Access Bank’s Renewed Strength
By Micheal Moses
Post merger operations of Access Bank show new strengths in critical areas, recharging further the enhanced operating momentum gained last year. It has emerged a carrier of the largest earning assets in the Nigerian banking industry as well as the biggest revenue earner.
The established strength of Diamond Bank in retail business has come handy for Access Bank toascend to the position of the largest single depository with customer deposits in the region of N4 trillion. This is a 53% jump from N2.56 trillion customer deposits at the end of 2018. The development has diluted cost of funds, improved margins and profit capacity.
Access Bank’s business combination with Diamond Bank has given birth to a N6.43 trillion nairabank, forming the largest bank in Nigeria by the size of the balance sheet. This is a high jump of 30% from the closing asset figure of under N5 billion in 2018.
The overnight swelling in balance sheet size has further extended the bank’ pre-merger lead asthe biggest lender. The bank was already carrying the largest credit portfolio in the banking industry at about N2 trillion before the merger. It has now extended the leadership by loan portfolio with a net lending to customers position of N2.6 trillion at the end of the first quarter.
Expansion of earning assets has increased the earning capacity. Gross earnings grew by 15%year-on-year to N160 billion in the first quarter. Both interest and non-interest income contributed to the revenue improvement recorded over the period.
Based on the first quarter growth rate, the full year outlook indicates gross earnings in the region of N645 billion for Access Bank in 2019. It closed last year with gross earnings of N528.72 billion, a growth of 15.2%.
The ability to convert revenue into profit has also increased. The bank has seen a big leap in netprofit margin from 18% in the 2018 full year to almost 26% at the end of the first quarter.
Access Bank hasn’t seen that level of profit capacity in many years.
First quarter ended with an after tax profit of N41 billion, a towering year-on-year growth of86%. Earnings per share grew from 77 kobo in the same period last year to N1.39 at the end of March 2019.
Cost moderation is one of the key strengths of the bank in the post merger trading. Therelatively high speed of growth in interest expenses experienced in the past two years has moderated and so has the proportionate claim of cost funds on revenue.
Compared to an increase of 15.8% in interest income to about N111 billion in the first quarter, interest expenses increased by less than 6% to N53 billion during the period. This enabled27% expansion in net interest income to about N57 billion, a positive indication amidst a generally decelerating net interest income in the banking industry.
Further strength in operations came from a drop of 32% in net impairment charge, which hassustained a major drop recorded in 2018. This indicates improving loan recoveries and write backs of previous charges to profit.
Cost saving in the area of operating expenses is yet another major strength the bank is putting up in the post-merger operations. Apparently, with the economy of scale benefits, total operating expenses increased just slightly in the first quarter, which reduced operating cost margin and improved profit margin for the bank.
Equity standing of the new Access Bank has been reinforced, raising shareholders’ funds fromN490 billion at the end of last year to N576 billion at the end of March 2019. This is one of the top three largest equity resources in the Nigerian banking industry.
Access Bank succeeded in rebuilding profit in 2018 from a drop in the prior year, ascending to anew profit high of N95 billion in the year. This year, the bank is likely to close with after-tax profit in the region of N160 billion.
The key factor in the performance last year is a drop of over 57% in loan impairment expenses, changing direction from major increases in the preceding two years. A 55% drop in tax expenses also provided support for the bank’s high-profit growth in 2018.
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