Access Holdings Leveraging on Africa Expansion to Drive Customers Deposits, Loans

Kayode Tokede

Access Holdings Plc inroad into emerging Africa’s strongest financial market with the reflection in its total assets that was driven by significant increase in customers deposits and loans & advances to customers. 

The expansion in total assets has continued to yield a massive return for its investors as the group proposed a final dividend of N1.30kobo per ordinary share of 50kobo each on the 35,545,225,622 issued ordinary shares of 50k each (Interim dividend of N0.20 kobo).

This brings total dividend payout in 2022 to N1.50 from N1.00 paid to shareholders in 2021 financial year.

The Pan-African financial institution in its audited statement for period ended December 31, 2022 announced N15trillion in total assets, an increase of per cent from N11.73trillion in 2021.

The Group between 2018 and 2022 has grown total assets by 202.74per cent, attributable to its expansion in over 10 African countries.

The Holdings ended the year with over 58 million customers across the extensive network of subsidiaries and business verticals, bringing its customer deposits to N9.25 trillion in 2022, with CASA mix up by five per cent, to 63per cent as a result of leveraging innovation, digital technology and financial inclusion to mobilize sustainable low-cost deposits.

Access Holdings in 2021 reported N6.95 trillion customers deposits from N5.59trillion reported in 2020.

Term deposits grew to N3.46trillon from N2.89trillion with (20 per cent y/y growth), as the management locked in rates to mitigate the prevailing interest rate environment

CASA account deposits stood at N5.78trillion in 2022 from N4.1trilllion in 2021, accounting for 63per cent of customer deposits.

This is due improved customer acquisition, leveraging technology and innovation and expanded agency network to increase financial inclusion.

It reported N5.1trillion loans and advances to customers in 2022, an increase of 23per cent from N4.1trillion reported in 2021.

The FCY as a share of the loan book increased to 23.7per cent in 2022 from 19.7per cent in 2021. The Group’s loan-to-Funding ratio closed at 58.7per cent as at from 50.8 per cent in 50.8 per cent, reflective of a healthy and cautious growth in the loan book.

Amid challenges where it operates, Access Holdings asset quality continues to improve, with Non-Performing Loan (NPL) ratio down to 3.1 per cent in 2022 from four per cent in 2021. This is hinged on proactive post – disbursement monitoring and robust risk management practices.

Also, 89per cent of gross loans in stage 1 classification underpinned by strong asset performance and minimal credit risk in the loan portfolio.

Diversified growing franchise drive top-line performance during turbulent times

Access Holdings grew gross earnings by 43 per cent to N1.39trillion in the period under review from N971.9billion, comprising of 60per cent of interest income and 40per cent in non-interest income.

CAGR increase of +35 per cent over the past 3 years, which denotes sustained growth and value accretion in the business

Interest income drivers that gained 37 per cent to N827.3billion in 2022 from N601.65billion in 2021 was a 21per cent increase in interest on Loans and Advances to N481.2billion from N399.2billion in 2021 despite the high inflationary environment, increase in interest income was driven by a corresponding growth of 25per cent in the loan portfolio.

Also, a 64per cent increase in Interest Income from Investment Securities to N333.8billion from N203.7billion also contributed to significant increase in interest income.

Interest expenses stood at N467.8billion in 2022, representing an increase of 56 per cent from N300.24billion in 2021. 

The group closed 2022 with N566billion Non-Interest Income, driven by a 131per cent growth in trading income to N335.5billion from N145billion in 2021.

Overall Cost to Income ratio improved by 92basis points to 57.9 per cent in 2022 from 58.8 per cent in 2021, as revenues grew, the management doubled down on cost containment strategies, and continued with investment in Infrastructure & Technology to support scale and next phase of growth.

Impact of the continuous investment from the last strategic cycle, beginning to show in strong growth across all revenue lines Growth in operating expense by 35per cent to N502.4billion from N370.9billion in 2021   driven by the double – digit inflationary environment pushing up wages, growth in regulatory fees, impact of FX devaluation, Full year impact of three new banking subsidiaries recognized in 2022.

In addition, there was an increase of 20.71 per cent and 46.98per cent in personnel expenses and other operating expenses to N116.62 billion and N341.32 billion, respectively.

These factors put together led to a decline in bottom-line as profit before tax and profit after tax fell marginally by 5.04per cent y/y and 5.01per cent to N167.68 billion and N152.20 billion, respectively.

Likewise, profit  settled 4.6 per cent lower to N152.90 billion in 2022, despite the lower income tax expense (-10.4per cent) in the period.

Conclusion

Analysts at InvestmentOne Research said, “Despite the growth in earnings, the decline in bottom-line can be attributed to the spike in impairment cost on financial assets.

“Going forward, we believe that the company will further leverage on its Holdco structure to boost earnings in the coming period, thus we expect the impressive earnings growth to be sustained. Hence, Access Corporation remains a notable opportunity in the banking sector.”

Also, analysts at Cordros Research in a report said, “While the revenue expansion in the period was impressive, Access Corporation’s exposure to the GoG’s debt pressured its profitability growth in 2022FY.

“Going into 2023E, we believe the group will deliver a positive financial performance, given the strong execution of its digitization and retail-led strategy in the Nigerian market, coupled with the leverage of its Holdco status to boosts earnings growth. Our estimates are under review.”