FRI, APRIL 24 2020-theG&BJournal-Access Bank Plc published its Q1-20 earnings Thursday, which revealed that the bank recorded a marginal decline in profitability. While both interest income and non-interest income growth in the period were positive, a substantial FX revaluation loss recorded pressured the trickle-down to the bottom-line. Also, the growth in operating expenses, and to a lesser extent, interest expense, resulted in a relatively weaker performance.
The bank recorded interest income growth of 19.0% y/y to NGN131.87 billion in the period, which was underpinned by strong growth in income from loans and advances (+46.4% y/y to NGN 83.84 billion) and cash (+67.7% y/y to NGN2.63 billion), even as income from investment securities declined (-13.4% y/y to NGN44.01 billion) relative to the corresponding period of the prior year. Also, interest expense increased by 10.6% y/y to NGN59.66 billion, below the growth rate in income, resulting in a significant growth in net interest income of 27.0% y/y.
Non-interest income grew by 56.0% y/y to NGN72.98 billion, supported by strong growth in income from derivative instruments (+416.4% y/y to NGN84.25 billion), which offset the substantial FX revaluation loss recorded (+1.032.9% y/y to NGN53.26 billion). Also, noteworthy was the significant growth in fees and commissions income (+76.0% y/y to NGN23.00 billion).
Operating expenses increased substantially during the period by 63.8% y/y to NGN90.32 billion, given the effects of the consolidation with Diamond bank, which had not reflected in the corresponding period of the prior year.
Consequently, all major contributory lines recorded spikes, with regulatory charges – AMCON levy (+54.6% y/y to NGN17.52 billion) (+31.0% y/y to NGN6.49 trillion), and NDIC premium (+62.0% y/y to NGN3.71 billion) –, personnel expenses (+53.5% y/y to NGN19.63 billion), and other expenses (+77.8% y/y to NGN42.31 billion) all expanding.
Given the significant year-on-year expansion in operating expenses, the bank’s cost-to-income ratio (after accounting for LLEs) deteriorated to 66.1% from 55.0% in the corresponding period of the prior year.
Consequent on the growth in income relative to expenses, the bank recorded a profit before tax growth of 2.6% y/y to NGN46.29 billion, while PAT settled 0.5% lower y/y at NGN40.93 billion, given the higher income tax expense (+35.7% y/y).
Cordros Research Comments: ‘’The bank’s performance was well removed from our expectation, given the substantial FX revaluation loss. Besides this there are some positives, related to growth in income and resilience of the fees and commissions despite weaker transaction flows and lower charges. This reflects the substantial growth in the bank’s customer base. Our estimates are under review.’’
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