ANNUAL REPORT FINANCIAL REPORTS - Citigroup. Fatai Karim Executive Director Mr. Ade Adeyemi Non...

33ANNUAL REPORT

FINANCIALREPORTS

34 TWO THOUSAND AND ELEVEN | FINANCIAL REPORTS

DIRECTORS, OFFICERS AND ADVISORS

Mr. Olayemi Cardoso Chairman

Mr. Emeka Emuwa Managing Director

Mrs. Funmi Ogunlesi Executive Director

Mr. Fatai Karim Executive Director

Mr. Ade Adeyemi Non Executive Director

Mr. Khalid Qurashi Non Executive Director

Mr. Naveed Riaz Non Executive Director

Chief Arthur Mbanefo Independent Director

Prof. Yemi Osinbajo S.A.N. Independent Director

Mr. Michael Murray-Bruce Non Executive Director

Dr. Hilary Onyiuke Non Executive Director

Mr. Tariq Masaud Executive Director

Mr. Omar Hafeez Executive Director

Mrs. Olusola Fagbure Company Secretary

CORPORATE HEAD OFFICE

Citibank Nigeria Limited

Charles S. Sankey House

27, Kofo Abayomi Street

Victoria Island, Lagos.

Telephone: +234 (1) 2798400

+234 (1) 4638400

Website: www.citigroup.com/nigeria

AUDITORS

PricewaterhouseCoopers

252E, Muri Okunola Street,

Victoria Island, Lagos

Telephone: +234 (1) 271 1700

Website: www.pwc.com/ng

35ANNUAL REPORT

DIRECTORS’ REPORTFOR THE YEAR ENDED 31 DECEMBER 2011

The directors have pleasure in presenting their annual report on the affairs of Citibank Nigeria Limited (“the Bank”) together

with the financial statements and auditors’ report for the year ended 31 December 2011.

LEGAL FORM

The Bank was incorporated in Nigeria under the Companies Act as a private limited liability company on 2 May 1984. It was

granted a license on 14 September 1984 to carry on the business of commercial banking and commenced business on 14

September 1984.

PRINCIPAL ACTIVITY AND BUSINESS REVIEW

The principal activity of the Bank is the provision of banking services to corporate and individual customers. Such services

include transactional services, corporate finance, provision of finance, custodial business and money market and trading

activities.

The Bank has a subsidiary, Nigeria International Bank Nominees Limited. The company is a nominee company that acts as the

registered holder of securities purchased for customers of the Bank’s Custodial business.

OPERATING RESULTS

Gross earnings increased by 19% and profit before tax of the Bank also increased by 7%. The directors recommend the

approval of a final dividend of N8,241,642,825.55 (N2.95k per share) (2010: N7,682,887,379.75 (N2.75k per share)) from

the outstanding balance in the retained earnings account as at 31 December 2011. The dividends are subject to deduction of

withholding tax.

Highlights of the Bank’s operating results for the year under review are as follows:

2011 2010

N’000 N’000

Gross earnings 24,791,081 20,918,450

Profit before taxation 12,192,183 11,728,301

Taxation (2,460,228) (2,674,075)

Profit after taxation 9,731,955 9,054,226

APPROPRIATIONS

Transfer to statutory reserve (1,459,793) (1,358,134)

Transfer to retained earnings (8,272,162) (7,696,092)

- -


DIRECTORS’ SHAREHOLDING

The following directors of the Bank held office during the year and had direct and indirect interests in the issued share capital

of the Bank as recorded in the register of directors’ shareholding and/or as notified by the directors for the purposes of

sections 275 and 276 of the Companies and Allied Matters Act, as noted below:

Shareholding

Director Position Date of appointment/ Number of Number of

Resignation Ordinary Shares Ordinary Shares

held held

2011 2010

Mr. Olayemi Cardoso Chairman - -

Mr. Emeka Emuwa Managing Director - -

Mrs. Funmi Ogunlesi Executive Director - -

Mr. Fatai Karim Executive Director - -

Mr. Ade Ayeyemi Non-Executive Director - -

Mr. Khalid Qurashi

(British) Non-Executive Director - -

Mr. Naveed Riaz

(American) Non-Executive Director - -

Chief Arthur Mbanefo Independent Director - -

Prof. Yemi

Osinbajo S.A.N. Independent Director - -

Mr. Michael

Murray-Bruce Non-Executive Director - -

Dr. Hilary Onyiuke Non-Executive Director - 33,445,769

Mr. Emeka Okonkwo Executive Director Resigned WEF September 30 2011 - -

Mr. Tariq Masaud

(Pakistani) Executive Director - -

Mr. Omar Hafeez

(Pakistani) Executive Director - -

Dr. Hilary Onyiuke’s shareholding of 33,445,769 ordinary shares is now held through Gauthier Investments Ltd.

Mr. Olayemi Cardoso is a representative of the Estate of F.B. Cardoso which has a shareholding of 30,196,109 ordinary shares.

Mr. Michael Murray-Bruce is a representative of Manilla Properties Limited which has a shareholding of 6,490,360 ordinary

shares.

Since the last Annual General Meeting, Mr. Emeka Okonkwo resigned from the board.

The directors to retire by rotation at the next Annual General Meeting (AGM) are Mr Yemi Cardoso, Mr. Naveed Riaz, Mr Khalid

Qurashi and Mr Ade Ayeyemi, who being eligible, offer themselves for re-election.

PROPERTY AND EQUIPMENT

Information relating to changes in property and equipment is given in Note 17 to the financial statements. In the directors’

opinion, the market value of the Bank’s properties is not less than the value shown in the financial statements.

37ANNUAL REPORT

SHAREHOLDING ANALYSIS

The shareholding pattern of the Bank as at 31 December 2011 is as stated below:

Share Range No. of Percentage of No. of Holdings Percentage

Shareholders Shareholders (%) Holdings

500,001 – 1,000,000 1 3.85% 950,011 0.03%

1,000,001 – 5,000,000 - - - -

5,000,001 – 10,000,000 5 19.23% 34,365,234 1.23%

10,000,001 – 50,000,000 18 69.22% 409,856,643 14.68%

50,000,001 – 100,000,000 1 3.85% 60,416,666 2.16%

100,000,001 – 500,000,000 - - - -

500,000,001 – 1,000,000,000 - - - -

Foreign Shareholders

Above 1,000,000,000 1 3.85% 2,288,188,675 81.90%

TOTAL 26 100% 2,793,777,229 100%

SUBSTANTIAL INTEREST IN SHARES

According to the register of members as at 31 December 2011, no shareholder held more than 5% of the issued share capital

of the Bank, except the following:

Shareholder No. of shares held Percentage of shareholding

Citibank Overseas Investment Corporation 2,288,188,675 81.90%

DIRECTORS

Directors’ remuneration was paid as follows

2011 2010

N’000 N’000

Fees and sitting allowances 36,600 29,050

Other emoluments 223,300 224,783

259,900 253,833


DONATIONS AND CHARITABLE GIFTS

The Bank and Citigroup Foundation made contributions to charitable and non-political organizations amounting to N62,910,000

(2010:N42,350,000) during the year as analyzed below:

Citibank Nigeria Limited Donations N

1 Abuja Children’s Home 400,000

2 Arrow of God Orphanage 500,000

3 Atunda Olu School 750,000

4 Care Organization Public Enlightenment (COPE) 500,000

5 CCWA International 400,000

6 Chesire Home (Borokiri) 500,000

7 Child Life Line (Yaba & Ikorodu) 700,000

8 Children Emergency Relief Foundation 500,000

9 City of Refuge 400,000

10 Compassion Home 500,000

11 Down Syndrome Association of Nigeria 500,000

12 Green Pasture and Home Initiative 500,000

13 Heart of Gold Children’s Hospice 1,000,000

14 Medical Missionaries of Mary Hospital (Lugbe) 400,000

15 Modupe Cole Memorial Child Care and Treatment Home 1,000,000

16 National Orthopedic Special School (Igbobi) 500,000

17 Ngwa Road Motherless Babies Home 400,000

18 Nigerian Red Cross 500,000

19 Our Lady of Mercy Orphanage 400,000

20 Pacelli School (For the Blind) 500,000

21 Port-Harcourt Children’s Home (formerly Motherless Babies Home, Borokiri) 500,000

22 Right Steps Incorporated 400,000

23 Rosali Home Rehabilitation Centre (Eleme, PH) 500,000

24 Seventh Day Adventist Motherless Babies Home 400,000

25 Sickle Cell Club 500,000

26 SOS Children’s Village 500,000

27 St. Anne’s Orphanage 400,000

28 Start Right Consulting 400,000

29 The Book Trust 400,000

30 The Child 500,000

31 Wesley School 1 (For Deaf Children) 500,000

32 Wesley School 2 (For Deaf Children) 500,000

Sub Total 16,350,000

Citi Foundation Grants N

1 Fate Foundation 4,800,000

2 Growing Business Foundation 8.000,000

3 Hope Worldwide 6,560,000

4 Junior Achievement 8,000,000

5 Leadership, Effectiveness, Accountability and Professionalism (LEAP) Africa 4,800,000

6 Citi Microenterprise Development for Rural Farmers Initiative 14,400,000

Sub Total 46,560,000

Total 62,910,000

39ANNUAL REPORT

POST BALANCE SHEET EVENTS

There were no post balance sheet events which could have a material effect on the financial position of the Bank as at 31

December 2011 or the profit for the year ended on that date that have not been adequately provided for or disclosed.

EMPLOYMENT OF DISABLED PERSONS

The Bank continues to maintain a policy of giving fair consideration to application for employment made by disabled persons

with due regard to their abilities and aptitudes. The Bank’s policies prohibit discrimination against disabled persons in the

recruitment, training and career development of employees. In the event of members of staff becoming disabled, efforts will

be made to ensure that their employment with the Bank continues and appropriate training arranged to ensure that they fit

into the Bank’s working environment.

HEALTH, SAFETY AND WELFARE AT WORK

The Bank enforces strict health and safety rules and practices at the work environment, which are reviewed and tested

regularly. In addition, medical facilities are provided for staff and their immediate families at the Bank’s expense.

Fire prevention and fire-fighting equipment are installed in strategic locations within the Bank’s premises.

The Bank operates both Group Personal Accident and Workmen’s Compensation Insurance cover for the benefit of its

employees. It also operates a contributory pension plan in line with the Pension Reform Act, 2004.

EMPLOYEE INVOLVEMENT AND TRAINING

The Bank ensures, through various fora, that employees are informed on matters concerning them. Formal and informal

channels are also employed in communication with employees with an appropriate two-way feedback mechanism.

In accordance with the Bank’s policy of continuous development, the Bank draws extensively on Citigroup’s training

programmes around the world. The programmes include on the job training, classroom sessions and web-based training

programmes which are available to all staff. In addition, employees of the Bank are nominated to attend both locally and

internationally organized courses.

DIVERSITY IN EMPLOYMENT

The bank recognises that the recruitment, involvement and advancement of women and a diverse workforce are business

imperatives. During the financial year ended 31 December 2011:

• There were 89 women out of 253 employees comprising 35% of the total number of employees;

• There was 1 woman out of 13 Directors on the Board of Directors;

• There were 30 women out of 99 top management staff;

• There were 29 women out of 94 top management staff between Assistant General Manager to General Manager grade;

• There was 1 woman out of 5 top management staff between Executive Director to Chief Executive Officer;

• The bank had no persons with disabilities in its employment.

The bank is committed to maintaining a positive work environment and to conducting business in a positive, professional

manner by consistently ensuring equal employment opportunity. The bank has programs aimed at achieving gender balance

which include developmental programs targeted for women; mentoring; and policies that support Work-Life balance.

AUDITORS

PricewaterhouseCoopers have indicated their willingness to continue in office as auditors in accordance with Section 357(2)

of the Companies and Allied Matters Act.

Charles S. Sankey House BY ORDER OF THE BOARD

27, Kofo Abayomi Street

Victoria Island, Lagos

1 March, 2012 OLUSOLA FAGBURE, Company Secretary


CORPORATE GOVERNANCE REPORTFOR THE YEAR ENDED 31 DECEMBER 2011

Citibank Nigeria Limited is committed to ensuring the implementation of good corporate governance principles in all its

activities. Citibank Nigeria adheres to Citigroup corporate governance principles and to the provisions of the Central Bank

of Nigeria Code on Corporate Governance for Banks in Nigeria- Post Consolidation (‘the Code’). Corporate governance

compliance is monitored and a monthly report on the Bank’s compliance with the Code is submitted to the Central Bank of

Nigeria. The Bank’s Board of Directors undergoes training in corporate governance best practices.

THE BOARD OF DIRECTORS

The Board of Directors consists of thirteen members comprising the Chairman, the Managing Director, seven Non-Executive

Directors and four Executive Directors. Two of the Non-Executive Directors are Independent Directors, appointed based on

criteria laid down by the CBN. Neither of the Independent Directors has any shareholding interest or business relationship

with the Bank. The Directors and their shareholdings are listed in the Directors’ report.

The Board is responsible for the oversight of executive management, ensuring that the Bank’s operations are conducted in

accordance with legal and regulatory requirements, approving and reviewing corporate strategy and performance, and for

ensuring that the rights of the shareholders are protected at all times. The members of the Board possess the necessary

experience and expertise to exercise their oversight functions.

In accordance with the provisions of the Code, the office and responsibilities of the Chairman and the Managing Director/Chief

Executive are separate.

The Board meets quarterly and additional meetings are convened as required. The Board may take decisions between

meetings by way of written resolution, as provided for in the Articles of Association of the Bank. In 2011 the Board met five

times.

The Board has delegated some of its responsibilities to the following standing board committees: Risk Management Committee,

Audit Committee, Credit Committee and the Board Remuneration Committee. Each of these committees reports to the Board

on its activities. The Chairman of the Board is not a member of any of the board committees.

BOARD COMMITTEES

a) The Risk Management Committee

The Risk Management Committee consists of six directors, two of whom, including the Chairman of the Committee, are Non-

Executive Directors. The Committee is responsible for overseeing the Bank’s Risk Management policies and procedures in the

areas of franchise, operational, credit and market risk. The Committee meets quarterly and met four times during the year.

b) The Credit Committee

The Credit Committee consists of six directors, two of whom, including the Chairman of the Committee are Non- Executive

Directors. The Committee is responsible for approving credits above such limits as may be prescribed by the Board of Directors

from time to time. The Committee meets quarterly and met four times during the year.

c) The Audit Committee

The Audit Committee consists of two shareholders and two non-executive directors. The Chairman of the Committee is a

shareholder.

The Committee’s responsibilities include the review of the integrity of the Bank’s financial reporting, oversight of the

independence and objectivity of the external auditors, the review of the reports of external auditors and regulatory agencies

41ANNUAL REPORT

and management responses thereto, and the review of the effectiveness of the Bank’s system of accounting and internal

control.

During the year the Committee approved the external auditors’ terms of engagement and scope of work and also reviewed the

internal auditor’s audit plan. The Committee received regular internal audit reports from the Bank’s internal auditor. Members

of the Committee have unrestricted access to the Bank’s external auditors.

The Committee meets quarterly and met four times during the year.

d) Executive Directors Remuneration Committee

The Committee is made up of three non-executive directors and is responsible for determining the remuneration of Executive

Directors.

GENERAL MEETINGS

The last Annual General Meeting was held on April 6, 2011. A quorum of shareholders was present at the meeting.

RISK AND CONTROLS

In line with Citigroup policies, the Bank maintains a strong control environment. The internal control system is designed to

achieve efficiency and effectiveness of operations, reliability of financial reporting and compliance with applicable laws and

regulations at all levels of the bank as required by the Code.

Robust risk management policies and mechanisms have been put in place to ensure identification of risk and effective control.

The Board, through the Board Risk Management Committee, oversees the Bank’s risk management policies.

WHISTLE BLOWING PROCEDURES

In line with the Bank’s commitment to instill best corporate governance practices, the Bank has established a whistle

blowing procedure that ensures anonymity. The Bank has a dedicated whistle blowing hotline and e-mail address. The Chief

Compliance Officer forwards monthly returns to the Central Bank of Nigeria on all whistle-blowing reports and corporate

governance breaches.

CODE OF CONDUCT

The Bank has a Code of Conduct which all officers of the Bank are expected to adhere to. All staff are expected to strive to

maintain the highest standards of ethical conduct and integrity in all aspects of their professional life as prescribed in the

Code of Conduct.

MANAGEMENT SUCCESSION

The Bank has a strong management team and a documented succession plan for every executive role within the Bank.


STATEMENT OF RESPONSIBILITY AND APPROVALFOR THE YEAR ENDED 31 DECEMBER 2011

Responsibility for Annual Financial Statements

In accordance with the provisions of the Companies and Allied Matters Act and the Banks and Other Financial Institutions

Act, the directors are responsible for the preparation of the annual financial statements which give a true and fair view of the

state of affairs of the Bank at the end of the year and of the profit or loss for the year then ended. The responsibilities include

ensuring that:

i. the Bank keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Bank and

comply with the requirements of the Companies and Allied Matters Act and the Banks and Other Financial Institutions Act;

ii. appropriate and adequate internal controls are established to safeguard its assets and to prevent and detect fraud and

other irregularities;

iii. the Bank prepares its financial statements using suitable accounting policies supported by reasonable and prudent

judgements and estimates, that are consistently applied; and

iv. it is appropriate for the financial statements to be prepared on a going concern basis.

The directors accept responsibility for the annual financial statements, which have been prepared using appropriate

accounting policies supported by reasonable and prudent judgements and estimates, in conformity with,

- Nigerian Accounting Standards;

- Prudential Guidelines for Licensed Banks;

- relevant circulars issued by the Central Bank of Nigeria;

- the requirements of the Banks and Other Financial Institutions Act; and

- the requirements of the Companies and Allied Matters Act.

The directors are of the opinion that the financial statements give a true and fair view of the state of the financial position of

the Bank and of its financial performance and cash flows for the year.

The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the

preparation of financial statements, as well as adequate systems of internal financial control.

Nothing has come to the attention of the directors to indicate that the Bank will not remain a going concern for at least twelve

months from the date of this statement.

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

OLAYEMI CARDOSO EMEKA EMUWA

Chairman Managing Director

1 March 2012

43ANNUAL REPORT

REPORT OF THE AUDIT COMMITTEEFOR THE YEAR ENDED 31 DECEMBER 2011

To the members of Citibank Nigeria Limited.

The members of the Board Audit Committee of Citibank Nigeria Limited hereby report as follows:

• We have exercised the responsibilities assigned to the Board Audit Committee by the Central Bank of Nigeria’s Code

of Corporate Governance for Banks and acknowledge the co-operation of management and staff in the conduct of

these responsibilities. We are of the opinion that the accounting and reporting policies of the Bank are in accordance

with legal requirements and agreed ethical practices and that the scope and planning of both the external and inter-

nal audits for the year ended 31 December 2011 were satisfactory and reinforce the Bank’s internal control systems.

• We are satisfied that the Bank has complied with the provisions of Central Bank of Nigeria circular BSD/1/2004

dated 18 February 2004 on “Disclosure of insider related credits in the financial statements of banks”, and hereby

confirm that there is no outstanding credit exposure as at 31 December 2011 (31 December 2010: Nil).

• We have deliberated with the External Auditors, who have confirmed that necessary cooperation was received from

Management in the course of their statutory audit and we are satisfied with management’s responses to the Exter-

nal Auditor’s recommendation for improvement and with the effectiveness of the Bank’s system of accounting and

internal control.

• We are satisfied that the Bank has put in place strong internal control structures and the level of compliance is

considered satisfactory.

CHIEF EDET JAMES AMANA

Chairman, Audit Committee

1 March 2012

Members of the Audit Committee are:

1. Chief Edet James Amana - Chairman

2. Mr. Michael Murray-Bruce

3. Chief Arthur C.I. Mbanefo

4. Chief Abel Ubeku


STATEMENT OF SIGNIFICANT ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER 2011

A summary of the principal accounting policies, applied consistently throughout the current and prior year is set out below.

(a) Basis of accounting

The financial statements are prepared under the historical cost convention, modified by the revaluation of certain investment

securities and comply with the Statements of Accounting Standards issued by the Financial Reporting Council. They have

also been prepared in the manner required by the Companies and Allied Matters Act of Nigeria, Banks and Other Financial

Institutions Act of Nigeria and relevant Central Bank of Nigeria circulars.

The results of Nigeria International Bank Nominees Limited have not been consolidated in these separate financial statements

of the Bank. In addition, the Bank has prepared consolidated financial statements for the Group for the year ended 31 December

2011 that provides full information on Group as a whole.

(b) Cash and short-term funds

Cash and short-term funds comprise cash balances on hand, cash deposited with the Central Bank of Nigeria (CBN), cash

deposited with other banks (local and foreign), placements with local and foreign banks, which are subject to insignificant risk

of changes in their carrying value.

(c) Investment securities

Investment securities are classified as either short-term or long-term. Investment securities are initially recognised at cost

and management determines the classification at initial investment.

Short term investments

Short-term investments comprise investments in marketable securities like bonds and treasury bills issued by the Federal

Government of Nigeria. In addition, Management intends to hold such securities for not more than one year. Short-term

investments are carried at lower of cost and market value. Gains or losses resulting from market valuation are recognised in

the profit and loss account.

Treasury bills not held for trading are presented net of unearned discount. Unearned discount is deferred and amortised as

earned. Interest earned while holding short term securities is recognised as interest income.

Long term investments

Long-term investments are investments securities other than short-term investments and may include debt and equity

securities.

Long-term debt securities are carried at cost, with disclosures made in the financial statements of their market valuation,

unless a permanent decline in value occurs, when the carrying amount is written down to recognise the loss.

Long-term equity instruments are carried at cost, with disclosures of market value, unless a permanent decline in value

occurs, when the carrying amount is written down to recognise the loss.

Such loss is charged to the profit and loss account. Subsequent gains on a long-term investment against which previous

provisions had been made is credited to the profit and loss account to the extent of such provisions previously charged in

order to restore the carrying amount to the original cost. A decline in the market value of investment securities is not taken

into account unless it is considered to be permanent.

Interest earned on investment securities are reported as interest income, while dividend received is reported as dividend

income.

47ANNUAL REPORT

Any discount or premium arising on acquisition of bonds is included in the original cost of the investment and is amortised

over the period of purchase to maturity.

(d) Loans and advances

Loans and advances are stated net of provision for bad and doubtful loans.

Classification and Provisioning of non performing accounts is made in accordance with the Prudential Guidelines for Deposit

Money Banks in Nigeria issued by the Central Bank of Nigeria from a specific assessment of each customer’s account as

stated below:

Period Interest and / or Principal has been outstanding Classification % Provision required

90 days but less than 180 days Substandard 10%

180 days but less than 360 days Doubtful 50%

Over 360 days Lost 100%

Bad debts are written off against the related provision for bad and doubtful debts when it is determined that they are

uncollectible. Subsequent recoveries on bad debts written off are credited to the profit and loss account.

Unrealized mark-up/interest in respect of non-performing loans and advances are reversed from revenue account and

recognised in the interest in suspense account where they are deferred until they are realised in cash. Suspended interest

is recognised in the profit and loss account in the year in which cash is received. Future interest charged on the accounts is

credited to the interest in suspense account until such facilities become performing.

General Provision

In accordance with Statement of Accounting Standards for Banks and Non-Bank Financial Institutions (SAS 10), a minimum of

1% general allowance is made on all loans and advances, which have not been specifically provided for.

(e) Advances under finance lease

Advances under finance lease are stated net of unearned lease finance income. Lease finance income is recognised in a

manner, which provides a constant yield on the outstanding net investment over the lease period.

In accordance with Statement of Accounting Standards for Banks and Non-Bank Financial Institutions (SAS 10) issued by the

Nigerian Accounting Standards Board, a minimum of 1% general provision is made on the aggregate net investment in finance

lease. Specific provision is made on lease rentals that are doubtful of collection in line with the CBN Prudential Guidelines for

licensed banks and the Bank’s standard policy on loans.

(f) Property, plant and equipment

All property, plant and equipment is initially recorded at cost. They are subsequently stated at historical cost less depreciation.

Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only

when it is probable that future economic benefits associated with the asset will flow to the Bank and the cost of the asset can

be measured reliably. All other repairs and maintenance are charged to the profit and loss account during the financial period

in which they are incurred.

Construction costs in respect of offices are carried at cost as work-in-progress. On completion of construction, the related

amounts are transferred to the appropriate category of property, plant and equipment. Payments in advance for items of

property, plant and equipment are included as prepayments in other assets and upon delivery are reclassified as additions

in the appropriate category of property, plant and equipment. No depreciation is charged until the assets are put into use.


(g) Deposit liabilities

Deposit liabilities are the Bank’s sources of debt funding. Deposit liabilities are carried at cost.

(h) Provisions

A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be

estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.

(i) Taxation

Income tax expenses/credits are recognised in the profit and loss account. Current income tax is the expected tax payable on

the taxable income for the year, using statutory tax rates at the balance sheet date.

(j) Deferred taxation

Deferred taxation, which arises from temporary differences in the recognition of items for accounting and tax purposes, is

calculated using the liability method. Deferred tax is provided on timing differences, which are expected to reverse in the

foreseeable future at the rates of tax likely to be in force at the time of reversal.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which

the associated unutilised tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to

the extent that it is no longer probable that the related tax benefit will be realized.

(k) Off balance sheet transactions

Transactions to which there are no direct balance sheet risks to the Bank are reported and accounted for as off balance sheet

transactions and comprise:

Acceptance/direct credit substitutes:

Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most

acceptances to be settled simultaneously with the reimbursement from customers.

Acceptances, which meet the conditions set out in Central Bank of Nigeria (CBN) Guidelines on the treatment of Bankers

Acceptances and Commercial Papers, are accounted for and disclosed as contingent liabilities. The income and expense

relating to these acceptances are reported net in the financial statements.

Guarantees and performance bonds:

The Bank provides financial guarantees and bonds to third parties on the request of customers in form of bid and performance

bonds or advance payment guarantees. These agreements have fixed limits and generally do not extend beyond the period

stated in each contract.

The amounts reflected in the financial statements for bonds and guarantees represent the maximum financial loss that would

be recognised at the balance sheet dates if counterparties failed completely to perform as contracted.

Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual values

over their estimated useful lives as follows:

Leasehold improvements Over the lease period

Building 50 years

Furniture and equipment 5 years

Computers and computer equipment 3 years

Motor vehicles 4 years

• Capital work-in-progress is not depreciated.

• Gains or losses on the disposal of fixed assets are included in the profit and loss account.

49ANNUAL REPORT

Transaction-related off-balance sheet engagements:

Transaction related contingencies comprise letters of credit and commitments to deliver on sales and/or purchase of foreign

exchange in the future.

(i) Letters of credit

The Bank provides letters of credit to guarantee the performance of customers to third parties. Confirmed letters of

credit for which the customer has not provided cash cover are reported as off balance sheet.

(ii) Commitments to deliver on sales or purchase of foreign exchange in the future:

Commitments to deliver on sales and/or purchases of foreign exchange transactions in future at contracted rates are

recognised as off balance sheet engagements. Foreign exchange commitments are converted at contracted rates at

the balance sheet date. The spot foreign exchange contracts are recognized as off balance sheet engagements on the

contract date and accounted for at the settlement date.

(l) Income recognition

Income in the profit and loss account is recognised as follows:

• Interest is accrued daily on all interest-bearing assets. Risk assets are classified as non-performing when matured

obligations are overdue for more than 90 days. Interest income arising there from is recognised only to the extent that

cash is received. The income and expense relating to acceptances disclosed as contingent liabilities are reported net in

the financial statements.

• Credit-related fee income is systematically spread over the life of the credit facility.

• Commissions and fees charged to customers for services rendered are recognised at the time the service or transaction

is effected, except for commissions earned on letters of credit, bonds and guarantees, which are amortised over the

life of the letters of credit.

• Dividend income is recognised in profit and loss account when the Bank becomes entitled to the dividend.

• Recoveries of previously written-off loans and advances are written back to profit and loss account on a cash basis.

(m) Foreign currency items

Reporting currency

The financial statements are presented in Nigerian Naira which is the Bank’s reporting currency.

Transactions and balances

Transactions in foreign currencies are translated into Naira at the rates of exchange ruling at the date of each transaction

(or where appropriate the rate of the related forward contracts). Monetary assets and liabilities denominated in foreign

currencies are reported at the rates of exchange prevailing at the balance sheet date. Any gain or loss arising from a change

in exchange rates subsequent to the date of the transaction is included in the profit and loss account.

(n) Pension scheme

The Bank operates a defined contributory pension scheme. The scheme is fully funded and is managed by licensed Pension

Fund Administrators. Membership of the scheme is automatic upon commencement of duties at the Bank. The employee

and the Bank contribute 7.5% each of the employee’s annual basic salary as well as housing and transport allowances to the

scheme. The Bank’s contributions to this scheme are charged to profit and loss account in the period to which they relate.

(o) Earnings per share

Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by

the weighted average number of ordinary shares outstanding during the year.

(p) Segment reporting

The Bank defines a segment as a distinct or distinguishable unit of the Bank that is engaged in providing financial products or

services subject to risks and rewards that are different from those of other segments. The Bank’s primary format for segment

reporting is based on business segments. The Bank currently operates in one geographical segment, which is Nigeria and, as

such, does not have a secondary segment reporting format.


(q) Dividend on ordinary shares

Dividend on ordinary shares is appropriated from retained earnings in the year they are approved by the Bank’s shareholders.

Dividend per share is calculated based on the declared dividend during the year and the number of shares in issue at the date

of the declaration and qualifying for dividend.

Dividend for the current year that is approved by the Directors after the balance sheet date are disclosed in the subsequent

events note to the financial statements.

Dividend proposed by the Directors’ but not yet approved by members is disclosed in the financial statements in accordance

with the requirements of the Companies and Allied Matters Act of Nigeria.

(r) Contingent assets and contingent liabilities

i. Contingent assets

Contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank.

Contingent assets are disclosed in the financial statements when they arise.

ii. Contingent liabilities

Contingent liability is a probable obligation that arises from past events and whose existence will be confirmed only by

the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank.

Contingent liabilities are disclosed in the financial statements. However they are recognized, if it is probable that an

outflow of economic resources will be required to settle the obligation and the amount can be reliably estimated.

51ANNUAL REPORT

The directors have proposed a dividend of N8,241,642,825.55 (N2.95k per share) (2010: N7,682,887,379.75 (N2.75k per

share)) from the outstanding balance in the retained earnings account as at 31 December 2011.

The statement of significant accounting policies and accompanying notes form an integral part of these financial statements.

PROFIT AND LOSS ACCOUNTSFOR THE YEAR ENDED 31 DECEMBER 2011 Notes 2011 2010

N’000 N’000

Gross earnings 24,791,081 20,918,450

Interest and similar income 3 15,933,715 11,613,948

Interest and similar expense 4 (2,880,533) (2,421,609)

Net interest income 13,053,182 9,192,339

Fees and commission income 5 4,536,374 4,337,629

Foreign exchange income 2,962,327 2,702,381

Income from investments 6 1,240,470 2,147,852

Other income 118,195 116,640

Operating income 21,910,548 18,496,841

Operating expenses 7(b) (9,340,903) (7,872,421)

(Allowance)/Write-back on risk assets 12(h) (377,462) 1,103,881

PROFIT BEFORE TAXATION 7(a) 12,192,183 11,728,301

Taxation 8(b) (2,460,228) (2,674,075)

PROFIT AFTER TAXATION 9,731,955 9,054,226

APPROPRIATIONS:

Transfer to statutory reserve 26 1,459,793 1,358,134

Transfer to retained earnings 26 8,272,162 7,696,092

9,731,955 9,054,226

Earnings per share 33 348K 324k

Declared dividend per share 32(a) 275k 350k


BALANCE SHEETAS AT 31 DECEMBER 2011

Notes 2011 2010

N’000 N’000

ASSETS

Cash and balances with central banks 9 13,420,668 2,983,740

Treasury bills 10 13,056,586 3,012,113

Due from other banks 11 212,273,652 144,998,390

Loans and advances to customers 12 56,904,102 43,833,016

On-lending facilities 13 1,735,265 322,500

Advances under finance lease 14 99,492 62,376

Investment securities 15 70,762,197 55,654,073

Other assets 16 447,076 4,939,766

Property, plant and equipment 17 2,656,924 3,106,370

371,355,962 258,912,344

LIABILITIES

Customer deposits 18 309,646,558 206,134,576

Due to other banks 19 248,008 378,104

On-lending liabilities 20 2,486,000 344,000

Provisions 21 58,488 8,488

Current income tax 8(a) 2,669,074 2,525,410

Other liabilities 22 12,156,168 7,208,701

Deferred taxation 23 293,972 537,740

Retirement benefit obligations 24 10,894 37,592

327,569,162 217,174,611

EQUITY

Share capital 25 2,793,777 2,793,777

Share premium 11,643,995 11,643,995

Statutory reserves 26 12,555,274 11,095,481

Retained earnings 26 13,452,846 12,863,572

SMEIS reserve 26 3,340,908 3,340,908

43,786,800 41,737,733

TOTAL EQUITY AND LIABILITIES 371,355,962 258,912,344

Acceptances, bonds, guarantees and other obligations

for the account of customers 27(b) 95,781,599 53,150,071

The accounting policies on pages 46 to 50 and financial statements and notes on pages 54 to 92 were approved by the Board

of Directors on 1 March 2012 and signed on its behalf by:

OLAYEMI CARDOSO EMEKA EMUWA

Chairman Managing Director

53ANNUAL REPORT

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011

Notes 2011 2010

N’000 N’000

OPERATING ACTIVITIES

Net cash flow from operating activities

before changes in operating assets 30 13,195,365 11,062,367

Changes in operating assets 31 90,403,692 73,388,228

Income tax paid 8(a) (2,560,332) (3,612,318)

Value added tax paid 31 (276,814) (194,638)

Net cash generated from operating activities 100,761,911 80,643,639

FINANCING ACTIVITIES

Dividend paid 26 (7,682,888) (9,778,220)

Net cash from financing activities (7,682,888) (9,778,220)

INVESTING ACTIVITIES

Purchase of property and equipment 17 (286,240) (697,211)

Purchase of long-term investments 15(d) (22,033,713) (35,064,547)

Redemption of long-term bonds 15(d) 9,466,000 1,221,026

Dividend received 6 41,924 32,630

Proceeds from sale of long-term investments 11,549 27,914

Proceeds from sale of property and equipment 68,042 282,155

Net cash from investing activities (12,732,438) (34,198,033)

Net increase in cash and cash equivalents 80,346,585 36,667,386

Cash and cash equivalents, beginning of year 34 150,133,596 113,466,210

Cash and cash equivalents, end of year 34 230,480,181 150,133,596

The statement of significant accounting policies and accompanying notes form an integral part of these financial statements.


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011

1. GENERAL INFORMATION

Citibank Nigeria Limited (“the Bank”) was incorporated in Nigeria on 2 May 1984 under the Companies & Allied Matters Act of

Nigeria as a private limited liability company. The Bank was granted its banking license on 14 September 1984.

The Bank has one subsidiary company, Nigeria International Bank Nominees Limited.

2. SEGMENT ANALYSIS

The segment information is presented in respect of the Bank’s business segments. The Bank operates the following main

business segments:

Corporate Banking - Includes loans, deposits and other transactions and balances with corporate customers.

Commercial Banking - Includes loans, deposits and other transactions and balances with medium sized customers.

Financial Institutions - Includes transactions in investment and trading securities, interbank placements and takings,

loans, deposits and other transactions and balances majorly with other financial institutions.

The bank’s business reporting information comprises:

Corporate banking Commercial banking Financial institutions Total

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

2011 2010 2011 2010 2011 2010 2011 2010

REVENUE

Gross revenue

5,648,537 7,035,785 6,140,879 5,215,680 13,001,665 8,666,985 24,791,081 20,918,450

Total revenue

5,648,537 7,035,785 6,140,879 5,215,680 13,001,665 8,666,985 24,791,081 20,918,450

Operating Income

4,934,730 6,596,422 4,701,730 4,201,630 12,274,088 7,698,789 21,910,548 18,496,841

Profit before tax

2,861,613 4,780,468 1,568,544 2,150,857 7,762,026 4,680,854 12,192,183 11,728,301

Income tax expense

(2,460,228) (2,674,075)

Profit for the year

2,298,308 3,727,418 1,259,778 1,677,062 6,173,869 3,649,746 9,731,955 9,054,226

ASSETS AND LIABILITIES

Segment assets

19,973,033 29,483,265 35,101,407 14,816,608 316,281,522 214,612,471 371,355,962 258,912,344

Segment liabilities

91,308,960 52,233,868 228,210,739 164,151,297 8,049,462 789,446 327,569,162 217,174,611

OTHER SEGMENT INFORMATION

Depreciation 159,878 239,241 173,813 187,746 359,643 281,156 693,334 708,143

55ANNUAL REPORT

3. INTEREST AND SIMILAR INCOME

Interest and similar income comprises:

2011 2010

N’000 N’000

TYPE:

Placements 4,093,878 2,090,677

Treasury bills and investment securities 6,392,965 3,867,796

Loans and advances 5,436,852 5,648,331

Advances under finance leases 10,020 7,144

15,933,715 11,613,948

SOURCE:

Interest income earned from Banks 10,486,843 5,958,473

Interest income earned from Non-Banks 5,446,872 5,655,475

15,933,715 11,613,948

GEOGRAPHICAL LOCATION:

Interest income earned in Nigeria 15,380,210 11,417,884

Interest income earned outside Nigeria 553,505 196,064

15,933,715 11,613,948

4. INTEREST AND SIMILAR EXPENSE

Interest expense comprises:

2011 2010

N’000 N’000

Current accounts 812,443 644,002

Savings accounts 1,018 1,031

Time deposits 1,352,875 836,428

Inter-bank takings 188,799 243,700

Borrowed funds 9,523 893

Cash call deposit 16,529 18,028

Net premium on investment securities 499,346 677,527

2,880,533 2,421,609

SOURCE:

Interest expense paid to Banks 786,022 949,214

Interest expense paid to Non-Banks 2,094,512 1,472,395

2,880,533 2,421,609

2011 2010

N’000 N’000

GEOGRAPHICAL LOCATION:

Paid in Nigeria 2,815,355 2,377,308

Paid outside Nigeria 65,178 44,301

2,880,533 2,421,609


5. FEES AND COMMISSION INCOME

2011 2010

N’000 N’000

Credit related fees 762,727 816,115

Commission on turnover 1,072,340 967,739

Commission on off-balance sheet transactions 180,462 127,894

Remittance fees 327,723 313,570

Letters of credit commissions and fees 1,049,893 1,040,192

Other fees and commissions 1,143,229 1,072,119

4,536,374 4,337,629

6. INCOME FROM INVESTMENTS

2011 2010

N’000 N’000

Dividend income 41,924 32,630

Profit on sale of securities 1,198,546 2,115,222

1,240,470 2,147,852

7. PROFIT BEFORE TAXATION

(a) Profit before taxation was arrived at after charging/ (crediting) the following:

2011 2010

N’000 N’000

Depreciation on property and equipment 693,334 708,143

Auditor’s remuneration 45,000 47,900

Gain on disposal of property and equipment (25,690) (261,455)

(b) Analysis of operating expenses:

2011 2010

N’000 N’000

Staff costs (see note (29(a)) 4,436,224 4,225,201

Directors’ emoluments (see note (29(b)) 259,900 253,833

Deposit insurance premium 1,001,522 738,631

Depreciation (see note 17) 693,334 708,143

Outsourced services 585,250 505,464

Communications 91,010 129,520

Transport and travel 160,164 113,419

Rentals 57,887 62,264

Auditor’s remuneration 45,000 47,900

Repairs and maintenance 143,907 136,637

Utilities 189,684 154,230

Postages and Supplies 131,909 120,793

Banking sector resolution cost (see note 22 (b)) 776,737 -

Other administrative expenses 768,375 676,386

9,340,903 7,872,421

57ANNUAL REPORT

8. TAXATION

(a) The movement in taxation payable during the year was as follows:

2011 2010

N’000 N’000

At 1 January 2,525,410 3,600,987

Payments during the year (2,560,332) (3,612,318)

Current year charge (see note (b) below) 2,703,996 2,536,741

At 31 December 2,669,074 2,525,410

(b) The tax charge for the year comprises:

2011 2010

N’000 N’000

Current tax charge 2,437,229 2,271,297

Education tax 168,959 137,991

Technology levy 118,395 116,122

Prior year under/(over) provision (20,587) 11,331

2,703,996 2,536,741

Deferred taxation (see note 23) (243,768) 137,334

2,460,228 2,674,075

The current tax charge has been computed at the rate of 30% on the profit for the year after adjusting for certain items of

income and expenditure, which are not deductible or chargeable for tax purposes. In addition, it includes 2% education levy

and 1% technology levy for the year.

9. CASH AND BALANCES WITH CENTRAL BANKS

(a) Cash and balances with central bank:

2011 2010

N’000 N’000

Cash 1,513,852 1,235,889

Balances held with Central Bank of Nigeria:

- Current accounts 1,136,091 887,204

- Mandatory reserve deposit (see (b) below) 8,270,725 860,648

- Placement 2,500,000 -

13,420,668 2,983,740

(b) This represents 8% of monthly average daily balances of deposit liabilities (2010: 1% of two weeks average daily balances

of deposit liabilities). Mandatory reserve deposits are not available for use in the Bank’s day to day operations.


10. TREASURY BILLS

(a) These comprise:

2011 2010

N’000 N’000

Treasury bills – trading 3,863,588 120,940

Treasury bills – non-trading (see (b) below) 9,192,998 2,891,173

13,056,586 3,012,113

(b) Treasury bills – non-trading are stated as follows:

2011 2010

N’000 N’000

Face value (see (c) below) 10,407,910 3,093,206

Unearned income (1,177,371) (164,474)

Revaluation gain/(loss) (37,541) (37,559)

Net investments 9,192,998 2,891,173

(c) Included in the treasury bills are bills amounting to N4,930,000,000 (2010: N1,000,000,000) held by third parties as

collateral for various transactions.

11. DUE FROM OTHER BANKS

2011 2010

N’000 N’000

In Nigeria:

- Current accounts 1,071,053 232,747

- Secured placements (see (a) below) 8,000,000 18,070,504

- Unsecured placements - 12,000,000

Outside Nigeria:

- Current accounts 196,722,782 36,432,815

- Placements with other Citigroup branches 1,149,296 76,058,350

- Placements held on account of customers’ obligations (see (b) below) 5,330,521 2,203,974

212,273,652 144,998,390

(a) This represents placements that have been secured with Federal Government of Nigeria (FGN) bonds.

(b) This represents the Naira value of foreign currencies held on behalf of customers in respect of letter of credit transactions.

The corresponding liability for this amount is included in other liabilities (see note 22).

59ANNUAL REPORT

12. LOANS AND ADVANCES TO CUSTOMERS

(a) The classification of loans and advances is as follows:

2011 2010

N’000 N’000

Overdrafts 22,011,818 18,036,229

Term loans 18,308,750 18,933,337

Others 17,173,859 7,916,884

57,494,427 44,886,450

Loan loss allowance

- Specific (see (f) below) (15,536) (635,360)

- General (see (e) below) (574,789) -

(590,325) (635,360)

Interest in suspense (see (g) below) - (418,074)

(590,325) (1,053,434)

56,904,102 43,833,016

(b) Analysis by security:

- Otherwise secured 10,440,719 3,594,925

- Unsecured 47,053,708 41,291,525

57,494,427 44,886,450

No loans were secured against real estate or shares of quoted companies (2010:Nil).

(c) Analysis by performance:

2011 2010

N’000 N’000

Performing

57,478,891 43,441,370

Non-performing

- substandard - 19,156

- doubtful - 748,812

- lost 15,536 677,112

57,494,427 44,886,450

(d) The maturity profile of loans and advances is as follows:

2011 2010

N’000 N’000

Under 1 month 17,368,649 1,112,119

1 - 3 months 6,747,734 10,360,528

3 - 6 months 10,933,276 4,473,453

6 - 12 months 16,078,307 28,918,258

Over 12 months 6,366,461 22,092

57,494,427 44,886,450


(e) The movement on the general loan loss allowance account during the year was as follows:

2011 2010

N’000 N’000

At 1 January - 432,250

Allowance/(Writeback) during the year (See (h) below) 574,789 (432,250)

At 31 December 574,789 -

(f) The movement on the specific loan loss allowance account during the year was as follows:

2011 2010

N’000 N’000

At 1 January 635,360 1,565,967

Write-back on specific provision (588,005) (901,866)

Allowance during the year 373,698 232,918

Allowance written-off during the year (405,517) (261,659)

At 31 December 15,536 635,360

(g) The movement on the interest in suspense account during the year was as follows:

2011 2010

N’000 N’000

At 1 January 418,074 990,380

Interest suspended during the year - 196,141

Interest recovered (20,075) (187)

Interest written-off (397,999) (768,260)

At 31 December - 418,074

(h) Write-back/ (allowance) on risk assets comprise:

2011 2010

N’000 N’000

Write-back on loans and advances - specific 588,005 901,866

Write-back on loans and advances - general - 432,250

Allowance on loans and advances - specific (373,698) (232,919)

Allowance on loans and advances – general (574,789) -

Allowance on other facilities (see note 13 (b)) (17,528) -

Allowance on advances under finance lease (see note 14(c)) (1,005) 684

Recoveries on loans written off 1,553 2,000

(377,462) 1,103,881

(i) The analysis of non-performing loans and advances and related provisions is as follows:

Number of days past due 2011 2010

N’000 N’000 N’000 N’000

Balance Allowance % Balance Allowance %

90-180 - - 19,156 1,916 10

180-360 15,536 15,536 100 748,812 374,406 50

Over 360 - - 677,112 677,112 100

15,536 15,536 1,445,080 1,053,434

61ANNUAL REPORT

2011 2010

N’000 N’000

Performing 574,789 -

Non-performing 15,536 1,053,434

590,325 1,053,434

(j) The analysis of loan loss allowance and interest in suspense on performing and non-performing loans and advances is as

follows

2011 2010

N’000 N’000

Unsecured 1,752,793 322,500

General allowance (see (b) below) (17,528) -

1,735,265 322,500

13. ON-LENDING FACILITIES

(a) The Bank acted as an intermediary for Bank of Industry (BOI) and Central Bank of Nigeria under the Commercial

Agricultural Credit Scheme (CACS) in respect of loans and advances, the classification of the outstanding balance as at year

end is as follows

(b) The movement on the general loan loss allowance for on-lending facilities during the year was as follows:

2011 2010

N’000 N’000

At 1 January - -

Allowance during the year (see note 12(h)) 17,528 -


(c) The maturity profile of on-lending facilities is as follows:

2011 2010

N’000 N’000

Under 1 month 16,865 21,500

1-3 months 1,064,500 64,500

3-6 months 28,571 64,500

6-12 months 557,143 129,000

Over12 months 85,714 43,000

1,752,793 322,500

(d) All on-lending facilities were performing as at year end.

14. ADVANCES UNDER FINANCE LEASE

(a) The classification of advances under finance lease is as follows:

2011 2010

N’000 N’000

Otherwise secured 100,497 62,376

General allowance (see (c) below) (1,005) -

99,492 62,376


(b) Advances under finance lease are stated as follows:

2011 2010

N’000 N’000

Gross investment 117,873 72,024

Unearned income (17,376) (9,648)

Net investment 100,497 62,376

(c) The movement on allowance for advances under finance lease during the year was as follows:

2011 2010

N’000 N’000

At 1 January - 684

Allowance/ (Write-back) during the year (see note 12(h)) 1,005 (684)


(d) The maturity profile of advances under finance lease is as follows:

2011 2010

N’000 N’000

Under 1 month 758 -

1-3 months 456 -

3-6 months - -

6 - 12 months 2,688 741

Over 12 months 96,595 61,635

100,497 62,376

(e) All advances under finance lease were performing as at year end.

63ANNUAL REPORT

15. INVESTMENT SECURITIES

(a) Long-term investments:

2011 2010

N’000 N’000

UNLISTED EQUITY SECURITIES AT COST:

Nigeria International Debt Fund (NIDF) Notes (see note (e) below) 298,700 298,700

SME companies (See note (f) below) 566,498 578,047

Nigeria Interbank Settlement System (NIBSS) (see note (g) below) 47,548 47,548

Valucard Nigeria Plc (See note (h) below) 23,019 23,019

Central Securities Clearing System Limited (See note (i) below) 6,000 6,000

Nigeria International Bank Nominee Limited (see (k) below) 1,000 1,000

942,765 954,314

Allowance for impaired investments (see (c) below) (92,419) (92,419)

850,346 861,895

DEBT SECURITIES AT COST:

Investments in Federal Government of Nigeria (FGN) bonds (see (l) below) 58,958,661 46,390,948

59,809,007 47,252,843

(b) Short-term investments:

FGN bonds - trading 3,363,102 481,020

Government of Ghana bonds - trading - 2,445,994

FGN bonds – Non-trading 7,590,088 5,474,216

10,953,190 8,401,230

Total investment securities 70,762,197 55,654,073

(c) The movement on the allowance for impaired investments during the year was as follows:

2011 2010

N’000 N’000

At 1 January 92,419 92,419

Allowance during the year - -

Write-back during the year - -

At 31 December 92,419 92,419

(d) Movement in long-term investments

At 1 January 47,252,843 13,467,126

Additions 22,033,713 35,064,547

Disposals (11,549) (22,179)

Redemption of long term bonds (9,466,000) (1,221,026)

Investment written off - (35,625)

At 31 December 59,809,007 47,252,843


(e) The market and net asset values of the investment in NIDF notes at the balance sheet date were N567,394,025.14 (2010:

N134,712,251) and N596,388,024.81 (2010: N535,069,110) respectively.

(f) This represents the Bank’s direct equity investment and convertible loan stock in Accion Microfinance of N398.020million

(2010: N397.998million) and indirect equity investment in Falcongaz Limited, Alvac Company Limited, Freezone Plant

Fabrication International, Impex Worldwide, Nigerian Starch Mills Limited, Orbital Track & Fleet Management, and Weltek

Limited through SME II Partnership. Net investments of N11.57million (2010: N22.179 million added) were exited during the year.

(g) This represents the Bank’s 4.00% equity participation in Nigerian Interbank Settlement System Plc.

(h) This represents the Bank’s 3.27 % equity investment in Valucard Nigeria Plc.

(i) This represents the Bank’s 1.06% equity investment in Central Securities Clearing System Limited.

(j) There was no movement on the provision on long-term investments during the year.

(k) There was no additional commitment paid to Nigeria International Bank Nominees Limited during the year. Nigeria

International Bank Nominees Limited commenced business in August 2008 to hold in its name securities purchased for the

Bank’s custody business clients.

The results of Nigeria International Bank Nominees Limited have not been consolidated in these separate financial statements

of the Bank.

(l) This represents investments in Federal Government of Nigeria bonds with outstanding tenor to maturity exceeding one

year and not held for trading. The maturity date of these bonds range from January 2013 to July 2017 with interest rates

ranging from 4.22% to 15.3%. The market value of the bonds is N51,672,157,300 (2010: N43,315,578,590).

(m) The directors are of the opinion that adequate allowance has been made for the diminution in the value of long-term

investments at the balance sheet date.

16. OTHER ASSETS

(a) Other assets comprise:

2011 2010

N’000 N’000

FGN bonds sold under open buy-back transactions - 4,500,000

Interest receivable on placements 7,438 101,826

Prepayments 371,233 204,258

Receivables 1,944 84,831

Fees and commissions receivable 62,935 45,659

Prepaid interest and discounts 3,526 3,192

447,076 4,939,766

65ANNUAL REPORT

17. PROPERTY, PLANT AND EQUIPMENT

(a) The movement on these accounts during the year was as follows:

Leasehold Computer

Improvements, Equipment,

Land & Furniture & Motor

Buildings Equipment Vehicles Total

N’000 N’000 N’000 N’000

COST:

At 1 January 1,911,082 3,198,802 779,734 5,889,618

Additions - 106,111 180,129 286,240

Disposals - (119,661) (230,949) (350,610)

At 31 December 1,911,082 3,185,252 728,914 5,825,248

ACCUMULATED DEPRECIATION:

At 1 January 162,998 2,190,713 429,537 2,783,248

Charge for the year 38,222 473,685 181,427 693,334

Disposals - (103,456) (204,802) (308,258)

At 31 December 201,220 2,560,942 406,162 3,168,324

NET BOOK VALUE:

At 31 December 1,709,862 624,310 322,752 2,656,924

At 1 January 1,748,084 1,008,089 350,197 3,106,370

(b) As at 31 December 2011, there were no authorised and committed contracts (2010: Nil).

18. CUSTOMER DEPOSITS

(a) Deposits and other accounts comprise:

2011 2010

N’000 N’000

Demand 82,972,342 63,863,729

Savings 50,466 135,704

Term 28,206,127 30,105,652

Domiciliary 198,392,708 111,993,253

Electronic purse 24,915 36,238

309,646,558 206,134,576

(b) The maturity profile of deposits and other accounts is as follows:

Under 1 month 306,619,444 198,326,400

1 - 3 months 2,374,556 1,816,717

3 - 6 months 135,000 197,119

6 - 12 months 517,558 4,991,069

1 - 5 years - 5,563

Over 5 years - 797,708

309,646,558 206,134,576


19. DUE TO OTHER BANKS

2011 2010

N’000 N’000

Current balances with banks 248,008 378,104

248,008 378,104

20. ON-LENDING LIABILITIES

(a) On-lending liabilities comprise:

2011 2010

N’000 N’000

Bank of Industry 986,000 344,000

Central Bank of Nigeria (CACS) 1,500,000 -

2,486,000 344,000

(b) i. On-lending liability from Bank of Industry (BOI) for which a management fee of 1% is charged and is secured with

Nigerian Treasury bills with face value not less than 100% of the facility and is repayable quarterly expiring in July 2013.

ii. On-lending liabilities from Central Bank of Nigeria under the Commercial Agricultural Credit Scheme (CACS) are

repayable after one year and expiring in September 2012.

(c) The maturity profile of on-lending liabilities is as follows:

2011 2010

N’000 N’000

Under 1 month 750,071 43,000

1-3 months 1,064,500 64,500

3-6 months 28,571 64,500

6-12 months 557,144 129,000

Over 12 months 85,714 43,000

2,486,000 344,000

21. PROVISIONS

(a) Provisions comprise:

2011 2010

N’000 N’000

Legal reserves (see note 21 (b)) 58,488 8,488

58,488 8,488

b) Increase in legal reserve due to additional litigation claim against the bank.

67ANNUAL REPORT

22. OTHER LIABILITIES

Other liabilities comprise:

2011 2010

N’000 N’000

Customers’ deposits for letters of credit (see Note 11 (b)) 5,330,521 2,203,974

Deposits for foreign exchange 378,433 10,335

Managers’ cheques 3,139,690 3,118,433

Accrued expenses 940,725 1,119,221

Banking sector resolution cost 776,737 -

Unearned income 235,447 267,953

Interest payable 241,648 134,550

Gratuity payable (see note 22(b) below) 112,897 126,317

Collections 121,186 32,170

Others 878,884 195,748

12,156,168 7,208,701

a) Gratuity payable

Effective from 1 July 2005, the gratuity scheme was terminated and replaced by a pension plan. Under the terms of the

termination, amounts payable to employees will be paid when such employees leave the service of the Bank and the amount

payable is calculated on a pro-rata basis.

(b) Banking sector resolution cost

The provision for the banking sector resolution cost is based on 0.3% of the bank’s total assets as of 31 December 2010. The

provision is made in compliance with the Memorandum of Understanding in relation to the Establishment and funding of the

Banking Sector resolution cost sinking fund.

23. DEFERRED TAXATION

(a) Movement on deferred tax account during the year was as follows:

2011 2010

N’000 N’000

At 1 January 537,740 400,406

(Credit)/Charge during the year (note 8 (b)) (243,768) 137,334

At 31 December 293,972 537,740

(b) The Bank’s exposure to deferred tax has been fully provided for in the financial statements. Deferred taxes are attributable

to timing differences arising between the tax bases of assets and liabilities and their carrying values largely due to property

and equipment. The directors are of the opinion that these timing differences are likely to reverse in the foreseeable future.


24. RETIREMENT BENEFIT OBLIGATIONS

(a) The balance on retirement benefit obligations at the end of the year comprise:

2011 2010

N’000 N’000

Defined contribution 10,894 37,592

10,894 37,592

(b) The Bank and its employees make a joint contribution of 15% (7.5% each) of basic salary, housing and transport allowance

to each employee’s retirement savings account maintained with their respective nominated pension fund administrators.

The movement on retirement benefit obligation account during the year was as follows:

2011 2010

N’000 N’000

At 1 January 37,592 45,384

Employee contribution 169,101 159,999

Charge to profit and loss 169,536 114,615

Remittances during the year (365,335) (282,406)

At 31 December 10,894 37,592

25. SHARE CAPITAL

(a) Share capital comprises:

2011 2010

N’000 N’000

AUTHORISED:

3.0 billion Ordinary shares of N1.00 each 3,000,000 3,000,000

ISSUED AND FULLY PAID:

2.794 billion Ordinary shares of N1.00 each 2,793,777 2,793,777

26. RESERVES

The movements on these accounts during the year were as follows:

Statutory Retained SMEIS

2011 reserve earnings reserve Total

N’000 N’000 N’000 N’000

At 1 January 11,095,481 12,863,572 3,340,908 27,299,961

Transfer from profit and loss account 1,459,793 8,272,162 - 9,731,955

Dividend paid - (7,682,888) - (7,682,888)

At 31 December 12,555,274 13,452,846 3,340,908 29,349,028

Statutory Retained SMEIS

2010 reserve earnings reserve Total

N’000 N’000 N’000 N’000

At 1 January 9,737,347 14,945,700 3,340,908 28,023,955

Transfer from profit and loss account 1,358,134 7,696,092 - 9,054,226

Dividend paid - (9,778,220) - (9,778,220)

At 31 December 11,095,481 12,863,572 3,340,908 27,299,961

69ANNUAL REPORT

Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by s16(1)

of the Bank and Other Financial Institutions Act of 1991 (amended), an appropriation of 30% of profit after tax is made if the

statutory reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the

paid up share capital. The statutory reserve is non distributable.

The SMEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set

aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium scale

enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of

profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after

tax. However, this is no longer mandatory based on the resolution of the Bankers’ Committee meeting and approved by the

Central Bank of Nigeria in 2007. The small and medium scale industries equity investment scheme (SMEIS) reserves are non-

distributable.

27. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Litigations and claims

There were litigations and claims against the Bank as at 31 December 2011 amounting to N598,051,479 (2010: N1,026,508,686).

These litigations and claims arose in the normal course of business and are being contested by the Bank. The directors, having

sought professional legal counsel are of the opinion that no significant liability will crystallize from these litigations and

therefore no provisions are deemed necessary to be made in the financial statements.

(b) Off-balance sheet engagements

2011 2010

N’000 N’000

Acceptances/direct credit substitutes 1,032,738 965,189

Foreign exchange commitments 44,449,226 19,445,253

Letters of credit 14,683,399 15,413,912

Bonds and guarantees 35,616,236 17,325,717

95,781,599 53,150,071

(i) Included in the bonds and guarantees are cash collateralized and secured guarantees with a total sum of N3,251,374,236

(2010: N5,371,432,244).

28. RELATED PARTY TRANSACTIONS

A number of banking transactions are entered into with related parties in the normal course of business. These include loans,

deposits and foreign currency transactions. The volumes of related-party transactions, outstanding balances at the year-end,

and related expense and income for the year are as follows:

(a) 81.9% of the Bank’s share capital is held by Citibank Overseas Investment Corporation. (2010: 81.9%)

(b) In the normal course of the Bank’s business, the Bank enters into business transactions with other Citigroup offices at

commercial rates.

(c) There was no director related loan outstanding as at year end. (2010: Nil).


(d) Deposits outstanding as at 31 December 2011

Name of company/Individual Relationship Type of deposit 2011 2010

N’000 N’000

Nigeria International

Bank Nominees Limited Subsidiary Deposit 1,182 1,035

1,182 1,035

(e) Director’s remuneration is disclosed at note 29 (b).

(f) There were no transactions in which a director had an interest as at reporting date in 2011.

29. EMPLOYEES AND DIRECTORS

(a) Employees

(i) The number of persons employed as at the end of the year is as follows:

2011 2010

Number Number

Executive directors 5 6

Management 191 182

Non management 57 58

253 246

(ii) Cost of employees, excluding executive directors, during the year amounted to:

2011 2010

Number Number

Wages and salaries 3,257,503 3,234,921

Pension costs 169,536 114,615

3,427,039 3,349,536

Other indirect employee costs 1,232,485 1,100,448

4,659,524 4,449,984

Executive Compensation (223,300) (224,783)

4,436,224 4,225,201

(iii) The number of persons employed by the Bank, who received emoluments in the following ranges (excluding pension

contribution), were:

2011 2010

N’000 N’000

N2,000,001 - N3,000,000 10 22

N3,000,001 - N4,000,000 20 -

N4,000,001 - N5,000,000 7 15

N5,000,001 - N6,000,000 16 20

N6,000,001 - N7,000,000 22 32

Above N7,000,000 178 151

253 240

71ANNUAL REPORT

(b) Directors

Directors’ remuneration was paid as follows:

2011 2010

N’000 N’000

Fees and sitting allowances 36,600 29,050

Executive Compensation 223,300 224,783

259,900 253,833

The directors’ remuneration shown above includes:

2011 2010

N’000 N’000

Chairman 8,200 7,625

Highest paid director 57,800 57,800

The number of other directors who received fees and other emoluments (excluding pension contributions) in the following

ranges were:

2011 2010

Number Number

Nil (Foreign non-executive directors) 2 2

Nil (Local non- executive director) 1 1

Above N2, 000,000 10 11

30. NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN OPERATING ASSETS

This comprises:

2011 2010

N’000 N’000

Profit after taxation 9,731,955 9,054,226

Add back: taxation charge 2,460,228 2,674,075

Profit before taxation 12,192,183 11,728,301

Adjustments to reconcile profit before taxation to net cash flow from operations:

- depreciation 693,334 708,143

- gain on disposal of fixed assets (25,690) (261,455)

- allowance/(write back) on risk assets 377,462 (1,103,881)

- dividend income (41,924) (32,630)

- provision for other assets - (6,001)

- write-off on long-term investments - 35,625

- Gain on sale of investments, (net) - (5,735)

Net cash flow from operating activities 13,195,365 11,062,367


31. CHANGES IN OPERATING ASSETS

This comprises:

2011 2010

N’000 N’000

(Increase)/decrease in operating assets:

- Cash reserve balance (7,410,078) 600,458

- Short term investments (2,551,960) (3,845,399)

- Loans and advances (13,011,941) 2,698,807

- Interest in suspense (418,074) (572,306)

- Other facilities (1,430,293) (322,500)

- Other assets 4,492,690 (4,079,721)

- Advances under finance lease (38,121) 6,070

Increase/ (decrease) in operating liabilities:

- Customer deposits 103,511,982 81,021,555

- Due to other banks (130,096) 378,090

- Other facilities 2,142,000 344,000

- Other liabilities 5,224,280 (2,830,787)

- Provisions 50,000 (2,246)

- Retirement benefit obligations (26,697) (7,793)

90,403,692 73,388,228

32. DIVIDENDS

(a) Declared dividend per share

2011 2010

N’000 N’000

Declared dividend (N’000) 7,682,888 9,778,220

No. of shares ranking for dividend (thousands) 2,793,777 2,793,777

Declared dividend per share 275k 350k

Payment of dividends is subject to withholding tax at a rate of 10%.

(b) Proposed dividend

Subsequent to the balance sheet date, the directors have proposed a dividend of N2.95k per share (2010: N2.75k per share)

amounting to N8,241,642,825.55 (2010:N7,682,887,379.75) from the outstanding balance in the retained earnings account

as at 31 December 2011.

(c) Dividend payable

2011 2010

N’000 N’000

At 1 January - -

Declared during the year 7,682,888 9,778,220

Paid during the year (7,682,888) (9,778,220)

At 31 December - -

73ANNUAL REPORT

33. EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average

number of Ordinary shares in issue during the year. The basic earnings per share (EPS) for the year is calculated as follows:

2011 2010

Net profit attributable to shareholders (N’000) 9,731,955 9,054,226

Number of Ordinary shares in issue at year end (thousands) 2,793,777 2,793,777

Time weighted average number of ordinary shares in issue (thousands) 2,793,777 2,793,777

Basic earnings per share 348k 324k

Diluted earnings per share 348k 324k

34. CASH AND CASH EQUIVALENTS

For the purposes of the cash flow statement, cash and cash equivalents include cash and non restricted balances with the

Central Bank, treasury bills and other eligible bills, operating account balances with other banks, amount due from other

banks:

2011 2010

N’000 N’000

Cash and balances with central banks 5,149,943 2,123,093

Treasury bills and eligible bills 13,056,586 3,012,113

Due from other banks 212,273,652 144,998,390

230,480,181 150,133,596

35. COMPLIANCE WITH BANKING REGULATIONS

The Bank did not contravene any regulations of the Banks and Other Financial Institutions Act (BOFIA) and CBN circulars

considered to have a significant impact for the financial year 2011.

In December 2011, the bank however paid N8,000,000 as penalty for the contravention of sections 2,7,9 & 10 of the Money

Laundering Prohibition Act 2004, for the financial year 2009.

36. POST BALANCE SHEET EVENTS

There were no post balance sheet events which could have a material effect on the financial position of the Bank as at 31

December 2011 or the profit for the year ended on that date that have not been adequately provided for or disclosed.

37. COMPARABILITY

When necessary, comparative figures have been adjusted to conform to changes in presentation in the current period.


FINANCIAL RISK ANALYSISFOR THE YEAR ENDED 31 DECEMBER 2011

(a) Principal credit policies

The bedrock of our corporate strategy remains sustaining and maximizing its risk-adjusted earnings objective, providing

appropriate financial solutions to meet customers’ needs while maintaining a sound credit portfolio. Credit policies help us to

achieve this balance. They define credit management issues from a strategic perspective. Credit procedures have a tactical

perspective, and change as frequently as our business changes.

The credit policy is predicated on the Bank’s business strategy and return objective through well pre-defined target markets,

risk acceptance criteria and stress testing.

• Business strategy: the Bank’s objective is to build strong customer relationships and diversified product portfolios. We

target industry sectors in which we can achieve a strong market position and adequate returns on capital. Strategic

business planning begins with an assessment of external (global, national, and local economic trends) and internal

factors (capital, staffing, and portfolio mix/quality). The external environment and the internal resources combined

will determine the business strategy, which includes: financial targets, growth, market share, geographic coverage

(positioning), segment focus (public sector, multinationals, local corporations and other financial institutions) and

Target Market (TM) and Risk Acceptance Criteria (RAC).

• Target market refers to the pre-defined acceptable profile of customers and the products we propose to offer them.

Our TM identifies potential markets, its opportunities and the Bank’s capacity to objectively exploit its potential with

available resources and potential risk.

• RAC specifies the terms and conditions for extending to an obligor in the target market. It defines items such as product

eligibility, tenor limits, security or support required for the financing and required documentation.

• Stress testing: in view of the dynamic nature of our market, the bank’s portfolio is subjected to stress testing, based

on emerging issues. Stress testing is a process whereby the Bank will systematically change one or more risk events or

risk factors within a portfolio to determine how the whole portfolio or key segments within the portfolio will respond.

It provides an opportunity for the Bank to dimension the potential impact of an adverse event and define proactive

solutions for such an adverse before it actually occurs.

(b) Methodology for risk rating

The Risk Rating Process is the end-to-end process for deriving Obligor Risk Rating (ORR’s) and Facility Risk Rating (FRR’s).

It involves the use of risk rating models, supplemental guidelines, support adjustments, collateral adjustments, process

controls, as well as any other defined processes that the Bank undertakes in order to arrive at ORR’s and FRR’s. The models

are statistical models, which are revalidated periodically by the Credit and Operational Risk Analytics Group of Citigroup –

which is based in New York.

The Obligor Risk Rating (ORR) represents the probability that an obligor will default within a one-year time horizon. Risk

ratings for obligors are assigned on a scale of 1 to 10, with sub-grades, where ‘1’ is the best quality risk and ‘6-’ is the worst for

obligors that are not in default. ORR “7” is assigned to substandard-classified performing or accruing obligors whilst “9” and

“10” rating categories indicate that the obligor is in default (ORR “8” is applicable only to adverse classifications resulting

solely from cross-border events)

The Facility Risk Rating (FRR) approximates a ‘Loss Norm’ for each facility, and is the product of two components: The Default

Probability of the Obligor, i.e. the Final ORR, and The Loss Given Default (‘LGD’). FRR’s are assigned on a scale of 1 to 10, with

sub-grades, where ‘1’ is the best quality risk and ‘7’ is the worst for performing or accruing facilities. The 9 and 10 rating

categories indicate facilities that have been placed on non-accrual status.

The Obligor Limit Rating (OLR) represents a longer-term (beyond one year) view of an obligor’s credit quality. The OLR is

derived from the Final ORR and considers a range of factors, such as quality of management and strategy, nature of industry,

and regulatory environment, among others.

75ANNUAL REPORT

(c) Enterprise risk review

The diversity of customers, products, and business strategies at Citibank Nigeria Limited requires that we have a well-defined,

integrated risk management structure to identify, analyze, originate, monitor and report on acceptable risk taking activities

within pre-defined thresholds.

The Bank’s risk management function works with the business groups with the goal of taking intelligent risk with shared

responsibility, without forsaking individual accountability and mitigating the potential of losses in risk activities under 3

broad categories: Operational risk, Credit risk and Market risk. Senior Business Management‘s objectives (budgets, portfolios

and investments) must be prudent, reflecting their view of risks and rewards arising from market conditions and should

dynamically adjust these strategies and budgets to fit changing environments.

Appropriate controls have been established to mitigate the risks and support business activities. There are checks and

balances as independent risk management set and monitor limits and other requisite conditions. Risks are measured and

managed pro-actively.

The governance structure includes the Board Risk Management Committee and Board of Directors which specifically focus on

each of the three broad risk categories stated above.

(d) Credit risk

Citibank Nigeria Limited’s credit facilities reflect the potential maximum credit exposure or loss to counter-party for a

particular product and exposure type. In furtherance of this objective, we consistently ensure the Bank’s business strategy

and exposure appetite are aligned. The key attributes of our credit policy are also consistent with the Citigroup Institutional

Clients Group (ICG) Principles and Policy Framework. This policy framework dictates best international practices in Risk

Management, including credit risk.

To enable consistent monitoring of exposure and risk:

• All credit exposures must be captured in the credit systems - irrespective of absolute size of exposure, duration,

location, counterparty, authorization level obtained or perceived economic risk.

• Credit facility amounts must capture exposure (the maximum potential for loss to an obligor or counterparty). Risk

adjustments are reflected for obligor limits and in other reporting.

• All potential credit relationships should have a proper account opened in the name of the obligor. For current credit

system integration, the client should have a Global Finance Customer Identifier (GFCID) created.

• Every business unit must maintain adequate controls to ensure compliance with all facility terms and conditions

established in conjunction with risk.

• Single name triggers prevent excessive concentrations of loss to a single name, and together form the basis for

compliance with regulatory rules such as legal lending limits.

• Obligor limits are the basis for credit portfolio managers to prevent concentrations of loss to any one obligor or

relationship. Business units must escalate any potential breach of a limit as provided for in the Citigroup ICG Risk

Manual.

• Credit facilities and the ability to manage the exposure should be in place prior to executing any new business.

• All credit relationships should be reviewed at a minimum annually, unless otherwise duly extended, where appropriate.

• Risk ratings must be established for all obligors and facilities using a Citi approved risk rating methodology.

(e) Credit risk measurement

(i) Loans and advances

Loans and advances form the primary offering of the Bank and are primarily short term in nature consisting of mostly

trade and overdraft lines. The offering is based on a detailed credit review process which involves analysis of both

quantitative and qualitative factors. This includes risk rating of the obligor and matching of the obligor’s qualitative

and quantitative attributes to pre-defined Target Market and Risk Acceptance Criteria to determine the optimal credit

exposure and product.


Bank rating Description of the grade External rating: External rating:

Standard & Poor’s Moody’s Equivalent

Equivalent

1 - 4 Investment Grade AAA to BBB- Aaa to Baa3

5 - 6 Non Investment Grade BB+ to B- Ba1 to B3

7 Speculative Grade CCC+ to CCC- Caa1 to Caa3

9 - 10 Default Unrated* Unrated

* Note that included in the unrated are the lost facilities, IENC and staff loans.

(ii) Debt securities and other bills

For debt securities and other bills, internal ratings for the counterparty and external ratings as specified in the Central

Bank circular on guidelines for treatment of commercial papers and bankers acceptances dated 18 November 2009 was

adopted by the Bank as part of its primary tools in managing its investment and liquidity risk exposures.

(f) Risk limit control and mitigation policies

The Bank as part of its portfolio monitoring functions routinely defines concentration limits, with the goal of establishing a

well-diversified portfolio where expected return on risk capital should be commensurate with the inherent risk therein. Single

name triggers prevent excessive concentrations of loss to a single name, and together form the basis for compliance with

regulatory rules such as legal lending limits. Concentration limits are monitored on a monthly basis.

(g) Authorizing level approval limit

The Bank’s internal credit approval limits are a function of experience and credit exposure in line with the ICG Risk Manual

requirement and the authorities delegated by the board. However, the board approved limits are listed below:

Authorising Level Approval Limit

Board N5billion and above for non cash collateralized facilities (for ratification)

Board Credit Committee1 1. N800million – N2.2billion for non cash-collateralised facilities (for noting).

2. N2.2billion - N5billion for non cash-collateralised facilities.

3. Over N5billion subject to final ratification by the Board, after board review

of the full credit approval packages.

Management Credit Committee 1. All fully cash-collateralised facilities.

2. Up to N2.2billion for non cash collateralized facilities.

The key feature of credit approval in the Bank is the fact that no one person can singly approve a credit, irrespective of

the limit.

1 Where the Board Credit Committee’s approval for a non cash-collateralised facility is required, which is over and above any cash collateralised facilities to the same obligor, the Board Credit Committee must be informed of the total facilities granted, i.e. inclusive of cash collateralised facilities

Current and potential market conditions, collateral considerations as well as credit history checkings are important integral

parts of our credit process.

The Bank’s internal ratings scale and mapping to external ratings are listed below:

77ANNUAL REPORT

Exposure to credit risk is also managed through periodic calls on the borrowers to ascertain operating performance and

determine their continued ability to meet all obligations as and when due.

Some other specific control and mitigation measures are outlined below.

(i) Collateral

The Bank focuses primarily on the cash-flows of the borrower for its repayments. The general principle is that repayment

should come from the transactions financed or other operating cash-flows. The Bank maintains a policy of not lending in an

inferior position, without proper approvals (and only in exceptional circumstances), or where it is at a disadvantage to other

lenders as regards seniority of claim in a default scenario.

During the annual credit review process, searches are conducted to verify that the Bank is not lending in an inferior position.

In instances where pre-existing charges exist on the customer’s assets, the Bank generally demands a pari-passu ranking with

other lenders. However, based on the credit profile assessment on a case by case basis, the Bank’s Credit Committee may also

request for additional collateral for credit enhancement.

For term loans for the acquisition of specific assets, the Bank generally takes a charge over the assets financed by the term

loan.

As a general principle, all credits are reviewed and approved based broadly on the under-listed key factors:

• The operations of the Borrower/Obligor falling within the approved target market.

• Strong financial profile with emphasis on present and future cash flow which determines the capacity of the operations

to meet debt obligations.

• Review and assessment of Borrower/Obligor management and sponsors.

• Credit history track record.

• Economic/industry trends.

• For an international company where the Bank has recourse to branches or subsidiaries of Citibank outside Nigeria, or

where the exposure is secured against guarantees, cash or other types of collateral, the Bank may reserve the right

not to insist on obtaining a local security ranking pari-passu with other local lenders, in view of the superior access it

maintains through its global affiliates to the parent company seniors.

The Bank implements the above guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The

principal collateral types for loans and advances are:

• Charges over business assets such as premises inventory and accounts receivable.

• Cash deposits.

• Mortgages to a very limited extent.

• Charges over financial instruments such as debt securities.

The Bank does not accept charges over equities as collateral for loans and advances.

(ii) Master netting arrangements

The Bank restricts its exposure to credit losses by entering into Master netting arrangements with counterparties with which

it undertakes a significant volume of transactions. Master netting arrangements do not generally result in an offset of balance

sheet assets and liabilities, as transactions are usually settled on a gross basis. However, the credit risk associated with

favourable contracts is reduced by a master netting arrangement to the extent that if a default occurs, all amounts with the

counterparty are terminated and settled on a net basis.

(h) Provisioning policies

The internal and external rating systems described above focus more on credit-quality mapping from the inception of the lending

and investment activities. In contrast, loan loss provisions are recognised for financial reporting purposes only for losses that

have been incurred at the balance sheet date based on criteria set out in the Prudential Guidelines for licensed banks.


Analysis by performance:

2011 2010

N’000 N’000

Performing 57,478,891 43,441,370

Non-performing

- substandard - 19,156

- doubtful - 748,812

- lost 15,536 677,112

57,494,427 44,886,450

(i) Performing but past due loans

Loans and advances less than 90 days past due are considered performing, unless other information is available to indicate the

contrary. The gross amount of loans and advances by class to customers that were past due but performing were as follows:

At 31 December Retail Corporate SME Financial Total

2011 Institutions

N’000 N’000 N’000 N’000 N’000

Past due up to 30 days - - - - -

Past due 30 - 60 days - - - - -

Past due 60-90 days - - - - -

- - - - -

At 31 December Retail Corporate SME Financial Total

2010 Institutions

N’000 N’000 N’000 N’000 N’000

Past due up to 30 days - 2,560,987 - - 2,560,987

Past due 30 - 60 days - - - - -

Past due 60-90 days - - - - -

- 2,560,987 - - 2,560,987

(j) Non-performing loans

(i) By industry

2011 2010

N’000 N’000

Oil and gas - 430

Manufacturing - 911,153

Real Estate and Construction - 268,464

Finance and Insurance - 3,356

Transportation - 9,978

Consumer - 211,205

Others 15,536 40,494

15,536 1,445,080

79ANNUAL REPORT

(i) By geography

2011 2010

N’000 N’000

South South - 79

South West 15,536 1,380,577

South East - 38,359

North Central - 26,065

North East - -

North West - -

15,536 1,445,080

At 31 December Due from Loans and On lending Adv under Debt Total

2011 banks advances facilities finance lease instruments

(Gross) (Gross) (Gross)

N’000 N’000 N’000 N’000 N’000 N’000

South South - 4,714,920 - - - 4,714,920

South West 9,071,053 51,451,866 1,752,793 100,497 - 62,376,209

South East - 54,747 - - - 54,747

North West - 1,265,264 - - - 1,265,264

North Central - 7,630 - - 69,911,851 69,919,481

North East - - - - - -

Outside Nigeria 203,202,599 - - - - 203,202,599

212,273,652 57,494,427 1,752,793 100,497 69,911,851 341,533,220




N’000 N’000 N’000 N’000 N’000 N’000

South South - 1,521,246 - - - 1,521,246

South West 30,303,251 42,421,771 322,500 62,376 - 73,109,898

South East - 90,218 - - - 90,218

North West - - - - - -

North Central - 26,065 - - 52,346,184 52,372,249

North East - 827,150 - - - 827,150

Outside Nigeria 114,695,139 - - - 2,445,994 117,141,133

144,998,390 44,886,450 322,500 62,376 54,792,178 245,061,894

(k) Concentration of risks of financial assets with credit risk exposure

(i) Geographical sectors

The following table analyses the Bank’s main credit exposure at their carrying amounts, as categorised by geographical

region as of 31 December 2011. For this table, the Bank has allocated exposures to regions based on the region of domicile

of our counterparties.


(ii) Industry sectors




N’000 N’000 N’000 N’000 N’000 N’000

Agriculture - 450,873 1,488,293 - - 1,939,166

Oil and gas - 4,553,589 - - - 4,553,589

Manufacturing - 28,618,549 264,500 100,497 - 28,983,546

Mining and Quarrying - - - - - -

Real estate & construction - 7,630 - - - 7,630

Finance & Insurance 212,273,652 3,032,720 - - - 215,306,372

Government - - - - 69,911,851 69,911,851

Transportation - 3,015,494 - - - 3,015,494

Communication - 8,427,540 - - - 8,427,540

Education - 630,145 - - - 630,145

Consumer - 6,051,589 - - - 6,051,589

Others - 2,706,298 - - - 2,706,298

212,273,652 57,494,427 1,752,793 100,497 69,911,851 341,533,220




N’000 N’000 N’000 N’000 N’000 N’000

Agriculture - 261,390 - - - 261,390

Oil and gas - 7,647,893 - - - 7,647,893

Manufacturing - 26,785,652 322,500 62,376 - 27,170,528

Mining and Quarrying - - - - - -

Real estate & construction - 509,693 - - - 509,693

Finance & Insurance 144,998,390 377,819 - - - 145,376,209

Government - - - - 54,792,178 54,792,178

Power - 53,672 - - - 53,672

Transportation - 5,133,689 - - - 5,133,689

Communication - 695,629 - - - 695,629

Consumer - 2,729,958 - - - 2,729,958

Others - 691,055 - - - 691,055

144,998,390 44,886,450 322,500 62,376 54,792,178 245,061,894

81ANNUAL REPORT

(iii) Analysis by portfolio distribution and risk rating

At 31 December AAA to AA- A+ to A- BBB+ to BB- Below BB- Unrated Total

2011

Due from banks 203,202,599 - 9,071,053 - - 212,273,652

Loans 3,368,467 8,729,335 34,473,593 10,747,770 175,262 57,494,427

On-lending facilities - - 1,488,293 264,500 - 1,752,793

Advances under finance lease - - 100,497 - - 100,497

Debt instruments - - 69,911,851 - - 69,911,851

206,571,066 8,729,335 115,045,287 11,012,270 175,262 341,533,220

At 31 December AAA to AA- A+ to A- BBB+ to BB- Below BB- Unrated Total

2010

Due from banks 114,695,139 - 30,303,251 - - 144,998,390

Loans 7,644,846 2,036,395 32,014,446 3,151,218 39,545 44,886,450

On-lending facilities - - 322,500 - - 322,500

Advances under finance lease - 62,376 - - - 62,376

Debt instruments - - 54,792,178 - - 54,792,178

122,339,985 2,098,771 117,432,375 3,151,218 39,545 245,061,894

(l) Foreign exchange risk

The Bank has a robust risk management system that identifies, measures and mitigates the foreign currency exchange rate

risk on its financial position and cash flows. Apart from regulatory imposed limits such as the net open position limit (OPL)

that helps to limit these exposures, the Bank has market risk limits such as:

1. Individual overnight position limits for individual currency positions, which limits exchange rate risk in all currencies

that the Bank has exposures.

2. Cross currency funding limits (CCFL); The CCFL restricts the proportion of local currency assets funded by foreign

currency liabilities.

3. Daily mark-to-market mechanism that revalues all currency positions daily, ensuring that foreign currency positions

are valued at current market price and not at cost.

4. Trading Management Action Trigger (MAT): This limits, on a realized or mark–to-market basis, the maximum loss

that your total currency position can make before escalation is made to the Bank’s management and the positions

liquidated or effectively hedged.

Where there are available-for-sale securities denominated in currencies other than the local currency (Naira), the Bank

hedges the change in fair value attributable to foreign-exchange rate movements in these securities. Typically, the hedging

instrument employed is a forward foreign-exchange contract.


The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December. Included in the table

are the Bank’s assets and liabilities at carrying amounts, categorised by currency.

Concentrations of currency risk – on- and off-balance sheet assets and liabilities

At 31 December Naira Dollar GBP Euro Others Total

2011

Assets N’000 N’000 N’000 N’000 N’000 N’000

Cash and balances

with central banks 13,184,201 184,217 31,352 20,898 - 13,420,668

Treasury bills 13,056,586 - - - - 13,056,586

Due from other banks 9,055,417 198,852,596 817,540 3,093,239 454,860 212,273,652

Loans and advances

to customers 42,576,436 13,116,619 23,823 1,125,856 61,368 56,904,102

On-lending facilities 1,735,265 - - - - 1,735,265

Advances under finance lease 99,492 - - - - 99,492

Investment securities 69,907,555 854,642 - - - 70,762,197

Other assets 390,495 27,880 1,264 25,558 1,879 447,076

Property and equipment 2,656,924 - - - - 2,656,924

Total financial assets 152,662,371 213,035,954 873,979 4,265,551 518,107 371,355,962

Liabilities

Customer deposits 104,265,009 204,306,090 419,952 655,507 - 309,646,558

Due to other banks 126,926 114,349 6,491 - 242 248,008

On-lending liabilities 2,486,000 - - - - 2,486,000

Provisions 58,488 - - - - 58,488

Current income tax 2,669,074 - - - - 2,669,074

Other liabilities 6,096,800 2,774,173 483,880 2,693,720 107,595 12,156,168

Deferred taxation 293,972 - - - - 293,972

Retirement benefit obligations 10,894 - - - - 10,894

116,007,163 207,194,612 910,323 3,349,227 107,837 327,569,162

Net on-balance sheet

financial position 36,655,208 5,841,342 (36,344) 916,324 410,270 43,786,800

Off balance sheet 35,992,366 46,300,332 1,631,717 11,252,928 604,256 95,781,599

83ANNUAL REPORT

At 31 December Naira Dollar GBP Euro Others Total

2010

Assets N’000 N’000 N’000 N’000 N’000 N’000

Cash and balances

with central banks 2,745,836 121,745 48,371 67,788 - 2,983,740

Treasury bills 3,012,113 - - - - 3,012,113

Due from other banks 30,278,838 112,665,057 536,593 1,164,696 353,206 144,998,390

Loans and advances

to customers 35,374,622 7,816,530 - 624,591 17,273 43,833,016

On-lending facilities 322,500 - - - - 322,500

Advances under finance lease 62,376 - - - - 62,376

Investment securities 53,208,079 - - - 2,445,994 55,654,073

Other assets 4,766, 325 165,842 359 7,240 - 4,939,766

Property and equipment 3,106,370 - - - - 3,106,370

Total financial assets 132,877,059 120,769,174 585,323 1,864,315 2,816,473 258,912,344

Liabilities

Customer deposits 88,299,356 116,622,995 235,702 976,523 - 206,134,576

Due to other banks 255,289 122,815 - - - 378,104

On-lending liabilities 344,000 - - - - 344,000

Provisions 8,488 - - - - 8,488

Current income tax 2,525,410 - - - - 2,525,410

Other liabilities 4,748,372 1,708,373 345,808 354,562 51,586 7,208,701

Deferred taxation 537,740 - - - - 537,740

Retirement benefit obligations 37,592 - - - - 37,592

96,756,247 118,454,183 581,510 1,331,085 51,586 217,174,611

Net on-balance sheet

financial position 36,120,812 2,314,991 3,813 533,230 2,764,887 41,737,733

Off balance sheet 15,268,420 28,082,567 1,119,203 7,764,022 915,859 53,150,071

(m) Market Risk Management Process

Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a financial

intermediary. Liquidity risk is the risk that an entity may be unable to meet its financial obligations when they come due. Price

risk is the earnings risk from changes in interest rates, foreign exchange rates, and equity and commodity prices. Price risk

arises in non-trading portfolios, as well as in trading portfolios.

Market risks are measured in accordance with established standards to ensure consistency across businesses and the ability

to aggregate risk. The Bank is required to establish, with approval from independent market risk management, a market

risk limit framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of

Citigroup’s overall risk appetite. In all cases, the Bank’s Treasury department is ultimately responsible for the market risk of

the Bank and for remaining within its defined limits.

(n) Liquidity Risk Management

Management of liquidity at the Bank is the responsibility of the Risk Treasurer. A uniform liquidity risk management

policy exists for Citigroup and its major operating subsidiaries. Under this policy, there is a single set of standards for the

measurement of liquidity risk in order to ensure consistency across businesses, stability in methodologies and transparency

of risk. Management of liquidity risk is performed on a daily basis and is monitored by the Country Treasurer and independent

risk management, combined with an active corporate oversight function.


The Bank’s Asset and Liabilities Committee (ALCO) undertakes this oversight responsibility along with the Country Treasurer.

One of the objectives of ALCO is to monitor and review the overall liquidity and balance sheet positions of the bank. The Risk

Treasurer must prepare an annual funding and liquidity plan for review by the Country Treasurer and approval by independent

risk management. The funding and liquidity plan includes analysis of the balance sheet, as well as the economic and business

conditions impacting the liquidity of the Bank. As part of the funding and liquidity plan, liquidity limits, liquidity ratios, market

triggers, and assumptions for periodic stress tests are established and approved. At a minimum, these parameters are

reviewed on an annual basis.

(i) Liquidity limits

Liquidity limits establish boundaries for market access in business-as-usual conditions and are monitored against the liquidity

position on a daily basis. These limits are established based on the size of the balance sheet, depth of the market, experience

level of local management, stability of the liabilities and liquidity of the assets. Finally, the limits are subject to the evaluation

of the entities’ stress test results. Generally, limits are established such that in stress scenarios, entities are self-funded or net

providers of liquidity. Thus, the risk tolerance of the liquidity position is limited based on the capacity to cover the position in

a stressed environment. These limits are the key daily risk-management tool for the Treasury management.

(ii) Liquidity sources

The Bank maintains cash and a portfolio of highly liquid government securities that could be sold or financed on a secured

basis.

(iii) Liquidity ratios

A series of standard corporate-wide liquidity ratios has been established to monitor the structural elements of the Bank’s

liquidity. Ratios are established for liquid assets against short-term obligations. Key liquidity ratios include cash capital

(defined as core deposits, long-term debt, and capital compared with illiquid assets), liquid assets against liquidity gaps, core

deposits to loans, and deposits to loans. Several measures exist to review potential concentrations of funding by individual

name, product, industry, or geography. Triggers for management discussion, which may result in other actions, have been

established against these ratios.

The Central Bank of Nigeria requires banks to maintain a statutory minimum liquidity ratio of 30% of liquid assets to all its

deposit liabilities. For this purpose, liquid assets comprise cash and balances with Central Bank of Nigeria and other local

banks, treasury bills, FGN Bonds, placement and money at call with other banks. Deposit liabilities comprise deposits from

customers, deposits due to other banks,. The liquidity ratio at the reporting date December 31 2011 stood at 97.6% (2010:

93%).

Market triggers:

Market triggers are internal, external market or economic factors that may imply a change to market liquidity or Citigroup’s

access to the markets. Citibank Nigeria’s market triggers are monitored on a weekly basis by the Country Treasurer and the

head of Risk and are presented to the ALCO at the monthly meeting.

Stress testing:

Simulated liquidity stress testing is periodically performed by the Bank. A variety of firm-specific and market related scenarios

are used at the consolidated level and in individual businesses. These scenarios include assumptions about significant changes

in key funding sources, credit ratings, contingent uses of funding, and political and economic conditions in certain countries.

The results of stress tests are reviewed to ensure that the bank is either a self-funded or net provider of liquidity. In addition,

a Contingency Funding Plan is prepared on a periodic basis for Citigroup. The plan includes detailed policies, procedures, roles

and responsibilities, and the results of corporate stress tests. The product of these stress tests is a series of alternatives that

can be used by the Treasurer in a liquidity event.

85ANNUAL REPORT

(o) Price Risk Management

(i) Non Trading Portfolios

Interest Rate Risk

One of Citibank’s primary business functions is providing financial products that meet the needs of its customers. Loans and

deposits are tailored to the customers’ requirements with regard to tenor, index, and rate type. Net interest revenue (NIR) is

the difference between the yield earned on the non-trading portfolio assets (including customer loans) and the rate paid on

the liabilities (including customer deposits or wholesale borrowings). NIR is affected by changes in the level of interest rates.

For example:

• At any given time, there may be an unequal amount of assets and liabilities which are subject to market rates due to

maturation or repricing. Whenever the amount of liabilities subject to repricing exceeds the amount of assets subject

to repricing, a company is considered “liability sensitive.” In this case, a company’s NIR will deteriorate in a rising rate

environment.

• The assets and liabilities of a company may reprice at different speeds or mature at different times, subjecting both

“liability-sensitive” and “asset sensitive” companies to NIR sensitivity from changing interest rates. For example, a

company may have a large amount of loans that are subject to repricing at a particular period, but the majority of

deposits are not scheduled for repricing until the following period. That company would suffer from NIR deterioration

if interest rates were to fall.

NIR in the current period is the result of customer transactions and the related contractual rates originated in prior periods

as well as new transactions in the current period; those prior-period transactions will be impacted by changes in rates on

floating-rate assets and liabilities in the current period.

Due to the long-term nature of the portfolios, NIR will vary from quarter to quarter even assuming no change in the shape or

level of the yield curve as the assets and liabilities reprice. These repricings are a function of implied forward interest rates,

which represent the overall market’s unbiased estimate of future interest rates and incorporate possible changes in the

NIBOR rate as well as the shape of the yield curve.

(ii) Interest Rate Risk Governance

The risks in the Bank’s non-traded portfolios are estimated using a common set of standards that define, measure, limit and

report the market risk. Each business is required to establish, with approval from independent market risk management, a

market risk limit framework that clearly defines approved risk profiles and is within the parameters of the Bank’s overall risk

appetite.

In all cases, the businesses are ultimately responsible for the market risks they take and for remaining within their defined

limits. These limits are monitored by independent market risk, country and business Asset and Liability Committees (ALCOs)

and financial control.

(iii) Interest Rate Risk Measurement

The Bank’s principal measure of risk to NIR is interest rate exposure (IRE). IRE measures the change in expected NIR in each

currency resulting solely from unanticipated changes in forward interest rates. Factors such as changes in volumes, spreads,

margins and the impact of prior-period pricing decisions are not captured by IRE. IRE assumes that businesses make no

additional changes in pricing or balances in response to the unanticipated rate changes.

IRE tests the impact on NIR resulting from unanticipated changes in forward interest rates. For example, if the current 90-day

NIBOR rate is 15% and the one-year-forward rate is 16.5% (i.e., the estimated 90-day NIBOR rate in one year), the +100 bps

IRE scenario measures the impact on the company’s NIR of a 100 bps instantaneous change in the 90-day NIBOR to 17.5% in

one year.


The impact of changing prepayment rates on loan portfolios is incorporated into the results. For example, in the declining

interest rate scenarios, it is assumed that mortgage portfolios prepay faster and income is reduced. In addition, in a

rising interest rate scenario, portions of the deposit portfolio are assumed to experience rate increases that may be less

than the change in market interest rates.

(iv) Mitigation of Risk

All financial institutions’ financial performances are subject to some degree of risk due to changes in interest rates. In

order to manage these risks effectively, the Bank may modify pricing on new customer loans and deposits, enter into

transactions with other institutions or enter into off-balance-sheet derivative transactions that have the opposite risk

exposures. Therefore, the Bank regularly assesses the viability of strategies to reduce unacceptable risks to earnings and

implements such strategies when the Bank believes those actions are prudent. As information becomes available, the

Bank formulates strategies aimed at protecting earnings from the potential negative effects of changes in interest rates.

The Bank employs additional measurements, including stress testing on the impact of non-linear interest rate movements

on the value of the balance sheet; the analysis of portfolio duration, volatility and the potential impact of the change in

the spread between different market indices.

(v) Trading Portfolios

Price risk in trading portfolios is monitored using a series of measures, including:

• Factor sensitivities;

• Value-at-Risk (VAR); and

• Stress testing.

Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor,

such as a change in the price of a treasury bill for a one-basis-point change in interest rates. The Bank’s independent

market risk management ensures that factor sensitivities are calculated, monitored and, in most cases, limited, for all

relevant risks taken in a trading portfolio.

VAR estimates the potential decline in the value of a position or a portfolio under normal market conditions. The VAR

method incorporates the factor sensitivities of the trading portfolio with the volatilities and correlations of those factors

and is expressed as the risk to the company over a one-day holding period, at a 99% confidence level. The Bank’s VAR

is based on the volatilities of and correlations among a multitude of market risk factors as well as factors that track the

specific issuer risk in debt and equity securities.

Stress testing is performed on trading portfolios on a regular basis to estimate the impact of extreme market movements.

It is performed on both individual trading portfolios, and on aggregations of portfolios and businesses. Independent

market risk management, in conjunction with the businesses, develops stress scenarios, reviews the output of periodic

stress testing exercises, and uses the information to make judgments as to the ongoing appropriateness of exposure

levels and limits.

Each trading portfolio has its own market risk limit framework encompassing these measures and other controls,

including permitted product lists and a new product approval process for complex products.

Total revenues of the trading business consist of:

• Customer revenue, which includes spreads from customer flow and positions taken to facilitate customer orders;

• Proprietary trading activities in cash transactions; and

• Net interest revenue.

All trading positions are marked to market, with the result reflected in the profit and loss account.

87ANNUAL REPORT

The Bank periodically performs extensive back-testing of many hypothetical test portfolios as one check of the accuracy

of its VAR. Back-testing is the process in which the daily VAR of a portfolio is compared to the actual daily change in the

market value of its transactions. Back-testing is conducted to confirm that the daily market value losses in excess of a

99% confidence level occur, on average, only 1% of the time. The VAR calculation for the hypothetical test portfolios,

with different degrees of risk concentration, meets these statistical criteria.

The level of price risk exposure at any given point in time depends on the market environment and expectations of future

price and market movements, and will vary from period to period.

(p) Maturity profile – on Balance Sheet

31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Gross Carrying

2011 month months months months years years nominal amount

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Liabilities:

Customer

deposits 306,619,444 2,374,556 135,000 517,558 - - 309,646,558 309,646,558

Due to other banks 248,008 - - - - - 248,008 248,008

On-lending liabilities 750,071 1,064,500 28,571 557,144 85,714 - 2,486,000 2,486,000

Current income tax - - - 2,669,074 - - 2,669,074 2,669,074

Other liabilities 5,152,981 4,828,196 2,004,892 146,350 23,749 - 12,156,168 12,156,168

Provisions - - - 58,488 - - 58,488 58,488

Deferred income tax liabilities - - - - 293,972 - 293,972 293,972

Retirement benefit

obligations 10,894 - - - - - 10,894 10,894

Total liabilities 312,781,398 8,267,252 2,168,463 3,948,614 403,435 - 327,569,162 327,569,162

Assets:

Cash and balances

with central banks 13,420,668 - - - - - 13,420,668 13,420,668

Treasury bills and

other eligible bills 3,915 2,293,935 952,258 9,806,478 - - 13,056,586 13,056,586

Due from

other banks 212,273,652 - - - - - 212,273,652 212,273,652

Loans and advances

to customers 17,368,649 6,747,734 10,933,276 16,078,307 5,736,320 630,141 57,494,427 56,904,102

Advances under

finance lease 750 451 - 2,661 95,630 - 99,492 99,492

On-lending facilities 16,696 1,053,855 28,285 551,572 84,857 - 1,735,265 1,735,265

Investment securities - - 7,619,161 6 4,020 59,109,616 3,969,400 70,622,016 70,762,197

Other assets 14,372 90,869 57,013 109,737 175,085 - 447,076 447,076

Property and equipment - - - - 947,425 1,709,499 2,656,924 2,656,924

Total assets 243,098,702 10,186,844 19,589,993 26,612,775 66,148,933 6,309,040 371,806,106 371,355,962

(Gap)/surplus (69,682,696) 1,919,592 17,421,530 22,664,161 65,745,498 6,309,040 44,236,944 43,786,800


31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Gross Carrying

2010 month months months months years years nominal amount

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Liabilities:

Customer

deposits 198,326,400 1,816,717 197,119 4,991,069 5,563 797,708 206,134,576 206,134,576

Due to other banks 378,104 - - - - - 378,104 378,104

On-lending liabilities 43,000 64,500 64,500 129,000 43,000 - 344,000 344,000

Current income tax - - - 2,525,410 - - 2,525,410 2,525,410

Other liabilities 5,214,689 1,466,371 412,853 22,148 90,930 1,710 7,208,701 7,208,701

Provisions - - - 8,488 - 8,488 8,488

Deferred income tax liabilities - - - - 537,740 - 537,740 537,740

Retirement benefit

obligations 37,592 - - - - - 37,592 37,592

Total liabilities 203,999,785 3,347,588 674,472 7,676,115 677,233 799,418 217,174,611 217,174,611

Assets:

Cash and balances

with central banks 2,983,740 - - - - - 2,983,740 2,983,740

Treasury bills and

other eligible bills 187,858 26,125 958,730 1,839,400 - - 3,012,113 3,012,113

Due from

other banks 144,998,390 - - - - - 144,998,390 144,998,390

Loans and advances

to customers 1,112,119 10,360,528 4,473,453 28,918,258 22,092 - 44,886,450 43,833,016

On-lending facilities 21,500 64,500 64,500 129,000 43,000 - 322,500 322,500

Advances under

finance lease - - - 741 61,635 - 62,376 62,376

Investment securities - 4,019,916 - 6,103,991 44,559,975 1,062,610 55,746,492 55,654,072

Other assets 272,417 15,096 4,519,620 24,872 107,761 - 4,939,766 4,939,766

Property and equipment - - - - 1,358,287 1,748,083 3,106,370 3,106,370

Total assets 149,576,024 14,486,165 10,016,303 37,016,262 46,152,750 2,810,693 260,058,197 258,912,344

(Gap)/surplus (54,423,761) 11,138,577 9,225,708 29,456,270 45,475,517 2,011,275 42,883,586 41,737,733

89ANNUAL REPORT

Maturity profile – Off Balance Sheet

(a) Financial guarantees and other financial facilities

Performance bonds and financial guarantees (Note 27) are also included below based on the earliest contractual maturity

date.

(b) Contingent letters of credits

Unfunded letters of credit (Note 27) are also included below based on the earliest contractual payment date.

31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Total

2011 month months months months years years

N’000 N’000 N’000 N’000 N’000 N’000 N’000

Performance bonds

and financial guarantees 425,673 279,992 414,394 5,799,586 2,657,657 26,038,933 35,616,235

Contingent Letters of credits 797,114 4,175,848 8,735,742 974,695 - - 14,683,399

Bankers acceptances - - - - - - -

Guaranteed commercial papers - - - - - - -

Foreign exchange

commitments 5,844,216 16,280,676 6,786,302 15,538,038 - - 44,449,232

Acceptances/direct

credit substitutes 581,251 451,482 - - - - 1,032,733

7,648,254 21,187,998 15,936,438 22,312,319 2,657,657 26,038,933 95,781,599

31 December Up to 1 1 – 3 3 – 6 6 - 12 1 – 5 Over 5 Total

2010 month months months months years years

N’000 N’000 N’000 N’000 N’000 N’000 N’000

Performance bonds

and financial guarantees 288,593 259,724 1,571,154 1,515,063 2,151,879 11,539,304 17,325,717

Contingent Letters of credits 2,259,227 5,933,486 6,870,509 350,690 - - 15,413,912

Bankers acceptances - - - - - - -

Guaranteed commercial papers - - - - - - -

Foreign exchange

commitments 15,719,069 1,433,612 866,074 1,426,500 - - 19,445,253

Acceptances/direct

credit substitutes 391,464 573,725 - - - - 965,189

18,658,353 8,200,547 9,307,735 3,292,253 2,151,879 11,539,304 53,150,071


(q) Capital Management

Capital is generally generated through issuance of common stock to the shareholders. This is augmented via earnings from

the operating business. Capital is used primarily to support assets in the Bank’s businesses and to absorb unexpected market,

credit or operational losses. Net earnings generated from operating business are used to pay dividends. The Bank’s capital

management framework is designed to ensure maintenance of sufficient capital consistent with the Bank’s risk profile, all

applicable regulatory standards and guidelines, and external rating agency considerations. The capital management process

is centrally overseen by senior management and is reviewed at the consolidated, legal entity, and country level.

The Board of Directors oversees the capital management process mainly through Citigroup’s Finance and Asset and Liability

Committee (ALCO). The Committee is composed of the senior-most management officials of the Bank in Nigeria for the

purpose of engaging management in decision-making and related discussions on capital and liquidity items. Among other

things, the Committee’s responsibilities include: determining the financial structure of the Bank and its subsidiary; ensuring

that the Bank and is adequately capitalized; determining appropriate asset levels and return hurdles for the Bank and individual

businesses; reviewing the funding and capital markets plan for the Bank; and monitoring interest-rate risk, corporate and

Bank liquidity, the impact of currency translation on non-U.S. earnings and capital.

The ALCO monitors the Regulatory and Citigroup capital ratio requirements to ensure compliance. As at 31 December 2011,

the Bank was in compliance with all the applicable capital ratios.

The table below summarises the composition of regulatory capital and the ratios of the Bank for the years ended 31 December

2011 and 2010. During those two years, the Bank complied with all of the externally imposed capital requirements.

2011 2010

N’000 N’000

Tier 1 capital

Share capital 2,793,777 2,793,777

Share premium 11,643,995 11,643,995

Statutory reserves 12,555,274 11,095,481

SMIEIS reserve 3,340,908 3,340,908

Retained earnings 13,452,846 12,863,572

Less: goodwill and intangible assets - -

Total qualifying Tier 1 capital 43,786,800 41,737,733

Tier 2 capital

General provision 593,322 -

Loan stock

Total qualifying Tier 2 capital 593,322 -

Total regulatory capital 44,380,122 41,737,733

Less: investment in unconsolidated subsidiary (1,000) (1,000)

Total qualifying capital 44,379,122 41,736,733

2011 2010

N’000 N’000

On-balance sheet 109,838,778 79,768,842

Off-balance sheet 68,335,804 36,780,257

Total risk-weighted assets 178,174,582 116,549,099

Risk weighted Capital Adequacy Ratio (CAR – minimum 10%) 25% 36%

91ANNUAL REPORT

STATEMENT OF VALUE ADDEDFOR THE YEAR ENDED 31 DECEMBER 2011

2011 2010

N’000 % N’000 %

Gross earnings 24,791,081 20,918,450

Interest expense

- Foreign (65,178) (44,301)

- Local (2,815,355) (2,377,308)

21,910,548 18,496,841

Loan loss write-back/ (allowance) (377,462) 1,103,881

Administrative overheads (3,988,045) (2,714,294)

17,545,041 100 16,886,428 100

Distribution:

Employees

- Salaries and benefits 4,659,524 4,449,984 27

Government

- Taxation 2,460,228 2,674,075 15

Future

- Asset replacement (depreciation) 693,334 708,143 4

- Expansion (transfers to retained earnings and statutory reserves) 9,731,955 9,054,226 54

17,545,041 100 16,886,428 100


FIVE YEAR FINANCIAL SUMMARYFOR THE YEAR ENDED 31 DECEMBER 2011

Balance Sheet

2011 2010 2009 2008 2007

N’000 N’000 N’000 N’000 N’000

ASSETS:

Cash and balances with Central Bank 13,420,668 2,983,740 24,539,219 16,462,300 13,794,592

Treasury bills and other eligible bills 13,056,586 3,012,113 5,894,955 8,378,803 19,615,058

Due from other banks 212,273,652 144,998,390 84,493,142 50,673,765 31,642,520

Loans and advances 56,904,102 43,833,016 44,856,319 58,302,699 42,386,004

On-lending facilities 1,735,265 322,500 - 330,784 560,936

Advances under finance lease 99,492 62,376 67,761 76,532 97,246

Investment securities 70,762,197 55,654,073 18,022,956 18,873,819 20,102,627

Other assets 447,076 4,939,766 854,044 917,167 4,033,018

Property and equipment 2,656,924 3,106,370 3,138,001 3,511,277 3,646,988

371,355,962 258,912,344 181,866,397 157,527,146 135,878,989

FINANCED BY:

Share capital 2,793,777 2,793,777 2,793,777 2,793,777 2,793,777

Share premium 11,643,995 11,643,995 11,643,995 11,643,995 11,643,995

Reserves 29,349,028 27,299,961 28,023,955 23,256,587 20,594,036

Customer deposits 309,646,558 206,134,576 125,113,021 96,263,317 79,134,721

Due to other banks 248,008 378,104 14 1,372,137 -

On-lending liabilities 2,486,000 344,000 - 334,125 566,602

Provisions 58,488 8,488 10,734 292,655 331,325

Current income tax 2,669,074 2,525,410 3,600,987 3,543,263 1,813,365

Other liabilities 12,156,168 7,208,701 10,234,124 17,791,315 18,570,906

Retirement benefit obligations 10,894 37,592 45,384 18,013 -

Deferred tax 293,972 537,740 400,406 217,962 430,262

371,355,962 258,912,344 181,866,397 157,527,146 135,878,989

Acceptances, bonds, guarantees

And other obligations 95,781,599 53,150,071 59,949,539 95,585,572 58,856,226

PROFIT AND LOSS ACCOUNT

Gross earnings 24,791,081 20,918,450 25,714,405 20,069,477 17,344,949

Net operating income 21,910,548 18,496,841 23,105,344 17,259,447 15,248,853

Operating expenses (9,340,903) (7,872,421) (7,454,962) (6,018,732) (6,206,721)

Write-back/ (allowance) on risk assets (377,462) 1,103,881 18,890 (443,279) (628,721)

Profit before taxation 12,192,183 11,728,301 15,669,272 10,797,436 8,413,411

Taxation 2,460,228 (2,674,075) (3,778,797) (2,267,953) (1,467,313)

Profit after taxation 9,731,955 9,054,226 11,890,475 8,529,483 6,946,098

Profit attributable to shareholders 9,731,955 9,054,226 11,890,475 8,529,483 6,946,098

Earnings per share 348K 324k 426k 305k 249k

Declared dividend per share 275K 350k 255k 210k 205k

Number of Ordinary shares of N1.00 (million) 2,794 2,794 2,794 2,794 2,794

ANNUAL REPORT FINANCIAL REPORTS - Citigroup. Fatai Karim Executive Director Mr. Ade Adeyemi Non...

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