Key Highlights From Access Bank H1 2017 Conference Call & Earnings Presentation

By Modupe Gbadeyanka

Yesterday, Access Bank held its H1 2017 Conference Call & Earnings Presentation and Business Post brings to its readers some key highlights from the call.

The lender, which boats of 4.6 million cards, 1734 ATMs, 385 branches and 9628 POS terminals, said in the presentation that its strong earnings for the period, N246 billion against N174 billion last year, was on the back of interest and non-interest income growth during the period reflecting improved returns.

Access Bank said it hopes to conclude the development of and commence implementation of its new 5 year (2018-2022) Rolling Plan

It further said it also hopes to intensify low cost deposits drive to reduce funding costs, and deepen retail market penetration to diversify income streams, particularly transaction banking income growth, and as well cautiously grow loan portfolio in light of macro realities, whilst upholding proactive risk management principles in order to maintain asset quality within acceptable limits.

Here are the key highlights below:

Gross earnings up 42% y/y to ₦246.6bn in H1’17 (Q1’16: ₦80.3bn) driven by a 44% and 37% increase in interest income and noninterest income of ₦161.9bn and ₦84.4bn, respectively during the period

• Interest income drivers:

− 35% y/y growth in interest from Loans and Advances as a result of asset re-pricing on the back of high interest rate environment

− 82% y/y increase in interest from investment securities, to ₦37.5bn (H1’16: ₦20.7bn) on the back of growth in investment securities

• Non-Interest Income drivers:

− Strong y/y growth in net trading income of ₦55.4bn (+152% y/y) driven by increase in the Bank’s foreign exchange income resulting from trading activities

Operating expenses up 38% to ₦105.0bn from ₦76.0bn in

H1’16 driven by a combination of:

− Increased regulatory costs

− The impact of devaluation and inflation on costs

− Continuous investments in our channels, distribution network, service quality and brand enhancement

• Consequently, cost-to-income ratio increased to 62.7% in H1’17 from 58.4% in the corresponding period of 2016
• We expect cost to income to normalize at 55% by year end 2017

Net impairment charges on credit losses were relatively flat y/y at ₦10.4bn in H1’17 (H1’16: ₦10.2bn). Collective impairments were up 56% y/y to ₦6.0bn arising from specific assets that were watch listed

• Cost of risk improved 10bps y/y to 1.0% from 1.1% in H1’16
• Net loans and advances stood at ₦1.79trn as at Jun’17 compared with ₦1.86trn in Dec’16 largely due to cautious asset growth given macro uncertainties
• Foreign currency denominated loans declined to $1.76bn by Jun’17 down 12% from $2.19in Dec’16 reflecting the Bank’s deliberate strategy to de-risk the loan portfolio
• FCY loans to total loans closed at 40% in Jun’17, down 200bps from 42% in Dec’16
• Loan-to-deposit ratio (inclusive of interest-bearing borrowings) stood at 74.3% as at Jun’17 (Dec’16: 74.0%)

Customer deposits stood at ₦1.90trn in Jun’17 (Dec’16: ₦2.09trn) on the back of the improved FX liquidity as deposits accumulated for FX purchase in 2016 were utilized

• Consequently, FCY contribution to total deposits declined 40bps to 30% in Jun’17 (Dec’16: 34%)
• Subsidiaries’ contribute 25% to total Group deposits, largely made up of low-cost savings Capital Adequacy Ratio (CAR) increased to 21.6%, up 60bps from 21% in Dec’16, reflecting the Group’s robust capacity for growth
• Risk-weighted assets remained relatively flat at ₦2.36trn on the back of slowed loan growth during the period
• Liquidity Ratio improved 180bps y/y to 45.4% in Jun’17 (Dec’16: 43.6%), reflecting the Bank’s improved ability to meet short-term obligations Increased e-channels adoption by customers (Internet/Mobile Banking, PayWithCapture, ATM & POS, etc)
• Improved efficiency, stability, ease of use and patronage on the PaywithCapture platform
• Seasonal and continuous customer rewards program to induce spending habit of customers
• Effective and enhanced call center engagements
• Account dormancy declined to 6% demonstrating renewed customer interest on the back of intensified engagement efforts and the migration of customer of alternative channels

Subsidiaries contribution to the group’s performance improved significantly in H1’17, recording total subsidiary profit before tax of ₦6.7bn up 56% y/y (H1’16: ₦4.3bn)

• Total assets from subsidiaries grew 18% to ₦711bn y/y largely driven by business operations in UK and Ghana, but reduced 5% q/q (Q1’17: ₦749bn)

• Zambia recorded a loss of ₦0.9bn driven by lower earnings and higher expenses as a result of for the period.