Access Holdings, Nigeria's largest banking group, reported a 5.9% decline in net profit for the nine months ending September, despite a 2.3% increase in gross earnings to N4 trillion. The drop in profit was attributed to a significant rise in the cost of funds, which consumed 58.4% of the group's total interest income. The cost of funds, which includes interest paid on deposits and borrowings, jumped to N1.8 trillion from N1.6 trillion in the same period last year.
The group's cost of funds has been a major pressure point on its earnings performance, particularly due to the high fixed deposit rates offered by its flagship commercial banking arm, Access Bank. This has made the cost of funds one of the group's largest expenditure categories. Despite this, the group's CEO, Innocent C. Ike, expressed optimism about the group's resilience, citing a significant reduction in impairment charges and growth in net interest income.
The group's gross earnings were boosted by a 12.4% increase in net fee and commission income to N534.9 billion, partly supported by lower fee and commission expenses. Other operating income also saw a 14.4% increase to N160.7 billion, driven by a gain on the disposal of non-current assets held for sale. These increases helped to offset the impact of the rising cost of funds on the group's earnings.
Access Holdings' pre-tax profit advanced by 8.3% to N667.4 billion, but profit after tax fell to N474.2 billion from N504.2 billion in the same period last year, representing a 5.9% decline. The group's return on equity stood at 10.6%, compared to 10% in the same period last year. The decline in profit was despite a reduction in provision for problem loans and similar assets to N92.9 billion from N350 billion.
Chairman Aigboje Aig-Imoukhuede told shareholders in June that the group was working to resume cash distribution to shareholders. The group's CEO, Innocent C. Ike, emphasized the group's priorities, which include stronger execution capacity, robust risk governance and regulatory compliance, disciplined capital allocation, greater operating efficiency, and improved capital productivity.
Access Holdings operates in 24 countries, serving over 63 million customers, and has operations in pensions, payments, and insurance brokerage. The group's Scale-to-Value agenda aims to drive growth and improve efficiency. The decline in profit highlights the challenges facing the group, particularly in managing its cost of funds and navigating the regulatory environment.
The group's financial performance is a significant indicator of the Nigerian banking sector's overall health. Access Holdings' ability to manage its cost of funds and improve efficiency will be crucial in driving growth and profitability in the future. The group's commitment to resuming cash distribution to shareholders is also expected to boost investor confidence.
Key points
- Access Holdings' nine-month profit drops 5.9% due to soaring cost of funds.
- The group's cost of funds consumes 58.4% of its total interest income.
- Access Holdings' pre-tax profit advances by 8.3% to N667.4 billion.
