We Are Here for Future Banking A Message from the Board

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2020 Annual Report

CONTENTS

03 We Are Here for Future Banking04 A Message from the Board Chairperson06 ChiefExecutiveOfficer’sReport10 Management Team12 ReviewofSegmentsandFunctions20 ChiefFinancialOfficer’sReview26 ChiefRiskOfficer’sReview32 Board of Directors34 StatementonCorporateGovernance46 ConsolidatedandSeparateFinancialStatements for the year ended 31 December 2020

Annual Report

2020

See how we arehere for good

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2020 Annual Report

CONTENTS

03 We Are Here for Future Banking04 A Message from the Board Chairperson06 ChiefExecutiveOfficer’sReport10 Management Team12 ReviewofSegmentsandFunctions20 ChiefFinancialOfficer’sReview26 ChiefRiskOfficer’sReview32 Board of Directors34 StatementonCorporateGovernance46 ConsolidatedandSeparateFinancialStatements for the year ended 31 December 2020

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2020 Annual Report 2020 Annual Report

We are a leading international banking group committed to building a sustainable business over the long-term.StandardCharteredBankfirstopenedfor business in Botswana in 1897 inFrancistown, making it the country’soldestbank.In1956,weweregivenfullbranch status and this was followedby the opening of our first branchin Lobatse. The Bank was locallyincorporated in 1975with a full boardand is listed on the Botswana StockExchange(BSECode:STANCHART).

Today, with approximately 600employees, we operate a network of19 branches, agencies and a PriorityBanking centre, all of which aresupported by a Loan Centre and 24-hour Customer Call Centre. With awidebranchnetwork,largesalesforce,and award-winning digital bankingplatforms, the Bank offers clients inthe Retail, Commercial and Corporatesegments international standards ofcustomerserviceandexcellence.

The Bank is in a unique position,able to leverage its deep-rootedlocal knowledge, its internationalnetwork and expertise for the benefitof Botswana corporates, individualdepositorsandmulti-nationals.

StandardCharteredBankhasbeenakeycontributing partner to the economicgrowth and financial development ofBotswanaforover120years.

The Bank is highly respected inBotswana for its adherence tocorporate governance, enthusiasm forgreat service anddedication to talentdevelopment, as well as for diversityandinclusion.

We have a highly active and farreachingcorporatesocialresponsibilityprogrammeanchoredbyourEmployeeVolunteering initiatives. Our purposeis to drive commerce and prosperity through our unique diversity all in linewith our brand promise of beingHereforGood.

About this reportFormoreinformationpleasevisitsc.com/bw/investor-relations/

@StanChart

linkedin.com/company/standard-chartered-bank

facebook.com/StandardCharteredBW

We are here for Future Banking

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2020 Annual Report

STRATEGIC REPORT

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DIRECTORS’ REPORT FINANCIAL STATEMENTS

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Delivering in a tough operating environment

Botswana was not spared from the COVID-19 impact, which saw unprecedented levels of disruption in the country’s socio-economic scene, like rest of the world. All major sectors of the economy were severelyimpacted, and GDP was 8% down. As a business,we focused on protecting our clients, staff andcommunitiesand spentP5million in theprocessofdoing so.We scaled up on our digital channels topreserveconvenienceforclients,wediscountedclientfeesondigitalplatformsby25%tosupportcurtailedmovements to our physical channels. Additionally,weofferedrepaymentholidaysandloanextensionsto359clientsonexposuresamountingtojustunderabillionPula.This reliefwasoffered to individuals,smallbusinessesandcorporateswhowereseverelyandevidentlyimpactedbytheCOVID-19scourge. It goeswithout saying, we have had to invoke ourBusiness Continuity Plans and operated in thatmode for the better part of 2020. Our colleaguespredominantly worked from home, with the front-line staff whose jobs demanded physical presenceworking from offices and branches on rotationalbasis. Indeed, this turnedout tobeanopportunityfor us to test our resilience as a business, and theadequacy of our investments into technology overthe years and we are satisfied with the outcome,although the pandemic has infused more urgencyintoourtechnologyandinvestmentinitiativepath. Despite the COVID-19 pandemic, we remainedfocused in protecting the business, and defendingthe gains from the past 3 years to the best extent possible. Amidst a substantially softened interestrate environment, our overall top line was up 4%.Thegrowthinincomewasitselfbroadbasedasbothour primary business segments delivered improvedresults.

Apartfromourlendingbusiness,goodperformanceonourprimaryproductandservicelineslikecorporatefinance,currencytradingandtransactionalbankingoffset the impact of reduced volumes on retailtransactions, and as a result protecting the non-FundedIncome.

We remained focused on efficiencies, underlyingcostsedgeduponlyby1%mainlyasaresultoftheneedtopromoteandprotectthehealthandsafetyofcolleagues,clientsandcommunitiesinthisphaseof COVID-19. However, our 2020 numbers carryan additional, but once off provision related to aplannedbusiness restructuring,and this resulted inanoverall6%increaseincosts.

We defended our growth path

Notwithstanding the extraordinary circumstanceswe operated under, our statutory profits were atP102 million, 47% up from prior year. Backing thisdecentperformanceisastrongbalancesheetwhichdelivered improved margins despite a depressedinterest environment. The capital position remainsstrongbothintermsofadequacyandcomposition.The Capital Adequacy Ratio remained above 17%throughout the year, against a normal regulatorythreshold of 15% (lowered to 12.5% as part of thebroader COVID-19 relief measured extended toregulatedbanksbyBankofBotswana).

We remain optimistic

Wemaintain someoptimismaround the economicoutlook for the year ahead, of course with somecaution. The Global economy will rebound in 2021andcouldpostgrowthintheregionof5.4%drivenbylesser interruptions to tradeandassociated supplychains.Thebenefitsofanimprovingglobaleconomywill have positive impact on the Sub-Saharaneconomy,whichweexpecttoregistera3.2%growth.

Likewise,thelocaleconomywillpostastrongrecoveryfromasteepcontractionwewitnessedin2020,withearlysignsofrecoverysupportingpreliminaryviewsthatsuggestaGDPgrowthratejustshyof9%.

A message from Board Chairperson

STRATEGIC REPORT

DIRECTORS’ REPORT

A successful implementation of the Economic Recovery and Transformation Plan by Government could deliver the desired turn around particularly within the non-mining sector.

Extreme uncertainties remain as the coronavirusresurgencecausespanictheworldover,exacerbatedbymutationofthevirusintoanincreasingnumberofvariants.Muchwilldependontheeffectiverolloutandefficacyofvaccinationevenlyacrosstheglobeandifthesetwocomeright,2021couldbeabetteryearthan2020,buteconomicactivityisunlikelytoreturntopre-COVID-19levelswithintheyear.

Thank you

Ithasbeenatoughyear,onefilledwithuncertaintiesandpain,andaswerememberthosewhohaveunfortunatelylosttheirlives,aswellasthosewholosttheirlovedones,Iwanttosincerelythankallcolleaguesforthepassiontoservetheyhavedisplayed.Specialthanksgotoourfrontlinecolleagueswhoshowedselflessnessandbraveryinensuringclientsneedsaretakencareofduringwhatcouldbethemostdifficulttimeswehaveeverexperiencedasanation. Aswecontinuedtobeabetterbankfortomorrow,wewillbeforevergratefulforthepatronageofourclients,andwemaintainthepromiseforaworldclassexperienceacrossallourclientchannels.

DoreenC.KhamaBoard Chairperson

FINANCIAL STATEMENTS 5

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Our Business Strategy

We remained focused on our path to deliver good business outcomes despite the challenging environment we found ourselves in, without compromising on health and safety of our colleagues.

For thethirdyear ina row,wehavemaintainedanupwardtrendonprofitability.

2020becametheyearourProfitBeforeTaxcrossedthe P100 million mark since 2016, symbolising ourconsolidating gains from decisive actions we havebeentakingtoreturnthebusinesstosustainability.

In pursuing our goal of actualising returns for ourinvestors, we have maintained a relatively highdividendpay-out ratio,amounting to 16tper shareasbothCapitalandSolvencypositionsallowustodoso.

We have refreshed our strategy aswe continue tofocus on;

Chief Executive Officer’s Report

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DIRECTORS’ REPORT FINANCIAL STATEMENTS 7

2020 Annual Report

Our EnablersThe Pillars

People & Culture

People & Culture

Digitisation

Digitisation

Operational EffectivenessOperational Effectiveness

PersonalImprovingoperationalleveragethroughtacticalcostcuts,streamlinedoperationsandchannels,reduce touch points and leveragemoreondigital,improved product mix secured/non-securedproduct mix and credit carduptake.

BuildontheStrengthofournetworktosupportcapitalmarketsdevelopmentandtobeapreferredpublicsectorprojectspartner.Growthe TB business on the strength.

Re-bootthesubsegementbacktorelevance,redefinethecustomerbase and embed a workingRMmodel,createaworkingcontinuumbetweenmassandaffluent,andensuretargeted penetration for therightqualitycustomer.

Deliversustainableperformanceresultsandoutcomes,basedonsecure foundations across allleversofthebusiness.Redefineourdistributionmodeltodigital,targetcarbonneutralfinancingand improve access for SMEs&womenownedenterprises

Affluent Network Diversified

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Here for good

Our brand promise - Here for good- speaks to our purpose,notonlytobuildasustainable legacy,butto thegood thatwecreate incommunities.Duringtheyear,weheededacalltocontributeinthefightagainstCOVID-19;

• WechannelledanamountofP3.6milliontotheRedCrossSocietyofBotswana in support fortheir COVID-19 related community outreachinitiatives,whichincludedpubliceducationtotheruralcommunities.

• Wecontributedcashamounting toP1millioninto the COVID-19 relief fund set up by theGovernment of Botswana. This fund wascritical in creating social safety nets for thehighlyimpacted,aswellasprocuringthemuchneeded Personal Protective Equipment (PPE)for the front liners in the battle against thescourge.

• Through our charitable trust, the StandardChartered Botswana Education Trust, weprocuredPPEworthP510,000forusebyhealthworkers at the Sir Ketumile Masire TeachingHospital.

In 2019 we launched FutureMakers™ a flagshipprojectthroughwhichwesupportgreatereconomicinclusionforyoungpeopleinourcommunities.

Among others, this programme enhances youthemployability through intensive training andexposure, as well as upskilling entrepreneurshipthroughpracticalbusiness training. Thefirstphasewasasuccessandin2020,weconceptualisedphase2,whichwewillrolloutin2021.

Our Brand

The Bank continues to pursue creative ways toensureClientengagementandtoensuretopofmindawarenessof theBank’sproductsandservicesandhowbesttheycanenhanceandorcomplementtheirday-to-dayrequirements.

Theyear2020providedopportunitiesforustoreachout to wider audiences through our social media,digital marketing and other platforms includingtraditionalmedia. The focusonAlwaysOnmediawillcontinuetoensurecontinuedclienteducationaswellasbothproductandbrandawareness.

Employee Volunteering

InabidtocontinuetheBank’sEmployeeVolunteeringprogramme, a global running league was set upwhichsawemployeescommittorunningandfund-raisingtargetsexchangingtimeforagoodcause.

TheinitiativerecognisedtheimpactofCOVID-19onthe employees’ ability to physically volunteer theirtimeandservices.

Chief Executive Officer’s Report cont.

STRATEGIC REPORT


Key Financial highlights

4% 14%Operating income up 4%toP753million,growthisbroadbased;FMIncome,RetailandCorporateclientassetsup.

Interest expense down14%,drivenbyfocusedliabilitymanagement.

47%Profit before tax P102million;up47%,underlyingprofits(net- off once off item)are11%up.

2%Loans and advances up2%toP8billion.

17.6% 4.7%CAR stableat17.6%,CET1at7.2%

Consistentpositive Return on equity at 4.7%

28%Expected Credit Losses up28%,reflectiveofuncertaintiesacrosscreditmarketsegments.

6%Operating expenses increasedby6%drivenbyaonce-offprovision,underlyingexpensesrelativelyflatYoY.

More details on financial performance are in the Chief Financial Officer’s review section of this annual report.

The Year ahead

While huge uncertainties remain, as dictated bythe unfolding COVID-19 scourge, we have had asomewhatcomfortablestartof2021andweintendto protect the trend for rest of the year. Businessmomentum will unlikely return to pre-COVID-19levelswithin thenext 12monthsand thiswillmeanperformancecouldbeimpacted.

Ourapproachtocreditoriginationwillbeinformedbytheeconomicrealitiesweoperateinwhilevolumesdrivenbusinesswill remain impactedforas longasrestrictionsremaininoneformoranother.

Digitizationofouroperations,productsandserviceswill remain a key driver for efficiency and clientservice improvement, and we are looking to bringsome exciting news to the market on this subjectduringthesecondhalfof2021.

All in all, we are comfortable of a positive overalloutcomefor2021.

Mpho MasupeChief Executive Officer

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EstherMokgatlhe-Head,Conduct,FinancialCrimeCompliance

ChazhaKgalemang-Head,LegalandCompanySecretary

AllanMutenda-ChiefRiskOfficer

AsuquoNkoposong-Head,CorporateCommercial&InstitutionalBanking

Management TeamSTRATEGIC REPORT


Mpho MasupeChief Executive Officer

LloydKusano-ChiefOperatingOfficer(Acting)

BinoRasedisa-Head,Consumer,PrivateandBusinessBanking

MbakoMbo-ChiefFinancialOfficer

LizzynetMaponga-Head,HumanResources

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2020 Annual Report

TuduetsoNtwaetsile-Head,InternalAudit

SinqobileMagenga-Head,FianancialMarkets

BameMoremong-Head,CorporateAffairs,Brand&Marketing

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Review of Segments and functions

1. Consumer, Private and Business Banking 2. Corporate, Commercial & Institutional Banking3. Human Resources

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DIRECTORS’ REPORT FINANCIAL STATEMENTS12

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ReviewofSegmentsand functions

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2020 Annual Report

In Consumer, Private and Business Banking we serve the Personal, Priority and Wealth clients. Increasingly, we provide digital banking serviceswith a human touch to our clients, with productsand services spanning across deposits, payments,financing products and wealth advisory. We alsosupportourclientswiththeirbusinessbankingneeds.

Thebusinessshowedresilienceanddeliveredstrongperformancedespite headwinds from theCovid-19pandemic and a challenged macro environmentin2020.Thebusinesswasabletorecord2percentincomegrowthyear-onyear.

Improved performance

Throughourclientcentricandfocusedapproachtobusiness the segment was able to achieve incomeandbalancesheetgrowth,whilemanaginginherentrisksreasonablywell.Someofthekeyhighlightsareasfollows;

• Incomegrowthof2%yearonyear• Clientassetsgrewby6%yearonyear• Achieved7%annualgrowthinRetaildeposits• Increased client acquisition and servicing

through our end to end digital channel (SCMobile)

Leading with Digital

Investments into our digital platforms helped todeepenour client relationships in all sub-segments(smallandmediumbusinesses,personalandpriorityclients.)

ThroughourDigitalbankwesawexponentialgrowthindigitalonboardingandservicingofourclients.

We onboarded over 10,000 new clients digitallyandhavegreatlyreducedourclientacquisitionandservicingcosts.

Wealsomadegreat strides inmigratingour smallandmediumbusinessclientsontoourdigitalchannelforbusinessclients(Straight2Bank)thiswascriticaltoincreasingbusinessefficiencyandcontinuityinthecurrentpandemic.

We increased the number of ATM machines and introduced cash deposit machines across our network. We also developed and rolled outinnovative upgrades to our mobile and onlinebankingplatformsimprovingclient’sabilitytobankonthego.

Pivoting to an Omni-channel model Our network strategy is to deliver a superior,sustainable, and scalable distribution network.Weintendtodeliverunrivalledclientexperiencethroughthedifferenttouchpointswhereourclientsinteractwiththebank.

We launched the first ever Digital branches whichwehavecalledExpressBankingCentres(EBCs).Weconsolidatedspecificbranchesreplacingthemwiththisinnovation,whichwilladdmorefreedomtoourclientsfortheirbankingneeds.

ThefollowingareservicesthatcanbeaccessedfromourEBCs:

• AccesstoiPadsandWI-FIfordigitalbanking• Latest generation Cash Deposit Machines

(CDM)• Phones with direct access to the 24/7 Client

Care Centre• Aservicedeskwhichwillbemannedatcertain

hours of the day by members of our branch teams to assist with any client queries orapplications.

Delivering value to Clients

Clientsareattheheartofeverythingwedo.In2020we rapidly implemented innovative initiatives tominimise disruption to our client’s operations, andweofferedvariousreliefoptionstoclientsinadditionto discounts on the fees attributable to digitaltransactions.Wealsoreinforcedourcommitmenttoenableourclientstogrowandprotecttheirwealth.

Strategic Priorities

Wewill improveour clients’ experience throughanenhancedend-to-enddigitaloffering,withintuitiveplatforms, best-in-class products and servicerespondingtothechangeindigitalhabitsofclientsinourmarket,andtobemoreinclusiveinourclientofferings.

WewillcontinuetoinvestinouraffluentandemergingaffluentclientswithafocusonWealthManagementand Deposits to capture the significant rise of themiddleclassinourmarkets. Incontributingtothebroaderstrategyofthebank,wewillfocusonthefollowing3priorities:

• Personal Banking: We have over the years built a very strong personal banking clientbase and have kept our product and service offeringsagile enough.Wewill focus on twothings going forward, Customer acquisitionand operational leverage, and both will bepursued by capitalising on gains we havescoredthroughourdigitalagenda.

• Affluent Segment: We are part of a huge global network known internationally forits affluent and wealth propositions, andwe intend to deliver group capabilities toBotswana.We will increase penetration intotheaffluentsegmentwithanexpandedserviceandproductoffering.

• Sustainable Performance: Customer service will remainat thecoreofwhatwewilldoaswe drive sustainable revenue growth, bothfromour lendingand feebusinesses.Wewillrelentlessly drive productivity and internalefficienciesthroughdigitizationasweredefinehow we interact with our clients for theirenhancedexperience.

01 Consumer, Private and Business Banking

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Corporate, Commercial & Institutional Banking

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2020 Annual Report

The segment provides a wide range of solutions to Corporates and Institutions. Products and services include lending, trade finance, cash management, securities services, foreign exchange, risk management, capital raising, corporate finance solutions and advisory needs providing solutions to local, inbound and outbound clients in Botswana. Ourclientsincludelargecorporations,governments,banksandinvestors.

Our coverage model integrating commercial andcorporate banking businesses allows us to offerclients a consistent service experience and deliveroperationalefficienciesacrossouroperations,ridingalsoonournetworkcapabilities.

Performance highlights

The segment returned to profitability following 3years of lossmaking, recordinga Profit before TaxofP57million,significantlybetterthanaP6.7millionlossrecordedin2019.

While performance of lending products remainedunder pressure, our Non-Funded business linesperformedwell.

Financial Markets took advantage of prevailingcurrency volatility conditions and recorded a grossgrowthinexcessof20%,contributingtotheoverall28% growth in segment income, which closed theyearatP253million,upfromP197millionrecordedin2019.

The improvements on the segment financialperformancewasbroadbasedasallmajor incomelinessawadecentincrease:

• Net Income Interest was up 8%• Net fee Income was up 11%• Net Trading Income was up 12%

Operatingexpenseswere4%downonthebackofincreased operational efficiencies,mostly aided byourinvestmentsintodigitisationovertheyears.

We also Launched our S2B2 NextGen platformprovidingworldclassdigitalbankingtoourclients.

We havemigrated over 90% of our client base todigital only transactions improving service qualityandeaseofinteractionwiththeBank.

Segment Financial Performance

38%41%

61%4%

Our Strategic priorities

Incontributingtothebroaderstrategyofthebank,wewillfocuson:

• Delivering our Network: We will convertopportunities within the China corridorthrough a meaningful participation ininfrastructure projects. We will leverage onournetworkinpartneringwiththepublicandcorporate sectors in delivering sustainableand innovative financing solutions, includinga pronounced contribution towards thedevelopmentofthelocalcapitalmarkets.

• Sustainable Performance: We will continueto grow our business on a broad-basedscale to attain a well-diversified revenuepool. Diversifying our client base forsustainable growthwill remain in focus,witha view to continuously optimize income andrisk concentrations. We will be leveragingtechnologyto improveclientexperience,andcontinuously invest in our people, focussingon creating a high performance and clientobsession culture. Our risk and controls willremain above board as we accelerate oursustainable finance offerings to our clientsthrough product innovation, leading thetransitionintoalowcarbonfuture.

Looking ahead

We have taken significant steps to reshape thebusiness for sustainable growth over the mediumtermandremainconfidentthatweare investing intherightdifferentiationforlastingsuccess.

Ourclientsremainatthecentreofourstrategyandour investments into newproducts and technologyareyieldingresultsinimprovedclientexperience.

WeareexcitedaboutthecapabilitiesourenhancedStraight2Bankplatform,“S2BNextGen”introducingouruniquemulti-bankliquiditymanagementfeatureandmobiletokens.Welookforwardtomigratingallourclientontothisplatform.

Wearecommittedtosustainablefinance,deliveringonourambitionstoincreasesupportandfundingforfinancialproductsandservicesthathaveapositiveimpact on our communities, the environment andsupportsustainableeconomicgrowth.

We have started this journey completing adevelopment financing supported medium-termloantooneofourkeyState-OwnedEnterprisesandlooktogrowourparticipationinsustainablefinancestructures.

NIIwasup

Net fee incomewasup

Net Trading incomewasup

Operating Expensesweredown02ReviewofSegmentsand functions

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2020 Annual Report

Our People

At Standard Chartered Bank we recognise that our workforce is a significant source of value that enables attainment of the Bank’s aspirations which are centred around Client Centricity.

Our people’s contribution is inspired by soundcapability,ahighperformingandinclusivecultureaswellasa safeandenablingworkenvironment.Webelievethesearefundamentalbuildingblocksforafuture- readyworkforcewellplacedtobetterserveourclientsanddelivertheBank’spurposeinlightofadvancesintechnologyandachangingworld.

HumanResourceshasfourpriorityareasdrawnupinserviceofthePeopleStrategy:

• Shaping and enabling a client centric andadaptableorganisation

• Developing and deploying the right talent(skillsandcapabilities)

• Making the most of our diversity to deliverprosperityforclientsandcommunities

• Buildingafuture-readyworkforce.

Future Workplace

TheunprecedentedchallengebroughtaboutbytheCOVID-19pandemicacceleratedtheneedtodeliveractivities related to our People Strategy as well adifferent approach to deliver peoplemanagementproductstoemployees.Byengagingwithemployees

andlisteningtofeedbackprovidedthroughvarioussurveys, wewere able to assist colleagues to copewith the pandemic, target support where it wasrequired while ensuring employees remainedproductive and committed to the success of the Bank.Employeeswereprovidedwithsupporttoworkremotely includingoutsideBotswana,opportunitiestoworkflexiblyandforthosereportingtotheofficesafeworkingpracticesthatassuredtheirwell-being.

Future Skills

Theworldcontinuestochange,clientneedsevolvingand employee needs transforming. Our employeesneed a combination of personal and technicalskills to succeed today and in the future. In 2020,the Bank introduced a digital learning platformwhereacademiesstructuredonpersonal(Resilience,Managingteamsremotely)andtechnical(Analytics,Data,DigitalandCyber)skillsidentifiedasrelevantfor the future were established. In-class trainingprogrammes were virtualised providing greateraccess to global training programmes to ouremployeesintheBotswanaatnocost.Thesuccessoftheinitiativeisembodiedinover75%ofemployeeshavinggrowthplansinplaceandutilisingourdigitallearningplatform. Employee Value Proposition

TheBankhasidentified12attributesforitsEmployeeValueProposition forwhichRewardandWellbeingwere areas of priority. While the story is one ofprogress and not success, the Bank was able tofurther embed the Fair PayCharter andmake realprogress towards a stronger reward propositionto all colleagues. Employee wellbeing is of crucialimportanceandapriority.

TheBank’sgoalistoequipemployeeswiththeskillsandsupport to realisetheirpotential.During2020,wespedupputtinginplacetherighttoolstosupportthewell-being of our employees,we upgraded ourEmployeeAssistanceProgramme,createdpracticaltoolkits,andinitiatedtrainingformentalhealthfirstaiders. A global roll out of Realise Your Potentialworkshops,partoftheHumanSkillsAcademyonthedigitallearningplatformwasundertaken.UtilisationoftheplatformisrisingandtheBankisproudtohavetherightsupporttohelpemployeesfeeltheirbestastheworldcontinuestochangeatpace.

Inclusive Culture

Our culture diversity is our main competitiveadvantage in making the bank a purpose ledbusiness and provides opportunities to all ouremployees.AninclusivecultureenablestheBanktounlockinnovationthroughdiversityofthought,makebetter decisions, live our valued behaviours anddeliver thebusiness strategy.Creating suchaworkenvironmentwasasignificantchallengeforpeopleleaderswhoneededtokeepteamsconnectedandcohesiveduringthepandemic.Peopleleadersweresupported and trained to manage teams and drive performance remotely. To promote inclusivity anda safe working environment, The Respect atWorkProgramme was launched and 58% of peopleleadersattendedthetrainingin2020. TheBankalso remained committed to itsDiversityand Inclusion agenda structured on specificpillars namely gender, ethnicity and nationality,generations, sexual orientation, and disability andwellbeing. Various activities were undertaken inBotswanainserviceofthisagendaincludingvirtualcelebrations of keys days such as InternationalWomen’sDay.ThedifferentinitiativesresultedintheBank’sdiversityandscoreincreasingby+1.64pts.

Priorities for the year ahead

• Workforce reskilling and retooling – This is yeartwoofanambitiousthree-yearagenda.

The Bank has the infrastructure in place,includinga strong learning culture, andaimsto deliver 3-5 proof points around ‘reskilling’colleaguesintoroleswheretheBankwillhavethegreatestdemandforthefuture.

• Performance, reward, recognition and talent – The Bank is executing work that is a keyenablertodeliveronourculturalaspirations–tobeinnovative,inclusiveandhighperforming.

• Future Workplace, Now –TheBankwilldialupefforts on emerging people risks on accountof large parts of the world getting into yeartwo of the pandemic – with continued focuson transforming the workplace and workingflexiblyintermsofbothlocationandtime

• Wellbeing will continue to be a focus areafor 2021 and beyond. The bankwill continuetoequiptheleadershipwithtoolstomanageempathically and with great understandingof each employee’s unique circumstances.Initiativesaroundhowemployeescancontinuetotakegreatercareoftheirwellbeingwilltakecentrestagetoenablethebanktodeliver itsmandateandbeapurposeledbusiness.

• Continuing the journey to digitise and improve technology interfacesinHRwiththeobjectiveofdeliveringbest-in-classEmployeeExperience. The focus is on the PeopleManagement system to get ready for a fulllaunch in 2022and increasing theadoption/satisfactionfromdigitalHRchannels.

• Finally, continuing the work on the Cultural TransformationoftheBank.TheBankwillbesharingmoreontheworkithasbeendoingtobecomeatrulypurpose-ledorganisationwithboldaspirations.Workingwith‘seniorleaders’to get a higher level of ambition across thefirmandastrongcultureofexcellence.

Human Resources03ReviewofSegmentsand functions

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Performance Summary: FY’20 Highlights

Chief Financial Officer’s Review

STRATEGIC REPORT


2020 Annual Report

4% 1%income growth up4%toP753million

Cost efficiency Underlyingexpenses1%upY-o-Y

47% Profit before tax P102million;up47%2% Loans and

advances atP8billionup2%.

17.6% Stable Capital T112.4%CAR17.6%52% Stable

Funding MixCASAcontibution52%

14% down 7% up 24% up Y-O-Y

44% up Y-O-Y +returns

6% up

Business Performance

Summary Profit and Loss Statement

2020 2019 Income Statement P’000 P’000 NetInterestIncome 464,263 435,659OtherIncome 289,004 287,941Operating income 753,267 723,600Operating Expenses (657,891 ) (621,834 )ProfitBeforeImpairmentandTax 95,376 101,766ImpairmentCharges (41,305) (32,187)Liabilitywrittenoff 48,049 -ProfitBeforeTax 102,120 69,579Taxfortheyear (52,397) (14,734)Net Profit for the Year 49,723 54,845

Despite a good start of the year, the Businesswasnotsparedfromthenegative impactsofCOVID-19which set in, in earnest at the beginning of thesecondQuarter.Inparticular,thenationallockdown,whichranfromAprilintoearlyMayof2020resultedin a substantial reduction in transaction volumestherebyimpactingournon-fundedincome.Thiswasalsocompoundedbyatemporary25%feediscountweofferedtoclientsonourdigitalplatformspartlyinabidtodrivemovementofpeopleawayfromourphysical branches. Our margin business was alsoimpactedfromtwoperspectives,firstly,salesactivitywas severely curtailedduring the lockdownperiod,and as expected, recovering with a pronouncedlag throughout the restof theyearalthoughneverreaching pre-COVID-19 levels. Secondly, we sawsuccessive policy rate cuts by theMonetary PolicyCommitteeof theCentralBank inabidtoassist inpromoting the much-desired economic activity,theratecutsaccumulatedtoafull100bpstherebyaffectingourgrossinterestearningssignificantly.

“ Our Financial Markets business fully exploited the volatility we saw across all our major currencies, resulting in an overall growth in our trading income, which was at 24% on gross basis.”

Mbako MboChief Financial Officer

6% Cost efficiency Reportedexpenses6%upY-o-Y

FocusedliabilitymanagementInterestexpense

Growthinconsumerassets offset rate impact

overallNilup,despiterate pressure

Currencymarketswerevolatile,weremainedrelevant,grosstradingincome up

Animprovedbalancesheet,ALM income up Overall,allkeyproductsandboth

segmentsdeliveredreturns

Growth is broad based

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Chief Financial Officer’s Review cont.

STRATEGIC REPORT


Despite the severely challenging businessenvironment, decisive steps were taken bymanagementtodefendbusinessgainsfromthelast3years.Appropriateliabilitymanagementstrategiesweredeployed,resultinginadouble-digitreductionininterestexpense,leadingtoanoverallincreaseinNetinterestincome.

Our Financial Markets business fully exploited thevolatility we saw across all our major currencies,resultinginanoverallgrowthinourtradingincome,whichwasat24%ongrossbasis.Underlyingcostswerebroadlyflatwitha1%increaseoverpriorlevels,although a once off restructuring provision of P23million drove an overall 6% increase in reportedcosts.

The1%growthisattributable,mainly,toexpendituresincurred in protecting our staff and clients againstCOVID-19, as well as contributing to efforts byGovernmentandcommunities in responding to thesame.

Againstacorrespondingincreaseindigitisationcostsis a 16% decrease in administrative expendituresas training and business meetings have beensubstantiallyvirtualised,therebyobviatingabiggerportion of travelling and accommodation needs.Underlyingcreditprovisionswentup28%,reflectingacreditmarketimpactedbyCOVID-19.

Provisions for Expected Credit Losses (ECL) werehigher in particular for our corporate segments asourclientswereeitherdirectlyorindirectlyaffectedbytheCOVID-19misfortunes inthemining,tourismand real estate sectors, being among the hardesthit areas of the economy. However, the increasein credit provisions was entirely off set by a once-off transaction in which a P48 million liability ofa consolidated entity, being a loan owed by theStandard Chartered Botswana Education Trust toStandardCharteredUKwaswrittenoff.

Ourunderlyingprofits,netofthetwoonceoffitemsmentionedabovegrew11%YoYwithstatutoryprofitsrecordinga47%growthtoP102million.TaxchargesfortheyearishigherduetoaP37milliondeferredtaxassetwrite-off.

Segment Performance

2020 2019 P’000 P’000 Statement for Profit or Loss Consumer,PrivateandBusinessBanking 507,395 493,941Corporate,CommercialandInstitutionalBanking 252,616 197,471Total Net Operating income 760,011 691,412 Consumer,PrivateandBusinessBanking (462,628) (417,695)Corporate,CommercialandInstitutionalBanking (195,263) (204,138)Total Operating Expenses (657,891 ) (621,833 ) Consumer,PrivateandBusinessBanking 44,767 76,246Corporate,CommercialandInstitutionalBanking 57,353 (6,667)Operating Profit Before tax 102,120 69,579

Consumer, Private and Business Banking Segment

In redefining our client channels and productconstructs, we have, during the year, transformedourRetailbusiness,andconsequentlyrenamedittheConsumer,PrivateandBusinessBanking,CPBB.Thesegmentregistereda3%growthinincome,drivenbya6%growthinclientassets.

Thegrowthwashoweversloweddownbysuccessivepolicy rate cuts. Non-interest income was also4% down on account of substantially reducedtransactionvolumesduringlockdownperiods.

However, the non-funded income base wasexpandedduring the yearwitha successful rolloutofCashDepositingATMsacrossthecountry,amainfeature of the Bank’s reconfigured client interfacecentres(ExpressBankingCentres).

These centres come with increased conveniencefor clients, but a lower cost to serve to the Bank.Overall profitability was down on account of onceoffprovisionsin2020.

Corporate, Commercial and Institutional Banking Segment

Thesegmentsawa28%y-o-ygrowthin incomeasthe commercial sub segment finally transformedintoprofitability.Astrongruninclienttransactions,includingCorporateFinancedelivereda10%growthonnon-funded income,withanother4%growth intradeincomecomingfromcurrencytrades.

There was also a strong conversion rate on thelending business including trade facilities resultingin a 7% growth in margin income. Costs werecontainedcloselytoa4%reduction,althoughcreditimpairments grew 2.9 times to P20 million mainlydriven by COVID-19 impacts on clients. However,there were no significant write offs. The segmentemerged from amarginal loss in the prior year torecordaprofitbeforetaxofP57million. Net Interest Income and margin

2020 2019 P’000 P’000

NetInterestIncome 464,263 435,659AverageInterest-earningAssets 13,624,225 13,364,632AverageInterest-bearingLiabilities 10,472,80010,802,096 Avg.GrossRateEarned 5.47% 5.70%Avg.NetInterestMargin(%) 4.21% 3.84%Avg.NetInterestSpread(%) 3.93% 3.69%Avg.Ratepaid(%) 2.55% 2.80% Net Interest Income went up 7% as liabilitymanagement strategies paid off, resulting in a 25-bpsreductionintheaverageinterestratepaid.

A 2% increase in average interest earning assetsmarginally offset the overall effects of successivepolicyratecutsthatledtoa23-bpspointreductioningrossyield.

AverageNetInterestmarginsandspreadswerealsoup37-bpsand24bpsrespectively,reflectingalaserfocusapproachtobalancesheetmanagement.

Credit Quality

2020 2019 P’000 P’000

Gross loans andAdvances to customers8,324,388 8,107,844OfwhichStage1and28,109,709 7,922,452OfwhichStage3 214,679 182,487 Expected Credit loss provisions 208,708188,617OfwhichStage1and286,073 91,114OfwhichStage3 122,635 97,503 Net loans and Advances to customers 8,115,6807,919,227OfwhichStage1and2 8,023,6367,831,338OfwhichStage3 92,04487,890 Collateral 3,901,826 4,732,901Stage1andstage2 exposures 3,656,509 4,099,782Stage3exposures 245,317633,119 Our approach to credit risk management waspromptly adjusted at the onset of COVID-19; thefrequencyandscopeofstresstestswere increased;ourcreditappetitewasalsoadjustedacrossproductgroupsandclientengagementswereelevated.

Thiswastoensureprotectionoftheassetbook,whileatthesametimingenhancingoriginationdiscipline.DeteriorationinassetqualitywasbroadlycontainedtoabareminimumastheNPLratioedgeduponly30-bpsto2.6%,thusremainingwellbelowindustryaverages.

Migration of exposures to Stage 3 (from 1 & 2)represented0.72%ofGross loans (or 28%of totalECLprovisionsheld).RelieftoclientsduetoCOVID-19impactwasofferedbasedongoodperformancepre-CODID-19,andatotalofP735millionwasofferedtodeserving clients, who have since resumed normaldebtservicingschedules.

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Chief Financial Officer’s Review cont.

STRATEGIC REPORT


Balance Sheet and Liquidity

2020 2019 P’000 P’000 Assets Loans and advances to banks 2,501,471 3,458,459Loans and advances to customers 8,115,680 7,919,227OtherAssets 3,447,553 4,352,641Total assets 14,064,70415,730,327Liabilities Deposits from other banks 436,471 1,020,928Deposits from customers 11,849,61012,875,805OtherLiabilities 718,636 725,747Total liabilities 13,004,71714,622,480Equity 1,059,987 1,107,847 Advances-to-deposits Ratio(%) 6861LiquidAssetsRatio(%) 17.224.5

Overall Balance sheet size went down 11% drivenmainlybyacombinedP852millionreductioninlowyieldassets,withacorrespondingreductioninpricierclient deposits and inter bank borrowings. Seniordebtinstruments(SCB003)thatmaturedduringtheyearwerealsonot rolledoveraspartofabroadercapitalmanagementplan.

However, our higher margin assets, particularlydriven by household credit went up 2%. Assets todeposit Ratio climbed 7% up as a direct result ofcontrolled liability reduction.All in all, theBalanceSheetremainedfairlystableandresilient,deliveringincreasedmargins.

Risk Weighted Assets

2020 2019 P’000 P’000 By Risk Type Credit 6,921,071 7,118,133Market 33,959 49,952Operational 722,185 761,215Total RWAs 7,677,215 7,929,300

RiskWeightedAssets (RWAs)were3%downy-o-ydespite a pronounced pressure on credit quality.

Strategies that included closer limit reviews anda more selective approach to credit extension onthe face of COVID-19 led to the decline in RWA,which conversely delivered increased returns. Thecompositionand/ormixofRWA remainedbroadlyunchangedfromwhatitwasin2019.

Capital Base and ratios

2020 2019 P’000 P’000 CET1 Capital 552,611646,214AdditionalTier1Capital(AT1) 400,000400,000Tier 1 Capital 952,6111,046,214Tier2Capital 397,273477,977Total Capital 1,349,884 1,524,191CapitalAdequacyRatio(%) 17.6 19.2RegulatoryThreshold(%) 12.515*

*InApril2020thecentralBankrevisedtheminimumregulatory CAR from 15% to 12.5% as part of thebroader COVID-19 relief measures offered to localregulatedBanks.

The Bank’s capital position remained strongthroughouttheyear,sourcesdiversifiedandqualityoptimal.

OutlookGiventhesomewhatrenewedoptimismoneconomicrecovery prospects, informed mainly by COVID-19vaccine availability and early signs of recovery insomesectors,2021couldturnoutabetteryearthan2020,butunlikelytodeliverbetterthanpre-COVID19businessmomentum.

We will leanmore on enhancing client experiencethrough improved internal productivity, expandedproductofferingandafasterpaceindeliveringourdigitalagenda.The immediate future does look uncertain, but ourfocusondeliveringbestpossibleriskadjustedreturnstoinvestorsremain,whilewewillnotcompromiseonqualityofservicetoourclients.

WewillcontinuetoprioritisehealthandsafetyforourstaffandclientsinthefaceofCOVID-19pandemic,andworkwithourcommunitiesinmitigatingimpactsofthescourge.

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Chief Risk Officer’s Review

STRATEGIC REPORT


2020 Annual Report

“In 2020, we increased focus on both financial and non-financial risks given the impact of the COVID-19 pandemic on the economy, disruption to normal business operations of the Bank and its clients as well as critical third-party services providers.”

AllanMutendaChief Risk Officer

Enterprise Risk Management Framework

Our Enterprise Risk Management Framework (‘ERMF’) sets out the principles and standards for risk management across the Bank. The ERMF approved by the Board in August 2018,enables the Group to manage enterprise-widerisks,withtheobjectiveofmaximisingrisk-adjustedreturnswhile remainingwithin our RiskAppetite. Itsetsouttheguidingprinciplesforourstaff,enablingustohaveintegratedandholisticriskconversationsacrosstheBank,andwithGroupstakeholders.

The Bank applies a three Lines ofDefence (‘LOD’)modeltotheday-to-dayriskmanagementactivitiesandcontrolframework.ThefirstLODbusinessesandfunctions that are engaged in, or support, revenuegenerating activities own and manage the risks.The second LOD comprise the control functionsteams who are independent of the First Line andprovideoversightandchallengeofriskmanagementto provide confidence to the Chief Risk Officer,SeniorManagementand theBoard.The thirdLODcomprises the internal audit team who providesindependent assurance on the effectiveness of controlsthatsupportFirstLine’sriskmanagementofbusinessactivities,andtheprocessesmaintainedbytheSecondLine.

The Board has established Board level andmanagement risk committees responsible for on-going governance and oversight of respective PrincipalRiskTypes(‘PRTs’).PRTsarethoserisksthatare inherent in our strategy and business model.TheserisksaremanagedthroughdistinctRiskTypeFrameworks (‘RTFs’), policies and standards thatdocument the overall risk management approachfortherespectivePRT.

In2020,theGrouprefreshedandrolledouttherisktype frameworks for Information & Cyber Securityand Operational Risk. The Group also completedthe annual review of the ERMF, expanding the

ReputationalRiskPRTto includeSustainabilityRiskand integrated Conduct risk management as an integral component of the overall ERMF given itsoverarchingnature.EffectiveJanuary2021,ConductRisk will not be viewed as a PRT. Additionally, inordertomeettheneedsoftheBank’sdigitalagendaand strengthen operational risk managementcapabilitiesoftheGroup,theOperationalRiskPRThasbeenexpandedtoincludeTechnologyRisk.ThisBankisembeddingClimateRiskmanagementintheits existing riskmanagementpractices for relevantPRTs.

Risk Culture

Embeddingahealthy riskculturecontinues tobeacoreobjectiveacrossallareasoftheBank.Itunderpinsan enterprise-level ability to identify and assess,openlydiscuss,andtakepromptactiontoaddressallexistingandemergingrisks.Internalmessagingfromseniormanagementpromotesahealthyriskcultureby valuing risk-based thinking across each line ofdefence, encouraging risk awareness, challengingthestatusquoandcreatingatransparent,safeandopen environment for employees to communicateriskconcerns.

In 2020, we increased focus on both financial andnon-financialrisksgiventheimpactoftheCOVID-19pandemic on the economy, disruption to normalbusiness operations of the Bank and its clients aswell as critical third-party services providers. Theimplementationofa revisedOperationalRiskTypeManagementFrameworkhasprogressedwell.

Risk Appetite and profile

TheBoardhasapprovedaRiskAppetiteStatement,which is underpinned by a set of financial andoperational control parameters known as RiskAppetite metrics and their associated thresholds.These directly constrain the aggregate riskexposuresthatcanbetakenacrosstheGroup.TheRisk Appetite Statement is supplemented by anoverarching statement outlining the Group’s RiskAppetitePrinciples.

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Chief Risk Officer’s Review cont.

STRATEGIC REPORT


Principal Risk Types

PrincipalRiskTypesarerisksthatareinherentinourstrategyandourbusinessmodelandhavebeenformallydefinedintheGroup’sERMF.TheserisksaremanagedthroughdistinctRiskTypeFrameworks(RTF)whichareapprovedbytheGroupChiefRiskOfficer.ThePrincipalRiskTypesandassociatedRiskAppetiteStatementsapplicablelocallyareapprovedbytheBoard.

TheBankhasidentifiedelevenPRTspresentinitsbusinessasfollows:

Credit risk PotentialforlossduetothefailureofacounterpartytomeetitsagreedobligationstopaytheGroup.TheBankmanagesitscreditexposuresfollowingtheprincipleofdiversificationacrossproducts,geographies,clientsegmentsandindustrysectors.TheBankactivelymanagesitscreditriskattransactional,counterpartyandanotherportfoliolevels,usingavarietyofqualitativeandquantitativemeasures.TheBankendeavourstominimiseriskasfaraspossiblebyonlygrantingaloanwheretheriskofdefaultandexpectedcreditlossisacceptable.Basedonevaluationofthecounterparty’screditworthinessandthetypeofcreditarrangementdesired,creditlimitsareassignedbyexperiencedcreditapprovers,andapprovedbytheBank’sCreditApproval’sCommittee.

Country risk Potentialfordefaultorlossesduetopoliticaloreconomiceventsinacountry.Countryriskcomprisesseveralrisks,notably(a)Transfer&Convertibilityrisk(‘TCR’):Potentiallossesoncross-borderorforeigncurrencyobligationsarisingfromthepossibilitythatagovernmentisunableorunwillingtomakeforeigncurrencyavailableforremittanceoutofthecountry.(b)LocalCurrencyrisk(‘LCR’):Potentiallossesonlocalcurrencyobligationsarisingfromoperatinginavolatiledomesticeconomicandpoliticalenvironment.GrossCountryriskistheaggregationofTCRandLCR.TheBankmanagesitsCountryriskexposuresfollowingtheprincipleofdiversificationacrossgeographiesandcontrolsthebusinessactivitiesinlinewiththelevelofjurisdictionrisk

Traded risk Tradedriskisthepotentialforlossofearningsoreconomicvalueduetoadversechangesinfinancialmarketratesorprices.Theprimarycategories of Traded risk for the Bank are interest rate risk and currency exchangeraterisk.Interestrateriskarisesfromadversemovementsininterestratesthataffecttheunderlyingvalueofassetsandliabilitiesandoraltersinterestratesensitiveincomeandexpensestherebyaffectingearnings.Currencyexchangeriskarisesfrommovementsinexchangerates.TheBankshouldcontrolitstradingportfolioandactivitiestoensurethatTradedrisklosses(financialorreputational)donotcausematerialdamagetotheBank’sfranchise.TradedriskisaddressedthroughtheExecutiveRiskCommittee(‘ERC’)oftheBankcomprisingtheCountryChiefRiskOfficer,ChiefExecutiveOfficerandHeadsofBusinessandFunctions.TheERCensuresthatTreasuryMarketsFairValueStressLossTriggersremainwithintheoverallapprovedriskappetite.

Capital & liquidity risk

Capital:potentialforinsufficientlevel,compositionordistributionofcapitaltosupportournormalactivities.

Liquidity:potentialforlosswherewemaynothavesufficientstableordiversesourcesoffundingorfinancialresourcestomeetourobligationsastheyfalldue.

TheBankshouldmaintainastrongcapitalpositionincludingthemaintenanceofmanagementbufferssufficienttosupportitsstrategicaimsandholdanadequatebufferofhigh-qualityliquidassetstosurviveextremebutplausibleliquiditystressscenariosforatleast60dayswithoutrecoursetoextraordinaryCentralBanksupport.LiquidityriskissuesareaddressedthroughtheAssetandLiabilityCommittee(‘ALCO’)comprisingtheChiefExecutiveOfficer,ChiefFinancialOfficerandCountryChiefRiskOfficer.TherespectiveHeadsofBusiness,FinancialMarkets,AssetandLiabilityManagementandGroupTreasuryattendbyinvitation.Atitsmeetings,ALCOdealswithstrategic,tacticalandpolicyissuesonliquidity,interestrateandcapitalmanagement,andsetsthepositionsandmismatchlevelswithinwhichtheactivitiesofthenextperiodareconducted.

Operational & Technology Risk

Potentialforlossresultingfrominadequateorfailedinternalprocessesandsystems,humanerror,orfromtheimpactofexternalevents(includinglegalrisks).Operationalriskexposuresaremanagedthroughasetofmanagementprocessesthatdriveriskidentification,assessment,controlandmonitoringactivitiesconsistentlyacrosstheBank.TheBankaimstocontroloperationalrisktoensurethatoperationallosses(financialorreputational),includinganyrelatedtoconductofbusinessmatters,donotcausematerialdamagetotheBank’sfranchise.

Reputational & Sustainability Risk

Thepotentialfordamagetothefranchise(suchaslossoftrust,earningsormarketcapitalization),becauseofstakeholderstakinganegativeviewoftheBankthroughactualorperceivedactionsorinactions,includingafailuretoupholdresponsiblebusinessconductorlapsesinourcommitmenttodonosignificantenvironmentalandsocialharmthroughourclient,third-partyrelationships,orourownoperations.TheBank’spolicyprovidesaframeworkoffirstandsecond-lineownership,riskauthorities,riskappetiteandreportingandgovernancecommitteeoversight.TheBankaimstoprotectthefranchisefrommaterialdamagetoitsreputationbyensuringthatanybusinessactivityissatisfactorilyassessedandmanagedbytheappropriatelevelofmanagementandgovernanceoversight.

Compliance PotentialforpenaltiesorlosstotheGrouporforanadverseimpacttoourclients,stakeholdersortotheintegrityofthemarketsweoperateinthroughafailureonourparttocomplywithlawsorregulations.TheBankmanagesthisriskthroughadedicatedComplianceunit,anestablishedsetofproceduresformanagingregulatorychange,ongoingtrackingofregulatoryobligationsandoversightbygovernancecommittees.TheBankhasnoappetiteforbreachesinlawsandregulations,whilerecognisingthatregulatorynon-compliancecannotbeentirelyavoided,theBankstrivestoreducethistoanabsoluteminimum

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Chief Risk Officer’s Review cont.

STRATEGIC REPORT


Conduct RiskofdetrimenttotheGroup’scustomersandclients,investors,shareholders,marketintegrity,competitionandcounterpartiesorfromtheinappropriatesupplyoffinancialservices,includinginstancesofwilfulornegligentmisconduct.Failuretodeliverfaircustomeroutcomesandtoprotecttheintegrityofthemarketsweoperateinmayleadtoregulatorysanctions,financiallossandreputationaldamage.TheBankbelievesthatallemployeesareentitledtoafairandsafeworkingenvironmentthatisfreefromdiscrimination,exploitation,bullying,harassmentorinappropriatelanguage.TheBankhasnoappetitefornegativeConductriskoutcomesarisingfromnegligentorwilfulactionsbytheBankorindividualsrecognisingthatwhileincidentsareunwanted,theycannotbeentirelyavoided.

Information and cyber security

InformationandCyberSecurityrisk(‘ICS’)isdefinedastherisktotheBank’sassets,operationsandindividualsduetothepotentialforunauthorisedaccess,use,disclosure,disruption,modification,ordestructionofinformationassetsandorinformationsystems.Thismayleadtoadversecustomerandreputationalimpacts,regulatorycensure,financialloss,litigationandorthepotentialfortheBanktofail;affectingfinancialmarketsandthewidereconomy.TheBankseekstoavoidriskanduncertaintyforourcriticalinformationassetsandsystemsandhasalowappetiteformaterialincidentsaffectingtheseorthewideroperationsandreputationofthebank.Boardandmanagementengagetodriveacultureofsecurityexcellenceandrobustgovernanceofcontroleffectiveness.BusinessesareaccountablefortheidentificationandmanagementofICSrisk.TheBankalsoembedssecurityandresiliencebydesign,automatingprocessestodriveefficiencywherepossibleandateachstageofclientjourneystoprotecttheBankandourclients’informationassets,supportingtechnologyinfrastructureandservices.TheBankhasputinplaceprocessestoidentifyandmanagecontrolweaknesses,andthathorizon-scanningtakesplacetoidentifyemergingthreatsandcontrolgaps.Staffareadequatelytrainedtosecurelyuseinformationassets,systemsandtechnologyinfrastructureandmonitortheirusagetodetectandreportpotentialsecurityincidents.Thirdpartieswhouse,orprocessbankinformationassets,systemsortechnologyinfrastructurecomplywithpolicyandstandards.

Financial crime Potentialforlegalorregulatorypenalties,materialfinanciallossorreputationaldamageresultingfromthefailuretocomplywithapplicablelawsandregulationsrelatingtointernationalsanctions,anti-moneylaunderingandanti-briberyandcorruptionandFraud.TheBankallocatesresponsibilitiesforthefinancialcrimeriskmanagementinamannerconsistentwiththeThreeLinesofDefencemodelsupportedbyongoingriskassessment,governance,2ndLODoversightandchallenge,independentfinancialcrimeriskfunctionowned2ndlineprocesses,learningandawareness,assuranceandtestinganddatamanagement.TheBankhasnoappetiteforbreachesinlawsandregulationsrelatedtoFinancialCrime,recognisingthatwhilstincidentsareunwanted,theycannotbeentirelyavoided.

Model Modelriskisdefinedasthepotentiallossthatmayoccurasaconsequenceofdecisionsortheriskofmis-estimationthatcouldbeprincipallybasedontheoutputofmodelsduetoerrorsinthedevelopment,implementation,oruseofsuchmodels.Modelsareinherentlyuncertainandusingmodelsindecision-makingcarriesrisks.Thedegreeofamodel’sriskinessisafunctionofitsmaterialityanduncertainty.TheBankaimstocontrolModelRiskthroughappropriatelevelofgovernanceandoversighttoprotectthefranchisefromlossesthatmayoccurasaconsequenceofdecisionsortheriskofmis-estimationthatcouldbeprincipallybasedontheoutputofmodelsduetoerrorsinthedevelopment,implementationoruseofsuchmodels.TheBankallocatesresponsibilitiesforthemodelriskmanagementinamannerconsistentwiththethreeLODmodel.

Allmodelswithinthebankadheretotherequirementsofthemodelriskpolicyandstandardsforthevariousstagesinthemodellifecycle,areindependentlyvalidatedandregularlymonitoredtoensuremodelscontinuetobefitfortheirintendedusage.

Strategic WhilethisisnotaPRT,StrategicriskreferstothepotentialforopportunitylossarisingfromfailuretooptimisetheearningspotentialoftheBank.TheBoardapprovestheBank’sstrategyasformulatedbytopmanagementinlinewiththeBanksapprovedriskappetitemandates,whiletheChiefExecutiveOfficerandtheCountryManagementTeamhaveoverallresponsibilityforstrategyimplementation.TheBoardconductsquarterlyreviewsofthestrategyanditscontinuedapplicability.

Our Risk Profile in 2020

Throughourwell-establishedriskgovernancestructureandriskmanagementframework,wecloselymanageourriskswiththeobjectiveofmaximisingrisk-adjustedreturnswhileremainingincompliancewiththeRiskAppetiteStatement.

Non-financialrisks,specificallyInformationandCyberSecurity,FinancialCrimeRiskandCompliancewerereceivingelevatedattentionmainlyonaccountofdisruptiveimpactandsocioeconomicimplicationsoftheCOVID-19pandemicgiving risk tonewwaysofworkingandelevatedhealthandsafetyconcerns forourstaffandclients.TheBanknotedincreasesincreditriskrequiringinterventionsbywayofreliefmeasurestosupportourclientsthroughthedifficultperiod.TheBank’smanagementcontinuestofocuson identifyingandmitigatingidentifiedrisksandemergingrisks.

32 33


Board of Directors

STRATEGIC REPORT DIRECTORS’ REPORT FINANCIAL STATEMENTS32

She is the founder and senior partner atDoreen Khama Attorneys, a private lawfirm established in 1982 which provideslegal advice to corporate and individualclientsoncommercialmattersandgenerallitigation. She is also the honorary ofAustriatoBotswana.

She has sat on the boards of BotswanaSavingsBank,ABCHoldingsandBancABCBotswana where she served as a NonExecutiveDirectorandChairperson.

Kweku Bedu-Addo was appointed astheCEOof StandardCharteredBank forSouthAfrica& SouthernAfrica inAugust2017. He joined SCB Ghana in 2000 andbecamethefirstGhanaianChiefExecutiveby2010.PriortojoiningSCB,KwekuworkedintheMinistryofFinanceinGhanaduringthe implementationofGhana’sStructuralAdjustmentProgram.

Kweku also served as the past Chairmanof the Ghana Stock Exchange and pastViceChairmanoftheGhanaFixedIncomeMarket Council. He was on the GlobalInvestment Committee, Acumen Fund,NewYorkfrom2012to2016.KwekuholdsaBachelorofSciencedegreeinAgriculturalEconomics from the University of GhanaandaMastersdegree inEconomicPolicyManagementfromColumbia.

MphoMasupejoinedStandardCharteredBank Botswana Limited in 2013 as ChiefFinancial Officer and was appointed asChief Executive Officer in 2017. Prior tojoining the Bank, he spent 10 years atDebswana Diamond Company in theAccountingandSharedServicesDivisions.Mpho has a strong financial backgroundacquired over 24 years leading financeandadministrationdepartments.

Mpho holds a Bachelor of CommerceDegree from the University of Botswanaand aMasters in StrategicManagementfrom the University of Derby. Mpho alsositson theBoardsofStandardCharteredInsurance Agency (Pty) Ltd, StandardChartered Investment Services (Pty)Ltd and Standard Chartered BotswanaNominees(Pty)Ltd.

JohnStevenswasappointedtotheboardas a Non-Executive Director in 2013. Heserved Deloitte & Touche in South AfricaandBotswanaforover33years,8ofthoseyears as partner in charge of Delotte &ToucheBotswana.

John retired from Deloitte & Touche in2007andtookupthechallengeofprivateconsultancy. He holds a B.Comm Degreefrom Rhodes University and is a fellowshareholderof the Botswana Institute of CharteredAccountants, a shareholder of the SouthAfricanInstituteofCharteredAccountantsand a shareholder of the Institute ofChartered Accountants of England andWales. John is also a shareholder of theBoardforCrestaMarakaneloLimited.

Rodgers Thusi was appointed to theboardasan IndependentNon-ExecutiveDirector in July 2019. Mr Thusi is the co– founder of Gidary Technical Solutions,a consultancy company which hasundertakenanumberofprojectscoveringtechnical investigations,mineral resourceevaluation including projects andoperations management support atvariousmines.

He holds a Bachelors Degree of Sciencespecialising in Mineral Processing fromtheUniversityofWales,apostGraduateDiploma in Management Studies fromManagement College of Southern AfricaandaCertificateinAdvancedOperationsManagementfromtheUniversityofCapeTown. He is a shareholder of BotswanaInstituteofEngineers,aregisteredengineerby the Engineering Registration BoardBotswana and a project managementprofessionalthroughprojectmanagementinstitute.

Thari Gilbert Pheko was appointedto the Board as an Independent Non-Executive Director in February 2020. MrPheko isaConsultantatZBL Investments(Pty) Limited, a company that providesconsultancy services in broad spectrumof Information and CommunicationTechnology(ICT).

He has over 10 years experience in Executive Management positionsof various organisations, he servedas a Chief Executive for BotswanaTelecommunications Authority and is afounding Chief Executive of BotswanaCommunications Regulatory Authority(BOCRA). He holds a Master’s Degre inManagement Information Systems, aBachelorsDegreeinBusinessFinanceandEconomics from the University of EastAnglia,Norwich,UnitedKingdom.

Doreen Cilla KhamaChairperson

John StevensIndependentNon-ExecutiveDirectorChairman:AuditCommittee

Rapelang RabanaIndependentNon-ExecutiveDirector

Jerry Kweku Boi Bedu – AddoNon-ExecutiveDirector

Rodgers ThusiIndependentNon-ExecutiveDirector

Chazha KgalemangCompanySecretary

ChazhawasadmittedasanAttorneyoftheHighCourtofBotswana in2006.Shehasgainedextensiveexperienceoncorporate,commercial, banking and finance lawthroughworkingasapractisingattorneyand as in-house counsel for the past 7years. Chazha holds a Masters of Laws,majoring in Corporate and CommercialLaw (University of Melbourne) and aBachelorofLaws(RhodesUniversity).

Rapelang Rabana was appointed to theboard as an Independent Non-ExecutiveDirectorinDecember2020.

Ms Rabana is an internationally laudedtechnology entrepreneur. Her areas ofexpertise include digital transformation,innovation, strategy and productdevelopment, operations and processengineering, communications and branddevelopment. Shehas receivednumerousawards as recognition for her skills,experience and expertise such as the 15WomenChangingtheWorldbytheWorldEconomicForumin2015,Entrepreneurfor

Mpho MasupeChiefExecutiveOfficerChairmanActing:Riskcommittee

Thari PhekoIndependentNon-ExecutiveDirector

theWorldby theWorldEntrepreneurshipForumin2014.

ShesitsasaboardmembertotheAfricanLeadership University in Mauritius andImagine Worldwide in San Francisco,UnitedStatesofAmerica.

Ms Rabana holds a Bachelor of BusinessScience (Computer Science Honours), aMaster’sofScience(PropertyStudies)fromtheUniversityofCapeTown(UCT),SouthAfrica,aFAISRegulatoryExamsRE1 (KeyIndividuals), RE3 (Key Individuals), RE5(Representatives), and aVenture CapitalIntensiveCoursefromVentureUniversityinSanFrancisco,USA.

34 35


Statement on Corporate Governance


2020 Annual Report

As a key player in the banking industry, Standard Chartered Bank Botswana Limited (“the Company”) recognises its responsibility to practise high standards of corporate governance and to contribute to the promotion of an environment where such are upheld and practiced by all industry players.

ExemplarygovernanceiskeytotheCompany’slong-term success, enabling the delivery of sustainableshareholdervalue.

The Company has an integrated approach to governance which ensures that the Company iseffectivelymanagedandcontrolled,inlinewiththestrategy, and with regard to the requirements ofkey stakeholders.TheCodeofConduct reviewandrecommitmentbystaff isanannualrequirementtoensurethatthekeyprinciplesunderpintheconductofallemployees intheirdealingswithoneanother,customers,suppliersandotherstakeholders.

Thevaluedbehavioursareembeddedasguidelinesfor the expected behaviour of all employees andalsoformpartofthecontractualobligationsforallthemain suppliers of the Company in the conductofbusinessinasfarasitrelatestotheCompanybutalsoasexpectedofallethicalbusinesses.

The Board Composition

TheBoardiscollectivelyresponsibleforthelong-termsuccessoftheCompanyandforensuringleadershipwithinaframeworkofeffectivecontrols.TheBoardsetsthestrategicdirectionoftheCompany,approvesthe strategy and takes the appropriate action to ensure that the Company is suitably resourced toachieveitsstrategicaspirations.TheBoardconsiderstheimpactofitsdecisionsanditsresponsibilitiestoallstakeholders,includingemployees,shareholders,regulators, clients, suppliers, the environment andthecommunitiesinwhichitoperates.

The Board has the appropriate mix of skills,knowledge and experience to perform its roleeffectively.Theareasofexpertiseofthedirectorsareasfollows:

Name Areas of expertise

D Khama Law

T Pheko InformationTechnology

R Thusi Operations,Technologyand RiskManagement

R Rabana DigitalTransformation, InnovationandStrategy Development

K Bedu-Addo Banking and Economics

J. Stevens AccountingandFinancial Management

M Masupe* BankingandFinancial Management

*Executive Director

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Statement on Corporate Governance cont.

Thereexistsacordialworkingrelationshipbetweenthe non-executive and executive directors,characterised by a healthy level of challengeand debate. The executive team ensures that thenon-executive directors receive comprehensive reportson thebusinessaswellason theeconomicandcompetitivelandscape.

TheBoardcontinuestoreviewthemattersreservedfor the Board, key among them being the reviewand tracking of the Company’s strategy, financialperformance, approving any changes to capital,ensuring there is a sound system of internalcontrols and risk management, delegation andmonitoring of authorities for expenditure, lending,people management and compensation, materialoutsourcing, and other significant commitments.In2020, theBoard spent significant timeprovidingoversight over action taken to steer the Company through thechallengespresentedby theCOVID-19pandemic.

Diversity and mix of skills

TheChairman iscommitted toensuring theoveralleffectiveness of the Board and that it achieves the appropriate composition and balance of directors.At yearend 2020, the Board had 7 members; fiveindependent non-executive directors including theChair,onenon-executivedirectorandoneexecutivedirector.

TheBoardhasagoodmixofskillsandexperiencetodrivethebusinessforwardwhilstmaintainingatightcontrol on risk management and good corporategovernance. It has the primary responsibility forensuring adherence to the code of corporate governance. The Board has a charter which ispubliclyavailableto investors.TheBoardmembersarerequiredtodiscloseanypotentialareaofconflictthatmaycompromiseorunderminetheirpositionorserviceasdirectors.

With respect to Boarddiversity, the BoardCharterdescribes the approach the Board takes to ensure that diversity in its broadest sense remains acentral feature of the Board. The Company hasa long history of diverse board membership. AllBoardappointmentsarebasedonmeritwitheachcandidate assessed against objective criteria,with the prime consideration of maintaining andenhancingtheBoard’soveralleffectiveness.

Thisnotwithstanding,theBoardstrivestomaintaindiversityrecognisingthebenefitsofadiversemixofgender,socialandethnicbackgrounds,knowledge,personal attributes, skills and experience. Thisdiversity provides a mix of perspectives which webelievecontributestoeffectiveBoarddynamics. Board selection and appointment principles

TheBoardhasaformalandtransparentprocedurefor the appointment of Board members based on a setofbroadprinciples:

• TheBoardshouldhavesufficientindependenceofmindsettochallengetheexecutivesaswellasanappropriatebalanceofskills,knowledge,diversity(thisincludesdiversityofgenderandperceptions) and experience relevant to theCompany’sbusiness.

• AtleastonethirdoftheBoardmembersmustbecomprisedofindependentdirectors.

• Prospective independent directors areinterviewedbytheBoardChair,TheRegionalChairmanAfricaregionandtheClusterChiefExecutive, Southern Africa, who assess theirsuitability and whether their values andbehaviours are aligned with the Company’scultureandvalues.

• Independentdirectorsshouldnotservelongerthan nine years.Where the Board considersthe value and experience of an independentdirector, who is serving his/her ninth year,outweighs the nine-year term requirement,reasons for an extended term are clearlydocumented.

• In accordance with the Company’s policy,due diligence/screening checks must becompleted prior to the appointment of anyindependent director to ensure there is no undue risk posed to theCompany in relationto integrity, financial soundness, conflicts ofinterest,relatedpartyrelationships.

• All directors should have the capacity todevote sufficient time and commitment toattendallBoard,BoardCommitteemeetings,aswellasengageinotherCompany’sevents.

• Akeyconsiderationforanappointmentfromwithin the Standard Chartered Group is thecandidate’sability tobringbroadknowledgeoftheGrouptotheBoard’sdeliberationsandprovide context, so that the independentdirectorsfullyunderstandtheGroup’sstrategicdirectionandkeypriorities.

• The Board has established and maintainsrobust succession plans to ensure soundplanning and a balance of knowledge andskillsaswellasappropriatecontinuity.

• A list of prospective independent directors ismaintained by the Company Secretary andreviewedatleastannuallybytheBoardChair.

Director induction

The Company has a comprehensive and tailoredinduction process for new directors covering itsbusiness operations and in particular the risk andcompliancefunctions,aswellasthelegal,regulatoryandotherpersonalobligationsofadirectorofalistedcompany. Upon joining the Board, a new directorreceivesabriefingonvariousaspectsofthebusinessfromtheExecutiveDirectors,theCompanySecretary,BusinessHeadsandotherSeniorExecutives.

Akeypartoftheinductionprogrammeistoensurethat the directors have a good understanding of the governanceenvironment,includingacomprehensiveunderstandingoftheirstatutoryduties,obligationsand responsibilities as directors of a Companycarrying on banking business. The CompanySecretaryplaysakeyroleinsupportingnewdirectorsthroughtheinductionprocess.

Directors are kept appraised on all regulationsand laws that are enacted which may affect theoperationsoftheCompany.

Thedirectorsareadvisedofthelegal,regulatoryandotherobligationsofadirectorofalistedcompanyonanongoingbasis.Thedirectorsalsoreceivetrainingoncorporategovernance.Thedirectorshaveaccesstoindependentprofessionaladvicetoenablethemtodischargetheirduties.

Directors ongoing development

In view of the changing business environment,continuous Board members’ development isundertaken in order to enhance governance practiceswithin theBoard itselfand in the interestoftheCompany.

The continuous development programme is needs-basedandisdesignedforindividualdirectorsorfortheBoardtofacilitatecompetenceup-skillingoftheDirectors.We ensure that directors secure at leasttwelve hours of development per year on areas ofgovernancefromcrediblesources.

Following from the annual evaluation exercise,the directors identify areas that require furtherconsiderationbytheBoardandindividualDirectorsandtheseareaddressedthroughtrainingandboardpresentations. The Board Committees also receivespecialistpresentationsandtrainingrelevanttotheworkoftheirCommitteesasmayberequired.

Duringtheyear,alldirectorsreceivedacombinationof mandatory learning and training, internaland external briefings, presentations from guestspeakers and papers on a range of topics to ensure thedirectorsarewell-informedandthat theBoardremainshighlyeffective.TheBoardreceivedtrainingin2020onvariousaspectsincluding:

• SustainableFinanceincorporatingEnvironmentalandSocialRiskManagement;

• Emergingtechnologies,andtheemergingchallengesandopportunities;

• RefresherawarenesssessiononIFRS-19andalookattheimpactofCOVID19;

• CyberSecurityRiskManagementtrainingandemerging trends; and

• FinancialCrimeControl(FCC)risks;• Anti-Bribery and Corruption;• Cyberresilienceandcyberreadinessinthe

ageofcyberthreat.

BOARD EFFECTIVENESS

The Effective BoardThe Board encourages open, transparent andconstructive dialogue amongst the members. Inadditiontothis,theBoardhasacarefullystructuredBoard agendawhich acts as a guideline to ensurethat the minimum standards of governance areadheredto.TheBoardheldaspecialstrategysessioninNovember2020toreview,discussandagreetheCompany’s strategy. There was sufficient time toexamine the emerging risks and opportunities indetail.

Board effectiveness evaluation The annual Board evaluation was conducted inMarch 2020 through a process led by the BoardChair and supported by the Company Secretary.Theevaluationentailedapeerevaluationforeachdirector, and of the overall Board interactions,conductofbusinessmeetingsand scopeof controlexercisedbythedirectorsaswellasevaluationofthefunctioningoftheBoardCommittees.Followingtheevaluation exercise, the directors identified areasthatrequiredfurtherconsiderationbytheBoardandtheseissueshavebeenactioned.


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Statement on Corporate Governance cont.TheBoardcontinuestooperateeffectively.Thereisahighlevelofengagementfromthenon-executivedirectors and meaningful interaction with theexecutivedirectorsandtheseniormanagement.

Roles of the Board Chairman and Chief Executive OfficerTheseparate rolesof theBoardChairmanand theChief Executive Officer are clearly defined in theBoard Charter which has been approved by theBoard.

Exceptfordirectionandguidanceongeneralpolicy,theBoardhasdelegatedtheconductoftheday-to-daybusinesstotheChiefExecutiveOfficerandtheExecutiveCommittee.

Succession planningTheCompanyhasinplaceasuccessionplanforthedirectorswhich is updated regularly anda plan tomaintainabalanceofcriticalskillsontheBoardofDirectors.

Access to informationDirectors have unrestricted access to informationand Management. They are provided with timelyinformationandcomprehensivereportsonmaterialoperational,riskmanagementandfinancialmattersof the Company to facilitate informed discussionsduringmeetings.

All the directors have access to the advice of theCompany Secretary, who provides support to theBoardand is responsible foradvising theBoardongovernancematters. Directors also have access toindependentprofessionaladviceat theCompany’sexpensewheretheyjudgeitnecessarytodischargetheirresponsibilitiesasdirectors.

BOARD ACTIVITIES

ToenabletheBoardtouseitstimemosteffectivelyandefficiently,supportedbytheCompanySecretary,it maintains a scheduled programme of meetingsandarollingagenda.Thereissufficientflexibilityintheprogrammeforspecificitemstobeaddedtoanyagenda to ensure that the Board can focus on the keymattersattheappropriatetime.

The Board also schedules informal sessions andinteractions,whichallowsBoardmemberstodiscussareas of the business, strategy and the externalenvironment with members of the ManagementTeamand/orexternaladvisers.

In2020,duetorestrictionsimposedongatheringsbyvirtueoftheCOVID-19pandemic,theBoardhelditsmeetingsvirtually.

Board meetings and attendanceThe Board meets regularly, with at least fourformal meetings a year and a strategy session. Aformal schedule of matters reserved for discussionis maintained. The directors receive appropriateand timely reports to enable them to exercise fulland effective control over strategic, financial,operational,risk,complianceandgovernanceissues.

Acarefulbalanceof formaland informalmeetingsthroughout the year exists and there is an atmosphere ofcordialrelations.Thiscreatesanenvironmentthatencourages challenge, consultation, informationsharing, innovative thinking and openness incommunication.TheBoardalsohasopportunitiestointeractwiththestaff.

The directors have full access to corporateinformation and sufficient detail to enable aproductiveandopendiscussion.ThereisdiversityintheBoardwhichensuresthatthe levelofdebate isbothdetailedandofahightechnicalstandard. The following table shows the number of Boardmeetingsheldduring theyearand theattendancebythedirectors: Scheduled Ad Hoc D Khama (Chairman) 4/4 1/1T Pheko 4/4 1/1J Stevens 4/4 1/1K Bedu Addo 4/4 1/1M Masupe 4/4 1/1R Thusi 4/4 1/1 BOARD COMMITTEES

TheBoardhastwoprimaryCommitteeswithspecificdelegated authorities. These are the Board AuditCommittee and the Board Risk Committee, allchairedbyindependentdirectors.

The respective Chairs present their reports to the Board at each scheduled meeting. The Asset andLiability Committee (ALCO), are managementcommitteeschairedbytheCEOandreportquarterlytotheBoard.

Details of these committees and membership areshownbelow:

BOARD AUDIT COMMITTEE

Committee Composition

Directors

J Stevens Chairperson

R Thusi IndependentNon Executive Director

T Pheko IndependentNon- Executive Director

* By invitation

M Mbo* ChieffinancialOfficer

C Kgalemang* Secretary

T Ntwaetsile* HeadofInternalAudit

E Mokgatlhe* HeadofConduct,Financial CrimeandCompliance

Ernst & Young* StatutoryAuditors

TheCommitteemembershavedetailedandrelevantexperience and bring an independent mindset to theirrole.TheBoardissatisfiedthatMrJohnStevens,asChairperson,hastherelevantfinancialexperiencetoleadthecommitteeandthatallothercommitteemembers have broad experience and sufficientknowledgeoffinancialreportingandtheattendantrequirements.

Highlights for 2020In2020, theCommitteedischarged itsmandateassetoutinitsTermsofReferenceasfollows:

• Closely monitored audit findings and theactionsthereonfromtheexternalandinternalauditors;

• Continued to robustlymonitor the controls inplaceformanagementofcapitalandliquiditypositions,especiallyinlinewiththeregulatoryrequirements;

• reviewed and approved the financialstatements of the Company for each quarter;

• SatisfieditselfthattheCompany’saccountingpoliciesandpracticesareappropriate;

• Monitored the integrity of the publishedfinancialstatements,reviewingthesignificantfinancialjudgementsandaccountingissues;

• ReviewedCOVID-19legislationenactedduringtheyearfollowingtheadventoftheCOVID-19pandemic;

• Ensuredactionandfollowuponallcompliancemonitoringreports;

• Providedoversightoftheworkundertakenbythe statutory auditor; and

• Provided oversight of the External Auditortransition:- Receivedanddiscussedupdatesonthe

statusofthetransitiontoErnst&Young(EY)astheCompany’sstatutoryauditorby2020toensureaseamlessandtimelyhandover

- ReviewedanddiscussedEY’sAuditPlanand sought and received assurance that EY’shandoverwithKPMGandtransitionas auditor to the Company had taken place effectively and seamlessly. EYattended one Committee meeting and presented the audit plan to theCommittee. in Q4, 2020 followingappointment at the annual generalmeeting and subsequent regulatoryapproval.

Role and functionThe Committee has a Charter that specifies theresponsibilities and procedures of the Committeeincluding conduct of special investigations. TheCommittee’sroleistoreview,onbehalfoftheBoard,the Company’s internal financial controls. It is alsoresponsible for oversight and advice to the Boardonmatters relating to financial reporting and hasexercised oversight of thework undertaken by theCompany’s Head of Conduct, Financial Crime andCompliance,HeadofInternalAuditandthestatutoryauditor. The Committee reports to the Board onits key areas of focus following each Committeemeeting.

ThekeyresponsibilitiesoftheCommitteeare:

Financial reportingTheCommitteereviewstheintegrityofthefinancialstatements of the Group and Company andrecommends the statements for approval to theBoard. The Committee considers Management’srecommendations in respect of impairment onloans and advances as well as other disclosurerequirements.


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Oversight of internal controlsTheCommitteeregularlyreviewsandreportstotheBoardontheeffectivenessoftheCompany’ssystemofinternalcontrol.TheCommitteediscussestherootcausesoftheissuesreportedbytheHeadofInternalAudit, and reviews Management’s responses andremedialactions.

Internal and external audit reportsThe Committee receives reports on the findingsof the internal and external audits and tracks theactionsonauditfindings.

TheCommitteealsoreviewstheproposedworkplansfor the InternalAuditandCompliance functionsatthebeginningofeachyearandguidesontheareasoffocus.

The Committee receives regular reports from theHead, InternalAuditoninternalaudits,complianceandlegalrisksandontheassuranceframework.TheHead, Conduct, Financial Crime and Compliancealsosubmitsreportsonregulatory,complianceandconduct issues. The Chief Financial Officer, Head,InternalAudit,Head,Conduct,FinancialCrimeandCompliance,theexternalauditorsandtheBusinessHeads are regularly invited to the meetings toprovidereportsorrespondtoissuesasrequired.Theindependentnon-executivedirectorsholdmeetingswiththeHead,InternalAuditandExternalAuditorswithoutmanagementtofreelydiscussissuesarisingfrom the audits and monitor progress on the audit planfortheyear.

TheCommitteeheldsixmeetingsintheyear.Areasoffocusintheyearwere:

• approval of the audit and compliancemonitoringplans;

• reviewoftheenhancedregulatoryreporting;• CentralBankofKenyamandatedInformation

&CommunicationTechnologyaudit;• CentralBankofKenyamandatedAnti-Money

Laundering report;• reviewofauditreports;and• review of the Group and Company financial

statements.

Appropriateness of the expertise and experience of the Chief Financial Officer (CFO)The committee on an annual basis, considers the

appropriateness of the expertise and experience of the Chief Financial Officer. Thismandate is in linewiththeBotswanaStockExchangelistingRules,thecommittee has executed the mandate as required and is satisfiedthat theChiefFinancialOfficerhasthe requisite expertise and experience to continueservinginoffice.

BOARD AUDIT COMMITTEE

Attendance Scheduled

Number of meetings held in 2020

J Stevens (Chairperson) 4/4 T Pheko 4/4 R Thusi 4/4 BOARD RISK COMMITTEE

Members M Masupe CommitteeChair(Acting)K Bedu-Addo MemberR Ochieng* ChiefRiskOfficerC Kgalemang* SecretaryT Pheko*R Thusi*

* By invitation

Role and function

Risk managementThe Committee is responsible for exercisingoversight of and reviewing prudential risk. Itreviews the Company’s overall Risk AppetiteStatement and makes recommendations to theBoard. Its responsibilities also include reviewingthe appropriateness and effectiveness of the Company’s risk management systems, consideringthe implications of material regulatory changeproposals, reviewing reports on principal risks tothebusinessandensuringeffectiveduediligenceonmaterialacquisitionsanddisposals.TheCommitteereportstotheBoardonitskeyareasoffocusfollowingeachCommitteemeeting.

The Chief Risk Officer presents a report to theCommittee at every scheduled meeting and theCommittee discusses the major risks faced by theCompanyacrossthebusinesses.

The Committee also reviews the Company’s riskappetite periodically. The directors provide criticalguidanceandfeedbacktoManagement.

The Committee is responsible for ensuring thattherearewrittenpolicies,proceduresandprocessesfor identifying and managing all risks within theCompany. The Committee receives reports on allaspects of risk management from the risk sub-committeesandriskmanagers.

Highlights for 2020TheCommitteeheld fourmeetings in theyearandtheareasoffocuswere:

• Enhanced focus on emerging risks includingcapital,liquidityandmarketrisk;

• FocusonheightenedriskarisingfromCOVID-19pandemic;

• Comprehensive review of the Company’s riskappetite;

• RevieweditsmembershipandreviseditsrollingagendatoensureallrisksarereviewedbytheCommittee,and;

• Monitored the Company’s capital adequacyandliquiditypositions.

• Monitored measures implemented tostrengthen the balance sheet to maintainadequate capital and liquidity, consideringtheCOVID-19pandemic.

Attendance Scheduled Number of meetings held in 2020 M Masupe (Acting Chairman)4/4K. Bedu-Addo 3/4 CORPORATE GOVERNANCE POLICIES

BOARD CHARTER The Board Charter outlines the specific roles andresponsibilitiesoftheBoardwhichareseparatefromthose of Management. The Charter provides forcomposition of the Board and its committees, andtheir respectiveTermsof Reference.Additionally, itcovers areas relating to Board structure, functions,processes, effectiveness, diversity, and internalcontrols.TheCharterispublishedontheCompany’swebsite.

INTERNAL CONTROLSThe Board is committed to managing risk and to controlling the Company’s business and financialactivities inamannerwhichenables ittomaximiseprofitable business opportunities, manage and

ensure compliance with applicable laws andregulations, and enhance resilience to externalevents.

The Company has a process in place to ensurethat any changes in legislation are captured andmonitoredeffectively.TheLegaldepartmentreviewsand undertakes a comprehensive gap analysisonce the lawsare inplaceandadvises the impactof the changes to the Company. The Compliancedepartment ensures that the business units put in placecontrolstoensurecompliancewiththevariouslawsandregulations.AsrequiredbytheCodealegalandcomplianceauditwillbeundertakenin2021.

TheeffectivenessoftheCompany’sinternalcontrolssystem is reviewed regularly by the Board througha Management framework and the Internal Auditfunction.

The Internal Audit function monitors compliancewith policies and standards and the effectivenessof internal control structures of the Group throughits programme of business audits. Thework of theInternal Audit function is focused on the areasof greatest risk as determined by a risk-based assessment methodology. The Internal Auditfunction reports to the Board Audit Committee and theCountryNon-FinancialRiskCommittee(CNFRC).

The Company’s business is conducted within adevelopedcontrolframework,underpinnedbypolicystatements,writtenproceduresandcontrolmanuals.This ensures that there are written policies andprocedures to identify and manage risk, includingoperationalrisk,countryrisk,liquidityrisk,regulatoryrisk, legal risk, reputational risk, market risk andcreditrisk.TheBoardhasestablishedamanagementframeworkthatclearlydefinesroles,responsibilitiesand reporting lines. Delegated Authorities aredocumentedandcommunicated.

The performance of the Company’s business isreported by Management to the Board. Financialinformationispreparedusingappropriateaccountingpolicies,whichareappliedconsistently.Operationalprocedures and controls have been established tofacilitatecomplete,accurateandtimelyprocessingoftransactionsandthesafeguardingofassets.

CONFLICT OF INTERESTAll directors are under a duty to avoid conflictsof interest. This entails not engaging, directly orindirectlyinanybusinessthatcompetesorconflictswiththeCompany’sbusiness.


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The Company has established a robust processrequiring directors to disclose outside businessinterestsbeforetheyareenteredinto.Anypotentialor actual conflicts of interest are reported to theCompany Secretary and a register of directors’interestsismaintained. The provisions on conflict of interest as outlinedin the Prudential Guidelines are embodied in thedirectors’lettersofappointment.TheCompanyhasacomprehensivepolicyonConflictsof Interestandstaffaswelldirectorsarerequiredtocomplywithit.

CODE OF CONDUCTTheBoardhadadoptedaCodeofConduct,relatingtothelawfulandethicalconductofbusinesswhichis supported by the Company’s core values. Alldirectors,managementandemployeesarerequiredto observe the Code and are expected to observe high standards of integrity and fair dealing inrelationtocustomers,staffandregulators.TheCodeofConductcanbefoundhere.

WHISTLE BLOWING POLICYSpeaking Up is our confidential and anonymouswhistleblowingprogramme.Itincludesindependentand secure channels for anyone – employees,contractors,suppliersandmembersofthepublic–toraiseconcerns.

The public, employees, contractors and suppliersare encouraged to report alleged irregularities ofa general, operational and financial nature in theCompany to the directors or designated officialthroughthe“SpeakUp”portal.All“Speak-Up”casesare investigated and the required action taken toensurefeedbackisprovidedasappropriate.

ANTI-BRIBERY AND CORRUPTION Anti-bribery and corruption (ABC) policies aim topreventemployees,directorsorthirdpartiesworkingonourbehalf,fromparticipatinginactiveorpassivebribery or corruption, or from making facilitationpayments. To embed the policy, the Companyregularly carries out training on all staff and theBoardregardingtheABCrisk.Further,theCompanyhasworkedwithitsthirdpartiestoraiseawarenesson the ABC risk, embed strict requirements in thecontractualdocuments,andsharebestpracticesoncontrolstomanagetherisk.

RELATED PARTY TRANSACTION STANDARDThe Company has established a Related PartyTransactions Standard that aims to set outrequirements for the creation of any new RelatedPartyandmaintainingcontrolstopreventoridentifyNon-ExemptTransactionsthatareenteredintowithexistingRelatedParties.

INSIDER TRADINGTheCompanyhasapolicyoninsidertradingwhichis observed and implemented through the GroupTransactional Conflicts and Information WallsStandardandtheGroupPersonalAccountDealingStandard. Directors, management and employeesare aware that they ought not to trade in theCompany’sshareswhileinpossessionofanyinsiderinformation not available to the public or duringa closed period. The closed period is a specifiedperiod before the publication of the Company’sannual and half year financial results and eachinterimmanagement statement. Further,directors,management,andemployeesinpossessionofinsideinformationmustnotdealdirectlyorindirectlyinanyfinancialinstrumentstowhichtheinsideinformationrelates, including Company shares. The GroupPersonalAccountDealing Standardwhich requiresspecificstafftodeclareanydealingswithsecuritiesorcompanysharesallyearround.

GOING CONCERNThe directors have assessed the Group andCompany’s ability to continue as a going concern.This assessment has been made having considered the impact of COVID-19 and macroeconomicheadwinds,andhasincluded:

• AreviewoftheStrategyandCorporateplan,includinga reviewof theactualperformanceto date, loan book quality and legal andregulatorymatters;

• Considerationof the capitaladequacy stresstestingperformed,includingaCOVID-19stressscenario; and

• Analysisof the fundingand liquiditypositionoftheGroup,includingareviewoftheGroup’semerging risks, to which COVID-19 has beenadded.

Based on the analysis performed, the directorsconfirm they are satisfied that the Group andCompany have adequate resources to continue in businessforaperiodofatleast12monthsfromthedateofapprovalofthesefinancialstatements.

For this reason, the Group continues to adopt thegoing concern basis of accounting for preparing thesefinancialstatements.

RELATIONS WITH SHAREHOLDERSThe Board recognises the importance of good communications with all shareholders. The virtualAnnual General Meeting (AGM) as well as thepublishedannualreportareusedasanopportunitytocommunicatewithallshareholders.TheCompanyalwaysgivesshareholdersthe21days’noticeoftheAGM as provided for in the Companies Act, Cap42:01 and shareholders are encouraged to submitquestions and appoint proxies to represent them wheretheyareunabletoattend.Adhocshareholderrequestsforinformationarehandledonanon-goingbasisandontheflooroftheAGM.

Inupholdingandprotectingshareholders’rights,theBoardrecognisesthateveryshareholderhasarighttoparticipateandvoteatthegeneralshareholdersmeeting.TheBoardalsoinvitesshareholderstoseekclarityon theGroupandCompanyperformance ingeneralmeetings.TheBoardalsoholdsaninteractiveinformalmeetingonceayearwiththeshareholders.

The Board has engaged the services of a professionalRegistrar toallowforquick resolutionsofallshareholderqueriesandsmooththetransferofshares.

COMPETENCE, QUALIFICATION AND EXPERIENCE OF THE COMPANY SECRETARYAs required by the Botswana Stock ExchangeListing Rules, the board has considered, and it issatisfiedthattheCompanySecretaryiscompetent,adequately qualified and experienced to continueservinginofficeandsupportingtheBoard.

Directors’ remunerationThe remunerationpolicy supports theachievementofthestrategicobjectivesthroughbalancingrewardfor both short-term and long-term sustainableperformance.

TheBoardreceivedshareholders’authorisationtofixthe directors’ remuneration by a resolution passedat the Annual GeneralMeeting held on 29th June2020.TheCommitteemonitorsthecompetitivenessofdirectors’remunerationtoensuretheGroupisabletomotivateandretainindividualsoftheappropriatecalibre as directors. The remuneration of theexecutivedirectorsisaspernegotiatedemploymentcontracts.

In determining remuneration for Independent non-executive directors, regular surveys on the marketrates for non-executive directors and the levels ofremuneration are carried out for consideration bytheCommittee.Alltheremunerationandprivilegesaccorded to the directors and enumerated under thepolicyare competitiveand reviewedaccordingto theprevailingmarket trends forcompaniesofasimilarsizeandcomplexityastheGroup.

Compensation is set to attract Independent non-executive directors (INEDs) who together with theBoardasawholehaveabroad rangeof skillsandexperience to determine the Group’s strategy andoverseeitsimplementation.

TheINEDsarepaidanannualfee.INEDs are also reimbursed for expenses, such astravelandsubsistence, incurredintheperformanceoftheirduties.During the financial year, the Board of Directorsconsistedof:

• Five Independent Non-Executive directors:Doreen Khama, Thari Pheko, Rogers Thusi,JohnStevensandRapelangRabana

• One Non-Executive Directors: Kweku BeduAddo

• OneExecutivedirectors:MphoMasupe

All Directors are subject to retirement by rotationand re-election by shareholders. The Company’sdirectors were appointed on the dates indicatedbelow:

Name Appointment Date

Doreen Khama 16/09/2018*John Stevens 01/08/2013Rogers Thusi 19/07/2019Thari Pheko 10/02/2020**Kweku Bedu-Addo 01/09/2018Mpho Masupe 01/10/2017Rapelang Rabana 13/12/2020

*SouthAfrican**Ghanian

Non-executive directors’ remuneration and policyTheCompanyhasputinplaceapolicythatdefinestheremunerationandrelatedprivilegesreceivedbythenon-executivedirectorsoftheCompany.


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All the remuneration and privileges accorded tothedirectorsandenumeratedunder thepolicyarecompetitiveandreviewedaccordingtotheprevailingmarket trends for companies of a comparable sizeand complexity. The components in the policy aredirectors’fees,travel,andaccommodation.

The feespayable reflect the timecommitmentandresponsibilities of a non-executive director of theCompany.Thenon-executivedirectorsemployedbyStandardCharteredGrouparenotremuneratedbytheCompany.

Service contracts for Independent non-executive directors IndependentNon-executivedirectorsareappointedfor fixed terms not exceeding three years, whichmay be renewed subject to their re-electionby shareholders at annual general meetings.Independent non-executive directors are bound byletters of appointment issued for and on behalf ofthe Company. Other than as set out above, therearenoobligationsintheIndependentnon-executivedirectors’ letters of appointment which could giverisetopaymentsforlossofoffice.

Executive directors’ remuneration policyExecutivedirectorstypicallyreceiveasalary,pension,andotherbenefits,andareeligibletobeconsideredfor variable remuneration (determined based onboththeCompanyandindividualperformance).TheCompany’sremunerationapproachisconsistentwitheffective riskmanagement and the delivery of theCompanystrategy,underpinnedbytheprinciplesof:

• a competitive remunerationopportunity thatenablestheCompanytoattract,motivateandretain the executive directors;

• a clearly defined performance managementframework that ensures executive directorshave clear objectives and receive ongoingfeedback;

• remuneration outcomes that relate to theperformance of the executive director and the Company. The Company aims to ensure theexecutive director is aligned to deliver long-term sustainable growth of the Company intheinterestofstakeholders;

• variable remuneration and deferred optionsthat recognises the achievement, conduct,behaviours and values of each executivedirector, ensuring reward is aligned to theCompany’sperformance.TheCompanytakesintoaccountbothwhatisachievedandhowitis achieved;

• an appropriate mix of fixed and variableremuneration, with the level of fixedremuneration based on each executive director’srole;

• remunerationthatisfairandtransparent.Anequalpayreviewisundertakenaspartofthepayreviewprocess;and

• a core level of benefits that protects theexecutivedirectorsandreflectstheCompany’scommitmenttoemployeewellbeing.

Therewerenochangesinremunerationpolicyfromtheprioryear.

Service contracts for executive directorsTheremunerationpolicyprovidesforacombinationof permanent terms and renewable fixed termemployment contracts for executive directors oninternationalassignments.

KING IV REPORT TheCompanyhasovertheyearsalwayscommitteditselftoaligningandadoptingtherecommendationsoftheKingCodeonCorporateGovernance.HavingadoptedtherecommendationsofKingIVin2017,theBoarddevelopedaprogrammeforimplementationof those of its principles that were practical forimplementation in our business environment.As atDecember 2020,most of the principleswere beingapplied, save for those where we had achievedpartialapplication.

Almost all the principles had been applied, theprinciple that was determined to not have beenappliedrelatestotheRiskCommitteecomposition.theRiskCommitteeoperatedwithoutanIndependentNon Executive Director formost of the year underreview.ThishasbeenrectifiedandthecommitteeischairedbyanIndependentNon-ExecutiveDirector.

King IV Principle StatusPrinciple 1: The governing body should lead ethically and effectively

Complied

Principle 2: The governing body should govern the ethics of the organization in a way that supports the establishment of an ethical culture

Complied

Principle 3:The governing body should ensure that the organization is and is seen to be a responsible corporate citizen

Complied

Principle 4:The governing body should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.

Complied

Principle 5:The governing body should ensure that reports issued by the organization enable stakeholders to make informed assessments of the organisation’s performance and its short, medium and long-term prospects.

Complied

Principle 6:The governing body should serve as the focal point and custodian of corporate governance in the organisation.

Complied

Principle 7:The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.

Complied

Principle 8:The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with the balance of power and the effective discharge of its duties.

Complied

Principle 9:The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members support continued improvement in its performance and effectiveness.

Complied

Principle 10:The governing body should ensure that the appointment of, and delegation to, management contribute to the role clarity and the effective exercise of authority and responsibilities.

Complied

Principle 11:The governing body should govern risk in a way that supports the organization in setting and achieving its strategic objectives.

Complied

Principle 12:The governing body should govern technology and information in a way that supports the organization in setting and achieving its strategic objectives.

Complied

*Principle 13:The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organization being ethical and a good corporate citizen.

Partial Compliance

Principle 14:The governing body should ensure that the organisation remunerates fairly, responsibly and transparently to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.

Complied

Principle 15:The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision making and external reporting purposes.

Complied

Principle 16:In the execution of its governance roles and responsibilities, the governing body should adopt a stakeholder inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organization over time.

Complied

Principle 17:The governing body of an institutional investor should ensure responsible investment.

Not Applicable


(226231571 shares)(72119040 shares)

4 non public shareholders

1169 public shareholders

76%24%

Shareholder Information Thecompanyhasa totalof 1173 shareholderswith298350611issuedsharescategorisedasfollows:

The company’s majority shareholder is StandardChartered Holdings (Africa) B.V with 221 246286 shares representing 74.156% of the entireshareholding.

46 47


STRATEGIC REPORT OUR BUSINESS FINANCIAL STATEMENTS

CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

48 Director’s Report50 Directors’ responsibility statement51 Independent auditor’s report58 Statements of profit or loss and other comprehensive income59 Statements of financial position60 Statements of cash flows61 Statements of changes in equity63 Notes to the financial statements138 Notice to shareholders139 Proxy Form

Standard Chartered Bank Botswana Limited

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2020

STRATEGIC REPORT OUR BUSINESS FINANCIAL STATEMENTS46 47


48 49




Directors’ Report for the year ended 31 December 2020 Directors’ Report for the year ended 31 December 2020 cont.

The directors have pleasure in submitting to themembers their report and the financial statementsof the Group and Company for the year ended 31December2020. Activities

TheGroupcontinuestobeengagedinthebusinessof commercialbankingandprovidesawide rangeof financial services. The Group comprises of foursubsidiaries, namely Standard Chartered BankInsurance Agency (Proprietary) Ltd, StandardChartered Bank Investment Services (Proprietary)Ltd, Standard Chartered Botswana EducationTrustandStandardCharteredBotswanaNominees(Proprietary)Ltd. Results

TheGroupresultsaredisclosedinthestatementsofprofitandlossandothercomprehensiveincomeonpage58andreflectthefollowing:

Stated capital

There was no additional capital issued during theyear. Additional Tier 1 Capital

There was no Additional Tier 1 capital injectionduring the year (2019: Nil).

Events after reporting date

The Directors are not aware of any matters orcircumstancesarisingsincetheendofthefinancialyear,notdealtwith in this reportor thesefinancialstatements, that would significantly affect theoperationsofthegrouportheresultsofitsoperations.

Refertonote38fordividenddeclared.

Going Concern

The financial statements were approved by theBoard of Directors on the 10th ofMarch 2021. TheDirectors have made a comprehensive assessment of theBank’sabilitytocontinueasagoingconcern,andthisentailedareviewoftheimpactofCovid-19onthebusiness (present and expected), macroeconomicoutlookandanyotherhorizonrisks.

Inparticular,thereviewentailed;

• A re-assessment of the Bank’s strategy, andtherevisedcorporateplanfor5yearsto2025(profitability, capital adequacy, liquidity andcashflows,withspecialemphasisinthenext12months).

• Adetailed analysis of capital adequacy anditsmakeup,liquidityprofileanddiversificationof sources, currentand forecastperformanceagainst prudential ratio thresholds and theICAAP(asummaryofthebank’scapitalandriskassessmentprocesses,assessesitscapitalrequirements and the adequacy of resources tomeetthem).

• An assessment of current performance in termsofprofitabilityagainstbudgets,liquidityandfundingagainstRiskAppetitethresholds,loanbookqualityandimpairments,regulatorycomplianceandanyimpedinglegalmatters.

• A consideration of the bank’s performanceunder an ICAAP stress scenario (A SlowRecoveryScenarioimposedbyCovid-19).

• The liability and asset maturity profile, theliquid assets profile, outstanding debts andthebank’soverallsolvencyandleverage.

P102 million

P49.7 million

P55 million

Profitbeforetaxation(2019 : P70 million)

Profitaftertaxation(2019 : P55 million)

Dividendsdeclaredandpaid(2019: P24 million)

• The emerging trends on average run rates for salesofprimaryproducts,banksprospectsonraising client deposits at requisite levels andissuanceofmedium-termdebtinstruments.

Based on the above, supported by a continuousscanning of horizon risks within the framework ofestablished principal risk types, the Directors aresatisfied that the Bank has adequate resources tocontinue running as a going concern for the next 12 monthsandbeyond.Assuch,thefinancialstatementsoftheBankarepreparedonagoingconcernbasis.

Holding company

TheGroup’sultimateholdingcompany is StandardCharteredBankPLC,a company incorporatedanddomiciledintheUnitedKingdom. Directors

ThefollowingweredirectorsoftheBankduringtheyear and at the date of approval of the financialstatements:

DoreenKhama (Board Chairperson)

Mpho Masupe (Executive)

JohnYendallStevens

JerryKwekuBoiBedu-Addo RodgersMajwabeThusi

ThariGilbertPheko (appointed 18 February 2020) RapelangRapana (appointed 13 December 2020)

Company Secretary: Chazha Kgalemang

Auditors Ernst &Young 2nd Floor, Plot 22, Khama Crescent P.O. Box 41015 Gaborone Botswana

By order of the Board

ChazhaKgalemangCompany Secretary

50 51




Directors’ Responsibility Statement for the year ended 31 December 2020

Independent Auditor’s ReportTotheShareholdersofStandardCharteredBankBotswanaLimitedReportontheAuditoftheConsolidatedandSeparateFinancialStatements

The directors are responsible for the preparation of the consolidated and separate annual financialstatementsofStandardCharteredBankBotswanaLimitedthatgiveatrueandfairview,whichcomprisethestatementsoffinancialpositionat31December2020,thestatementsofconsolidatedprofitorlossandothercomprehensiveincome,thestatementsofchangesinequityandstatementsofcashflowsfortheyearthenended,andthenotestothefinancialstatementswhichincludeasummaryofsignificantaccountingpolicies,inaccordancewithInternationalFinancialReportingStandards.Inaddition,thedirectorsareresponsibleforpreparingthedirectors’report. Thedirectorsarealsoresponsibleforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerrorandformaintainingadequateaccountingrecordsandaneffectivesystemofriskmanagement. Thedirectors,supportedbytheAuditCommittee,aresatisfiedthatmanagementintroducedandmaintainedadequateinternalcontrolstoensurethatdependablerecordsexistforthepreparationoftheGroupannualfinancialstatements,tosafeguardtheassetsoftheGroupandtoensurealltransactionsaredulyauthorised. The directors have made an assessment of the ability of the Company and its consolidated entities tocontinueasgoingconcernsandhavenoreasontobelievethattheentitieswillnotbegoingconcernsintheyearahead.AnimpactassessmentoftheCoronavirusCovid-19pandemichasbeenconducted. Theauditorisresponsibleforreportingonwhethertheconsolidatedandseparatefinancialstatementsgiveatrueandfairviewinaccordancewiththeapplicablefinancialreportingframework. Approvaloftheconsolidatedandseparateannualfinancialstatements: TheconsolidatedandseparateannualfinancialstatementsofStandardCharteredBankBotswanaLimited,wereapprovedbytheboardofdirectorsonthe10thofMarch2021andaresignedby:

DoreenKhama MphoMasupeChairperson Managing Director

Opinion

WehaveauditedtheconsolidatedandseparatefinancialstatementsofStandardCharteredBankBotswanaLimited and its subsidiaries (the Group) and company set out on pages 58 to 137, which comprise theconsolidatedandseparatestatementsoffinancialpositionasat31December2020,andtheconsolidatedand separate statements of profit or loss and comprehensive income, the consolidated and separatestatementsofchangesinequityandtheconsolidatedandseparatestatementsofcashflowsfortheyearthenended,andthenotestotheconsolidatedandseparatefinancialstatements,includingasummaryofsignificantaccountingpolicies.

Inouropinion,theconsolidatedandseparatefinancialstatementsgiveatrueandfairviewoftheconsolidatedandseparatefinancialpositionofStandardCharteredBankBotswanaLimitedasat31 December 2020,andofitsconsolidatedandseparatefinancialperformanceandofitsconsolidatedandseparatecashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct(CAP42:01)andtheBankingAct(CAP46:04). Basis for Opinion

WeconductedourauditinaccordancewithInternationalStandardsonAuditing(ISAs).OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sResponsibilitiesfortheAuditoftheConsolidatedandSeparateFinancialStatementssectionofourreport.WeareindependentoftheGroupandCompanyinaccordancewiththeInternationalEthicsStandardsBoardforAccountants’CodeofEthicsforProfessionalAccountants (including International Independence Standards) (IESBACode) togetherwithother ethicalrequirementsthatarerelevanttoourauditoftheconsolidatedfinancialstatementsinBotswana.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion. Key Audit Matters

Keyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditoftheconsolidatedandseparatefinancialstatementsofthecurrentperiod.Thesematterswereaddressedinthecontextofourauditoftheconsolidatedandseparatefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.Foreachmatterbelow,ourdescriptionofhowourauditaddressedthematterisprovidedinthatcontext. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of theconsolidatedandseparateFinancialStatementssectionofourreport,includinginrelationtothesematters.Accordingly,ourauditincludedtheperformanceofproceduresdesignedtorespondtoourassessmentoftherisksofmaterialmisstatementoftheconsolidatedandseparatefinancialstatements.Theresultsofourauditprocedures,includingtheproceduresperformedtoaddressthemattersbelow,providethebasisforourauditopinionontheaccompanyingconsolidatedandseparatefinancialstatements.

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Independent Auditor’s ReportTotheShareholdersofStandardCharteredBankBotswanaLimitedReportontheAuditoftheConsolidatedandSeparateFinancialStatements cont.


KeyAuditMatterKeyAuditMatter HowthematterwasaddressedintheauditHowthematterwasaddressedintheaudit

Credit Impairment of loans and advances tocustomers (Consolidated and separate financialstatements)

WeevaluatedthedesignandoperatingeffectivenessofcontrolsrelevanttotheGroupandCompany’sprocessesover material ECL balances, including the judgementsand estimates noted, involving EY specialists to assistus in performing our procedures to the extent it wasappropriate.

At 31 December 2020 the Group and Companyreported total credit impairment of P41m (2019:P32m).

Theseincluded:

- controlsovertheallocationofassetsintostagessuchasmanagement’smonitoringofstageeffectiveness;

Management’s judgements and estimates whichareespeciallysubjectivetoauditduetosignificantuncertainty associated with the assumptionsused in the estimation in respect of the timingandmeasurement of expected credit losses (ECL)include:

- thegovernanceandreviewofpostmodeladjustments;

- riskeventoverlays;

• Allocation of assets to stage 1, 2, or 3 on atimely basis using criteria in accordancewithIFRS9consideringtheimpactofCOVID-19andrelatedgovernmentsupportmeasures,suchaspaymentdeferrals,oncustomerbehaviours;

- completenessandaccuracyofdata;

• Accounting interpretations, modellingassumptions and data used to build and runthemodelsthatcalculatetheECLconsideringtheimpactofCOVID-19onmodelperformanceand any additional data to be considered intheECLcalculation;

- multipleeconomicscenarios;

• There are significant judgements involvedwith thedeterminationofparametersused inMonte Carlo Simulation and the evaluationof the appropriateness of using Monte Carlo Simulation in the context of COVID-19with regards to whether the simulation cansufficiently capture the non-linearity ofexpected credit losses and appropriatelygenerateawiderangeofpossibleoutcomes.

- creditmonitoring;and

• Appropriateness, completenessandvaluationof post model adjustments and COVID-19specificriskeventoverlaysgiventheincreaseduncertainty and less reliance on modelledoutputs increasing the risk of managementoverride; and

- individualprovisions.

• Measurementofindividualprovisionsincludingthe assessment of probability weightedscenariosandtheimpactCOVID-19hadonexitstrategies, collateral valuations and time tocollect.

• We obtained papers and minutes of the executive forumsthatevaluatecreditmodelsandECLprovisionsforevidenceofexecutivereviewandchallenge.

Refer to the Use of judgements and estimationuncertainty(Note2)Significantaccountingpolicies(Note3)

• We performed an overall assessment of the ECLprovision levels by stage to determine if they werereasonable by considering the overall credit qualityof the Group and Company’s portfolios, risk profile,impactofCOVID-19andhigh-riskindustries.Wealsoassessed the effect of government support measures e.g. payment deferrals, whichmay delay andmaskstagemigrations.Our assessmentalso included theevaluation of the macroeconomic environment byconsidering trends in theeconomyand industries towhichtheGroupandCompanyareexposed.

Accounting policies; Expected credit loss onfinancial assets (Note 9); and relevant credit riskdisclosures(Note4)

• Weevaluated thecriteriaused toallocatefinancialassetstostage1,2or3inaccordancewithIFRS9.Wereperformedthestagingdistributionforasampleofassets and assessed the reasonableness of stagingdowngradesappliedbymanagement.

• WeperformedariskassessmentonmodelsinvolvedintheECLcalculationtoselectasampleofmodelstotest.

• Our modelling specialists evaluated a sample ofECL models by assessing the reasonableness ofunderpinning assumptions, inputs and formulaeused.This includeda combination ofassessing theappropriatenessofmodeldesignandformulaeused,alternative modelling techniques and recalculatingthe Probability of Default, Loss Given Default andExposureatDefault.

54 55






• We also assessed the material post-modeladjustments which were applied as a responseto model ineffectiveness and risk event overlaysas a result of COVID-19. With our modellingspecialists,wealsoconsideredthecompletenessandappropriatenessoftheseadjustmentsbyconsideringthe judgments, methodology and governanceapplied.

• In response to new models implemented this yearwhich addressed knownweaknesses, we performedmore extensive substantive procedures in testing the modelledECL.

• To test credit monitoring, we challenged the riskratingsforasampleofperformingloansandfocusedour testing on high risk industries impacted byCOVID-19.

• Toevaluatedataquality,weagreedasampleofECLcalculationdatapoints to source systems, includingbalancesheetdatausedtorunthemodels.Wealsotested a sample of the ECL data points from thecalculationenginethroughtothegeneralledgeranddisclosures.

• We included COVID-19 specific data points in thistesting.

• We involved economic specialists to assist us inevaluating the reasonableness of the base forecastand the range of economic scenarios produced by the MonteCarloSimulation.

• Procedures performed included benchmarking asampleofcoremacro-economicvariablestoavarietyofexternalsources.

• For material models, in collaboration with oureconomists and modelling specialists, we alsochallengedthecompletenessandappropriatenessofthemacroeconomicvariablesusedasinputstothesemodels.

When recalculating a sample of individually assessedprovisions, our procedures included challengingmanagement’sforward-lookingeconomicassumptionsoftherecoveryoutcomesidentifiedandassigningindividualprobabilityweightings.

• We also engaged our valuation specialists to testthe value of the collateral used in management’scalculations.Oursamplewasbasedonquantitativethresholds and qualitative factors includingvulnerablesectors.

• WeconsideredtheimpactCOVID-19hadoncollateralvaluationsandtimetocollect.

• WealsoconsideredwhetherplannedexitstrategiesremainedviableunderCOVID-19.

• We tested the data flows used to populate thedisclosuresandassessedtheadequacyofdisclosuresfor compliance with the accounting standards andregulatory considerations including expectations ofCOVID-19specificdisclosures.

Other Matter

ThefinancialstatementsoftheCompanyfortheyearended31December2019,wereauditedbyanotherauditorwhoexpressedanunmodifiedopiniononthosefinancialstatementson14April2020.

Other Information

Otherinformationcomprisestheinformationincludedonpage48 to 50ofthedocumenttitled“StandardCharteredBankBotswanaLimitedAnnualFinancialStatementsfortheyearended31December2020”,whichincludestheDirectors’ResponsibilityStatementandtheDirector’sReportasrequiredbytheCompaniesAct(CAP42:01),whichweobtainedpriortothedateofthisreport,andtheAnnualReport,whichisexpectedtobemadeavailabletousafterthatdate.Thedirectorsareresponsiblefortheother information.Otherinformationdoesnotincludetheconsolidatedortheseparatefinancialstatementsandourauditor’sreportthereon.

Ouropinionontheconsolidatedandseparatefinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanauditopinionoranyformofassuranceconclusionthereon.

In connectionwith our audit of the consolidated and separate financial statements, our responsibility istoreadtheotherinformationidentifiedaboveand, indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththeconsolidatedandseparatefinancialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkwehaveperformedontheotherinformationobtainedpriortothedateofthisauditor’sreport,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

56 57






Thedirectorsare responsible for thepreparationandfairpresentationof theconsolidatedandseparatefinancialstatementsinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct(CAP42:01)andtheBankingAct(CAP46:04)andforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationofconsolidatedandseparatefinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingtheconsolidatedandseparatefinancialstatements,thedirectorsareresponsibleforassessingthegroupandcompany’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessthedirectorseitherintendtoliquidatethegrouporcompanyortoceaseoperations,orhavenorealisticalternativebuttodoso.

ThosechargedwithgovernanceareresponsibleforoverseeingtheGroupandCompany’sfinancialreportingprocesses.

Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.ReasonableassuranceisahighlevelofassurancebutisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedandseparatefinancialstatements. AspartofanauditinaccordancewithISAs,weexerciseprofessionaljudgementandmaintainprofessionalscepticismthroughouttheaudit.Wealso: Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedandseparatefinancialstatements,whetherdueto fraudorerror,designandperformauditprocedures responsive to those risks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol. Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthegroup’sandcompany’sinternalcontrol. Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebythedirectors. Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingandbasedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtonthegroup’sandcompany’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedandseparatefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’sreport.However,futureeventsorconditionsmaycausethegroupandcompanytoceasetocontinueasagoingconcern.

Evaluate the overall presentation, structure and content of the consolidated and separate financialstatements, including the disclosures, and whether the consolidated and separate financial statementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation. Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithinthegrouptoexpressanopinionontheconsolidatedandseparatefinancialstatements.Weareresponsibleforthedirection,supervisionandperformanceofthegroupandcompanyaudit.Weremainsolelyresponsibleforourauditopinion. Wecommunicatewiththedirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit. Wealsoprovidethedirectorswithastatementthatwehavecompliedwithrelevantethicalrequirementsregarding independence, and to communicate with them all relationships and other matters that mayreasonablybethoughttobearonourindependence,andwhereapplicableactionstakentoeliminatethreatsorsafeguardsapplied. Fromthematterscommunicatedwiththedirectors,wedeterminethosemattersthatwereofmostsignificanceintheauditoftheconsolidatedandseparatefinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters.Wedescribethesemattersinourauditor’sreportunlesslaworregulationprecludespublicdisclosureabout thematterorwhen, inextremely rarecircumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.

Practicing member: Thomas Chitambo Partner Certified Auditor Membership number: 20030022 Gaborone 31 March 2021

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Statement of financial position as at 31 December 2020

Statement of profit or loss and other comprehensive incomefor the year ended 31 December 2020

GROUP COMPANY 2020 2019 2020 2019 Note P’000 P’000 P’000 P’000 Interestrevenuecalculatedusingtheeffectiveinterestmethod 5 745,154 762,047 745,154 762,047Interestexpensecalculatedusingtheeffectiveinterestmethod 6 (280,891) (326,388) (279,321) (322,826)

Net interest income 464,263 435,659 465,833 439,221 Feeandcommissionincome 7 229,779 238,387 204,378 205,260Feeandcommissionexpense 7 (29,151) (35,459) (29,151) (35,459)

Net fee and commission income 200,628 202,928 175,227 169,801 Nettradingincome 8 88,376 85,013 88,376 85,013Creditlossexpenseonfinancialassets 9 (41,305) (32,187) (41,305) (32,187)Liabilitywrittenoff 9.1 48,049 - - - Net operating income 760,011 691,413 688,131 661,848 Operating expenses Employeebenefits 10 (252,344) (225,119) (252,344) (225,119)Rentalexpenses (1,079) (1,214) (1,079) (1,214)Depreciationandamortisation 19&20 (45,484) (38,704) (45,484) (38,704)Administrationexpenses 11 (358,984) (356,797) (346,710) (346,789)

Total operating expenses (657,891 ) (621,834 ) (645,617 ) (611,826 )

Profit before taxation 102,120 69,579 42,514 50,022 Incometaxexpense 12 (52,397) (14,734) (51,375) (9,501)

Profit/ (loss) for the year attributable to parent 49,723 54,845 (8,861) 40,521 Other comprehensive income Other comprehensive income that will be reclassified to the income statement Changeinfairvalueoffinancialinstrumentsatfairvaluethroughothercomprehensiveincome,netoftax 17 (12,886) (1,374) (12,886) (1,374) Other comprehensive income that will not be reclassified to the income statement Revaluationofproperty,netoftax 19 - 2,005 - 2,005Othercomprehensiveincomefortheyear,netoftax (12,886) (10,646) (12,886) 631Totalcomprehensiveincome/(loss)fortheyear,netoftaxattributabletoparent 36,838 55,476 (21,747 ) 41,152 Basicanddilutedearningspershare(Thebe) 14 16.81 18.54 The notes on pages 63 to 137areanintegralpartofthesefinancialstatements

GROUP COMPANY 2020 2019 2020 2019 Note P’000 P’000 P’000 P’000 Assets CashandbalanceswiththeCentralBank 15 975,991 870,350 973,484 867,731Loansandadvancestobanks 16 2,501,471 3,458,459 2,501,471 3,458,459Investmentsecurities 17 2,113,719 3,073,599 2,113,719 3,073,599Loansandadvancestocustomers 18 8,115,680 7,919,227 8,115,680 7,919,227Otherassets 21 168,809 182,514 168,779 142,169Taxationrefundable 25 - 1,665 - 1,665Propertyandequipmentandright-of-useassets 19 112,720 131,883 112,720 131,883Intangibleassetsandgoodwill 20 38,781 31,327 38,781 31,327Investmentinsubsidiaries 30 - - 30 30Deferredtaxation 26 37,534 61,305 37,534 61,305Total assets 14,064,704 15,730,327 14,062,198 15,687,395 Liabilities Depositsfromotherbanks 22 436,471 1,020,928 436,471 973,746Depositsfromcustomers 23 11,849,61012,875,805 11,849,610 12,875,805UnsettledTreasurybills 27.1 29,878 - 29,878 -Otherliabilities 27.2 268,503 286,251 296,113 261,703Provisions 27.3 23,158 - 23,158 -Taxationpayable 25 8,097 496 7,440 -Senior&subordinatedloan 24 389,000 439,000 389,000 439,000Total liabilities 13,004,717 14,622,480 13,031,670 14,550,254 Equity Statedcapital 179,273 179,273 179,273 179,273Capitalcontribution 428,213 428,213 428,213 428,213Retainedearnings 452,501 500,361 423,042 529,655Totalequityattributabletoparent 1,059,987 1,107,847 1,030,528 1,137,141Total equity and liabilities 14,064,704 15,730,327 14,062,198 15,687,395 The notes on pages 63 to 137areanintegralpartofthesefinancialstatements

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Statement of changes in equityfor the year ended 31 December 2020

Statement of cash flowsfor the year ended 31 December 2020

GROUP COMPANY 2020 2019 2020 2019 Note P’000 P’000 P’000 P’000 Cashflow from operating activities Profit/(loss)fortheyear 49,723 54,845 (8,861 ) 40,521 Adjustmentsfor: Interestincome (745,154) (762,047) (745,154) (762,047)Interestexpense 280,891 323,747 279,321 320,185Taxation 52,397 14,734 51,375 9,501Depreciation 19 30,243 23,792 30,243 23,792Amortisationonintangibles 20 14,403 14,912 14,403 14,912Profitondisposalofassets - (140) - (140)Netimpairmentlossonloansandadvances 9 25,058 26,168 25,058 26,168Movementinoperatingleaseaccrual 31 - (5,908) - (5,908)Unrealisedforeignexchange(gains)/losses (1,614) 243 (1,614) 243Liabilitywrittenoff (48,049) - - -Movementinprovisions 23,158 (30,674) 23,158 30,674Changesbeforechangesinworkingcapital (318,944 ) (340,328 ) (332,072 ) (302,099 ) Changeininvestmentsecurities 978,246 974,490 978,246 974,490Changeinloansandadvancestocustomers (221,511) (460,160) (221,511) (460,160)Changeinotherassets 12,319 61,626 (27,995) (4,546)Changeindepositsfromotherbanks (584,457) 266,499 (537,275) 262,576Changeinamountsduetononbankcustomers (1,026,195) 535,144 (1,026,195) 535,144PaymentofunsettledTreasurybills -(1,348,939) -(1,348,939)Changeinotherliabilities 47,206 (25,752) 48,961 (13,314) (1,113,338) (337,419) (1,117,842) (356,846) Taxationrefunded - 13,150- 13,150Taxationpaid (17,081) (5,883) (13,609) (1,665)Interestreceived 742,975 762,047 742,975 762,047Interestpaid (255,886) (291,454) (254,316) (320,185)Netcashgenerated/(used)inoperatingactivities (643,329 ) 140,441 (642,791 ) 96,500 Cash flow from investing activities Acquisitionofpropertyandequipment 19 (11,308) (111,299) (11,308) (111,299)Acquisitionofintangibles 20 (21,857) (16,873) (21,857) (16,873)Proceedsfromsaleofassets - 140 - 140Netcashusedinoperatingactivities (33,165) (128,032) (33,165) (128,032) Cash flow from financing activities Redemptionofseniordebt 24 (50,000) (247,260) (50,000) (247,260)Interestpaidonseniorandsubordinateddebt 6 (25,005) (32,293) (25,005) -Leaseliabilityinterestpayments 31 (2,184 - (2,184) -Leaseliabilitycapitalpayments 31 (13,210) - (13,210) -Dividendspaid (54,419) (23,844) (54,845) (23,844)Distributionpaymenttoholdersofsubordinatedcapitalsecurities (30,035) (30,889) (30,035) (30,889)Netcashfromfinancingactivities (174,852 ) (334,286 ) (175,278 ) (301,993 ) Decreaseincashandcashequivalents (851,347) (321,878) (851,235) (333,524)Cashandcashequivalentsat1January2020 4,264,337 4,687,481 4,261,718 4,696,509Netforeignexchangedifferences 64,472 (36,795) 64,472 (36,795)Cash and cash equivalents as 31 December 2020 28 3,477,462 4,328,809 3,474,955 4,326,190 The notes on pages 63 to 137areanintegralpartofthesefinancialstatements

Stated Revaluation Statutory Retained Capital Treasury Fair value Total Capital reserve credit risk earnings Contri- Share reserve reserve bution reserveGroup P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Balances 1 January 2019 179,273 23,691 19,152 483,734 428,213 (31,566 ) 6,282 1,108,779 Total comprehensive income Profitfortheyear - - -54,845 - - - 54,845Othermovements - - - (1,675) - - - (1,675)Other comprehensive income Fairvalueadjustment:itemsmeasuredatfairvaluethroughothercomprehensiveincome - 2,005 - - - - (1,374) 631Transactions with owners of the bank Dividendstoequityholders-paid - - - (23,844) - - - (23,844)IssueofsharecapitalDistributionstoholdersofsubordinatedcapitalsecurities - - - (30,889) - - - (30,889)Balance at 31 December 2019 179,273 25,696 19,152 482,171 428,213 (31,566 ) 4,908 1,107,847 Balances 1 January 2020 179,273 25,696 19,152 482,171 428,213 (31,566 ) 4,908 1,107,847 Total comprehensive income Profitfortheyear - - - 49,723 - - - 49,723Othermovements - - - (244) - - - (244)Other comprehensive income Fairvalueadjustment: itemsmeasuredatfairvaluethrough othercomprehensiveincome - - - - - - (12,886) (12,886)Transactions with owners of the bank Dividendstoequityholders-paid - - - (54,419) - - - (54,419)Distributionstoholdersofsubordinatedcapitalsecurities - - - (30,035) - - - (30,035)Balance at 31 December 2020 179,273 25,696 19,152 447,197 428,213 (31,566 ) (7,978 ) 1,059,987 Company Balance at 01 January 2019 179,273 23,691 19,152 494,185 428,213 - 6,282 1,150,796 Total comprehensive income Othermovements - - - (73) - - - -Profitfortheyear - - - 40,521 - - - 40,521Other comprehensive income “Fairvalueadjustmentitemsmeasuredatfairvaluethroughothercomprehensiveincome“ - 2,005 - - - - (1,374) 631Transactions with owners of the bank - Dividendstoequityholders-paid - - -(23,844) - - - (23,844)Distributionstoholdersofsubordinatedcapitalsecurities - - -(30,889) - - - (30,889)Balance at 31 December 2019 179,273 25,696 19,152 479,900 428,213 - 4,908 1,137,214 As 1 January 2020 179,273 25,696 19,152 479,900 428,213 - 4,908 1,137,141 Total comprehensive income Other movements - - - 14 - - - 14 Profitfortheyear - - - (8,861) - - - (8,861)Other comprehensive income - - - - - - - - “Fairvalueadjustmentitemsmeasuredatfairvaluethroughothercomprehensiveincome“ - - - - - - (12,886) (12,886)Transactions with owners of the bank - Dividendstoequityholders-paid - - - (54,845) - - - (54,845)Distributionstoholdersofsubordinatedcapitalsecurities - - -(30,035) - - - (30,035)Balance at 31 December 2020 179,273 25,696 19,152 386,172 428,213 - (7,978 ) 1,030,528

The notes on pages 63 to 137areanintegralpartofthesefinancialstatements

62 63




Notes to the financial statementsfor the year ended 31 December 2020

Statement of changes in equityfor the year ended 31 December 2020 cont.

Stated capitalAuthorised ordinary sharesTheCompany’sstatedcapitalconsistsof400000000ordinarysharesofnoparvalue(2019:400000000).

Issued ordinary shares298380611ordinarysharesofnoparvalue(2019:298350611).Allissuedsharesarefullypaid.

Unissued ordinary sharesAsat31December2020,unissuedsharestotalled101 619389(2019:101 649389). Theholdersofordinarysharesareentitledtoreceivedividendsasdeclaredfromtimetotimeandareentitledtoonevotepershareatmeetingsoftheentity.AllsharesrankequallywithregardtotheBank’s residualassets. The Group’s policy is tomaintain a strong capital base so as tomaintain investor, creditor andmarketconfidence and to sustain future development of the business. The impact of the level of capital onshareholders’returnisalsorecognisedandtheGrouprecognisestheneedtomaintainabalancebetweenthehigherreturnsthatmightbepossiblewithgreatergearingandtheadvantagesandsecurityaffordedbyasoundcapitalposition. The Group and its individually regulated operations have all complied with externally imposed capitalrequirementsthroughouttheperiod. Revaluation reserveTherevaluationreservecomprisesthenetcumulativeincreaseinthefairvalueofproperty. Statutory credit risk reserveThisreserverepresentsastatutoryreserverequiredundertheBankingAct,1995. Capital contributionThis consists of part of the consideration for the acquisition of the custody business (P28m) and thesubordinatedundatedcapitalsecurities(P400m). Fair value reserveThis represents the cumulative movement on debt instruments measured at fair value through othercomprehensiveincomeuntiltheinstrumentisderecognisedorimpaired,inwhichcasethecumulativeamountrecognisedinothercomprehensiveincomeisreleasedtoprofitorloss. Retained earningsRetainedearningsrepresentthecumulativenetprofitorlossrealisedbytheGroupafterdeductingdividendstoshareholdersandotherutilisationofthereserve. Treasury share reserveThereserveforthecompany’streasurysharescomprisesthecostoftheBank’ssharesheldbytheGroup.Asatthereportingdate,theGroupheld0.84%oftheCompany’sshares(2019:0.84%)astreasuryshares.

1. Reporting entity

StandardCharteredBankBotswanaLimited(“Bank”)wasincorporatedinBotswanaasaBankwithlimitedliabilityundertheBotswanaCompaniesActandislicensedtooperateasacommercialbankunderSection6 of the Banking Act, 1995 (Chapter 46:04). The Company’s registered address is Standard CharteredBankBotswanaLimited,StandardHouse,Plot1124-30QueensRoad,MainMall,Gaborone,Botswana.TheCompanyislistedontheBotswanaStockExchange(BSECode:STANCHART).Theconsolidatedfinancialstatements for the year ended 31 December 2020 comprise the Company and its controlled entities(together referred toas the “Group”). TheCompanyhas four subsidiaries, namely StandardCharteredBank Insurance Agency (Proprietary) Limited, Standard Chartered Investment Services (Proprietary)Limited,StandardCharteredBotswanaNominees(Proprietary)LimitedandStandardCharteredBotswanaEducationalTrust.StandardCharteredBankPLC,incorporatedinUnitedKingdomistheultimateparent.ThesefinancialstatementsrepresenttheGroup’sandBank’sstatutoryfinancialstatements.

2. Basis of preparation

(a). Statement of compliance These financial statements have been prepared in accordance with International Financial Reporting

StandardsandinthemannerrequiredbytheBankingAct(Cap46:04). Thesefinancialstatementswereapprovedbytheboardofdirectorson10March2021.

(b) Functional and presentation currency ThesefinancialstatementsarepresentedinBotswanaPula(P).ThefunctionalcurrencyoftheBankisthe

BotswanaPula.Exceptwhereindicated,thefinancial informationpresentedinBotswanaPulahasbeenroundedtothenearestthousand.

(c) Basis of consolidation Entities controlled by the Group are consolidated. The Group controls an entity if it is exposed to, or

has rights to,variable returns from its involvementwiththe investeeandhastheability toaffect thosereturns through itspowerover theentity. Inassessingcontrol,potential voting rights thatarepresentlyexercisable are taken into account. The consolidated financial statements have been prepared usinguniformaccountingpoliciesforliketransactionsandothereventsinsimilarcircumstances.Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedateonwhichcontrolcommencesuntilthedatewhencontrolceases.

Business combinations are accounted for using the acquisition method under IFRS 3, i.e. the date ofacquisitionisthedateonwhichcontrol istransferredtotheGroup.Theconsiderationtransferredintheacquisitionisgenerallymeasuredatfairvalue,asaretheidentifiablenetassetsacquired.Theexcessofconsiderationtransferredovernetfairvalueofidentifiableassetsacquiredisrecordedasgoodwill(refernote3(j).Anygainonabargainpurchaseisrecognisedinprofitorlossimmediately.Transactioncostsareexpensedasincurred,exceptiftheyarerelatedtotheissueofdebtorequitysecurities.Theconsiderationtransferreddoesnotincludeamountsrelatedtothesettlementofpre-existingrelationships.Suchamountsaregenerallyrecognisedinprofitorloss

Investment in subsidiaries Investmentinsubsidiariesareheldatcostlessimpairment.

Transactions eliminated on consolidation Inter-group balances and transactions, and any unrealised income and expenses arising from inter-

grouptransactions,areeliminatedinpreparingtheconsolidatedfinancialstatements.Unrealisedlossesareeliminated in thesamewayasunrealisedgains,butonly to theextent that there isnoevidenceofimpairment.

64 65




Notes to the financial statementsfor the year ended 31 December 2020 cont.


2. Basis of preparation (continued)

(d) Segmental reporting AsegmentisacomponentoftheGroupthatengagesinbusinessactivitiesfromwhichitmayearnrevenues

andincurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheGroup’sothercomponents,whoseoperatingresultsarereviewedregularlybytheGroupManagementCommittee(beingthechiefoperatingdecisionmaker)tomakedecisionsaboutresourcesallocatedtoeachsegmentandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.Segmentresultsincludeitemsthataredirectlyattributabletoasegmentaswellasthosethatcanbeallocatedonareasonablebasis.

(e) Use of judgement and of estimation uncertainty Inpreparingtheseconsolidatedfinancialstatements,managementhasmadejudgements,estimatesand

assumptionsthataffecttheapplicationoftheGroup’saccountingpoliciesofthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionofestimatesarerecognisedprospectively.

Further information about key assumptions concerning the future, and other key sources of estimation

uncertaintyand judgementare set out in the relevantdisclosure notesandaccountingpolicies for thefollowingareas:

Creditimpairment(note4) Valuationoffinancialinstruments(note4) Deferredtaxassets(note3) 3. Significant accounting policies

Theaccountingpolicies setoutbelowhavebeenapplied consistently toallperiodspresented in thesefinancialstatements,andhavebeenappliedconsistentlybyGroupentities(unlessotherwisespecifiedinthenotebelowonchangesinaccountingpolicies).TheaccountingpoliciesdisclosedfortheconsolidatedfinancialstatementsapplyequallytotheBank’sseparatefinancialstatementsunlessotherwisespecified.Certaincomparativeamounts for theGrouphavebeen restatedasa resultof thecorrectionofapriorperioderror.

(a) Changes in accounting policies TheGrouphasadoptedthefollowingrelevantnewstandards,includinganyconsequentialamendmentsto

otherstandards,whichwereeffectiveforthefinancialyearbeginningon1January2020:

Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide

anumberof reliefs,whichapply toall hedging relationships thataredirectlyaffectedby interest ratebenchmark reform. Ahedging relationship isaffected if the reformgives rise touncertaintyabout thetimingand/oramountof benchmark-basedcashflowsof thehedged itemor thehedging instrument.TheseamendmentshavenoimpactontheconsolidatedfinancialstatementsoftheGroupasitdoesnothaveanyinterestratehedgerelationships.

Interest Rate Benchmark Reform – Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16IFRIC

23: IBORreformPhase2)whichiseffectiveforannualperiodsbeginningonorafter1January2021withearlieradoptionpermitted.

3. Significant accounting policies (continued)

Definition of Material - Amendments to IAS 1 and IAS 8, effective for annual periods beginning on or after 1 January 2020.

InOctober2018,theIASBissuedamendmentstoIAS1PresentationofFinancialStatementsandIAS8toalignthedefinitionof‘material’acrossthestandardsandtoclarifycertainaspectsofthedefinition.Thenewdefinitionstatesthat,’Informationismaterialifomitting,misstatingorobscuringitcouldreasonablybeexpectedtoinfluencedecisionsthattheprimaryusersofgeneralpurposefinancialstatementsmakeonthebasisofthosefinancialstatements,whichprovidefinancialinformationaboutaspecificreportingentity.’Theamendmentsclarifythatmaterialitywilldependonthenatureormagnitudeofinformation,eitherindividuallyorincombinationwithotherinformation,inthecontextofthefinancialstatements.Amisstatementofinformationismaterialifitcouldreasonablybeexpectedtoinfluencedecisionsmadebytheprimaryusers.Theseamendmentshadnoimpactontheconsolidatedfinancialstatementsof,noristhereexpectedtobeanyfutureimpactto,theGroup.

Amendments to IFRS 3: Definition of a Business TheamendmenttoIFRS3BusinessCombinationsclarifiesthattobeconsideredabusiness,anintegrated

setofactivitiesandassetsmustinclude,ataminimum,aninputandasubstantiveprocessthat,together,significantlycontribute to theability tocreateoutput.Furthermore, itclarifies thatabusinesscanexistwithout includingallof the inputsandprocessesneededtocreateoutputs.TheseamendmentshadnoimpactontheconsolidatedfinancialstatementsoftheGroup,butmayimpactfutureperiodsshouldtheGroupenterintoanybusinesscombinations.

(b) Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreigncurrenciesatthereportingdatearetranslatedintothefunctionalcurrencyatthespotexchangerateatthatdate.Theforeigncurrencygainorlossonmonetaryitemsisthedifferencebetweentheamortisedcostinthefunctionalcurrencyatthebeginningoftheyear,adjustedforeffectiveinterestandpaymentsduringtheyear,andtheamortisedcostintheforeigncurrencytranslatedatthespotexchangerateattheendoftheyear.

Non-monetaryassetsandliabilitiesthataremeasuredatfairvalueinaforeigncurrencyaretranslated

intothefunctionalcurrencyatthespotexchangerateatthedateonwhichthefairvalueisdetermined.Non-monetaryitemsthataremeasuredbasedonhistoricalcostinaforeigncurrencyaretranslatedusingthespotexchangerateatthedateofthetransaction.

Foreigncurrencydifferencesarisingontranslationarerecognisedinprofitorloss. (c) Interest Interest income and expense are recognised in profit or loss using the effective interest method. The

effectiveinterestrateistheratethatexactlydiscountstheestimatedfuturecashpaymentsandreceiptsthroughtheexpectedlifeofthefinancialassetorliability(or,whereappropriate,ashorterperiod)tothecarryingamountofthefinancialassetorliability.Whencalculatingtheeffectiveinterestrate,theGroupestimates futurecashflowsconsideringall contractual termsof thefinancial instrument,butnot futurecredit losses. The calculationof theeffective interest rate includesall feesandpointspaidor receivedthatareanintegralpartoftheeffectiveinterestrate.Transactioncostsincludeincrementalcoststhataredirectlyattributabletotheacquisitionorissueofafinancialassetorliability.

Interestincomeandexpensepresentedinprofitorlossinclude: - interestonfinancialassetsandfinancialliabilitiesmeasuredatamortisedcostcalculatedonan

effective interest rate basis; and - interestoninvestmentsecuritiesmeasuredatfairvaluethroughothercomprehensiveincome

calculatedonaneffectiveinterestbasis.

66 67







(c) Interest Interest incomeandexpenseonall tradingassetsand liabilitiesare considered tobe incidental to the

Group’stradingoperationsandarepresentedtogetherwithallotherchangesinthefairvalueoftradingassetsandliabilitiesinnettradingincome.

Interest in suspense Ifthereareanyrecoveriesonstage3loans,anycontractualinterestearnedwhiletheassetwasinstage

3isrecognisedinthecreditimpairmentline.Nostage3assetscuredduringtheyearwhereinterestwaspreviouslysuspended.

(d) Fees and commission Feesandcommissionincomethatareintegraltotheeffectiveinterestrateonafinancialassetorliability

are included in themeasurementof theeffective interest rate.Feesandcommission incomeconsistsofincomefromfiduciaryactivities,commissiononinsurancebrokerageactivitiesandotherfeeswhichincludesplacementfeesandsyndicationfeeswhicharerecognisedastherelatedservicesareperformed.Whenaloancommitmentisnotexpectedtoresultinthedraw-downofaloan,therelatedloancommitmentfeesarerecognisedonastraight-linebasisoverthecommitmentperiod.

Feesandcommissionexpensesrelatemainlytotransactionandservicefees,whichareexpensedastheservicesarerendered.

Thedeterminationoftheservicesperformedforthecustomer,thetransactionprice,andwhentheservicesarecompleteddependsonthenatureoftheproductwiththecustomer.Themainconsiderationsonincomerecognitionbyproductareasfollows:

Transaction Banking The Bank recognises fee income associated with transactional trade, cashmanagement and custody

activitiesatthepointintimetheserviceisprovided.TheBankrecognisesincomeassociatedwithtradecontingentriskexposures(suchaslettersofcreditandguarantees)andperiodiccustodyactivitiesovertheperiodinwhichtheserviceisprovided.

Paymentoffeesisusuallyreceivedatthesametimetheserviceisprovided.Insomecases,lettersofcredit

andguaranteesissuedbytheBankhaveannualupfrontpremiums,whichareamortisedonastraight-linebasistofeeincomeovertheyear.

Financial Markets and Corporate Finance TheBankrecognisesfeeincomeatthepointintimetheserviceisprovided.Feeincomeisrecognisedfor

asignificantnon-lendingservicewhenthetransactionhasbeencompletedandthetermsofthecontractwiththecustomerentitletheBanktothefee.Feesareusuallyreceivedshortlyaftertheserviceisprovided.

Insurance Brokerage Forcommissiononbrokerageactivities,customersareentitledtoapro-ratarefundofinsurancepremiums

paid in advance if their loans are early settled.As a result, a portion of the commission onbrokerageactivitiesmayneedtoberefunded.Refundoncommissionearnedontheseinsurancepremiumscollectedareaccountedforasvariableconsideration.Thecommissionincomeisestimated,andrecognisedonlytotheextentthatitishighlyprobablethatasignificantreversalofrevenuewillnotoccur(theconstraint).Theamountreceivedbutnotrecognisedasrevenueisaccountedforasaclaw-backliability,untilsuchtimeasthepremiumsarerefundedortheconstraintisremoved.Clawbackliabilityisincludedinotherliabilitiesnote(27.2).


(e) Net trading income Nettradingincomecomprisesforeigncurrencygainsandlosseswhichareincludedintheprofitorlossin

theperiodtheyarise. (f) Dividend income Dividendincomeisrecognisedwhentherighttoreceivedividendincomeisestablished.Usuallythisisthe

ex-dividenddateforquotedequitysecurities.Thedividendincomeformspartofrevenue. (g) Loans and advances Loansandadvancescaptionsinthestatementoffinancialpositionincludeloansandadvancesmeasured

atamortisedcost,theyareinitiallymeasuredatfairvalueplusincrementaldirecttransactioncosts,andsubsequentlyattheiramortisedcostusingtheeffectiveinterestmethod.Includedinloansandadvancesareloansandadvancestobanks,advancestocustomersandinvestmentsecurities.WhentheGrouppurchasesafinancialassetandsimultaneouslyentersintoanagreementtoreselltheasset(orasubstantiallysimilarasset)atafixedpriceonafuturedate(“reverserepo”or“stockborrowing”),thearrangementisaccountedforasaloanoradvance.

(h) Financial instruments TheGroupclassifiesitsfinancialassetsintothefollowingmeasurementcategories:a)amortisedcostb)

fairvaluethroughothercomprehensiveincomeandc)fairvaluethroughprofitorloss.Financialliabilitiesareclassifiedatamortisedcostorheldatfairvaluethroughprofitor loss.Managementdeterminestheclassificationofitsfinancialassetsandliabilitiesatinitialrecognitionor,whereappropriate,atthetimeofreclassification.TheGrouppolicyfor‘Regularwaypurchaseorsale’ofafinancialasset(otherthanloansandreceivables)shallbeaccountedbasedontradedateaccounting.

Financial assets held at amortised cost and fair value through other comprehensive income (FVOCI) Debtinstrumentsheldatamortisedcostorheldatfairvaluethroughothercomprehensiveincome(FVOCI)

havecontractualtermsthatgiverisetocashflowsthataresolelypaymentsofprincipalandinterest(SPPIcharacteristics).Principalisthefairvalueofthefinancialassetatinitialrecognitionbutthismaychangeoverthelifeoftheinstrumentasamountsarerepaid.Interestconsistsofconsiderationforthetimevalueofmoney,forthecreditriskassociatedwiththeprincipalamountoutstandingduringaparticularperiodandforotherbasiclendingrisksandcosts,aswellasaprofitmargin.

In assessing whether the contractual cash flows have SPPI characteristics, the Group considers the

contractual terms of the instrument. This includes assessing whether the financial asset contains acontractualtermthatcouldchangethetimingoramountofcontractualcashflowssuchthatitwouldnotmeetthiscondition.Inmakingtheassessment,theGroupconsiders:

Contingenteventsthatwouldchangetheamountandtimingofcashflows; Leverage features; Prepaymentandextensionterms; TermsthatlimittheGroup’sclaimtocashflowsfromspecifiedassets(e.g.non-recourseassetarrangements);

and Featuresthatmodifyconsiderationofthetimevalueofmoney(e.g.periodicalresetofinterestrates). WhetherfinancialassetsareheldatamortisedcostoratFVOCIdependontheobjectivesofthebusiness

modelsunderwhichtheassetsareheld.AbusinessmodelreferstohowtheGroupmanagesfinancialassetstogeneratecashflows.

68 69







(h) Financial instruments (continued)

Financial assets held at amortised cost and fair value through other comprehensive income (FVOCI) (continued)

TheGroupmakesanassessment of the objective of a businessmodel inwhichanasset is heldat theindividual productbusiness line, andwhereapplicablewithinbusiness linesdependingon theway thebusinessismanagedandinformationisprovidedtomanagement.Factorsconsideredinclude:

• HowtheperformanceoftheproductbusinesslineisevaluatedandreportedtotheGroup’s

management; • Howmanagersofthebusinessmodelarecompensated,includingwhethermanagementis

compensatedbasedonthefairvalueofassetsorthecontractualcashflowscollected; • Therisksthataffecttheperformanceofthebusinessmodelandhowthoserisksaremanaged;and • Thefrequency,volumeandtimingofsalesinpriorperiods,thereasonsforsuchsalesand

expectationsaboutfuturesalesactivity. FinancialassetswhichhaveSPPIcharacteristicsandthatareheldwithinabusinessmodelwhoseobjective

istoholdfinancialassetstocollectcontractualcashflows(“holdtocollect”)arerecordedatamortisedcost. Conversely, financial assetswhich have SPPI characteristics but are heldwithin a businessmodelwhoseobjectiveisachievedbybothcollectingcontractualcashflowsandsellingfinancialassets(“holdtocollectandsell”)areclassifiedasheldatFVOCI.

Bothaholdtocollectbusinessmodelandaholdtocollectandsellbusinessmodelinvolveholdingassetsto

collectthecontractualcashflows.However,thebusinessmodelsaredistinctbyreferencetothefrequencyandsignificancethatassetsalesplayinmeetingtheobjectiveunderwhichaparticulargroupoffinancialassetsismanaged.Holdtocollectbusinessmodelsarecharacterisedbyassetsalesthatareincidentaltomeetingtheobjectivesunderwhichagroupofassetsismanaged.Salesofassetsunderaholdtocollectbusinessmodelcanbemadetomanageincreasesincreditriskoffinancialassetsbutsalesforotherreasonsshouldbeinfrequentorinsignificant.

Cashflowsfromthesaleoffinancialassetsunderaholdtocollectandsellbusinessmodelbycontrastare

integraltoachievingtheobjectivesunderwhichaparticulargroupoffinancialassetsaremanaged.ThismaybethecasewherefrequentsalesoffinancialassetsarerequiredtomanagetheGroup’sdailyliquidityrequirementsortomeetregulatoryrequirementstodemonstrateliquidityoffinancialinstruments.Salesofassetsunderholdtocollectandsellbusinessmodelsarethereforebothmorefrequentandmoresignificantinvaluethanthoseundertheholdtocollectmodel.

Designated at fair value through profit or loss Financialassetsandliabilitiesmaybedesignatedatfairvaluethroughprofitorlosswhenthedesignation

eliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldotherwisearisefrommeasuringassetsorliabilitiesonadifferentbasis(accountingmismatch).



Designated at fair value through profit or loss (continued) Financialliabilitiesmayalsobedesignatedatfairvaluethroughprofitorlosswheretheyaremanagedon

afairvaluebasisorhaveanembeddedderivativewheretheGroupisnotabletoseparatetheembeddedderivativecomponent.

Financial liabilities held at amortised cost Financial liabilities that are not financial guarantees or loan commitments and that are not classified

asfinancial liabilitiesheldatfairvaluethroughprofitor lossareclassifiedasfinancial liabilitiesheldatamortisedcost.

Financial guarantee contracts and loan commitments TheGroupissuesfinancialguaranteecontractsandloancommitmentsinreturnforfees.Underafinancial

guarantee contract, theGroupundertakes tomeeta customer’sobligationsunder the termsofadebtinstrumentifthecustomerfailstodoso.Loancommitmentsarefirmcommitmentstoprovidecreditunderpre-specifiedtermsandconditions.Financialguaranteecontractsandloancommitmentsissuedatbelowmarket interest rates are initially recognised as liabilities at fair value,while financial guarantees andloancommitmentsissuedatmarketratesarerecordedoffbalancesheet.Subsequently,theseinstrumentsaremeasuredatthehigheroftheexpectedcreditlossprovision,andtheamountinitiallyrecognisedlessthecumulativeamountof incomerecognised inaccordancewiththeprinciplesof IFRS15RevenuefromContractswithCustomers.

Debt investment securities Debtinvestmentsecuritiesareinitiallyrecognisedandsubsequentlymeasuredatfairvaluethroughother

comprehensive income. The Group establishes fair value by using valuation techniques. These includethe use of recent arm’s length transactions, discounted cash flow analysis, option pricingmodels andother valuation techniques commonlyusedbymarketparticipants.Onderecognition,gainsand lossesaccumulatedinothercomprehensiveincome(OCI)arereclassifiedtoprofitorloss.

Fair value of financial assets and liabilities Fairvalue is thepricethatwouldbereceivedtosellanassetorpaidtotransfera liability inanorderly

transactionbetweenmarketparticipantsatthemeasurementdateintheprincipalmarketfortheassetorliability,orintheabsenceofaprincipalmarket,themostadvantageousmarkettowhichtheGrouphasaccessatthedate.ThefairvalueofaliabilityincludestheriskthattheBankwillnotbeabletohonouritsobligations.

The fair value of financial instruments is generally measured on the basis of the individual financial

instrument.However,whenagroupoffinancialassetsandfinancial liabilities ismanagedon thebasisofitsnetexposuretoeithermarketriskorcreditrisk,thefairvalueofthegroupoffinancialinstrumentsismeasuredonanetbasis.

70 71








Financial liabilities designated at fair value through profit or loss Financialliabilitiesdesignatedatfairvaluethroughprofitorlossareheldatfairvalue,withchangesinfair

valuerecognisedinthenettradingincomelineintheprofitorloss,otherthanthatattributabletochangesincreditrisk.Fairvaluechangesattributabletocreditriskarerecognisedinothercomprehensiveincomeandrecordedinaseparatecategoryofreservesunlessthisisexpectedtocreateorenlargeanaccountingmismatch, inwhichcasetheentirechangeinfairvalueofthefinancial liabilitydesignatedatfairvaluethroughprofitorlossisrecognisedinprofitorloss.

Modified financial instruments Financialassetsandfinancial liabilitieswhoseoriginalcontractualtermshavebeenmodified, including

those loans subject to forbearance strategies, are modified instruments. Modifications may includechangestothetenor,cashflowsandorinterestratesamongotherfactors.

Wherederecognitionoffinancialassetsisappropriate,thenewlyrecognisedresidualloansareassessed

todeterminewhethertheassetsshouldbeclassifiedasPurchasedorOriginatedCredit Impairedassets(POCI).

Where derecognition is not appropriate, the gross carrying amount of the applicable instruments is

recalculatedasthepresentvalueof therenegotiatedormodifiedcontractualcashflowsdiscountedattheoriginaleffectiveinterestrate(orcredit-adjustedeffectiveinterestrateforPOCIfinancialassets).Thedifferencebetweentherecalculatedvaluesandthepre-modifiedgrosscarryingvaluesoftheinstrumentsarerecordedasamodificationgainorlossintheprofitorloss.

Gainsandlossesarisingfrommodificationsforcreditreasonsarerecordedaspartofcreditimpairment.Modificationgainsand lossesarisingfromnon-credit reasonsforfinancialassetsarerecognisedwithinincome.Modificationgainsandlossesarisingonfinancialliabilitiesarerecognisedwithinincome.

Derecognition of financial instruments

Financial assets

Financial assets arederecognisedwhen the rights to receive cashflows from thefinancial assets haveexpiredorwheretheGrouphastransferredsubstantiallyallrisksandrewardsofownership.IfsubstantiallyalltherisksandrewardshavebeenneitherretainednortransferredandtheGrouphasretainedcontrol,theassetscontinuetoberecognisedtotheextentoftheGroup’scontinuinginvolvement.

Where financial assets have been modified, the modified terms are assessed on a qualitative and

quantitative basis to determine whether a fundamental change in the nature of the instrument hasoccurred,suchaswhetherthederecognitionofthepre-existinginstrumentandtherecognitionofanewinstrumentisappropriate.

Onderecognitionofafinancialasset, thedifferencebetween thecarryingamountof theasset (or the

carryingamountallocated to theportionof theassetderecognised)and the sumof theconsiderationreceived(includinganynewassetobtainedlessanynewliabilityassumed)andanycumulativegainorlossthathadbeenrecognisedinothercomprehensiveincomeisrecognisedinprofitorlossexceptforequityinstrumentselectedFVOCIandcumulativefairvalueadjustmentsattributabletothecreditriskofaliabilitythatareheldinothercomprehensiveincome.



Financial liabilities Financialliabilitiesarederecognisedwhentheyareextinguished.Afinancialliabilityisextinguishedwhen

theobligationisdischarged,cancelledorexpiresandthisisevaluatedbothqualitativelyandquantitatively.However,whereafinancial liabilityhasbeenmodified, it isderecognised if thedifferencebetween themodifiedcashflowsandtheoriginalcashflowsismorethan10percent.

Reclassifications Financialliabilitiesarenotreclassifiedsubsequenttoinitialrecognition.Reclassificationsoffinancialassets

aremadewhen,andonlywhen,thebusinessmodelforthoseassetschanged.Suchchangesareexpectedtobeinfrequentandariseasaresultofsignificantexternalorinternalchangessuchastheterminationofalineofbusinessorthepurchaseofasubsidiarywhosebusinessmodelistorealisethevalueofpre-existingheldfortradingfinancialassetsthroughaholdtocollectmodel.

Reclassified from amortised cost Wherefinancialassetsheldatamortisedcostarereclassifiedtofinancialassetsheldatfairvaluethrough

profitor loss, thedifferencebetweenthefairvalueof theassetsat thedateof reclassificationandthepreviouslyrecognisedamortisedcostisrecognisedinprofitorloss.

Forfinancialassetsheldatamortisedcostthatarereclassifiedtofairvaluethroughothercomprehensive

income,thedifferencebetweenthefairvalueoftheassetsatthedateofreclassificationandthepreviouslyrecognisedgross carrying value is recognised in other comprehensive income.Additionally, the relatedcumulativeexpectedcreditlossamountsrelatingtothereclassifiedfinancialassetsarereclassifiedfromloanlossprovisionstoaseparatereserveinothercomprehensiveincomeatthedateofreclassification.

Reclassified from fair value through other comprehensive income Wherefinancialassetsheldatfairvaluethroughothercomprehensiveincomearereclassifiedtofinancial

assetsheldatfairvaluethroughprofitorloss,thecumulativegainorlosspreviouslyrecognisedinothercomprehensiveincomeistransferredtoprofitorloss.

Reclassified from fair value through profit or loss Wherefinancialassetsheldatfairvaluethroughprofitorlossarereclassifiedtofinancialassetsheldat

fairvaluethroughothercomprehensiveincomeorfinancialassetsheldatamortisedcost,thefairvalueatthedateofreclassificationisusedtodeterminetheeffectiveinterestrateonthefinancialassetgoingforward.Inaddition,thedateofreclassificationisusedasthedateofinitialrecognitionforthecalculationofexpectedcredit losses.Wherefinancialassetsheldatfairvaluethroughprofitor lossarereclassifiedtofinancialassetsheldatamortisedcost,thefairvalueatthedateofreclassificationbecomesthegrosscarryingvalueofthefinancialasset.

Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported on the statement of

financialpositionwhenthereisalegallyenforceablerighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasis,ortorealisetheassetandsettletheliabilitysimultaneously.

IncomeandexpensesarepresentedonanetbasisonlywhenpermittedunderIFRS,orforgainsandlosses

arisingfromagroupofsimilartransactionssuchasintheGroup’stradingactivity

72 73







(h) Financial instruments (continued) Credit impairment The Group’s expected credit loss (ECL) calculations are outputs of complexmodels with a number of

underlying assumptions. The significant judgments and estimates in determining expected credit lossinclude:

TheGroup’scriteriaforassessingiftherehasbeenasignificantincreaseincreditrisk;and Developmentofexpectedcredit lossmodels, including thechoiceof inputs relating tomacroeconomic

variables. Thecalculationofcredit-impairmentprovisionsalsoinvolvesexpertcreditjudgmenttobeappliedbythe

credit riskmanagement team based upon counterparty information they receive from various sourcesincludingrelationshipmanagersandonexternalmarketinformation.

Expected credit losses Expectedcredit lossesaredeterminedforallfinancialdebt instrumentsthatareclassifiedatamortised

costorfairvaluethroughothercomprehensiveincome,undrawncommitmentsandfinancialguarantees. Anexpectedcreditlossrepresentsthepresentvalueofexpectedcashshortfallsovertheresidualtermofa

financialasset,undrawncommitmentorfinancialguarantee.AcashshortfallisthedifferencebetweenthecashflowsthataredueinaccordancewiththecontractualtermsoftheinstrumentandthecashflowsthattheGroupexpectstoreceiveoverthecontractuallifeoftheinstrument.

Expectedcredit lossesarecomputedasunbiased,probabilityweightedamountswhicharedetermined

by evaluating a range of reasonably possible outcomes, the time value ofmoney, and considering allreasonableandsupportableinformationincludingthatwhichisforwardlooking.

Formaterialportfolios,theestimateofexpectedcashshortfallsisdeterminedbymultiplyingtheprobability

ofdefault(PD)withthelossgivendefault(LGD)withtheexpectedexposureatthetimeofdefault(EAD).Theremaybemultipledefaulteventsoverthelifetimeofaninstrument.ForlessmaterialRetailBankingloanportfolios,theGrouphasadoptedasimplifiedapproachbasedonhistoricalrollratesorlossrates.

Forward-lookingeconomicassumptionsareincorporatedintothePD,LGDandEADwhererelevantandwheretheyinfluencecreditrisk,suchasGDPgrowthrates,interestrates,housepriceindicesandcommoditypricesamongothers.TheseassumptionsareincorporatedusingtheGroup’smostlikelyforecastforarangeofmacroeconomicassumptions. These forecasts aredetermined usingall reasonableand supportableinformation,which includesboth internallydevelopedforecastsandthoseavailableexternally,andareconsistent’withthoseusedforbudgeting,forecastingandcapitalplanning.


(h) Financial instruments (continued) Expected credit losses (continued)

To account for the potential non-linearity in credit losses, multiple forward-looking scenarios areincorporatedintotherangeofreasonablypossibleoutcomesforallmaterialportfolios.Forexample,wherethere is a greater risk of downside credit losses than upside gains,multiple forward-looking economicscenariosareincorporatedintotherangeofreasonablypossibleoutcomes,bothinrespectofdeterminingthePD(andwhererelevant,theLGDandEAD)andindeterminingtheoverallexpectedcreditlossamounts.These scenariosaredeterminedusingaMonteCarloapproach centredaround theGroup’smost likelyforecastofmacroeconomicassumptions.

ThebelowtableshowstheforwardlookingassumptionsincorporatedintheECLcalculation:

2020 2021 2022 Base forecast Base forecast Base forecast GDPgrowth(real%YearonYear) -1.9 4.7 4.5 CPI(%annualaverage) 2.2 2.5 2.4 Policyrate(%) 3.75 3.75 4.25 USD-BWP 11.2 11.0 11.0

Theperiodoverwhich cash shortfalls aredetermined is generally limited to themaximumcontractualperiodforwhichtheGroupisexposedtocreditrisk.However,forcertainrevolvingcreditfacilities,whichinclude credit cards or overdrafts, the Group’s exposure to credit risk is not limited to the contractualperiod.Fortheseinstruments,theGroupestimatesanappropriatelifebasedontheperiodthattheGroupisexposedtocreditrisk,whichincludestheeffectofcreditriskmanagementactionssuchasthewithdrawalofundrawnfacilities.

For credit-impairedfinancial instruments, theestimateof cash shortfallsmay require theuseof expert

creditjudgment.Asapracticalexpedient,theGroupmayalsomeasurecreditimpairmentonthebasisofaninstrument’sfairvalueusinganobservablemarketprice.

Theestimateofexpectedcashshortfallsonacollateralisedfinancialinstrumentreflectstheamountand

timingofcashflowsthatareexpectedfromforeclosureonthecollaterallessthecostsofobtainingandsellingthecollateral,regardlessofwhetherforeclosureisdeemedprobable.

Cashflowsfromunfundedcreditenhancementsheldare includedwithinthemeasurementofexpectedcreditlossesiftheyarepartof,orintegralto,thecontractualtermsoftheinstrument(thisincludesfinancialguarantees,unfundedriskparticipationsandothernon-derivativecreditinsurance).Althoughnon-integralcreditenhancementsdonotimpactthemeasurementofexpectedcreditlosses,areimbursementassetisrecognisedtotheextentoftheexpectedcreditlossesrecorded.

Cashshortfallsarediscountedusingtheeffectiveinterestrateonthefinancial instrumentascalculated

at initial recognitionor if the instrumenthasa variable interest rate, the current effective interest ratedeterminedunderthecontract.

74 75







(h) Financial instruments (continued) Expected credit losses (continued) Cashshortfallsarediscountedusingtheeffectiveinterestrateonthefinancial instrumentascalculated

at initial recognitionor if the instrumenthasa variable interest rate, the current effective interest ratedeterminedunderthecontract.

Instrument Location of expected credit loss

Financialassetsheldatamortisedcost Lossprovisions:nettedagainstgrosscarryingvalue

FinancialassetsheldatFVOCI-Debt instruments Othercomprehensiveincome(FVOCIexpectedcredit

lossReserve)1 Loancommitments Provisionsforliabilitiesandcharges2 Financialguarantees Provisionsforliabilitiesandcharges2

1. DebtandtreasurysecuritiesclassifiedasFVOCIareheldatfairvalueinthestatementoffinancial

position. The expected credit loss attributed to these instruments is heldas a separate reservewithinOCIandisrecycledtoprofitandlossalongwithanyfairvaluemeasurementgainsorlossesheldwithinFVOCIwhentheapplicableinstrumentsarederecognised.

2. Expected credit loss on loan commitments andfinancial guarantees is recognisedas a liabilityprovision.Whereafinancialinstrumentincludesbothaloan(i.e.financialassetcomponent)andanundrawncommitment(i.e. loancommitmentcomponent),anditisnotpossibletoseparatelyidentifytheexpectedcreditlossonthesecomponents,expectedcreditlossamountsontheloancommitmentarerecognisedtogetherwithexpectedcreditlossamountsonthefinancialasset.Totheextentthecombinedexpectedcreditlossexceedsthegrosscarryingamountofthefinancialasset,theexpectedcreditlossesarerecognisedasaliabilityprovision.

Recognition

12monthsexpectedcreditlosses(Stage1)

Expected credit losses are recognised at the time of initial recognition of a financial instrument andrepresentthelifetimecashshortfallsarisingfrompossibledefaulteventsupto12monthsintothefuturefromthereportingdate.Expectedcreditlossescontinuetobedeterminedonthisbasisuntilthereiseitherasignificantincreaseinthecreditriskofaninstrumentortheinstrumentbecomescreditimpaired.Ifaninstrumentisnolongerconsideredtoexhibitasignificantincreaseincreditrisk,expectedcreditlosseswillreverttobeingdeterminedona12-monthbasis.


(h) Financial instruments (continued) Recognition (continued) Significantincreaseincreditrisk(Stage2) If a financial asset experiences a Significant Increase in Credit Risk (SICR) since initial recognition, an

expectedcreditlossprovisionisrecognisedfordefaulteventsthatmayoccuroverthelifetimeoftheasset. Significantincreaseincreditriskisassessedbycomparingtheriskofdefaultofanexposureatthereporting

date to the risk of default at origination (after taking into account the passage of time). Significantdoesnotmeanstatisticallysignificantnorisitassessedinthecontextofchangesinexpectedcreditloss.Whetherachangeintheriskofdefaultissignificantornotisassessedusinganumberofquantitativeandqualitativefactors,theweightofwhichdependsonthetypeofproductandcounterparty.Financialassetsthatare30ormoredayspastdueandnotcredit-impairedwillalwaysbeconsideredtohaveexperiencedasignificant increase incredit risk.For lessmaterialportfolioswherea loss rateor roll rateapproach isappliedtocomputeexpectedcredit loss,significant increaseincreditrisk isprimarilybasedon30dayspastdue.

Quantitativefactorsincludeanassessmentofwhethertherehasbeensignificantincreaseintheforward-

lookingprobabilityofdefault(PD)sinceorigination.Aforward-lookingPDisonethatisadjustedforfutureeconomicconditionstotheextentthesearecorrelatedtochangesincreditrisk.TheresiduallifetimePDatthereportingdateiscomparedtotheresiduallifetimePDthatwasexpectedatthetimeoforiginationforthesamepointinthetermstructureanddeterminewhetherboththeabsoluteandrelativechangebetweenthe two exceeds predetermined thresholds. To the extent that the differences between the measuresof default outlined exceed the defined thresholds, the instrument is considered to have experiencedasignificantincreaseincreditrisk.

Qualitative factorsassessed include those linked to current credit riskmanagementprocesses, suchas

lendingplacedonnon-purelyprecautionaryearlyalert(andsubjecttoclosermonitoring). A non-purely precautionary early alert account is onewhich exhibits risk or potentialweaknesses of a

material nature requiring closer monitoring, supervision, or attention by management.Weaknesses insuchaborrower’saccount,ifleftuncorrected,couldresultindeteriorationofrepaymentprospectsandthelikelihoodofbeingdowngraded. Indicatorscouldincludearapiderosionofpositionwithintheindustry,concernsovermanagement’sabilitytomanageoperations,weak/deterioratingoperatingresults,liquiditystrainandoverduebalancesamongotherfactors.

Creditimpaired(ordefaulted)exposures(Stage3) Financialassetsthatarecreditimpaired(orindefault)representthosethatareatleast90dayspastdue

inrespectofprincipaland/orinterest.Financialassetsarealsoconsideredtobecreditimpairedwheretheobligorsareunlikelytopayontheoccurrenceofoneormoreobservableeventsthathaveadetrimentalimpactontheestimatedfuturecashflowsofthefinancialasset.Itmaynotbepossibletoidentifyasinglediscreteeventbut insteadthecombinedeffectofseveraleventsmaycausefinancialassets tobecomecreditimpaired.

Evidencethatafinancialassetiscreditimpairedincludesobservabledataaboutthefollowingevents:

• Significantfinancialdifficultyoftheissuerorborrower;• Breachofcontractsuchasdefaultorapastdueevent;

76 77







(h) Financial instruments (continued) Recognition (continued)

• Foreconomicorcontractualreasonsrelatingtotheborrower’sfinancialdifficulty,thelendersoftheborrowerhavegrantedtheborrowerconcession/sthatlenderswouldnototherwiseconsider.Thiswouldincludeforbearanceactions

• Pendingoractualbankruptcyorotherfinancialreorganisationtoavoidordelaydischargeoftheborrower’sobligation/s;

• Thedisappearanceofanactivemarketfortheapplicablefinancialassetduetofinancialdifficultiesoftheborrower;and

• Purchaseororiginationofafinancialassetatadeepdiscountthatreflectsincurredcreditlosses. Irrevocable lendingcommitments toacredit impairedobligor thathavenotyetbeendrawndownare

alsoincludedwithinthestage3creditimpairmentprovisiontotheextentthatthecommitmentcannotbewithdrawn.

Lossprovisionsagainstcredit impairedfinancialassetsaredeterminedbasedonanassessmentof the

recoverablecashflowsunderarangeofscenarios,includingtherealisationofanycollateralheldwhereappropriate.Thelossprovisionsheldrepresentthedifferencebetweenthepresentvalueofthecashflowsexpected tobe recovered,discountedat the instrument’s original effective interest rate, and thegrosscarryingvalueoftheinstrumentpriortoanycreditimpairment.

Expert credit judgment ForCorporate,Institutional&CommercialBanking,borrowersaregradedbycreditriskmanagementona

creditgrading(CG)scalefromCG1toCG14.Onceaborrowerstartstoexhibitcreditdeterioration,itwillmovealongthecreditgradingscale intheperformingbookandwhenit isclassifiedasCG12thecreditassessmentandoversightoftheloanwillnormallybeperformedbyGroupSpecialAssetsManagement(GSAM).

BorrowersgradedCG12exhibitwell-definedweaknessesinareassuchasmanagementand/orperformance

but there isnocurrentexpectationofa lossofprincipalor interest.Where the impairmentassessmentindicatesthattherewillbealossofprincipalonaloan,theborrowerisgradedaCG14whileborrowersofothercreditimpairedloansaregradedCG13.InstrumentsgradedCG13orCG14areregardedasnon-performingloans,i.e.Stage3orcreditimpairedexposures.

TheGroupusesthefollowinginternalriskmappingtodeterminethecreditqualityforloans:

Corporate, Institutional and Commercial Banking Retail Banking

Credit quality description

Default grade mapping

S&P external ratings equivalent

PD range (%) Number of days past due

ECL Stages

Strong Grades1-5 AAA/AA+toBB+/BBB-

0.000–0.425 Current and past duetill29

1

Satisfactory Grades6–8

Grades9-11

BB+toBB-/B+

B+/BtoB-/CCC

0.426–2.350

2.351–15.570

Pastdue30-89 2

Higher risk Grade12 B-/CCC 15.571–50.00 Pastdue30-89 2


(h) Financial instruments (continued) Expert credit judgment (continued) ForindividuallysignificantfinancialassetswithinStage3,GSAMwillconsideralljudgmentsthathavean

impactontheexpectedfuturecashflowsoftheasset.Theseinclude:thebusinessprospects,industryandgeo-politicalclimateofthecustomer,qualityofrealisablevalueofcollateral,theGroup’s legalpositionrelativetootherclaimantsandanyrenegotiation/forbearance/modificationoptions.

Thedifferencebetweentheloancarryingamountandthediscountedexpectedfuturecashflowswillresult

inthestage3creditimpairmentamount.Thefuturecashflowcalculationinvolvessignificantjudgmentsandestimates.Asnew informationbecomesavailableand furthernegotiations/forbearancemeasuresaretakentheestimatesofthefuturecashflowswillberevised,andwillhaveanimpactonthefuturecashflowanalysis.

For financial assetswhichare not individually significant, suchas the Retail Bankingportfolio or small

business loans,whichcomprisea largenumberofhomogenous loans that share similar characteristics,statisticalestimatesandtechniquesareused,aswellascreditscoringanalysis.

RetailBankingclientsareconsideredcreditimpairedwheretheyaremore90dayspastdue.RetailBanking

products are also considered credit impaired if the borrower files for bankruptcy or other forbearanceprogramme, theborrower isdeceasedor thebusiness isclosed in thecaseofasmallbusiness,or if theborrower surrenders the collateral, or there is an identified fraud on the account. Additionally, if theaccountisunsecuredandtheborrowerhasothercreditaccountswiththeGroupthatareconsideredcreditimpaired,theaccountmaybealsobecreditimpaired.

Techniques used to compute impairment amounts usemodelswhich analyse historical repayment and

default ratesovera timehorizon.Wherevariousmodelsareused, judgment is required toanalyse theavailableinformationprovidedandselecttheappropriatemodelorcombinationofmodelstouse.

Expertcreditjudgmentisalsoappliedtodeterminewhetheranypost-modeladjustmentsarerequiredfor

creditriskelementswhicharenotcapturedbythemodels. Modified financial instruments Wheretheoriginalcontractualtermsofafinancialassethavebeenmodifiedforcreditreasonsandthe

instrumenthasnotbeenderecognised,theresultingmodificationlossisrecognisedwithincreditimpairmentinprofitorlosswithacorrespondingdecreaseinthegrosscarryingvalueoftheasset.Ifthemodificationinvolveda concession that theGroupwouldnototherwise consider, the instrument is considered tobecreditimpairedandisconsideredforborne.

Expectedcreditlossformodifiedfinancialassetsthathavenotbeenderecognisedandarenotconsidered

tobecredit-impairedwillberecognisedona12-monthbasis,ora lifetimebasis, if there isasignificantincreaseincreditrisk.Theseassetsareassessedtodeterminewhethertherehasbeenasignificantincreaseincredit risksubsequenttothemodification.Although loansmaybemodifiedfornon-credit reasons,asignificantincreaseincreditriskmayoccur.

In addition to the recognition ofmodification gains and losses, the revised carrying value ofmodified

financial assetswill impact the calculation of expected credit losses, with any increase or decrease inexpectedcreditlossrecognisedwithinimpairment.

78 79







(h) Financial instruments (continued) Modified financial instruments (continued) Forborneloans Forborneloansarethoseloansthathavebeenmodifiedinresponsetoacustomer’sfinancialdifficulties.

Forbearancestrategiesassistclientswhoaretemporarilyinfinancialdistressandareunabletomeettheiroriginalcontractualrepaymentterms.Forbearancecanbeinitiatedbytheclient,theGrouporathirdpartyincludinggovernmentsponsoredprogrammesoraconglomerateofcreditinstitutions.

Forbearancemayincludedebtrestructuringsuchasnewrepaymentschedules,paymentdeferrals,tenor

extensions,interestonlypayments,lowerinterestrates,forgivenessofprincipal,interestorfees,orrelaxationofloancovenants.Forborneloansthathavebeenmodified(andnotderecognised)ontermsthatarenotconsistentwiththosereadilyavailableinthemarketand/orwheretheGrouphasgrantedaconcessioncomparedtotheoriginaltermsoftheloansareconsideredcreditimpairedifthereisadetrimentalimpactoncashflows.Themodificationlossisrecognisedinprofitorlosswithincreditimpairmentandthegrosscarryingvalueoftheloanreducedbythesameamount.

Loansthathavebeensubjecttoaforbearancemodification,butwhicharenotconsideredcreditimpaired

(not classified as CG13 or CG14), are disclosed as ‘Forborne – not credit impaired’. This may includeamendmentstocovenantswithinthecontractualterms.

Write-offsofcreditimpairedinstrumentsandreversalofimpairment Totheextentafinancialdebtinstrumentisconsideredirrecoverable,theapplicableportionofthegross

carrying value iswrittenoff against the related loanprovision. Such loansarewrittenoff after all thenecessaryprocedureshavebeencompleted,itisdecidedthatthereisnorealisticprobabilityofrecoveryandtheamountofthelosshasbeendetermined.Subsequentrecoveriesofamountspreviouslywrittenoffdecreasetheamountoftheimpairmentinprofitorloss.If,inasubsequentperiod,theamountofthecreditimpairment lossdecreasesand thedecreasecanbe relatedobjectively toaneventoccurringafter thecredit impairmentwasrecognised(suchasanimprovementinthedebtor’screditrating),thereversalisrecognisedintheprofitorloss.

Lossprovisionsonpurchasedororiginatedcreditimpairedinstruments(POCI) TheGroupmeasuresexpectedcreditlossonalifetimebasisforPOCIinstrumentsthroughoutthelifeofthe

instrument.However,expectedcreditlossisnotrecognisedinaseparatelossprovisiononinitialrecognitionforPOCI instrumentsasthelifetimeexpectedcredit loss is inherentwithinthegrosscarryingamountoftheinstruments.TheGrouprecognisesthechangeinlifetimeexpectedcreditlossesarisingsubsequenttoinitialrecognitioninprofitorlossandthecumulativechangeasalossprovision.WherelifetimeexpectedcreditlossesonPOCIinstrumentsarelessthanthoseatinitialrecognition,thenthefavourabledifferencesare recognisedas impairmentgains inprofitor loss(andas impairment losswheretheexpectedcreditlossesaregreater).

Improvementincreditrisk/curing Aperiodmayelapsefromthepointatwhichinstrumentsenterlifetimeexpectedcreditlosses(stage2or

stage3)andarereclassifiedbackto12monthexpectedcreditlosses(stage1).Forfinancialassetsthatarecredit-impaired(stage3),atransfertostage2orstage1isonlypermittedwheretheinstrumentisnolongerconsideredtobecredit-impaired.Aninstrumentwillnolongerbeconsideredcredit-impairedwhenthereisnoshortfallofcashflowscomparedtotheoriginalcontractualterms.


(h) Financial instruments (continued) Modified financial instruments (continued)

For financial assets within stage 2, these can only be transferred to stage 1 when they are no longerconsideredtohaveexperiencedasignificantincreaseincreditrisk.Wheresignificantincreaseincreditriskwasdeterminedusingquantitativemeasures,theinstrumentswillautomaticallytransferbacktostage1whentheoriginalPDbasedtransfercriteriaarenolongermet.

Where instrumentswere transferred to stage 2 due to an assessment of qualitative factors, the issues

that ledtothereclassificationmustbecuredbeforethe instrumentscanbereclassifiedtostage1.Thisincludesinstanceswheremanagementactionsledtoinstrumentsbeingclassifiedasstage2,requiringthatactiontoberesolvedbeforeloansarereclassifiedtostage1.Aforborneloancanonlyberemovedfromthedisclosure(cured)iftheloanisperforming(stage1or2)andafurthertwoyearprobationperiodismet.

Inorderforaforborneloantobecomeperforming,thefollowingcriteriahavetobesatisfied:

• Atleastayearhaspassedwithnodefaultbasedupontheforbornecontractterms• Thecustomerislikelytorepayitsobligationsinfullwithoutrealisingsecurity• Thecustomerhasnoaccumulatedimpairmentagainstamountoutstanding.

Subsequenttothecriteriaabove,afurthertwoyearprobationperiodhastobefulfilled,wherebyregular

payments are made by the customer and none of the exposures to the customer are more than 30 days past due.

Fairvalueoffinancialinstruments Fairvalue is thepricethatwouldbereceivedtosellanassetorpaidtotransfera liability inanorderly

transactionbetweenmarketparticipantsatthemeasurementdateintheprincipalor,initsabsence,themostadvantageousmarkettowhichtheGrouphasaccessatthatdate.Thefairvalueofaliabilityreflectsitsnon-performancerisk.Allfinancialinstrumentsareinitiallyrecognisedatfairvalue,whichisnormallythetransactionprice.Incertaincircumstances,theinitialfairvaluemaybebasedonavaluationtechniquewhichmay lead to the recognitionofprofitsor lossesat the timeof initial recognition.However, theseprofitsorlossescanonlyberecognisedwhenthevaluationtechniqueusedisbasedsolelyonobservablemarketinputs.

Subsequenttoinitialrecognition,someofthefinancialinstrumentsarecarriedatfairvalue,withchanges

infairvalueeitherreportedwithintheincomestatementorwithinothercomprehensiveincomeuntiltheinstrumentissoldorbecomesimpaired.

Thefairvaluesofquotedfinancialinstrumentsinactivemarketsarebasedoncurrentprices.Ifthemarket

forafinancialinstrumentisnotactive,includingforunlistedsecurities,theGroupestablishesfairvaluebyusingvaluationtechniques.Theseincludetheuseofrecentarm’slengthtransactions,discountedcashflowanalysis,optionpricingmodelsandothervaluation techniquescommonlyusedbymarketparticipants.Whererepresentativepricesareunreliablebecauseofilliquidmarkets,thedeterminationoffairvaluemayrequireestimationofcertainparameters,whicharecalibratedagainstindustrystandardsandobservablemarketdata,or theuseofvaluationmodels thatarebasedonobservablemarketdata.The fairvalueforthemajorityoftheGroup’sfinancialinstrumentsisbasedonobservablemarketpricesorderivedfromobservablemarketparameters.

Equityinvestmentsthatdonothaveobservablemarketpricesarefairvaluedbyapplyingvariousvaluation

techniques,suchasearningsmultiples,netassetsmultiples,discountedcashflows,andindustryvaluationbenchmarks. These techniques are generally applied prior to any initial public offering afterwhich anobservablemarketpricebecomesavailable.Disposalofsuchinvestmentsaregenerallybymarkettradesorprivatesales.

80 81







(h) Financial instruments (continued) IFRS 9 methodology Approachfordeterminingexpectedcreditlosses

Component Definition

Probabilityofdefault(PD) Theprobabilitythatacounterpartywilldefault,overthenext12monthsfromthereportingdate(stage1)oroverthelifetimeoftheproduct(stage2),incorporatingtheimpactofforwardlookingeconomicassumptionsthathaveaneffectonCreditRisk,suchasinterestrates,unemploymentratesandGDPforecasts.ThePDestimateswillfluctuateinlinewiththeeconomiccycle.Thelifetime(ortermstructure)PDsarebasedonstatisticalmodels,calibratedusinghistoricaldataandadjustedtoincorporateforward-lookingeconomicassumptions

LossGivenDefault(LGD) Thelossthatisexpectedtoariseondefault,incorporatingtheimpactofforward-lookingeconomicassumptionswhererelevant,whichrepresentsthedifferencebetweenthecontractualcashflowsdueandthosethatthebankexpectstoreceive.TheGroupestimatesLGDbasedonthehistoryofrecoveryratesandconsiderstherecoveryofanycollateralthatisintegraltothefinancialasset,takingintoaccountforward-lookingeconomicassumptionswhererelevant

ExposureatDefault(EAD) Theexpectedbalancesheetexposureatthetimeofdefault,takingintoaccountexpectedchangesoverthelifetimeoftheexposure.Thisincorporatestheimpactofdrawdownsoffacilitieswithlimits,repaymentsofprincipalandinterest,amortisationandprepayments

Todetermine theexpected credit loss, these componentsaremultiplied together: PD for the reference

period (up to 12monthsor lifetime) x LGDx EADanddiscounted to thebalance sheetdate using theeffective interestrateasthediscountrate. IFRS9expectedcredit lossmodelshavebeendevelopedfortheCorporate& InstitutionalBankingandCommercialBankingbusinessesatGroup level,however, thecalibration of forward-looking information is assessed at a Botswana level to take into account localmacroeconomicconditions.RetailBankingexpectedcreditlossmodelsarecountryandproductspecificgiven the local nature of the Retail Banking business. For his segment’s portfolio, loss ratemodels areapplied.Theseuseanadjustedgrosscharge-offrate,developedusingmonthlywrite-offandrecoveriesoverthepreceding12monthsandtotaloutstandingbalances.Whilethisapproachdoesnotincorporateforward-looking information, to the extent that there are significant changes in the macroeconomicforecastsanassessmentwillbecompletedonwhetheranadjustmenttothemodelledoutputisrequired.

Thefollowingprocessesareinplacetoassesstheongoingperformanceofthemodels:• Quarterlymodelmonitoring that uses recent data to compare the differences betweenmodel

predictionsandactualoutcomesagainstapprovedthresholds.• AnnualindependentvalidationsoftheperformanceofmaterialmodelsbyGroupModelValidation

(GMV);anabridgedvalidationiscompletedfornon-materialmodels.

Application of lifetime ExpectedcreditlossisestimatedbasedontheperiodoverwhichtheBankisexposedtoCreditRisk.For

themajorityofexposuresthisequatestothemaximumcontractualperiod.ForRetailBankingcreditcardsandCorporate& InstitutionalBankingoverdraft facilitieshowever, theBankdoesnot typicallyenforcethecontractualperiod,whichcanbeasshortasoneday.Asaresult,theperiodoverwhichtheBankisexposedtoCreditRiskfortheseinstrumentsreflectstheirbehaviourallife,whichincorporatesexpectationsofcustomerbehaviourandtheextenttowhichCreditRiskmanagementactionscurtailtheperiodofthatexposure.Theaveragebehavioural lifeforRetailBankingcreditcardsisbetween3and6years,and24monthsforcorporateoverdraftfacilities.


(h) Financial instruments (continued) IFRS 9 methodology (continued)

Post model adjustments

Asat31December2020,therewerenomaterialPMArelatedECLsonthebook.

Key assumptions and judgements in determining expected credit loss Incorporation of forward-looking information Theevolvingeconomicenvironment isakeydeterminantof theabilityofabank’sclients tomeet their

obligationsastheyfalldue.ItisafundamentalprincipleofIFRS9thattheprovisionsbanksholdagainstpotentialfutureCreditRisklossesshoulddependnotjustonthehealthoftheeconomytodaybutshouldalsotakeintoaccountpotentialchangestotheeconomicenvironment.Forexample, ifthebankwastoanticipateasharpslowdownintheworldeconomyoverthecomingyear, itshouldholdmoreprovisionstodaytoabsorbthecreditlosseslikelytooccurinthenearfuture.Tocapturetheeffectofchangestotheeconomicenvironment,thePDsandLGDsusedtocalculateECLincorporateforward-lookinginformationintheformofforecastsofthevaluesofeconomicvariablesandassetpricesthatarelikelytohaveaneffectontherepaymentabilityoftheBank’sclients.The‘BaseForecast’oftheeconomicisbasedonmanagement’sviewonthefive-yearoutlook,supportedbyprojectionsfromStandardCharteredPLC(Group)’sin-houseresearchteamandoutputsfromathird-partymodelthatprojectspecificeconomicvariablesandassetprices. The research team takes consensus views into consideration and senior management reviewprojectionsforsomecorelocalvariablesagainstconsensuswhenformingtheirviewoftheoutlook.

Fortheperiodbeyondfiveyears,managementutilisesthein-houseresearchviewandthird-partymodeloutputs,whichallowforareversiontolong-termgrowthratesornorms.Allprojectionsareupdatedonaquarterlybasis.

Forecast of key macroeconomic variables underlying the expected credit loss calculation TheBaseForecast,whichrepresentsthemanagement’sviewofthemostlikelyoutcome,isthattheprospects

forapathoutoftheCOVID-19crisishaveimprovedwithprogressonvaccinesandvirustreatments.Earlyinto2021,thishasraisedconfidenceovertheeconomicoutlookandisexpectedtosupporttherecoveryofeconomicactivityoverthenexttwoyears.GlobalGDPisexpectedtogrowbyaround5percentin2021,wellabove theaverageof3.7percent for the tenyearsbetween2010 to2019.However, this followsacontractionofalmost4percent in2020, theworstperformancesincetheGreatDepressionof 1929-31.Recoverywill strengthen in the secondhalfof 2021as investmentpicksuparound theworld.With theglobalrecoveryunderway,manycountriesareexpectedtobeclosetotheirforward-lookinglong-term–orfuturepotential–growthlevelsbytheendofthenexttwoyears.However,theoutlookremainshighlyuncertain.Afasterdistributionofvaccineswilllikelysupportstrongergrowth,whiledelaysanddisruptionswillholditback.Thecurrent(andanyfuture)resurgenceofthevirus inmanycountriescouldalsoforcegovernments to tighten restrictionsoneconomicactivity for longer thananticipated.The sub-Saharaneconomyisforecasttoexperienceamodestrecoveryof3.2%in2021followinganestimateddegrowthof2.6%in2020,comparingunfavourablywitha3.9%growthin2019.Supplychains,tradeandinvestmentswereseverelydisruptedforthebetterpartof2020leadingtopronouncedcurrentaccountdeficitsamongstexportingnations,Botswanaincluded.

82 83







(h) Financial instruments (continued) IFRS 9 methodology (continued) Areboundiswidelyanticipatedforthelocaleconomy,withthe2021growthratepeggedat8.8%.Much

ofthis recovery isdependantontherecoveryof theworldeconomy,awideavailabilityandefficacyofCovid-19vaccines,recoveryindiamondmarkets(demandandprices)aswellasopeningupofinternationaltravel,amongothers.TheGovernmentofBotswanahasinplaceacomprehensiveEconomicRecoveryandTransformationPlantocaptureallpossibilitiesandpropelgrowth.Therearehighexpectationsthatvaccinerolloutwillprogresswellinto2021acrossthecountryandreachthemajorityofthetargetpopulationbythethirdendoftheyear.

While thequarterlybase forecasts inform the strategicplan,onekey requirementof IFRS9 is that theassessmentofprovisionsshouldconsidernotjustonepossibleoutcomeonfutureeconomicenvironment.For example, the economymay growmore quickly or more slowly than the Base Forecast, and thesevariationswouldhavedifferent implications for theprovisions that thebank shouldhold today.As thenegativeimpactofaneconomicdownturnoncreditlossestendstobegreaterthanthepositiveimpactofaneconomicupturn,ifthebanksetsprovisionsonlyontheECLundertheBaseForecastitmightmaintainalevelofprovisionsthatdoesnotappropriatelycapturetherangeofpotentialoutcomes.Toaddressthispropertyof skewness (or non-linearity), IFRS9 requires reportedECL tobeaprobabilityweightedECLcalculatedoverarangeofpossibleoutcomes.Toassesstherangeofpossibleoutcomes,theGrouplevelmodelsimulatesasetof50scenariosaroundtheBaseForecast,calculatestheECLundereachofthemandassignsanequalweightof2percenttoeachscenariooutcome.ThesescenariosaregeneratedbyaMonteCarlosimulation,whichaddressesthechallengesofcraftingmanyrealisticalternativescenarios.Thisnaturallymeansthateachofthe50scenariosdonothaveaspecificnarrative,althoughcollectivelytheyexplorearangeofhypotheticalalternativeoutcomesfortheeconomy,includingscenariosthatturnoutbetterthanexpectedandscenariosthatamplifyanticipatedstresses.

The Base Case InBotswana,baselineassumptionisthatthelockdownandotherrestrictionsimposedbytheGovernment

tocontainthevirusareshorttermand,willthereforemateriallyeasedoffduring2021.Thebaselinealsoassumesthatglobally,theCovid-19crisisabatesprogressivelyintorestof2021,resultantly,tradelinksandsupplychainsre-open.TheBankassumesanearnormaleconomicactivitywithintheearlypartof2021leadingtoastrongreboundin2021duetoalowbaseeffectandraiseourgrowthforecastto4.7%.InflationislikelytoremainbelowtheBankofBotswana’sobjectiverange;weakgrowthandloweroilpriceswillhelp.WelowerouraverageCPIinflationforecaststo2.2%for2020and2.5%for2021.TheBankofBotswana(BoB)cutthepolicyratefurtherinQ3of2020to3.75%andweexpectittostayatthislevelthroughend-2021.Givenweakdemandfordiamonds,Botswanaisunlikelytorecordcurrentaccountsurpluses inthemediumterm.WenowexpectC/Adeficitsof4.7%,3.9%and3.1%ofGDPin2020,2021and2022.Thefiscaldeficitisalsolikelytowidenonweakerminingrevenue.Wenowexpectadeficitof6.2%inFY2021.

The Worst Case - A Slow Recovery Scenario Prevalentlockdowns TheimmediatepriorityofgovernmentsinresponsetotheCovid-19scourgehasbeentocontainitsspread,

typicallythroughlockdownsandlimitationsonmobilityofhouseholds.Thishasalreadyextractedasizeabletolloneconomicactivityinmanycountries.Intheslowrecoveryscenariothesemeasuresareassumedtobeinsufficientasmajoreconomiesexhibitincreasingnumbersofcases.Currentlesseraffectedeconomiesareassumedtostarttofollowasimilarpath,therefore,intermittentlockdownsareassumedforgreaterpartof2021,albeitwithsofterimpactcomparedto2020.Thisnecessitaterestrictionsofeconomicactivitytocoveringbasicneedsandsmallerbusinessescontinuetosuffer,withunemploymentfiguresrisingsharplyformanycountries.Cross-bordertradeishalted,andgovernmentdebt jumpstostimulatetheeconomyandkeeptheprivatesectorafloat.



ThedeepU-shapedglobalrecession Theglobaleconomyisexpectedtocontractbyalmost12%intheSlowRecoveryScenario,characterisedby

deepcontractionsinoutputin2020.Thiscompareswiththe3%contractionassumedbytheIMFfortheirbase.SCBGlobalResearchexpecttheglobaleconomytocontractbyjustover2%.

Withthelockdownextendedinthescenarioandgovernmentmeasurestosupporttheireconomiesalsoprovinginsufficient,GDPisexpectedtoremainbroadlyunchangedfromQ2levelsformanyeconomies.Therecoveryin2021willalsobemuted.WorldGDPisexpectedtogrowby3.3%in2021.Excluding2019,thiswouldbetheslowestpacesincetheglobalfinancialcrisiswhenworldGDPcontractedby0.1%in2009.ItisalsoalmosthalftheGDPgrowthof5.8%forecastbytheIMFfor2021.SCBGlobalresearchexpectanexpansionof5.4%.

DomesticStress Covid19casespersistandthereforeLockdownsandextremesocialdistancingmeasuresareintermittently

re-introduced throughout the first half of 2021. Disruptions to economic activities are prolonged. Inthis scenario,Output frommining, thecountry’seconomicanchor, isexpected todropbyat least33%.Production,particularlyforDiamondisexpectedtomateriallyslowdownwhilesalesplummet.AllsightsareheavilyimpactedduetoinabilityofbuyerstofreelytraveltoBotswanatoviewandpurchasethestone.Trade,Hotelsandrestaurantindustrieswouldslumpbyconsiderableproportions.Unemploymentshootsup,householdincomesplummetbyatleast9.5%instressduetobusinessclosuresandjobcuts.

TheCovid-19pandemiccontinuestolowerdomesticdemandpressures.Somedevelopmentshavepushedpricesdown,suchasglobaloilandcommodityprices,whichwilleventuallycontributetolowerdomesticinflation.Reduceddemandgenerallywillalsobedeflationary.Butsupplychainconstraintsandpossibleshortageswill have the opposite effect. Extreme social distancingmeasures and erosion of householdincomesarelikelytopullthedemandsideoftheequationmuchmorestrongly.

84 85








Below is a summary of macroeconomic variable assumptions adopted by management:

MacroeconomicIndicator-Base 2019A 2020F 2021F 2022F 2023F 2024F

RealGDPgrowthrate(%) 3.0

(1.9)

4.7

4.5

4.5

4.5

Inflation,CPI(%) 2.8

2.2

2.5

2.4

2.8

2.8

Policyrate 4.75

3.75

3.75

4.25

4.25

4.50

EquityIndex 5.4

(5.0)

20.0

10.0

7.5

7.5

FXrate(perUSD1.00) 10.9

11.2

11.0

11.0

11.0 11.0

HouseholdIncome 7.5

3.5

10.0

7.5

7.5

7.5

Imports(valueof) 3.3

(15.0)

15.0

10.0

10.0

10.0

Exports(valueof) (8.7)

(20.0)

5.0

15.0

10.0

10.0

MacroeconomicIndicator-Stress 2019A 2020S 2021S 2022S 2023S 2024SPolicyrate

4.75 3.75

3.75

4.00

4.25

4.50

EquityIndex 5.4

(24.4)

11.5

10.1

8.8

7.4

HouseholdIncome 7.5

(9.5)

5.2

8.6

8.3

8.1

Imports(valueof) 3.3

(28.4)

1.5

15.1

12.3

9.5

Exports(valueof) (8.7)

(40.7)

1.8

12.2

11.1

10.0

Stressseverity 1in25 1in7 1in5 1in3 1in3



Covid 19 Relief measures offered by the Bank TheBankofferedcreditreliefmeasurestoclientswhoweredemonstrablyimpactedbyCovid-19,andthe

reliefwasonlyavailableforclientswhoseexposureswereclassifiedasStage1under IFRS9. Forclientswhoseobligationswerecurrentasatdateof implementingthe reliefmeasuresandofferedapaymentholiday,interestduringthepaymentholidayperiodaccruedbutwasparkedasbrokenperiodinteresttobepaidattheendoftheloanfacility.Theinterestwasnotcapitalizedontheloanandthereforedidnotincreasetheprincipalbalanceoftheloans.Asat31December2020therewerenoloansremainingunderthereliefmeasures,whileatotalofP31,984,212(2019:Nil)ininterestwasparkedtobepaidattheendoftheloanfacilities.Ofthisamount,P13,148,162relatestoretailloansandthebalanceofP18,836,050relatestocorporateloans.

Forclientswhosefacilitieswereinarrearsasatdateoftheimplementationofthepaymentholiday,the

overdue interestwas capitalized on the principal loan balancewhile the interest for the period of thepaymentholidaywasaccruedandparkedasbrokenperiodinterestpayableattheendoftheloan.Forclientswhooptedforotherformofreliefmeasurese.g.TenorExtension,interestwaspaidbytheclientbasedonrevisedpaymentschedule.Asat31December2020,atotalofP27,185,940(2019:Nil) in interestwascapitalizedintoprincipaloutstanding,andformpartofgrossloansreported.Ofthisamount,P8,762,253relatetoretailloansandthebalanceofP18,423,687relatestocorporateloans.

ExposuresonclientswhoqualifiedforthereliefmeasureremainedclassifiedwithinStage1underIFRS9duringthetermofthecreditreliefmeasures.Clientswhofailedtohonourtheirpaymentsatexpiryofthecreditreliefmeasuresmovedtostage2andremainsubjecttoordinaryIFRS9rules.Stage2&3exposureswerenoteligibleforCovid19reliefmeasures.Formalforbearanceprogramsappliedandcontinuetoapplyaccordingly,alongwiththeassociatedordinaryIFRS9rules.

Asat31December2020,noloansqualifyingforreliefmeasureswasoutstanding,andnonehadmigrated

fromStage1tostage2.

86 87







(i) Property and equipment Recognition and measurement Itemsofpropertyandequipmentaremeasuredatcostlessaccumulateddepreciationandaccumulated

impairmentlosses.Costincludesexpendituresthataredirectlyattributabletotheacquisitionoftheasset. Buildingsaremeasuredatrevaluedamountlessrelatedaccumulateddepreciationandimpairmentlosses.

Land ismeasuredat revaluedamount. Revaluations are carried out periodically by thedirectors usingindependentvaluersontheopenmarketbasis.Thedirectorsconsiderthefairvalueoflandandbuildingseverythreeyears.Surplusesanddeficitsarisingontherevaluationoflandandbuildingsaretransferredtoorfromtherevaluationreservethroughothercomprehensiveincomeandaccumulatedinequity.Thereserveisutilisedonthesaleoftheasset.

Whensignificantpartsofanitemofpropertyandequipmenthavedifferentusefullives,theyareaccounted

forasseparateitems(majorcomponents)ofpropertyandequipment. Thegainorlossondisposalofanitemofpropertyandequipmentisdeterminedbycomparingtheproceeds

fromdisposalwiththecarryingamountoftheitemofpropertyandequipment,andarerecognisednetwithinotherincomeinprofitorloss.

Subsequent cost Thecostofreplacingapartofanitemofpropertyorequipmentisrecognisedinthecarryingamountofthe

itemifitisprobablethatfutureeconomicbenefitsembodiedwithinthepartwillflowtotheGroupanditscostcanbemeasuredreliably.Thecarryingamountofthereplacedpartisderecognised.Thecostsoftheday-to-dayservicingofpropertyandequipmentarerecognisedinprofitorlossasincurred.

Depreciation Depreciationisrecognisedinprofitorlossonastraight-linebasisovertheestimatedusefullivesofeachpart

ofanitemofpropertyandequipmentsincethismostcloselyreflectstheexpectedpatternofconsumptionof the future economic benefits embodied in the asset. The estimated useful lives for the current andcomparativeperiodsareasfollows:

Capitalworkinprogresscomprisesexpensesincurredinconstructingplantandequipmentthataredirectlyattributabletotheconstructionoftheasset.Theseitemsarenotyetavailableforuseandthereforenotdepreciated.Assetsremainincapitalworkinprogressuntiltheyhavebeenputintouseorcommissioned,whicheveristheearlierdate.Atthattimetheyaretransferredtotheappropriateclassofproperty,plantandequipmentasadditionsanddepreciated.

LeaseholdpropertiescomprisesofofficebuildingsandATMs.


(i) Property and equipment Repairs and maintenance Repairsandmaintenancecostsarerecognisedinprofitorlossduringthefinancialperiodinwhichthese

costsareincurred.Thecostofamajorrenovationisincludedinthecarryingamountoftherelatedassetwhen it is probable that future economic benefits in excess of themost recently assessed standard ofperformanceof theexistingassetwillflowtothecompanyandthe renovation replacesan identifiablepartoftheasset.Majorrenovationsaredepreciatedovertheremainingusefullifeoftherelatedassetoruntilthenextmajorrenovations,whicheverperiodisshorter.

Depreciationmethods, useful lives and residual values are reassessed at each financial year-end and

adjustedifappropriate.

(j) Leases TheBankassessesatcontractinceptionwhetheracontractis,orcontains,alease.Thatis,ifthecontract

conveystherighttocontroltheuseofanidentifiedassetforaperiodoftimeinexchangeforconsideration.

Bankasalessee

TheBankappliesa single recognitionandmeasurementapproach forall leases,except for short-termleasesand leasesof low-valueassets. IFRS16 introducedasingle lesseeaccountingmodelandrequiresa lessee to recogniseassetsand liabilities forall leaseswitha termofmore than 12months,unless theunderlyingassetisoflowvaluewhichhasbeendeterminedaslessthanP50,000fortheGroup.Alesseeisrequiredtorecognisearight-of-useassetrepresentingitsrighttousetheunderlyingleasedassetandaleaseliabilityrepresentingitsobligationtomakeleasepayments.

Right-of-useassets

TheBankrecognisesright-of-useassetsatthecommencementdateofthelease(i.e.,thedatetheunderlyingassetisavailableforuse).Right-of-useassetsaremeasuredatcost,lessanyaccumulateddepreciationandimpairmentlosses,andadjustedforanyremeasurementofleaseliabilities.Thecostofright-of-useassetsincludestheamountofleaseliabilitiesrecognised,initialdirectcostsincurred,andleasepaymentsmadeatorbeforethecommencementdatelessanyleaseincentivesreceived.Right-of-useassetsaredepreciatedonastraight-linebasisovertheleaseterm.

Theright-of-useassetsarepresentedwithinNote19Property,equipmentandright-of-useasset;andaresubjecttoimpairmentinlinewiththeBank’spolicyasdescribedinNote3(l)-Impairmentofnon-financialassets.

Leaseliabilities

At thecommencementdateof the lease, theBank recognises lease liabilitiesmeasuredat thepresentvalueofleasepaymentstobemadeovertheleaseterm.Theleasepaymentsincludefixedpayments(lessanyleaseincentivesreceivable),variableleasepaymentsthatdependonanindexorarate,andamountsexpectedtobepaidunderresidualvalueguarantees.TheleasepaymentsalsoincludetheexercisepriceofapurchaseoptionreasonablycertaintobeexercisedbytheBankandpaymentsofpenaltiesforterminatingthelease,iftheleasetermreflectsexercisingtheoptiontoterminate.Variableleasepaymentsthatdonotdependonanindexoraratearerecognisedasexpensesintheperiodinwhichtheeventorconditionthattriggersthepaymentoccurs.

Leaseliabilitiesarereportedinotherliabilitiesonnote27.2.

Land (owned) Leasehold properties Buildings Equipment Motor vehicles Furniture, fixtures and fittings

Land is not depreciated Shorter of useful life / period of lease 50 years 3 - 5 years 3 years 7 – 10 years

88 89






3. Significant accounting policies (continued) Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share

of identifiable net assets of the acquired subsidiary at the date of acquisition. Goodwill included inthe intangibleassets isassessedateach reportingdate for impairmentandmeasuredatcost lessanyaccumulatedimpairmentlosses.Gainsandlossesatdisposalofanentityincludethecarryingamountofgoodwillrelatingtotheentitysold.

Goodwill is allocated to cashgeneratingunits for thepurposeof impairment testing.Cashgenerating

units (CGU) represent the lowest levelwithin theGroupatwhich thegoodwill ismonitored for internalmanagementpurposes.ThesearesmallerthantheGroup’sreportablesegments.Therecoverableamountof the CGUwas based on value in use, estimated using discounted cash flows (budget). Five years ofcashflowswere included in the discounted cashflowmodel. TheCGUwas taken to beCorporate andInstitutionalBanking(CIB)segment.ThiswasmadebyconsideringthevalueaddthataccruedtoCIBasaresultofacquisitionofthecustodybusiness.AGDPcontractionof810bpswouldcausetheCGU’scarryingamounttoequalitsrecoverableamount.Thekeyassumptionsusedintheestimationoftherecoverableamountaresetoutbelow;

TherecoverableamountoftheCGU,P526masat31December2020,hasbeendeterminedbasedonavalueinusecalculationusingcashflowprojectionsfromfinancialbudgetsapprovedbyseniormanagementcoveringafive-yearperiod.ThecarryingamountoftheCGUasat31DecemberwasanegativeP3622m.Asaresultoftheanalysis,thereisheadroomofP4149mandmanagementdidnotidentifyanimpairmentfortheCGU.

Acquired intangibles Acquiredintangiblescompriseofcustomerrelationships,capitalisedsoftwareandworkinprogress.Atthe

dateofacquisitionofasubsidiary,intangibleassetsthatarisefromcontractualorotherlegalrightsarecapitalisedandincludedwithinthenet identifiableassetsacquired.Theseintangibleassetsareinitiallymeasuredat fair value,which reflectsmarketexpectationsof theprobability that the futureeconomicbenefitsembodiedintheassetwillflowtotheentityandareamortisedonthebasisoftheirexpectedusefullives;withtheexceptionofworkinprogresswhichisnotamortised.Ateachreportingdatetheseassetsareassessedforindicatorsofimpairment.Intheeventthattheasset’scarryingamountisdeterminedtobegreaterthanitsrecoverableamount,theassetiswrittendownimmediately.

Amortisation Amortisationmethods,usefullivesandresidualvaluesarereviewedateachreportingdateandadjustedif

appropriate.Amortisationisbasedonthecostofanassetlessitsresidualvalue.Amortisationisrecognisedinprofitor lossovertheestimateduseful livesof intangibleassets,otherthangoodwill,fromthemonththattheyareavailableforuse.Theestimatedusefullifeofsoftwareis8yearsand10yearsforcustomerrelationships.

In percent Discount rate (weighted average cost of capital) GDP growth rates Effective tax rate

2021 6.42 4.7 22

20206.42-1.9022

20195.914.3022


(k) Impairment of non-financial assets ThecarryingamountsoftheGroup’snon-financialassetsarereviewedateachreportingdatetodetermine

whether there isany indicationof impairment. Ifanysuch indicationexists thentheasset’s recoverableamountisestimated.Goodwillistestedannuallyforimpairment.

Forimpairmenttesting,assetsaregroupedintothesmallestgroupofassetsthatgeneratescashinflowsfrom continuing use that is largely independent of the cash inflows of other assets or cashgeneratingunits.Goodwillarisingfrombusinesscombinationisallocatedtocashgeneratingunitsorgroupsofcashgeneratingunitsthatareexpectedtobenefitfromsynergiesofthecombination.

The‘recoverableamount’ofanassetorcashgeneratingunitisassessedasthegreaterofitsvalueinuseanditsfairvaluelesscoststosell.‘Valueinuse’isbasedontheestimatedfuturecashflows,discountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetorcashgeneratingunit.

An impairment loss is recognised ifthecarryingamountofanassetorcashgeneratingunitexceeds itsrecoverableamount.

TheGroup’scorporateassetsdonotgenerateseparatecashinflowsandareusedbymorethanonecashgeneratingunit.Corporateassetsareallocatedtocashgeneratingunitsonareasonableandconsistentbasisandtestedforimpairmentaspartofthetestingofthecashgeneratingunittothecorporateassetsareallocated.

Impairmentlossesarerecognisedinprofitorloss.Theyareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtothecashgeneratingunits,andthentoreducethecarryingamountsoftheotherassetsinthecashgeneratingunitsonaproratabasis.Animpairmentlossinrespectofgoodwillisnotreversed.Forotherassets,animpairmentlossisreversedonlytotheextentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortisation,ifnoimpairmentlosshadbeenrecognised.

(l) Stated capital Ordinarysharesareclassifiedasequity.Statedcapitalisrecognisedatthefairvalueoftheconsideration

received.Incrementalcostsdirectlyattributabletotheissueofordinaryshares,netofanytaxeffects,arerecognisedasadeductionfromtheinitialmeasurementoftheequityinstrument

(m) Capital contribution ThecapitalcontributionispartoftheGroup’ssourcesoffunding.TheGroupclassifiescapitalcontributions

asequityorfinancialliabilities,inaccordancewiththesubstanceofthecontractualtermsoftheinstruments,thereisnocontractualobligationtodelivercashandatanyeventthatwouldrequiretheBanktodelivercash isat itsoption.TheGroup’s capital securitiesare redeemableat theoptionof the issuer,andarethereforeclassifiedasequity.

90 91







(n) Taxation Incometaxexpensecomprisescurrentanddeferredtax.Currenttaxanddeferredtaxarerecognisedinprofit

orlossexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequityorinothercomprehensiveincome.

Currenttax is theexpectedtaxpayableor refundableonthetaxable incomeor loss fortheyear,using

taxratesenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.Currenttaxismeasuredusingtaxratesenactedorsubstantiallyenactedatthereportingdate.

Deferredtax is recognised in respectof temporarydifferencesbetweenthecarryingamountsofassets

andliabilitiesforfinancialreportingpurposesandtheamountsusedfortax.Deferredtaxisnotrecognisedforthefollowingtemporarydifferences:thosearisingontheinitialconsiderationofgoodwill;differencesarisingontheinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombinationandthataffectsneitheraccountingnortaxableprofitsorlosses;anddifferencesrelatingtoinvestmentsinsubsidiariestotheextentthatitisprobablethattheywillnotreverseintheforeseeablefuture.

Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtothetemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedatthereportingdate.Deferredtaxassetsandliabilitiesareoffset ifthere isa legallyenforceablerighttooffsetcurrenttaxation liabilities against current tax assets, and they relate to income taxes levied by the same taxauthorityonthesametaxableentity,orondifferenttaxentities,buttheyintendtosettlecurrentliabilitiesandassetsonanetbasisortheirtaxassetsandliabilitieswillberealisedsimultaneously.

Adeferredtaxassetisrecognisedforunusedtaxlosses,taxcreditsanddeductibletemporarydifferences

to theextent that it isprobable that futureprofitswillbeavailableagainstwhich theycanbeutilised.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

WithholdingtaxthatarisefromthedistributionofdividendsbytheBankarerecognisedasaliabilitytopaytherevenueauthorityatthesametimethedividendisrecognised.Withholdingtaxof7.5%ispayableonthegrossvalueofthedividendspaid,therate is5%forUKshareholdersundertheDoubleTaxationAgreement.Effective1April2021,taxongrossdividendswillbewithheldatanincreasedrateof10%.

(o) Employee benefits Retirement benefits The Group operates a defined contribution pension plan. Contributions by the Group to the plan are

recognisedinprofitorloss.Theplanisexternallyadministered,thereforethereisnoliabilitytotheGroupapartfromthemonthlycontributions.Therearenopost-retirementmedicalfundingobligations.

Short term employee benefits Shorttermemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedasthe

relatedserviceisprovided. Aprovisionisrecognisedfortheamountexpectedtobepaidundershorttermcashbonusorprofitsharing

class if theGrouphasapresent legalor constructiveobligation topay thisamountasa resultofpastserviceprovidedbytheemployeeandtheobligationcanbeestimatedreliably.

Accrualsrelatingtoshorttermemployeebenefitsareincludedinothernon-financialliabilities.

Other staff costs Otherstaffcostsmainlyconsistsofstaffsubsidyonstaffloanschargedasaperiodiccostbasedonthe

differentialbetweenthemarketinterestrateandstaffrateovertheperiodofservice.


(p) Earnings per share TheGroup presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS

is calculated by dividing the profit attributable to ordinary shareholders of the Bank by theweightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitattributabletotheordinaryshareholdersandtheweightedaveragenumberofordinarysharesoutstandingfortheeffectsofalldilutivepotentialordinaryshares.Throughoutthefinancialyear,therewerenodilutivepotentialshareswhichwouldresultinDilutedEPSbeingdifferenttoEPS.

(q) New standards and interpretations Anumberofnewstandards,amendmentstostandardsandinterpretationsthatarenotyeteffectivefor

theyearended31December2020havenotbeenapplied inpreparing thesefinancial statements.TheGroupdoesnotplantoadoptthesestandardsearly.Thesewillbeadoptedintheperiodthattheybecomemandatory. The group has only considered the below new standards and interpretations relevant totheGroup.The followingaccountingstandardsnotyeteffectiveandthesearenotexpectedtohaveasignificantimpactonthefinancialsstatementsoftheGroup.

Standard/Interpretation Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

TheBankhasnotearlyadoptedtherequirementsof‘InterestRateBenchmarkReform–Phase2Amendmentsto IFRS9, IAS39, IFRS7, IFRS4and IFRS 16’ (IBORreformPhase2)which iseffective forannualperiodsbeginningonorafter1January2021withearlieradoptionpermitted.

ThebankisstillconsideringtheadoptionofInterestRateBenchmarkReform–Phase2Amendments.

IBORreformPhase2 includesanumberof reliefsandadditionaldisclosures.ThereliefsapplyuponthetransitionofafinancialinstrumentfromanIBORtoarisk-free-rate(RFR).

Changestothebasisfordeterminingcontractualcashflowsasaresultofinterestratebenchmarkreformarerequiredasapracticalexpedienttobetreatedaschangestoafloatinginterestrate,providedthat,forthefinancialinstrument,thetransitionfromtheIBORbenchmarkratetoRFRtakesplaceonaneconomicallyequivalentbasis.

Theamendment isnotexpectedtohavean impacttotheGroupas itdoesnotcurrentlyhavehedging

relationships.

92 93







(q) New standards and interpretations not yet effective Anumberofnewstandards,amendmentstostandardsandinterpretationsthatarenotyeteffectivefor

theyearended31December2020havenotbeenapplied inpreparing thesefinancial statements.TheGroupdoesnotplantoadoptthesestandardsearly.Thesewillbeadoptedintheperiodthattheybecomemandatory.

ThegrouphasonlyconsideredthebelownewstandardsandinterpretationsrelevanttotheGroup.ThefollowingaccountingstandardsnotyeteffectiveandthesearenotexpectedtohaveasignificantimpactonthefinancialsstatementsoftheGroup.

Standard/Interpretation IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) thatwas issued in 2005. IFRS 17applies toall

typesofinsurancecontracts(i.e., life,non-life,directinsuranceandre-insurance),regardlessofthetypeofentitiesthatissuethem,aswellastocertainguaranteesandfinancial instrumentswithdiscretionaryparticipationfeatures.Afewscopeexceptionswillapply.IFRS17introducesnewaccountingrequirementsforbankingproductswithinsurancefeaturesthatmayaffectthedeterminationofwhichinstrumentsorwhichcomponentsthereofwillbeinthescopeofIFRS9orIFRS17.

IFRS17 iseffectivefor reportingperiodsbeginningonorafter 1January2023,withcomparativefiguresrequired.TheGroupiscurrentlyintheprocessofassessingtheimpactofadoptingIFRS17onitsfinancialstatements.

IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities Aspartofits2018-2020AnnualImprovementstoIFRSstandardsprocess,theIASBissuedanamendment

toIFRS9.Theamendmentclarifiesthefeesthatanentityincludeswhenassessingwhetherthetermsofanewormodifiedfinancialliabilityaresubstantiallydifferentfromthetermsoftheoriginalfinancialliability.Thesefeesincludeonlythosepaidorreceivedbetweentheborrowerandthelender,includingfeespaidor receivedbyeither theborroweror lenderon theother’sbehalf.Anentityapplies theamendment tofinancialliabilitiesthataremodifiedorexchangedonorafterthebeginningoftheannualreportingperiodinwhichtheentityfirstappliestheamendment.

Theamendmentiseffectiveforannualreportingperiodsbeginningonorafter1January2022withearlieradoption permitted. The Bank will apply the amendments to financial liabilities that are modified orexchangedonorafterthebeginningoftheannualperiodinwhichitwillfirstapplytheamendmentanddoesnotexpectthiswillresultinamaterialimpactonitsfinancialstatements.

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 Theamendmentprohibitsentitiesfromdeductingfromthecostofanitemofproperty,plantandequipment

(PP&E),anyproceedsofthesaleofitemsproducedwhilebringingthatassettothelocationandconditionnecessaryfor it tobecapableofoperating inthemanner intendedbymanagement. Instead,anentityrecognisestheproceedsfromsellingsuchitems,andthecostsofproducingthoseitems,inprofitorloss.Theamendmentiseffectiveforannualperiodsbeginningonorafter1January2022andnoimpactisexpectedonthebank’sassets.

Classification of Liabilities as Current or Noncurrent - Amendments to IAS 1 InJanuary2020,amendmentstoparagraphs69to76ofIAS1PresentationofFinancialStatementswere

issuedtospecifytherequirementsforclassifyingliabilitiesascurrentornon-current.Theamendmentsareeffectiveforannualperiodsbeginningonorafter1January2023.Theamendmentsclarify:• Whatismeantbyarighttodefersettlement• That a right to defer must exist at the end of the reporting period• Thatclassificationisunaffectedbythelikelihoodthatanentitywillexerciseitsdeferralright• Thatonlyifanembeddedderivativeinaconvertibleliabilityisitselfanequityinstrument,would

thetermsofaliabilitynotimpactitsclassification.


(q) New standards and interpretations not yet effective (continued) TheGroupiscurrentlyassessingthe impacttheamendmentswillhaveoncurrentpracticeandwhether

existingloanagreementsmayrequirerenegotiation.

Covid-19-Related Rent Concessions – Amendment to IFRS 16 On28May2020,theIASBissuedCovid-19-RelatedRentConcessions-amendmenttoIFRS16LeasesThe

amendmentsproviderelieftolesseesfromapplyingIFRS16guidanceonleasemodificationaccountingforrentconcessionsarisingasadirectconsequenceoftheCovid-19pandemic.Asapracticalexpedient,alesseemayelectnottoassesswhetheraCovid-19relatedrentconcessionfromalessorisaleasemodification.Theamendmentappliestoannualreportingperiodsbeginningonorafter1June2020.Earlierapplicationispermitted.ThisamendmentisnotexpectedtohaveanimpactontheconsolidatedfinancialstatementsoftheGroup.

(r) Other payables OtherpayablescomprisesmostlyofVATaccrualsandpayrollaccruals.Theaccountingpolicyforpayroll

relatedaccrualsissetoutin(p)employeebenefits.

4. Financial risk management 4.1 Introduction and overview The Group has exposure to the following risks from financial instruments:

• capitalrisk• credit risk• liquidityrisk• market risk• operationalrisk

TheGroup’sriskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbytheGroup,to setappropriate risk limitsandcontrols,and tomonitor risksandadhere to limits.Riskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditions,productsandservicesoffered. TheGroup, through its trainingandmanagement standardsandprocedures, aims todevelopa disciplined and constructive control environment, in which all employees understand their roles andobligations.

The Group Audit and Risk Committee is responsible for monitoring compliance with the Group’s risk

managementpoliciesandprocedures,andforreviewingtheadequacyoftheriskmanagementframeworkinrelationtotherisksfacedbytheGroup.TheGroupAuditandRiskCommitteeisassistedinthesefunctionsbymanagementaswellastheComplianceandInternalAuditdepartment.Theyundertakebothregularandad-hocreviewsofriskmanagementcontrolsandprocedures,theresultsofwhicharereportedtotheGroupAuditandRiskCommittee.

The Group implemented an enterprise management framework. The Enterprise Risk Management

Framework(“ERMF”)setsouttheBank’sapproachtoriskmanagementandthecontrolframeworkwithinwhichrisksaremanagedwiththeobjectiveofmaximisingrisk-adjustedreturnswhileremainingwithintheGroup’sriskappetite.

94 95






4. Financial risk management (continued) 4.1 Introduction and overview (continued)

TheERMF:• establishescommonprinciplesandstandardsforthemanagementandcontrolofallrisks,andtoinform

behaviouracrosstheorganisation;• providesa shared frameworkand language to improveawareness of riskmanagementprocesses and

providesclearaccountabilityandresponsibilityforriskmanagement.

Therewerenochangesfromtheprioryearinhowtheapplicablerisksaremanaged. 4.2 Credit risk CreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrument

fails to meet its contractual obligations. It arises principally from the Group’s loans and advances tocustomersandotherbanksanditsinvestmentinsecurities.Forriskmanagementreportingpurposes,theGroupconsidersandconsolidatesallelementsofcreditriskexposure(suchasindividualobligordefaultrisk,countryandsectorrisk).

For risk management purposes, credit risk arising on trading assets is managed independently; and

informationthereon isdisclosedbelow.Themarket risk in respectofchanges invalue in tradingassetsarisingfromchangesinmarketcreditspreadsappliedtodebtsecuritiesandderivativesincludedintradingassetsismanagedasacomponentofmarketrisk.Furtherdetailsareprovidedinnote4.6.

Management of credit risk (a) The Board of Directors have overall responsibility for managing credit risk. A separate Group Credit

department,reportingtotheBoard,isresponsibleformanagementoftheGroup’screditrisk,including:

- Formulating credit policies in consultationwithbusiness units, covering collateral requirements,creditassessment,riskgradingandreporting,documentaryandlegalprocedures,andcompliancewithregulatoryandstatutoryrequirements.

- Establishing theauthorisation structure for theapprovaland renewalof credit facilities. LargerfacilitiesrequireapprovalbytheHeadofCredit,withexpertinputfromGroupCreditdepartmentandtheBoardofDirectorsasappropriate.

- Reviewingandassessingcreditrisk.TheGroupCreditdepartmentassessesallcreditexposuresinexcessofdesignatedlimits,priortofacilitiesbeingcommittedtocustomersbythebusinessunitconcerned. Renewals and reviews of facilities are subject to the same review process. Limitingconcentrationsofexposuretocounterparties,geographiesandindustries(forloansandadvances),andbyissuer,creditratingband,marketliquidityandcountry(forinvestmentsecurities).

- DevelopingandmaintainingtheGroup’sriskgradingsinordertocategoriseexposuresaccordingtothedegreeofriskoffinanciallossfacedandtofocusmanagementoftheattendantrisks.Theriskgradingsystemisusedindeterminingwhereimpairmentprovisionsmayberequiredagainstspecificcreditexposures.Thecurrentriskgradingframeworkconsistsoffourteengradesreflectingvaryingdegreesofriskofdefaultandtheavailabilityofcollateralorothercreditriskmitigation.TheresponsibilityforsettingriskgradeslieswiththeGroupCreditdepartment.

4. Financial risk management (continued)

4.2 Credit risk (continued)

RiskgradesaresubjecttoregularreviewsbyGroupCreditdepartment.

- Reviewingcomplianceofbusinessunitswithagreedexposure limits, including thoseof selectedindustries,countryriskandproducttypes.RegularreportsonthecreditqualityoflocalportfoliosareprovidedtotheGroupCreditdepartmentwhomayrequireappropriatecorrective-actiontobetaken.

- Providingadvice,guidanceandspecialistskillstobusinessunitstopromotebestpracticethroughouttheGroupinthemanagementofcreditrisk.

Eachbusinessunit isrequiredtoimplementcreditpoliciesandprocedures,accordingtocreditapproval

authorities delegated. Each business unit has a Head of Credit Risk who reports on all credit relatedmatterstomanagementandtheGroupCreditCommittee.Eachbusinessunitisresponsibleforthequalityandperformanceofitscreditportfolioandformonitoringandcontrollingallcreditrisksinitsportfolios,includingthosesubjecttocentralapproval.

Business units and credit functions carry out regular assurance checks and control self-testing with

independentoversightfromCountryOperationalRiskunit.GroupInternalAuditdoescarryoutperiodicindependentauditsofthebusinessunitsandcreditprocesses.

96 97






4. Financial risk management (continued) 4.2 Credit risk (continued)

Exposure to credit risk – Group and Company

Loans Loans Invest- and and ment advances advances security to to customers banks

2020 2020 2020 Assets at amortised cost Stage Stage Stage Total Stage Stage Stage Stage Stage Stage 1 2 3 1 2 3 1 2 3 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Credit impaired: Grade13:Substandard - -214,679 214,679 - - - - - -Grade14:Loss - - - - - - - - - -Gross carrying amount - - 214,679 214,679 - - - - - - Specific-Expectedcreditlosses - -(110,249)(110,249) - - - - - -Portifolio-Expectedcreditlosses - - (12,386) (12,386) - - - - - - - - 92,044 92,044 - - - - - - Not credit impaired comprises: Grade 12-past due loans up to 90 days 01–30days 31,842 145,478 -177,320 - - - - - -31–60days 1,372 32,366 - 33,738 - - - - - -61–90days - 7,255 - 7,255 - - - - - -Gross carrying amount 33,214 185,099 - 218,314 - - - - - - Not credit impaired: Grade1-5:Strong 7,115,335 - -7,115,335 - 2,501,550 - 2,113,719 - -Grade6-8Satisfactory 714,501 10,223 -724,724 - - Grade9-11Satisfactory - 51,336 - 51,336 - - Grosscarryingamount 7,829,836 61,559 - 7,891,395 - 2,501,550 -2,113,719 - -ECLimpairmentprovision (71,068) (15,005) -(86,073) - (79) - - - - 7,791,982 231,653 92,044 8,115,680 - 2,501,471 - 2,113,719 - -

Expected credit loss on loansandadvances tobanks (note 16), investments securities (note 17), otherfinancialassets(note21)andrelatedparties(note29)andrelatedpartiesisconsideredimmaterial.

Credit impaired loans Credit impaired loans are loans and advances for which theGroup determines that there is objective

evidenceof impairmentanditdoesnotexpecttocollectallprincipalandinterestdueaccordingtothecontractualtermsofthe loan.These loansaregradedCG13andCG14 intheGroup’s internalcredit riskgradingsystem.

Not credit impaired loans Notcredit impaired loans,are those forwhichcontractual interestorprincipalpaymentsarepastdue,

buttheGroupbelievesthatspecificimpairmentisnotappropriateonthebasisofthelevelofsecurity/collateralavailableand/orthestageofcollectionofamountsowedtotheGroup.


Write off policy The Group writes off a loan or an investment debt security balance, and any related allowances for

impairmentlosses,whentheGroupCreditdepartmentdeterminesthattheloanorsecurityisuncollectible.Thisdeterminationismadeafterconsideringinformationsuchastheoccurrenceofsignificantchangesintheborrower’s/issuer’sfinancialpositionsuchthattheborrower/issuercannolongerpaytheobligation,orthatproceedsfromcollateralwillnotbesufficienttopaybacktheentireexposure.Forsmallerbalancestandardisedloans,write-offdecisionsgenerallyarebasedonaproduct-specificpastduestatus.

TheGroupholdscollateralagainstloansandadvancestocustomersintheformofmortgageinterestsover

property,otherregisteredsecuritiesoverassets,andguarantees.Estimatesoffairvaluearebasedonthevalueofcollateralassessedatthetimeofborrowing,andareupdatedannuallyforcommercialpropertiesand every three years for residential properties during the life of the loan until the loan is individuallyassessedas impaired.Collateral generally is not heldover loansandadvances tobanks, exceptwhensecuritiesareheldaspartofreverserepurchaseandsecuritiesborrowedactivity.Collateralusuallyisnotheldagainst investment securities,andnosuchcollateralwasheldat thecurrentorprevious reportingdate.

Exposure to credit Risk - Group and Company

Loans Loans Invest- and and ment advances advances security to to customers banks

2019 2019 2019 Assets at amortised cost Stage Stage Stage Total Stage Stage Stage Stage Stage Stage 1 2 3 1 2 3 1 2 3 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Creditimpaired: Grade13:Substandard - - 182,487 182,487 - - - - - -Grade14:Loss - - - - - - - - - -Gross carrying amount - - 182,487 182,487 - - - - - - Specific-Expectedcreditlosses - -(88,736) (88,736) - - - - - -Portifolio-Expectedcreditlosses - - (8,767) (8,767) - - - - - - - - 84,984 84,984 - - - - - - Not credit impaired comprises: Grade 12-past due loans up to 90 days 01–30days 18,960 2,471 538 21,968 - - - - - -31–60days - 24,108 1,347 25,455 - - - - - -61–90days - 11,629 1,021 12,650 - - - - - -Gross carrying amount 18,960 38,208 2,906 60,073 - - - - - - Not credit impaired: Grade1-5:Strong 6,746,442 - - 6,746,442 - 3,458,461 -3,073,599 - -Grade6-8Satisfactory 801,454 239,208 - 1,040,662 Grade9-11Satisfactory 13,210 64,970 - 78,180 Grosscarryingamount 7,561,106 304,178 -7,865,284 -3,458,461 -3,073,599 - -ECLimpairmentprovision (67,545) (23,569) - (91,114) - (2) - - - - 7,493,561 280,609 - 7,774,170 - 3,458,459 - 3,073,599 - - Net loans and advances 7,512,521 318,817 87,890 7,919,227 -3,458,459 -3,073,599 - -

98 99






4. Financial risk management (continued) 4.2 Maximum credit exposure

AreconciliationofchangesingrosscarryingamountandcorrespondingallowanceforECLbystageforloansandadvancestocustomers.

Stage 1 Stage 2 Stage 3 Total Gross ECL Gross ECL Gross ECL Gross ECL carrying carrying carrying carrying amount amount amount amount As at 1 January 2020 7,580,065 (67,545) 342,387 (23,569) 185,392 (97,503) 8,107,844 (188,617)TransferstoStage1 243,143 (17,314) (243,143) 17,314 - - - -TransferstoStage2 (974,297) 3,284 974,297 (3,284) - - - -TransferstoStage3 - - (59,368) - 59,368- - -Netchangeinexposures 1,058,960 (43,387)(746,059) (1,104) (93,526) 129,715 219,376 85,223ImpactonECLoftransfers - 1,414 - (1,849) - (0) - (435)Changesinriskparameters - 42,960 - (230) -(188,902) - (146,172)Recoveries - - - - - 40,865 - 40,865Exchangetranslationdifferences (44,821) 9,520 (21,455) (2,283) 63,444 (6,810) (2,832) 427At 31 December 2020 7,863,051 (71,068 ) 246,658 (15,005 ) 214,679 (122,635 ) 8,324,388 (208,708 ) As at 1 January 2019 6,858,095 (94,620) 499,613 (21,941) 306,083 (61,995) 7,663,791(178,556)TransferstoStage1 106,708 (16,406)(106,708) 16,406 - - - -TransferstoStage2 (167,348) 1,342 167,348(25,897) - 24,555 - -TransferstoStage3 - - (33,109) 149 33,109 (149) - -Netchangeinexposures 782,598 32,945 (181,851) 22,048 (156,714) (12,784) 444,032 42,209ImpactonECLoftransfers - 1,018 - (1,614) - - - (596)Changesinriskparameters - 8,154 - (12,720) - (47,130) - (51,696)Exchangetranslationdifferences 12 22 - - 9 (0) 21 22At 31 December 2019 7,580,065 (67,545 ) 345,292 (23,569 ) 182,487 (97,503 ) 8,107,844 (188,617 )

Accruedinterestreceivableonloansandadvancesisreportedinotherassets;accruedincome(Note21).

4. Financial risk management (continued) 4.2 Maximum credit exposure (continued)

Areconciliationofchangesingrosscarryingamountandcorrespondingallowanceforcontingentliabilitiesandcommitments.

Stage 1 Stage 2 Stage 3 Total Gross ECL Gross ECL Gross ECL Gross ECL carrying carrying carrying carrying amount amount amount amount Asat1January2020 4,613,597 (1,856) 504,048 (1,445) 3,106 - 5,120,751 (3,301)TransferstoStage1 799,042 (4,819)(799,042) 4,819 - - - -TransferstoStage2 (658,991) 1,818 658,991 (1,818) - - - -TransferstoStage3 - - - - - - - -Netchangeinexposures 1,615,635 (55) (110,064) 517 2,678 13 1,508,249 475ImpactonECLoftransfers - 1,900 - (939) - - - 962Changesinriskparameters - 2,674 - (1,796) - (496) - 383Exchangetranslationdifferences (957) (112) 2,153 1 - (0) 1,196 (111)At 31 December 2020 6,368,326 (450 ) 256,086 (660 ) 5,784 (483 ) 6,630,196 (1,593 ) As at 1 January 2019 5,707,572(1,691) 487,146 (1,455) 6,537 - 6,201,255 (3,146)TransferstoStage1 364,080(1,606) (364,070) 1,606 (10) - - -TransferstoStage2 (653,283) 835 653,283 (835) - - - -TransferstoStage3 - - - - - - - -Netchangeinexposures (804,051) (838) (272,541) 1,221 (3,476) - (1,080,068) 383ImpactonECLoftransfers - 725 - (1,173) - - - (448)Changesinriskparameters - 723 - (806) - - - (83)Exchangetranslationdifferences (721) (4) 230 (3) 55 - (436) (7)At 31 December 2019 4,613,597 (1,856) 504,048 (1,445 ) 3,106 - 5,120,751 (3,301 )

100 101






4. Financial risk management (continued) 4.2 Maximum credit exposure

AreconciliationofchangesingrosscarryingamountandcorrespondingallowanceforECLbystageforloansandadvancestobanks.

Stage 1 Stage 2 Stage 3 Total Gross ECL Gross ECL Gross ECL Gross ECL carrying carrying carrying carrying amount amount amount amount

As at 1 January 2020 3,458,462 (3) - - - - 3,458,462 (3)Netchangeinexposures (956,911) (76) - - - - (956,911) (76)At 31 December 2020 2,501,550 (79 ) - - - - 2,501,550 (79 ) As at 1 January 2019 3,488,495 (4) - - - - 3,488,495 (4)Netchangeinexposures (30,036) (3) - - - - (30,036) (3)Changes in risk parameters - 4 - - - - - 4 Exchangetranslationdifferences 3 - - - - - 3 -At 31 December 2019 3,458,462 (3 ) - - - - 3,458,462 (3 ) AreconciliationofchangesingrosscarryingamountandcorrespondingallowanceforECLbystageforInvestmentsecurities. Stage 1 Stage 2 Stage 3 Total Gross ECL Gross ECL Gross ECL Gross ECL carrying carrying carrying carrying amount amount amount amount

As at 1 January 2020 3,073,599 (5) - - - - 3,073,599 (5)Netchangeinexposures (959,880) (312) - - - - (959,880) (312)Changesinriskparameters - 157 - - - - - 157At 31 December 2020 2,113,719 (160 ) - - - - 2,113,719 (160 ) As at 1 January 2019 4,049,463 64 - - - - 4,049,463 64Netchangeinexposures (975,864) (328) - - - - (975,864) (328)Changesinriskparameters - 259 - - - - - 259At 31 December 2019 3,073,599 (5 ) - - - - 3,073,599 (5 )


Anestimateofthefairvalueofcollateralandothersecurityenhancementsheldagainstloansandadvancestocustomersandbanksisshownbelow.TheGroupisnotpermittedtoresaleorrepledgethesecuritiesintheabsenceofdefault.

Group Company 2020 2019 2020 2019 Carrying Collateral Carrying Collateral Security Carrying Collateral Carrying Collateral Security amount amount Held amount amount Held

P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Stage3 214,679 245,317 182,487 633,119 Property 214,679 245,317 182,487 633,119 Property and and guarantees guarantees Stage1and2 8,109,709 3,656,509 7,925,357 4,099,782 Property 8,109,709 3,656,5097,925,3574,099,782 Property and and guarantees guarantees

ThebankobtainedcourtjudgementtoforeclosepropertyheldassecurityworthP22253682(2019:P52672804).

Thequalityofcollateralheldin2020broadlyremainsinlinewiththeexposuresheld.

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GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000 4. Financial risk management (continued) 4.2 Credit risk (continued) Thebankmonitorsconcentrationofcreditriskbysector.Grossloansandadvancesatthereportingdateis

disclosedbelow:

Analysis by industry Financeandinsurance 198,328 267,972 198,328 267,972Construction 147,091 72,351 147,091 72,351Manufacturing 29,619 41,651 29,619 41,651Trade,restaurantandbars 681,642 726,120 681,642 726,120Community,socialandpersonalservices 62,230 209,049 62,230 209,049Transport 8,773 48,461 8,773 48,461Households 7,196,705 6,742,240 7,196,705 6,742,240Total gross loans 8,324,388 8,107,844 8,324,388 8,107,844 Loansandadvancestobanks 2,501,471 3,458,461 2,501,471 3,458,461Investmentsecurities 2,113,719 3,073,599 2,113,719 3,073,599Contingentliabilitiesandcommitments 6,630,196 5,120,751 6,630,196 5,120,751Otherassets 163,529 174,172 163,499 133,859Maximum credit risk exposure 19,733,303 19,934,827 19,733,273 19,894,514

Credit concentration risk in Corporate & Institutional Banking segment and Commercial Bankingsegmentismanagedthroughtheuseofvariousconcentrationdimensionsthatincludeindustrysector,geographicspread,creditrating,customersegmentandexposuretosinglecounterpartiesorgroupsofrelatedcounterparties. CreditconcentrationriskinRetailBankingsegmentismanagedwithinexposurelimitssetforeachproduct.These limitsarereviewedat leastannuallyandareapprovedbytheresponsiblebusinessandriskofficersinaccordancewiththeirdelegatedauthoritylevel.

4. Financial risk management (continued) 4.3 Liquid risk LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingobligationsassociatedwithits

financialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset. Management of liquidity risk TheGroup’sapproachtomanagingliquidityistoensureasfaraspossiblethatitwillalwayshavesufficient

liquidity tomeet its liabilities when due, both under stressed and normal conditions, without incurringunacceptablelossesorriskingdamagetotheGroup’sreputation.

Thedailyliquiditypositionismonitoredandregularliquiditystresstestingisconductedunderavarietyof

scenarioscoveringbothnormalandmoreseveremarketconditions.AllliquiditypoliciesandproceduresaresubjecttoreviewandapprovalbytheAssetsandLiabilitiesCommittee(ALCO),whichhasbeenmandatedby the Board of Directors. Daily reports cover the liquidity position of both the Group and operatingsubsidiaries.Asummaryreport,includinganyexceptionsandremedialactiontaken,issubmittedregularlytoALCO.

The Group relies on deposits from customers and banks, and issued debt securities and subordinated

liabilitiesasitsprimarysourcesoffunding.WhiletheGroup’sdebtsecuritiesandsubordinatedliabilitieshavematuritiesofoveroneyear,depositsfromcustomersandbanksgenerallyhaveshortermaturitiesandalargeproportionofthemarerepayableondemand.Theshort-termnatureofthesedepositsincreasestheGroup’sliquidityriskandtheGroupactivelymanagesthisriskthroughmaintainingcompetitivepricingandconstantmonitoringofmarkettrends.

Exposure to liquidity risk ThekeymeasureusedbytheGroupformanagingliquidityriskistheratioofnetliquidassetstodeposits

fromcustomers.Forthispurposenetliquidassetsareconsideredasincludingcashandcashequivalentsandinvestmentgradedebtsecuritiesforwhichthereisanactiveandliquidmarketlessanydepositsfrombanks,debtsecurities issued,otherborrowingsandcommitmentsmaturingwithin thenextmonth.Thislimitrequiresthattotalliquidassetsdividedbytotaldepositsmustbeatleast10%.

Liquidityratiohasbeenassessedasnotedbelow: GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000

Totalliquidassets 2,033,117 3,149,453 2,033,117 3,149,453TotalCustomerdeposits (11,849,610) (12,875,805) (11,849,610) (12,875,805) Ratio 17.2% 24.5% 17.2% 24.5%

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4. Financial risk management (continued) 4.3 Liquidity risk (continued)

Maturity Analysis

Group - 31 December 2020 ASSETS Carrying amount Gross Less than 1-3 3-12 1-5 More than Nominal 1 month months months years 5 yeras inflow P’000 P’000 P’000 P’000 P’000 P’000 P’000 Financial assets by type Non derivative assets CashandbalanceswiththeCentralBank 975,991 975,991 975,991 - - - -Loansandadvancestobanks 2,501,471 2,501,471 2,501,471 - - - -Investmentsecurities 2,113,719 2,113,719 1,250,319 206,000 150,000 507,400 -Loansandadvancestocustomers 8,115,680 8,115,681 874,895 122,395 104,767 3,569,722 3,443,901Total financial assets due from customers and banks 13,706,861 13,706,862 5,602,676 328,395 254,767 4,077,122 3,443,901 Otherfinancialassets* 163,529 163,529 163,529 - - - - Total financial assets 13,870,390 13,870,391 5,766,205 328,395 254,767 4,077,122 3,443,901 *Otherfinancialassetsincludesprepaymentsandaccruedinterest. Group - 31 December 2019 ASSETS Financialassetsbytype Nonderivativeassets CashandbalanceswiththeCentralBank 870,350 870,350 870,350 - - - -Loansandadvancestobanks 3,458,459 3,458,459 3,458,459 - - - -Investmentsecurities 3,073,599 3,037,000 - 2,300,000 470,000 267,000 -Loansandadvancestocustomers 7,919,227 7,919,227 841,778 60,617 266,569 2,714,858 4,035,405Total financial assets due from customers and banks 15,321,634 15,285,036 5,170,587 2,360,617 736,569 2,981,858 4,035,405 Otherfinancialassets 178,760 178,760 178,760 - - - -Total financial assets 15,500,394 15,463,796 5,349,347 2,360,617 736,569 2,981,858 4,035,405


Maturity Analysis (continued)

Company - 31 December 2020 ASSETS Carrying amount Gross Less than 1-3 3-12 1-5 More than Nominal 1 month months months years 5 yeras inflow P’000 P’000 P’000 P’000 P’000 P’000 P’000 Financial assets by type Non derivative assets CashandbalanceswiththeCentralBank 973,484 973,484 973,484 - - - -Loansandadvancestobanks 2,501,471 2,501,471 2,501,471 - - - -Investmentsecurities 2,113,719 2,113,719 1,250,319 206,000 150,000 507,400 -Loansandadvancestocustomers 8,115,680 8,115,680 874,895 122,395 104,767 3,569,722 3,443,901Total financial assets due from customers and banks 13,704,354 13,704,355 5,600,169 328,395 254,767 4,077,122 3,443,901 Otherfinancialassets* 163,499 163,499 163,499 - - - - Total financial assets 13,867,853 13,867,854 5,763,668 328,395 254,767 4,077,122 3,443,901 *Otherfinancialassetsincludesprepaymentsandaccruedinterest. Company - 31 December 2019 ASSETS Financial assets by type Non derivative assets CashandbalanceswiththeCentralBank 867,731 867,731 867,731 - - - -Loansandadvancestobanks 3,458,459 3,458,459 3,458,459 - - - -Investmentsecurities 3,073,599 3,037,000 - 2,300,000 470,000 267,000 -Loansandadvancestocustomers 7,919,227 7,919,227 841,778 60,617 266,569 2,714,858 4,035,405Total financial assets due from customers and banks 15,319,016 15,282,417 5,167,968 2,360,617 736,569 2,981,858 4,035,405 Otherfinancialassets 138,447 138,447 - - - - -Total financial assets 15,457,463 15,420,864 5,167,968 2,360,617 736,569 2,981,858 4,035,405

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Maturity Analysis

Group - 31 December 2020 LIABILITIES Carrying amount Gross Less than 1-3 3-12 1-5 More than Nominal 1 month months months years 5 yeras Outflow P’000 P’000 P’000 P’000 P’000 P’000 P’000 Demanddeposits 7,236,729 (7,236,729) (7,236,729) - - - -Termdeposits 4,612,881 (4,818,797) (736,616) (1,225,191) (2,578,719) (278,271) -Depositsfrombanks 436,471 (436,471) (436,471) - - - -Total financial liabilities to customers and banks 12,286,081 (12,491,997 ) (8,409,816 ) (1,225,191 ) (2,578,719 ) (278,271 ) - Otherfinancialliabilities** 129,540 (129,540) (129,540) - - - -Leaseliability 46,821 (52,191) (13,098) (32,174) (6,919)Seniorandsubordinateddebt 389,000 (409,304) - - (4,512) (404,792) -Total financial liabilities 12,851,442 (13,083,033 ) (8,539,357 ) (1,225,191 ) (2,596,329 ) (715,237 ) (6,919 ) **Otherfinancialliabilitiesincludesaccruedinterestpayable,accrualsandothersuspenseaccounts. Group - 31 December 2019 LIABILITIES Demanddeposits 7,921,772 (7,921,772) (7,921,772) - - - -Termdeposits 4,954,033 (4,954,033) (1,281,472) (1,380,254) (2,176,542) (115,765)Depositsfrombanks 1,020,928 (1,020,928) (1,020,928) - - - -Total financial liabilities to customers and banks 13,896,733 (13,896,733 ) (10,224,172 ) (1,380,254 ) (2,176,542 ) (115,765 ) - Financialliabilities 248,646 (248,646) (248,646) - - - -Seniorandsubordinateddebt 439,000 (439,000) - - (50,000) - (389,000)Total financial liabilities 14,584,379 (14,584,379 ) (10,472,818 ) (1,380,254 ) (2,226,542 ) (115,765 ) (389,000 )


Maturity Analysis

Company - 31 December 2020 LIABILITIES Carrying amount Gross Less than 1-3 3-12 1-5 More than Nominal 1 month months months years 5 yeras Outflow P’000 P’000 P’000 P’000 P’000 P’000 P’000 Demanddeposits 7,236,729 (7,236,729) (7,236,729) - - - -Termdeposits 4,612,881 (4,612,881) (733,421) (1,209,887) (2,452,886) (216,688) -Depositsfrombanks 436,471 (436,471) (436,471) - - - -Total financial liabilities to customers and banks 12,286,081 (12,286,081 ) (8,406,621 ) (1,209,887 ) (2,452,886 ) (216,688 ) - Otherfinancialliabilities** 170,838 (170,838) (170,838) - - - -Leaseliability 46,821 (46,821) (46,821)Seniorandsubordinateddebt 389,000 (389,000) - - - (389,00) -Total financial liabilities 12,892,740 (12,892,740 ) (8,577,459 ) (1,209,887 ) (2,452,886 ) (652,509 ) - **Otherfinancialliabilitiesincludesaccruedinterestpayable,accrualsandothersuspenseaccounts. Company - 31 December 2019 LIABILITIES Demanddeposits 7,921,772 (7,921,772) (7,921,772) - - - -Termdeposits 4,954,033 (4,954,033) (1,281,472) (1,380,254) (2,176,542) (115,765) -Depositsfrombanks 973,746 (973,746) (973,746) - - - -Total financial liabilities to customers and banks 13,849,551 (13,849,55 ) (10,176,990 ) (1,380,254 ) (2,176,542 ) (115,765 ) - Financialliabilities 238,881 (238,881) (238,881) - - - -Seniorandsubordinateddebt 439,000 (439,000) -- (50,000) - (389,000)Total financial liabilities 14,527,432 (14,527,432 ) (10,415,871 ) (1,380,254 ) (2,226,542 ) (115,765 ) (389,000 )

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4. Financial risk management (continued) 4.4 Capital Management BankofBotswana(BoB)setsandmonitorsthecapitalrequirementsfortheBankandrequirestheBankto

maintainaminimumCapitalAdequacyRatio(CAR)of15percentofrisk-weightedassets(RWA).AttheonsetofCovid-19impacttotheeconomy,BoBsetthisratioat12.5%,anditwillremainthereuntilfurthernotice.TheBank’spolicy is tomaintainastrongcapitalbase tomaintain investor,creditorandmarketconfidencetosustainthefuturedevelopmentofthebusiness.Therewerenobreachestothisrequirementinthecurrentorpreviousyear,astheBankmaintaineditsCARatabove15%.TheBankhasdevelopedCapitalriskappetitewhichdefinesthecapitaltolerancelevelsbothminimum(floor)andmaximum(ceiling)whichismonitoredandtrackedonamonthlybasisthroughvariousgovernanceforums.TheBank’sregulatorycapitalisanalysedintwoparts:

• Tier I capital, which includes stated capital, additional Tier 1 capital (AT1), retained earnings,

accumulatedothercomprehensiveincomeandotherdisclosedreserves,commonsharesissuedbyconsolidatedsubsidiariesofabankandheldbythirdparties,regulatoryadjustmentsappliedinthecalculationofCET1capital.

• Tier II capital, which includes unpublished profits for the current year, subordinated debt andimpairments.

Thecalculationofboththeaboveratiosisasfollows:

Company 2020 2019 P’000 P’000 Capital adequacy Corecapital Statedcapital 179,273 179,273 Otherrevenuereserves 386,172 479,974 Capitalcontribution 28,213 28,213 Statutorycreditriskreserve 19,152 19,152 Lessregulatoryadjustments (60,199) (60,398) 552,611 646,214 AdditionalTier1Capital(AT1) 400,000 400,000 Total Tier 1 Capital 952,611 1,046,214 Supplementarycapital Non-specificimpairment 86,073 88,977 *Subordinateddebt 311,200 389,000 397,273 477,977 Riskweightedassets Credit 6,921,071 7,118,133 Market 33,959 49,952 Operational 722,185 761,215 7,677,215 7,929,300 Capital adequacy ratio 17.6% 19.2%

4. Financial risk management (continued) 4.4 Capital Management (continued) Duringtheyear,dividendsamountingtoP55millionweredeclaredandpaid(2019:P24m).

AdistributionofP30.8mwaspaidtoholdersofsubordinatedundatedAT1capitalsecuritiesduringtheyear(2019:P30.9m).

*Subordinateddebtinstrumentisnowwithin5yearsofmaturityandhasbeenamortisedonastraightlinebasisat20%inlinewiththeregulatoryrequirementsfromJuly2020.

4.5 Market risk Marketriskistheriskthatchangesinmarketprices,suchasinterestrates,foreignexchangerates,equity

pricesandcreditspreads(notrelatingtochanges intheobligor/issuer’screditstanding)willaffecttheGroup’s incomeor thevalueof itsholdingoffinancial instruments.Theobjectiveof theGroup’smarketriskmanagement is tomanageand controlmarket risk exposureswithinacceptableparameterswhileoptimisingthereturnonrisk.

Exposure to market risks TheprincipaltoolusedtomeasureandcontrolmarketriskexposurewithintheGroup’sportfoliosisValue

atRisk(VaR).TheVaRistheestimatedlossthatwillariseontheportfoliooveraspecifiedperiodoftime(holdingperiod)fromanadversemarketmovementwithaspecifiedprobability(confidencelevel).TheVaRmodelusedbytheGroupisbasedupona99percentconfidencelevelandassumesan8-dayholdingperiod.

TheVaRmodel used isbasedmainlyonhistorical simulation.Takingaccountofmarketdata from the

previoustwoyears,andobservedrelationshipsbetweendifferentmarketsandprices,themodelgeneratesawiderangeofplausiblefuturescenariosformarketpricemovements.AlthoughVaRisanimportanttoolformeasuringmarketrisk,theassumptionsonwhichthemodelisbaseddogiverisetosomelimitations,includingthefollowing:

An8-dayholdingperiodassumesthatitispossibletohedgeordisposeofpositionswithinthatperiod.This

maynotbethecaseforcertainhighlyilliquidassetsorinsituationsinwhichthereisseveregeneralmarketilliquidity.

A99percent confidence leveldoesnot reflect losses thatmayoccurbeyond this level. Evenwithin themodelusedthereisaonepercentprobabilitythatlossescouldexceedtheVaR.VaRiscalculatedonanend-of-daybasisanddoesnotreflectexposuresthatmayariseonpositionsduringthetradingday.Theuseofhistoricaldataasabasisfordeterminingthepossiblerangeoffutureoutcomesmaynotalwayscoverallpossiblescenarios,especiallythoseofanexceptionalnature.

TheVaRmeasureisdependentupontheGroup’spositionandthevolatilityofmarketprices.TheVaRofan

unchangedpositionreducesifmarketpricevolatilitydeclinesandviceversa.

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4.5 Market risk (continued) TheGroupusesVaRlimitsfortotalmarketriskandspecificforeignexchange,interestrate,equity,

creditspreadandotherpricerisks.TheoverallstructureofVaRlimitsissubjecttoreviewandapprovalbyERC.VaRlimitsareallocatedtoportfolios.VaRismeasuredatleastdailyandreportsofutilisationofVaRlimitsaresubmittedtoMarketRiskdepartmentandregularsummariesaresubmittedtoERC.

AsummaryoftheVaRpositionoftheGroup’sportfoliosasat31Decemberandduringtheperiodisasfollows:

At 31 Dec Average Maximum Minimum P’000 P’000 P’000 P’000 2020 Foreigncurrencyrisk 147 30 147 4 Interestraterisk 1,215 566 1,559 169 Overall 1,362 596 1,706 173 2019 Foreigncurrencyrisk 7 15 124 4 Interestraterisk 315 219 579 115 Overall 322 234 703 119

ThelimitationsoftheVaRmethodologyarerecognisedbysupplementingVaRlimitswithotherpositionand sensitivity limit structures, including limits to address potential concentration risks within eachportfolio.Inaddition,theGroupusesawiderangeofstressteststomodelthefinancialimpactofavarietyof exceptionalmarket scenarios, such as periods of prolongedmarket illiquidity on individual tradingportfoliosandtheGroup’soverallposition.

Theprincipalrisktowhichnon-tradingportfoliosareexposedistheriskoflossfromfluctuationsinthefuture

cashflowsorfairvaluesoffinancialinstrumentsbecauseofachangeinmarketinterestrates.Interestrateriskismanagedprincipallythroughmonitoringinterestrategapsandbyhavingpre-approvedlimitsforre-pricingbands.ALCOisthemonitoringbodyforcompliancewiththeselimitsandisassistedbyTreasurydepartmentinitsday-to-daymonitoringactivities.


4.5 Market risk (continued) Exposure to interest rate risk in the banking book Themanagementofinterestrateriskagainstinterestrategaplimitsissupplementedbymonitoringthe

sensitivity of theGroup’s financial assets and liabilities to various standard and non-standard interestratescenarios.Standardscenariosthatareonamonthlybasis includea100basispointparallel fallorrise inyieldcurvesworldwideanda50basispointsriseorfall ingreaterthan12-monthportionofyieldcurves.AnanalysisoftheGroup’ssensitivitytoanincreaseordecreaseinmarketinterestrates,assumingnoasymmetricalmovementinyieldcurvesandaconstantfinancialposition,isasfollows:

Group - 31 December 2020

Zero Floating Fixed Rate instruments rate rate 0-1 month 1-6 months 6-12 months 1 to 5 years Over 5 years Total P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Totalfinancialassets 1,468,000 8,040,941 2,718,000 1,194,000 6,000 583,000 - 14,009,941Totalfinancialliabilities (274,941)(8,457,000) (1,028,000) (2,717,000) (1,266,000) (267,000) - (14,009,941)Net Mismatch 1,193,059 (416,059 ) 1,690,000 (1,523,000 ) (1,260,000 ) 316,000 - - Interest sensitivity gap- Floating rate bucket Impactofdecreasein interest rates 50basispoints 2,080 100basispoints 4,161

Group - 31 December 2019 Totalfinancialassets 776,405 8,300,000 4,713,000 864,000 613,000 286,000 - 15,552,405Totalfinancialliabilities (470,489)(9,410,000)(1,520,000) (2,967,000) (1,090,000) (66,000) (50,000) (15,573,489)Net Mismatch 305,916 (1,110,000 ) 3,193,000 (2,103,000 ) (477,000 ) 220,000 (50,000 ) (21,084 ) Interest sensitivity gap- Floating rate bucket Impactofdecreasein interest rates 50basispoints 5,550 100basispoints 11,100 Adecreaseininterestratesisseentohaveanequalandoppositeeffectonprofitsandequityasnoted

above.Fixedandzerorateinstrumentsarebytheirverynaturenotaffectedbyachangeininterestrates.

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4.5 Market risk (continued)

Exposure to interest rate risk in the banking book (continued)

Sensitivity analysis (PV01) PV01(pricevalueperbasispoint)isameasureofsensitivitytoa1bp(basispoint)changeininterestrates.

Itcanbeshownforasetofassetsorliabilities,andalsothedifferencebetweenthetwowhichisknownasactivePV01.Theoutcomesmaybepositiveornegativereflectingthechangeinvalueforsayariseorfallininterestrates.ApositivePV01impliesa-venetbalancesheetgapinaparticulartenor(Moreliabilitiesthanassets),whileanegativePV01implies+vebalancesheetgap(Moreassetsthanliabilities).

Thismetricisstrategicallyusedtoindicateimmunizationcompleteness(attempttohaveazeroactivePV01orasclosetoZeroaspossible).Wherebalancesheetgapsareperfectlyimmunized,theassetswouldfundthe liabilities ineachtimeperiod,howevertooptimiserevenuegeneration,assetsand liabilitiescannotbeperfectlymatched.Themetricassistsinensuringriskarisingfrombalancesheetmismatch(differencebetweenassetsandliabilitiesinvarioustenors)remainswithinourriskappetite.

Company - 31 December 2020

Zero Floating Fixed Rate instruments rate rate 0-1 month 1-6 months 6-12 months 1 to 5 years Over 5 years Total P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 TotalAssets 1,468,000 8,040,941 2,718,000 1,194,000 6,000 583,000 - 14,009,941TotalLiabilitiesandshareholders’funds (274,941)(8,457,000)(1,028,000) (2,717,000) (1,266,000) (267,000) - (14,009,941)Net Mismatch 1,193,059 (416,059 ) 1,690,000 (1,523,000 ) (1,260,000 ) 316,000 - - Interest sensitivity gap- Floating rate bucket Impactofdecreasein interest rates 50basispoints 2,080 100basispoints 4,161

Company - 31 December 2019 TotalAssets 728,014 8,300,000 4,713,000 864,000 613,000 286,000 - 15,504,014TotalLiabilitiesandshareholders’funds (1,320,000)(9,410,000)(1,520,000) (2,967,000) (1,090,000) (66,000) (50,000) (16,423,000)Net Mismatch (591,986 ) (1,110,000 ) 3,193,000 (2,103,000 ) (477,000 ) 220,000 (50,000 ) (918,986 ) Interest sensitivity gap- Floating rate bucket Impactofdecreasein interest rates 50basispoints 5,550 100basispoints 11,100 Adecreaseininterestratesisseentohaveanequalandoppositeeffectonprofitsandequityasnoted

above.Fixedandzerorateinstrumentsarebytheirverynaturenotaffectedbyachangeininterestrates.


4.6 Foreign exchange rate risk management

TheresponsibilitiesofFinancialMarketsdepartmentincludemonitoringofforeignexchangerisk.Foreignexchangerateriskisthepotentialimpactofadversecurrencyratesmovementsonearningsandeconomicvalue.ThisinvolvestheriskoftheGroupincurringfinanciallossonsettlementofforeignexchangepositionstaken inboththetradingandbankingbooks. Theforeignexchangepositionsarisefromthefollowingactivities:

• Trading in foreign currencies through spot and forwards transactions as a market maker orposition taker, including thede-hedgedpositionarising fromcustomerdriven foreignexchangetransactions.

• HoldingforeigncurrencypositionintheBank’sbooks(e.g.intheformofloans,depositsandcrossborderinvestments).

TheGroup’sFinancialMarketsdivisionisresponsiblefor:

• Settingtheforeignexchangeriskmanagementstrategyandtolerancelevels.• Ensuringthateffectiveriskmanagementsystemsandinternalcontrolsareinplace.• Monitoringsignificantforeignexchangeexposure.• Ensuringthatforeignexchangeoperationsaresupportedbyadequatemanagementinformation

systemswhichcomplementtheriskmanagementstrategy.• Reviewingthepolicies,proceduresandcurrencylimitsregularlyinlinewithchangesintheeconomic

environment. TheALCOregularlymonitorsthecontrolsputinplacebytheGroupFinancialMarketsdivision,whichare

approvedandreviewedbytheBoardfromtimetotime. The table below sets out principal structural foreign exchange exposures of the Group for onlymajor

currenciesat31December2020and2019.

Group and Company 2020 2019 Assets / (liabilities) Sensitivity* Assets /(liabilities) Sensitivity* millions 1% 5% millions 1% 5% AmericanDollar 37 (0.37) (1.84) 39 (0.39) (1.95) BritishPound 39 (0.39) (1.94) 5 (0.05) (0.26) Euro 105 (1.05) (5.27) 247 (2.47) 12.36) SouthAfricanRand 167 (1.67) (8.33) 29 (0.29) (1.44)

*A1%and5%weakeningofthePulaagainsttheabovecurrencieswilldecreaseprofitorlossbytheamountsshownabove.Theanalysisassumesthatallothervariablesinparticularinterestrates,remainconstant.

ThestrengtheningofthePulaagainsttheabovecurrencieswillhaveanoppositeandequaleffectonprofitorlossandequity.

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4.7 Classification of Financial assets and liabilities

Thetablebelowsetsouttheclassificationofeachclassoffinancialassetsandliabilities,andfairvalue(excludingaccruedinterest):

Intheopinionofdirectors,thefairvaluesoftheGroup’sfinancialassetsandliabilitiesapproximatetherespectivecarryingamounts.FairvaluesoffinancialliabilitiesarebasedondiscountedcashflowsusingadiscountratebasedupontheratethatdirectorsexpectwouldbeavailabletotheGroupatthereportingdate.Financialassets(Investments)fairvalueisdeterminedusingmeasurementtechniquesin3(i).

Fair value Amortised Total through cost other comprehensive income Group – 31 December 2020 Note P’000 P’000 P’000 Assets Cashandbalanceswithcentralbank 15 - 975,991 975,991 Loansandadvancestootherbanks 16 - 2,501,471 2,501,471 Investmentsecurities 17 2,113,719 - 2,113,719 Loansandadvancestocustomers 18 - 8,115,680 8,115,680 Otherfinancialassets* 21 4,893 158,636 163,529 2,118,612 11,751,778 13,870,390 *Otherfinancialassetsincludesaccruedinterestincome. Liabilities Depositsfromotherbanks 22 - 436,471 436,471 Depositsfromcustomers 23 - 11,849,610 11,849,610 Seniorandsubordinateddebt 24 - 389,000 389,000 Otherfinancialliabilities** 27 - 223,183 223,183 - 12,898,264 12,898,264 **Otherfinancialliabilitiesincludesaccruedinterestpayable,accrualsandothersuspenseaccounts.

Group – 31 December 2019

Assets Cashandbalanceswithcentralbank 15 - 870,350 870,350 Loansandadvancestootherbanks 16 - 3,458,459 3,458,459 Investmentsecurities 17 3,073,599 - 3,073,599 Loansandadvancestocustomers 18 - 7,919,227 7,919,227 Otherfinancialassets 21 - 174,172 174,172 3,073,599 12,422,208 15,495,807 Liabilities Depositsfromotherbanks 22 - 1,020,928 1,020,928 Depositsfromcustomers 23 - 12,875,805 12,875,805 Seniorandsubordinatedliabilities 24 - 439,000 439,000 Otherfinancialliabilities 27 - 178,760 178,760 - 14,514,493 14,514,493


4.7 Financial assets and liabilities (continued)

Fair value measurement

TheGroupmeasuresfairvaluesusingthefollowingfairvaluehierarchythatreflectsthesignificanceoftheinputsusedinmakingthemeasurement:

Level1:inputsthatarequotedmarketprices(unadjusted)inactivemarketsforidenticalinstruments. Level2:inputsotherthanquotedpricesincludedwithinLevel1thatareobservableeitherdirectly(i.e.as

prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quotedmarketpricesinactivemarketsforsimilarinstruments;quotedpricesforidenticalorsimilarinstrumentsinmarketsthatareconsideredlessthanactive;orothervaluationtechniquesinwhichallsignificantinputsaredirectlyorindirectlyobservablefrommarketdata.

Level 3: inputs that are unobservable. This category includes all instruments for which the valuationtechniqueincludesinputsnotbasedonobservabledataandtheunobservableinputshaveasignificanteffectontheinstrument’svaluation.Thiscategoryincludesinstrumentsthatarevaluedbasedonquotedpricesforsimilarinstrumentsforwhichsignificantunobservableadjustmentsorassumptionsarerequiredtoreflectdifferencesbetweentheinstruments.

Valuationtechniquesincludenetpresentvalueanddiscountedcashflowmodelsforinvestmentsecurities

classifiedas level2 (seebelow table), includingcomparisonswith similar instruments forwhichmarketobservable prices exist. Assumptions and inputs used in valuation techniques include risk-free andbenchmark interest rates,creditspreadsandotherpremiaused inestimatingdiscount rates,bondandequityprices,foreigncurrencyexchangerates,equityandequityindexpricesandexpectedpricevolatilitiesandcorrelations.

Theobjectiveofvaluationtechniquesistoarriveatafairvaluemeasurementthatreflectsthepricethat

wouldbereceivedtoselltheassetorpaidtotransfertheliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.

TheGroupuseswidelyrecognisedvaluationmodelsfordeterminingthefairvalueofcommonandmore

simplefinancial instruments, suchas interest rateandcurrency swaps thatuseonlyobservablemarketdataand require littlemanagement judgementandestimation.Observablepricesormodel inputsareusually available in themarket for listed debt and equity securities, exchange-traded derivatives andsimpleover-the-counterderivativessuchasinterestrateswaps.Availabilityofobservablemarketpricesandmodel inputs reduces the need formanagement judgement and estimation and also reduces theuncertaintyassociatedwithdeterminingfairvalues.Availabilityofobservablemarketpricesandinputsvaries depending on the products andmarkets and is prone to changes based on specific events andgeneralconditionsinthefinancialmarkets.

Valuationmodels thatemploysignificantunobservable inputs requireahigherdegreeofmanagement

judgementandestimation inthedeterminationoffairvalue.Management’s judgementandestimationareusuallyrequiredforselectionoftheappropriatevaluationmodeltobeused,determinationofexpectedfuturecashflowsonthefinancialinstrumentbeingvalued,determinationofprobabilityofcounterpartydefaultandprepaymentsandselectionofappropriatediscountrates.

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4.7 Financial assets and liabilities (continued)

Fair value measurement (continued)

TheGroup has an established control frameworkwith respect to themeasurement of fair values. Thisframework includes a Product Control function,which is independent of front officemanagement andreportstoFinancialMarketsDepartment,andwhichhasoverallresponsibilityforindependentlyverifyingthe results of trading and investment operations and all significant fair valuemeasurements. Specificcontrols include: verificationofobservablepricing inputsand re-performanceofmodels involvingbothProductControlandGroupMarketRisk;calibrationandbacktestingofmodels involvingGroupMarketRiskpersonnel;andreportingofsignificantvaluationissuestotheGroupAuditandRiskCommittee.

Thetablebelowanalysesfinancialandnon-financialinstrumentsmeasuredatfairvalueattheendofthereportingperiod,bythelevelinthefairvaluehierarchyintowhichthefairvaluemeasurementiscategorised:

Note Level 1 Level 2 Level 3 Total P’000 P’000 P’000 31-Dec-20 Investmentsecurities 17 - 2,113,719 - 2,113,719 31-Dec-19 Landandbuildings(revaluationamount***) - - 2,570 2,570 Investmentsecurities 17 -3,073,599 - 3,073,599

***Arevaluationwascarriedoutin2019.ThecarryingamountoftherespectiveassetsbasedonthecostmodelwouldhavebeenP7944(2019;P8173)asat31December2020.

GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000 5. Interest income

Loansandadvancestocustomers 674,808 644,916 674,808 644,916Investmentsecurities 49,438 63,696 49,438 63,696Balanceswithbanksandinvestments 20,908 53,435 20,908 53,435 745,154 762,047 745,154 762,047

6. Interest expense

Amountsduetobanks 141,091 163,908 139,522 160,346Subordinatedloancapital 25,005 32,293 25,005 32,293Amountsduetocustomers 112,611 127,546 112,611 127,546Interestexpenseonleaseliabilities 2,184 2,641 2,183 2,641 280,891 326,388 279,321 322,826

7. Fees and commission

TransactionBanking 11,036 28,552 10,886 28,368FiduciaryActivities 12,025 11,713 12,025 11,713FinancialMarkets 15,793 3,330 15,793 3,330CorporateFinance 10,716 - 10,716 -LendingandPortfolioManagement 2,381 4,296 2,381 4,296RetailProducts 152,578 157,554 152,578 157,554Insurancebrokerage 25,251 32,942 - -Fees and commission 229,779 238,387 204,378 205,260 Commission expenses Transactionbanking (168) (123) (168) (123)Cardexpenses (22,616) (29,204) (22,616) (29,204)Salescommission (6,367) (6,132) (6,367) (6,132)Total (29,151 ) (35,459 ) (29,151 ) (35,459 )Net fees and commission 200,628 202,928 175,227 169,801 Themainconsiderationsonincomerecognitionbyproductareasfollow;

Transaction BankingThe Bank recognises fee income associated with transactional trade, cashmanagement and custodyactivitiesatthepointintimetheserviceisprovided.TheBankrecognisesincomeassociatedwithtradecontingentriskexposures(suchaslettersofcreditandguarantees)andperiodiccustodyactivitiesovertheperiodinwhichtheserviceisprovided.

Financial Markets and Corporate FinanceTheBankrecognisesfeeincomeatthepointintimetheserviceisprovided.Feeincomeisrecognisedforasignificantnon-lendingservicewhenthetransactionhasbeencompletedandthetermsofthecontractwiththecustomerentitletheBanktothefee.Feesareusuallyreceivedshortlyaftertheserviceisprovided.

Retail ProductsTheBankrecognisesmostincomeatthepointintimetheBankisentitledtothefee,sincemostservicesareprovidedatthetimeofthecustomer’srequest.Commissionsforbancassuranceactivitiesarerecordedastheyareearnedthroughsalesofthird-partyinsuranceproductstocustomers.

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2020 Annual Report

CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS


GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000

118

2020 Annual Report


CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS


GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000 8. Trading income Foreigncurrency 88,376 85,013 88,376 85,013 88,376 85,013 88,376 85,013

9. Expected credit loss on financial assets Expectedcreditlosses 69,776 65,854 69,776 65,854 Recoveries (28,471) (33,667) (28,471) (33,667) - - - -

- - - - - - - - 41,305 32,187 41,305 32,187 Expectedcredit loss relatestocustomer loansandadvances, loansandadvancestobanks, investment

securitiesandguaranteesandcommitments. 9.1 Liability written off Liabilitywrittenoff(Refertonote30) 48,049 - - - Otherimpairment - - - - 48,049 - - - 10. Employee benefits Salariesandwages 204,098 199,514 204,098 199,514

Contributionstodefinedcontributionpensionplan 15,711 14,961 15,711 14,961 Otherstaffcosts 9,377 10,644 9,377 10,644 Restructuring 23,158 - 23,158 - 252,344 225,119 252,344 225,119 **OtherstaffcostsincludeP7.7m(2019;P6.9m)staffloansubsidy. 11. Administration expenses Auditfees 2,432 2,040 2,432 2,040 Consultancycosts 5,226 4,744 5,226 4,744 DirectorsFees 479 383 440 383 Repairsandmaintenance 15,810 16,422 15,810 16,422 Communicationcosts 19,619 18,292 19,619 18,292 Grouprecharges 209,847 196,393 209,847 196,393 Advertisingandsponsorship 8,629 9,309 8,629 9,309 Technicalsupport 8,052 7,047 8,052 7,047 Printingandstationery 2,367 5,469 2,367 5,469

Security 19,881 24,379 19,881 24,379IrrecoverableVATandWHTongrouprecharges 39,448 40,123 39,448 40,123Otherexpenses** 27,194 32,196 14,959 22,188 358,984 356,797 346,710 346,789

**Other expenses include expenses includes Insurance, travel, corporate subscriptions and outsourcingcosts.

12. Income tax expense Taxation charge for the year Corporatetaxcurrentyearat22% 25,687 5,233 22,714 - Deferredtax 26,051 9,501 28,661 9,501 Underprovisioncorporatetaxprioryear 659 - - - 52,397 14,734 51,375 9,501 Profitbeforetax 102,120 69,579 42,514 50,022 Taxationreconciliation: Taxationatstatutoryrate:22% 22,466 15,307 9,353 11,005 Permanentdifferences** 2,325 1,448 2,325 675 Exemptincome (10,140) - - - Prioryeartaxadjustment* 37,087 (2,180) 39,697 (2,179) Underprovisioncorporatetaxprioryear 659 - - - 52,397 14,575 51,375 9,501

**Permanentdifferencesincludedonationsandexpatriatepensioncosts. *TheprioryearadjustmentwasaresultofaccumulateddeferredtaxassetfollowingadoptionofIFRS9

basedonthebalancesheetapproach.Duringtheyearitwasclarifiedthatthe1.5%limitationallowanceis should be based on the current year (Income statement approach) and not accumulated provisions(Balancesheetapproach)resultinginP37mwriteoff.

13. Dividends Dividenddeclaredandpaid (Grossofwithholdingtax) 54,419 23,844 54,845 23,844 54,419 23,844 54,845 23,844 Calculateddividendpershare(Thebe) 18.39 8.06 14. Earnings per share Profitattributabletoordinaryshareholders 49,723 54,845 Weightedaveragenumberofordinaryshares 295,844 295,844 Treasuryshares 2,506 2,506 Totalweightedaveragenumberofordinaryshares 298,351 298,351 Calculatedearningspershare(Thebe) 16.81 18.54

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15. Cash and balances with the Central Bank 975,991 870,350 973,484 867,731 16. Loans and advances to banks Bankbalances 590 21,657 590 21,657 Placementsandotherinvestments 2,500,881 3,436,802 2,500,881 3,436,802 2,501,471 3,458,459 2,501,471 3,458,459 2,501,471 3,488,495 2,501,471 3,500,093 17. Investment securities BankofBotswanaCertificates 1,474,932 2,298,912 1,474,932 2,298,912 Governmentbonds 638,787 774,687 638,787 774,687 2,113,719 3,073,599 2,113,719 3,073,599 Changeinfairvalueoffinancialinstruments (FVOCI) 16,520 1,762 16,520 1,762 Tax (3,634) (388) (3,634) (388) Netoftax 12,886 1,374 12,886 1,374 2,117,353.46 - 2,117,353.46 -

18. Loans and advances to customers Loansandadvances-originated 8,324,388 8,161,991 8,324,388 8,161,991 Less:allowanceforimpairment(note9) (208,708) (242,764) (208,708) (242,764) 8,115,680 7,919,227 8,115,680 7,919,227

AccruedinterestonloansandadvancesisincludedinOtherassets(Note21)

19. Property, equipment and right-of-use assets - Group and company

Right-of-use assets Land and Equip- Motor Furniture, Capital Buildings ATMs Total buildings ment vehicles fixtures WIP and fittings

2020 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 Cost or valuation Balancesat1January2019 58,244 79,954 595 21,312 2,358 - - 162,463 EffectofadoptionofIFRS16 asat1January2019 - - - - - 55,330 5,283 60,613 Revaluationofproperty 2,570 - - - - - - 2,570 Additions - 8,502 - 1,231 7,503 14,319 2,406 33,961 Disposals - (76) (595) - - - - (671) At 31 December 2019 60,814 88,380 - 22,543 9,861 69,649 7,689258,936 Additions - 8,949 - 717 1,325 (436) 754 11,308 Disposals - - - - - - - - Transfers - - - - (228) - - (228) At 31 December 2020 60,814 97,328 - 23,260 10,958 69,213 8,443 270,016 Depreciation At1January2019 (16,850) (73,181) (595) (13,306) - - -(103,932) Depreciationchargefor theyear (2,951) (2,118) - (2,425) -(13,768) (2,530)(23,792) Disposals - 76 595 - - - - 671 At 31 December 2019 (19,801 ) (75,223 ) - (15,731 ) - (13,768 ) (2,530 ) (127,054) Depreciationchargefor theyear (2,561) (8,455) - (2,594) -(13,766) (2,867)(30,243) Disposals - - - - - - - - At 31 December 2020 (22,362) (83,678) - (18,325) -(27,534) (5,397)(157,296) Net book value At31December2020 38,452 13,651 - 4,935 10,958 41,679 3,046 112,720 At31December2019 41,013 13,157 - 6,812 9,861 55,881 5,159 131,883 Group Group Company Company 2020 2019 2020 2019 P’000 P’000 P’000 P’000 Revaluationofproperty - 2,570 - 2,570 Tax - (565) - (565) Netoftax - 2,005 - 2,005

Landandbuildingscomprisesofcommercialandresidentialproperties.Buildingsaredisclosedatrevaluedamountlessaccumulateddepreciationandimpairment.

Thetransferofcapitalworkinprogresshasbeenincludedaspartofadditions.Aregistercontainingthedetailsofeachpropertyisavailableforinspectionattheregisteredoffice.

Property,equipmentcomprisesofsomeassetswithoriginalcostBWP127million(2019:83million)whicharefullydepreciatedandstillinuse.

Thecurrentuseofnonfinancialassetsisregardedasitshighestandbestuse.

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19. Property and equipment (continued) - Group and company

Measurement of fair values Fair value hierarchy The fair value of the land and buildings was determined by an external independent valuer, having

appropriaterecognisedprofessionalqualificationsandrecentexperienceinthelocationandcategoryofthepropertybeingvalued.Thevaluationwasperformedon20December2019usingdiscountedcashflowvaluationmodel. Themodel considers thepresent value of property rentals taking intoaccount rentalgrowth rates. The net cashflows are discounted using risk adjusted discount rates of 10%. The valuerprovidesthefairvalueoftheGroup’slandandbuildingsatleasteverythreeyears;howeverthedirectorsconsiderthefairvalueoflandandbuildingsateachreportingdate.

ThefairvaluemeasurementoflandandbuildingshasbeencategorisedasaLevel3fairvaluebasedontheinputstothevaluationtechniqueused.

Thedirectorshaveassessedassumptionsandestimates in the fairvaluecalculation indeterminingthe

fair value of landandbuildings. Therewere nomaterial changes to the estimates. The carrying valueapproximatesthefairvalueoflandandbuildings.

Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of the land and

buildings,aswellasotherunobservableinputsused: Valuation technique Significant unobservable inputs Inter-relationship between

key unobservable inputs and fair value measurement

Discounted cashflows; The estimated fair

Comparablemethodfor valuewouldincrease/ residentialpropertiesand (decrease)if: Investmentmethodfor commercialproperties •Marketyield ofbetween •Higher/lowermarketyields 10-14% •Primerentalsofofficespace

betweenP80-130/sq.m“ •Increase/decreaseinrental persq.m”

20. Intangibles assets and goodwill - Group and Company Customer Capita- Good- Total relation- lised will ships Soft- ware

2020 P’000 P’000 P’000 P’000 Cost Atbeginningofyear 94,684 72,163 29,880 196,727 Additions(Developed) - 21,857 - 21,857 Totalattheendoftheyear 94,684 94,020 29,880 218,584 Amortisation and impairment losses Atbeginningofyear (94,684)(52,095) (18,621)(165,400)

Amortisationfortheperiod - (14,403) - (14,403) At 31 December 2020 (94,684 ) (66,498 ) (18,621 ) (179,803 ) Net book value - 27,522 11,259 38,781 2019 Cost Atbeginningofyear 94,684 55,290 29,880 179,854 Additions - 16,873 - 16,873 Totalattheendoftheyear 94,684 72,163 29,880 196,727 Amortisation and impairment losses Atbeginningofyear (94,684) (37,183) (18,621)(150,488) Amortisationfortheperiod -(14,912) - (14,912) At31December2019 (94,684)(52,095) (18,621)(165,400) Net book value - 20,068 11,259 31,327 Softwareiscapitalisedonthebasisofthecostsincurredtobringthesoftwaretouse.Directcostsofthe

developmentofseparatelyidentifiableinternallygeneratedsoftwarearecapitalisedwhereitisprobablethatfutureeconomicbenefitsattributabletotheassetwillflowfromitsuse(internallygeneratedsoftware).Costsincurredintheongoingmaintenanceofsoftwareareexpensedimmediatelywhenincurred.Internallygeneratedsoftwareisamortisedoveritsusefullife.

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21. Otherassets Financial Accruedincome 130,462 128,283 130,462 128,283 Otherreceivables 33,067 45,889 33,037 5,576 Non financial Prepayments 1,024 4,588 1,024 4,588 Valueaddedtaxrecoverable 4,256 3,753 4,256 3,722 168,809 182,513 168,779 142,169 Accruedincomerelatestoaccruedinterestreceivableonloansandadvancesreportedonnote18.

Otherreceivablesincludesundryfeeincomereceivable. 22. Deposits from other banks BankBalances 431,061 1,013,046 431,061 965,864 Placements 5,410 7,882 5,410 7,882 436,471 1,020,928 436,471 973,746 23. Deposits from customers Demanddeposits 7,236,729 7,921,772 7,236,729 7,921,772 Timedeposits 4,612,881 4,954,033 4,612,881 4,954,033 11,849,610 12,875,805 11,849,610 12,875,805 Accruedinterestexpenseonliabilitiesisreportedaspartofotherliabilitiesinnote27.2

24. Senior and subordinated loan Seniordebt(SCBB003) - 50,000 - 50,000 Subdebt 389,000 389,000 389,000 389,000 389,000 439,000 389,000 439,000 Thegroupredeemedsubordinatedloaninstruments(SCBB003)amountingtoP50millionduringthe

year. Changesinliabilitiesarisingfromfinancingactivities Senior & subordinated debt Openingbalance 439,000 686,260 439,000 686,260 Cashflowitems Redemptionduringtheyear (50,000) (247,260) (50,000) (247,260) Interestpaid (25,005) (32,293) (25,005) (32,293) Non-Cashflowitems Interestaccrued 25,005 32,293 25,005 32,293 Balance at the end of the year 389,000 439,000 389,000 439,000

ThetermsandconditionsofthesubordinatednotesandtheSeniordebtforbothGroupandCompanyareasfollows:

24. Note information Interest rate Maturity 2020 2019 P’000 P’000

Seniordebtwasissuedon20December Fixedinterestrate 2005.Interestispayablesemi-annually. of10.50%per Claimsinrespectoftheloancapitaland annum 20-Dec-20 - 50,000 interest thereon are subordinate to the claimsofothercreditorsanddepositors

Subordinateddebtissuedforcapital 4%abovethe injection 91dayBOBCrate 29-Jul-25 389,000389,000

Group Company 2020 2019 2020 2019 P’000 P’000 P’000 P’000 25. Current taxation payable/refundable Openingbalance(payable)/refundable (1,169) (13,926) (1,665) (13,150) Chargefortheyear 25,687 5,233 22,714 - Prioryearunderprovision 659 257 - - Incometaxrefunded 0 13,150 0 13,150 Incometaxpaid (17,081) (5,883) (13,609) (1,665) Balance at the end of the year 8,096 (1,169 ) 7,440 (1,665 )

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26. Deferred taxation Group- 31 December 2020 Net Recognised Recognised Closing

balance in profit in equity balance as at 01 or loss as at 31 Jan 2020 Dec 2020

P’000 P’000 P’000 P’000 Propertyandequipment 2,500 351 - 2,851 Availableforsalesecurities 2,640 - (4,890) (2,250) Revaluationofproperty,plantandequipment 5,455 - - 5,455 Restructuringprovision - (5,095) - (5,095) Provisionforsharebasedpayments (16) (17) - (33) BonusProvision (4,976) 679 - (4,297) Unclaimedcustomerdeposits (46) - - (46) Expectedcreditlosses (51,554) 33,369 - (18,185) Unrealisedgains - 355 - 355 Incomereceivedinadvance (351) (4,583) - (4,934) Prepayments 1,010 (784) - 226 Leavepayaccrual (1,906) (406) - (2,312) Assessedloss (13,901) 13,901 - - RightofUse(ROU)leasedassets (159) (928) - (1,087) Clawbackprovisions - (2,610) - (2,610) CBRAccruals(NoWHT) - (8,180) - (8,180) Balance at the end of the year (61,304) 26,051 (4,890) (40,143) Company- 31 December 2020 Propertyandequipment 2,500 351 - 2,851 Availableforsalesecurities 2,640 - (4,890) (2,250) Revaluationofproperty,plantandequipment 5,455 - - 5,455 Restructuringprovision (6,748) (5,095) - (11,843) Provisionforsharebasedpayments (905) (17) - (922) BonusProvision 2,661 679 - 3,340 Unclaimedcustomerdeposits (46) - - (46) Expectedcreditlosses (51,554) 33,369 - (18,185) Unrealisedgains - 355 - 355 Incomereceivedinadvance (351) (4,583) - (4,934) Prepayments 1,010 (784) - 226 Leavepayaccrual (1,906) (406) - (2,312) Assessedloss (13,901) 13,901 - - RightofUse(ROU)leasedassets (159) (928) - (1,087) CBRAccruals(NoWHT) - (8,180) - (8,180) Balance at the end of the year (61,304) 28,661 (4,890) (37,533)

26. Deferred taxation

Group and company - 31 December 2019 Net Recognised Recognised Closing balance in profit in equity balance

as at 01 or loss as at 31 Jan 2020 Dec 2020

P’000 P’000 P’000 P’000

Propertyandequipment 869 1,631 - 2,500 Availableforsalesecurities 1,581 - 1,059 2,640 Revaluationofproperty,plantandequipment 4,890 - 565 5,455 Restructuringprovision (6,748) 6,748 - - Provisionforsharebasedpayments (16) - - (16) BonusProvision (4,087) (889) - (4,976) Operationallossprovision (46) - - (46) Expectedcreditlosses (46,650) (4,904) - (51,554) Incomereceivedinadvance (364) 13 - (351) Prepayments 973 37 - 1,010 Leavepayaccrual (1,751) (155) - (1,906) Assessedloss (21,079) 7,178 - (13,901) RightofUse(ROU)leasedassets - (159) - (159) Balanceattheendoftheyear (72,428) 9,500 1,624 (61,304)

Therewerenounrecogniseddeferred taxassetsand liabilitiesasat currentorprevious reportingdate.

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27.1 Unsettled treasury bills 29,878 - 29,878 - 27.2 Other liabilities Financial Accruals 569 2,436 569 2,436 Accountspayable 175,793 195,245 217,090 173,617 Leaseliability 46,821 62,828 46,821 62,828 Non financial Otherpayables 45,320 25,742 31,633 22,822 268,503 286,251 296,113 261,703 27.3 (a) Provisions Restructuring provision Balanceatthebeginningofyear - - - 30,674 Provisionmadeduringtheyear 23,158 - 23,158 - Payments/reversalsduringtheyear - - - (30,674) 23,158 - 23,158 - Theprovisionrelatesprincipallytooutcomesofourstrategicre-thinkarounddigitalanddeliverychannels.

Therestructuringisexpectedtobelargelycompletedby2021. 27.3 (b) Clawback provisions** Balanceatthebeginningofyear 11,862 8,162 - - Provisionmadeduringtheyear 10,734 10,321 - - RealisedinP&L - - - - Paymentsduringtheyear (8,665) (6,621) - - 13,932 11,862 - - **Clawbackliabilityisrecognisedoncreditlifeonearlysettlementofloans.

28. Cash and cash equivalent CashandbankbalancewithCentralBank(note15) 975,991 870,350 973,484 867,731 Loansandadvancestobanks(note16) 2,501,471 3,458,459 2,501,471 3,458,459 3,477,462 4,328,809 3,474,955 4,326,190 Cashandcashequivalentsincludecashonhand,balanceswithCentralBankandplacementswithother

bankswithamaturityoflessthan3monthsandreadilyconvertibleintocashatnocharge. TheGroupheldcashandcashequivalentsofP3477millionat31December2020(2019:P4329million)

whichrepresentsitsmaximumcreditexposureontheseassets.ThecashandcashequivalentsareheldwiththeCentralBankandotherfinancialinstitutioncounterparties.TheCashandbankbalanceswithCentralincludeaprimaryreserverequirementofP251m(2019;P506m).

29. Related Parties

Anumberofbankingtransactionsareenteredintowithrelatedpartiesinthenormalcourseofbusiness.These transactions are carried out under mutually agreed terms and conditions. These include loans,depositsandforeigncurrencytransactionswiththegroupandpurchaseofsoftware.Duringthecurrentyear,therewasanewdispensationagreedwithSCBgrouptocaprechargesat40%ofdirectcosts.

(a) Balances and transactions with directors and key management personnel Theaggregatevalueoftransactions,compensationandoutstandingbalancesrelatedtokeymanagement

personnelforbothGroupandCompanywereasfollows: (i) Directorsandkeypersonnelcompensation:

2020 2019 P’000 P’000

Directors’fees-shorttermemployeebenefits 479 461 Directorsandkeymanagementpersonnelcompensation -shorttermemployeebenefits 24,171 19,361 Directorsandkeymanagementpersonnelcompensation –longtermemploymentbenefits 1,243 1,103 Directors’holdinginCompanyshares 483 222 CompensationoftheGroup’skeymanagementpersonnelincludes,shorttermemployeebenefitsandnon-

cashbenefits. (ii) Keymanagementpersonnelandnon-executivedirectors’balances: Assets Liabilities 2020 2019 2020 2019 Loans P’000 P’000 P’000 P’000

Auto,mortgagesandpersonal 14,843 13,620 - - Deposits - - 5,635 1,616 Expectedcreditlossesontherelatedpartybalancesareincludedintheretailbook.

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29. Related parties (continued)

(a) Balances and transactions with the holding company and with entities within Standard Chartered Group

Nature of related-party relationships

StandardCharteredBankPLCistheholdingcompanyandtheothercompaniestransactedwitharefellowsubsidiaries.

Detailsofrelatedpartyatyearendareasfollows: Balancesduefrom: StandardCharteredBankPLC 2,062,325 2,030,047 2,062,325 2,030,047 StandardCharteredBankNewYork 29,442 - 29,442 - StandardCharteredBankJohannesburg 239,804 202,954 239,804 202,954 StandardCharteredBankMauritius 54,302 637,272 54,302 637,272 Othergroupcompanies 128,864 84,886 128,864 84,886 StandardCharteredInsuranceAgency - - 105,846 45,010 2,514,738 2,955,159 2,620,584 3,000,169 Balancesdueto: StandardCharteredBankPLC 460,712 620,950 460,712 620,950 StandardCharteredBankNewYork 256 388,811 256 388,811 StandardCharteredBankJohannesburg 6,885 92,623 6,885 92,623 Othergroupcompanies 38,721 60,610 38,721 60,610 StandardCharteredInsuranceAgency - - 163,617 41,490 506,575 1,162,994 670,192 1,204,484 Balances due to related companies are unsecured, carry variable interest rates, and are short term in

nature.

29. Related Parties (continued)

Detailsofrelatedpartytransactionsduringtheyearareasfollows: Interest Interest Group Group income expense recharges share scheme expense P’000 P’000 P’000 P’000 Group and Company - 2020 SCBUKTreasury 6,642 20,231 139,214 439 SCBSingaporeDBU - 10 32,552 - SCBZimbabwe 79 - - - SCBJapan - 2 - - SCBKenya - 4 7,884 - SCBNewYork - 346 - - SCBJohannesburg 7,627 1,321 - - SCBMauritius 6,154 - - - SCBHongKong - - - - MESARegionalOffice - - - - SCBIndia - 1 26,936 - SCBMalaysia - - 2,332 - StandardCharteredBankAG - 3,585 - - SCBChina - 0 928 - SCBothers - 800 - -

20,502 26,300 209,847 439 Group and Company - 2019

SCBUKTreasury 25,297 14,366 143,885 9 SCBSingaporeDBU - 2,379 7,990 - SCBSrilanka - - - - ScopeTokyo - - - - SCBKenya - 6 10,864 - SCBNewYork 2,528 - - - SCBJohannesburg 11,729 8,969 - - SCBMauritius 12,035 - - - SCBHongKong - - - - MESARegionalOffice - - 9,367 - SCBIndia - 2,946 21,653 - SCBMalaysia - - 1,726 - StandardCharteredBankAG - 3,585 - - SCBChina - - 888 - 51,589 32,251 196,373 9 TransactionwithotherentitiesintheStandardCharteredGroupareintheordinarycourseofbusinesson

mutuallyagreedtermsandconditions.

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32. Contingent liabilities and commitments

2020 2019 Stage 1 Stage 2 Stage 3 Total Total

P’000 P’000 P’000 P’000 P’000

Grade 1-11: Low - fair risk Un-drawncommitments 5,882,806 183,923 - 6,066,729 4,562,944 GuaranteesandLettersofcredit 485,520 72,163 - 557,683 554,701

Grade 13/14: Substandard/loss Un-drawncommitments - - - - -

GuaranteesandLettersofcredit - - 5,784 5,784 3,106Contingentliabilitiesand

commitments 6,368,326 256,086 5,784 6,630,196 5,120,751Expectedcreditlosses (450) (660) (483) (1,593) (3,301)Contingent liabilities and

commitments 6,367,876 255,426 5,301 6,628,602 5,117,450

33. Fiduciary activities

Inthenormalcourseofbusiness,theGroupisapartytofinancialinvestmentswithoff-balancesheetrisktomeetthefinancingneedsofcustomers.Theseinstrumentsinvolve,tovaryingdegrees,elementsofcreditriskwhicharenotreflectedinthestatementoffinancialposition.TheGroup’smaximumexposuretocreditlossundercontingentliabilitiesandcommitmentstoextendcreditintheeventofnon-performancebytheotherpartywhereallcounterclaims,collateralorsecurityprovevalueless,isrepresentedbythecontractualamountofthoseinstruments.Alargemajorityoftheseexpirewithoutbeingdrawnupon,andasaresultthecontractednominalprincipleamountsarenotrepresentativeoftheactualfuturecreditexposureorliquidity requirements of theGroup. Expected credit loss for contingent liabilities and commitments ofP1.6m(2019;P3.3m)wasrecognisedunderIFRS9atthecurrentreportingdate.

Baseduponthe leveloffeescurrentlychargedtaking intoaccountmaturityandinterestratestogetherwithanychangeinthecreditworthinessofcounterpartiessinceorigination,theGrouphasdeterminedthatthefairvalueofcontingentliabilitiesandun-drawnloancommitmentsisnotmaterial.

TheGroupcommonlyactsastrusteeandinotherfiduciarycapacitiesthatresultintheholdingorplacingofassetsonbehalfof individuals, trusts, retirementbenefitplansandother institutions.Theassetsandincomearisingthereonareexcludedfromthesefinancialstatements,astheyarenotassetsoftheGroup.

TheseinstrumentsareheldintrustonbehalfofcustomersandarethereforenottreatedasassetsoftheBankandaccordinglyhavenotbeenincludedinthesefinancialstatements.

30. Subsidiaries and other structured entities Thelistbelowprovidesdetailsofthesubsidiariesofthegroup. Stated capital Ownership

interest 2020 2019

StandardCharteredBankInsuranceAgency(Proprietary)Ltd 30100 100% 100% StandardCharteredBankInvestmentServices(Proprietary)Ltd 100 100% 100% StandardCharteredBotswanaEducationTrust - 100% 100% StandardCharteredBotswanaNominees(Proprietary)Ltd 100 100% 100% The Group has not provided any financial support or issued guarantees in favour of the subsidiaries.

StandardCharteredInvestmentServices(Proprietary)LtdandStandardCharteredBotswanaNominees(Proprietary) Ltd are dormant companies. Standard Chartered Insurance Agency (Proprietary) LtdoperatesasaninsuranceagentfortheGroupandismanagedfromtheGroup’sheadoffice.TheAgencycollectspremiumsfromclientsonbehalfofaBrokerforacommission.

StandardCharteredBotswanaEducationTrustisastructuredentitythatwassetuptopromoteeducationalactivities. Standard Chartered Botswana Education Trust acquired 0.84% shareholding in StandardCharteredBankBotswanaLimited.

The Group was directly involved in the design and establishment of the Trust and in determining theactivities itundertakes.StandardCharteredBotswanaEducationTrustobtaineda loanofP32.8mfromStandardCharteredBankPLCwhichwasrepayableon31December2019.Duringtheyear,theloanpayabletoStandardCharteredBankPLCwasforgivenresultinginaP48m(includingcapitalisedinterest)creditonthestatementofprofitorlossandothercomprehensiveincome.

2020 2019 Investment in subsidiaries P’000 P’000

Asat1January** 30 - Additions - 30 As at 31 December 30 30 **Theamountofsharecapitalasat1January2019wasbelowonethousandwhenrounded,hencethePnil

balance. 31. Leases - Right-of-use asset Interestonleasepayments(Note6) 2,184 2,641 Expensesrelatingtoshort-termpropertyleases 1,079 1,214 Amountsrecognisedinstatementofcashflows Leaseliabilitypayments 15,394 14,941 Interest 2,184 2,641 Principal 13,210 12,300 TheGroup’scommitmentsundernon-cancellableoperatingleasesexpiring:

Within1year 13,098 12,305 After1yearbutlessthan5years 32,174 31,151 After5years 6,919 6,919 Totalundiscountedleaseliabilities 52,191 50,375

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33. Fiduciary activities (continued) Assetsheldincustody 15,627,103 15,522,519 15,627,103 15,522,519

33.1 Litigations Standard Chartered Bank Botswana Limited together with African Banking Corporation Botswana,

African Banking Corporation Zambia and Standard Chartered Bank Johannesburg Branch (Lenders)are defendants in a dispute before the Gauteng High Court, instituted byMapula Solutions (Pty) Ltd“Mapula”. Mapulaisclaimingdamages,tothesumofZAR577million,foranallegedbreachofcontractinrespectofaDebtReschedulingAgreement“DRA”.

TheDRAwassignedbetweentheLendersandBlueFinancialServicesLimited.Bluebreachedthetermsof

theDRAandtheLenderscancelledtheDRA,thiscancellationwasconfirmedbytheJohannesburgHighCourt.Mapulaassumed rightsby cession fromaRelatedPartyofBlue,basedon that cessionof rightsMapulainstitutedactionagainsttheLenders.

Mapula in claiming that the Lenders hadno right to cancel theDRA.Thematter is going through the

litigationprocessattheJohannesburgHighCourt,accordingly, thishasbeendisclosedasacontingentliabilityandnoprovisionhasbeenrecognised.

34. Segmental reporting

TheGrouphasthefollowingtwostrategicdivisions,whicharereportablesegments.Thesedivisionsofferdifferent products and services and aremanaged separately based on the Group’smanagement andinternalreportingstructure.ThereisnointersegmentrevenueandallfinancialincomeforthesesegmentsisearnedinBotswana.

As part of our transformation strategy, Corporate & Institutional Banking and Commercial Bankingbusinessesmergedintoasinglesegment,the“Corporate,CommercialandInstitutionalBanking(CCIB)”withaviewtoleveragingthecapabilitieswithinbothbusinessestodeliversuperiorbankingsolutionstoourclients.Asaresultofthistransformation,2019and2020segmentresultsarenoteasilycomparable.

Corporate, Commercial and Institutional Banking provides lending, trade finance, cash management,

securities services, foreignexchange, riskmanagement,capital raising,corporatefinancesolutionsandadvisory services to its customers. The segment focuses on deepening relationships with clients andprovidingthemwithsolutions.

RetailBankingprovidesabroadrangeofproductsandservicestomeettheborrowing,wealthmanagement

andtransactionsneedsofindividualsandsmallsizedenterprises(SEs).WhilewemaintainourstrongholdonthePersonalsegment,morefocuswillbegiventohighnetworthindividualsandSEspayingparticularattentiontoproductinnovationtoattractandretaincustomers.

TheGroup’sexecutivecommitteereviewstheinternalmanagementreportsatleastmonthly.Information

relatedtoeachreportablesegmentissetoutbelow.SegmentprofitbeforetaxationasincludedininternalmanagementreportsreviewedbytheGroup’smanagementcommitteeisusedtomeasureperformancebecausemanagementbelievesthatthisinformationisthemostrelevantinevaluatingtheresultsoftherespectivesegmentstootherentitiesthatoperatewithinthesameindustries.

34. Segmental reporting (continued) Retail Corporate, Total Banking Commercial and Institutional

Banking P’000 P’000 P’000 2020 ProfitorLoss Netinterestrevenuecalculatedusingthe effectiveinterestmethod 348,652 115,611 464,263 Netfeeandcommissionincome 149,320 51,308 200,628 Nettradingincome 30,796 57,580 88,376 Creditlossexpenseonfinancial (21,373) (19,932) (41,305) Liabilitywrittenoff 48,049 48,049 Net operating income 507,395 252,616 760,011 Operatingexpenses (462,628) (195,263) (657,891) Segment profit (loss) before taxation 44,767 57,353 102,121 Incometaxexpense (52,397) Profit for the year 49,724 Statement of financial Position InvestmentSecurities - 2,113,719 2,113,719 Loansandadvancestocustomers 7,071,323 1,044,357 8,115,680 Otherassetsforreportablesegments 160,116 3,675,189 3,835,305 Total assets for reportable segments 7,231,439 6,833,265 14,064,704 Depositsfromnonbankcustomers 4,149,434 7,700,176 11,849,610 Otherliabilitiesforreportablesegments (56,433) 1,211,540 1,155,107 Total liabilities for reportable segments 4,093,002 8,911,716 13,004,717

136 137







GROUP COMPANY 2020 2019 2020 2019 P’000 P’000 P’000 P’000 35. Issued Capital Authorised Shares OrdinarysharesofP1each 400,000 400,000 400,000 400,000 Ordinary shares Issuedandfullypaid At1January2020(excludingtreasury sharesforGroup) 295,844 295,844 298,351 298,351 Issuedin2020 - - - - At 31 December 2020 295,844 295,844 298,351 298,351

36. Events after reporting period

Dividend declared

Therehavebeennoevents,factsorcircumstancesofamaterialnaturethathaveoccurredsubsequenttothereportingdatewhichnecessitateanadjustmenttothedisclosureintheseAnnualFinancialStatementsorthenotesthereto.TheDirectorshaveresolvedtoawardafinaldividendofP48m(2019;P55m)grossofwithholdingtax.

34. Segmental reporting (continued) Retail Corporate Commercial Total Banking and Banking Institutional Banking

P’000 P’000 P’000 2019 ProfitorLoss Netinterestrevenuecalculatedusingthe effectiveinterestmethod 328,598 84,823 22,238 435,659 Netfeeandcommissionincome 156,671 36,731 9,526 202,928 Nettradingincome 33,750 35,891 15,372 85,013 Creditlossexpenseonfinancial (25,078) (8,337) 1,228 (32,18) Net operating income 493,941 149,107 48,364 691,413 Operatingexpenses (417,695) (131,660) (72,479) (621,834) Segment profit (loss) before taxation 76,246 17,447 (24,115) 69,579 Incometaxexpense (14,734 ) Profit for the year 54,845 StatementoffinancialPosition InvestmentSecurities - 3,073,599 - 3,073,599 Loansandadvancestocustomers 6,674,082 1,027,225 217,920 7,919,227 Otherassetsforreportablesegments 115,622 4,628,545 3,509 4,747,676 Total assets for reportable segments 6,789,704 8,729,369 221,429 15,740,501 Depositsfromnonbankcustomers 3,851,931 8,022,577 1,001,297 12,875,805 Otherliabilitiesforreportablesegments 14,352 1,789,892 (49,546) 1,754,698 Total liabilities for reportable segments 3,866,283 9,812,469 951,751 14,630,503 Segment balances exclude total equity, property, plant and right of use assets and, other assets and

liabilitieswhichcannotbeallocatedtothesegments.

138 139








Please complete in block letters

I/WE____________________________________________________________

BeingashareholderofStandardCharteredBankBotswanaLimited,herebyappoint:

_____________________________________________orfailinghimorher



asmyproxytovoteonmybehalfattheannualgeneralmeetingofthecompanytobeheldonthe30thJune2021andatanyadjournmentofthemeetingthereofasfollows;

Resolution For Against Abstain1. Toreceive,considerandadopttheChairperson’sreport.

2. Toreceive,considerandadopttheChiefExecutiveOfficer’sreport.3. Toreceive,considerandapprovetheAnnualFinancialStatementsfortheyear

ended31stDecember2020,togetherwiththeAuditor’sreportstherein.4. Toratifythedeclarationofafinaldividendof16thebeperordinarysharepaid

totheshareholdersaroundthe19thMay2021.5. Tore-electasaDirectorDoreenCillaKhamawhoretiresby rotationand in

accordancewithSection66oftheConstitution,andwhobeingeligible,offersherselfforre-election

6. Tore-electasaDirectorRodgersMajwabeThusiwhoretiresbyrotationandinaccordancewithSection66oftheConstitution,andwhobeingeligible,offershimselfforre-election.

7. ToratifyandconfirmtheappointmentofRapelangRabanaasanIndependentNon- Executive Director effective 13th December 2020 in accordance withSection90oftheCompaniesConstitution.

8. To approve the remuneration for directors for the year ending 31st December 2021.

9. Toapprovetheremunerationoftheauditors,Ernst&YoungBotswanafortheyear ended 31stDecember2020.

10. Toconfirmtheappointmentoftheauditorsfortheensuingyear.

Unlessotherwiseindicated,myproxymayvoteashe/shethinksfit.

Signature_____________________Date__________________2021

Notes_________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________

1. Anyalterationofthisformmustbeinitialledbythesignatory

AcopyoftheProxyFormisavailablefordownloadatwww.sc.com/bworpleaserequestforacopyfromtheCompanySecretaryviae-mailatChazha.Kgalemang@sc.com

2. ThisformofproxyshouldbecompletedandreturnedsoastoreachtheSecretaryoftheCompanyonthe5thfloor,StandardHouse,TheMall,POBox496,Gaboronealternativelysentbye-mailtoChazha.Kgalemang@sc.comnolaterthanFriday25thJune2021.

Proxy Form

Notice is hereby given that the 46th Annual General Meeting of the members of Standard Chartered Bank Botswana Limited will be held on Wednesday 30th June 2021 at 1500 hours via bluejeans for the following purposes:

1. Toreceive,considerandadopttheChairperson’sreport.2. Toreceive,considerandadopttheChiefExecutiveOfficer’sreport.3. Toreceive,considerandapprovetheAnnualFinancialStatementsfortheyearended31stDecember2020,together

withtheAuditor’sreportstherein.4. Toratifythedeclarationofafinaldividendof16thebeperordinarysharepaidtotheshareholdersonthe19thMay

2021.5. To re-electasaDirectorDoreenCillaKhamawho retiresby rotationand inaccordancewithSection66of the

Constitution,andwhobeingeligible,offersherselfforre-election.DirectorKhamaisthefounderandseniorpartnerof Doreen Khama Attorneys, a private law firm established in 1982 which provides legal advice to corporate,individualclientsoncommercialmattersandgeneral litigation.Shehassaton theboardsofBotswanaSavingsBank,ABCHoldingsandBancABCBotswanawheresheservedasaNon-ExecutiveDirectorandaChairperson.

6. Tore-electasaDirectorRodgersMajwabeThusiwhoretiresbyrotationandinaccordancewithSection66oftheConstitution,andwhobeingeligible,offershimselfforre-election.MrThusiistheco–founderofGidaryTechnicalSolutions, a consultancy company which specialises in technical investigations, mineral resource evaluationincludingprojectsandoperationsmanagementsupportatvariousmines.HeholdsaBachelor’sdegreeofSciencespecialisinginMineralProcessingfromtheUniversityofWales,aPostGraduateDiplomainManagementStudiesfromManagementCollegeofSouthernAfricaandaCertificate inAdvancedOperationsManagementfromtheUniversityofCapeTown.HeisamemberofBotswanaInstituteofEngineers,aregisteredengineerbytheEngineeringRegistrationBoardBotswanaandaprojectmanagementprofessionalthroughtheProjectManagementInstitute.

7. ToratifyandconfirmtheappointmentofRapelangRabanaasanIndependentNon-ExecutiveDirectoreffective13thDecember2020inaccordancewithSection90oftheCompaniesConstitution.MsRabanaisaninternationallylauded technologyentrepreneur.Herareasofexpertise includedigital transformation, innovation, strategyandproductdevelopment,operationsandprocessengineering,communicationsandbranddevelopment.ShesitsasaboardmembertotheAfricanLeadershipUniversityinMauritiusandImagineWorldwideinSanFrancisco,UnitedStatesofAmerica.MsRabanaholdsaBachelorofBusiness Science (Computer ScienceHonours), aMaster’s ofScience(PropertyStudies)fromtheUniversityofCapeTown(UCT),SouthAfrica,aFAISRegulatoryExamsRE1(KeyIndividuals), RE3 (Key Individuals), RE5 (Representatives), and a Venture Capital Intensive Course fromVentureUniversityinSanFrancisco,USA.

8. Toapprovetheremunerationfordirectorsfortheyearending31stDecember2021.9. Toapprovetheremunerationoftheauditors,Ernst&YoungBotswanafortheyearended31stDecember2020.10. Toconfirmtheappointmentoftheauditorsfortheensuingyear.11. Toreceiveandconsiderquestionsandorcommentsfromtheshareholders.

Notes: Anymemberentitledtoattendandvote, isentitledtoappointaproxytoattendandspeakand,onapoll,vote inhis/herstand.Thepersonsoappointedneedsnotbeamember.The instrumentappointingsuchaproxytogetherwiththeshareholder’srequestforthelinktoattendthemeetingshouldbeforwardedtotheCompanybye-mailnotlessthan48hours before the meeting at [email protected]@sc.com

AcopyoftheAnnualReportisavailablefordownloadat www.sc.com/bw, oratthecompany’sregisteredofficealternativelypleaserequestforacopyfromtheCompanySecretaryviae-mailat [email protected]

By order of the Board

ChazhaKgalemangCompany Secretary

Annual General Meeting Noticefor the year ended 31 December 2020

http://www.sc.com/bw

Notes

140

2020 Annual Report

Documents

We Are Here for Future Banking A Message from the Board