MON 01 NOV, 2021-theGBJournal- Access Bank Plc published its 9M-21 interim financial report after trading hours last Friday (29 October).
The report revealed that the bank reported strong earnings growth from its interest-yielding assets, which was enough to offset the rising costs on its interest-bearing liabilities, credit impairments and operating expenses.
On the other hand, non-interest income settled relatively lower on a year-on-year basis. Overall, the top-line performance trickled down to the bottom-line, allowing the bank to record a second consecutive quarter of double digit earnings growth (EPS: +19.3% y/y to NGN3.46 from the corresponding period last year).
Maintaining the momentum from preceding quarters of the year, the bank recorded interest income growth of 25.5% y/y to NGN470.91 billion. The breakdown provided showed that income from investment securities (+61.4% y/y to NGN132.19 billion) was the major driver as the bank continues to benefit from favourable yields on its sovereign swap portfolio, rising FI yields, and the increasing trading volumes.
In addition, the (1) 10.3% y/y growth in income from loans & advances to banks to NGN261.10 billion, on the back of accelerated risk assets creation (YTD: +16.4% to NGN3.75 trillion) and adequate risk repricing, and (2) +0.5% y/y growth in loans & advances to banks (to NGN11.46 billion) also contributed to this performance.
Elsewhere, interest expense settled higher (+13.5% y/y to NGN119.67 billion) as all major contributory lines, save for expenses on deposits from financial institutions (-0.8% y/y to NGN48.35 billion) recorded increases. Particularly, expenses on deposits from customers were higher (+12.9% y/y), following the bank’s acquisition of more expensive term deposits (CASA: 55.0% in 9M-21 vs. 64.6% in 2020FY).
Likewise, the costs of other borrowings – interest bearing borrowings (+51.6% y/y to NGN32.40 billion) and debt securities issued (+9.4% to NGN15.74 billion) came in higher in the period under review, as the bank increased its increased on-lending facilities and issued an additional Eurobond for USD500.00 million. Overall net interest income ex-LLE was higher by +41.2% y/y to NGN228.81 billion.
Non-interest income declined by 2.0% y/y to NGN197.37 billion as losses on investment securities amounting to NGN1.78 billion (vs a gain of NGN84.19 billion in 9M-20) offset the growth in income from foreign exchange trading (+35.7% y/y to NGN86.81 billion) and fees and commissions (+23.9% y/y to NGN88.99 billion). We expect the negative growth in this income segment to be reversed in the coming quarter, given our expectations of higher fees, commissions and FX trading income from higher e-banking transaction volumes and FX sales. Nonetheless, operating income maintained its positive growth trajectory (+ 17.2% y/y).
Operating expenses significantly increased by 17.9% y/y to NGN189.80 billion during the period, as the bank recorded both higher regulatory and discretionary costs. All opex lines recorded spikes – NDIC premium (+33.0% y/y to NGN15.15 billion), personnel expenses (+25.8% y/y to NGN71.83 billion), AMCON levy (+17.1% y/y to NGN41.51 billion) and non-cash charges (+17.2% y/y to NGN30.38 billion). Consequent to the higher rate of increase in expenses than income, the bank’s cost-to-income ratio (after accounting for LLEs) inched slightly higher to 68.3% (from 67.9% in 9M-20).
Overall, the bank recorded a profit before tax growth of 15.8% y/y to NGN135.07 billion consequent on the strong top-line performance. This was further supported by the 8.0% y/y decline in tax expense which led a higher growth in profit after tax (+19.1% y/y to NGN121.89 billion).
‘’The bank’s performance remains impressive in the challenging and dynamic economic environment. For 2021FY results, the stable Interest rates are likely to result in further growth in funded income,’’ says Cordros Research.
Cordros expects the growth momentum to be sustained as risk asset creation continues in light of sub-regulatory limit on LFR and, they also room for improvements in FX trading gains despite persisting weaker debt recoveries.
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