Access Bank Plc released its H1-20 earnings recently which revealed that the bank recorded a marginal decline in profitability. On the EPS of NGN1.73 (-8.9% vs. H1-19), the bank’s board has proposed an interim dividend of NGN0.25/s (H1-19: 0.25/s), which equates to a yield of 3.9% based on the closing price of NGN6.40 as of the 3rd of September 2020.
The bank recorded an interest income decline of 9.6% y/y to NGN246.72 billion in the period, pressured by the decline in income from investment securities (-31.4% y/y to NGN74.00 billion).

According to Cordros Capital, the decline in income from investment securities was expected given increased capital allocation to risk asset creation given the CBN’s LDR policy, as well as the precipitous decline in yields on assets from the prior year.

This decline was steep enough to offset growth in other contributory lines, as income from loans and advances to customers (+0.3% y/y to NGN160.61 billion) and banks (+7,598% y/y to NGN6.72 billion), as well as cash and balances with banks (+11.5% y/y to NGN5.39 billion) all expanded over the period.
Interest expense expanded moderately over the period, advancing by 2.3% y/y to NGN120.52 billion, with the most pressure exerted by interest on deposits from financial institutions, which rose by 48.8% y/y to NGN34.07 billion, and offset the declines from  deposit from customers (-11.6% y/y) and debt securities (-31.3% y/y).

The bank seems to have now optimised its deposit base and is taking advantage of the synergy with Diamond bank, as cost of deposits declined by 27.9% from the Q4-19 standalone period to the Q2-20 period. While there was a moderate growth in expense on deposits from customers q/q in Q2-20 (+4.2%), the run rate would still be well below expense in 2019FY.
Non-interest income grew by 194.5% y/y to NGN138.85 billion, supported by strong growth in income from investment securities (3,152% y/y to NGN134.84 billion), primarily driven by derivative instruments, which offset the substantial FX revaluation loss recorded (+988.7% y/y to NGN57.6 billion).
Operating expenses increased substantially during the period by 40.0% y/y to NGN174.29 billion, given the effects of the consolidation with Diamond bank. Consequently, all major contributory lines recorded spikes, with regulatory charges – AMCON levy (+56.5% y/y to NGN35.44 billion) and NDIC premium (+28.8% y/y to NGN7.54 billion) –, personnel expenses (+16.0% y/y to NGN36.25 billion), and other expenses (+49.2% y/y to NGN77.70 billion) all expanding.

Given the significant year-on-year expansion in operating expenses, the bank’s cost-to-income ratio (after accounting for LLEs) deteriorated to 70.1% from 66.1% and 55.0% in the previous quarter and corresponding period of the prior year, respectively.
Consequent on the growth in income relative to expenses, the bank recorded a profit before tax growth of 1.8% y/y to NGN74.31 billion, while PAT settled 1.4% lower y/y at NGN61.03 billion, given the higher income tax expense (+19.7% y/y).