Access Holdings Bad Loan Losses Tripled To N123bn At H1

Losses from bad loans and advances multiplied more than three times for Access Holdings Plc to N122.7 billion at the end of half-year operations, marking a resurgence of credit losses after a drop of 29.5 per cent to N139.5 billion for the 2023 full year.

However, a continuing windfall from fair value and foreign exchange gains at N407 billion at half year helped the bank to dilute the incursion from loan losses and lift the bottom line by 107.7 per cent to over N281 billion.

Loan loss expenses follow the rapid expansion of the bank’s N10.8-trillion customer lending portfolio that grew by N2.8 trillion in six months of the first half compared to an increase of N2.9 trillion in the entire 2023 financial year.

The audited financial report of the multinational financial services group for the half year ended June 2024 shows a top speed growth of the bank’s massive balance sheet for the second year from the closing level of N26.7 trillion in 2023 to N36.6 trillion at half year.

The increase of N9.9 trillion in assets in six months overtakes the increase of N11.7 trillion for the 2023 full year.

Despite the high rise in bad loan losses, the bank’s asset expansion has significantly improved its earnings capacity and asset yield. On a year-on-year basis, revenue grew by 133.6 per cent to roughly N2.20 trillion at the end of June 2024, ahead of an increase of 75.5 percent in assets.

The resulting gain in asset turnover is however undermined by loss of profit margin, as costs grew generally ahead of revenue. Net profit margin went down from 14.4 per cent in the same period last year and from 23.6 per cent at the full year to 12.8 per cent at the end of half-year operations.

The expenses on bad loans and advances surging by 230 per cent from N37 billion to N123.7 billion are leading to cost increases that eroded margins during the period. This was a big cost saving line for the bank last year when it dropped by 29.5 per cent to N139.5 billion.

Credit losses are followed by cost of funds that rose two and half times to close at N958.7 billion at half year. The figure is already almost at par with the interest expenses of less than N959 billion the bank incurred for the 2023 full year.

Cost of funds grew well ahead of interest earnings at 150.6 per cent compared to an increase of 88 per cent in interest income year-on-year at half year. This is an accelerating growth in interest expenses from an increase of 105 per cent last year.

Interest expenses claimed 65 percent of interest income at half year, rising from 58 percent at the end of last year.

Completing the third leg of the surging cost tripod are operating expenses, which grew by 127.6 per cent year-on-year to N719 billion, as cost saving even from the usual sources such as personnel expenses failed to be realised.

The summary of the bank’s earnings story at half year is that while it has retained the key advantage of outstanding growth in earnings seen in the preceding year, the slowdown in some key cost elements that stretched out margins has reversed and the major revenue consuming cost line – cost of funds has accelerated.

This explains the loss of net profit margin by the bank at half year – the ability to convert revenue into profit.

The bank closed the half year trading with earnings per share of N7.61, rising from N3.74 per share in the same period last year. It has announced an interim cash dividend of 45 kobo per share to be paid to shareholders on 17th October 2024.