Access Holdings maintains growth trajectory as interest income, profits wax strong despite challenging macroeconomic environment

By Philemon Adedeji

Access Holdings plc, one of the leading financial institution in Nigeria listed on the Nigerian Exchange Limited (NGX) under banking sector, in its audited financial results ended March 31, 2023, reported remarkable performance across its major indices to continue maintaining its position as one of the leading Tier-1 bank in the country. Specifically the group Interest income, Profit, Assets increased stronger despite the challenging and dynamic macro-economic environment.

In its audited financial statement ended March 31, 2023 the group Interest Income (II) increased to a remarkable 46.4 per cent Year-on-Year (Y-o-Y) to N254.22 billion in first quarter Q1 2023 from N173.69 billion generated in first quarter Q1 2022, as all major contributory lines, save for income from cash and balances with banks declined by 6.4 per cent y/y to N2.56 billion recorded increases.

On a balancing note, the Holdco recorded a Profit Before Tax (PBT) growth of 25.3 per cent y/y to N81.60 billion in first quarter (Q1) of 2023 from N65.56 billion in first quarter (Q1) of 2022.

Eventually, the group delivered a remarkable 24.8 per cent y/y growth in Profit-After-Tax (PAT) to N71.66 billion in Q1 2023 from N57.8 billion achieved in Q1 2022, amid the higher income tax expense which grew by 28.5 per cent y/y to N9.94 billion in the period

In nominal terms, higher income was generated from loans and advances to customers 62.6 per cent y/y to N149.10 billion, investment securities 18.0 per cent y/y to N90.47 billion and loans and advances to banks 360.6 per cent y/y to N12.10 billion

We attribute the higher income generated from investment securities to the volume growth of 27.3 per cent Year-to-Date (YTD) to N3.51 trillion and improved yield on securities during the period.

Interest expense advanced by 84.1 per cent y/y to N158.94 billion, as the group incurred higher costs on deposits from financial institutions 152.2 per cent y/y to N39.12 billion, deposits from customers increased by 82.2 per cent y/y to N98.09 billion, and other borrowings – interest-bearing borrowings grew by 27.1 per cent y/y to N14.31 billion and debt securities issued gained nearly 11.4 per cent y/y to N6.00 billion – in the period under review.

Similarly, the group’s non-interest income advanced by 42.5 per cent y/y to N154.82 billion third quarter of 2023 from N108.65 billion accounted in the third quarter of 2022, the growth was primarily driven by the gains in FX trading (+30.9 per cent y/y to N112.39 billion) and net fees & commission 5.8 per cent y/y to N45.38 billion

Likewise, the lower losses on investment securities amounting to N6.71 billion (vs a loss of N44.63 billion in Q1-22) further aided the growth in non-interest income. Consequently, the group’s net interest income settled 9.1 per cent y/y higher to N95.28 billion the first three months of 2023 from N87.36 billion in the first three months of 2022

Further in, operating expenses surged by 27.8 per cent y/y from N117.19 billion in Q1 2022 to N149.79 billion, triggered by the combined impact of higher regulatory costs and inflationary pressures in the review period.

For clarity, the group incurred higher costs on business travel expenses (+676.6 per cent y/y to N7.58 billion), administrative expenses (+105.2 per cent y/y to N15.92 billion), while AMCON levy grew by 24.8 per cent y/y to N33.32 billion, NDIC premium rose marginally by 22.0 per cent y/y to N7.65 billion, and personnel expenses rose by 14.8 per cent y/y to N33.57 billion.

Consequent to the higher rate of increase in expenses than income, the Holdco’s cost-to-income ratio (after accounting for LLEs) inched slightly higher to 64.7 per cent (from 64.3 per cent in Q1-22).

Net Fee and Commission grew slightly, up 5.8 per cent y/y. Some Fee and Commission Income lines that showed growth were credit related fees and commissions up 6.3 per cent year-on-year, commission on other financial services (up 41.4 per cent y/y) and commission on bills and letters of credit (up 52.4 per cent y/y).

During the period under review the group Earnings Per Share (EPS) increased in double digits by 26.4 per cent y/y to N2.06 in Q1 2023 from N1.63 in Q1 2022, the rise in the Holdco’s earnings was supported by the strong growth across its funded 46.4 per cent y/y and non-funded 42.5 per cent y/y income lines.

BALANCE SHEET WELL POSITIONED

In the unaudited financial statement ended March 31st, 2023, the group balance sheet remained resilient and well structure, as Access Holdings total assets improved nearly 5.0 per cent to N15.742 trillion in Q1 2023 from N14.998 trillion generated in full year 2022, while total liabilities moved from N13.8 trillion as of end of December 31, 2022 to N14.3 trillion in Q1 2023, indicating a significant improvement of 4.2 per cent.

In addition, the group shareholders’ fund increased by 13.4 per cent to N1.396 trillion in Q1 2023 from N1.231 trillion achieved as of end of 2022 financial year.

The Vice President of Highcap Securities Limited, David Andori said, “Very impressive Q1 2023 performance. While total equity gained double digits growth, they succeeded in keeping total liabilities at single digit. Hope they can maintain this tempo throughout the year.”

Analysts at Cordros Research commented that Access bank Q1-23 financial performance was remarkable, despite the challenging and dynamic macro-economic environment. “Specifically, we like the stellar growth across the group’s core and non-core income lines. For 2023E, we believe the rising interest rates in the fixed-income market and the continuous leverage of its Holdco status will boost the group’s earnings growth. Our estimates are under review.”

ABOUT ACCESS BANK

Access Bank Plc. is a full service Commercial Bank operating through a network of over 305 branches and service outlets located in major centres across Nigeria, Sub Saharan Africa, the United Kingdom, Asia and the Middle East. Listed on the Nigerian Stock Exchange in 1998, the Bank serves its various markets through 4 business segments: Personal, Business, Commercial and Corporate & Investment Banking.

The Bank has over 830,000 shareholders including several Nigerian and International Institutional Investors and has enjoyed what is arguably Africa’s most successful banking growth trajectory in the last ten years ranking amongst Africa’s top 20 banks by total assets and capital in 2011.

As part of its continued growth strategy, Access Bank is focused on mainstreaming sustainable business practices into its operations. The Bank strives to deliver sustainable economic growth that is profitable, environmentally responsible and socially relevant.