Capital - Tier 2 capital

Tier 2 capital consists of the sum of the following elements:

  • Instruments issued by Absa Bank Limited that meet the criteria for inclusion in Tier 2 capital (and are not included in Tier 1 capital);
  • Stock surplus (share premium) resulting from the issue of instruments included in Tier 2 capital;
  • Instruments issued by consolidated subsidiaries of Absa Bank Limited and held by third parties that meet the criteria for inclusion in Tier 2 capital and are not included in Tier 1 capital;
  • Certain loan loss provisions such as general provisions/general loan-loss reserve; and › Regulatory adjustments applied in the calculation of Tier 2 capital.

Capital - Tier 2 ratio

A component of regulatory capital, comprising qualifying subordinated loan capital, related minority interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties.

Claims ratio

Net insurance claims and benefits paid as a percentage of net premium income.

Combined ratio

Insurance losses incurred and expenses as a percentage of insurance premiums earned.

Conduct risk

Conduct risk is the detriment caused to the Group’s customers and clients, counterparties or Absa Bank Limited as a result of inappropriate execution of the business activities.

Constant currency

The selected line items from the Condensed consolidated statement of comprehensive income and Condensed consolidated statement of financial position for the rest of Africa market segment disclosed on pages 60 and 89, are derived by translating the Statement of comprehensive income and Statement of financial position from the respective individual entities’ local currencies to rand.

The current reporting period’s results are translated at the current reporting period’s average rates for the Statement of comprehensive income, while the closing rate is used for the Statement of financial position in terms of IFRS. In order to calculate the percentage change based on constant currency, the previous reporting period’s results have also been translated at the current reporting period’s average rates for the Statement of comprehensive income, while the current reporting period’s closing rate has been used for the Statement of financial position.

This has been done in order to provide investors with information on the impact of foreign currency movements on the local currency earnings. The percentage change based on constant currency is provided for illustrative purposes only and may not fairly present the Group’s financial position and/or the results of its operations. The directors are responsible for the preparation of the constant currency information. An assurance report on the constant currency financial information prepared by the Group’s auditors is available for inspection at the Group’s registered office.

Cost-efficiency ratio

‘Operating expenses’ as a percentage of income. Income consists of net interest income and non-interest income, net of reinsurance, unearned premiums, net insurance claims and benefits paid, changes in investment and insurance contract liabilities and acquisition costs.

Cost of equity

An estimate of the return that the market demands in exchange for the risk of ownership of equity.

Cost-to-income ratio

‘Operating expenses’ as a percentage of income. Income consists of net interest income and non-interest income.

Coverage ratio

Impairment loans on losses and advances as a proportion of gross loans and advances.

Credit risk

Credit risk is the risk of financial loss should the Group’s customers, clients or market counterparties fail to fulfil their contractual obligations.

Credit loss ratio

Impairment losses on loans and advances for the reporting period, divided by total average advances (calculated on a daily weighted- average basis).

Debt securities in issue

Short- to medium-term instruments issued by the Group, including promissory notes, bonds and negotiable certificates of deposits.

Diluted headline earnings per share

Headline earnings for the reporting period that is attributable to ordinary equity holders, as a proportion of the weighted average number of ordinary shares in issue adjusted for the effect of all potential dilutive ordinary shares.

Distribution force

Number of active advisers.

Dividend cover

Headline earnings per share divided by dividend per share.

Dividend per ordinary share relating to income for the reporting period

Dividend per ordinary share for the reporting period is the actual interim dividends paid and the final dividends declared for the reporting period under consideration, expressed as cents per share. Special dividend per ordinary share is a payment made by the Group that is considered separate from the typical recurring dividend cycle, expressed as cents per share.

Earnings per share

Basic earnings per share

This constitutes the net profit for the reporting period, less earnings attributable to non-controlling interest, divided by the weighted average number of ordinary shares in issue during the reporting period.

Diluted basic earnings per share

The amount of profit for the reporting period that is attributable to ordinary equity holders, divided by the weighted average number of ordinary shares in issue during the reporting period, both adjusted for the effects of all potential dilutive ordinary shares, assuming they had been in issue for the reporting period.

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