Access Holdings’ Revenue Jumps To N1.6trn In Q3 But Rising Cost Shrinks Margins

Access Holdings Plc gained speed on its earnings growth track in the third quarter with gross earnings accelerating from 59 percent increase at half-year to 75.7 percent to close at almost N1.6 trillion at the end of September 2023.

More than N653 billion was generated in gross income in the third quarter, which represents 41 percent of the closing nine-month figure.

Profit improvement also gained momentum in the third quarter from 52.6 percent at half year to almost 83 percent at the end of the third quarter. The third quarter contributed N115 billion to the bottom line, the biggest quarterly profit so far this year.

Pressure from rapid cost increases led by cost of funds however intensified during the period, leaving margins unimproved.

The bank’s third-quarter interim financial report at the end of September 2023 shows that the galloping speed growth in cost of funds seen at half year got further extended in the third quarter.

Interest expenses have kept on accelerating from 84 percent growth in the first quarter to almost 119 percent jump at half year and further to 126 percent to close at N658.5 billion at the end of the third quarter.

Cost of funds claimed 69 percent of interest income at the end of the third quarter, which is an increase from 51 percent in the same period last year, posing a continuing strain on the bank’s ability to convert interest earnings into profit.

The accelerated growth in revenue in the third quarter was led by interest earnings, which rose by 106 percent to over N441.6 billion for the quarter. Foreign exchange gain equally grew by 119.4 percent to N122.6 billion over the same period.

The increased revenue delivery in the quarter was followed by some cost moderation, which enabled an increase of over 138 percent in profit for the quarter to N115 billion or 46 percent of the nine-month figure.

The bank’s nine-month position shows that interest income accelerated from 63 percent at half a year to 83.3 percent to over N1 trillion at the end of September. With the strong growth in cost of funds, net interest earnings grew by a much slower margin of 39 percent than the increase in interest income.

The cost of funds continues to claim rising proportions of interest income from 63 percent at half year to 69 percent at the end of the third quarter.

However, the bank’s management continues to save costs from a comparatively slow rate of increase in net impairment charges on financial assets. Net loan impairment charges grew by 11.8 percent year-on-year to N61.8 billion. Considerable expansion in assets hasn’t led to a significant increase in credit losses.

Net interest income after loan impairment charges therefore keeps accelerating from an increase of less than 4 percent in the first quarter to 16.4 percent at half year and further to 44.3 percent at the end of the third quarter to close at N328 billion.

Total operating expenses grew at a faster pace in the third quarter than previously, which pushed up the year-on-year increase from 23 percent at half-year to 37.8 percent to N519 billion at the end of the third quarter.

However, with the more rapid increase in gross earnings, the operating cost margin kept declining from 35.2 percent in the first quarter to 33.6 percent at half year and further to 32.6 percent at the end of the third quarter.

Yet, the cost savings made from net impairment charges on financial assets and operating expenses were insufficient to remedy the encroachment of cost of funds on earnings and the profit margin was only slightly improved from 15.1 percent in the same period last year to 15.7 percent at the end of the third quarter, improving however from 14.4 per cent at half year.

Access Holdings closed the third quarter operations with earnings per share of N6.92, improving from N3.87 per share in the same period last year.