The Managing Director of Access Bank Plc in a conference call with its shareholders and stakeholders regarding the Half Year 2021 performance gave a future projection of the Group’s expectation at the end of 2021 financial year.
Reviewing the Bank’s performance, in the first half of 2021, Hebert Wigwe stated thus:
“So far 2021 has presented its own challenges, but I’m pleased to report that Access Bank have had a solid half year with robust revenues, profitability and increased distribution to our shareholders.
Looking at the macroeconomic environment, over the last quarter, we’ve experienced the highest GDP growth rate of 5.01%, signalling significant improvement in the economy, coupled with the reduction in the inflation rate to about 17.38%. We’ve also experienced strong recovery in crude oil prices and Treasury Bills. As we reflect over the last 18 months since the start of the pandemic, there are signals that we are beginning to see economic recovery and I think that you believe that this will enable us achieve our Financial Year 2021 target.
As at June 2021, we have basically built over 42 million unique customers and 50 million accounts; and this speaks to our increasing coverage at the scale of our franchise. Our business footprint is strong and growing with over 2,950 ATMs spread across in strategic locations of the country. We also have about 63,675 Point of Sale (PoS) equipment and about 10.7 million mobile and internet banking users. Our USSD subscribers’ base also stood at about 6.5 million unique users. We have a wide spread of branches in major cities and financial inclusion centres, with about 759 branches and about 75,231 agent locations. This reflects the share scales of our digital and physical presence in a bid to remain closer to our customers.
Today we are present in 11 African countries, UK, UAE, with strategic representative offices in China, India and Lebanon.
On issue of diversity, ratings and recognitions, which are important to us because of our sustainability ethos; gender diversity remains an extremely important subject for us as you know. Our employee mix is almost an equal distribution with about 53% male to 47% female as at the end of the period.
Our risk ratings are reflective of our strong financial performance with the risk rating caps by the rating of the Sovereigns. We have maintained our risk ratings, except for Standard and Poor’s which dropped because S&P downgraded Nigeria in 2020.
We’ve also received several accolades in 2021 for some of the good jobs which the team has done. This include Africa’s best digital bank from Euro Money; recognition for our strides in digital banking, deals executed in the Agricultural space and of course the one we are particularly and extremely proud of, which our CSR sustainability award; and for 5th time in a role, Access Bank was declared the winner of the Karlsruhe award for outstanding business sustainability achievement. Karlsruhe tends to be growth standard as far as issues around sustainability is concerned.
Speaking more about sustainability efforts and ensuring Access Bank runs in a sustainable manner, we have since embraced ESG as part of our lives; whether it is the diversity of our Board or our workforce or the work that we have done with respect to sustainable financing and all of them; it is at the core of what we do. We have also today the only climate lending bank on the continent
Our Gross Earnings grew by 14% year on year to about N450.6 billion during the period compared to about N396.8 billion in the corresponding period in 2020; comprising of about 71% interest income and 29% non-interest income. Interest Income was up by 30% year on year with 319.7 billion as a result of the increasing yield environment. The key contributors include:
- 79% year on year growth in income from our investment securities groups to N132.2 billion, compared to the N74 billion in the half year of last financial year. This was due to the improved yield environment and the fact that our investment securities groups were growing and
- 9.9% yield in interest on loans and advances to customers which grew to 182.4bn compared to N167.3 billion in the corresponding period of last year. This basically offset a 4% decline in interest income from cash & cash equivalent to N5.2 billion. The decline was driven by downward reprising of placement generally in the market place.
Our non-interest income fell by 13% year on year to N130.9 billion from N150 in the corresponding period in 2020. And this was largely as a result of the significant drop in our net trading income and other operating income.
At a starting point, there was a 41% decline our net trading income to N40.7 billion from N68 billion in the corresponding period last year. And this was as a result of the Naira devaluation.
Secondly there was a 45% drop in our other operating income to N16 billion. This is underlined by the reduction in recoveries from written off loans. If you look at it properly, coming through the acquisition of Diamond Bank, most of the bad loans that we could recover had been recovered. So what we are now beginning to see is a temporary drop in terms of the recoveries.
We also saw a 42% increase in Commissions and Fees to N73.7 billion compared to N51.8billion in the corresponding period of last year. This is coming from increased transaction velocity across our channels and e-business and also some credit related fees and commissions.
We will continue to gain traction on our income from these lines as we extend our retail and loan offerings.
Our retail banking business have seen consistent and continued to witness significant growth driven by strong focus on consumer lending, payments, remittances, digitisation of customer journeys and customer acquisition on a large scale.
We are focused on generating sustainable revenue across all lines. All aspect of our business continues to show significant improvement because Access Bank now more digital than ever before.
Our retails commissions have increased by about 27% per annum over the last 3 years while digital banking revenue increased by 63% over the same period.
We have continued to see resilient income with our improved margins. Our yield of assets increased by 80 basis points driven by the improved deals from Government Securities. This increase, coupled with the decline in our cost of funds by 80 basis points led us to develop an optimal and low cost deposit base and help us to improve our net interest margin. Our net interest margin improved by 157 basis points to stand at 6.4%; and our loans continues to improve with moderation of our cost of funds. We expect that with all of these, moving into the rest of the year, we should be begin to see better performance.
Our operating expenses were up by 9% year on year to N189.8 billion compared to N174.3 billion; and this was well below the inflation rate. The growth we are seeing is driven by the recent acquisition made over the past 12 months in Zambia, Kenya, South Africa and Mozambique. But if you look at the bank level, our operating expense was flat. And this is despite the increased regulatory cost and expenses from AMCON fees and premium as well as depreciation and amortaiztion expenses.
With market realities our Financial Year 2021 target is as follows
- We will achieve a Return on equity greater than 20%
- Our NPL ratio will remain far less than 5%
- Our cost of income ratio will fall further below 60%
- Our Capital Adequacy ratio shall remain greater than 20%
- Our loan to deposit ratio will should be about 65%
- Our cost of risk will be less than 1.5%
- Liquidity ratio should be slightly higher than 50%
- We expect our net interest margins to be well above 5%.
We are confident in the momentum that we’ve built and excited about delivering on our vision of being the world’s most respected African bank”.