Access Bank H1 2021 Result: Earnings Rise, But Debt Worries Persist


Tuesday, September 21, 2021/ 1:15PM /By Adaeze Nwachukwu, Proshare Research/Header Image Credit: Access Bank Plc

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Access Bank Plc had a decent H1 2021 corporate financial performance, with gross earnings rising by +13.58% year on year (Y-o-Y). Most of the gross revenue increases came from interest income (which rose by +58.52%), while non-interest income dipped by -13%. A standout feature of the bank's H1 2021 performance was the +66.95% growth in its loans and advances. The bank's strong earnings equally mirror a diversification of its operating incomes. The bank's Nigerian operation has become watered down as the rest of Africa becomes a stronger corporate focus. Against the African Continental Free Trade Agreement (AfCFTA) background, Access bank's aggressive continental gambit may pay off in spades.     


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H1 2021 Result: Key Highlights

  • Gross earnings rose year-on-year (Y-o-Y) by +13.58% to N450.62bn in H1 2021 from N396.76bn in H1 2020.
  • Net interest income was up Y-o-Y by +58.52% to N200.07bn from N126.21bn in H1 2020
  • Non-interest income fell by -13% to N130.9bn
  • Net interest margin increased to 6.40% from 4.90% in H1 2020.
  • Profit before tax inched up by +31.21% to N97.49bn from N74.31bn in H1 2020
  • Basic earnings per share rose Y-o-Y by +43.35% to 248Kobo from 173kobo in H1 2020
  • Loans and advances to customers rose Y-o-Y by +79.16% to N3.58trn in H1 2021 from N1.99trn in H1 2020
  • Deposit from customers grew by +28.00% to N5.97trn from N4.67trn in H1 2020
  • Total assets inched up by +29.45% in H1 2021 to N10.05trn from N7.77trn in H1 2020
  • Shareholder's fund was up +15.67% to N775bn in H1 2021 from N670bn in H1 2020
  • Return on average equity grew to 22.8% from 19.10% in H1 2020
  • The cost-to-income ratio fell to 60.10% from 65.8% in H1 2020
  • The capital adequacy ratio rose to 21.30% in H1 2021, above the regulatory minimum of 15%
  • The non-performing loans ratio of the group improved to 4.30% in H1 2021 from 4.4%.

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Gross Earnings

The retail lender's gross earnings grew Y-o-Y by +13.58% from N396.76bn in H1 2020 to N450.62bn in H1 2021. Interest income accounted for 71% of the gross earnings, while non-interest income comprised 29%, giving room for growth in the Bank's non-interest income. Growth in earnings was tied to a +58.52% Y-o-Y rise in net interest income (see chart 1 below).


Converting to US dollar terms, gross earnings dipped marginally by -0.04% to US$1.09bn in the same period using the investors' and exporters' window closing rate for the conversion. Gross earnings of the bank declined in US dollar terms because of the devaluation of the domestic currency.


Chart 1: Access Bank's Gross Earnings H1 2017 - H1 2021 (N'bn)

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Source: Access Bank's Financial Statement, Proshare Research


Net Interest Margin

After falling to 4.90 percent in H1 2020 from 7.70 percent in H1 2019, Access Bank's net interest margin rose to 6.40 percent in H1 2021. The rise in net interest margin was supported by a reduction in the cost of funds, from 3.7% in H1 2020 to 2.9% in H1 2021, and improved assets yields as stated by the bank's management (see chart 2 below).


Chart 2: Access Bank's Net Interest Margin H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research



Profit Before Tax

Profit before tax rose Y-o-Y by +31.21% from N74.31bn to N97.49bn in H1 2021 (see chart 3 below).


Translating to the US dollar, PBT saw a lower percentage growth against the Naira. PBT was up Y-o-Y by +15.48% to US$237.70m from US$205.83m in H1 2020.


Chart 3: Access Bank's Profit Before Tax H1 2017 - H1 2021 (N'bn)

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Source: Access Bank's Financial Statement, Proshare Research


The bank's expansion strategy seems to be acing competition as its rest of Africa business segment recorded the highest percentage growth in the period. PBT for the Nigerian business jumped by +20.95%, while the rest of Africa rose by +54.26%, and the Europe segment grew by +46.76%.


However, the Nigerian business segment accounted for the most significant portion of the Group's PBT and contributed 60.87%, although this represented a decline from 66.04% in H1 2020 (see table 2 below).


Table 2: Access Bank's Profit Before Tax by Business Segment

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Impairment Charges

The Group's impairment charges rose for the second consecutive year, however, at a decreasing rate. Impairment charges increased by +74.11% to N28.67bn from N16.47bn in H1 2020 (see chart 4 below).


Total impaired loans and advances were up Y-o-Y by +10.76%, propelled by a +99.62% rise in impairment charges on loans and advances to customers.


Chart 4: Access Bank's Impairment Charges H1 2017 - H1 2021 (N'bn)

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Source: Access Bank's Financial Statement, Proshare Research


Non - Performing Loans

NPLs of the credit lender fell slightly to 4.30% from 4.4%, which is below the regulatory threshold of 5%. H1 2019 records the highest NPL ratio of the bank in recent years (see chart 5 below).


A breakdown of the bank's NPL ratio by sector shows that the manufacturing sector accounted for the highest NPL's by 22.0% in H1 2021, while in H1 2020, the Oil and Gas Services sub-sector accounted for the highest at 11.5%.


Chart 5: Access Bank's NPL Ratio H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research

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Deposits & Loans: Figuring out the Core Business


Deposits-Strong Tailwinds Buoy Growth


The growth in Access Bank's total deposits has not been steady over the years; in H1 2017, total deposits fell by -2.29%, a rebound was recorded consecutively in two years, however, in H1 2020 and H1 2021, growth levels have not returned to H1 2019 levels (see chart 6 below).


In H1 2021, total deposit grew Y-o-Y by +29.05% to N7.73trn from N5.99trn in H1 2020. The growth in total deposit was supported by a +33.47% rise in deposits from financial institutions, while deposits from customers went up by +28.00% to N5.97trn in H1 2021.




Chart 6: Access Bank's Growth in Total Deposits H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research


Loans & Advances- A Lending Spring Unwinds

The financial institution's growth in total loans and advances improved in H1 2021 by +66.95% from +29.19% in H1 2020 and a decline of -7.04% in H1 2019. The +79.16% rise in loans and deposits to customers led the growth in total loans and advances (see chart 7 below).


The loan-to-deposit ratio (LDR) was up to 59.97% in H1 2021 from 42.84% in H1 2020, although the LDR is below the regulatory minimum of 65%.


Chart 7: Access Bank's Growth in Total Loans & Advances H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research


Total Assets-A Jumping Jack in the Making

The lower growth in H1 2020 was seen in total assets; H1 2021 total assets rose by +29.45% to N10.5trn, although not at the H1 2019 levels. This was driven by the +105.53% rise in cash and balances with banks (see chart 8 below).


Chart 8: Access Bank's Growth in Assets H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research


Investor Returns


Return on Average Equity (ROaE)-All in A Days Money Making

ROaE inched up to 22.8% in H1 2021 from 19.1%, with the bank posting its highest ROaE of 23.5% in H1 2019. The rise in equity return was due to an improvement in earnings (see chart 9 below).


Chart 9: Access Bank's Return on Average Equity H1 2017 - H1 2021

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Source: Access Bank's Financial Statement, Proshare Research


The bank has set its FY2021 financial targets for prudential ratios, close to the H1 2021 figures. The NPL ratio as of H1 2021 was 4.3%, below the regulatory threshold of 5%(see illustration 2 below).

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The bank's recent Mergers and Acquisitions (M&As) activities indicate a geographic risk diversification play plan; the reduction in the PBT contribution from Nigeria shows the beneficial outcome of the strategy. The Bank's increased debt size, on the other hand, may cause investor's concern.


Some analysts will argue that the move into the Eurobond market by Access Bank can be seen as a strategic decision; this is as a result of the liquidity glut in the investment space, which was seen in the oversubscription of the instrument issued by the Bank.


There has been a trend of oversubscription in other African Countries that have issued Eurobond instruments in the first half of 2021. In H1 2021, Sub-Sahara African countries (SSA) have raised a total of US$6.1bn in Eurobond Issuance, which is higher by US$2bn or +48.78% increase from the H1 2020 issuance (according to Comercio Partners). The Issuance attracted strong interest as all issues were oversubscribed, with Kenya recording the highest oversubscription of 5x. The country raised a 12-year instrument of US$1bn in the Eurobond market, and it attracted US$6bn with a coupon rate of 6.3% (see table 2 below).




Table 2: Eurobond Issue in SSA

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Analysts also believe that this increased interest in sovereign Eurobond Issues may spill into the Nigeria Eurobond Issuance slated for October 2021. Available data and investor perception suggest continued faith in African sovereign Bond Issues, driving the recently observed oversubscription of recent African Eurobond Offers.


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11.  ACCESS Declares N106bn PAT in 2020 Audited Results, Proposes 55K Final Dividend; (SP: N8.00k)

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