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ABSA GROUP LIMITED - Absa Group - Basel III Pillar 3 Disclosure as at 31 March 2023

Wrap Text
Absa Group - Basel III Pillar 3 Disclosure as at 31 March 2023

ABSA GROUP LIMITED                                                     ABSA BANK LIMITED
(Incorporated in the Republic of South Africa)                         (Incorporated in the Republic of South Africa)
(Registration number: 1986/003934/06)                                  (Registration number: 1986/004794/06)
ISIN: ZAE000255915                                                     ISIN: ZAE000079810
JSE share code: ABG                                                    JSE share code: ABSP
Bond code: ABGI                                                        Bond code: BIABS
(Absa Group or the Group)                                              (Absa Bank or the Bank)


ABSA GROUP – BASEL III PILLAR 3 DISCLOSURE AS AT 31 MARCH 2023

This Pillar 3 disclosure contains the quantitative Pillar 3 disclosure requirements in respect of Absa Group and Absa Bank. The quarterly report
provides a view of the Group’s regulatory capital and risk exposures, and it complies with:

•     The Basel Committee on Banking Supervision (BCBS) revised Pillar 3 disclosure requirements (Pillar 3 standard).
•     Regulation 43 of the Regulations relating to Banks (Regulations), issued in terms of the Banks Act, 1990 (Act No. 94 of 1990), where not
      superseded by the revised Pillar 3 disclosure requirements.



1.      Key prudential metrics and RWA


In line with regulatory and accounting requirements, the capital and leverage positions of the Group and the Bank in this document are reflected on a
regulatory basis (which requires unappropriated profits to be excluded).
The Group liquidity coverage ratio (LCR) reflects an aggregation of the Bank LCR and the LCR of the Absa Regional Operations (ARO). For this
purpose, a simple average of the relevant three month-end data points is used for ARO, noting that ARO LCR is capped at 100% per the minimum
regulatory requirements. For the Bank, the LCR was calculated as a simple average of 90 calendar-day LCR observations.
The summary table below provides key capital adequacy and liquidity information on a regulatory basis as at 31 March 2023.

1.1 KM1: Key metrics


Absa Group ( 1, 2)
               0F   1F




                                                                                     a           b            c                    d              e
                                                                              31 March 31 December 30 September              30 June       31 March
                                                                                  2023        2022         2022                 2022           2022

    Available capital (Rm)
     1    CET1                                                                  119 299    120 390 (3)        115 240        112 630        110 721
     2    Tier 1                                                                136 206    136 635 (3)        130 587        129 460        126 582
     3    Total capital                                                         159 247    158 719 (3)        153 444        149 576        146 583
    RWA (Rm)
     4    Total RWA                                                           1 017 928          1 007      1 002 540        948 670        923 058
                                                                                                387( 3)
                                                                                                     2F




    Risk-based capital ratios as a percentage of RWA (%)
     5     CET1 ratio                                                               11.7       12.0 (3)           11.5           11.9           12.0
     6     Tier 1 ratio                                                             13.4          13.6            13.0           13.6           13.7
     7     Total capital ratio                                                      15.6          15.8            15.3           15.8           15.9
    Additional CET1 buffer requirements as a percentage of RWA (%)
     8     Capital conservation buffer requirement                                   2.5            2.5            2.5            2.5            2.5
     9     Countercyclical buffer requirement ( 4)
                                             3F                                        -              -              -              -              -
     10    Global systemically important banks (G-SIB) and/or domestic               1.0            1.0            1.0            1.0            1.0
           systemically important banks (D-SIB) additional requirements
     11    Total of bank CET1 specific buffer requirements (Row 8 + row              3.5            3.5            3.5            3.5            3.5
           9 + row 10)
     12    CET1 available after meeting the bank’s minimum capital                   3.2         3.5 (3)           3.0            3.4            3.5
           requirements
    Basel III leverage ratio
     13    Total Basel III leverage ratio exposure measure (Rm)               1 902 576      1 848 607      1 883 283      1 829 289      1 705 152
     14    Basel III leverage ratio (%) (row 2 / row 13)                            7.2            7.4            6.9            7.1            7.4
    LCR
     15    Total high-quality liquid assets (HQLA) (Rm)                         245 024        240 876        241 373        220 072        211 840
     16    Total net cash outflow (Rm)                                          185 132        193 299        186 811        181 679        177 802
     17    LCR (%)                                                                132.4          124.6          129.2          121.1          119.1
    NSFR
     18    Total available stable funding (ASF) (Rm)                          1 116 892 1 081 769(3)        1 058 319      1 030 521        973 930
     19    Total required stable funding (RSF) (Rm)                             969 803 954 359 (3)           947 805        911 668        855 523
     20    NSFR (%)                                                               115.2        113.4            111.7          113.0          113.8
Absa Bank (1,2)
                                                                              a           b            c            d           e
                                                                       31 March 31 December 30 September      30 June    31 March
                                                                           2023        2022         2022         2022        2022

 Available capital (Rm)
  1     CET1                                                             79 704        79 249      75 009      75 582      75 821
  2     Tier 1                                                           95 402        94 334      88 666      90 797      90 215
  3     Total capital                                                   114 701    112 835 (3)    108 002     106 806      107302
 RWA (Rm)
  4     Total RWA                                                       660 251       662 093     654 895     628 228     628 390
 Risk-based capital ratios as a percentage of RWA (%)
  5     CET1 ratio                                                          12.1         12.0         11.5        12.0        12.1
  6     Tier 1 ratio                                                        14.4         14.2         13.5        14.5        14.4
  7     Total capital ratio                                                 17.4         17.0         16.5        17.0        17.1
 Additional CET1 buffer requirements as a percentage of RWA (%)
  8     Capital conservation buffer requirement                              2.5          2.5          2.5         2.5         2.5
  9     Countercyclical buffer requirement (4)
  10    Global systemically important banks (G-SIB) and/or domestic          1.0          1.0          1.0         1.0         1.0
        systemically important banks (D-SIB) additional requirements
  11    Total of bank CET1 specific buffer requirements (Row 8 + row         3.5          3.5          3.5         3.5         3.5
        9 + row 10)
  12    CET1 available after meeting the bank’s minimum capital              3.6          3.5          3.0         3.5         3.6
        requirements
 Basel III leverage ratio
  13    Total Basel III leverage ratio exposure measure (Rm)           1 578 254    1 543 179    1 558 417   1 537 928   1 450 804
  14    Basel III leverage ratio (%) (row 2 / row 13)                        6.0          6.1          5.7         5.9         6.2
 LCR
  15    Total high-quality liquid assets (HQLA) (Rm)                    215 111       208 117     212 724     191 019     186 662
  16    Total net cash outflow (Rm)                                     157 519       161 347     160 215     155 817     152 760
  17    LCR (%)                                                           136.6         129.0       132.8       122.6       122.2
 NSFR
  18    Total available stable funding (ASF) (Rm)                       917 129    895 875 (3)    871 027     857 843     814 099
  19    Total required stable funding (RSF) (Rm)                        837 645    826 055 (3)    814 313     790 522     751 037
  20    NSFR (%)                                                          109.5         108.5       107.0       108.5       108.4
1.2       OV1: Overview of RWA


                                                                                    Group                                   Bank ( 5)4F




                                                                             a              b             c             a             b      c
                                                                      31 March    31 December     31 March       31 March 31 December 31 March
                                                                          2023           2022         2023           2023         2022    2023
                                                                          RWA            RWA       MRC ( 6)
                                                                                                        5F           RWA         RWA MRC (6)
                                                                           Rm             Rm           Rm             Rm            Rm     Rm

      1    Credit risk (excluding counterparty credit risk (CCR))      756 387     739 995 (3)      94 548        486 638      488 353 (3)    60 829
      2        Of which: standardised approach (SA)                    254 135        235 128       31 767            419             506         52
      3        Of which: foundation internal ratings-based (FIRB)            -               -           -              -                -         -
               approach
      4        Of which: supervisory slotting approach                       -               -           -              -                -         -
      5        Of which: advanced internal ratings-based (AIRB)        502 252     504 867 (3)      62 781        486 219      487 847 (3)    60 777
               approach
      6    CCR                                                          16 451          16 303       2 056         14 575          14 860      1 822
      7        Of which: standardised approach for CCR (SA-             16 451          16 303       2 056         14 575          14 860      1 822
               CCR)
   8           Of which: internal model method (IMM)                         -               -           -              -               -          -
   9           Of which: other CCR                                           -               -           -              -               -          -
  10       Credit valuation adjustment (CVA)                             7 941           6 480         993          6 815           5 098        852
  11       Equity positions under the simple risk weight                 3 484           3 482         436          1 823           1 823        228
           approach
  12       Equity investments in funds – look-through approach           7 935           8 151         992          2 570           2 626        321
  13       Equity investments in funds – mandate-based                       -               -           -              -               -          -
           approach
  14       Equity investments in funds – fall-back approach                  -               -           -              -               -          -
  15       Settlement risk                                                 888           1 279         111            825           1 222        103
  16       Securitisation exposures in banking book                        566             577          71            566             577         71
  17           Of which: IRB ratings-based approach (SEC-IRBA)               -               -           -              -               -          -
  18           Of which: securitisation external ratings-based               -               -           -              -               -          -
               approach (RBA) (SEC-ERBA), including internal
               assessment approach (IAA)
  19           Of which: securitisation SA (SEC-SA)                        566             577          71            566             577         71
  20       Traded market risk                                           40 312          38 882       5 039         28 555          28 250      3 570
  21           Of which: SA                                             19 610          18 915       2 451          7 853           8 283        982
  22           Of which: internal model approach (IMA)                  20 702          19 967       2 588         20 702          19 967      2 588
  23       Capital charge for switch between trading book and                -               -           -              -               -          -
           banking book
  24       Operational risk                                            122 493     122 493 (3)      15 312         74 857       74 857 (3)     9 357
           Non-customer assets                                          26 669         25 838        3 334         17 457          17 405      2 182
  25       Amounts below the thresholds for deduction (subject          25 274         34 379        3 159         13 666          15 118      1 708
           to 250% risk weight)
  26       Floor adjustment (after application of transitional cap)      9 528        9 528 (3)      1 191         11 904       11 904 (3)     1 488
           ( 7)
            6F




  27       Total (1+6+10+11+12+13+14+15+16+20+23+24+                  1 017 928   1 007 387 (3)    127 242        660 251         662 093     82 531
           25+26+non-customer assets)



1.3       CR8: RWA flow statements of credit risk exposures under IRB


                                                                                                                          a                      a
                                                                                                              31 March 2023       31 December 2022
                                                                                                              RWA amounts          RWA amounts (3)
                                                                                                                        Rm                     Rm

      1     RWA as at end of previous quarter                                                                       504 867                  493 244
      2     Asset size                                                                                                 (538)                    6 286
      3     Asset quality                                                                                            (2 216)                    4 659
      4     Model updates                                                                                                  -                    (124)
      5     Methodology and policy                                                                                         -                        -
      6     Acquisitions and disposals                                                                                     -                        -
      7     Foreign exchange movements                                                                                 1 840                  (1 940)
      8     Other ( 8)
                   7F
                                                                                                                     (1 701)                    2 742
      9     RWA as at end of reporting period                                                                       502 252                  504 867
1.4           MR2: RWA flow statements of market risk exposures under IMA


                                                                                    a              b              c           d            e                 f
                                                                                                            31 March 2023
                                                                                          Stressed      Increment
                                                                                           value at         al risk Credit risk
                                                                            Value at           risk        charge   mitigation
                                                                          risk (VaR)        (sVaR)           (IRC)      (CRM)          Other       Total RWA
                                                                                 Rm            Rm              Rm          Rm            Rm               Rm

          1     RWA at previous quarter end                                    9 692         10 275               -           -                -       19 967
          2     Movements in risk levels                                       1 388          (653)               -           -                -          735
          3     Model updates/changes                                              -              -               -           -                -            -
          4     Methodology and policy                                             -              -               -           -                -            -
          5     Acquisitions and disposals                                         -              -               -           -                -            -
          6     Other                                                              -              -               -           -                -            -
          7     RWA at end of reporting period                                11 080          9 622               -           -                -       20 702


                                                                                    a              b             c           d             e                 f
                                                                                                           31 December 2022
                                                                                VaR           sVaR             IRC        CRM          Other       Total RWA
                                                                                 Rm             Rm              Rm          Rm           Rm               Rm

          1     RWA at previous quarter end                                    8 749          8 688               -           -                -       17 437
          2     Movements in risk levels                                         943          1 587               -           -                -        2 530
          3     Model updates/changes                                              -              -               -           -                -            -
          4     Methodology and policy                                             -              -               -           -                -            -
          5     Acquisitions and disposals                                         -              -               -           -                -            -
          6     Other                                                              -              -               -           -                -            -
          7     RWA at end of reporting period                                 9 692         10 275               -           -                -       19 967




2. Leverage


Consistent with the treatment in table KM1, the leverage position below is shown on a regulatory basis.

2.1 LR1: Summary comparison of accounting assets versus leverage ratio exposure measure


Absa Group
                                                                                                                                         Group
                                                                                                                                  31 March 31 December
                                                                                                                                      2023        2022
                                                                                                                                       Rm          Rm

      1        Total consolidated assets                                                                                          1 829 664         1 793 201
      2        Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for         (32 741)          (31 869)
               accounting purposes but outside the scope of regulatory consolidation
      3        Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting                        -                 -
               framework but excluded from the leverage ratio exposure measure
      4        Adjustments for derivative financial instruments                                                                      7 145           (14 103)
      5        Adjustments for securities financing transactions (i.e. repos and similar secured lending)                                -                  -
      6        Adjustments for off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet          114 045           117 482
               exposures)
      7        Other adjustments                                                                                                    (15 537)          (16 104)
      8        Leverage ratio exposure measure                                                                                    1 902 576         1 848 607
Absa Bank
                                                                                                                                      Bank
                                                                                                                               31 March 31 December
                                                                                                                                   2023        2022
                                                                                                                                    Rm          Rm

  1   Total consolidated assets                                                                                                1 498 229        1 479 352
  2   Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for                     -                -
      accounting purposes but outside the scope of regulatory consolidation
  3   Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting                              -                -
      framework but excluded from the leverage ratio exposure measure
  4   Adjustments for derivative financial instruments                                                                             7 242         (13 537)
  5   Adjustments for securities financing transactions (i.e. repos and similar secured lending)                                       -                -
  6   Adjustments for off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet                  88 502           92 485
      exposures)
  7   Other adjustments                                                                                                          (15 718)         (15 121)
  8   Leverage ratio exposure measure                                                                                          1 578 254        1 543 179



2.2 LR2: Leverage ratio common disclosure template

                                                                                                      Group                            Bank
                                                                                                       a           b                    a           b
                                                                                                31 March 31 December             31 March 31 December
                                                                                                    2023        2022                 2023        2022
                                                                                                     Rm          Rm                   Rm          Rm

 On-balance sheet exposures
   1 On-balance sheet exposures (excluding derivatives and securities financing                 1 653 867      1 611 729        1 360 905        1 338 039
      transactions (SFTs), but including collateral)
   2 (Asset amounts deducted in determining Basel III Tier 1 capital)                             (15 537)       (16 104)         (15 718)         (15 121)
   3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of                  1 638 330      1 595 625        1 345 187        1 322 918
      rows 1 and 2)
 Derivative exposures
   4 Replacement cost associated with all derivative transactions (where applicable net            29 146            20 943         28 439          20 510
      of eligible cash variation margin and/ or with bilateral netting)
   5 Add-on amounts for potential future exposure (PFE) associated with all derivative             32 050            26 240         31 282          25 727
      transactions
   6 Gross-up for derivatives collateral provided where deducted from the balance                        -                 -                -                -
      sheet assets pursuant to the operative accounting framework
   7 (Deductions of receivable assets for cash variation margin provided in derivatives            (5 759)           (6 170)       (5 759)          (6 170)
      transactions)
   8 (Exempted central counterparty (CCP) leg of client-cleared trade exposures)                        -                 -              -               -
   9 Adjusted effective notional amount of written credit derivative                                9 792             8 445          9 792           8 445
  10 (Adjusted effective notional offsets and add-on deductions for written credit                      -                 -              -               -
      derivatives)
  11 Total derivative exposures (sum of rows 4 to 10)                                              65 229            49 458         63 754          48 512
 Security financing transaction exposures
  12 Gross SFT assets (with no recognition of netting), after adjusting for sale                   84 972            86 043         80 811          79 264
      accounting transactions
  13 (Netted amounts of cash payables and cash receivables of gross SFT assets)                         -                 -              -               -
  14 CCR exposure for SFT assets                                                                        -                 -              -               -
  15 Agent transaction exposures                                                                        -                 -              -               -
  16 Total securities financing transaction exposures (sum of rows 12 to 15)                       84 972            86 043         80 811          79 264
 Other off-balance sheet exposures
  17 Off-balance sheet exposures at gross notional amount                                         396 836        408 792           335 777         350 894
  18 (Adjustments for conversion to credit equivalent amounts)                                  (282 791)      (291 310)         (247 275)       (258 409)
  19 Off-balance sheet items (sum of rows 17 and 18)                                              114 045        117 482            88 502          92 485
 Capital and total exposures
  20 Tier 1 capital (excluding unappropriated profits)                                            136 206        136 619           95 402           94 334
  21 Total exposures (sum of lines 3, 11, 16 and 19)                                            1 902 576      1 848 607        1 578 254        1 543 179
 Leverage ratio
  22 Basel III leverage ratio                                                                          7.2              7.4            6.0              6.1
3. Liquidity

3.1 LIQ1: Liquidity coverage ratio (LCR)

                                                                                          a             b             a             b
                                                                                     31 March 2023             31 December 2022
                                                                                      Total         Total          Total        Total
                                                                                unweighted      weighted    unweighted       weighted
                                                                                      value         value         value         value
                                                                                  (average)     (average)     (average)     (average)
 Group ( 9)
         8F                                                                             Rm            Rm            Rm            Rm

 High-quality liquid assets (HQLA)
   1 Total HQLA                                                                                  245 024                      240 876
 Cash outflows
   2 Retail deposits and deposits from small business customers of which:          457 524        38 657       457 319         36 692
   3    Stable deposits                                                                  -             -             -              -
   4    Less stable deposits                                                       457 524        38 657       457 319         36 692
   5 Unsecured wholesale funding of which:                                         537 893       271 500       521 622        262 457
   6    Operational deposits (all counterparties) and deposits in networks of      157 322        39 330       157 728         39 432
        cooperative banks
   7    Non-operational deposits (all counterparties)                              368 221       219 820       359 315        218 446
   8    Unsecured debt                                                              12 350        12 350         4 579          4 579
   9 Secured wholesale funding                                                                       877                          663
 10 Additional requirements of which:                                              339 444        47 421       335 960         45 729
 11     Outflows related to derivative exposures and other collateral               22 352        22 352        19 626         19 626
        requirements
 12     Outflows related to loss of funding on debt products                             -             -             -              -
 13     Credit and liquidity facilities                                            317 092        25 069       316 334         26 103
 14 Other contractual funding obligations                                              317           317             -              -
 15 Other contingent funding obligations                                           253 013        10 669       249 072         10 337
 16 Total cash outflows (Sum of lines 2+5+9+10+14+15)                                            369 441                      355 878
 Cash inflows
 17 Secured lending (e.g., reverse repos)                                           47 280        11 681        45 641          4 333
 18 Inflows from fully performing exposures                                        194 297       163 799       174 432        144 398
 19 Other cash inflows                                                               9 677         8 829        15 050         13 848
 20 Total cash inflows (Sum of lines 17-19)                                        251 254       184 309       235 123        162 579

                                                                                     Total weighted value         Total weighted value

 High-quality liquid assets (HQLA)
  21 Total HQLA (Rm)                                                                             245 024                      240 876
  22 Total net cash outflows (Rm)                                                                185 132                      193 299
  23 LCR (%)                                                                                       132.4                        124.6
                                                                                          a             b             a             b
                                                                                     31 March 2023             31 December 2022
                                                                                      Total         Total          Total        Total
                                                                                unweighted      weighted    unweighted       weighted
                                                                                      value         value         value         value
                                                                                  (average)     (average)     (average)     (average)
 Bank ( 10)
        9F                                                                              Rm            Rm            Rm            Rm

 High-quality liquid assets (HQLA)
   1 Total HQLA                                                                                  215 111                     208 117
 Cash outflows
   2 Retail deposits and deposits from small business customers of which:          362 298        30 764       363 819        28 894
   3    Stable deposits                                                                  -             -             -             -
   4    Less stable deposits                                                       362 298        30 764       363 819        28 894
   5 Unsecured wholesale funding of which:                                         425 953       218 908       417 273       214 530
   6    Operational deposits (all counterparties) and deposits in networks of      157 322        39 330       157 728        39 432
        cooperative banks
   7    Non-operational deposits (all counterparties)                              256 848       167 795       255 583       171 136
   8    Unsecured debt                                                              11 783        11 783         3 962         3 962
   9 Secured wholesale funding                                                                       877                         663
 10 Additional requirements of which:                                              311 666        42 929       308 175        41 620
 11     Outflows related to derivative exposures and other collateral               20 141        20 141        17 836        17 836
        requirements
 12     Outflows related to loss of funding on debt products                             -             -             -             -
 13     Credit and liquidity facilities                                            291 525        22 788       290 339        23 784
 14 Other contractual funding obligations                                              317           317             -             -
 15 Other contingent funding obligations                                           222 400         9 374       217 814         9 019
 16 Total cash outflows (Sum of lines 2+5+9+10+14+15)                                            303 169                     294 726
 Cash inflows
 17 Secured lending (e.g. reverse repos)                                            47 280        11 681        45 641         4 333
 18 Inflows from fully performing exposures                                        150 021       126 394       140 947       118 314
 19 Other cash inflows                                                               8 424         7 575        11 934        10 732
 20 Total cash inflows (Sum of lines 17-19)                                        205 725       145 650       198 522       133 379

                                                                                     Total weighted value        Total weighted value

 High-quality liquid assets (HQLA)
 21 Total HQLA (Rm)                                                                              215 111                     208 117
 22 Total net cash outflows (Rm)                                                                 157 519                     161 347
 23 LCR (%)                                                                                        136.6                       129.0



Johannesburg
31 May 2023

Enquiries:
Alan Hartdegen
E-mail: Alan.Hartdegen@absa.africa

Lead Independent Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited

Joint Sponsor:
Corporate and Investment Bank – a division of Absa Bank Limited
Notes:
1
    The fully loaded accounted ECL basis has been fully transitioned in.
2
    The numbers are excluding unappropriated profits.
3
    The December 2022 figures were revised to align with final regulatory submissions.
4
    The countercyclical buffer in South Africa is currently zero.
5
    Absa Bank Limited includes subsidiary undertakings, special-purpose entities, joint ventures, associates and offshore holdings.
6
    The 2023 minimum total regulatory CAR of 12.5% includes the capital conservation buffer, Pillar 2A at 1.00% and the D-SIB add-on but excludes
    the bank-specific individual capital requirement (Pillar 2B add-on).
7
    Includes the operational risk floor.
8
    Other reflects RWA movements on non-performing loans due to differences in the definition of default between IFRS 9 impairment and regulatory
    capital models.
9
    The Group LCR reflects an aggregation of the Bank LCR and the LCR of the Absa Regional Operations (ARO). For this purpose, a simple average
    of the relevant three month-end data points is used for ARO, noting that ARO LCR is capped at 100% per the minimum regulatory requirements.
    For the Bank, the LCR was calculated as a simple average of 90 calendar-day LCR observations.
10
     The Bank LCR was calculated as a simple average of 90 calendar-day LCR observations.

Date: 31-05-2023 11:58:00
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