Access Bank Plc earned an after-tax profit of about N53 billion at the end of the first quarter in March 2021 – one-half of its closing profit of N106 billion in 2020. This follows a major improvement in converting revenue into profit that the bank has never attained all through the past decade.
Net profit margin took a big leap from less than 14 percent at the end of last year to 23 percent in the first quarter of the current financial year. This means the proportion of the naira of gross earnings that formed after-tax profit rose from less than 14 kobos to 23 kobo over the period.
The profit figure for the quarter is an increase of over 28 percent year-on-year, a strong acceleration from an increase of 8.7 percent in profit at the end of last year.
The elevated profit record was achieved from less than a 6 per cent improvement in gross earnings. This indicates that the strength for the profit growth lay in significant cost savings during the quarter.
Interest expenses provided the cost-saving channel for the bank in the first quarter. Cost of funds dropped by close to N10 billion or 16.5 per cent year-on-year to N49.8 billion at the end of March 2021. This is further to a drop of over N33 billion or 13 per cent in interest expenses at the end of 2020.
Unlike in the preceding financial year however the drop in interest expenses this year was supported by an increase in interest income. There is a turnaround for the bank from a drop of 9 per cent in interest income in 2020 to an increase of 9 per cent in the first quarter. The bank closed the first quarter with interest earnings of N144 billion.
The combination of an increase in interest earnings and a drop in interest expenses was the critical development that powered profit growth for Access Bank over the period. It accounted for a leap of 30 per cent in net interest income year-on-year to N94 billion.
Rapidly growing loan impairment charges is a challenge that has been on for the bank since the past two years – from an increase of 38 per cent in 2019 to 211 per cent in 2020 and further to 46 per cent in the first quarter of this year. A net loan impairment charge of N12.5 billion was recorded in the first quarter.
Despite the strong growth in net credit loss expenses, the bank was able to push up net interest income after the charges by 28 per cent to over N81 billion at the end of the period.
Access Bank closed the first quarter with gross earnings of N222 billion, which is an increase of less than 6 per cent year-on-year. The increase was accounted for exclusively by interest income while non-interest earnings closed flat at N78 billion.
The bank is experiencing volatile behaviour of non-interest income lines for yet another year. There was a marked drop of 67 per cent in net gains on financial instruments and a 73 per cent drop in other income. These were moderated by upswings in net foreign exchange gain and net gain on fair value hedge.
The bank’s management cut its way through the volatility to keep profit accelerating in the first quarter. It closed the first quarter with an after-tax profit of N52.5 billion.
The bank succeeded in reversing the position last year when profit improved at about one-half the revenue growth. This time, profit rose well ahead of revenue at 28 per cent compared to 6 per cent. It has therefore recovered from a loss of profit margin at the end of last year and lifted net profit margin to the highest record of 23 per cent in a decade at least.
Another favourable turn of events that helped profit performance in the first quarter is a sharp slowdown in operating expenses compared to a 27 per cent advance in 2020. At N91.5 billion in the first quarter, total operating cost claimed a reduced share of gross earnings at 41 per cent against 43 per cent in the same period last year.
Access Bank grew the size of the balance sheet by N374 billion to the N9-trillion mark at the end of March 2021. With that, it has retained the banking industry leadership by assets. And with the improvement in revenue and a strong gain in profit margin, the bank is also pressing for industry leadership by revenue and profit numbers.
Access Bank closed the first quarter of the year with earnings per share of N1.49, improving from N1.21 per share in the same period last year.
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