Q1: Access Bank generates N149bn as income from loans and advances to customers



Uba Group

Access Bank Limited, biggest subsidiary of Access Holdings Plc, generated more income from its lending to customers in the first quarter of 2023 ended March 31.

The lender grew revenue from loans and advances portfolio to customers by 62.6 percent in the review period, standing at N149.1 billion whilst it made N12.1 billion from lending to other banks year on year in the review period.

The group’s interest income grew by 46.4 percent y/y to N254.22 billion in Q1-23, as all major contributory lines, save for income from cash and balances with banks (-6.4% y/y to N2.56 billion) recorded increases.

The bank also raised N90.47 billion from investment securities which represents 18 percent growth year on year.

Financial analysts have attributed the higher income generated from investment securities to the volume growth of 27.3 percent  year to date to N3.51 trillion and improved yield on securities during the period.

Interest expense advanced by 84.1 percent y/y to N158.94 billion, as the group incurred higher costs on deposits from financial institutions (+152.2% y/y to N39.12 billion), deposits from customers (+82.2% y/y to N98.09 billion), and other borrowings – interest-bearing borrowings (+27.1% y/y to N14.31 billion) and debt securities issued (+11.4% y/y to N6.00 billion) in the period under review.

Similarly, the group’s non-interest income advanced by 42.5 percent y/y to N154.82 billion, primarily driven by the gains in FX trading (+30.9% y/y to N112.39 billion) and net fees & commission (+5.8% y/y to N45.38 billion).

Likewise, the lower losses on investment securities amounting to N6.71 billion as against a loss of N44.63 billion in Q1-22, further aided the growth in non-interest income. Consequently, the group’s net interest income settled 9.1 percent y/y higher to N95.28 billion.

Operating expenses surged by 27.8 percent y/y to N149.79 billion, triggered by the combined impact of higher regulatory costs and inflationary pressures in the review period.

For clarity, the group incurred higher costs on business travel expenses (+676.6% y/y to N7.58 billion), administrative expenses (+105.2% y/y to N15.92 billion), AMCON levy (+24.8% y/y to N33.32 billion), NDIC premium (+22.0% y/y to N7.65 billion), and personnel expenses (+14.8% y/y to N33.57 billion).

Consequent to the higher rate of increase in expenses than income, the Holdco’s cost-to-income ratio (after accounting for LLEs) inched slightly higher to 64.7 percent (from 64.3% in Q1-22).

On a balancing note, the Holdco recorded a profit before tax growth of 25.3 percent y/y to N81.60 billion. Eventually, the group delivered a 24.8 percent y/y growth in profit-after-tax to N71.66 billion, amid the higher income tax expense (+28.5% y/y to N9.94 billion) in the period.

Analysts at Cordros Research are on the opinion that the group’s Q1-23 financial performance was remarkable, despite the challenging and dynamic macro-economic environment. “Specifically, we like the stellar growth across the group’s core and non-core income lines. For 2023E, we believe the rising interest rates in the fixed-income market and the continuous leverage of its Holdco status will boost the group’s earnings growth,” they noted.