Access Bank: Diversification Drives Profitability, Dividend

Access Bank Plc’s diversified business strategy in 17 markets has yielded significant growth in non-core and core businesses, leading to 40 per cent and 51per cent increase in profit before tax and profit after tax in 2021, respectively. 

The Group, guided by a robust risk management framework, grew its business cautiously and recorded sound prudential ratios despite challenging market conditions.

With the growth in profits, the lender hit an all-time high total dividend payout to shareholders to pose as one of the most profitable banks in the continent. 

On the Earning Per Share that gained 52.2 per cent to N4.58 in 2021 from N3.05 reported in 2020, the board proposed a final dividend of N0.70 per share as against N0.55 per share in 2020 and equates to a dividend yield of 7.14 per cent based on the last closing price of N9.95 per share as at March 25^th, 2022. 

The board had paid shareholders interim dividend of N0.30 kobo per ordinary share of 50 kobo each (H1 2020: 25Kobo) on the 35,545,225,622 issued ordinary shares of 50k each, bringing total dividend payout to shareholders in financial year ended December 31, 2021 to N1.00 as against N0.80 paid to shareholders in 2020. 

The lender currently has a presence in over 17 markets, providing banking services to over 45 million customer base, and making it Africa’s largest lender by customer base.

Access Bank has subsidiaries across Sub-Saharan Africa and Europe, providing financial and banking services. The Bank’s subsidiaries include Access Bank (Gambia) Limited, Access Bank (Sierra Leone) Limited, Access Bank (Zambia) Limited, Access Bank (UK) Limited, Access Bank (Ghana) Limited, Access Bank (D.R. Congo), Access Bank (Rwanda) Limited, Access Bank (Guinea) Limited, Access Bank (Kenya) Limited and Access Bank (Mozambique) Limited.

The Bank also has representative offices in China, Lebanon, India and United Arab Emirate (UAE).

Access Bank remains well-positioned to maximize opportunities, given its significant traction in Nigeria, across Africa and the world at large.

In 2021, the Bank relied heavily on its robust technology (digital platforms) to deliver uninterrupted services to customers in addition it continued its African expansion project, though cautiously.

As of 2021, Access Bank has about 2,921 Automated Teller Machines (ATMs), about 74,612 Point of Sales (PoS) terminals, and 735 branches.

The figure keeps increasing by the day and shows the sheer scale of digital footprint following more acquisition in Africa.

This is in addition to the Bank’s existing commitment to sustainable business practices and demonstration of its ability to re-engineer the face of Africa by engaging in transactions, processes and partnerships that enable future generations to meet their needs.

Gross earnings, profits new high

The 2021 financial year results showed substantial growth in Gross Earnings that gained 27.1 per cent to N971.89 billion from N764.7 billion reported in 2020.

The growth in gross earnings was driven by growth in interest income and non-interest income as the bank was more aggressive in creating risk assets, especially through its digital and retail-based products, which bolstered fees and commission income. 

The bank recorded an interest income growth of 23per cent to N601.70 billion in 2021 from N489.22billion in 2020, buoyed by the uptick in income from investment securities that gained 31.7 to N203.68 billion in 2021, while income from loans and advances to customers grew by 16.4 to N370.82billion from N309.54billion reported in 2020. 

The growth across these income lines offset the sole decline in cash and balances with banks that dropped by 20.9 per cent to N9.46 billion in 2021 from N11.96 billion reported in 2020.

Interest expense also increased by 32.8per cent to N300.24 billion in 2021 from N226.3billion in reported in 2020, with a significant spike in the cost of deposit from customers that grew by 41.1 as the bank took on more expensive term deposits to meet its obligations. 

Consequently, the bank’s Current Account Savings Account (CASA) mix deteriorated to 58.4per cent in 2021 from 64.6per cent in 2020. 

So, the group reported 15 per cent increase in net interest income to N301.46billion in 2021 from N262.95billion reported in 2020. 

Similar to other Tier-1 peers, Access bank’s non-interest income grew significantly by 34 to N370.09 billion in 2021 from N275.5billion in 2020, supported by 48 per cent increase in other operating income to N65.9billion, including the bargain Purchase from acquisition in the period of N2.5billion and recoveries from written off loans, a 36 per cent increase in fee and commission income to N159.2billion in 2021 on the back of increased adoption of channels and velocity of transactions. In addition to factors that contributed to the Group’s non-interest income was 27 per cent increase in net trading income to N145billion in 2021 on the back of efficient treasury activities. 

This growth in non-funded income further supported the funded income growth, leading to a 21.1 per cent expansion in operating income.

In the year under review, Access Bank’s Operating expenses (OPEX) increased by 14per cent to N371.14 billion in 2021 from N326.5billion reported in 2020, driven by the high inflationary environment, exchange rate movement and the enlarged franchise following the recent acquisitions across Africa.

African Expansion Drives OPEX

OPEX from the new subsidiary in Guinea and recent acquisition in Botswana, Mozambique, South Africa and Zambia was N25.3billion. Taking this into consideration, OPEX grew by six per cent to N345.8billion.  

Other major contributory lines to spikes in OPEX include  – personnel expenses that gained 32.2 per cent to N96.71 billion; deposit insurance premium increased by 32per cent to N20.44 billion; AMCON levy rose by 17.1 per cent to N41.51 billion and non-cash depreciation and amortization charges rose by 12.3 per cent to N42.15 billion in 2020.

Given the more significant year-on-year expansion in operating income than expenses, the bank’s cost-to-income ratio improved to 58.8 per cent from 63.4 per cent in 2020.  Cost of risk also grew by 25 basis points to two per cent on the back of the increase in impairments on loan. 

From the profit & loss figures, the bank recorded a profit before tax growth of 40.3per cent to N176.70 billion in 2021 from N125.9 billion reported in 2020. 

However, profit for the year notched up higher by 51.1per cent to N160.22 billion in 2021 from N106.01 billion in 2020, given the 17.2 per cent drop in lower income tax expense to N16.48 billion from N19.91billion paid to tax agencies in 2020.

Significant assets growth       

On the backdrop of expansion in 17 markets, the Group remained strong and resilient with total assets of N11.7trillion in 2021, a growth of 35per cent from N8.7 trillion 2020. 

Customer Deposits totaled N7trillion in 2021 from N5.6trillion reported in 2020, reflecting the impact of the group’s continuous and deliberate deposit mobilization.  CASA account deposits stood at N4.1trillion in 2021 from N3.6trillion in 2020, accounting for 58 per cent of customers deposits. According to the bank: “This is largely as a result of leveraging innovative digital technology and financial inclusion to mobilize sustainable low-cost deposits.”  

“UK and Ghana jointly accounted for 66 per cent (Dec: 2020: 85 per cent) of total subsidiaries deposits. The decline in contribution was on the back of deposit growth from other subsidiaries.”

Net Loans and Advances totaled N4.4trillion in 2021 from N3.6trillion, reflecting the Group approach to mitigate concentration risk.

FCY exposure further declined by 616 basis points to 19.7 per cent from 25.9 per cent of the total loan portfolio in the period, due to significant LCY loan portfolio acquired during the business combination done within the year and deliberate efforts at mitigating currency risk.

Loan to funding ratio declined to 50.8 per cent in 2021 from 54.2 per cent on the back of the increase in funding base. 

As assets quality remained stable despite macro pressures, the group Non-Performing loans (NPL) ratio stood at four per cent in 2021 4.3 per cent.

Basel 2 Capital Adequacy Ratio (CAR) stood at 24.5 per cent in 2021 from 19.6 per cent in 2020, remaining well above the regulatory minimum of 15 per cent. Liquidity ratio in the period stood at 51 per cent from 46 per cent, and it remained well in excess of the regulatory minimum. 

Disciplined implementation of strategy

The Group Managing Director, Access Bank, Mr. Herbert Wigwe in a statement said: “2022 is pivotal for our franchise, as we conclude our 2018-2022 corporate strategic plan. 

“In the year, we will focus on a disciplined implementation of our strategy to drive efficiency and operational excellence across all segments, expand revenue and increase profitability, with enhanced focus on risk management practices and a disciplined cost containment structure.

“As we go into our next 5-year strategy cycle, we are realigning the franchise for growth, by transitioning into a Holding Company (HoldCo). 

“This will enable us to unlock and capture available non-banking opportunities in the market, that would lead to the diversification of our earnings, drive efficiency, and grow scale while maintaining our moderate risk management approach.

“Having met regulatory requirements and obtained the Court Sanction, we expect the HoldCo to become operational in the first half (H1) of 2022. This will lead to the delisting of Access Bank Plc’s shares on the Nigerian Exchange (NGX) and listing of Access HoldCo shares.”

However, analysts at Cordros research stated that the bank’s increasingly strong financial performance and the corresponding increase in payout to shareholders lend credence to our positive outlook on the bank. 

“We envisage positive price reactions in the short to medium term. The bank is also one of the fastest-growing banks nationwide, with an increasing footprint across Africa. This, coupled with the strong execution of its digitization and retail-led strategy in the Nigerian market informs our view of a positive growth trajectory.”