandpublicsector 359 400

Otherservices 94 328 63462

1 180 852 784648


SouthAfrica 1 180 852 784648

Gauteng 635 401 434915

WesternCape 150 131 100522

EasternCape 55 918 38589

KwaZulu-Natal 133 288 84619

FreeState 52 979 33518

NorthWest 25 441 16290

Mpumalanga 89 972 54415


Limpopo 24 344 13839

1 180 852 784648

16.4 Ratio of impairments

Impairmentofloansandadvancesatendofyear 1 180 852 784648

Totalgrossloansandadvances 51 584 847 45444609

Ratio(%) 2.3% 1.7%


17 PROPERTY AND EQUIPMENT

LandandbuildingsComputerequipment

Furnitureandotherequipment Vehicles Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000



Acquisitions 6 788 86534 18 963 22588 2 683 6681 581 853 29 015 116656

Transfers – – – 55 – – – – – 55

Disposals (417) (1206) (9 453) (7935) (1 547) – (757) (1881) (12 174) (11022)

Revaluation – 17600 – – – – – – – 17600


Accumulated depreciation and impairment losses


Depreciationchargefortheyear 11 304 5305 14 209 14488 5 149 3521 519 692 31 181 24006

Transfers – – – 3 – – – – – 3

Disposals (52) (21) (2 699) (189) (58) – (497) (1210) (3 306) (1420)

Revaluation – 1872 – – – – – – – 1872


Carrying amount

At1January 219 344 123572 34 645 34239 22 719 19559 1 574 2084 278 282 179454

At31December 214 463 219344 32 645 34645 18 764 22719 1 376 1574 267 248 278282

Registersprovidingtheinformationregardinglandandbuildings,asrequiredintermsofSchedule4oftheCompaniesActof1973,areavailableforinspectionattheregisteredofficeoftheCompany.

Landandbuildingsarerevaluedbyanindependentvalueratthree-yearintervals.Observablemarketdataisusedtoperformthevaluation.Thelatestindependentvaluationwasperformedin2007.



18 INTANGIBLE ASSETS

18.1 Intangible assets

Softwaredevelopmentcosts*

2009 2008

R’000 R’000



Developmentcostscapitalised 74 937 –

Borrowingcostscapitalised 3 199 –

Balanceat31December 78 136 –

Accumulated amortisation and impairment losses


Balanceat31December – –

Carrying amount

At1January – –

At31December 78 136 –

*SoftwaredevelopmentscostsontheSAPprojecthavebeencapitalisedinaccordancewiththe requirementsof IAS38– IntangibleAssets.This iscalculatedonthe rateatwhichNedbanklendsfundstoImperialBank.TheSAPprojectisnotcompleteandthereforeisnotreadyforuse.Amortisationoftheintangibleassetwillcommenceoncetheprojectiscompleted.

18.2 Borrowing costs capitalised

Borrowingcostscapitalisedduringtheperiod 3 199 –

GeneralborrowingcostsontheSAPproject(note18.1)havebeencapitalisedinaccordancewiththerequirementsofIAS23–BorrowingCosts.ThisiscalculatedontherateatwhichNedbanklendsfundstoImperialBank.

19 POST-EMPLOYMENT EMPLOYEE BENEFITS

AlleligibleemployeesaremembersoftheImperialBankPensionFundorProvidentFund,financedby Company and employee contributions. These funds are defined contribution plans andare governed by the Pension Funds Act of 1956. There are no further post-retirement benefitobligations.

Pensionfundcontributionsexpensed 28 473 24882


2009 2008

R’000 R’000

20 SHARE CAPITAL

20.1 Ordinary share capital

Authorised:

500000000(2008:500000000)ordinarysharesofR0.01each 5 000 5000

Issued:

393682789(2008:393682789)fullypaidordinarysharesofR0.01each 3 937 3937

SubjecttotherestrictionsimposedbytheCompaniesActof1973,theunissuedsharesareunderthecontrolofthedirectorsuntiltheforthcomingannualgeneralmeeting.

Shareholders’ analysis

NedbankLimited 50.1% 50.1%

ImperialHoldingsLimited 49.9% 49.9%

100.0% 100.0%

TheultimatecontrollingshareholderisOldMutualplc,listedontheLondonStockExchange.

20.2 Preference share capital

Authorised:


Issued:


Share premium:

Preferencesharepremium 298 045 298045

Total preference share capital and premium 298 047 298047

Allthepreferenceshareswereissuedduring2006andarelistedontheJSELimited(JSE)inthe“PreferenceShares”sectoroftheJSElistwiththeabbreviatedname“IBLPref”,JSEpreferencesharecodeIBLPandISINZAE000081675.



22 OTHER LIABILITIES

Creditorsandotherliabilities 99 034 83747

Leavepayaccrual(note22.1) 19 529 14156

Deferredrevenue 5 968 3807

Operatingleasesaccelerated 2 214 1505

126 745 103215

22.1 Leave pay accrual

Balanceatbeginningofyear 14 156 14350

Movementforyear 5 373 (194)

19 529 14156

23 PROVISIONS

Provisionforbonuspay 33 943 25984

Othergeneralprovisions* 18 049 18103

51 992 44087

*Othergeneralprovisionsincludethepotentialtaxliabilityonthestructuredfinancedeals.

2009 2008

R’000 R’000

21 AMOUNTS OWED TO DEPOSITORS

21.1 Analysis

Depositsandloanaccounts

–Callandtermdeposits 47 250 538 40245256

–Fixeddeposits 1 496 804 2000817

–DepositsfromOctane* 1 425 650 1748786

–Noticedeposits – 12475

50 172 992 44007334

Comprises:

–Amountsowedtodepositors 1 584 347 2023152

–Amountsowedtobanks 48 588 645 41984182

50 172 992 44007334

*On18June2007,ImperialBanksuccessfullysecuritisedR1.7billionofitsmotorvehicleinstalmentsaleagreements.ThetransactionhasbeenstructuredasarevolvingR1.7billiontranche for a period of 24 months, which ended on 20 July 2009, and thereafter acontrolled amortisation. Although the instalment sale agreements have been legallycededbyImperialBank,theinstalmentsaleassetsremainontheImperialBankstatementof financial position, as required by IAS 39 – Financial Instruments: Recognition andMeasurement.Refertonote30forfurtherinformationonsecuritisations.


Banks 48 588 645 41984182

Businesssector 1 584 347 2023152

50 172 992 44007334


SouthAfrica

Gauteng 50 172 992 44007334


2009 2008

R’000 R’000

24 LONG-TERM DEBT INSTRUMENTS

Rand-denominated



R350millionbondsrepayableon16September2015 351 651 –

1 146 653 791750

TheR500millionbond(IPB2)issubordinated,unsecuredandcallableon30December2010.Therateisfixedat8.38%.

TheR300millionbond(IPB3)issubordinated,unsecuredandcallableon4December2013.Therateisvariableat3monthJIBARplus2.5%.

TheR350millionbond(IPB4)issubordinated,unsecuredandcallableon16September2015.Therateisvariableat3monthJIBARplus4.25%.

25 CASH FLOW INFORMATION

25.1 Reconciliation of profit from operations before direct taxation to cash generated by operating activities

Profitfromoperationsbeforedirecttaxation 526 981 524010

Adjustedfor:

–Indirecttaxation 49 176 49811

Non-cash items

–Fairvalueadjustmentsthroughprofitandloss (16 118) 10559

–Depreciation 31 181 24006

–Movementinleave-payprovision 5 373 (194)

–Movementinotherprovisions 7 905 (20677)

–Operatingleasedeferrals 709 572

–Movementinimpairmentofadvances 1 010 345 716115

–Fairvalueadjustmentonoptions (6 152) –

–(Profit)ondisposalofpropertyandequipment (506) (276)

–Deferredrevenue/deferredacquisitioncosts 123 550 19551

–Longtermdebtinstruments’interestaccruals 955 –

–Borrowingcostscapitalised (3 199) –

1 730 200 1323477

25.2 Cash received from clients

Interestincomeanddividendsfromfinancefacilities 6 321 468 6451415

Commissionandfeeincome(note4) 162 486 96875

Otherincome 8 193 8893

6 492 147 6557183



2009 2008

R’000 R’000

25 CASH FLOW INFORMATION (continued)

25.3 Cash paid to clients, staff and suppliers

Interestexpenseandsimilarcharges (4 260 966) (4763075)

Staffcosts(note5) (352 091) (297194)

Otheroperatingexpenses (200 152) (192451)

(4 813 209) (5252720)

25.4 Increase in operating assets

Othershort-termsecurities (783 578) (457791)

Governmentandpublicsectorsecurities 326 555 (198178)

Loansandadvancesandotheraccounts (7 095 516) (9842398)

(7 552 539) (10498367)

25.5 Increase in operating liabilities

Otherdeposits 6 165 658 9662157

Creditorsandotherliabilities (5 283) 44179

6 160 375 9706336

25.6 Taxation paid

Amountsdueatbeginningofyear (1 334) (2558)

Statementofcomprehensiveincomecharge (146 150) (146924)

Deferredtaxationmovement 6 475 31783

Totalindirecttaxation (49 176) (49811)

Amountsdueatendofyear 22 020 1334

(168 165) (166176)

26 CONTINGENT LIABILITIES

Liabilitiesunderguarantees* 363 806 1079640

The Company in the ordinary course of business enters into transactions which expose the Company to taxation, legal andbusinessrisks.Provisionsaremadeforknownliabilitieswhichareexpectedtomaterialise.Possibleobligationsandknownliabilitieswherenoreliableestimatecanbemadeoritisconsideredimprobablethatanoutflowwouldresult,arenotedasacontingentliability.ThisisinaccordancewithIAS37–Provisions,ContingentLiabilitiesandContingentAssets.

Inaddition,inpastyearsImperialBankenteredintostructuredfinancetransactionswiththirdpartiesusingthetaxationbaseoftheCompany.Pursuanttothetermsofthemajorityofthesetransactions,theunderlyingthirdpartyhascontractuallyagreedtoaccepttheriskofanytaxationbeingimposedbySARS,althoughtheobligationtopayinthefirstinstancemayrestwithImperialBankLimited.Inlimitedcasesaprovisionismadewherethecreditqualityofaclientbecomesdoubtful.



27 COMMITMENTS

27.1 Operating lease commitments

TheCompanyenteredintoleasesoverfixedproperty,furnitureandotherequipmentforvaryingperiods.Thechargeswillincreaseinfutureinlinewithnegotiatedescalationsandexpansions.Thefollowingaretheminimumleasepaymentsundernon-cancellableleases.

2011– 2015and

2010 2014 beyond

R’000 R’000 R’000

Landandbuildings 9447 24063 16784

2009 2008

R’000 R’000

27.2 Commitments

Irrevocableguarantees 11 467 3409

Capitalcommitments

Contracted 4 943 97791

Notyetcontracted 40 941 –

57 351 101201

27.3 Unutilised facilities

TheBankcommits toextendcredit tocustomers in theordinarycourseofbusiness.Thecontractualamountofthisoff-balancesheetcommitmentisasfollows:

Unutilisedfacilities* 977 455 2711602

*Unutilisedfacilitiesfor2008havebeenrestated.ThisrestatementhasnoimpactontheStatementofComprehensiveIncomeortheStatementofFinancialPosition.



28 RELATED PARTIES

28.1 Relationships between parent and subsidiaries

Theparent companyof ImperialBank isNedbankLimited,whichholds50.1%of theCompany’sordinary shares. TheultimatecontrollingpartyisOldMutualplc,incorporatedintheUnitedKingdom.

MaterialsubsidiariesoftheCompanyareidentifiedonpage93.

28.2 Key management personnel compensation

28.2.1 Directors’ compensation

CompensationpaidtotheBoardofDirectorsisaggregatedbelow,togetherwiththeaggregatecompensationpaidtotheexecutivedirectors.

2009 2008

R’000 R’000

Executive directors

RvanWyk 3 653 2819

–Salary 1 646 1511

–Bonus–shortterm 1 500 750



–Benefits 9 9

PCWHibbit 1 792 1544

–Salary 1 079 830

–Bonus–shortterm 600 475



–Benefits 9 9

Non-executive directors

Fees: 1 557 1337

OSArbee* 70 87

LEBakoro 220 192

CJWBall 232 212

HRBrody* 227 208

MJCroucamp 382 350

NPMnxasana* 119 87

PKWard 146 16

PAWessels* 161 185

*Directors’ feesmarkedwithanasteriskdonot accrue to the individualsbut toeitherImperialHoldingsorNedbankLimited.

28.2.2 Compensation of other members of the Executive Committee

9 669 11334

Salary 5 621 7061

Bonus-shortterm 2 925 2775

Bonus-longterm 379 552

Retirementfund 582 857

Benefits 162 89


28 RELATED PARTIES (continued)28.3 Identity of related parties with whom material transactions have occurred

TheCompanyanditssubsidiaries,intheordinarycourseofbusiness,enterintovariousfinancialservicestransactionswithassociates,jointventuresandotherrelatedpartieswithinthegreaterNedbank,ImperialHoldingsandOldMutualgroup.Thefollowingmaterialtransactionsoccurredbetweenrelatedparties:

2009

Statement of financial position information

Balance due from/(to)

R’000 Terms and conditionsParent – Nedbank LimitedDeposit (47 556 543) NofixedtermsofpaymentattheNedbank

primereplicatingportfoliorateFixeddeposit (1 496 804) FixeddeposithelduntilmaturityCurrentaccount 300 344 CurrentaccountattheNedbankprime

replicatingportfoliorateLoan 615 952 CallandtermloanSwaps (157 483) NetswapsBonds (502 771) IPB3&IPB4Non-controlling shareholder – Imperial Holdings Limited Option 6 152 OptionSubsidiariesNRBRiskSolutionsLtd (92 811) Nofixedtermsofpaymentattheinternal

fundingrateMotorFinanceCorporation(Pty)Ltd (6 813) Nofixedtermsofpaymentattheinternal

fundingrateSpecial-purpose vehicleOctane(Pty)Ltd 273 682 DepositOctane(Pty)Ltd (244 376) TransactionaccountOctane(Pty)Ltd 47 985 SubordinatedloanOctane(Pty)Ltd (323 080) Nofixedtermsofpaymentattheinternal

fundingrateOctane(Pty)Ltd (2 548) SwapsFellow subsidiaries*MutualandFederalLtd (12 184) BondsNedgroupInsurancecompanies (4 501) FixedandcalldepositNedgroupPensionFund (3 201) IPB2OldMutualLtd (136 797) BondsAssociated companies**AssociatedMotorHoldings(Pty)Ltd (8 032) JointventureDreamWorldInvestments239(Pty)Ltd 119 193 PreferencesharesEagleBondsOne(Pty)Ltd 3 988 BondsMedicalAidPre-Funder (3 748) CalldepositRegentInsuranceLtd (151 120) IPB3RegentLifeAssuranceAnnuitiesFund (24 606) CalldepositRegentLifeAssuranceSinkingFund (3 700) CalldepositSAFAIRLeaseFinance(Pty)Ltd 4 393 NetswapsFarmBothasfontein(Kyalami)(Pty)Ltd 13 888 GuaranteesImperialLogisticsLtd 2 250 GuaranteesCargoAfrica(Pty)Ltd 1 989 InstalmentsaleagreementFourwaysHaulage(Pty)Ltd 7 562 InstalmentsaleagreementMegafreightServices(Pty)Ltd 26 942 GuaranteesNationalAirwaysCorporation(Pty)Ltd 2 106 Loan43AirSchool(Pty)Ltd 9 262 LoanFuelogic(Pty)Ltd 44 100 Suretyship





Interest received/

(paid)


(paid)

Statement of comprehensive income information R’000 R’000


Deposit (3 647 320)

Fixeddeposit (185 751)

Currentaccount 1 820

Loan 51 781

Swaps (87 346)

Bonds (24 059)


Fairvalueadjustmentonoption 6 152

Dealerincentivecommission (91 750)

Special-purpose vehicle – Octane (Pty) Ltd

Swaps 7 942

Transactionaccount (11 637)

Deposits 27 971

Subordinatedloan 25 366

Loan (3 914)

Serviceandadministrationfees 1 826


MutualandFederalLtd (1 598)

NedbankGroupInternalAudit (1 106)

NedgroupInsurancecompanies (6 898)

OldMutualLtd (13 124)


AssociatedMotorHoldings(Pty)Ltd (26 713)

DreamWorldInvestments239(Pty)Ltd 11 089

RegentInsuranceLtd (18 518) 5 947

RegentLifeAssuranceAnnuitiesFund (1 926)

RegentLifeAssuranceCompanyCorporateFund (1 125)

RegentLifeAssuranceIphFund (3 427)

SAFAIRLeaseFinance(Pty)Ltd 4 315

FourwaysHaulage(Pty)Ltd 1 057

Fuelogic(Pty)Ltd 16 937




28 RELATED PARTIES (continued)28.3 Identity of related parties with whom material transactions have occurred (continued)

2008

Statementoffinancialpositioninformation

Balanceduefrom/(to)

R’000 TermsandconditionsParent – Nedbank LimitedDeposit (40060681) Nofixedtermsofpaymentat

theNedbankprimereplicatingportfoliorate

Fixeddeposit (1960653) Fixeddeposithelduntilmaturity

Currentaccount 12564 CurrentaccountattheNedbankprimereplicating

portfoliorateLoan 2166 TermloanSwaps 263494 NetswapsBonds (151670) IPB3SubsidiariesNRBRiskSolutionsLtd 22278 Nofixedtermsofpaymentat

theinternalfundingrateSpecial-purpose vehicleOctane(Pty)Ltd (1748786) DepositsOctane(Pty)Ltd 3340 SwapsFellow subsidiaries*MutualandFederalLtd (18456) BondsNedgroupInsurancecompanies (41871) TermandfixeddepositNedgroupPensionFund (3201) BondsOldMutualLtd (144264) BondsAssociated companies**DreamWorldInvestments239(Pty)Ltd 122104 PreferencesharesEagleBondsOne(Pty)Ltd 5195 BondsMedicalAidPre-Funder 2166 Calldeposit Calldeposit (29621) Calldeposit Bond (69768) IPB3RegentLifeAssuranceAnnuitiesFund Calldeposit (22679) Calldeposit Bond (56624) IPB3RegentLifeAssuranceCompanyCorporateFund Calldeposit (2321) Calldeposit Bond (13145) IPB3RegentLifeAssuranceIphFund Calldeposit (47523) Calldeposit Bond (7078) IPB3RegentLifeAssuranceSinkingFund Calldeposit (3410) Calldeposit Bond (5056) IPB3SAFAIRLeaseFinance(Pty)Ltd 8181 NetswapsFarmBothasfontein(Kyalami)(Pty)Ltd*** 12338 GuaranteesImperialLogistics(Pty)Ltd*** 2250 GuaranteesCargoAfrica(Pty)Ltd*** 3707 InstalmentsaleagreementFourwaysHaulage(Pty)Ltd*** 11443 InstalmentsaleagreementMegafreightServices(Pty)Ltd*** 29472 GuaranteesNationalAirwaysCorporation(Pty)Ltd*** 1904 Loan43AirSchool(Pty)Ltd*** 10628 LoanTycoTrucks(Pty)Ltd*** 2015 Variousaccounts





Interestreceived/

(paid)


(paid)

Statementofcomprehensiveincomeinformation R’000 R’000


Deposit (4128420)

Fixeddeposit (169989)

Currentaccount 1349

Swaps (15391)


Dealerincentivecommission (119048)

Subsidiaries

Octane(Pty)Ltd 285937


MutualandFederalLtd (2210)

NedbankGroupInternalAudit (1573)

NedgroupInsurancecompanies (4906)

OldMutualLtd (36258)


AssociatedMotorHoldings(Pty)Ltd (1213)

DreamWorldInvestments239(Pty)Ltd 11066

RegentInsuranceLtd (4122) 5260

RegentLifeAssuranceAnnuitiesFund (2909)

RegentLifeAssuranceIphFund (6949)

SAFAIRLeaseFinance(Pty)Ltd (5164)

43AirSchool(Pty)Ltd*** 1482

Fuelogic(Pty)Ltd*** 19158



***Information regarding these transactions was unavailable in 2008. It has now beendisclosedforcompleteness.

***



29 COMPANY RISK DISCLOSURES

29.1 Company liquidity risk analysis

Term to maturity

2009R’000 Demand

1 – 12 months 1 – 5 years

Over 5 years

Non-determin-

able

ASSETSCashandcashequivalents 300 792 300 792 Othershort-termsecurities 2 346 963 1 034 572 1 312 391 Derivativefinancialinstruments 43 282 5 876 23 429 13 977 Governmentandothersecurities 202 608 101 023 101 585 Loansandadvancestoclients 50 403 995 2 762 135 9 728 248 28 539 535 9 374 077 Otherassets 735 746 735 746 Investmentinsubsidiarycompanies 43 018 43 018 Investmentsecurities 325 640 277 655 47 985 Propertyandequipment 267 248 267 248 Intangibleassets 78 136 78 136 Mandatorydepositswithcentralbank 1 215 575 1 215 575

Total assets 55 963 003 5 313 074 11 883 284 28 942 204 9 436 039 388 402

EQUITY AND LIABILITIESOrdinarysharecapital 3 937 3 937 Ordinarysharepremium 1 097 747 1 097 747 Reserves 2 268 864 2 268 864

Total ordinary shareholders’ equity 3 370 548 – – – – 3 370 548


Total shareholders’ equity 3 668 595 – – – – 3 668 595 Total liabilities 52 294 408 3 333 179 11 194 663 30 714 075 6 815 772 236 719 Bankoverdraft 6 920 6 920 Derivativefinancialinstruments 234 770 16 560 166 473 51 737 Amountsowedtodepositors 50 172 992 2 901 541 10 613 704 30 245 363 6 412 384 Loansfromsubsidiarycompanies 424 718 424 718 Otherliabilities 126 745 49 616 77 129Provisions 51 992 51 992 Currenttaxation 22 020 22 020 Deferredtaxation 107 598 107 598 Long-termdebtinstruments 1 146 653 492 763 302 239 351 651

Total equity and liabilities 55 963 003 3 333 179 11 194 662 30 714 075 6 815 772 3 905 314

Remaining contractual maturitiesBalance sheet liabilities 60 874 782 3 333 179 15 098 937 35 359 901 6 846 045 236 719Bankoverdraft 6 920 6 920Derivativefinancialinstruments 234 770 16 560 166 473 51 737Amountsowedtodepositors 58 363 648 2 901 541 14 405 014 34 644 709 6 412 384Loansfromsubsidiarycompanies 424 718 424 718Otherliabilities 126 745 49 616 77 129Provisions 51 992 51 992Currenttaxation 22 020 22 020Deferredtaxation 107 598 107 598Long-termdebtinstruments 1 536 371 605 727 548 720 381 924Off-balance sheet liabilities 1 352 728 1 352 728 – – – – Revocableguarantees 363 806 363 806Irrevocableguarantees 11 467 11 467Loancommitments 977 455 977 455

Total liabilities 62 227 510 4 685 907 15 098 937 35 359 901 6 846 045 236 719


29 COMPANY RISK DISCLOSURES (continued)29.1 Company liquidity risk analysis (continued)

Termtomaturity

2008R’000 Demand

1–12months 1–5years

Over5years

Non-determin-

ableASSETSCashandcashequivalents 46435 46435Othershort-termsecurities 1563385 1563385Derivativefinancialinstruments* 26978 86 26892Governmentandothersecurities 529163 217618 311545Loansandadvancestoclients 44659961 3147652 8204927 24474839 8832543Otherassets 503986 503986Investmentinsubsidiarycompanies 43018 43018Investmentsecurities 329899 12716 274183 43000Propertyandequipment 278282 278282Mandatorydepositswithcentralbank 1067795 1067795Total assets 49048902 4261882 10502718 25087459 8875543 321300EQUITY AND LIABILITIESOrdinarysharecapital 3937 3937Ordinarysharepremium 1097747 1097747Reserves 1918109 1918109Total ordinary shareholders’ equity 3019793 – – – – 3019793Preferencesharecapitalandpremium 298047 298047Total shareholders’ equity 3317840 – – – – 3317840Total liabilities 45731062 861220 3705474 40819806 149466 195096Derivativefinancialinstruments* 349871 310 200193 149368Amountsowedtodepositors 44007334 528872 3650501 39827863 98Loansfromsubsidiarycompanies 332348 332348Otherliabilities 103215 53329 49886Provisions 44087 44087Currenttaxation 1334 1334Deferredtaxation 101123 101123Long-termdebtinstruments 791750 791750

Total equity and liabilities 49048902 861220 3705474 40819806 149466 3512936Remaining contractual maturitiesBalance sheet liabilities 53739733 861220 4434144 48099807 149466 195096Derivativefinancialinstruments* 349871 310 200193 149368Amountsowedtodepositors 51672546 528872 4294082 46849494 98Loansfromsubsidiarycompanies 332348 332348Otherliabilities 103215 53329 49886Provisions 44087 44087Currenttaxation 1334 1334Deferredtaxation 101123 101123Long-termdebtinstruments 1135209 85089 1050120Off-balance sheet liabilities 2715011 2715011 – – – –Irrevocableguarantees** 3409 3409Loancommitments** 2711602 2711602

Total liabilities 56454744 3576231 4434144 48099807 149466 195096 *DerivativefinancialinstrumentshavebeenreclassifiedintodifferentmaturitybucketstoalignwithNedbankLimited’sdisclosure.**Irrevocableguaranteesandloancommitmentsfor2008havebeenrestated.ImperialBank’sALCOmeetsmonthlytomanageliquidityandinterestraterisk,andreportstotheBoardRiskCommitteequarterly.TheBankhasnoappetiteormandatetotakeproprietarytradingriskormarketrisk.LiquidityriskisnegligiblegivenNedbankLimited’scommitmenttoprovidefundsasrequired.However,theALCOdoesmonitormaturitymismatchesandfixedratehedgeeffectiveness.Italsoensuresliquidassetsaremaintainedatrequiredlevelsandinstrumentspurchasedarecost-effective.ImperialBankdoesnotfundadvancesinforeigncurrency,andhasnocross-borderexposure.Thisremovesforeignexchangeriskandcurrencytranslationrisk.


29 COMPANY RISK DISCLOSURES (continued)

29.2 Company credit risk analysis

Maximum exposure to credit risk per financial assets

2009 2008

R’000 R’000

Balance sheet

Off-balance sheet Total

Balancesheet

Off-balancesheet Total

Mandatoryreservedepositswithcentralbank 1 215 575 1 215 575 1067795 1067795

Loansandadvances* 50 403 995 1 341 261 51 745 256 44659961 2711602 47371563

Homeloans 2 985 711 144 851 3 130 562 1620946 1620946

Commercialmortgages 6 028 515 767 749 6 796 264 6175065 2711602 8886667

Otherloanstoclients 5 073 662 5 073 662 4812479 4812479

Netinvestmentininstalmentsaleandleaseagreements 37 377 766 428 661 37 806 427 32714015 32714015

Preferenceshares 119 193 – 119 193 122104 122104

Less:Impairmentofloansandadvances (1 180 852) (1 180 852) (784648) (784648)

Investmentsandsecurities 2 860 186 – 2 860 186 2204781 – 2204781

Governmentandgovernment- guaranteedsecurities 2 549 571 2 549 571 2092548 2092548


Short-termfundsandsecurities 300 792 300 792 46435 46435

Other 5 853 5 853 60615 60615

Derivativefinancialinstruments–assets 43 282 – 43 282 26978 – 26978

Guarantees–irrevocable – 11 467 11 467 3409 3409

54 523 038 1 352 728 55 875 766 47959515 2715011 50674526




29.2 Company credit risk analysis (continued)

2009 2008

R’000 R’000

Loans and advances

Gross statement of financial position value of loans and advances*

Neitherpastduenorimpaired 49 402 392 43944198

Pastduebutnotspecificallyimpaired 568 802 622706

Impairedloansandadvances 1 613 653 877705

Total gross loans and advances 51 584 847 45444609

Divisionalbreakdownofimpairedloansandadvances* 1 613 653 877705

–MotorFinance 838 292 651143

–PropertyFinance 464 421 131563

–SupplierAssetFinance 196 876 38453

–ProfessionalFinance 113 889 56403

–TreasuryandEliminations 175 143

Restructureslessthanandequaltofourmonths**

Riskbucketindicatorpriortorestructure 715 471 307429

–Standard 342 791 133825



–Doubtful 12 571 4681

–Loss 1 103 980

Restructuredloansandadvancesthathavebeenrehabilitatedandincludedin“Neitherpastduenorimpaired”*** 1 386 933 744550

Analysis of gross statement of financial position value by Basel II categories

–Standard 49 402 392 43944198



–Doubtful 49 037 19751

–Loss 1 421 124 745269

51 584 847 45444609

*GrossloansandadvancessplithasbeenreclassifiedinordertoalignwithNedbankLimited’sdisclosure.

**This relates to loansandadvances thathavebeen restructuredandare still in the four-monthperiod. In linewiththeCompany’simpairmentmethodologytheseloanscarryanadditionalimpairmentassociatedwiththeriskbucketindicatorpriortorestructuring.Theseloansareincludedinthe“Neitherpastduenorimpaired”category.

***Thisrelatestothoseloansandadvancesthathavebeenrestructured,havepassedthefour-monthperiodfromthedateoftherestructureandduetogoodperformancedonotcarryanadditionalimpairment.Theseloansareincludedinthe“Neitherpastduenorimpaired”category.



29.2 Company credit risk analysis (continued)

Imperial Bank’s impairment methodology on loans and advances:

Legal loans and advances Allloansandadvancesclassifiedaslegal(>90days)areimpairedusingthefollowingformula:

Outstandingbalancelessthenetpresentvalue(NPV)ofexpectedfuturecashflows.

• AspertheCompany’screditpolicy,securityvaluesaredeterminedonaforcedsalebasis. • InMotor Finance, the collectionsproceduremanual specifies the security value as apercentageof trade value. This

percentageisreviewedfromtimetotimebytheMotorFinanceExecutiveCommitteebasedoncollectionsachievedandusedcarpricesobtained.ProfessionalFinanceadoptsasimilarapproach.

• InPropertyFinance,thesecurityvalueistakenfromthelatestannualvaluation(externalvaluationordesktop,basedonnatureofpropertyandmateriality)oranimmediaterevaluationifthemostrecentvaluationisdeemedtobestale,orconditionswiththespecificpropertyorareahavechanged.

• InSupplierAssetFinance,thesecurityvalueisdeterminedviaaconservativeforcedsalevaluebasedonlatestmarketpricingforthespecificasset.Onspecialisedequipment,includingaviation,anindependentexpertvaluationmaybecalledfor.

•Ifthesecurityvaluecannotbedeterminedaccurately,ortherealisationofsecurityisofseriousconcern,100%impairmentisraised.

Arrears (pre-legal) loans and advances ImpairmentsonarrearaccountsinMotorFinancearecalculatedbasedontheoutstandingbalanceslesstheNPVoftheexpectedfuturerecoveries.Thisimpairmentlossisraisedonaportfoliobasis.

ArrearaccountsinPropertyFinance,SupplierAssetFinanceandProfessionalFinancearescrutinisedonacase-by-casebasis.Specificimpairmentsareraised,withapprovalfromtheImpairmentCommittee,iffeltnecessary.

Impairments on arrears accounts are IFRS compliant and are always based on the NPV of the expected future cashflows.

Performing loans and advances AnIBNRportfolioimpairmentisraisedonallperformingloansandadvances.Theimpairmentisbasedontheprobabilityofdefaultandthelossgivendefault.Theannualprobabilitiesofdefaultarescaledtotherelevantemergenceperiods.

Restructured loans and advances Restructuredloansandadvancescarrytheriskbucketindicatorpriortotherestructureforaperiodoffourmonthsaftertheinitialrestructure.Similarly,therestructuredcreditexposurewillretainthehigherimpairmentassociatedwiththeriskbucketintowhichtheloanfellpriortotherestructurebeingprocessed,foraminimumperiodoffourmonths.

Statement of financial position value of debt and similar securities, other than loans and advances, according to rating agency designation (based on Standard and Poor’s ratings or equivalent)

R’000 TreasurybillsOthereligible

bills Debtsecurities Total

Investmentgrade(AAAtoBBB) 1634976 711987 3970 2350933

Ofwhichissuedby:

–Governmentsandgovernment-guaranteedsecurities 1634976 711987 2346963

–Other 3970 3970

1634976 711987 3970 2350933




29.3 Company market risk analysis

29.3.1 Company interest rate risk analysis

Interest rate sensitive

2009 R’000 < 3 months

3 months< 6 months

6 months< 1 year

1 year< 5 years > 5 years

Tradingand non-

ratesensitive

ASSETS


Othershort-termsecurities 2 346 963 2 346 963



Loansandadvancestocustomers 50 403 995 41 550 367 307 908 643 916 5 712 804 2 189 000

Otherassets 735 746 735 746






Total assets 55 963 003 44 519 774 307 908 744 939 5 818 377 2 189 000 2 383 005




Reserves 2 268 864 2 268 864

Total ordinary shareholders’ equity 3 370 548 – – – – – 3 370 548


Total shareholders’ equity 3 668 595 – – – – – 3 668 595

Total liabilities 52 294 408 49 036 815 491 087 1 555 812 667 569 – 543 125



Amountsowedtodepositors 50 172 992 48 074 455 376 413 1 054 555 667 569

Loansfromsubsidiarycompanies 424 718 301 550 114 674 8 494





Long-termdebtinstruments 1 146 653 653 890 492 763

Total equity and liabilities 55 963 003 49 036 815 491 087 1 555 812 667 569 – 4 211 720



29.3 Company market risk analysis (continued)

29.3.1 Company interest rate risk analysis (continued)

Interestratesensitive

2008R’000 <3months

3months<6months

6months<1year

1year<5years >5years

Tradingandnon-

ratesensitive

ASSETS





Loansandadvancestocustomers 44659961 36270526 19483 43860 4016552 4309540






Total assets 49048902 38409964 19483 43860 4333280 4309540 1932775




Reserves 1918109 1918109

Total ordinary shareholders’ equity 3019793 – – – – – 3019793


Total shareholders’ equity 3317840 – – – – – 3317840





Otherliabilities 103215 103215




Long-termdebtinstruments 791750 303342 488408





29.3 Company market risk analysis (continued)

29.3.2Sensitivity analysis for market risk

Method used in preparing the sensitivity analysis • The interest rate risk of the Company is best understood by analysing the balance sheet repricing

characteristics.• 82%oftheCompany’sassetsarelinkedtovariablerateswith18%atfixedrates. • 88% of the Company’s funding liabilities are sourced from Nedbank Limited as per the Memorandum of

Understanding. The applicable cost of funds is the prime replicating portfolio rate which is made up of theNedbankLimitedcall,1-month,3-monthand12-monthrates.

• A100basispointinstantaneousparalleldeclineintheinterestrateswillresultinaR46.9millionlossinNIIovera12-monthperiod.

• A 25 basis point decline in the prime/call gap would result in a R50.8 million loss for the Company over a12-monthperiod.

• TheCompany’scapital ispartly invested inthetwo-tofive-yearfixedrateassetfinancetransactionswiththebalanceinvestedinprimelinkedassets.

Sensitivity analysis

AnanalysisoftheCompany’ssensitivitytoadecreaseinthemarketinterestratesisasfollows:

2009 2008

100 bp parallel decline

25 bp prime/ call gap decline

100bpparalleldecline

25bpprime/callgapdecline

Impactonnetinterestincome(Rm) (46.9) (50.8) (23.4) (43.7)

Asapercentageoftotalshareholders’equity(%) (1.28) (1.38) (0.71) (1.32)

The following model assumptions are used in the above sensitivity analysis: • Theplannedcapitalmanagementactionsareincludedinthemodelling. • The statement of financial position maturity profile is expected to remain unchanged during the modelling

period. • Ratesspreadshavebeenadjustedtoalignwithforecasts. • Therehavebeennomaterialchangestothemodelassumptionsduringtheyearunderreview.


30 SECURITISATIONSTheCompanywaspartytosecuritisationtransactionsinvolvingmotorvehiclefinancing.

Securitisationsmay,dependingontheindividualarrangement,resultincontinuedrecognitionofthesecuritisedassetsandtherecognition of the debt securities issued in the transaction, partial continued recognition of the assets to the extent of theCompany’s continuing involvement in those assets or derecognition of the assets and the separate recognition, as assets orliabilities,ofany rightsandobligationscreatedor retained in the transfer.FullderecognitiononlyoccurswhentheCompanytransfersbothitscontractualrighttoreceivecashflowsfromthefinancialassets,orretainsthecontractualrightstoreceivethecashflows,butassumesacontractualobligationtopaythecashflowstoanotherpartywithoutmaterialdelayorreinvestment,andalsotransferssubstantiallyalltherisksandrewardsofownership,includingcreditrisk,prepaymentriskandinterestraterisk.

Thefollowingtableshowsthecarryingamountofsecuritisedassets,statedattheamountoftheCompany’scontinuinginvolvementwhereappropriate,togetherwiththeassociatedliabilities:

2009 2008

Carrying amount of

assetsAssociated liabilities

Carryingamountof

assetsAssociated

liabilities

R’000 R’000 R’000 R’000

Loans and advances to customers

Motorvehiclefinancing 1 672 740 1 593 683 1781406 1751366

31 SUBSEQUENT EVENTS31.1 The preference share dividend of 374.73973 cents per share has been approved by the Board of Directors on

10February2010.

31.2 Subsequenttoyear-end,regulatoryapprovalintermsoftheBanksActof1990wasobtainedtoenableNedbankLimitedtoacquirethe49.9%ofordinarysharesheldbyImperialHoldings.Allconditionsprecedenttotheacquisitionhavethereforebeenfulfilledandtheacquisitionwillnowbeimplementedbytheparties.

31.3 Witheffectfrom10February2010,OsmanArbeehasresignedasadirectoroftheBank.



2009 2008

R’000 % R’000 %

Value added is the wealth created from providing quality services to clients

Netinterestincome 1 939 196 209% 1668789 192%

Impairmentlossesonloansandadvances (959 083) (103%) (697101) (80%)

Marginonlending 980 113 106% 971688 112%

Non-margin-relatedincome 193 455 20% 95485 11%

Otherexpenditure (245 320) (26%) (196158) (23%)

928 248 100% 871015 100%

Value is allocated to:

Employees

Salaries,wagesandotherbenefits 352 091 38% 297194 34%

Government

Normaltaxation 146 150 16% 146924 17%

Value-addedtaxation 49 176 5% 49811 6%

Retentions for growth 380 831 41% 377086 43%

Depreciationandamortisation 31 181 4% 24006 3%

Reserves 349 650 37% 353080 40%

928 248 100% 871015 100%

Value-added Statement for the year ended 31 December 2009


Home Loan and Mortgage Disclosures* for the year ended 31 December 2009

Disclosure requirements in terms of the Home Loan and Mortgage Disclosures Act of 2000

1. Thetotalnumberandrandamountofapplications:

2009 2008

Number R’000 Number R’000

(a)Received 1 265 1 529 253 870 1250388

(b)Approved 666 783 770 676 964131

(c)Declined 57 87 849 26 42406

(d)Disbursed 127 135 870 488 559570

2. Thetotalnumberofapplicationsreceived,approved,declined,anddisbursed,respectively,inrespectof:

(a)Racegroups(African,White,Indian,Coloured)

African White Indian Coloured Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000

Received 153 157 489 102 138564 868 1 086 775 607 888734 187 229 989 119 178951 57 55 000 42 44139 1265 1 529 253 870 1250388

Approved 65 77 683 68 95629 467 547 851 481 698628 103 125 630 97 135785 31 32 606 30 34089 666 783 770 676 964131

Declined 19 20 875 8 6850 31 60 288 16 33606 4 4 030 1 1750 3 2 656 1 200 57 87 849 26 42406

Disbursed 7 5 033 52 63897 97 106 072 344 404231 18 19 568 70 72484 5 5 197 22 18958 127 135 870 488 559570

(b)Province

Received Approved Declined Disbursed

2009 2008 2009 2008 2009 2008 2009 2008

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

EasternCape 102 057 127880 59 716 99331 13 859 7803 10 280 48535

FreeState 137 997 91374 84 348 76663 4 504 5802 19 535 35759

Gauteng 528 582 392738 228 728 280617 40 638 15723 39 459 138902

KwaZulu-Natal 275 839 252473 147 405 198048 10 842 3100 12 939 124870

Limpopo 18 531 16846 10 513 12037 1 548 674 2 272 5958

Mpumalanga 37 695 48148 19 313 34402 2 500 1928 480 17029

NorthWest 36 801 50018 20 036 41965 3 289 3176 4 080 19575

NorthernCape 16 492 24437 10 952 19941 – – 1 638 15239

WesternCape 375 259 246474 202 759 201127 10 669 4200 45 187 153703

Total 1 529 253 1250388 783 770 964131 87 849 42406 135 870 559570

*Thisinformationhasnotbeenaudited.


Disclosure requirements in terms of the Home Loan and Mortgage Disclosures Act of 2000

1. Thetotalnumberandrandamountofapplications:

2009 2008

Number R’000 Number R’000

(a)Received 1 265 1 529 253 870 1250388

(b)Approved 666 783 770 676 964131

(c)Declined 57 87 849 26 42406

(d)Disbursed 127 135 870 488 559570

2. Thetotalnumberofapplicationsreceived,approved,declined,anddisbursed,respectively,inrespectof:

(a)Racegroups(African,White,Indian,Coloured)

African White Indian Coloured Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000 Number R’000

Received 153 157 489 102 138564 868 1 086 775 607 888734 187 229 989 119 178951 57 55 000 42 44139 1265 1 529 253 870 1250388

Approved 65 77 683 68 95629 467 547 851 481 698628 103 125 630 97 135785 31 32 606 30 34089 666 783 770 676 964131

Declined 19 20 875 8 6850 31 60 288 16 33606 4 4 030 1 1750 3 2 656 1 200 57 87 849 26 42406

Disbursed 7 5 033 52 63897 97 106 072 344 404231 18 19 568 70 72484 5 5 197 22 18958 127 135 870 488 559570

(b)Province

Received Approved Declined Disbursed

2009 2008 2009 2008 2009 2008 2009 2008

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

EasternCape 102 057 127880 59 716 99331 13 859 7803 10 280 48535

FreeState 137 997 91374 84 348 76663 4 504 5802 19 535 35759

Gauteng 528 582 392738 228 728 280617 40 638 15723 39 459 138902

KwaZulu-Natal 275 839 252473 147 405 198048 10 842 3100 12 939 124870

Limpopo 18 531 16846 10 513 12037 1 548 674 2 272 5958

Mpumalanga 37 695 48148 19 313 34402 2 500 1928 480 17029

NorthWest 36 801 50018 20 036 41965 3 289 3176 4 080 19575

NorthernCape 16 492 24437 10 952 19941 – – 1 638 15239

WesternCape 375 259 246474 202 759 201127 10 669 4200 45 187 153703

Total 1 529 253 1250388 783 770 964131 87 849 42406 135 870 559570

*Thisinformationhasnotbeenaudited.


Numberofshareholders %ofholders

Numberofshares

%ofissuedsharecapital

Analysis of preference shares

Range

1–999 4 22.21 726 0.02

1000–9999 10 55.56 36760 1.23

10000–99999 1 5.56 67112 2.24

100000andmore 3 16.67 2895402 96.51

Totals 18 100.00 3 000 000 100.00

Major holders

(5% or more of the preference shares in issue)

Beneficial holder

Brokerpropriety 2962514 98.75

Distribution of shareholders

Category

Individuals 10 55.56 22785 0.76

Nomineecompaniesandtrusts 6 33.33 2971514 99.05

Privatecompanies 2 11.11 5701 0.19

Totals 18 100.00 3 000 000 100.00

Shareholder spread

Public 18 100.00 3000000 100.00

Non-public nil nil nil nil

Totals 18 100.00 3 000 000 100.00

Analysis of Preference Shareholders for the year ended 31 December 2009


2009 2008

R’000 R’000

Risk type

Credit risk 39 938 134 35315511

Corporate 13 195 453 12390204

Publicsectorentities 9 107

Localgovernmentandmunicipalities 6 026 4479

Banks 60 890 42869

Retail 26 347 048 22562942

Securitisation 259 280 261821

Counterpartycreditrisk 69 428 53089

Operational risk 2 868 545 1745000

Other assets 1 079 934 745115

Total risk-weighted assets 43 886 613 37805626

Minimum regulatory capital requirements 4 278 945 3686049

Qualifying capital and reserves 4 905 868 4188056

Tier 1 3 559 518 3205904

Ordinarysharecapital 3 937 3937


Non-redeemable,non-participating,non-cumulativepreferenceshares 298 047 298047

Reserves 2 179 715 1817009

Deductions

50%offirstlosscreditenhancementprovidedinrespectofasecuritisationscheme (19 928) (10836)

Tier 2 1 346 350 982152

Long-termdebtinstruments 1 150 000 800000

Revaluationreserves(50%) 23 591 23591

Generalallowanceforcreditimpairment 192 687 169397

Deductions

50%offirstlosscreditenhancementprovidedinrespectofasecuritisationscheme (19 928) (10836)

Total surplus capital 626 923 502007

Capital adequacy ratio 11.2% 11.1%

Capital Adequacy Report at 31 December 2009


Notes



Imperial Bank Limited

RegistrationNumber1995/012641/06

Directors

OSArbee (7) Resignedwitheffectfrom10February2010

LEBakoro (2)(4)(8)

CJWBall (2)(3)(4)(9)

HRBrody (3)(4)(7)(8)(9) Chairman

MJCroucamp (3)(4)

PCWHibbit (1)(5)(9) ChiefFinancialOfficer

NPMnxasana (2)

RvanWyk (1)(5)(9) ChiefExecutiveOfficer

PKWard (2)(4)

PAWessels (3)(4)(6)(9)

Company secretary

GTyusha

(1) ExecutivedirectorofImperialBankLimited

(2) MemberoftheAuditCommittee

(3) MemberoftheRemunerationCommittee

(4) MemberoftheRiskandCapitalManagementCommittee

(5) MemberofALCO

(6) ExecutiveofNedbankLimited

(7) ExecutiveofImperialHoldingsLimited

(8) MemberoftheDirectors’AffairsCommittee

(9) MemberoftheLargeCreditExposuresCommittee

Business address and registered office

24AchterRoad

Paulshof

Sunninghill

2191

Postal address

POBox6093

Rivonia

2128

Auditor

Deloitte&Touche

Contact details

www.imperialbank.co.za

0112753000

Corporate Information

www.imperialbank.co.za

Documents

Contents · with an increase of 218.0% in impairments from R13.3 million last year to R42.3 million for the current year, resulted in net profitafter tax declining 36.7% from R164.0