Access Bank Grows Profit Amid Headwinds


Goddy Egene writes that despite the economic headwinds, Access Bank recorded improved results for the nine months ended September 30

Mixed reactions had followed the devaluation of the Naira in June 2016. Reacting to what the impact might be for banks, Renaissance Capital had said: “We see a three-fold impact on Nigerian banks from a Naira devaluation: capital, foreign exchange income and asset quality.”

On its part, Fitch Ratings said: “Banks’ ability to continue to generate solid performance indicators largely depends on developments in asset quality and loan impairment trends.”

With the above comments and similar ones on how the naira devaluation would impact banks’ performances, investors have been trending cautiously. While the first half of year results to June 30, 2016 did not reflect significant effect of the devaluation on banks’ results, investors were more apprehensive over the outcome of nine months results of banks.

And when the banks made their corporate earnings available for the nine months to September 30, 2016, it was mixed performance. Some banks reported growth in profit, while some ended with lower bottom-lines.
However, Access Bank Plc is among the banks that recorded improved results for the nine months, thereby raising shareholders’ hopes for higher returns on investments at the end of the current financial year.

Revenue and Profitability

Access Bank reported gross earnings of N274.5 billion, showing an increase of seven per cent compared with N257.6 billion posted in the corresponding period of 2015. An analysis of the gross earnings indicates that interest income rose 17 per cent to N181.2 billion, from N155.4 billion in 2015. The growth was realised on the back of continued growth in the bank’s core business. Non-interest income stood at N92.9 billion, down from N102.2 billion in 2015. Operating income grew by 12 per cent to N199.3 billion, from N178.1 billion in the corresponding period of 2015. Access Bank posted a profit before tax (PBT) of N72 billion, showing a growth of 19 per cent from N60.4 billion posted in the same period in 2015. Similarly, profit after tax (PAT) rose by 19 per cent from N48.1billion to N57.1 billion in 2016. Return on average equity stood at 18.8 per cent, as against 20.4 per cent in 2015.

Balance sheet

In terms of balance sheet size of Access Bank as at September 2016, the bank closed the period with loans and advances of N1.84 trillion, up by 30 per cent from N1.41 trillion in as at December 31, 2015. The Access Bank brand continued to be attractive to the customers leading to a growth of 25 per cent in customer deposits. Specifically, customer deposits grew from N1.68 trillion in December 31, to N2.1 trillion in September 30, 2016. Total assets improved by 31 per cent to N3.39 trillion, up from N2.59 trillion. Capital adequacy ratio stood at N19 per cent, which is well above the regulatory minimum.

Asset Quality/operational efficiency

Looking at the asset quality of the bank, the percentage of non-performing loans(NPL) to gross loans stood at 2.1 per cent, up from 1.7 per cent, which reflect the effect of the devaluation of the naira but remained also showed a stable asset quality. NPL coverage ratio remained strong at 209.5 per cent as against 216.4 per cent as at December 31, 2015. Impairment charges rose to N12.3 billion. From N11.6 billion in 2015, while cost of risk improved from 1.0 per cent in 2015 to 0.9 per cent in 2016.
In terms of operational efficiency, cost of funds improved to 4.0 per cent in 2016, from 5.6 per cent in 2015. Similarly, cost to income ratio improved from 59.6 per cent to 57.7 per cent in 2016. However, net interest margin rose to 6.5 per cent, from 6.0 per cent in 2015.

GMD/CEO explains performance

Explaining the results, the Group Managing/Chief Executive Officer of Access Bank, Mr. Herbert Wigwe said the bank’s performance in the first three quarters of this year remained strong and consistent, reflecting a stable business with the capacity to deliver sustainable returns, particularly during a period underlined by significant macro headwinds.

“The Group recorded a 19 per cent growth in pre-tax profits to N72.0 billion and a net interest income growth of 40 per cent to N106.4 billion, benefiting from enhanced business efficiency as a result of the effective execution of our long-term strategy.

Against the macro economic backdrop, we maintained stable asset quality, recording NPL and cost of risk ratios of 2.1 per cent and 0.9 per cent, respectively. Our capital and liquidity position remained adequately above regulatory levels, as we continued to implement a disciplined capital plan, ensuring sufficient levels of profit retention to support our growth.”

He said that in addition to capital enhancement, the recently concluded $300 million senior unsecured debt issue allows the bank to optimise and enhance its foreign currency funding capacity whilst strengthening its balance sheet.

“We remain committed to our cost containment plan, as we strive to balance operational efficiency with earnings growth in a constrained environment. The bank will remain resilient in the achievement of its strategic imperatives; maximising our strong market position and solid capital base, while leveraging digital innovation to improve service touch points as we sharpen our retail play with emphasis on cheaper funding sources,” he said.

$300m Eurobond boost

Access Bank Plc successfully raised US$300 million via a Eurobond from the international bond market recently, a development expected to boost its operations going forward. The successful issue made Access Bank the first Nigerian bank to raise a bond from the international market this year despite the country’s macroeconomic headwinds.

The bank’s management explained that the successful outcome of the bond demonstrated the strength, resilience and international endorsement of Access Bank Plc.
Access Bank currently has two series of Eurobonds in issue – the $350 million maturing in July 2017, at a coupon of 7.25 per cent, and the $400 million (9.25 per cent) maturing in June 2021 – as part of a $1 billion global medium-term note programme.

Commenting on the bond, Wigwe said: “The bond will be for working capital, for lending to investment-grade names, including Nigerian companies seeking to expand their exports.”
He emphasised that the process signified a significant moment in the bank’s journey to entrench itself as one of Nigeria’s top three banks by 2017.

“It also ensures that we keep our promise of speed, service and security to our customers as we target Africa’s fastest-growing industrial sectors”, he added.

Access Bank is now one of the top three banks in Nigeria and ranked among the top 500 global banks, according to a 2015 report by The Banker magazine and is aiming to be Africa’s top bank.
The bank recently won the Best Branch Automation Project in the 2016 Asian Banker Awards; the 2016 Karlsruhe Outstanding Business Sustainability Award; 2016 Euromoney Africa’s Best Bank Transformation Award; and the EMEA Finance ‘Best Bank of the Year’ and CEO of the Year.