Arguably one of the most successful lenders in Africa’s most populous nation, Access Bank Nigeria Plc continues to be resilience in the face of economic turbulence buffeting most companies and hindering them from delivering on the strategic objective of maximizing the value of owners.
It is crystal clear like the glowing moon that the Nigerian lender’s performance in the half year was stellar and above average, making it shares attractive to investors. With the impressive results, shareholders can drink from the golden goblet as high returns on investments await them.
The bank’s half year financial statement showed it was able to grow profitability and other key and other financial indicators while maintaining an excellent risk management strategy as evidenced its stable assets quality.
Strong growth in gross earnings
Gross earnings for half year 2015 grew by 3.36 percent to N174.01 billion in June 2016 from N168.34 billion the corresponding period of 2015; driven primarily by rise in net interest margin. The rise in net interest margin was on the back of 42 percent growth in interest income and a 14 percent decline in interest expense.
Similarly, interest income increased by 13.58 percent in June 2016 compared with N98.86 billion as at June 2015. Net interest income was up 44.20 percent to N68.45 billion in June 2016 as against 48.16 billion as at June 2015.
Interest expense fell by 13.53 percent to N43.84 billion in June 2016 from N50.67 billion as at June 2015. The reduction in funding cost is commendable given the high interest rate environment banks operate in.
Analysts are of the view that the recent hike in interest rate by the apex bank will suppress banks net income margins-on the back of increased deposit rates.
Central Bank of Nigeria (CBN) further tightened monetary policy as MPR was raised to 14% percent from 12 percent but kept CRR unchanged at 22.5 percent.
However, non-interest income stood at N61.70 billion in June 2016 from N69.5 billion as at June 2015. The drop was due to 40 percent y/y drop in trading income (+108 percent y/y, H1’16: ₦35.6 billion) was significantly offset by strong growth in fee and commission income.
Significant growth in profitability amid tough operating environment
The bank recorded profit before tax of N50.03 billion for the half year ended June 2016; representing an increase of 27.79 percent year on year from N39.11 billion in 2015. Profit after tax followed the same growth trajectory as it jumped by 26.21 percent to N39.48 billion in June 2016 compared with N31.28 billion as at June 2015. Operating income increased by 10.65 percent to N130.17 billion as at June 2016 from N117.64 billion as at June 2015.
The key drivers of bottom lines were a 14 percent growth in interest income to N112.3 billion in the period under review and strong fee and commission income (+108 percent y/y, H1’16: N35.6 billion), largely driven by growth in utilization and transaction volumes on its channels and e-business platforms.
Access Bank’s operating expenses remained flat at N69.9 billion in June 2016.
However, total impairment charges on credit losses grew by 15.12 percent to N10.20 billion from N8.9 billion as at June 2015; primarily driven by collective impairment on a larger loan book – Prudent specific impairment across various sectors in addition to the impact of naira depreciation on dollar NPLs.
Strong asset position
Access Bank’s total assets increased by 26.64 percent to N3.28 trillion in June 2016 as against N2.59 trillion as at December 2015. Further analysis reveals that the growth in total assets was driven by increased investment in high yield securities and loans and advances to customers.
Loans and advances to customers moved by 29.07 percent to N1.82 trillion in June 2016 compared with N1.41 trillion as at June 2015. 16 percent of the loan growth is as a result of the naira depreciation, 8.5 percent due to government on-lending loans, while 4.5 percent represents core growth.
Deposits to customers were up by 17 percent to N1.97 trillion in June 2016 from N1.68 trillion as at December 2015; reflecting more diversified deposit mix.
Stable asset quality in spite of prevalent macro headwinds
Despite the tough macroeconomic environment and regulatory policies in the banking, Access Bank maintained a stable asset quality as Non Performing Loans (NPL) was 1.90 percent in June 2016, higher than the 1.70 percent recorded as at December 2015; the lowest in the industry. The moderate growth in NPLs was due to the currency depreciation on existing FCY NPLs – Prudent impairment on a few obligors in the oil and gas services and construction sectors.
Efficiency and key ratios
After tax return on average assets (ROAE) reduced to 19.80 percent in June 2016 compared with 20.40 percent as at December 2015. ROAA dropped to 2.7 percent in June 2016 from 2.8 percent as at December 2015; primarily due to significant growth in total assets.
Net margin, a measure of profitability and efficiency increased to 22.68 percent in June 2016 as against 18.58 percent in June 2015.
Earnings per share EPS increased by 19.01 percent to 161k in June 2016 as against June 2015. Cost to Income ratio (CIR) reduced to 53.7 percent in June 2016 as against 59.20 percent as at June 2015 as the lender continues to minimize costs while maximization profit.
At 35.80 percent, the Bank’s liquidity ratio remains above the minimum regulatory requirement of 30 percent while capital adequacy ratio stood strong at 19.6 percent above the regulatory requirement of 15 percent.
“Access Bank’s performance continues to be resilient in the face of a challenging macro-economic environment, which has been further exacerbated by double-digit inflation, amidst an untimely devaluation. Despite these macro uncertainties, we delivered gross earnings of ₦174 billion, while pretax profits grew 28% to ₦50 billion in the period. The results underscore our continued ability to grow sustainably whilst effectively adapting to a challenging operating landscape. The prevalent macro-economic conditions put a strain on business performance across the industry, with increased concerns about asset quality deterioration. Despite these challenges, the Bank’s asset quality remained stable, as non-performing loans remained below industry average, in line with our guidance.
Our capital and liquidity levels were also sustained above regulatory limits. During the period, we grew our retail market share, leveraging innovation and technology to create lifestyle products and enhance customer experience. This growth has led to significant increase in our transaction volumes and fee-related income. In addition, our cost of funds dropped by 170 bps y/y reduction, reflecting the increase in our low cost funding base. Notwithstanding the high inflation and the impact of the currency devaluation on cost, operating cost remained stable owing to our cost management initiatives. Optimising operational efficiency will remain an imperative for the second half of the year, as we continue to see the benefits of our cost initiatives intensify over the next few months. We believe that macro conditions will remain challenging. Nonetheless, our priority in the coming months will be to strengthen our position in the industry; increasing focus on risk and operational efficiency, with customer-centricity at the heart of our strategy.” said Herbert Wigwe Group Managing Director and CEO of the bank.
Access Bank Upgrades its Digital Solution, PayWithCapture
Determined to make its digital banking application fast, convenient and hassle-free, Access Bank Plc has refreshed the revolutionary lifestyle solution,PayWithCapture to a more illimitable version.
The latest version, PayWithCapture 5.0, according to a statement from the bank yesterday, comes with additional features that enable customers to transfer funds from any bank account (one or more) to any bank account or phone number and email addresses.
PayWithCapture 5.0 has also expanded to the web for users to experience the many benefits on larger screens. It also offers a USSD service *901# that allows users to carry out most of the listed functions without the need to access the internet, the bank added.
“PayWithCapture 5.0 users can, still enjoy the success of QR code scanning for payments but with the added ability to make transfers to bank accounts, phone numbers and email addresses. Users can also set up a savings club throughPayWithCapture. Savings Clubs, commonly known as Ajo or Esusu enable them save jointly with friends towards a common goal as the funds can be pooled and rotated among all members of the group or pooled and given to one person”, it added.
The Head of Digital Banking at Access Bank, Adeleke Adekoya explained: “We heard about the issues and complaints our customers had on the old app. With this new version, we’ve tried to resolve them all”. According to him, the latest version has extended beyond simply scanning QR-Codes to pay for transactions to allowing customers experience banking in a way that feels as personal as they want it to be.
Another key feature of the upgrade, according to Adekoya was the introduction of the PayWithCapture Titanium Card.
BALA AUGIE
