Access Bank closed the 2018 financial year with a strong final quarter that produced close to 30% of gross earnings and more than one-third of profit. That changed the bank’s earnings picture at the end of the third quarter when it was unable to grow revenue. Rebuilding profit from a drop in the prior year, the bank attained a new profit high in 2018 and set a record of the highest profit advancement in six years.
The ability of management to push gross income from a marginal increase of 2.8% at the end of September to 15% at full year is one of the critical factors in the improved earnings story of the bank at the end of 2018.
Another key factor in the performance is a drop of over 57% in loan impairment expenses, changing direction from major increases in the preceding two years. A 55% drop in tax expenses provided the third leg of the profit growth tripod upon which the bank’s high profit growth in 2018 is mounted.
Gross earnings amounted to N528.72 billion for Access Bank at the end the 2018 financial year, a growth of 15.2%. The bank had grown revenue by 20% to N459 billion in 2017.
Interest income provided the strength for revenue growth in 2018, speeding up from an 11% increase at the end of the third quarter to 19% at full year. It countered a drop in non-interest income, which was led by a net foreign exchange loss of close to N24 billion.
Foreign exchange income has fluctuated widely from 86% drop in 2016 to a massive growth in 2017 and then to a huge loss in 2018. This was largely countered by a sharp swing from a net loss on investment securities of N33 billion in 2017 to a net gain of N96 billion in 2018.
Interest expenses remained a big challenge for the bank for the second year – growing well ahead of interest income and claiming a steadily growing share of both interest income and gross earnings. Interest expenses consumed over 54% of interest income in 2018, rising from less than 44% in 2016 and 49% in 2017.
The result is slowing growth in net interest income from 32% in 2016 to 17.5% in 2017 and further down to 6.2% in 2018. Net interest income amounted to N173.58 billion at the end of 2018.
The impact of rising interest expenses was remedied by a drop of 57.5% in loan impairment expenses to N14.66 billion. This afforded the bank savings of close to N20 billion, lifting interest income net of loan loss expenses by 23% to N159 billion.
Further cost saving came from a 55% drop in tax expenses to N8.2 billion, slashing effective tax rate from 23% to less than 8% over the period. The bank saved another N10 billion from the drop in tax expenses.
The bank’s management squeezed total operating expenses and achieved a significantly lower growth rate than revenue at 6% compared to 15%. At N194 billion, total operating expenses grew at a slower pace than any time since 2015. Operating cost margin therefore declined from 40% in 2017 to 36.7% in 2018.
With the favourable developments on the sides of cost and income, Access Bank expanded profit capacity in 2018. It improved net profit margin from 13% in 2017 to 18% in 2018. After tax profit amounted to N95 billion at the end of 2018, rising from a restated figure of N60 billion in 2017.
The bank earned N3.31 per share at the end of 2018, improving from N2.11 per share in the preceding year. It has announced a final cash dividend of 25 kobo per share in addition to an interim of 25 kobo per share paid at the end of half year trading in June. Dividend qualification date is 11th April and payment date is 25th April, 2018.
Access Bank closed the 2018 operations with a balance sheet size of N4.95 trillion, a total credit portfolio of slightly over N2 trillion, customer deposits of N2.6 billion standing on an equity cushion of N490 billion.