Access Bank records interest income decline of 8.9% y/y to N489.22bn
Access Bank released FY-20 earnings earlier in the week, showing the bank recorded growth in earnings even though it recorded an interest income decline of 8.9% y/y to NGN489.22 billion in the period under review.
Analysts say it was pressured by the decline in income from investment securities (-20.1% y/y to NGN154.64 billion). The decline in income from investment securities was expected given increased capital allocation to risk asset creation given the CBN’s LDR policy and the precipitous decline in yields on assets during the year. Similarly, the bank recorded a decline in income from loans and advances to customers (-5.8% y/y to NGN309.54 billion). These declines were steep enough to offset growth in other contributory lines – cash and balances with banks (+29.8% y/y to NGN11.96 billion) and loans and advances to financial institutions (+134.8% y/y to NGN13.09 billion).
However, on the EPS of NGN3.01 (+7.3% vs. 2019FY), the board has proposed a final dividend of NGN0.55/s (2019FY: NGN0.44/s), which equates to a dividend yield of 6.9% based on the last closing price of NGN8.00/s (31st of March).
Interest expense declined over the period by 12.8% y/y to NG226.27 billion, as the bank recorded declines in expenses on deposits from customers (-29.7% y/y to NGN118.44 billion) and debt securities (-15.7% y/y to NGN19.31 billion), which may be tied to the bank’s improved CASA (64.6% vs. 2019FY: 58.1%) as well as lower net debt outstanding after repayment of a portion of debt in 2019FY.
Non-interest income grew by 125.8% y/y to NGN253.17 billion, supported by strong income growth from investment securities (85.6% y/y to NGN122.69 billion), primarily driven by derivative instruments, which offset the substantial FX revaluation loss recorded (NGN52.23 billion vs. 2019FY: NGN19.05 billion). This growth in non-funded income was strong enough to offset the decline in funded income, leading to a 22.8% y/y expansion in operating income.
Operating expenses increased during the period by 29.0% y/y to NGN327.30 billion, as all major contributory lines recorded spikes, save for personnel expenses – AMCON levy (+56.3% y/y to NGN35.44 billion) and NDIC premium (+18.3% y/y to NGN15.48 billion). On the other hand, personnel expenses declined by 4.9% y/y to NGN73.17 billion. Given the significant year-on-year expansion in operating expenses, the bank’s cost-to-income ratio (after accounting for LLEs) deteriorated to 72.2% from 68.7% in 2019FY.
Consequent to the growth in income relative to expenses, the bank recorded a profit before tax growth of 9.1% y/y to NGN125.92 billion. However, PAT settled 8.7% higher y/y at NGN106.01 billion, given the higher income tax expense (+11.4% y/y).
According to analysts at Cordros Capital, “The bank’s performance was generally in line with our expectations. The deterioration in core income growth was expected given the slowdown in economic activities due to the pandemic as well as regulatory pressure. Our estimates are under review.”
