Reduced FX losses drove Access Bank Plc’s robust revenue growth by 14.7% y/y to N764.7bn amidst challenging operating environment

• Banking group reports an overwhelming Q4’20 numbers with falling gross earnings to N171.9bn

Charles Abuede

Nigeria’s top-most lender, Access Bank Plc has on Thursday announced a 14.7 per cent year on year growth in its total revenue (gross earnings) at N764.7 billion. The robust growth in gross earnings was principally driven by an 85.6 per cent year on year spurt in net gains on financial instrument held at fair value and reduced FX losses, offset by a decline in other operating income by 20.3 per cent and a 23.7 per cent drop in interest income on financial assets at the fair value of profit and loss (FVPL).

The banking group, in its consolidated group financial statement for full-year 2020, also ascertained that its profit before tax (PBT) was reported at N125.9 billion from N111.9 billion last year rising by 12.5 per cent year on year and helped by gains on financial instruments held at fair value of profit and loss (FVPL) at 85.6 per cent year on year and reduced foreign exchange losses. Also, an 11.4 per cent year on year increase in tax expense led to profit after tax (PAT) being reported at N106.0 billion, a 12.7 per cent rise compared to FY2019.

Elsewhere, the bank reported underwhelming fourth-quarter numbers with gross earnings declining 12.3 per cent quarter on quarter to N171.9 billion while the interest income on financial assets fell 74.1 per cent quarter on quarter. On the flip side, the loan impairment charges rose by 61.2 per cent year on year to N28.6 billion in the quarter. In addition, the fee and commission income declined 20.2 per cent quarter on quarter coupled with a 45.8 per cent quarter on quarter rise in the expense. Other income was up 271.3 per cent, majorly due to disposal gains on property and equipment. The personnel expenses were controlled at N16.1 billion and resulting in a 78.0 per cent quarter on quarter drop in profit before tax (PAT) at N9.3 billion in the final three months of 2020.

Further breakdown of the annual financial data from the tier-1 financial institution, the group experienced a significant reduction in interest expense attributable to the drop in interest payout for savings accounts based on the decision to reduce interest on savings to 10 per cent of monetary policy rate (MPR) from 12 per cent. This also stems from the fact that the deposit mix contains a significant portion of the savings account category. The decrease in interest income is attributable to a drop in yield of securities and decreased trading activity level during the year. The bank also, grew its commercial sector loan book by the highest 53.4 per cent year on year, followed by loans to the corporate sector by 2.1 per cent year on year. However, there was a decline in banks’ business and retail banking loans by 2.7 per cent and 61.3 per cent.

Also, in the year 2020, the bank operated above its targeted capitalisation range and well over the CBN mandated regulatory minimum of 16 per cent for domestic systemically important banks. As of December 31, 2020, the bank’s capital adequacy ratio was 20.6 per cent. The net fee and commission income grew 26.4 per cent year on year to N93.6 billion in FY20 despite the containment measures implemented against the COVID-19 pandemic and Central Bank’s revised guide on bank charges with a significant impact on fees and commission line. The bank’s channel and E-business income reported under the fee and commission line increased significantly from N36.0 billion to N56.1 billion. Further afield, it is worth noting that there was a 211.5 per cent year on year surge in its loan impairment charges from N20.2 billion to N62.9 billion, given the weak economic environment, resulting in a 22.2 per cent year on year decline in net interest income after impairment charges at N200.1 billion.

Looking at the bank’s performance geographically, the Rest of the African region was the best performing region as it posted a 44.2 per cent year on year jump in revenues to N89.0 billion, supported by a 17 per cent year on year growth in Europe to N49.3 billion. However all these, Nigeria accounts for more than 80 per cent of the group’s revenues climbing 11.1 per cent year on year to N635.7 billion in the year under review. Meanwhile, the bank was able to keep its personnel expenses in check with a 4.9 per cent decline during the reported year. However, other operating expenses surged by a whopping 42.8 per cent year on year from N151.1 billion to N215.8 billion.

At some point in the 2020 financial year, the bank Directors declared and paid an interim dividend of 25 Kobo per ordinary share for the half-year period ended June 30, 2020, and subsequently recommended a final dividend of 55 Kobo per share, bringing the total dividend for the financial year ended December 31, 2020 to 80 Kobo per share from 65 Kobo per share declared in 2019.