Nigeria’s largest bank by customer base and total assets, Access Bank plc recorded significant growth in its earnings in the first six months of 2021 via the bank’s core income segment.
According to its financial statements for the period under review, improvements in the bank’s funded business have continued to outperform its counterparts and deviate from the pattern recorded in the year thus far, even though its non-core earnings settled relatively weaker on a year-on-year basis.
Despite the aforementioned and the even higher operating expenses, the growth in funded income was enough to drive a substantial expansion in the bank’s bottom-line.
The bank recorded an interest income growth of 29.6 percent year-on-year to NGN319.73 billion in the period, supported by impressive growth in income from investment securities (+78.6 percent y/y to NGN132.19 billion), loans & advances to banks (+18.3 percent y/y to NGN7.95 billion) and loans & advances to customers (+8.6 percent y/y to NGN174.43 billion).
The expansions in these lines were enough to offset the decline in income from cash and balances with banks (-4.1 percent y/y to NGN5.17 billion).
This performance was driven by a combination of rising yields on fixed income securities and strong growth in risk assets creation (+11.3 percent to NGN3.58 trillion).
Interest expense declined marginally by 0.7 percent year-on-year to NGN119.67 billion, supported mainly by the moderation in interest expense on deposits from customers (-11.1 percent y/y to NGN56.77 billion).
The reduced expense on deposits from customers neutered the impact of the increases in borrowings (+73.2 percent y/y to NGN21.61 billion) and debt securities issued (+7.2 percent y/y to NGN10.14 billion). Consequently, cost of funds moderated to 2.9 percent vs 3.7 percent in the first half of 2020, despite the 6.9 percent year-to-date increase in interest-bearing liabilities.
Non-interest income declined by 16.5 percent year-on-year to NGN115.90 billion as losses on investment securities, particularly non-hedging derivatives (-NGN23.25 billion vs gain of NGN134.85 in the first half of 20201) and decline in other operating income (-44.5 percent y/y to NGN16.45 billion) offset the growth in income from foreign exchange trading (+200.3 percent year-on-year to NGN68.20 billion) and fees and commissions (+44.7 percent y/y to NGN58.73 billion).
Despite the weaker non-funded income growth, funded income growth was substantial enough to lead to a growth in operating income (+15.6 percent year-on-year).
Operating expenses increased by 8.9 percent year-on-year to NGN189.80 billion during the period, following higher regulatory costs and inflationary pressures.
Save for other operating expenses, all other lines recorded spikes – NDIC premium (+32.2 percent y/y to NGN9.96 billion), personnel expenses (+20.3 percent year-on-year to NGN43.60 billion), AMCON levy (+17.1 percent y/y to NGN41.51 billion) and non-cash charges (+15.7 percent y/y to NGN20.08 billion).
Nonetheless, the bank’s cost-to-income ratio improved to 66.1 percent from 70.1 percent in the first half of 2020, given the higher year-on-year expansion in operating income relative to operation expenses.
Overall, the bank recorded a profit before tax growth of 31.2 percent year-on-year NGN97.50 billion consequent on the strong gross earnings growth. However, profit after tax settled 42.4 percent higher year-on-year at NGN86.94 billion, given the lower income tax expense (-20.4 percent y/y).
Analysts say the bank’s performance remains impressive in the recovering economic environment.