Access Holdings’ nine-month profit dips 6% as cost of funds erodes earnings

Access Holdings saw its net profit for the year to September drop 5.9 per cent, compared to the same period last year, hammered by soaring cost of funds, even though revenue came out stronger, its latest earnings report showed on Monday.

What the corporation pays to depositors for holding their money and the interest it pays on borrowings, both jointly called cost of funds by analysts, jumped to N1.8 trillion from N1.6 trillion, consuming the lion’s share of the interest it generated by itself.

For that reason, Nigeria’s biggest banking group ended up spending 58.4 per cent of its total interest income on such costs during the period. That was up from 56.7 per cent a year ago.

The main pressure point on earnings performance is often the fixed deposit rates of Access Bank, its flagship commercial banking arm, usually priced high, compared to those of its peers.

This has made cost of funds perhaps its single biggest expenditure category.

Gross earnings rose by 2.3 per cent to N4 trillion for the financial services group, which also has operations in pensions, payments and insurance brokerage, and also operates in 24 countries, serving over 63 million customers.

The corporation reduced its provision for problem loans and similar assets to N92.9 billion from N350 billion, easing the pressure of impaired credit on profits, relative to the end of last year when the sheer weight of delinquent loans on earnings, and the regulatory complications from that, became a hindrance to dividend payment.

Chairman Aigboje Aig-Imoukhuede told shareholders in June that the group was working to resume cash distribution to shareholders.

“The significant reduction in impairment charges, together with growth in net interest income after impairment and net fee and commission income, demonstrates the resilience of our core earnings base,” said Innocent C. Ike, the CEO

“As we advance our Scale-to-Value agenda, our priorities remain clear: stronger execution capacity, robust risk governance and regulatory compliance, disciplined capital allocation, greater operating efficiency and improved capital productivity,” he added.

Non-interest income received a boost from net fee and commission income, which went up 12.4 per cent to N534.9 billion, partly supported by lower fee and commission expense.

Other operating income jumped 14.4 per cent to N160.7 billion due to increased gain on disposal of non-current asset held for sale.

Pre-tax tax advanced by 8.3 per cent to N667.4 billion, while profit after tax fell to N474.2 billion from N447.5 billion. Return on equity stood at 10.6 per cent, compared to 10 per cent a year earlier.