Annual REPORT

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ANNUAL <strong>REPORT</strong> AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5 CAPITAL MANAGEMENT (Continued) Regulatory capital (Continued) The Central Bank of Kenya requires each bank to: a) Hold the minimum level of regulatory capital of Shs 1 billion. b) Maintain a ratio of total regulatory capital; to risk weighted assets plus risk weighted off balance assets at above the required minimum of 10.5%; c) Maintain a core capital of not less than 8 % of total deposit liabilities d) Maintain total capital of not less than 14.5% of risk weighted assets plus risk weighted off balance sheet items. It is expected that with the introduction additional capital requirements which require the bank to have higher ratios of total capital to risk weighted assets the capital requirements are going to be more stringent with expectation of adoption of the additional capital requirements for market and operational risks. The bank has until December 2015 to comply with the new capital requirements. The Insurance Regulatory Authority requires Family Insurance Agency to maintain a minimum level of regulatory capital of Shs 1,000,000. The agency has complied with the capital requirement. The group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and the group recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. The group and its individually regulated operations have complied with all externally imposed capital requirements throughout the year. The bank’s regulatory capital is analysed into two tiers: · Tier 1 capital, which includes ordinary share capital, non-cumulative irredeemable non-convertible preference shares, disclosed reserves such as share premiums, retained earnings, and 50% un-audited after tax profit less investment in subsidiaries conducting banking business, investments in equity of other institutions, intangible assets (excluding computer software ) and goodwill. · Tier 2 capital, which includes 25% revaluation surplus which have received prior CBK approval, subordinated debt, hybrid capital instruments or any other capital instruments approved by CBK. The bank’s regulatory capital position at 31 December 2015 was as follows: 2015 2014 Sh’000 Sh’000 Tier 1 capital Share capital 1,245,186 1,245,186 Share premium 5,062,519 5,063,676 Retained earnings 5,136,745 3,944,241 _________ _________ Total 11,444,451 10,253,104 _________ _________ 78
ANNUAL <strong>REPORT</strong> AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5 CAPITAL MANAGEMENT (Continued) Regulatory capital (Continued) 2015 2014 Sh’000 Sh’000 Tier 2 capital Revaluation reserves (25%) Term subordinated debt 18,044 2,018,000 19,677 - General loan loss provision (statutory reserve) 527,484 357,503 _________ _________ Total 2,563,528 377,180 _________ _________ Total regulatory capital 14,008,778 10,630,283 ======== ======== Risk-weighted assets 73,765,213 52,060,130 ======== ======== Capital ratios 2015 2014 Total regulatory capital expressed as a percentage of total risk-weighted assets (CBK minimum 14.5%) 18.86% 20.26% ======== ======== Total tier 1 capital expressed as a percentage of risk-weighted assets (CBK minimum 10.5%) 15.5% ======== 19.56% ======== 6 INTEREST INCOME Group Bank 2015 2014 2015 2014 Sh’000 Sh’000 Sh’000 Sh’000 Interest on loans and advances 8,258,102 6,216,205 8,258,102 6,216,205 Interest on bank placements 764,346 243,377 764,346 243,377 Interest on held to maturity assets: - government securities 742,962 520,445 742,962 520,445 - corporate bonds and commercial paper 222,218 134,846 222,218 134,846 Interest on available for sale assets - government securities 44,686 6,703 44,686 6,703 _________ _________ _________ _________ 10,032,314 7,121,576 10,032,314 7,121,576 ========= ======== ========= ======== 7 INTEREST EXPENSE Interest on customer deposits 3,261,998 1,544,940 3,269,496 1,547,577 Interest on balances due to banks 45,908 11,213 45,908 11,213 Interest on borrowings 324,479 192,067 324,479 192,067 _________ _________ _________ _________ 3,632,385 1,748,220 3,639,883 1,750,857 ======== ======== ======== ======== 79
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ANNUAL REPORT AND FINANCIAL STATEME
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BOARD OF DIRECTORS ANNUAL REPORT AN
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Annual REPORT

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