confidence - Investing In Africa

Management Discussions & AnalysisRAROC is the measure of performance used across the Bank whether it is toassess lines of business, products, portfolios or customers. Such a superiorperformance framework required significant investment in a data warehouseand an end user information delivery and reporting tool, besides skillsdevelopment. Raw data extracted into the data warehouse is enrichedthrough applying internationally recognised and appropriate methodologiesfor transfer pricing of funds, cost allocation via an activity based costingframework and capital allocation by applying the Basel II accord to reflect atrue measure of economic performance at the various dimensions. Thesemethodologies are reviewed and kept up to date to ensure their continuousapplicability to the changing environment.For the year ended 30 June 2005, the Bank created economic value to theshareholders to the extent of Rs304M (2004:Rs338M). Prior year data has beenrestated on a comparable basis to reflect the refinements in methodology incalculating the risk adjusted return on capital.Table 1 - RAROCMRs’000 Personal Business Treasury & Leasing Subs & Consolidated Jun-05 Jun-04Banking Banking Funding Centre Others Adjustments Group GroupRestatedNet Income before Income Taxes 229,486 810,873 297,771 78,622 431,014 (346,467) 1,501,299 1,365,513Net Income after Income Taxes 172,114 591,015 217,473 71,233 502,705 (358,107) 1,196,433 1,130,172Income after Tax afterComparative Adjustments 147,056 609,935 236,281 71,233 382,101 (358,107) 1,088,499 1,127,172Allocated Capital 327,196 1,983,975 238,007 163,840 151,509 2,864,527 2,884,169RAROC 2005 38RAROC 2004 3977*RAROC is an indicative performance measure based on current methodologies and available data, which are continuously beingrefined. As such, refinements for prior periods were made for comparative purpose.