Access Bank: Sustaining growth in profit, assets amid macro economy challenges


By Kayode Tokede

Access bank plc for the half year ended June 30, 2020 audited result and accounts maintained growth in profit and total assets amid macro economy challenges, caused by COVID-19 pandemic.

The lender reported stronger growth in total assets, driven by impressive performance on customers deposit and loans & advances to customers.

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

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 reported N7.76trillion total assets as at June 30, 2020 from N7.14trillion reported in financial year ended December 31, 2019.

The nine per cent growth in total assets resulted from 11 per cent growth in net loans and advances and 10 per cent increase in customers’ deposits to N4.67trillion as at June 30, 2020 from N4.26trillion reported in 2019.

The group asset base improved on the back of an 81per cent Year-Till-Date (YTD) increase in derivative portfolio to N259.6billion; a 12 per cent YTD growth in Investment Securities to N1.21trillion and 11per cent YTD growth in Loans and Advances to N3.39trillion, reflecting  continuous drive to improve core loan growth.

However, Access Bank liability base improved largely underscored by, 10per cent YTD growth in total Deposit Liabilities to N5.99trillion, boosted by our continuous deposit mobilization drive

Customer deposits increased by 10per cent YTD to N4.67trillon in the period (Dec’19: N4.26 trillon), reflecting the impact of our continuous and deliberate deposit mobilization CASA(1) account deposits grew 17per cent YTD to N3.1trillion (Dec’19: N2.62trillion) accounting for 66 per cent of customer deposits.

This is largely as a result of leveraging innovative digital technology and financial inclusion to mobilize sustainable low-cost deposits

Access Bank’s total savings deposits crossed the N1trillion threshold in the period. Improved Customer Deposit mix, comprised of 65per cent local currency deposits and 35 per cent foreign currency deposits (Dec’19; 61 per cent:39per cent), further reducing foreign currency liabilities

Subsidiary contributions of N1.16trillion accounted for 18per cent of total group customer deposits in the period (Dec’19: N694.6billion).

Access bank’s UK and Ghana jointly accounted for 88 per cent (Dec’19: 83 per cent) of total subsidiary customer deposits and 16 per cent of total deposits.

Well diversified gross loan book of N3.55trillion as at Jun’20 from N3.26trillion), up nine per cent YTD reflecting the impact of our drive to improve core loan growth

According to the lender, Foreign Currency (FCY) exposures dropped by 80basis points to 32per cent of the total loan portfolio in the period, due to deliberate efforts at de-risking the portfolio

Consequently, Loan-to-Funding ratio stood at 59.1per cent as at Jun’20 (Dec’19: 62.9 per cent), including the 150 per cent weight on growth in retail exposures.

Profit maintaining stronger performance

In spite of the impact of COVID-19 pandemic on transaction volume and economic & market disruptions coupled with pressure on asset yield and revision to Bank charges which impact the non-interest income line, the Group delivered a After-tax ROAE of  19.1per cent as against 23 per cent reported in 2019 full year results.

The Group posted a Profit before tax of N74.31billion in H1 2020, a two per cent increase from N72.97 billion reported in H1 2019.

The management of Access bank proposed interim dividend of N0.25 for every share of 50 kobo.

Gross earnings grew by 22 per cent to N396.8billion in the period as against N324.4billion reported in H1 2019, and it comprises of 62 per cent interest income and 38 per cent in non-interest income. Net interest income also gained 19 per cent to N126.2billion as against N155.15billion reported in H1 2019. However, operating expenses increased significantly by 40 per cent to N174.3billion in H1 2020 as against N124.45billion reported in H1 2019.

Operating expenses grew by 19.2 per cent from N69.9 billion in H1 2020 to N83.3billion in H1 2020, reflecting the impact of the enlarged franchise and the inflationary environment.

Actual cost growth was six per cent y/y on a common-sized bassis (full six months of Diamond and Access bank for 2019), which is well below inflation rate of 12.6 per cent. Operating expenses declined by seven per cent q/q to N84billion, reflecting the results of cost transformation initiative. A 56 per cent y/y growth in AMCON surcharge, reflecting the growth of the Bank’s assets base, accounting for 20 per cent of total operating cost. IT and E-business expenses surged by 91 per cent, mainly due to increased investment in creating IT efficiency and increasing transaction volumes on E-business.

Consequently, the Group’s Cost to Income ratio (CIR) worsened to 65.8 per cent in H1 2020 from 61.5 per cent recorded in H1 2019.

The Group sustained its assets quality with Non-Performing Loan (NPL) dropped from 5.8per cent in 2019 FY to 4.4 per cent in H1 2020.

NPL is kept low owing to cautious approach to credit growth especially during the pandemic which weighed negatively on every segment of the economy.

An integral part of the Group’s strategy is the early identification of the vulnerable sectors, implementation of appropriate measures to manage and avert NPLs in the identified sectors.

The Group had identified individuals, Oil and Gas, SMEs, General Commerce as the most vulnerable sectors susceptible to the impact of the pandemic.

Measures implemented include, but not limited to, interest rate reduction on loans to individuals in January 2020, insurance and Retails loans, deferrals of principal repayments for SMEs till September 2020.

A significant portion of the upstream Oil and Gas exposures have hedges executed against price risk and maintenance of Debt Service Reserve Account (DSRA) to serve as protection against declining oil prices.

Implementation of the CBN directive on moratorium of one year and reduction in interest rate granted on all CBN intervention facilities also help to cushion the stress which would have resulted from impact of the pandemic on the business financed with intervention funds.

Coverage for the group’s NPL, remained strong at 117 per cent, down from 102 per cent in 2020 FY.

Strong liquidity Position

Liquidity ratio closed at 44.7 per cent in H1 2020 as against 47.6 per cent, which is well above the regulatory minimum of 30 per cent. The group also maintained 20 per cent Capital Adequacy ratio.

Access bank key priorities for 2020

According to the lender, “We will continue to: Reduce operating cost by aggressively executing strategic cost saving initiatives Intensify low-cost deposit drive to reduce funding costs, thereby enhancing liquidity and margins

“Culture an aggressive recovery drive and decisively deal with challenged facilities. Significantly increase the productivity of people and resources to enhance operations efficiency.

“Extract value from new and existing accounts and migrate customers to alternative channels to enhance transaction banking income and increased focus on asset quality.”