Access Bank Plc, one of the leading financial service providers in Nigeria with total assets of about N9 trillion, recorded its best performance in five years considering its recent audited financial records for the year ended December 31 2020. According to the bank’s financial reports approved by regulators of the financial industry, the majority of its performance measuring indices had an impressive growth compared to the previous year. Gross Earnings recorded the biggest growth in five years at N765 billion. It represents a year-on-year growth of 14.7% growth compared to N764. 7billion achieved in the financial year ended December 31, 2019. Despite the challenging operating environment, Profit before Tax (PBT) and Profit after Tax (PAT) grew by 12.5% and 12.7% to N125.9billion and N106.0billion respectively. Similarly, Loans and Deposits portfolios expanded by 17.8% and 20.3% to N3.6trillion and N5.6trillion.
Analysts are of the opinion that the bank’s performance was buoyed by its merger with the erstwhile Diamond Bank Plc, a deal which was concluded in March 2019. “The Issuer is known for its good brand franchise, an experienced management team and adequate capital adequacy ratios levels at 20%,” Analysts at United Capital Limited pointed out. Access Bank Plc total assets and contingents amounted to N8.7trillion as at December 2020, a 19 % growth over FYE2019. Thus, the Issuer became the largest bank in Nigeria by total assets as at December 2020. However, offsetting these positive performances are sectoral concentration in the loan book and the fragile Nigerian macroeconomic environment.
Financial Income
The bank reported a 14.7% y/y expansion in gross earnings despite an 8.9%y/y decline in Interest Income to N489.2billion amid pressure on asset yields (which slid to 9.0% from 12.8% in 2019) and increased uncertainties in the macroeconomic environment. Specifically, the increase in gross earnings was driven by Non-interest income (NII) which jumped 112.1% to N275.5billion, essentially boosted by a 743.0% y/y surge in net trading income to N114.3billion (vs. -N17.8billion in 2019), traceable to Net gain on derivatives, FX and treasury activities. Also, with expansion in its retail banking services, payments, remittance and aggressive customer acquisition, Fees and commission income increased 27.1% to N116.7billion, significantly supported by an upsurge in E-banking charges.
Net Interest Margin (NIM) declined 170 basis points (bps) to 4.9% despite reduction in funding cost to 3.3% (against 5.0% in 2019) and amid an industry wide decline in interest expense. Expectedly, impairment charges jumped 211.5% to N62.9 billion due to COVID-19 worries, pushing cost of risk to 1.8%. Similarly, operating expenses (OPEX) increased by 26.9% to N326.5billion. As such, Cost to income Ratio ticked northwards to 63.4% (vs. 66.1% in 20-19). An inspection of the OPEX component indicated a jump in regulatory levy – AMCON (up 56.0% to N35.4billion), Outsourcing costs (+50.0% N25.billion) and IT & E-business expenses (+92.0% to 18.7billion), accounted for the pressure on OPEX. Against this backdrop, PBT and PAT growth improved by over 12.0% to N125. billion and N106.0billion respectively, with ROE and net margin settling at 15.6% and 13.9% respectively.
Asset Quality
Access Bank’s total assets stood at N8.68trillion as of FYE 2020, up 21.5% from N7.1trillion in December 2019. Loans and advances represented N3.6trillion, up 18.8%, while Investment Assets surged by 61.3% to N1.7trillion. Cash balances, however, stood flattish at 0.1% to N723.9billion, a sharp contrast to peers. Also, deposits expanded by 21.5% to 6.5%. Also worthy of note, derivative assets expanded 75.0% to N251.1billion, buttressing the jump in non-interest income. Loan to funding ratio stood at 50.7%. Despite asset quality issues across the market, ACCESS’ NPL ratio improved to 4.3% (previously 5.8%), thanks to a well-diversified loan book, though the loan to funding ratio came in at 50.7% (from 62.9% in 2019). Access Bank’s shareholders’ equity strengthened by 19% to N751 billion as at December 2020, following the combination with the erstwhile Diamond Bank Plc Overall, Capital Adequacy Ratio (CAR) was flattish at 20.6% while liquidity ratio settled at 46.0% for the period. Analysts are of the opinion that the Bank needs to shore up capital to create sufficient buffer for unforeseen risks.