Access Bank:  Sustained solid and resilient results

Access Bank Plc for the full year ended December 31, 2020 audited result and accounts reported maintained its solid and resilient results amid numerous domestic and foreign challenges that faced the sector and economy at large.

The Group continued to maintain a well-structured, efficient and diversified balance sheet with strong earnings capacity.

Access Bank recorded a consistent growth in its retail banking business, reporting a 5.8million growth in customer sign-on during the year through our financial inclusion efforts.

The balance sheet structure enabled the group to withstand the negative impact of COVID-19 which virtually affected all the sectors of the nation’s economy.

Access Bank in the year under review crossed N8trillion in total assets and grow customers deposit by 31 per cent to maintain a well-structured and diversified balance sheet.

In spite of all the challenges posed by the COVID-19 pandemic in terms of disruption to businesses and households as well as the impact of regulatory response by way of moratorium/interest rate reductions, the Bank was able to navigate efficiently, deploying appropriate strategies to deliver 13 per cent increase in profit after tax to N106billion in 2020 from N94.1billion reported in 2019.

With growth in profits, the management of Access Bank proposed a final dividend of N0.55, bring total dividend to N0.80 in 2020(interim dividend of N0.25 was paid in half year results for period ended June30, 2020).

From the income statement, Access Bank’s Gross earnings grew by 15per cent from N666.75billion in 2019 to N4764.72billon in 2020.  64 per cent increase in interest income and 36 per cent growth in non-interest income impacted positively on Gross earnings growth in 2020.

Interest Income closed 2020 at N63.55billion in 2020, about 9 per cent decline from N83.3billion in 2019, while interest expenses moved from N259.6billion to N226.27billion reported in 2019.

The drivers in interest income includes a 30 per cent growth in income from Cash and Cash Equivalents to N12.0billion in 2020 from N9.2billion, offsetting the        3 per cent decline in interest on loans and advances to customers and 20per cent decline in income from investment securities driven by a sharp drop in yield on government securities.

In addition, the decline in interest on Loans and Advances is largely driven by the reduction of interest rate on intervention loans by the Central Bank of Nigeria (CBN).

With decline in interest income and interest expenses, Net Interest Income dropped by 5 per cent to N252.95billion in 2020 from N277.23billion in 2019.

Access Bank’s Loan Impairment charge increased by 212per cent from N20.19billion in 2019 to N62.89billion in 2020, on account of the asset quality issues arising from the pandemic and the need to write off challenged loans.

In the year under review, the Group’s Non-Interest Income gained 112 per cent to N275.5billion, driven by 743per cent growth in net trading income to N114.3billion in 2020 from N17.8billion, on the back of a Net gain on derivatives and foreign exchange due to efficient treasury activities.

Also, a 27 per cent increase in Fee & Commission income to N116.7billion from N91.8billion in 2019, largely underlined by the increased transaction velocity across Channels and other E-business during the pandemic.

The Group’s total operating expense grew by 27 per cent to N326.5billion in 2020 from N257.2billion in 2019 , reflecting the impact of the enlarged franchise and the inflationary environment

Other key factors that contributed to expenses growth are actual cost growth is 10.2per cent on a commonsized basis (full 9 months of Diamond and Access Bank for 2019) . The growth in Operating cost was largely driven by increased IT and E-business expenses (+92per cent), and regulatory costs – AMCON charge (+56per cent).

The increase in IT and E-business expense is due to investments in IT capability with the focus of improving customer experience and to support digitization, while the increase in AMCON charge is due to the growth in our asset base.

Accordingly, Cost to Income ratio declined by 271basis points to 63.4per cent from 66.1per cent reported in 2019.

Despite a challenging economic and regulatory landscape, Access Bank reported Profit Before Tax (PBT) of N125.9billion in its audited results for full year ended December 31, 2020 from N111.93billion reported in 2019, while Profit After Tax gained 13 per cent to N106.01billion in 2020 from N94.06billion in 2019.

Subsidiaries contribution to the group’s performance stood at 28per cent, recording total subsidiaries’ PBT of N35.7billion.

Both UK and Ghana accounted for 86 per cent of total 2020 subsidiaries’ PBT, with a Return on average Equity of five per cent and 27per cent respectively.

Total loans for subsidiaries stood at N837.1billion (+22 per cent), contributing 24 per cent of total net loans for the group Total deposits from subsidiaries amounted to N1.2trillion (+11 per cent YTD), contributing 19 per cent of total group deposits.

Loans to customers & Deposit drive total assets

Access Bank’s total assets grew by 22 per cent to N8.68trillion in 2020 from N7.14trillion reported in 2019, drive by significant increase in loans to customers and deposit.

Net loans & Advances grew by 18 per cent to N3.6trillion in 2020 from N3.06trillion reported in 2019.

The financial institution in the year under review had a well diversified gross loan book of N3.76trillion in 2020 from N3.26trillion, up 15per cent, reflecting the impact to improve core loan growth FCY exposures dropped by 1,421basis points to 25.9 per cent from 40.1 per cent in 2019   of the total loan portfolio in the period, due to deliberate efforts at mitigating our currency risk

Loan-to-Funding ratio stood at 50.7 per cent as at Dec’20 (Dec’19: 62.9 per cent), including the 150 per cent weight on growth in retail exposures.

Access Bank’s customer deposits also gained 31 per cent to N5.59trillion in 2020 from N4.26trillion reported in 2019, reflecting the impact of the management continuous and deliberate deposit mobilization.

The group’s Current Accounts and Savings Accounts (CASA) account deposits grew 46per cent to N3.61trillion in 2020 from N2.47trillion, accounting for 65per cent of customer deposits. This is largely as a result of leveraging innovative digital technology and financial inclusion to mobilize sustainable low-cost deposits.

Total savings account deposits closed the period at N1.31trillion, recording a growth rate of 66per cent  Subsidiary customer deposits totaled N754.7billion, accounting for 14 per cent of the group’s total deposits from customers UK and Ghana jointly accounted for 77 per cent (Dec’19: 80per cent) of total subsidiary customer deposits.

Assets quality

The management promised to sustained improvement in Asset quality following the merger inflated Non-Performing Loan (NPL) ratio at 2019.

In the year under review, Access Bank’s NPL ratio down 150basis points to 4.3per cent in 2020, driven by the Bank’s robust risk management process, selective loan growth, loan repayments and write offs.

Also, adequate NPL coverage ratio (including regulatory risk reserves) closed 2020 at 122per cent from 112 per cent in 2019.

A well diversified funding base of N8.68trillion, reflecting a 22per cent growth from N7.14trillion.

Also, Access Bank’s Capital Adequacy Ratio (CAR) reflecting Day IFRS 9 transitional adjustment stood at 20.6 per cent(Dec’19: 20.0 per cent), and the full impact CAR of 19.6 per cent remained well above regulatory minimum of 15 per cent.

In the year under review, Tier II capital increased by 38 per cent  largely driven by capital raising exercises executed within the period.

Liquidity ratio in the period of 46 per cent (Dec’19: 47.0 per cent) remained well in excess of the regulatory minimum.

Conclusion

The Group Managing Director and CEO of Access Bank , Herbert Wigwe said the institution’s resilient performance “is testament to the effectiveness of our strategy and capacity to generate sustainable revenue.

“The strategic actions that the Bank has taken over the past 12 months evidence a strong focus on retail banking and financial inclusion, an African expansion strategy and a drive for scale for sustainable value creation.

“In 2020, Access Bank proudly opened its doors for business in Kenya and Mozambique, further increasing our footprints across the African Continent.

“Access Bank Zambia also concluded the acquisition of Cavmont Bank Limited in January 2021 and the Group recently announced the approval by relevant regulatory authorities for the acquisition of Grobank Limited, creating an inroad into the South African market in realization of the Group’s strategic ambitions.

In view of the opportunities that exist in the market, we will be transitioning to a HoldCo structure.

“The Bank has received the Approval-In-Principle from the Central Bank of Nigeria for the restructuring and the HoldCo will consist of 4 subsidiaries in order to tap into the market opportunities that are available in the consumer lending market, electronic payments industry and retail insurance market.

“Going into the fourth year of our 5-year cyclical strategy, our focus remains on consolidating our retail momentum and expanding our African footprint in a sustainable manner,” Wigwe said.

As the Bank intensified recovery efforts, undertook significant write off and leveraged its robust risk management practices, its asset quality improved to 4.3per cent compared to its 2019 report of 5.8per cent and this is expected to continue to trend downwards as it strives to surpass the standard it had built in the industry prior to the merger with Diamond Bank.