Access Holdings Plc’s half-year performance indicates that the top-ranked financial services institution is on course to cross the historic milestone of N15 trillion in assets by the end of 2022. Currently, Access Bank is the largest Deposit bank by assets (N11.73 trillion as of December 31, 2021).
The bank’s audited results report for the six months ended June 2022 shows significant asset growth of 31.3% year-on-year from N10 trillion to N13.2 trillion. Compared to the then historic 11.73 trillion naira in FY2021, the 12.5% increase in assets in H1 2022 represents good news for stakeholders. Using a combined average percentage growth of 22% for both periods, the bank’s asset growth shows prospects of reaching around N16 trillion by the end of 2022, all else being equal.
“A strong asset base means that a business is strategically positioned to take advantage of its environment. For a bank, there is no time when people will not need money. Once a company focuses and invests in areas that people still need, it won’t lose. That explains the continued (asset) growth despite challenging environments,” the professor of finance and accounting at Nasarawa State University, Keffi, Muhammad Mainoma.
According to Mainoma, outgoing President of the Association of National Accountants of Nigeria (ANAN), companies with strong assets will easily weather tough economic environments. “Given Access Bank’s growth history and performance trajectory in recent years, there is no doubt that it will reach and surpass the 15 trillion mark in assets this year as it continues to profit benefits of its mega merger with the former Diamond Bank Plc,” said Adolphus Ehimoke, a financial analyst.
In addition to strong asset performance, the group recorded impressive results in other key metrics at the end of operations in the first half ending June 30, 2022. This signals a strong trend to reach and exceed the 15,000 mark. billion in assets, thus placing it further. industry peers in an increasingly challenging environment.
It closed half-year operations with a gross profit of N591.80 billion, or 31.4% of closing revenue for the equivalent period of 2021. With higher revenue outlook in the second half based on the bank’s earnings model, Access Holco is likely to generate gross income of over N1 trillion by the end of 2022. It recorded 145% gross income in fiscal year 2021 year-on-year .
The main balance sheet items – customer deposits and customer loans and advances – showed an upward trend during the period under review. Customer deposits increased from 5.97 trillion naira in the first half of 2021 to 7.83 trillion naira in the first half of 2022, reflecting an increase of 31.2%. Similarly, loans and advances to customers grew to N4.61 trillion in the first half of 2022 from N3.99 trillion in the corresponding period, representing a growth of 15.6%.
Tier 1 bank revenue came under cost pressure during the period resulting in lower after-tax profit which saw a marginal increase of 2.2% to N88.73 billion vs. N86.9 billion for the corresponding period. The main challenging factors include interest expense which increased approximately three times as much as interest income during the period.
Interest expense reached around N175 billion during the period, representing a 46% year-on-year increase. On the other hand, interest income recorded an increase of 16% to close at N372 billion for the period. Compared to the first quarter performance, interest income and interest expense were down 21% and 73% respectively.
Earnings were also pressured by personnel costs, which rose 34% to N58 billion in the corresponding period. The net loan impairment charge is also another key expense line that impacted the profit window: it recorded 28.6% to almost 37 billion naira, claiming 18.7% of net profit income. interest during the reporting period, compared to 14.3% in the first half of 2021. As a result, the bank’s income net of impairment charge decreased to N160.6 billion, representing a decline of 6% during the period under review.
Further analysis of Holco’s HY 2022 results revealed that total operating cost, which reached N257 billion, reduced gross profit to 35% from a 31% impact in the previous period. . The operating cost margin increased to 43.4% from 42% in the prior period of 2021.
Improved net earnings on financial instruments relieved the cost pains that Holco has been experiencing. This revenue line, which has grown from a net loss of over N23 billion in the first half of 2021 to over N64 billion in the half of 2022, has been a soothing relief. The same goes for net gains on hedging which registered over N11 billion during the reporting period, compared to a net loss of over N4 billion during the previous period.
The bank’s Rest of Africa business also helped change the narrative as it increased profit before tax (PBT) by 175.1% over last year and contributed 64.2 % to group PBT in the first half of 2022. This is up from a contribution of 23.4%. percent in the first half of 2021.
Some analysts have expressed mixed feelings about Access Bank’s inaugural financial results following the introduction of a holding structure in May 2022. “The second quarter results were not impressive, in our view, with profits falling to a six-quarter low. We expected the market to react negatively to the cut in the dividend,” Ope Ani, senior analyst at Coronation Merchant Bank, said in a note to clients. Despite the share price decline, most investment banks maintained their buy rating on the bank, citing strong prospects for future growth.
Analysts also say the unexpected cut in the interim dividend could be due to the group’s need to conserve capital to fund its upcoming acquisitions and expansion of its Holdco operations. They believe that the strong performance in the first quarter of 2022 offset the lower-than-expected second-quarter output, suggesting that HY 2022 earnings exceeded market expectations.
Commenting on the 2022 half year results, Group CEO Herbert Wigwe said: “The holding company’s inaugural financial results showed a strong performance, in the first half despite strong local and international macroeconomic headwinds.
“The Holding became fully operational in May 2022 and the other verticals: Payment Company (PayCo), Asset Management Company (AmCo), Insurance Brokerage Company (InsureCo) should be fully consolidated from the second half. These results reflect a sustainable business model coupled with effective execution of the banking group’s strategy, in a challenging macroeconomic environment with significant headwinds.
“This reflects deliberate measures to optimize our balance sheet and ensure that the Group can support its customers in different markets, in addition to the execution of our expansion strategy. 2022 marks the final year of our five-year strategy to become the gateway Africa’s gateway to the world.
“Over the five-year period, we have seen tremendous growth in our value proposition and international presence as we expand our operations across Africa. As Access Corporation enters a new chapter, we are realigning our goals to create a globally connected ecosystem, delivering new, interconnected services for all customer needs.
Access Bank is Nigeria’s largest banking group, accounting for 19% of banking system assets at the end of fiscal 2021, according to Fitch Rating which applauded the bank’s acquisition strategy.
Wigwe revealed that the transition to a holding company structure will enable Access Bank Plc to generate more revenue from other non-core banking activities, expand its business, remain competitive in an ever-changing business environment and deliver more value to shareholders. The banking model should also help Access Bank to diversify its income and remain competitive in the financial market.
Aiming to become the gateway to the global financial system, Access Bank has in recent years acquired several banks in other Sub-Saharan African countries, in line with its strategy of expanding into Africa.
Access Bank has invested heavily in the cutting-edge technological evolution of the African banking sector through its strategic partnership with Africa Fintech Foundry to nurture the next generation of innovative fintech startups. The Bank has also deployed technology to help it achieve its Sustainable Development Goals. It has developed a portal that tracks its environmental footprint, including its carbon emissions.