Access Bank 9M 2020 Results: Topline Growth Greets Rising Impairment Charges

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Sunday, December 13, 2020, 9:00 AM / by Adaeze Nwachukwu, Proshare Research / Header Image Credit: Punchy Info


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The 9 Month 2020 result of Access Bank Plc showed strong top and bottom-line numbers, which was achieved despite harrowing economic headwinds caused by the COVID-19 pandemic and tumbling international oil prices. Although the bank's operating expense rose by +34%, profit after tax (PAT) moved up by +15.68% year-on-year (Y-o-Y).


 

Key Highlights

  • Gross earnings increased by +15.41%, from N513.66bn in 9months 2019 to N592.79bn in 9months 2020.
  • Profit before tax for the group grew by +15.69% from N100.8bn in 9months 2019 to N116.62bn in 9 months 2020
  • Profit after tax increased by +15.68% from N88.44bn in 9months 2019 to N102.3bn in 2020
  • Total Assets grew significantly by +19.96% from N6.61trn in 9months 2019 to N7.92trn in 9months 2020.
  • NPL ratio for the group rose from 6.3% in 9months 2019 to 4.2% in 9months 2020.
  • Capital adequacy ratio (CAR) rose to 21.1% as against 20.0% for FY 2019.
  • The group's cost-to-income ratio (CIR) fell to 62.1% in 9 months 2020 from 63.8% in 9months 2019.
  • The deposit money institution's liquidity ratio climbed marginally from 47.0% in FY 2019 to 48.0% in 9months 2020, this was above the regulatory minimum of 30%.

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Profit Still Receive a Pat on The Back


Profitability

Access Bank Plc saw steady growth in gross earnings over the first nine months of 2020, gross earnings rose by +15.41% year-on-year (Y-o-Y) from N513.66bn in 9months 2019 to N592.79bn in 9months 2020. Non-interest income drove the rise in gross earnings, as fees and commission jumped by +31.37% Y-o-Y, despite the -6.63% drop in net interest income (see chart 1 below).


In US dollar terms, gross earnings of the group slid by -7.03% which was in contrast to the growth recorded in Naira terms, from $1.67bn in 9months 2019 to $1.56bn in 9months 2020 using the CBN official rates at the different periods. The banking group's foreign currency translation cost settled at $375.53m, representing a dollar diminution in earnings as a result of a naira devaluation.

 

 

Chart 1: Access Bank Gross Earnings 9M 2016 - 9M 2020 (N'bn)

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Source: Access Bank Financial Statement, Proshare Research

 

Profit before tax (PBT) increased by +15.69% Y-o-Y, from N100.8bn in 9months 2019 to N116.62bn in 9months 2020. Growth in PBT was driven major on the back of gains on financial instruments and foreign exchange gains, they both increased significantly by +2431.07% and +145.34% respectively, this was achieved despite the +34.04% growth in operating expense (OPEX) (see chart 2 below).


Translating to US dollar terms, PBT declined by -6.80% Y-o-Y, from US$328.43m in 9months 2019 to US$306.09m in 9months 2020 using the CBN official rate. Foreign currency translation cost was US$73.88m because of the devaluation of the domestic currency.

 

Chart 2: Access Bank Profit Before Tax 9M 2016 - 9M 2020 (N'bn)

 

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Source: Access Bank Financial Statement, Proshare Research

 

Impairment charges of the group worsened for the period; the moneylender recorded a +222.70% growth in impairment charges from an impairment charge of N10.61bn recorded in 2019 to a charge of N34.24bn (see chart 3 below).

 

Chart 3: Access Bank Impairment Charge 9M 2016 - 9M 2020 (N'bn)

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Source: Access Bank Financial Statement, Proshare Research


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Asset Quality

Asset quality of the Group improved significantly as can be seen in the ratio of the Non-performing loan (NPL) for the period. NPL declined to 4.2% from 6.3% in 9months 2019 (see chart 4 below). 


Chart 4: Access Bank NPL Ratio 9M 2016 - 9M 2020 (%)

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Source: Access Bank Financial Statement, Proshare Research

 

Growth in total assets has an upward trend over the period, for 9months 2020, total assets grew by +19.96% Y-o-Y from N6.61trn in 9months 2019 to N7.92trn. major drivers of the growth in total assets were the cash and balances with banks. Non-pledged trading assets, total loans, and advances, and investment securities, all increased by +14.66%, +317.58%, +19.21%, and +65.65% respectively (see chart 5 below).

 

Converting to US dollar terms, total assets dipped by -3.37% from $21.52bn in 9months 2019 to $20.79bn in 9months 2020.


Chart 5: Access Bank Total Assets 9M 2016 - 9M 2020 (N'trn)

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Source: Access Bank Financial Statement, Proshare Research


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A Mixed Music Machine for Investors


Total Shareholders Fund

Shareholders fund increased by +10.51% Y-o-Y, from N614.84bn in 9months 2019 to N679.46bn in 9months 2020. The growth in shareholders fund was on the back of a +23.52% increase in retained earnings, "other components of equity" increased also by +8.55% which comprises of the bank's various reserves (see chart 6 below).

 

In USD terms, shareholders fund declined Y-o-Y by -10.98%, from $2.0bn in 9months 2019 to $1.78bn in 9months 2020 using the official exchange rate.

 

Chart 6: Access Bank Total Shareholders Fund 9M 2016 - 9M 2020 (N'bn)

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Source: Access Bank Financial Statement, Proshare Research


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Cost

The cost-to-income ratio declined to 62.1% in 9months 2020 from 63.8% in 9months 2019, this was achieved despite the +34.04% increase in operating expenses and -1.41% decline in operating income (see chart 7 below).

 

Chart 7: Access Bank Cost-to-Income Ratio 9M 2016 - 9M 2020 (%)

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Source: Access Bank Financial Statement, Proshare Research


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Investor Ratio

Access Bank posted a marginal decline in its return on equity (ROE) for the period. ROE dropped to 21.2% in 9months 2020 from 22.3% in 9months 2019 (see chart 8 below).

 

Chart 8: Access Bank Return on Average Equity 9M 2016 - 9M 2020 (%)

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Source: Access Bank Financial Statement, Proshare Research

 

Return on assets also declined in 9months 2020 to 1.8% from 2.1% in 9months 2019, the lowest it has been in the last 5 years (see chart 9 below).

 

Chart 9: Access Bank Return on Average Assets 9M 2016 - 9M 2020 (%)

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Source: Access Bank Financial Statement, Proshare Research

 

Year-End's Hopeful Tally

Access Bank Plc is one of the most rigorous pursuers of delinquent debtors. The bank's efforts have been notable even if not as successful as would be desired. Nevertheless, the bank's books look decent and could improve markedly as the impact of the COVID-19 pandemic lockdown wears off and businesses find new oomph.



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