Access Bank lifts revenue with forex, investment incomes

Access Bank recorded a strong growth in earnings in its 2015 operations with two major income lines driving the growth. The strongest growth came from foreign exchange trading, the net gains of which soared nearly 46000% from just N564 million in 2014 to over N26.50 billion at the end of 2015. The second revenue growth driver is income from investment securities, which surged up by 168% to N62.74 billion in the year.

The bank’s main income line remains interest income from core lending operations, which improved by 17.4% to N207.80 billion in 2015. The bank closed the financial year with a gross income of N337.41 billion, an increase of 37.6% over the 2014 figure. This is an accelerated growth compared with the increase of 18.5% in gross earnings in the preceding year.

With the strong growth in earnings in a year of a general industry slowdown, Access Bank is expected to move up the industry ladder in terms of the biggest revenue earners in the business. Its chief executive officer, Mr. Herbert Wigwe, who took over the bank’s management two years ago, was given the task – to drive a strong growth in earnings in the bank’s next chapter of growth. So far, he has been able to spur growth in revenue and profit for the second year.

A major operating headache for the bank last year came from interest expenses, which grew nearly twice as fast as interest income at 33.2% compared to 17.4%. That lowered the growth of net interest income to 5.4%, indicating a reduced ability to control cost at that point. This is however a problem faced by both banks and their customers generally, as high cost of funds prevailed in the economy during the year.

With the strong growth in earnings in the year, Access Bank was able to diffuse the impact of rising interest and loan loss expenses on the overall earnings performance. Interest expenses claimed a slightly reduced proportion of gross earnings compared with the preceding year’s figures. Net impairment charge on risk assets, which amounted to N14.22 billion in 2015, also claimed a reduced share of gross income. These favourable developments on costs enabled the bank to improve its profit capacity in 2015.

Operating expenses deviated from the generally cautious pattern in the banking sector in the year and rose by 39% to N145.57 billion. That raised operating cost margin from 42.7% in 2014 to 43.1% in 2015, as total operating cost grew slightly ahead of gross earnings. This remains within the average banking industry figure, which enabled significantly increased earnings to flow down into the bottom line.

An outstanding growth of 53.3% in after tax profit to N65.87 billion was reported by the bank for the 2015 operations. That is an accelerated growth from the increase of 18.4% in after tax profit in 2014. This is a defiant growth going by the general slowdown in earnings in the banking sector in 2015.

Net profit margin improved from 17.5% in 2014 to 19.5% in 2015, indicating a new strength in converting revenue into profit. The strength came from the strong growth in revenue and cost moderation in two major expenditure lines during the year. There is also an improved capacity in converting assets into revenue. The combination of the two areas of strength has yielded increased returns to shareholders.

The bank achieved a strong balance sheet growth of over 23% in 2015 with an asset base of over N2,591 billion at the end of 2015. It carries a net credit portfolio of about N1,366 billion, an increase of 23% in the year. The growth in assets was funded by impressive growths in both liabilities and equity capital.

The bank raised earnings per share from N1.86 in 2014 to N2.65 at the end of 2015. It has announced a final cash dividend of 30 per share in addition to an interim of 25 kobo earlier paid. The register of shareholders will close on 13^th April and payment is scheduled for 27^th April 2015.