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By Chinwendu Obienyi
Bank efficiency ratios are one of the most important measures of success in the banking industry, helping financial institutions become more resilient, competitive and profitable.
Access Holdings appreciates this and has continually invested in systems, processes and procedures to retain its leading position in the banking industry.
In fact, a recent Mckinsey research found out that banks that take aggressive measures to improve efficiency can reduce cost by 20 per cent to 40 per cent.
The same research also revealed that more than 150 bank executives found out that increasing operational efficiency is the top strategic goal of mid-market banks and this is no surprise that Access Holdings in its full year (FY) 2023 financial year report and accounts for the period ended December 31, 2022, recorded an impressive performance over the period across major indicators.
The Group’s vision is “to create a globally connected community and ecosystem inspired by Africa for the world”. It reported a significant increase in key profit & loss figures, balance sheets that eventually impacted on key financial ratios in the period under review.
Access Holdings’ 2023 results
The group witnessed significant growth in both core and non-core income lines, with interest income expanding by 99.9 per cent year-on-year (y/y) to N1.65 trillion from N827.47 billion recorded in the same period of 2022. Precisely, the growth was primarily driven by higher income from investment securities (+146.0 per cent y/y to N821.57 billion) and loans and advances to customers (+62.0 per cent y/y to N747.22 billion), amid a decline in interest from cash and balances with banks (-51.0 per cent y/y to N6.00 billion) in the review period.
Despite the impressive growth in interest income, the group also faced a notable 105.0 per cent year-on-year increase in interest expenses to N958.99 billion, largely due to rising borrowing costs (due to the consistent hike in benchmark interest rate), owing to deposit from banks (+170.6 per cent y/y to N320.76 billion), deposits from customers (+85.2 per cent y/y to N505.59 billion), debt securities (+127.3 per cent y/y to N79.30 billion and interest-bearing liabilities (+52.5 per cent y/y to N79.30 billion).
However, the impact of higher interest expenses was mitigated by lower credit impairment charges, resulting in a substantial expansion of net interest income. Correspondingly, non-interest income advanced by 71.3 per cent y/y to N870.70 billion, as the sturdy net gains from investment securities trading (+82.1 per cent y/y to N512.36 billion) and fees and commission income (+42.6 per cent y/y to N207.78 billion) offset the decline recorded in net FX revaluation gains (-50.0 per cent y/y to N17.26 billion) during the period.
The company’s profitability surged significantly, with profit before tax (PBT) increasing by 334.8 per cent y/y to N729.00 billion to N167.680 billion recorded in 2022 whilst Profit after tax (PAT) settled at N619.32 billion from N152.90 billion, marking a remarkable 305.0 per cent year-on-year increase.
Access Holdings’ Loans and Advances expanded by 60.5 per cent to N8.9 trillion, accompanied by an improvement in the non-performing loan ratio, which decreased to 2.8 per cent from 3.2 per cent in 2022. The group closed the year with N2.18 trillion in shareholders’ funds, marking a significant 77.5 per cent growth from N1.23 trillion in FY 2022.
Access Holdings’ regulatory ratios strengthened in 2023 as Capital Adequacy Ratios for the Group, and its flagship subsidiary, Access Bank, stood at 19.01 per cent and 21.09 per cent, respectively. The Liquidity Ratio remained robust at 51.8 per cent, well above the regulatory threshold. Operating expenses increased by 38.9 per cent y/y to N697.53 billion, mainly attributed to inflationary pressures and higher regulatory charges. However, despite the rise in expenses, the company managed to improve its cost-to-income ratio, reflecting efficient cost management practices.
The group has proposed a final dividend of N1.80 kobo per share for the 2023 financial year, bringing the total dividend payment to N2.10 kobo per share with a total value of N74.6 billion.
CEO’s view
Commenting on the performance, Acting Group Chief Executive Officer, Access Holdings, Bolaji Agbede, in a statement, said that the group’s strong performance in 2023 reflects its commitment to delivering value to its shareholders and stakeholders amidst a challenging operating environment.
“The significant growth in our earnings is a testament to the resilience, strategic focus, and efficiency of our team, and reflects the diversity of our offering across banking, pension, insurance, and payments driven by robust risk management, best-in-class corporate governance, and cutting-edge technology”.
As we look ahead, we remain committed to driving sustainable growth, consolidating our footprint, and accelerating the attainment of our 2027 strategic objectives,” the acting Group CEO stated.
Corroborating her, the Managing Director, Access Bank, Roosevelt Ogbonna, said that the bank is excited about the prospects the bank has.
Ogbonna said, “Our relentless focus on customer-centricity, digital innovation, and operational excellence has positioned us strongly to capitalise on emerging opportunities. As we enter the consolidation and efficiency phase of our Africa and international expansion strategy, we remain committed to driving sustainable growth, enhancing shareholder value, and delivering exceptional banking experiences to our customers across Africa and beyond”
Reiterating his confidence in the organisation’s resilience, Chairman, Access Holdings, Aigboje Aig-Imoukhuede in a statement said: “As we navigate this transformative period, we remain confident in the leadership of the group to continue this upward trend and set the standard for financial service groups in the continent. Access Holdings has a rich history of excellence, and we will continue to deliver unparalleled value to our stakeholders.”
Access Holdings Plc acquired Megatech Insurance Brokers Ltd. (now known as Access Insurance Brokers Ltd.) and successfully completed a $300million capital injection into Access Banking Group, which acquired several entities, including Finibanco Angola S.A., and select Standard Chartered Bank operations in Africa.
Also, Access Bank’s UK subsidiary also opened a branch in Paris and received regulatory approval to commence operations in Hong Kong. This underscores confidence in the company’s ability to deliver sustainable growth and value to its stakeholders.
Analysts’ view
Analyst at Coronation Research, Blessing Ishola, said, “Overall, the results impressed the market, beating both our view and those of other analysts. As part of the firm’s growth strategy, it has announced its proposed acquisition of the National Bank of Kenya and the acquisition of an insurance company Megatech Insurance Brokers, and others. We expect that this diversification will continue to further strengthen the group”.
Analysts at Cordros Research, while impressed with the group 2023 FY performance, stated that the group performed exceptionally well across its core and non-core operations owing to the high yielding environment and FX impact on investment securities.
“Looking ahead into 2024, we anticipate a sustained uptrend in funded and non-funded income given the still elevated interest rate environment and depreciation of the local currency so far in the year. Furthermore, we believe the group’s solid foundation in the financial industry, strategic acquisitions across the continent and significant investments in digital and technological advancements will support its strategy of capitalising on emerging opportunities and help it remain competitive”, they said.
Conclusion
Commencing in the second half of 2024, the group’s Africa and international expansion strategy are expected to enter the consolidation and efficiency phase, aligning with the institution’s five-year plan to accelerate the attainment of its 2027 strategic objectives. Hence, the significant cost reductions achievable through aggressive efficiency improvement measures underscore the importance of prioritizing operational excellence in the banking industry.
By continuously seeking ways to enhance efficiency, Access Holdings is well on its way to unlocking substantial value, strengthening competitiveness, and positioning itself for sustained success in an increasingly dynamic and challenging market landscape.
