TheCable

Access Bank Plc gained further momentum in the third quarter towards its historic move to become the first Nigerian bank to hit the N1 trillion mark in gross earnings by the end of the 2022 financial year. The N13.5 trillion financial institution closed the third quarter operations with gross earnings of N908 billion, already close to the N949 billion revenue figure it posted at the end of 2021.

The third quarter interim financial report of the bank for the period ended September 2022 shows that it stepped by gross earnings from a quarterly average of N296 billion at half year to N316 billion in the third quarter. The third quarter earnings accounted for 35 percent of the nine-month revenue figure.

The projection is in line with earlier analysis of the company’s expected stronger second half for the bank on revenue performance, which also supports our full year revenue projection for the bank in the region of N1.2 trillion.

Three main income lines are driving the bank’s revenue growth so far in the year, which is led by net gains in financial instruments that rebounded from a net loss of N1.8 billion in the same period last year to N78.4 billion at the end of the third quarter.

This is followed by net gains on hedging, which made a similar upswing from a net loss of N1.1 billion to N8.8 billion over the same period.

The third revenue growth driver is interest income — the main revenue line of the bank, which grew by about 22 percent from N471 billion to N573 billion over the review period.

Also, after tax profit has rebounded after dropping from N57.4 billion in the first quarter to N31.3 billion in the second to N48 billion in the third quarter. The numbers sum up to N137 billion after tax profit the bank posted at the end of the third quarter operations.

Revenue continues to grow well ahead of profit at 31 percent compared to 12.3 percent over the corresponding figures in the same quarter in 2021. Net profit margin went down from 17.6 percent to 15 percent over the same period.

Cost increases explain the disparity in the growths of revenue and profit and the main culprit is the cost of funds. At N291.5 billion, interest expenses grew by 43.4 percent over the corresponding figure in 2021, roughly twice the 22 percent increase in interest earnings.

Another major cost increase came from net loan loss charges that rose by 37 percent from N38.7 billion in the same period last year to N53 billion at the end of September 2022. Credit losses are rising rapidly for the fourth straight year after an increase of 32 percent to over N83 billion in 2021.

The two major cost increases consumed more than all the increase of N102 billion in interest income over the review period and left a slight decline in net interest income after loan impairment charges at N227.6 billion. Effectively, no part of the increase in interest earnings formed part of the improvement in the bottom line.

Operating expenses however provided a little cost saving for the bank, reversing the half year position when total operating cost grew ahead of gross earnings. At N377 billion at the end of the third quarter, total operating expenses grew slightly below gross earnings at 29.6 percent compared to 31 percent.

Operating cost margin went down from 42 percent in the same period in 2021 and from 43.4 at half year to 41.5 percent at the end of the third quarter. This provided room for the 12 percent improvement in profit to N137 billion the bank achieved at the end of the period.