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).

Ebenezer Onyeagwu

MD/CEO

Zenith Bank Plc

The 2020 half-year (H1) financial report of Zenith Bank Plc reveals a mixed bag of decline and strong growth in certain market fundamentals.

On the EPS of NGN3.30 (+16.6% vs. H1-19), the Board has proposed an interim dividend of NGN0.30/s (H1-19: 0.30/s), which equates to a yield of 1.7% based on the closing price of NGN17.20 as of the 3rd of September 2020.
Analysis by Cordros Research shows that interest income grew by 1.1% y/y to NGN216.95 billion, supported primarily by the income from loans and advances to customers (+11.6% y/y to NGN128.37 billion) as risk asset creation has been strong in the year so far (+13.8% YTD to NGN2.62 trillion).

The other contributory line recorded a decline – investment securities (-18.1% y/y). The decline in income from investment securities was expected, as yields across assets have pared significantly from the prior year.
Also, interest expense declined by 17.4% y/y to NGN59.55 billion, reflecting lower interest cost on borrowings over the corresponding period of the prior year (-50.7% to NGN17.00 billion) and despite the increased cost on deposits from customers (+13.3% to NGN42.54 billion).

Consequent to the decline in interest expense, net interest income settled higher by 10.5% y/y at NGN157.41 billion. After accounting for credit impairment charges (+74.2% y/y to NGN23.92 billion), net interest income (ex-LLE) settled 3.7% higher year-on-year.

The exponential growth in LLE is in line with our expectations, given the application of the ECL model and the expected impact of the pandemic on the bank’s risk asset quality both at present and going forward.
Continuing the trend during the year, non-interest income (NII) was strong, settling 6.2% higher y/y at NGN116.49 billion. The strong growth recorded was supported by expansions in FX revaluation gains (+239.6% y/y to NGN22.02 billion), and gains on investment securities (+30.4% y/y to NGN58.83 billion). This expansion in NII, alongside the growth in net interest income, led to an expansion in operating income of 4.8% y/y to NGN249.97 billion.
Operating expenses growth was moderate, as the bank continued to focus on cost management in the face of moderate gross earnings growth. Opex grew by 7.1% y/y to NGN135.85 billion, with the most pressure exerted by other operating expenses (+16.6% y/y to NGN21.22 billion) such as I.T, and maintenance costs.

Consequent to the Opex growth relative to operating income growth, the bank’s cost-to-income ratio (ex-LLE) settled higher at 54.3% relative to 52.7% and 50.9% in the prior quarter and the corresponding period of the prior year.

Also, profitability was stronger, with profit-before-tax settling 2.2% higher year-on-year. However, profit-after-tax settled 16.8% higher year-on-year, on account of a 54.8% decline in income tax expense.
In our view, the bank’s macro-prudential ratios remain strong, as all ratios settled within statutory limits. The bank’s non-performing loans ratio improved to 4.7% from 5.0% in the prior quarter, although this may be adduced to the significant YTD expansion in loans to customers, as well as regulatory forebearance for distressed restructures.

Similarly, the bank’s capital adequacy (20.0%) and liquidity (43.8%) ratios remained strong after expanding quarter on quarter and signifies that the bank has ample headroom for growth over the medium-term.

“Also, we note that the bank’s current loans-to-deposits ratio (66.1%) is now above the minimum LDR of 65.0%.”

African leaders have reaffirmed their support for the African Development Bank Group and its leadership under Dr. Akinwumi Adesina as he begins his second five-year term with a renewed mandate to foster sustainable development on the continent.

In goodwill messages to mark Adesina’s inauguration, Presidents Muhammadu Buhari of Nigeria, Paul Kagame of

Rwanda, Alpha Conde of Guinea, George Weah of Liberia, President Sassou Nguesso of Republic of the Congo and Guinea Bissau’s Umaro Embalo, commended the Bank’s interventions, especially its assistance to member states in the wake of the COVID-19 pandemic.

“Dr. Adesina, you have our full support as you continue to lead the Bank through this COVID-19 period, marked by turmoil but also the prospect of new opportunities for our continent,” Kagame said, noting that the Bank had played a key role in ensuring that Africa’s interests reflected on the international agenda during the crisis.

Adesina, who first took office as the 8th elected president of the Bank Group in 2015, was unanimously reelected by the Board of Governors with a 100 percent vote at the end of the Bank’s 2020 Annual Meeting on 27 August. For the first time, the meetings were held virtually due to the restrictions imposed by the COVID-19 outbreak.

President Buhari noted that the unanimity of Adesina’s reelection was a vote of confidence in his leadership and programs, especially the Bank’s High 5 priority agenda. If diligently implemented, the High 5s will help Africa to meet most of the Sustainable Development Goals of the UN.

“Under your leadership, the Bank has made admirable progress and we are confident that this gain will be consolidated and scaled up in the next five years,” Buhari said in a message presented on his behalf by the Bank’s Governor for Nigeria.

While congratulating Adesina for his overwhelming reelection, President Conde urged him to continue to pursue the High 5s and related policies to provide jobs for the continent’s growing youth population.

President Weah pledged Liberia’s continued partnership with the Bank under Adesina’s leadership. “Dr. Adesina, your reelection signifies Africa and the world’s confidence in your leadership,” he added.

Niale Kaba, the Ivorian Minister of National Planning and the immediate past chairperson of the Bank’s Board of Governors, represented Ivorian President Alassane Ouattara, who also reaffirmed his country’s strong bond with the Bank.

There were solidarity messages also from former Nigerian President Goodluck Jonathan and former Vice President Atiku Abubakar, under whose government Adesina served as Agriculture Minister. Messages also poured in from regional bodies, including the African Union Commission, the Common Market For Eastern and Southern Africa (COMESA), ECOWAS and the New Partnership for Africa’s Development (NEPAD).

In his inaugural speech, Adesina outlined a renewed vision to build a much stronger and resilient African Development Bank Group, with the leadership and capacity to deliver greater quality impacts for Africa, while remaining financially strong and sustainable.

To achieve this, he said he would focus on building a stronger institution, strengthen human capacity, enhance effectiveness, deepen quality and impact and maintain financial sustainability.

Ghana’s Finance Minister and incoming chairman of the Board of Governors Kenneth Ofori-Atta, presided over the swearing in ceremony.

The H1 2020 result of GTBank Plc shows that operating expenses expanded by 19.2% y/y to NGN83.31 billion, with the most pressure exerted by regulatory charges – AMCON levy (+11.1% y/y to NGN17.20 billion) and NDIC premium (+105.0% y/y to NGN8.26 billion).

A relative decline in earnings as a deterioration of its still industry-best efficiency led to a moderate decline in profitability.

Consequent on the OPEX growth relative to operating income growth, cost-to-income ratio (ex-LLE) settled higher at 43.2% relative to 40.6% and 37.6% in the prior quarter and the corresponding period of the prior year respectively.

According to Cordros Research, profitability was weaker, with profit-before-tax settling 5.2% lower year-on-year, while profit-after-tax settled 4.9% lower, given the decline in income tax expense (-7.3% y/y to NGN15.44 billion).
Also, the bank proposed an interim dividend of NGN0.30/s, which translates to a dividend yield of 1.2%, based on a market price of NGN25.66/s (2nd September 2020).
Interest income grew by 3.2% y/y to NGN153.71 billion, supported by growth in income from loans and advances to customers (+6.2% y/y), and investment securities (+6.9% y/y), both of which masked declines across interest income from cash (-57.4% y/y), loans to financial institutions (-45.3% y/y) and assets pledged as collateral (-14.7% y/y). We note that the strong growth recorded in risk assets (8.2% YTD to NGN1.62 trillion) was likely responsible for the acceleration in interest income from loans to customers.
On the other hand, interest expense pared by 20.0% y/y to NGN26.09 billion, despite an increase in deposits by 18.5% YTD to NGN3.00 trillion, as the bank has seemingly continued to improve its CASA (low-cost deposits: current and savings accounts) mix during the year.

Consequent on the strong balance sheet management, net interest income growth was strong, expanding by 9.7% y/y to NGN127.62 billion.
Non-interest income grew moderately during in the period, settling 1.0% higher y/y at NGN72.18 billion, with major lines recording declines save for, gains from FX trading (+43.6% y/y to NGN7.65 billion) and FX revaluation (+723.1% y/y to NGN21.90 billion).

While NII grew at a slower pace than might otherwise been expected, given revised charges and weaker transactions flows occasioned by the global pandemic, the positive impact of revaluation gains should lead to a positive year-on-year performance in non-core income.

Given the growth in income, and despite the exponentially larger loan loss expenses (+209.7% y/y to NGN6.77 billion), the bank recorded an expansion in operating income of 4.0% y/y.

Kennedy Uzoka

Group Managing Director/CEO

UBA Plc

The United Bank for Africa (UBA) Plc released its audited H1-20 numbers recently, which showed that interest income increased by 0.3% y/y to NGN205.59 billion, supported by the growth across major contributors to the line, with the largest contributions coming from loans and advances to customers (+9.9% y/y to NGN113.89 billion), and loans and advances to banks (+77.5% y/y to NGN2.17 billion).  

On the EPS of NGN1.24 (-23.5% vs. H1-19), the Board has proposed an interim dividend of NGN0.17/s (H1-19: 0.20/s), which equates to a yield of 2.6% based on the closing price of NGN6.55 as of the 1st of September 2020.
However, income from investment securities (-9.5% y/y to NGN83.04 billion) declined as yields on assets have fallen in 2020 across OMO and other fixed income instruments. We expect this line to remain under pressure through the year, and as such underperform FY-19.
Interest expense declined by 9.0% y/y to NGN86.26 billion despite growth across most major interest expense lines. However, the reduced cost on deposits from customers (-19.9% y/y to NGN53.38 billion), as the bank’s CASA mix improved during the period (78.5% vs. 73.5% in H1-19), was able to offset the impact. Consequent to the growth in income and decline in expense, the bank recorded an expansion in net interest income of 8.4% y/y.

According to Cordros Research, the bank still has some scope for gains here given that the CBN has now reviewed the minimum rate on savings deposits down to 10.0% of MPR (30.0% previously).

“We expect this will sustain net interest income growth in the year, even as interest income from loans may pare q/q through the rest of the year.”
Non-interest income grew during the period by 6.7% y/y to NGN77.74 billion, driven by the growth in fees and commissions income (+7.0% to NGN38.58 billion) and FX revaluation gains (+619.8% to NGN7.80 billion).

As expected there were declines in income from investment securities (-19.6% y/y to NGN13.84 billion) – given the LDR limit which reduced capital allocation –, and FX trading (-7.3% y/y to NGN13.37 billion) – given FX illiquidity.
Operating expenses settled 20.6% higher year-on-year, driven primarily by increased personnel expense (+19.9% y/y to NGN44.57 billion) and regulatory costs – AMCON levy (+12.1% y/y to NGN22.42 billion) and NDIC premium (+12.2% y/y to NGN5.58 billion).

Consequently, the bank’s cost-to-income ratio (ex-LLE) settled higher at 69.8% relative to 60.9% in the corresponding period of the prior year.

This pressured the trickle-down from the income line and resulted in profit-before tax declining significantly by 18.7% y/y to NGN57.13 billion. Consequently, profit-after-tax settled 21.7% lower y/y at NGN44.43 billion, despite a lower income tax expense (-6.2% y/y to NGN12.70 billion).

The recovery in the Nigerian private sector gathered momentum in August as demand improved following the easing of restrictions related to the coronavirus disease 2019 (COVID-19). Output and new orders rebounded, rising sharply from July. Employment was broadly stable, although excess capacity remained as a result of the severe declines in new business during the second quarter.

Currency weakness led to another record increase in purchase costs, in turn feeding through to arise in selling prices unprecedented since the survey began in January 2014.

The  headline  figure  derived from the survey  is  the Nigeria Purchasing Managers’ Index™ (PMI®), a property of Stanbic IBTC Bank PLC.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The headline PMI rose sharply in August to 54.6, up from

50.4 in July.The reading signalled a marked improvement in business conditions, following a return to growth in the previous month.

There bound in new orders continued midway through the third quarter as client demand strengthened following the easing of COVID-19 restrictions. New business increased for the second month running, and to the greatest extent since January.

A similar picture was evident with regards to business activity, which rose at a substantial pace that was much stronger than seen in the previous month.

Despite strong rises in workloads during August, data suggested that the steep contractions seen during the second quarter left residual spare capacity. Companies were therefore able to continue depleting backlogs of work while leaving staffing levels broadly unchanged. The stability of employment did bring a four-month sequence of job cuts to an end, however.

Spare capacity was also reported at suppliers. This, alongside relatively quiet road conditions, meant that vendors were able to speed up deliveries in spite of a marked increase in purchasing activity. Stocks of purchases meanwhile rose sharply for the second month running.

Overall input cost inflation quickened to a fresh series record in August, despite a reduction in staff costs.  The rise in overall input prices was driven by a record increase in purchase costs, in turn largely the result of currency weakness. In response to higher raw material prices, companies raised their own charges. As was the case with input costs, the increase in selling prices was the quickest since the survey began.

Subdued business sentiment was registered again amid concerns around the lasting impact of COVID-19.

Africa’s leading payment technology and card business, Verve International, has launched a nationwide promo to reward its cardholders with cash prizes and airtime. The promo tagged “The Verve Good Life Promo” kicks off today, September 1, 2020 and will run till November 29, 2020.

The Verve Good Life Promo seeks to enable Verve’s loyal cardholders to live the good life, whatever the ‘good life’ means to them. Its objective is to alleviate the adverse impact of the COVID-19 pandemic and subsequent economic hardship on Verve card holders and Nigerians in general

Speaking about the initiative, Cherry Eromosele, Group Chief Marketing and Communications Officer, Interswitch Group, reiterated the brand’s commitment to reward Verve card holders for their loyalty.

She said: “Beyond our commitment to provide Verve card holders with seamless, reliable and secure payment solutions both locally and internationally, we currently identify with their challenges, especially as occasioned by the pandemic, therefore we desire to play a part in alleviating these. This has informed the introduction of the Verve Good Life Promo. During the 12 weeks of the promo, we will be rewarding over 2,500Verve card holders nationwide with over N27 million in cash and airtime.”

Mike Ogbalu III, Divisional CEO for Verve International, stated that the Verve Good Life promo idea represents the latest initiative among recent interventions conceptualized by Verve to reward the loyalty of its cardholders whilst incentivizing them towards continued transaction, in addition to other activations such as the highly successful series of ‘Free Fuel Friday’ promotions that are being championed by the brand.

Ogbalu said, “Despite the economic challenges, we will continue to stay true to our commitment to being customer-centric by guaranteeing efficient payment solutions tailored to the lifestyles of African consumers and continuously rewarding customers who have stayed loyal to our brand.”

To qualify for the grand draw for N1,000,000 cash prize, Verve cardholders are expected to transact with their Verve cards at least 36 times during the 3 months duration of the promo.

To qualify for the monthly raffle draws for N50,000 cash prize, card holders are expected to transact with their Verve cards at least 12 times monthly. To qualify for the weekly raffle draws for N10,000 cash prize and N5,000 airtime reward, cardholders are expected to transact at least 3 times weekly. The more customers transact, the higher their chances of winning.

Weekly Prize category 1 – 100 winners to win N10,000 cash every week for 12 weeks

Weekly Prize category 2 – 100 winners to win N5,000 airtime every week for 12 weeks

Monthly Prize category – 50 winners to win N50,000 cash every month during the 3 months of the promo

Grand Prize category – 2 winners to win N1,000,000 cash each at the end of the 3 months period of the promo

The promo will run for three (3) months, with rewards for Verve cardholders who consistently use their cards across various payment channels such as: Point of Sale (POS) terminals, Automated Teller Machines (ATMs), Web and agent banking centers.

About Verve

Verve is Interswitch Group’s innovative card scheme, offering products and solutions that enable consumers to transact all over Nigeria and across international markets.

As the first African card scheme to be recognized as a valid, globally accepted e-payment gateway, we have built a world-class value chain ecosystem that provides seamless payment options for consumers and businesses in Nigeria and across Africa.

The Verve Classic card enables ease of secured payment across the African markets, while the Verve Global card now empowers its cardholders to make seamless payments in over 185 countries, including the US, UK, UAE and South Africa, across 20 million platforms, wherever the Discover, Diners Club International, Pulse and Verve logos are displayed.

By Elvis Eromosele

Alake Suleman is 45 years old. He is popularly referred to as Baba Kareem. He is the definition of a journeyman. He is a certified ‘labour’ on construction sites, a respected grasscutter cum gardener and an itinerary real estate agent.

He never had a bank account in his first three decades on earth. He is not lettered, and cannot read or write in English. The compound where he lives is not connected to the mains, so he doesn’t have a utility bill, never had.

He used to send money to his mother in the village through interstate transporters until recently. Now, he uses a kiosk a street away. For the first time, banking has reached Baba Kareem. Agency banking has brought financial inclusion home to him.

Today, financial inclusion is not just a term for Baba Kareem; it is a new way of life. It has brought the reality of easy banking service home. It is not as if Baba Kareem knows what financial inclusion is.

According to the World Bank, “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”

Reports indicate that over two billion adults are without a bank account. Women, young people and persons who live in rural and suburban areas make up a significant percentage of the unbanked. This shows why it is important and urgent. Too many are out of the financial systems and are thus deprived.

The World Bank is big on financial inclusion. It sees possibilities every time it is mentioned. To the World Bank, financial inclusion is a key enabler to reducing poverty and boosting prosperity.

With the potential to reduce poverty and boost prosperity, financial inclusion should concern everyone.

In Nigeria, the rapid and widespread deployment of Information and Communication Technology (ICTs) and CBN policies has led to progress on financial inclusion. Banks, fintech firms and digital mobile services providers have all pitched in. But the truth be told, so much more still needs to be done. A lot of people are unbanked and underbanked. There are the ones that have to be reached.

A close look would suggest that what exists in Nigeria currently is only partial financial inclusion. It may look good in the media but it is largely thin on the ground. So, what we see is agency banking focused on cash withdrawals and deposits, transfers and some payment.

This in itself is not bad. Infact, it is a step in the right direction.

It is now time to move forward. We have celebrated too long at this stop we need to move on. It is time to move beyond transfers and payments to other parts of financial inclusion that makes it so admirable. It is time to consider micro/nano lending and micro-insurance.

As Sri MulyaniIndrawati, Minister of Finance of Indonesia, former head of the World Bank Group said, “Financial inclusion matters not only because it promotes growth, but because it helps ensure prosperity is widely shared. Access to financial services plays a critical role in lifting people out of poverty, in empowering women, and in helping governments deliver services to their people.”

This is precisely the sort of thing that we need financial inclusion to mean in Nigeria – to help to reduce poverty.

Experts concede that access to fund plays an important role in the process of reducing poverty. Lending is about access to funds-funds to invest in a new or existing business, to meet emergencies and urgent needs. This is a way out of poverty for many.

Crowd-sourcing is today emerging as a popular way to raise funds along with peer to peer (P2P) lending. We can do better. Small loans should be an integral part of financial inclusion.

No, we are not talking microfinance institutions (MFI) that have gradually left their key function and are comparing themselves and competing with banks. Many have introduced conditions people struggle to meet. It should be more in the mode of nano finance. This is access to small amounts largely interest-free.

Nano finance refers to a system which provides the opportunity for the poorest of the poor, especially women all over the world to have access to individual interest-free loans of not more the equivalent of 20 USD to support their livelihoods, emergency needs, school fees for their children and healthcare for their family.

This is where mobile money can play a huge role. Let the banks talk to the fintech firms and telcos. The potential is humongous.

Another important area is micro-insurance. Micro-insurance is described as a mechanism to protect low-income households against risks, such as illness, a death in the family, or crop failure. The whole idea is the creation of a value proposition for the informal economy, to reach those who would otherwise be underserved by mainstream commercial and social insurance schemes.

It is, however, only beginning to find ground in Nigeria. In a country where over 90 million people live in poverty, micro-insurance would be a hit. Health insurance is an indispensable part of this insurance. Insurance for the bottom of the pyramid would truly be a game-changer. Insurance firms with foresight should begin to jostle for a slice the cake in this space.

Investopedia explains that financial inclusion strives to remove the barriers that exclude people from participating in the financial sector and using these services to improve their lives. It is also called inclusive finance.

So, it is time to remove the barriers. It is time to grant people access to funds. This is true financial inclusion.

Yes, there are challenges. The two biggest ones include a population that is largely financially illiterate and infrastructural facilities that are mainly inadequate and sometimes totally unavailable. They are not insurmountable. They can indeed be overcome with persistent and directed action.

The whole idea behind financial inclusion is the opportunity to help to alleviate poverty through access to the various classes of financial services

Financial inclusion may well be an all-important driver for economic growth. The government must explore how to employ it to curtail the menace of poverty.

The future is definitely financial inclusion.

Elvis Eromosele, a Corporate Communication professional and public affairs analyst lives in Lagos.