THUR 02 SEPT, 2021- Event: Access Bank released its audited H1-21 interim financial report today, showing significant earnings growth supported by the core income segment.
Improvements in the bank’s funded business has continued to outperform its counterparts and deviate from the pattern recorded in the year thus far, even 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, resulting in an EPS of NGN2.42 (+40.7% vs H1-20).
The board has proposed an interim dividend of NGN0.30/share (+20.0% from the NGN0.25/share in H1-20).
The bank recorded an interest income growth of 29.6% y/y to NGN319.73 billion in the period, supported by impressive growth in income from investment securities (+78.6% y/y to NGN132.19 billion), loans & advances to banks (+18.3% y/y to NGN7.95 billion) and loans & advances to customers (+8.6% 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% 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% to NGN3.58 trillion).
Interest expense declined marginally by 0.7% y/y to NGN119.67 billion, supported mainly by the moderation in interest expense on deposits from customers (-11.1% y/y to NGN56.77 billion).
The reduced expense on deposits from customers neutered the impact of the increases in borrowings (+73.2% y/y to NGN21.61 billion) and debt securities issued (+7.2% y/y to NGN10.14 billion). Consequently, cost of funds moderated to 2.9% vs 3.7% in H1 2020, despite the 6.9% year-to-date increase in interest-bearing liabilities.
Non-interest income declined by 16.5% y/y to NGN115.90 billion as losses on investment securities, particularly non-hedging derivatives (-NGN23.25 billion vs gain of NGN134.85 in H1-20) and decline in other operating income (-44.5% y/y to NGN16.45 billion) offset the growth in income from foreign exchange trading (+200.3% y/y to NGN68.20 billion) and fees and commissions (+44.7% 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% y/y).
Operating expenses increased by 8.9% y/y to NGN189.80 billion during the period, following higher regulatory costs and inflationary pressures. Save for other operating expenses (-3.9% y/y to NGN74.64 billion), all other lines recorded spikes – NDIC premium (+32.2% y/y to NGN9.96 billion), personnel expenses (+20.3% y/y to NGN43.60 billion), AMCON levy (+17.1% y/y to NGN41.51 billion) and non-cash charges (+15.7% y/y to NGN20.08 billion).
Nonetheless, the bank’s cost-to-income ratio (after accounting for LLEs) improved to 66.1% from 70.1% in H1-20, given the higher year-on-year expansion in operating income relative to opex.
Overall, the bank recorded a profit before tax growth of 31.2% y/y to NGN97.50 billion consequent on the strong gross earnings growth. However, profit after tax settled 42.4% higher y/y at NGN86.94 billion, given the lower income tax expense (-20.4% y/y).
Comment on the performance, analysts at Cordros Research said: ‘’the bank’s performance remains impressive in the recovering economic environment. For the rest of the year, we expect the growth momentum to be sustained as risk asset acceleration continues in light of sub-regulatory limit on LFR. We also see room for improvements in FX trading gains despite persisting weaker debt recoveries.’’
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