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Access Bank Q3-17: Declines in Loan Loss Provision, Opex Supported PAT Growth

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By Cordros Research

Access Bank Plc (ACCESS) yesterday released its Q3-17 results, wherein gross earnings (9.31% q/q and 18.26% y/y, in line with our estimate) came in lower relative to Q2-17.

This follows lacklustre performance across income lines-interest income grew lower than expected (1.69% q/q and 21.84% y/y, 4.32% below our estimate) and non-interest income declined 28.25% q/q (+10.35% y/y), 11.37% above our estimate.

However, following significant declines in loan loss provision and opex, PBT (+0.12% q/q and -5.08 y/y – 7.63% below our estimate) grew marginally, while PAT (26.04% q/q and -3.81% y/y – 9.28% below our estimate) grew double-digit, supported by a lower effective tax rate during the quarter.

The marginal q/q growth in interest income during the period was driven by 6.35% q/q (+13.22% y/y) decline in interest on loans and advances, which muted the double-digit growth in interest earned on investment securities –available for sale (+31.84% q/q and 105.90% y/y), held for trading (+2.68% q/q and +152.26% y/y), and held for maturity (+25.54% q/q and +1.73% y/y) – thus supporting a slight expansion in assets yield by 3 bps y/y to 10.35%.

Accordingly, net interest margin expanded 10 bps y/y to 5.51%, despite a more-than-expected growth in interest expense (7.735 q/q and 46.91% y/y – 11.78% above our estimate), driven by the elevated interest charges on customers deposit (12.24% q/q), and borrowings – debt securities issue (+4.97% q/q) and other borrowed funds (+304.72% q/q) – reflecting the impact of the premium on the USD112 million refinancing of its Eurobond and an additional N59 billion commercial paper issued in H1-17.

The steep contraction in NIR stemmed from significant declines in fixed income securities and derivative instruments trading, the cumulative impact of which masked the 36.85% q/q growth in foreign exchange trading income and marginal growth in fee income.

On the positive, total opex declined (17.82% q/q and +6.74% y/y, in line with our estimate) in Q3-17, following significant contraction in operating expenses (29.03% q/q and +6.74% y/y), which subdued growth in personnel expenses (8.18% q/q and 13.52% y/y) and depreciation and amortization (10.56% q/q and 24.94% y/y).

Overall, over 9M-17, gross earnings grew double-digit (by 33.05%), in line with our estimate. While PBT grew marginally by 1.26%, PAT declined slightly by 1.23%. The impressive growth in gross earnings over the period broadly reflects robust interest income, on impressive yield on interest earning assets (+190bps to 12.92%), and the surge in foreign exchange trading income, which supported 27.91% growth in NIR. The bottom-line contraction was due to opex increasing by 34.49% y/y, with cost to income ration expanding 665 bps y/y to 64.32%.

Over 9M-17, asset quality deterioration persists, with NPL ratio rising 41 bps y/y to 2.51% (3 bps above the 2.48% in H1-17), while additional provisioning of N2.46 billion in Q3-17 pushed annualized cost of risk 40 bps y/y higher to 1.22%.

The provisioning came in below our estimate of N7.62 billion. Given the impressive PAT over Q3, we believe management is still on course to deliver its 2017F ROE guidance of 20.0% (vs. 17.4% in FY-16). While acknowledging the slow growth in interest income in Q3, we believe ACCESS is poised to outperform in 2017F, driven by (1) the significant growth reported in interest income and (2) foreign exchange trading gain booked in 9M-17. Based on our last TP of N12.06, we have a BUY recommendation on the stock.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

Banking

874 Stanbic IBTC Bank Customers to Win N130m in Reward4Saving Promo Season 4

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Stanbic IBTC Bank seamless transactions

By Dipo Olowookere

About N130 million has been set aside by Stanbic IBTC Bank for 874 of its lucky customers in the Reward4Saving Promo season 4.

This year’s campaign, which was launched recently, has more cash prizes, providing customers even more chances to save and win big.

The promotion encourages Nigerians to develop a savings culture and reward their loyalty. Simply fund your new or existing savings or @ease wallet with a minimum of N10,000 for at least 30 days. The more multiples of N10,000 they save, the higher of their chances of winning.

To participate, eligible individuals must maintain a minimum balance of N10,000 in their Stanbic IBTC Bank Savings Accounts or @ease Wallet for at least 30 days to be automatically entered into the promotion.

Non-account holders are encouraged to open Stanbic IBTC Bank Savings Accounts and maintain a balance of N10,000 to participate. Winners will be selected through a transparent random draw process and receive exciting cash prizes ranging from N100,000 to N5 million.

To lend credence to the transparency of the winners’ selection process in the Reward4Saving Promo, the draws are usually supervised by representatives from National Lottery Regulatory Commission (NLRC) and Advertising Regulatory Council of Nigeria (ARCON).

The promo has won The Most Transparent Consumer Promotion Award, two years in a row at the Industry Awards.

The financial services provider in Nigeria said it created this campaign to reinforce its commitment to fostering a strong savings culture among Nigerians.

“We are committed to empowering our customers to achieve their financial goals.

“The Reward4Saving Promo is our way of saying ‘thank you’ to our loyal customers and encouraging them to develop a savings culture,” the chief executive of Stanbic IBTC Bank, Mr Wole Adeniyi, stated.

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Banking

No Plans to Introduce N5000, N10000 Naira Notes—CBN

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n5000 and n10000 naira notes

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) has dismissed a widespread circular claiming the country has introduced two new large denominations— N5,000 and N10,000 notes.

The apex bank described the circular as “fake” in a statement via its official handle on X (formerly Twitter).

The alleged circular said the new notes were set for circulation from May 1.

Business Post gathered that the notes were generated with Artificial Intelligence (AI) showing the late Obafemi Awolowo, who is originally on the N100 note, on the N5,000 note and the late Nnamdi Azikiwe, originally on the N500 note, on the N10,000 version.

“The Central Bank of Nigeria (CBN) has officially announced the introduction of two new denominations – N5,000 and N10,000 banknotes; as part of ongoing efforts to streamline cash transactions and improve liquidity management,” the viral circular widely shared online and falsely attributed to the CBN, stated.

The document further alleged that one Deputy CBN Governor, Mr Ibrahim Tahir Jr, justified the move as a way to reduce cash-handling costs while offering Nigerians more efficient options for larger transactions.

However, the apex bank refuted the claims, urging the public to verify information through its official website.

“The content is not from the Central Bank of Nigeria. Kindly note that the official website of the CBN is cbn.gov.ng,” the CBN stated, emphasising its commitment to transparency and accurate communication.

In 2022, the apex bank announced the redesign of the N200, N500, and N1,000 notes with the new notes entering circulation on December 15, 2022. This initiative aimed to address issues such as currency counterfeiting, the prevalence of currency outside the banking system, and to promote a cashless economy.

According to the CBN, under then Governor Godwin Emefiele, said the redesigned banknotes feature enhanced security measures and updated designs to improve their durability and aesthetic appeal.

The CBN emphasized that introducing new designs aligns with global practices, where national currencies are periodically redesigned to combat counterfeiting and enhance security.

The old versions of these denominations remained legal tender and circulated alongside the new notes until January 31, 2023, after which they were phased out.

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Banking

Sterling Bank Waives Bank Transfer Fees for Customers

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sterling bank logo

By Aduragbemi Omiyale

A tier-2 financial institution, Sterling Bank, has confirmed the introduction of a zero-transfer-fee policy for customers with immediate effect.

The bank has urged others in the banking industry to emulate this initiative, saying customers should not be overburdened with bank transfer charges.

“We believe access to your own money shouldn’t come with a penalty.

“This is more than a financial decision, it’s a values-based one. It reflects our commitment to making banking fair, inclusive, and truly customer focused.

“We’re not yet the biggest bank in Nigeria, but we’ve been the boldest.

“Sterling fearlessly believes in the future of Nigeria, and this is us backing Nigerians with more than words,” the Growth Executive Leading the Consumer and Business Banking Directorate at Sterling Bank, Obinna Ukachukwu, stated.

Recall that on April Fool’s Day, Sterling Bank announced waiving bank transfer fees for customers and many thought it was just a marketing prank.

But in a statement today, the lender reaffirmed that it introduced this policy to set a new benchmark for customer-focused banking in Nigeria by championing the cancellation of bank transfer charges.

With this move, Sterling becomes the first major Nigerian bank to take a definitive stand against the long-standing practice of charging customers for everyday digital transfers, an issue that has grown increasingly contentious as digital banking adoption deepens.

Under the new policy, Sterling Bank customers will enjoy free transfers for all local transactions conducted via the bank’s mobile app. This translates into significant savings, particularly for individuals and new small business owners who make frequent daily transfers.

This customer-first orientation is not new for the bank. During the COVID-19 pandemic, the company stood out by providing supplementary payments to healthcare workers in public hospitals—at a time when few others were willing or able to offer additional support.

The bank’s latest move has been met with widespread public approval, sparking positive reactions across social media and placing pressure on industry peers to follow suit.

“We’re proud to lead this change. We hope it inspires others to think differently about what customers truly need from their banks, not just in services, but in values,” Ukachukwu added.

Sterling Bank’s zero-fee policy is part of a broader strategy to transform the customer experience and deliver transparent, ethical banking solutions at scale.

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