Absa Group Limited (JSE:ABG) News - Absa Group - Basel III Pillar 3 Disclosure at at 31 March 2022 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 2022 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the Regulations relating to Banks (Regulations), issued in terms of the Banks Act, 1990 (Act No. 94 of 1990), where not superseded by the revised Pillar 3 disclosure requirements. 1.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 capital and leverage positions of the Group are also managed on a statutory basis (which includes unappropriated profits). 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. 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 both a regulatory and statutory basis as at 31 March 2022. 1.1 Capital adequacy and liquidity 31 March 31 December 31 March 31 December 2022 2021 2022 2021 Minimum Board target regulatory Group Group Bank Bank ranges1 requirements2 performance performance performance performance Statutory capital ratios (includes unappropriated profits) (%) Common equity tier 1 (CET1) 11.0 – 12.5 12.6 12.8 12.4 12.4 Tier 1 >12.0 14.3 14.6 14.7 14.8 Total capital adequacy requirement (CAR) >14.5 16.5 17.0 17.5 17.9 Leverage 5.5 – 7.5 7.8 7.9 6.4 6.5 Regulatory capital ratios (excludes unappropriated profits) (%) CET1 8.5 12.0 12.2 11.9 11.9 Tier 1 10.3 13.7 14.1 14.2 14.3 Total CAR 12.5 15.9 16.5 16.9 17.5 Leverage 4.0 7.4 7.6 6.2 6.3 LCR (%) 90.03 119.1 116.8 122.2 124.5 Net stable funding ratio (NSFR) (%) 100.0 113.8 116.1 108.4 110.1 Page 1 of 8 1.2 KM1: Key metrics (at consolidated group level) 4 a b c d e 31 March 31 December 30 September 30 June 31 March 2022 2021 2021 2021 2021 Available capital (Rm) 1 CET1 110 721 114 080 108 822 107 437 103 041 2 Tier 1 126 582 131 059 125 163 123 508 111 990 3 Total capital 146 583 153 534 148 281 147 781 136 908 RWA (Rm) 4 Total RWA 923 058 931 524 916 711 891 769 904 628 Risk-based capital ratios as a percentage of RWA (%) 5 CET1 ratio 12.0 12.2 11.9 12.1 11.4 6 Tier 1 ratio 13.7 14.1 13.7 13.9 12.4 7 Total capital ratio 15.9 16.5 16.2 16.6 15.1 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 requirement5 - - - - - 10 Global systemically important banks (G-SIB) and/or domestic 1.0 1.0 1.0 1.0 0.5 systemically important banks (D-SIB) additional requirements 11 Total of bank CET1 specific buffer requirements (Row 8 + row 9 3.5 3.5 3.5 3.5 3.0 + row 10) 12 CET1 available after meeting the bank’s minimum capital 3.5 4.2 3.9 4.1 3.9 requirements Basel III leverage ratio 13 Total Basel III leverage ratio exposure measure (Rm) 1 705 152 1 716 289 1 697 416 1 645 788 1 614 976 14 Basel III leverage ratio (%) (row 2 / row 13) 7.4 7.6 7.4 7.5 6.9 LCR 15 Total high-quality liquid assets (HQLA) (Rm) 211 840 206 880 196 248 214 589 206 410 16 Total net cash outflow (Rm) 177 802 177 075 166 010 173 009 175 300 17 LCR (%) 119.1 116.8 118.2 124.0 117.7 NSFR 18 Total available stable funding (ASF) (Rm) 973 930 1 003 080 987 128 962 485 942 574 19 Total required stable funding (RSF) (Rm) 855 523 863 640 828 853 813 629 812 689 20 NSFR (%) 113.8 116.1 119.1 118.3 116.0 Page 2 of 8 1.3 OV1: Overview of RWA Group Bank6 a b c a b c 31 March 31 December 31 March 31 March 31 December 31 March 2022 2021 2022 2022 2021 2022 RWA RWA MRC7 RWA RWA MRC7 Rm Rm Rm Rm Rm Rm 1 Credit risk (excluding counterparty credit risk 658 587 675 930 82 323 456 994 463 433 57 123 (CCR)) 2 Of which: standardised approach (SA) 187 591 198 515 23 449 386 430 48 3 Of which: foundation internal ratings-based - - - - - - (FIRB) approach 4 Of which: supervisory slotting approach - - - - - - 5 Of which: advanced internal ratings-based 470 996 477 415 58 874 456 608 463 003 57 075 (AIRB) approach 6 CCR 21 964 16 254 2 746 19 594 14 780 2 449 7 Of which: standardised approach for CCR (SA- 21 964 16 254 2 746 19 594 14 780 2 449 CCR) 8 Of which: internal model method (IMM) - - - - - - 9 Of which: other CCR - - - - - - 10 Credit valuation adjustment (CVA) 15 067 10 203 1 883 11 854 8 594 1 482 11 Equity positions under the simple risk weight 3 248 3 578 406 1 767 1 815 221 approach 12 Equity investments in funds – look-through 8 599 9 172 1 075 2 549 2 396 319 approach 13 Equity investments in funds – mandate-based - - - - - - approach 14 Equity investments in funds – fall-back approach 483 446 60 - 199 - 15 Settlement risk 1 039 1 191 130 989 1 133 124 16 Securitisation exposures in banking book 3 656 3 937 457 3 656 3 937 457 17 Of which: IRB ratings-based approach (SEC- 3 656 3 937 457 3 656 3 937 457 IRBA) 18 Of which: securitisation external ratings-based - - - - - - approach (RBA) (SEC-ERBA), including internal assessment approach (IAA) 19 Of which: securitisation SA (SEC-SA) - - - - - - 20 Traded market risk 35 475 39 183 4 435 23 280 25 838 2 910 21 Of which: SA 18 996 19 693 2 375 6 801 6 348 850 22 Of which: internal model approach (IMA) 16 479 19 490 2 060 16 479 19 490 2 060 23 Capital charge for switch between trading book and - - - - - - banking book 24 Operational risk 115 059 115 059 14 382 73 504 73 504 9 188 Non-customer assets 28 783 25 519 3 598 16 014 16 046 2 002 25 Amounts below the thresholds for deduction 23 488 23 442 2 936 11 156 11 270 1 395 (subject to 250% risk weight) 26 Floor adjustment (after application of transitional 7 610 7 610 951 7 035 7 035 879 cap) 8 27 Total (1+6+10+11+12+13+14+15+16+20+23+24+ 923 058 931 524 115 382 628 392 629 980 78 549 25+26+non-customer assets) 1.4 CR8: RWA flow statements of credit risk exposures under IRB a a 31 March 2022 31 December 2021 RWA amounts RWA amounts Rm Rm 1 RWA as at end of previous quarter 477 415 474 696 2 Asset size 8 427 8 002 3 Asset quality (2 238) (532) 4 Model updates (7 652) (15 195) 5 Methodology and policy - - 6 Acquisitions and disposals - - 7 Foreign exchange movements (2 760) 1 186 8 Other9 (2 196) 9 258 9 RWA as at end of reporting period 470 996 477 415 Page 3 of 8 1.5 MR2: RWA flow statements of market risk exposures under IMA a b c d e f 31 March 2022 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 8 244 11 245 - - - 19 490 2 Movements in risk levels ( 945) (2 066) - - - (3 011) 3 Model updates/changes - - - - - - 4 Methodology and policy - - - - - - 5 Acquisitions and disposals - - - - - - 6 Other - - - - - - 7 RWA at end of reporting period 7 299 9 179 - - - 16 479 a b c d e f 31 December 2021 VaR sVaR IRC CRM Other Total RWA Rm Rm Rm Rm Rm Rm 1 RWA at previous quarter end 7 814 11 905 - - - 19 719 2 Movements in risk levels 430 (660) - - - (229) 3 Model updates/changes - - - - - - 4 Methodology and policy - - - - - - 5 Acquisitions and disposals - - - - - - 6 Other - - - - - - 7 RWA at end of reporting period 8 244 11 245 - - - 19 490 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 10 Group Bank a b a b 31 March 31 December 31 March 31 December 2022 2021 2022 2021 Rm Rm Rm Rm 1 Total consolidated assets 1 632 126 1 640 833 1 363 524 1 350 998 2 Adjustment for investments in banking, financial, insurance or commercial (33 381) (33 081) - - 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 (1 641) (2 569) (1 429) (2 526) 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 120 663 123 674 98 130 99 170 amounts of off-balance sheet exposures) 7 Other adjustments (12 615) (12 568) (11 922) (11 819) 8 Leverage ratio exposure measure 1 705 152 1 716 289 1 448 303 1 435 823 Page 4 of 8 2.2 LR2: Leverage ratio common disclosure template Group Bank a b a b 31 March 31 December 31 March 31 December 2022 2021 2022 2021 Rm Rm Rm Rm On-balance sheet exposures 1 On-balance sheet exposures (excluding derivatives and securities financing 1 453 750 1 461 297 1 221 1 212 365 transactions (SFTs), but including collateral) 11 886 2 (Asset amounts deducted in determining Basel III Tier 1 capital) (12 615) (12 568) (11 922) (11 819) 3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of 1 441 135 1 448 729 1 209 1 200 546 rows 1 and 2) 11 964 Derivative exposures 4 Replacement cost associated with all derivative transactions (where applicable net 41 904 26 071 40 780 25 428 of eligible cash variation margin and/ or with bilateral netting) 5 Add-on amounts for potential future exposure (PFE) associated with all derivative 31 133 32 639 30 298 31 834 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 (4 701) (6 103) (4 701) (6 103) transactions) 11 8 (Exempted central counterparty (CCP) leg of client-cleared trade exposures) - - - - 9 Adjusted effective notional amount of written credit derivative 5 175 5 287 5 175 5 287 10 (Adjusted effective notional offsets and add-on deductions for written credit - - - - derivatives) 11 Total derivative exposures (sum of rows 4 to 10)11 73 511 57 894 71 552 56 446 Security financing transaction exposures 12 Gross SFT assets (with no recognition of netting), after adjusting for sale 69 843 85 992 68 657 79 661 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) 69 843 85 992 68 657 79 661 Other off-balance sheet exposures 17 Off-balance sheet exposures at gross notional amount 369 367 374 839 313 915 315 079 18 (Adjustments for conversion to credit equivalent amounts) (248 704) (251 165) (215 (215 909) 785) 19 Off-balance sheet items (sum of rows 17 and 18) 120 663 123 674 98 130 99 170 Capital and total exposures 20 Tier 1 capital (excluding unappropriated profits) 126 582 131 059 89 171 90 279 21 Total exposures (sum of lines 3, 11, 16 and 19) 1 705 152 1 716 289 1 448 1 435 823 303 Leverage ratio 22 Basel III leverage ratio 7.4 7.6 6.2 6.3 Page 5 of 8 3. Liquidity 3.1 LIQ1: Liquidity coverage ratio (LCR) a b a b 31 March 2022 31 December 2021 Total Total unweighted weighted Total Total weighted value value unweighted value (average) (average) value (average) (average) Group Rm Rm Rm Rm High-quality liquid assets (HQLA) 1 Total HQLA 211 840 206 880 Cash outflows 2 Retail deposits and deposits from small business customers of which: 431 674 33 319 435 400 33 448 3 Stable deposits - - - - 4 Less stable deposits 431 674 33 319 435 400 33 448 5 Unsecured wholesale funding of which: 490 404 243 911 495 655 246 822 6 Operational deposits (all counterparties) and deposits in networks of 150 055 37 514 147 790 36 947 cooperative banks 7 Non-operational deposits (all counterparties) 336 357 202 405 345 235 207 245 8 Unsecured debt 3 992 3 992 2 630 2 630 9 Secured wholesale funding 400 743 10 Additional requirements of which: 310 872 35 067 310 293 35 881 11 Outflows related to derivative exposures and other collateral 11 577 11 577 12 418 12 418 requirements 12 Outflows related to loss of funding on debt products - - - - 13 Credit and liquidity facilities 299 295 23 490 297 875 23 463 14 Other contractual funding obligations - - - - 15 Other contingent funding obligations 149 743 6 437 149 080 6 425 16 Total cash outflows (Sum of lines 2+5+9+10+14+15) 319 134 323 319 Cash inflows 17 Secured lending (e.g. reverse repos) 28 670 3 573 41 836 6 560 18 Inflows from fully performing exposures 152 456 127 448 147 266 123 336 19 Other cash inflows 11 880 10 311 17 987 16 348 20 Total cash inflows (Sum of lines 17-19) 193 006 141 332 207 089 146 244 Total weighted value Total weighted value High-quality liquid assets (HQLA) 21 Total HQLA (Rm) 211 840 206 880 22 Total net cash outflows (Rm) 177 802 177 075 23 LCR (%)12 119.1 116.8 Page 6 of 8 a b a b 31 March 2022 31 December 2021 Total Total unweighted weighted Total Total weighted value value unweighted value (average) (average) value (average) (average) Bank13 Rm Rm Rm Rm High-quality liquid assets (HQLA) 1 Total HQLA 186 662 182 584 Cash outflows 2 Retail deposits and deposits from small business customers of which: 348 498 26 171 350 282 26 214 3 Stable deposits - - - - 4 Less stable deposits 348 498 26 171 350 282 26 214 5 Unsecured wholesale funding of which: 400 212 204 492 396 408 202 705 6 Operational deposits (all counterparties) and deposits in networks of 150 055 37 514 147 790 36 947 cooperative banks 7 Non-operational deposits (all counterparties) 246 795 163 616 246 572 163 712 8 Unsecured debt 3 362 3 362 2 046 2 046 9 Secured wholesale funding 400 743 10 Additional requirements of which: 282 321 30 603 282 112 32 843 11 Outflows related to derivative exposures and other collateral 9 567 9 567 11 854 11 854 requirements 12 Outflows related to loss of funding on debt products - - - - 13 Credit and liquidity facilities 272 754 21 036 270 258 20 989 14 Other contractual funding obligations - - - - 15 Other contingent funding obligations 124 445 5 385 122 430 5 298 16 Total cash outflows (Sum of lines 2+5+9+10+14+15) 267 051 267 803 Cash inflows 17 Secured lending (e.g. reverse repos) 28 670 3 573 41 836 6 560 18 Inflows from fully performing exposures 123 371 103 856 126 054 106 874 19 Other cash inflows 8 431 6 862 9 303 7 664 20 Total cash inflows (Sum of lines 17-19) 160 472 114 291 177 193 121 098 Total weighted value Total weighted value High-quality liquid assets (HQLA) 21 Total HQLA (Rm) 186 662 182 584 22 Total net cash outflows (Rm) 152 760 146 705 23 LCR (%) 122.2 124.5 Johannesburg 2 June 2022 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 Page 7 of 8 Notes: 1 Capital ratios (including unappropriated profits) are managed against Board capital target ranges. The Absa Bank Limited CET1 Board target range is 10.5% to 12.0% and Absa Bank Leverage Board Target is 5.0% to 7.0%. 2 The 2022 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). 3 The LCR minimum regulatory requirements increased from 80% to 90% with effect from 1 January 2022. 4 The fully loaded accounted ECL basis has been fully transitioned in. 5 The countercyclical buffer in South Africa is currently zero. 6 Absa Bank Limited includes subsidiary undertakings, special-purpose entities, joint ventures, associates and offshore holdings. 7 The 2022 minimum total regulatory capital adequacy requirement of 12.5% includes the capital conservation buffer, Pillar 2A at zero percent and the D-SIB add-on but excludes the bank specific individual capital requirement (Pillar 2B add-on). 8 Includes the operational risk floor. 9 Other reflects RWA movements on non-performing loans due to misalignment of the definition of default between IFRS 9 impairment and regulatory capital models. 10 Numbers reported are on a regulatory quarter-end basis. 11 Prior period restated with a move of the cash variation margin deduction from line 1 to line 7. 12 The Group LCR reflects an aggregation of the Bank LCR and the ARO LCR. For this purpose, a simple average of the relevant three month-end data points is used in ARO, noting that, at a legal entity level, the ARO LCR is capped at 90% per the minimum regulatory requirements. For the Bank, the LCR was calculated as a simple average of 90 calendar-day LCR observations. 13 The Bank LCR was calculated as a simple average of 90 calendar-day LCR observations. Page 8 of 8 Date: 02-06-2022 01:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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