Forex Income Lifts Access Bank FY2015 Earnings Growth | Independent Newspapers Limited
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 Forex Income Lifts Access Bank FY2015 Earnings Growth

Posted: Apr 15, 2016 at 3:00 am   /   by   /   comments (0)

While most banks are complaining about poor revenue from oil and its
attendant drop in foreign exchange, 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 per cent 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 percent 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 per cent 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 per cent over the 2014 figure. This is an
accelerated growth compared with the increase of 18.5 percent 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
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
percent compared to 17.4 per cent. That lowered the growth of net
interest income to 5.4 per cent, 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 per cent to N145.57 billion.
That raised operating cost margin from 42.7 per cent in 2014 to 43.1
per cent 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 per cent 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 per cent 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 percent in 2014 to 19.5 percent
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 per cent 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 per cent 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 closed on 13th April and payment is scheduled for 27th
April 2015.