Access Bank FY profit climbs 18% on improved interest income

Access Bank Nigeria plc full-year 2014 profit climbed 18 percent on improved interest and non-interest income, as the Nigerian lender continues to record impressive results amid though operating environment.

The audited financial statement of the bank showed profit after increased by 18 percent to N42.97 billion compared with N36.30 billion the same period of the corresponding year (FY) 2013.

Earnings per share increased to 188k in FY 2014 as against 158k as of December 2013.

The growth in profitability can be attributed to rise in interest income of 21 percent and a 28 percent increase in other income, data from the financial statement show.

Return on average assets was 16.46 percent in 2014, while the return on average assets stood at 2.10 percent, one of the highest in the industry.

Also, the improved top- and bottom-line earnings were driven by deposit and loan growth and operating efficiency as the Nigerian lender continues to seek high interest yielding assets.

Access Bank was efficient as cost of income ratio reduced to 66.78 percent in FY 2014, from 69.92 percent as of December 2013, while net margin remained flattish at 17.5 percent.

However, operating expenses jumped by 3 percent to N104.60 billion in 2014, as against N101.18 billion the preceding year while interest expense increased by 13 percent to N76.90 billion from N68.23 billion last year, as Central Bank Nigeria (CBN) tightening policy and regulatory induced costs continue to weigh on banks’ profit.

The CBN has increased the MPR to 13 percent while the CRR on public sector deposits still remains at 75 percent in order to defend the naira and stabilise the economy.

Also, the higher contribution to the resolution cost fund (AMCON levy) and reduced COT charges, all pressured the earnings generation of Nigerian banks.

All banks in Nigeria are mandated to pay to the sinking fund 0.5 percent of their total assets on annual basis; a policy analysts say is bleeding profit of banks.

“The boost to the bottomline was driven purely by a N5.3 billion positive result on the other comprehensive income line,” according to Olubunmi Asaolu, equity research analyst with FBN Capital in a March 16 note.

“Compared with the results of its larger rivals, Access Bank’s underlying numbers are not that strong,” said Asaolu.

Access Bank’s loan-to-deposit ratio increased to 76.55 percent in 2013, from N59.09 billion the preceding year as the lender sought to replace profits lost to higher cash reserve requirements (CRR), tighter monetary policy and regulation aimed at lowering fees and increasing competition.

The ratio grew higher as loans to customers surged by 41 percent to N1.11 trillion from N786.0 billion.

Deposit from customers moved by 9 percent to N1.45 trillion in 2014 compared with N1.33 trillion in 2013.

Total assets spiked by 15 percent to N2.10 trillion in 2014 as against N1.83 trillion the preceding year.

Access Bank has proposed a final dividend of 35 kobo, implying a total dividend for the year of 60 kobo, representing a payout ratio of 30 percent and a dividend yield of 9.81 percent.

Recently, the bank secured approval of the Securities and Exchange Commission (SEC) to proceed with plans to raise N52.6 billion in a share sale as it pursues expansion and a stronger cash reserve.

Access Bank’s share price closed at N5.98 on the floor of the exchange, while market capitalisation was N136.84 billion.

“We would expect the market to be looking for comments from management as to how it sees the outlook for 2015, given how surprisingly bullish the other two banks have been (since the macro environment is weaker), especially on risk asset growth and asset quality,” said Asaolu.

 

BALA AUGIE